Proceedings of the 12th European Conference on Knowledge ...

Evangelia Siachou, S<strong>of</strong>ia Daskou and Peter Yannopoulos
actions and routines. In certain circumstances, <strong>the</strong> knowledge stock possessed by an organization
consists <strong>of</strong> patents which are found to be <strong>the</strong> basis for development and innovation. Consequently,
<strong>the</strong> existing organizational knowledge is <strong>the</strong> appropriate cognitive background in order for <strong>the</strong> new
knowledge to be effectively assimilated and utilised aiming at <strong>the</strong> economic value (on <strong>the</strong> part <strong>of</strong>
organizations, Cohen and Levinthal, 1990). In an attempt to expand <strong>the</strong> existing <strong>the</strong>ory <strong>of</strong> absorptive
capacity we focus our analysis on individual level arguing <strong>the</strong> functionality <strong>of</strong> (MMs) <strong>of</strong> managers in
recognizing <strong>the</strong> value <strong>of</strong> external knowledge acquisition <strong>of</strong> entrepreneurs. Specifically we propose that
MMs mediate <strong>the</strong> absorptive capacity <strong>of</strong> entrepreneurs, who use <strong>the</strong>m to filter <strong>the</strong> value <strong>of</strong> new
knowledge <strong>the</strong>y acquire from <strong>the</strong> external environment.
2.2 Mental models (MMs) adopted in decision making
Literature suggests that exploration <strong>of</strong> managerial MMs contribute in our understanding <strong>of</strong> how
managers make informed decisions (Yannopoulos and Daskou, 2010). MMs are cognitive structures
(Song et al., 1999) used by managers or entrepreneurs to make sense <strong>of</strong> environmental complexities,
draw inferences and make decisions (Kiesel and Sproull, 1982). They are simplified mental
representations (Thagard, 2005), belief systems (Simon, 1955) and filters (Daft and Weick, 1984) <strong>of</strong>
external knowledge used by entrepreneurs for <strong>the</strong> sake <strong>of</strong> cognitive economy in dealing with
environmental complexity. Managers use MMs to make evaluations (Song et al., 1999), scan <strong>the</strong>
environment and make strategic decisions (Stubbart, 1989).
Day and Nedungadi (1994) identified 4 types <strong>of</strong> managerial MMs and <strong>the</strong> MMs typology was later
fur<strong>the</strong>r conceptualized by Karakaya and Yannopoulos (2010) who propose that firms that
internationalize use <strong>the</strong>m in situations <strong>of</strong> foreign market entry. The typology is described in table 1.
Table 1: Types <strong>of</strong> Mental Models (MMs)
Type <strong>of</strong> MMs Description
Competitor
centered
Self (firm)
centered
Market driven
Customer
centered
Firm directly compares with competition and search <strong>the</strong> environment for information
about <strong>the</strong> competition (Day and Nedungadi, 1994). Firm responds to competitive
activities (Narver and Slater, 1990, lower prices and costs and improve products and
forms strategy in terms <strong>of</strong> competitive activities. The company forms strategy in terms
<strong>of</strong> competitive activities.
Limited responsiveness to customer needs and competitive moves (Maignain and
Lucas, 1997). Focus on selling a specific product to a specific market (Levit, 1960).
Firms accommodate <strong>the</strong>ir rivals ra<strong>the</strong>r than compete with <strong>the</strong>m. Limited attention to
customer needs, lower awareness <strong>of</strong> competitive environment, do not notice <strong>the</strong>
threatening signals <strong>of</strong> competitors (Day and Nedungadi, 1994).
Firm focuses on competitive activity and customer requirements, are open to
environmental information, do not oversimplify, use <strong>the</strong>ir knowledge to generate value
and satisfaction to customers, and are proactive ra<strong>the</strong>r than reactive to change (Day,
1994; Noble, Sinha and Kumar, 2002; Deshpande, Farley and Webster, 1993;
Gatington and Xuereb, 1997).
The firm notices customer preferences (Voss and Voss, 2000) and behaviors. Firm
places attention to customer retention, product innovation, good customer service,
and focused customer segments.
*Source: Typologies <strong>of</strong> MMs based on Karakaya and Yannopoulos, (2010) and fur<strong>the</strong>r developed by Daskou, Yannopoulos and
Koutoulas (2012).
In situations <strong>of</strong> uncertainty individuals may assume inductions which facilitate <strong>the</strong>m to learn from <strong>the</strong>ir
former choices (Heiner, 1983). More specifically, in many circumstances individuals may ga<strong>the</strong>r
information, organizing and interpreting <strong>the</strong>m ra<strong>the</strong>r daunting <strong>of</strong> this process (March, 1994). Given
individuals limited capacity to process information (Simon, 1955), <strong>the</strong>y occasionally choose to make
decisions that are simply quite good (in terms <strong>of</strong> <strong>the</strong>ir quality, March, 1994) ra<strong>the</strong>r than to decide
based on <strong>the</strong> outcome <strong>of</strong> a fully developed and informed learning process. Therefore, in such
situations, MMs service managers’ cognitive economy, by aiding <strong>the</strong>m to pay <strong>the</strong>ir attention on some
aspects <strong>of</strong> <strong>the</strong> incoming knowledge (ra<strong>the</strong>r than <strong>the</strong> totality <strong>of</strong> <strong>the</strong> external knowledge as a whole)
(Day, 1994; Walsh, 1995). Consequently, <strong>the</strong>y avoid becoming overwhelmed by <strong>the</strong> substantial
complexity <strong>of</strong> <strong>the</strong> incoming information <strong>the</strong>y would rationally acquire to aforementioned process
(Karakaya and Yannopoulos, 2010). That is <strong>the</strong> primary utility <strong>of</strong> MMs.
937