Knowledge Management, Strategic Decision-Making, Intuition and Planning Effectiveness

Academic studies on planning and strategic decision-making have traditionally contrasted the technocratic decision-making style with the intuitive-based style (Khandwalla, 1977; Covin et al, 2001; Elbanna, 2010), sustaining that the former leads to better decisions compared to the latter. A technocratic style consists in a highly rational and structured (systematic) process that requires managers to break down a problem into smaller pieces necessary to solve it, search and evaluate relevant objective information, and prefer the use of quantitative tools when assessing and choosing among alternatives (Grünig et al, 2005) . On the contrary, an intuitive style consists in the use “of the mass of facts, patterns, concepts, techniques, abstractions, and generally what we call formal knowledge or beliefs, which are impressed on our minds” (Barnard, cited in Simon, 1987). However, nowadays both styles are necessary. Firms have to rely on both managers’ rationality and intuition to make effective decisions because of today’s very complex and uncertain environment. Since information and knowledge are at the basis of both decision-making processes, we aim to understand the linkage between knowledge management practices, rationality and intuition, in order to analyse the impact they have on planning effectiveness. To test our hypotheses we developed a conceptual model in which knowledge management practices directly affect rationality, intuition and planning effectiveness. At the same time, we focused on the impact that rationality and intuition have on planning effectiveness. The model was empirically tested on a sample of 169 Italian medium high-tech firms using structural equation modelling (SEM) based on consistent partial least square (PLSc). Results clearly show that knowledge management practices have a positive direct impact on rationality and planning effectiveness. In addition, knowledge management practices provide a strong contribution to intuition, but intuition has no impact on planning effectiveness. This paper enriches existing literature by highlighting the linkage between knowledge management practices and intuition, which has remained under researched in academia. The main limitation of this study concerns the fact that it focuses only on Italian technology-based firms and thus, results cannot be generalized.