The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1755-425X.htm

Psychological capital and strategic Strategic

decision
decision outcomes outcomes
Sina Kiegler
The Boston Consulting Group, Frankfurt, Germany
303
Torsten Wulf
Philipps-University Marburg, Marburg, Germany and Received 1 March 2021
HHL Leipzig Graduate School of Management, Leipzig, Germany Revised 11 August 2021
Accepted 7 September 2021
Niklas Nolzen
Philipps-University Marburg, Marburg, Germany, and
Philip Meissner
ESCP Business School Berlin, Berlin, Germany

Abstract
Purpose – A large body of research has analyzed individual psychological characteristics as antecedents of
strategic decision-making. However, this research has mainly focused on trait-based characteristics that
explain impaired strategic decision outcomes. Recently, PsyCap has been proposed as an alternative driver of
strategic decision outcomes that, in contrast to other drivers, can be influenced by management.
Design/methodology/approach – Drawing on research on psychological capital (PsyCap), a psychological
construct conceptualized as a state-like individual strength that is malleable, the authors argue that PsyCap
exerts an inverted curvilinear effect on strategic decision outcomes. The authors use a computerized strategic
decision simulation involving 102 managers to empirically test our hypotheses.
Findings – The authors show that PsyCap improves strategic decision outcomes up to an inflection point,
after which it negatively affects those outcomes. The authors also show that this effect is mediated by heuristic
information processing.
Research limitations/implications – For the empirical study the authors relied on a sample of 102
practicing managers from the financial services industry in Germany.
Practical implications – PsyCap has been shown to be malleable through, for instance, micro-interventions
and dedicated web-based trainings. Therefore, depending on managers’ PsyCap levels, either further increases
in PsyCap or a regulation of this characteristic might be appropriate in order to optimize strategic decision
outcomes.
Social implications – As a state-like individual strength that is malleable, PsyCap might serve as a
management characteristic that is particularly important in challenging situations such as the COVID-19
pandemic.
Originality/value – This paper contributes to research on strategic decision making by introducing PsyCap
as an important antecedent of strategic decision outcomes that – in contrast to other individual characteristics –
is state-like and, hence, malleable.
Keywords PsyCap, Strategic decision making, Strategic decision outcomes, Heuristic information processing
Paper type Research paper

1. Introduction
Individual psychological characteristics have been identified as important drivers of
strategic decision outcomes in organizations (Hambrick, 2007; Hiller and Hambrick, 2005;
Powell et al., 2011). However, the extant research has mainly focused on individual, trait-
based characteristics that negatively affect strategic decision-making outcomes (for reviews,
see Bromiley and Rau, 2016; Hutzschenreuter and Kleindienst, 2006), such as narcissism
Journal of Strategy and
(Chatterjee and Hambrick, 2007) and hubris (Hayward and Hambrick, 1997). Narcissism, for Management
example, has been found to foster excessive risk taking (Zhu and Chen, 2015) and to Vol. 15 No. 2, 2022
pp. 303-325
negatively affect performance in pre-crisis contexts (Cragun et al., 2020; Patel and Cooper, © Emerald Publishing Limited
1755-425X
2014). Hubris has been associated with excessive risk taking (Haynes et al., 2010), unethical DOI 10.1108/JSMA-03-2021-0065
JSMA behavior (Zhang et al., 2020), as well as higher acquisition premiums and shareholder losses
15,2 (Hayward and Hambrick, 1997).
Recently, psychological capital (PsyCap; Luthans and Youssef, 2004) has been proposed
as another important individual characteristic. PsyCap is defined as the psychological
capacity of an individual that drives motivation and efforts focused goal achievement (Avey
et al., 2011; Luthans et al., 2007). It is a higher-order construct that comprises the psychological
capacities of self-efficacy, hope, optimism and resilience (Luthans and Youssef, 2004; Luthans
304 et al., 2006b). In contrast to trait-based psychological characteristics, PsyCap is defined as
state-like and, as such, it can be developed (Luthans et al., 2006a; Luthans et al., 2008). PsyCap
has been extensively researched in the field of organizational behavior, where it has
consistently been found to positively affect employees’ behavior and performance (e.g. Avey
et al., 2010b; for meta-analyses and reviews, see, e.g. Avey et al., 2011; Newman et al., 2014;
Nolzen, 2018). Despite the relevance of individual characteristics for strategic decision
outcomes (Hambrick, 2007; Hiller and Hambrick, 2005; Powell et al., 2011) and the importance
of PsyCap as a driver of individuals’ behavior in the workplace (e.g. Avey et al., 2010b),
PsyCap’s role for strategic decision outcomes has not yet been researched (Nolzen, 2018). This
is surprising, as research on PsyCap’s components (e.g. Papenhausen, 2010; Polivy and
Herman, 2002; Stone, 1994) indicates that it might constitute a particularly relevant
individual-level driver of strategic decision outcomes.
Building on research on the impact of PsyCap’s individual components in the strategic
decision-making context (e.g. Papenhausen, 2010; Polivy and Herman, 2002; Stone, 1994), we
argue that PsyCap exerts an inverted curvilinear effect on strategic decision outcomes. While
PsyCap’s components drive motivated efforts towards goal achievement (Avey et al., 2011;
Luthans et al., 2007), excessive levels of self-efficacy (Beck and Schmidt, 2012; Stone, 1994),
optimism (Papenhausen, 2010; Segerstrom, 2001) or hope (Polivy and Herman, 2002) might
induce extreme confidence in goal achievement, which could reduce effort and negatively
affect strategic decision outcomes. We also argue that the effect of PsyCap on strategic
decision outcomes is mediated by heuristic information processing (Chaiken and
Maheswaran, 1994; Maheswaran and Chaiken, 1991). An increase in motivated efforts
towards goal achievement, which has been associated with higher PsyCap levels (Kim and
Noh, 2016; Luthans et al., 2007; Siu et al., 2014), tends to decrease heuristic information
processing, as individuals view this processing style as insufficient for achieving their goals
(Maheswaran and Chaiken, 1991; Dreu et al., 1999). However, at very high PsyCap levels,
individuals’ confidence in their ability to achieve the desired goal increases, which fosters
heuristic information processing (Maheswaran and Chaiken, 1991). Heuristic information
processing, in turn, has been shown to negatively impact strategic decision outcomes
(Elbanna and Child, 2007; Khatri and Ng, 2000). The results of an empirical study involving
102 managers in the financial services industry support our hypotheses.
Our study makes three conceptual contributions. First, we expand research on strategic
decision making by introducing PsyCap as a new and potentially relevant driver of strategic
decision outcomes (Hambrick, 2007; Miller and Droge, 1986). PsyCap differs from previously
researched psychological characteristics because it can have positive – instead of solely
negative – effects on strategic decision outcomes. Moreover, it is conceptualized as state-like
and, thus, as a malleable construct (Luthans et al., 2006a, b, 2008). Second, our study
contributes to information processing research by highlighting the influence of PsyCap on
heuristic information processing (Maheswaran and Chaiken, 1991; Petty and Cacioppo, 1986).
In particular, PsyCap might constitute a psychological characteristic that explains individual
differences in (heuristic) information processing. Third, we contribute to research on PsyCap
itself. More specifically, we extend PsyCap research beyond the organizational behavior field
and show that PsyCap has different effects in the strategic decision-making field.
2. Background and hypotheses Strategic
2.1 Individual psychological characteristics as drivers of strategic decision outcomes decision
Strategic decision-making situations are characterized by high complexity, ambiguity and a
lack of structure (Mintzberg et al., 1976; Schwenk, 1984). They are highly relevant for
outcomes
organizations, as they can influence the outcomes in terms of organizational performance
(Dean and Sharfman, 1996; Elbanna and Child, 2007; Shepherd and Rudd, 2014). In addition,
they involve substantial resource commitments (Mintzberg et al., 1976; Schwenk, 1984).
Managerial characteristics are generally regarded as important drivers of strategic decision 305
outcomes (Hambrick, 2007; Miller and Droge, 1986) because they influence the individual
interpretation of a situation and the resulting behavior (Finkelstein and Hambrick, 1990).
Hence, research from the upper-echelons and strategic decision-making fields has long
investigated how managers’ psychological characteristics drive strategic decision outcomes
(Hambrick, 2007).
Most research in these domains has focused on negative psychological characteristics that
adversely affect strategic decision outcomes, such as narcissism (Chatterjee and Hambrick,
2007), hubris (Hayward and Hambrick, 1997), hyper-core self-evaluations (hyper-CSE; Hiller
and Hambrick, 2005), and overconfidence (Russo and Schoemaker, 1992). Narcissism refers to
a positively inflated self-concept as well as strategies to maintain and promote that self-
concept (Campbell et al., 2004; Chatterjee and Hambrick, 2007). It not only spurs excessive risk
taking (Campbell et al., 2004; Zhu and Chen, 2015) and reduces performance in pre-crisis
contexts (Patel and Cooper, 2014) but also decelerates post-crisis recovery (Buyl et al., 2019).
Narcissism has also been associated with the aggressive adoption of technological
discontinuities (Gerstner et al., 2013), extreme performance fluctuations (Chatterjee and
Hambrick, 2007), and an increased number of lawsuits involving the firm (O’Reilly
et al., 2018).
Hubris is defined as trait-based, exaggerated self-confidence (Hayward and Hambrick,
1997; Hiller and Hambrick, 2005). It is associated with excessive risk taking (Haynes et al.,
2010; Li and Tang, 2010), increased acquisition premiums, and shareholder losses (Hayward
and Hambrick, 1997). Hubris has also been linked to an increased probability of venture
failure (Hayward et al., 2006) and unethical decision-making (McManus, 2018; Zhang
et al., 2020).
Hyper-CSE is conceptualized as a dispositional trait that involves excessive levels of self-
esteem, emotional stability, locus of control and generalized self-efficacy (Hiller and
Hambrick, 2005). Hyper-CSE aligns with less comprehensive decision making, risk taking,
higher persistence in chosen strategies and extreme performance outcomes (Hiller and
Hambrick, 2005).
Finally, overconfidence is defined as an individual tendency to overestimate one’s abilities
and chances for success (Russo and Schoemaker, 1992). Overconfidence is associated with
resistance to corrective feedback (Chen et al., 2015) and strategic change (Park et al., 2011), and
with highly risky and less successful product introductions (Simon and Houghton, 2003). It
also leads to disadvantageous investment decisions (Mueller and Brettel, 2012) and lower-
quality acquisition decisions (Malmendier and Tate, 2008).
PsyCap was introduced in 2004 (Luthans and Youssef, 2004) as a different type of
managerial characteristic. It offers two main advantages compared to other psychological
characteristics, such as narcissism, hubris, hyper-CSE and overconfidence. While these four
psychological characteristics are conceptualized as negatively affecting strategic decision
outcomes, PsyCap is grounded in positive psychology. As such, it focuses on psychological
characteristics that enable individuals to flourish (Seligman and Csikszentmihalyi, 2000).
In addition, narcissism (Chatterjee and Hambrick, 2007), hubris (Hayward and Hambrick,
1997) and hyper-CSE (Hiller and Hambrick, 2005) are defined as trait-based and, hence, stable
characteristics of managers. In contrast, PsyCap is conceptualized as a state-like construct
JSMA that is open to development (Luthans et al., 2006a, b, 2008). Therefore, analyzing PsyCap in
15,2 the context of strategic decision making might enable better predictions of positive strategic
decision outcomes and help influence strategic decision-making processes in the desired
direction.

2.2 The concept of psychological capital

306 PsyCap is conceptualized as a higher-order construct “representing one’s positive appraisal
of circumstances and probability for success based on motivated effort and perseverance”
(Luthans et al., 2007, p. 550). It builds on four components: self-efficacy, hope, optimism and
resilience (Luthans et al., 2006b, 2007). While research on the discriminant validity of these
components shows that they are conceptually independent, they are tied together by an
underlying link that explains their shared variance. This underlying link relates to the
processes that drive motivation and behavior towards goal achievement (Luthans et al., 2007).
While self-efficacy encourages individuals to set challenging goals and motivates them to
reach those goals (Bandura, 1993; Stajkovic and Luthans, 1998), optimism provides them with
an expectation of a positive outcome i.e. the expectation that they will achieve their goals
(Seligman, 1998). Hope, through its elements of agency and pathways, not only supports an
individual’s determination to pursue the goals but also to determine ways of achieving them
(Snyder et al., 1991, 1996). Finally, resilience ensures adaptability on the path to goal
achievement (Masten, 2001).
All four components of PsyCap are conceptualized as state-like, i.e. they are open for
development. Consequently, PsyCap is also defined as a state-like concept (Luthans et al.,
2007). Studies have shown that PsyCap is malleable through, for example, short micro
interventions (Luthans et al., 2006a) and web-based training sessions (Luthans et al., 2008).
Specifically, Luthans and colleagues have found that a 2-h intervention, which includes
exercises to foster hope, optimism, self-efficacy and resilience, can increase PsyCap-levels of
managers by about 3% which is associated with an annual revenue increase of about $10
million (Luthans et al., 2006a).
Since its introduction, PsyCap has been intensively researched in the organizational
behavior field. Studies have consistently confirmed its positive impact on employees’
behaviors, attitudes, and perceptions (for reviews, see Dawkins et al., 2013; Avey et al., 2011;
Newman et al., 2014; Nolzen, 2018). For instance, several researchers have shown that
PsyCap improves performance by enhancing motivated efforts towards goal achievement
(e.g. Avey et al., 2010b; Avey et al., 2011; Peterson et al., 2011). PsyCap has also been found to
increase employees’ organizational citizenship behavior (Mart
ınez et al., 2019) and to
decrease detrimental workplace behaviors (Avey et al., 2010a; Norman et al., 2010). It has
also been associated with more innovative behavior (Abbas and Raja, 2015; Luthans et al.,
2011), enhanced creativity (Gupta and Singh, 2014; Huang and Luthans, 2015) and
intrapreneurship (Pandey et al., 2021). In addition, PsyCap has been found to increase job
satisfaction (Avey et al., 2011; Larson and Luthans, 2006; Luthans et al., 2007) and
organizational commitment (Avey et al., 2011; Larson and Luthans, 2006), and to reduce
cynicism, job searches, and intentions to leave the job (e.g. Avey et al., 2009, 2011). Finally,
PsyCap has been associated with higher perceived quality of work life (Nguyen and
Nguyen, 2012) and fewer symptoms of stress at work (Abbas and Raja, 2015; Avey et al.,
2009; Siu et al., 2015).

2.3 Psychological capital in the strategic decision-making context

Despite the importance of individual psychological characteristics as drivers of strategic
decision outcomes (Hambrick, 2007) and the relevance of PsyCap as a driver of individual
behavior in the workplace (e.g. Avey et al., 2010b), PsyCap’s effect on strategic decision
outcomes has not yet been assessed (Nolzen, 2018). This is surprising, as research on Strategic
PsyCap’s components – self efficacy, optimism, hope and resilience – indicates that PsyCap decision
might constitute a particular relevant individual-level driver of strategic decision outcomes.
For example, Stone (1994) shows that compared to low or high levels of self-efficacy,
outcomes
moderate levels lead to greater decision accuracy based on higher variability in information
search and lower decision speed. While moderately self-efficacious individuals increase their
motivated efforts because they tend to have a greater willingness to achieve goals (Bandura,
1993; Stajkovic and Luthans, 1998), overconfident individuals are certain of their success and, 307
hence, do not invest additional effort (Stone, 1994). These findings are in line with Bandura
and Jourden (1991), who use a complex decision-making experiment to show that individuals
with moderate self-efficacy levels increasingly invest in an analytical thinking strategy, while
that is not the case for individuals with high levels of self-efficacy. Similarly, a recent study by
Beck and Schmidt (2012) reports a curvilinear relationship between self-efficacy and strategic
decision outcomes, which is mediated by the effort invested in information search. Studies on
the effect of self-efficacy on overconfidence support these findings (e.g. Chen et al., 2015; Park
et al., 2011; Simon and Houghton, 2003). Overall, these findings indicate that self-efficacy
exerts an inverted curvilinear effect on strategic decision outcomes based on differences in
motivated efforts.
Similar effects have been reported in research on optimism – PsyCap’s second component.
Papenhausen (2010) uses a strategy simulation task to show that the effort invested in
information search focused on achieving intended outcomes is highest at moderate levels of
optimism. Highly optimistic individuals, in contrast, tend to be extremely confident in the
likelihood of their own success (Papenhausen, 2010). Therefore, they reduce their efforts to
pursue a goal (Scheier and Carver, 1992). Segerstrom (2001) shows that moderately optimistic
individuals pay attention to positive and negative information in a more balanced way than
individuals with low or high levels of optimism (Segerstrom, 2001). Gibson and Sanbonmatsu
(2004) find that highly optimistic individuals do not adequately react to feedback because
they tend to focus on positive information. This selective attention mechanism has been used
in other studies to explain why highly optimistic individuals overlook contradictions (Geers
and Lassiter, 2002) as well as informational errors (Spirrison and Gordy, 1993) and why they
draw on defensive information processing, which is characterized by selective information
choice and recall (Radcliffe and Klein, 2002). Overall, these findings indicate an inverted
curvilinear relationship between optimism and strategic decision outcomes.
Hope – PsyCap’s third component – is associated with better problem-solving skills and
improved performance, as it fosters conscious motivated efforts to pursue and achieve the
desired goal (Chang, 1998). However, an excessive level of hope, which is also referred to as
“false hope” (Polivy and Herman, 2002), is considered to be detrimental, as it implies
overconfidence, ignorance, and distortion of information in favor of the desired goal (Luthans
et al., 2006b; Polivy and Herman, 2002). Thus, hope might also exert an inverted curvilinear
effect on strategic decision outcomes.
Resilience – PsyCap’s forth component – in contrast, might impact strategic decision
outcomes differently compared to the other three components. Resilience has been
associated with greater stress resistance and the ability to quickly recover from stress
(Bande et al., 2015). In particular, resilient individuals have been found to experience more
positive emotions in stressful situations and to perceive such situations as opportunities
rather than as threats (Ong et al., 2006; Shin et al., 2012; Tugade and Fredrickson, 2004).
Such positive emotions enhance innovativeness and creativity in problem-solving
processes (Isen, 2001). Thus, resilience might exert a positive impact on strategic
decision outcomes.
JSMA 2.4 Development of hypotheses
15,2 As a higher-order construct, PsyCap reflects the underlying link that connects its
components. This link is related to the processes that drive motivation and behavior
towards goal achievement (Luthans and Youssef, 2004; Luthans et al., 2006b). PsyCap has
been shown to increase motivated efforts directed towards goal achievement (Kim and Noh,
2016; Luthans et al., 2007; Siu et al., 2014). Motivation and its associated effort, in turn,
contribute to solving complex decision-making tasks (Wood et al., 1990) and have been linked
308 to higher performance (Locke and Latham, 2004).
At the same time, however, research on PsyCap’s single components has shown that at
very high levels of self-efficacy, optimism or hope, individuals tend to invest less effort in goal
achievement (Stone, 1994), more selectively attend to and process information (Gibson and
Sanbonmatsu, 2004), and ignore or distort information (Polivy and Herman, 2002). Other
research has stressed that PsyCap as a higher-order construct shows effects similar to those
of its components with regard to motivation and behavior related to goal achievement (Avey
et al., 2006; Luthans et al., 2007). Thus, we argue that very high levels of PsyCap are likely to
decrease motivated efforts and, consequently, lead to worse strategic decision-making
outcomes (Levin et al., 2000; Locke and Latham, 2004; Wood et al., 1990). This results in an
inverted curvilinear relationship between PsyCap and strategic decision outcomes. Hence,
we posit:
H1. PsyCap has an inverted curvilinear relationship with strategic decision outcomes,
such that increasing PsyCap leads to improved strategic decision outcomes at low
and moderate PsyCap levels, but reduces strategic decision outcomes at high PsyCap
levels.
We also argue that the curvilinear effect of PsyCap on strategic decision outcomes is
mediated by heuristic information processing. Heuristic information processing relies on
easily accessible information and is characterized by low attention to detail, simple rules
and non-content cues. Moreover, it requires little effort (Chaiken et al., 1989). PsyCap
fosters motivated effort in general (Kim and Noh, 2016; Luthans et al., 2007; Siu et al.,
2014). Motivated effort, in turn, leads to lower levels of heuristic information processing
(Maheswaran and Chaiken, 1991), as highly motivated individuals tend to perceive
heuristic processing as insufficient for achieving the desired goal (Chaiken et al., 1989;
Maheswaran and Chaiken, 1991). DeDreu et al. (1999), for example, show that highly
motivated individuals are less likely to engage in heuristic information processing in
complex negotiation- and decision-making situations than individuals with low
motivation.
However, at very high levels of PsyCap, motivated effort focused on goal achievement
tends to decrease. Such reductions in motivated effort foster heuristic information
processing, as decision-makers perceive this type of information processing as sufficient
(Maheswaran and Chaiken, 1991). Thus, they become more likely to act less deliberately
and more instinctively (Ferris et al., 2011; Hiller and Hambrick, 2005). Heuristic
information processing, in turn, is not only negatively related to strategic decision
effectiveness (Elbanna and Child, 2007), but it also decreases financial and non-financial
performance (Khatri and Ng, 2000). In a meta-analysis, Phillips et al. (2016) find that
intuition negatively affects decision performance. Hence, we argue that heuristic
information processing mediates the relationship between PsyCap and strategic decision
outcomes. We posit:
H2. Heuristic information processing mediates the curvilinear relationship between
PsyCap and strategic decision outcomes.
3. Method Strategic
3.1 Sample and research design decision
To test our hypotheses, we conducted a field study involving 102 managers from the German
financial services industry. We restricted our sample to one industry to avoid potentially
outcomes
confounding systematic industry effects (Dess et al., 1990). We initially approached 195
managers working for banks or insurance companies who had been involved in at least one
strategy project with a global strategy consulting company in the previous year. Thus, we
ensured that all participants had experience in making strategic decisions. Non-respondents 309
received a follow-up request. 102 individuals agreed to participate in the study. Of these, 60
percent were male and 40 percent were female. Their ages ranged from 23 to 65 with an
average age of 34.1. The majority of the participants (76%) held a master’s degree or the
equivalent, and the participants had been working for their current employers for an average
of 9.3 years. To account for a potential nonresponse bias, we compared age and company
tenure for respondents and 43 of the non-respondents, for whom we were able to obtain
respective data. Results of t-tests suggest an absence of nonresponse bias.
In line with Chesney and Locke (1991), we asked each manager in our sample to participate
in a computerized strategic decision-making task – Harvard Business School’s “Strategy
Simulation: The Balanced Scorecard” (Narayanan, 2014). The use of computer-based tasks to
study the influence of individuals’ personality attributes on strategic decision-making
processes and outcomes is suggested by Hambrick (2007). This approaches responds to the
call for methodological diversity in strategy research (Powell et al., 2011). In addition, the use
of a computerized strategic decision-making task reduces the threat of common method bias
(Podsakoff et al., 2003). Instead of relying on self-reported information, the strategy
simulation allowed us to measure actual strategic decision outcomes and, hence, to rely on a
different source than the predictor variable (Podsakoff et al., 2003). This measurement of
strategic decision outcomes also reduces the threat of social desirability bias (Fisher, 1993).
This bias was further mitigated by the fact that we did not provide the participants with
information on our measurements and by the fact that we guaranteed complete anonymity
(Fisher, 1993).
In the strategy simulation, participants were instructed to imagine themselves as CEOs of
a struggling automotive parts manufacturer and they were given the goal of maximizing the
company’s performance. Before starting the simulation, each participant was told that she or
he would receive a purchase offer from a private equity company at the end of the simulation
and that the offer would reflect the company’s performance. Company performance was
contingent on the extent to which initiatives selected during the simulation matched the
strategy that the participant chose at the beginning of the simulation. Hence, each
participant’s first task was to select one of four strategies for the company. In addition, each
participant had to select metrics to be used to monitor the strategy’s success. Overall,
participants could choose among 60 different objectives and related metrics that reflect
financial, customer, internal process, as well as learning and growth perspectives. Thereafter,
each participant was offered a budget of US$25 million that she or he could allocate to
initiatives that she or he believed best matched the selected strategy. These initiatives, such
as investment in R&D partnerships, also reflected customer, internal process, as well as
learning and growth perspectives. For each of the 56 available initiatives a qualitative
description was available. The budget could be (re-)allocated to initiatives in eight
consecutive periods. After each period, the participants received performance feedback based
on their selected metrics, such as customer satisfaction, as well as additional financial data,
such as ROE or earnings per share, which they could use to alter their budget-allocation
decisions. Given the complexity, uncertainty and resource commitments involved in the
strategy simulation (Narayanan, 2014), it matched the characteristics of strategic decision-
making processes (Mintzberg et al., 1976; Schwenk, 1984).
JSMA 3.2 Procedure
15,2 The data-collection procedure consisted of three central parts. First, after a verbal briefing
outlining the overall procedure for the study including the scheduled times for the respective
parts of the study, the participants were asked to complete an initial questionnaire that tested
for PsyCap (Luthans et al., 2006b). Second, participants were given a short briefing on the
theoretical foundations of the balanced scorecard tool and the particularities of the strategy
simulation. In addition, each participant was asked to read an outline of the simulation, which
310 was provided as a handout. After reading the outline, participants were asked to start the
simulation. Third, after the simulation was finished, each participant was asked to complete
an additional questionnaire, which included items on heuristic information processing
(Smerecnik et al., 2012) as well as demographic characteristics. On average, participants took
30 min to complete the simulation. To avoid potential biases due to respondent fatigue, we
used decision time as a control variable in our analysis.

3.3 Measures
3.3.1 PsyCap. To measure PsyCap we used the PsyCap questionnaire (PCQ) (Luthans et al.,
2006b). The PCQ is a 24-item questionnaire that contains six items for each of the four
components of PsyCap, all of which are measured on a six-point Likert scale (1 5 strongly
disagree; 6 5 strongly agree). These items are derived from pre-existing measures for self-
efficacy (Parker, 1998), hope (Snyder et al., 1996), optimism (Scheier and Carver, 1985), and
resilience (Wagnild and Young, 1993). The PCQ has been applied in a wide range of previous
studies (e.g. Avey et al., 2010b; Luthans et al., 2007; Peterson et al., 2011). As a measure of
PsyCap, we used the mean value of the 24 items. The Cronbach’s alpha for the scale was 0.86,
which indicates a high level of scale reliability. The full questionnaire can be found in
Appendix 1.
3.3.2 Strategic decision outcomes. We adopted an outcome-based perspective (Jones et al.,
1997; Meissner et al., 2020) and measured strategic decision outcomes for each participant as
the respective company’s return on equity (ROE) after completion of the strategy simulation.
ROE is a common performance measure in management research (Richard et al., 2009) and it
has been previously used in strategic decision-making research (e.g. Lubatkin et al., 2006;
Richardson, 2000; Westphal and Bednar, 2005). ROE is calculated as net income after the final
round of the simulation divided by equity.
3.3.3 Heuristic information processing. In line with Smerecnik et al. (2012), we measured
heuristic information processing (α 5 0.76) using five items measured on a seven-point Likert
scale (1 5 completely disagree; 7 5 completely agree). This measure has been applied in
previous studies (e.g. Gaspar et al., 2016). In the questionnaire, we specifically linked the items
to the information-processing approach applied in the strategy simulation. As a measure of
heuristic information processing, we used the mean value of the five items. The items are
listed in Appendix 2.
3.3.4 Control variables. We included five control variables in our analysis. First, we
controlled for age, as it has been shown to impact strategic decision-making (Chatterjee and
Hambrick, 2011). Second, as gender can affect strategic decision-making processes and
outcomes (Jeong and Harrison, 2017; Malhotra et al., 2018), we included gender as a control
variable. Third, we controlled for the participants’ educational level, as this might influence
strategic decision-making processes and outcomes (Hitt and Tyler, 1991). To do so, we
measured the participants’ highest educational level (i.e. vocational training, bachelor’s
degree, master’s degree, doctoral degree or their equivalents). Fourth, we controlled for
automotive work experience, which we measured as the participants’ professional experience
in the automotive industry in months. We did so because the strategy simulation dealt with
an automotive parts supplier and work experience in the industry might affect the
participants’ strategic choices (Gerstner et al., 2013; Hitt and Tyler, 1991). Finally, we included Strategic
decision time as a control variable, as research has shown that the time used to make a decision
decision affects strategic decision outcomes (Miller and Judge, 1991). In line with previous
research (Helgeson and Ursic, 1993; Jacoby et al., 1974), we measured decision time as the total
outcomes
time that a participant needed to complete the strategy simulation (i.e. to (re-)allocate budget
to the initiatives and to analyze performance feedback).
311
4. Results
Table 1 shows the means, standard deviations and correlations for all variables. We also
addressed the potential for multicollinearity and heteroscedasticity in our sample. To control
for multicollinearity, we calculated the variance inflation factors. None of the variance
inflation factors exceeded 1.3, which suggests that multicollinearity is not a concern (Hair
et al., 2014). In addition, we tested whether the regression residuals were dependent on the
values of the independent variables by using the Breusch-Pagan/Cook-Weisberg test for
heteroscedasticity (Breusch and Pagan, 1979; Cook and Weisberg, 1983). The results were not
significant, which implies that heteroscedasticity is not a problem.
Table 2 shows the results of the regression analyses that we used to test our first
hypothesis, which proposes an inverted curvilinear effect of PsyCap on strategic decision
outcomes. Thus, we used strategic decision outcomes as the dependent variable in Models 1
and 2. In Model 1, we introduced only the control variables. We entered PsyCap and PsyCap
squared in Model 2 to test for PsyCap’s curvilinear effects (Aiken and West, 1991). Both
models are significant and explain between 11.4 and 34.3% of the variance in strategic
decision outcomes. Moreover, we find a positive, highly significant coefficient for PsyCap
(b 5 0.246; p 5 0.001) and a negative, significant coefficient for PsyCap squared (b 5 0.024;
p 5 0.003) in Model 2. These findings support Hypothesis 1. To further substantiate the
curvilinear relationship, we plotted the graph (see Figure 1) and calculated the inflection point
(Haans et al., 2016; Lind and Mehlum, 2010), which is at a PsyCap level of 5.13.
Our second hypothesis proposes that heuristic information processing mediates the
inverted curvilinear relationship between PsyCap and strategic decision outcomes. Hayes
and Preacher (2010) propose instantaneous indirect effect analysis as an appropriate
approach for assessing mediating effects when the relationships among the independent
variable, the proposed mediator and the dependent variable are non-linear. Such a non-linear
relationship exists in our case. Instantaneous indirect effect analysis estimates the indirect
effect (denoted as θ) of the independent variable on the dependent variable through a
mediating variable at different values of the independent variable (Hayes and Preacher, 2010).
Consequently, we estimated the instantaneous indirect effect of PsyCap on strategic decision
outcomes through heuristic information processing at different representative PsyCap
values. As suggested by Hayes and Preacher (2010), we used the sample mean for PsyCap as
well as the values one standard deviation below and above the sample mean as relatively
moderate, relatively low, and relatively high PsyCap values, respectively.
Table 2 shows the three regression models that we estimated to specify the relationships
among the independent, mediating, and dependent variables. Model 2 addresses the
relationship between PsyCap and strategic decision outcomes. Model 3 is the mediator model
that depicts the relationship between PsyCap and heuristic information processing. Finally,
Model 4 shows the full dependent variable model that specifies the joint effect of PsyCap and
heuristic information processing on strategic decision outcomes.
To comprehensively test the mediating effect, we performed an instantaneous indirect
effect analysis based on the MEDCURVE macro and 5,000 bootstrap samples (Hayes and
Preacher, 2010). The results of this analysis are displayed in Table 3. The table shows that at
low and moderate PsyCap levels, PsyCap exerts a positive and significant effect on strategic
 15,2

312
JSMA

Table 1.

and correlations
Descriptive statistics
Variables Min Max Mean SD 1 2 3 4 5 6 7 8

1. Strategic decision outcomes 0.02 0.15 0.09 0.02 1

2. Heuristic information processing 1.00 5.20 2.92 0.98 0.455** 1
3. PsyCap 3.42 5.71 4.76 0.44 0.372** 0.370** 1
4. Age 23.00 65.00 34.07 8.76 0.176 0.042 0.285** 1
5. Gender (female) 0.00 1.00 0.40 0.49 0.041 0.014 0.033 0.080 1
6. Education level 0.00 3.00 1.88 0.51 0.222* 0.097 0.172 0.299** 0.098 1
7. Automotive experience 0.00 240.00 12.93 33.55 0.045 0.011 0.116 0.310** 0.086 0.182 1
8. Time 648.00 3798.00 1830.19 639.51 0.018 0.173 0.169 0.083 0.126 0.117 0.051 1
Note(s): *p < 0.05; **p < 0.01; N 5 102
 Strategic decision Strategic decision Heuristic info. Strategic decision
Strategic
outcomes outcomes Processing outcomes decision
Model 1 Model 2 Model 3 Model 4 outcomes
Variables Coeff SE Coeff SE Coeff SE Coeff SE

Controls
Age 0.001* 0.000 0.001** 0.000 0.004 0.011 0.001** 0.000
Gender (female) 0.002 0.005 0.002 0.004 0.003 0.186 0.002 0.004 313
Education level 0.014** 0.005 0.013** 0.004 0.245 0.184 0.011** 0.004
Automotive 0.000 0.000 0.000 0.000 0.002 0.003 0.000 0.000
experience
Time 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Main effect
PsyCap – 0.246*** 0.072 7.539* 3.214 0.192** 0.071
PsyCap squared – 0.024** 0.008 0.731* 0.347 0.019* 0.008
Heuristic – – – 0.007** 0.002
information
processing
n 102 102 102 102
R-squared 0.114 0.343 0.201 0.410
Δ R-squared – 0.229*** – –
Adjusted R-squared 0.068 0.294 0.141 0.360
F 2.470* 7.009*** 3.372** 8.093*** Table 2.
Note(s): *p < 0.05; **p < 0.01; ***p < 0.001 Regression results

10.5%

10.0%

9.5%

9.0%

8.5%
ROE

8.0%

7.5%

7.0%
Figure 1.
6.5% Curvilinear
relationship between
6.0%
PsyCap and strategic
3.8 4.0 4.2 4.4 4.7 4.9 5.1 5.3 5.5 5.8 decision outcomes
PsyCap

θ(x) CI (95%)

Low PsyCap (M 5 4.3223) 0.0088 0.0031 0.0168 Table 3.

Moderate PsyCap (M 5 4.7627) 0.0042 0.0007 0.0115 Instantaneous indirect
High PsyCap (M 5 5.2030) 0.0005 0.0085 0.0076 effect results
JSMA decision outcomes that is mediated by heuristic information processing at a decreasing rate
15,2 (95% CI for θx 5 4.3223 5 0.0031 to 0.0168; 95% CI for θx 5 4.7627 5 0.0007 to 0.0115). At high
PsyCap levels, increasing PsyCap negatively affects strategic decision outcomes. However,
this relationship is not mediated by heuristic information processing, as the indirect effect of
PsyCap on strategic decision outcomes through heuristic information processing is not
statistically different from zero (95% CI for θx 5 5.2030 5 0.0085 to 0.0076; Hayes and
Preacher, 2010). Thus, our results show that heuristic information processing mediates the
314 relationship between PsyCap and strategic decision outcomes at low and moderate levels of
PsyCap, but not at high levels of PsyCap. Overall, our results offer partial support for
Hypothesis 2.
To increase our confidence in our findings, we conducted additional robustness checks.
Specifically, we re-ran our analyses using returns on assets (ROA) and stock prices as
alternative measures of strategic decision outcomes. Both measures are commonly used in
management research in general (Richard et al., 2009) and in research on strategic decision
making in particular (e.g. Lubatkin et al., 2006; Chatterjee and Hambrick, 2007; Sanders and
Hambrick, 2007). For both alternative specifications of our dependent variable, the results
remained unchanged. In addition, we re-ran the instantaneous indirect effect analysis for
other PsyCap values (25th, 50th and 75th percentiles). Again, our results remained
unchanged. As such, these robustness checks offer further support for our findings. Overall,
our results appear robust to alternative analyses and variable choices.

5. Discussion
Research in the strategic decision-making and the upper echelons fields has consistently
shown that the psychological characteristics of decision makers have important impacts on
strategic decision outcomes (Hambrick, 2007; Miller and Droge, 1986). By introducing
PsyCap, we offer a new and potentially more differentiated explanation for the impact of
individual characteristics on strategic decision outcomes. Our theoretical arguments and
empirical results suggest that PsyCap exerts an inverted curvilinear effect on strategic
decision outcomes that is partly mediated by heuristic information processing. Through an
empirical study involving 102 executives in the financial services industry, we show that
increasing PsyCap from low and moderate levels positively affects strategic decision
outcomes, although this impact is mediated by heuristic information processing. At very high
levels, PsyCap’s effect on strategic decision outcomes becomes negative.
The main contribution of our paper is the introduction of PsyCap into strategic decision-
making research. Thus far, research in the field has concentrated on individual
characteristics, such as narcissism (e.g. Chatterjee and Hambrick, 2007; Patel and Cooper,
2014), hubris (e.g. Hayward and Hambrick, 1997; Li and Tang, 2010), hyper-CSE (Hiller and
Hambrick, 2005) and overconfidence (e.g. Chen et al., 2015; Simon and Houghton, 2003), which
explain negative effects on strategic decision outcomes. In contrast, PsyCap, which originates
from positive psychology, primarily explains improvements in strategic decision outcomes.
In addition, PsyCap is not conceptualized as a trait, like narcissism, hubris, or hyper-CSE.
Instead, PsyCap is viewed as state-like and, hence, malleable. Therefore, it can be developed
and managed in a way that improves performance (Luthans et al., 2006a, 2008). These
characteristics clearly differentiate PsyCap from previously researched psychological
characteristics in strategic decision-making research. Thus, drawing on PsyCap as an
antecedent of strategic decision outcomes might enable future research to go beyond merely
explaining the negative outcomes of strategic decisions (e.g. Hiller and Hambrick, 2005) and
to extend the number of studies that concentrate on how individual characteristics can be
developed to improve strategic decisions in organizations (Weick and Sutcliffe, 2006).
Second, our study contributes to research on information processing by highlighting the
impact of individual differences as drivers of processing styles (Curtis and Wee, 2021;
Kiat and Belli, 2018). Dual-system theories of information processing, such as Chaiken’s Strategic
(1980) dual-process theory, emphasize the relevance of individual differences in, for instance, decision
values (e.g. Borgstede et al., 2014), attitudes (Fazio et al., 1986) and motivations (e.g. Levin
et al., 2000) for the choice of information-processing methods. We add to this research by
outcomes
introducing PsyCap as a cognitive individual characteristic that – at low and moderate levels
– reduces the degree of heuristic information processing. As such, our study might contribute
to research on individual differences in information processing by highlighting the role of
cognitive characteristics as drivers of processing styles (e.g. Leung, 2020). 315
Third, we contribute to research on PsyCap itself by analyzing its effects beyond the fields
of positive psychology and organizational behavior. In contrast to the linear effects of PsyCap
on several outcome variables found in organizational behavior research (e.g. Avey et al.,
2010b), we theoretically argue for and empirically find an inverted curvilinear effect of
PsyCap on strategic decision outcomes. As such, our paper highlights the relevance of
PsyCap in the strategic decision-making context and demonstrates that the effects of PsyCap
might be different in this context from those found in organizational behavior research. Thus,
it seems promising to analyze the impact of PsyCap on other aspects of strategic decision
making, such as top management team constellations (e.g. Liu et al., 2021).

5.1 Limitations
As with all research, our paper suffers from several limitations that point to opportunities for
future research. First, our results show only partial support for Hypothesis 2. More
specifically, heuristic processing mediates the relationship between PsyCap and strategic
decision outcomes at low and moderate levels of PsyCap, but not at high levels. Even though
our sample comprises 102 executives, the share of participants with PsyCap levels exceeding
the inflection point of 5.13 amounts to only 18.6%. Hence, future studies could attempt to
increase the sample size or focus on executives with very high PsyCap levels. Such steps
might help in the exploration of potential mediating effects at very high PsyCap levels. Such
studies could also test for additional mediating effects. For instance, selective attention has
been shown to negatively affect strategic decision processes and their outcomes (Geers and
Lassiter, 2002; Radcliffe and Klein, 2002; Spirrison and Gordy, 1993).
Second, our participants were all active in the German financial services industry. Even
though a focus on a single industry and a single national setting has been applied in previous
research (Buyl et al., 2019; Gerstner et al., 2013; Simon and Houghton, 2003) and helps to
reduce the threat of potentially confounding systematic effects (Dess et al., 1990), future
studies should analyze different industries and cultural settings to ensure that the findings
are representative beyond the financial industry.
Third, we used a computerized strategy simulation for our empirical study (Narayanan,
2014). Even though that simulation (Narayanan, 2014) reflected the characteristics of
strategic decision making (Mintzberg et al., 1976; Schwenk, 1984), future studies should use
alternative research designs to test the effects of PsyCap on strategic decision outcomes.
Qualitative research (Burgeois and Eisenhardt, 1988) or surveys (Meissner and Wulf, 2014)
might be suitable in this regard.
Fourth, while we have contributed towards opening the blackbox of strategic decision
making by analyzing the impact of PsyCap and heuristic information processing on strategic
decision outcomes, future research needs to address further potential socio-psychological
drivers of strategic decision outcomes such as emotions (Meissner et al., 2020) as well as their
interplay with PsyCap.
Fifth, we have used a simulation-based field study to measure the impact of PsyCap on
strategic decision outcomes. While ours one of the first studies that links PsyCap to strategic
decision making (Nolzen, 2018), future research should go beyond assessing the impact on
JSMA strategic decision outcomes and analyze the effect of PsyCap in the strategic decision process
15,2 in general in more detail, e.g. by analyzing sub-decision in each round of the simulation and
by applying multi-level modeling to account for potential autocorrelation between these sub-
decisions (Woltman et al., 2012).

5.2 Implications for corporate praxis

316 The results of this study have also implications for corporate praxis. PsyCap has been shown
to be malleable through, for instance, micro-interventions (Luthans et al., 2006a) and
dedicated web-based training (Luthans et al., 2008). Therefore, an awareness of the
curvilinear effects of PsyCap in relation to strategic decision making is relevant for ensuring
appropriate PsyCap levels among managers. More specifically, depending on managers’
PsyCap levels, either further increases in PsyCap or a regulation of this characteristic might
be appropriate in order to optimize strategic decision outcomes.

6. Concluding remarks
This study enriches research on individual characteristics as drivers of strategic decision
making. We introduce PsyCap as a driver of strategic decision outcomes. Drawing on the
effects of PsyCap’s individual components on strategic decision outcomes, we hypothesize
and find evidence of a curvilinear effect of PsyCap on strategic decision outcomes. Our results
show that PsyCap improves strategic decision outcomes up to an inflection point, after which
it reduces strategic decision outcomes. We also find that this effect is mediated by heuristic
information processing for low and medium levels of PsyCap.

References
Abbas, M. and Raja, U. (2015), “Impact of psychological capital on innovative performance and job
stress”, Canadian Journal of Administrative Sciences, Vol. 32, pp. 128-138.
Aiken, L.S. and West, S.G. (1991), Multiple Regression: Testing and Interpreting Interactions, Sage,
Newbury Park, CA.
Avey, J.B., Patera, J.L. and West, B.J. (2006), “The implications of positive psychological capital on
employee absenteeism”, Journal of Leadership and Organizational Studies, Vol. 13, pp. 42-60.
Avey, J.B., Luthans, F. and Jensen, S.M. (2009), “Psychological capital. A positive resource for
combating employee stress and turnover”, Human Resource Management, Vol. 48, pp. 677-693.
Avey, J.B., Luthans, F. and Youssef, C.M. (2010a), “The additive value of positive psychological capital
in predicting work attitudes and behaviors”, Journal of Management, Vol. 36, pp. 430-452.
Avey, J.B., Nimnicht, J.L. and Graber Pigeon, N. (2010b), “Two field studies examining the association
between positive psychological capital and employee performance”, Leadership and
Organization Development Journal, Vol. 31, pp. 384-401.
Avey, J.B., Reichard, R.J., Luthans, F. and Mhatre, K.H. (2011), “Meta-analysis of the impact of positive
psychological capital on employee attitudes, behaviors, and performance”, Human Resource
Development Quarterly, Vol. 22, pp. 127-152.
Bande, B., Fern
andez-Ferr
ın, P., Varela, J.A. and Jaramillo, F. (2015), “Emotions and salesperson
propensity to leave: the effects of emotional intelligence and resilience”, Industrial Marketing
Management, Vol. 44, pp. 142-153.
Bandura, A. (1993), “Perceived self-efficacy in cognitive development and functioning”, Educational
Psychologist, Vol. 28, pp. 117-148.
Bandura, A. and Jourden, F.J. (1991), “Self-regulatory mechanisms governing the impact of social
comparison on complex decision making”, Journal of Personality and Social Psychology, Vol. 60,
pp. 941-951.
Beck, J.W. and Schmidt, A.M. (2012), “Taken out of context? Cross-level effects of between-person self- Strategic
efficacy and difficulty on the within-person relationship of self-efficacy with resource allocation
and performance”, Organizational Behavior and Human Decision Processes, Vol. 119, decision
pp. 195-208. outcomes
Borgstede, C.V., Andersson, M. and Hansla, A. (2014), “Value-congruent information processing: the
role of issue involvement and argument strength”, Basic and Applied Social Psychology, Vol. 36,
pp. 461-477.
Breusch, T.S. and Pagan, A.R. (1979), “A simple test for heteroscedasticity and random coefficient 317
variation”, Econometrica, Vol. 47.
Bromiley, P. and Rau, D. (2016), “Social, behavioral, and cognitive influences on upper echelons during
strategy process”, Journal of Management, Vol. 42, pp. 174-202.
Burgeois, L.J. and Eisenhardt, K.M. (1988), “Strategic decision processes in high velocity
environments: four cases in the microcomputer industry”, Management Science, Vol. 34,
pp. 816-835.
Buyl, T., Boone, C. and Wade, J.B. (2019), “CEO narcissism, risk-taking, and resilience: an empirical
analysis in US commercial banks”, Journal of Management, Vol. 45 No. 4, pp. 1372-1400.
Campbell, W.K., Goodie, A.S. and Foster, J.D. (2004), “Narcissism, confidence, and risk attitude”,
Journal of Behavioral Decision Making, Vol. 17, pp. 297-311.
Chaiken, S. (1980), “Heuristic versus systematic information processing and the use of source versus
message cues in persuasion”, Journal of Personality and Social Psychology, Vol. 39, pp. 752-766.
Chaiken, S. and Maheswaran, D. (1994), “Heuristic processing can bias systematic processing: effects
of source credibility, argument ambiguity, and task importance on attitude judgment”, Journal
of Personality and Social Psychology, Vol. 66, pp. 460-473.
Chaiken, S., Liberman, A. and Eagly, A.H. (1989), “Heuristic and systematic information processing
within and beyond the persuasion context”, in Uleman, J.S. and Bargh, J.A. (Eds), Unintended
Thought, Guilford Press, New York, pp. 212-252.
Chang, E.C. (1998), “Hope, problem-solving ability, and coping in a college student population: some
implications for theory and practice”, Journal of Clinical Psychology, Vol. 54, pp. 953-962.
Chatterjee, A. and Hambrick, D.C. (2007), “It’s all about me: narcissistic chief executive officers and
their effects on company strategy and performance”, Administrative Science Quarterly, Vol. 52,
pp. 351-386.
Chatterjee, A. and Hambrick, D.C. (2011), “Executive personality, capability cues, and risk taking”,
Administrative Science Quarterly, Vol. 56, pp. 202-237.
Chen, G., Crossland, C. and Luo, S. (2015), “Making the same mistake all over again: CEO
overconfidence and corporate resistance to corrective feedback”, Strategic Management Journal,
Vol. 36, pp. 1513-1535.
Chesney, A.A. and Locke, E.A. (1991), “Relationships among goal difficulty, business strategies, and
performance on a complex management simulation task”, Academy of Management Journal,
Vol. 34, pp. 400-424.
Cook, R.D. and Weisberg, S. (1983), “Diagnostics for heteroscedasticity in regression”, Biometrika,
Vol. 70 No. 1, pp. 1-10.
Cragun, O.R., Olsen, K.J. and Wright, P.M. (2020), “Making CEO narcissism research great: a review
and meta-analysis of CEO narcissism”, Journal of Management, Vol. 46 No. 6, pp. 908-936.
Curtis, G.J. and Wee, S. (2021), “Are individual differences in information-processing styles related to
transformational leadership? A test of the Cognitive Experiential Leadership Model”, Frontiers
in Psychology, Vol. 12, p. 983.
Dawkins, S., Martin, A., Scott, J. and Sanderson, K. (2013), “Building on the positives: a psychometric
review and critical analysis of the construct of psychological capital”, Journal of Occupational
and Organizational Psychology, Vol. 86, pp. 348-370.
JSMA Dean, J.W. Jr and Sharfman, M.P. (1996), “Does decision process matter? A study of strategic decision-
making effectiveness”, Academy of Management Journal, Vol. 39, pp. 368-396.
15,2
Dess, G.G., Ireland, R.D. and Hitt, M.A. (1990), “Industry effects and strategic management research”,
Journal of Management, Vol. 16, pp. 7-27.
Dreu, C.K.W.D., Koole, S.L. and Oldersma, F.L. (1999), “On the seizing and freezing of negotiator
inferences: need for cognitive closure moderates the use of heuristics in negotiation”, Personality
and Social Psychology Bulletin, Vol. 25, pp. 348-362.
318
Elbanna, S. and Child, J. (2007), “Influences on strategic decision effectiveness: development and test
of an integrative model”, Strategic Management Journal, Vol. 28, pp. 431-453.
Fazio, R.H., Sanbonmatsu, D.M., Powell, M.C. and Kardes, F.R. (1986), “On the automatic activation of
attitudes”, Journal of Personality and Social Psychology, Vol. 50, pp. 229-238.
Ferris, D.L., Rosen, C.R., Johnson, R.E., Brown, D.J., Risavy, S.D. and Heller, D. (2011), “Approach or
avoidance (or both?): integrating core self-evaluations within an approach/avoidance
framework”, Personnel Psychology, Vol. 64, pp. 137-161.
Finkelstein, S. and Hambrick, D.C. (1990), “Top management team tenure and organizational
outcomes: the moderating role of managerial discretion”, Administrative Science Quarterly,
Vol. 35, pp. 484-503.
Fisher, R.J. (1993), “Social desirability bias and the validity of indirect questioning”, Journal of
Consumer Research, Vol. 20, pp. 303-315.
Gaspar, R., Lu
ıs, S., Seibt, B., Lima, M.L., Marcu, A., Rutsaert, P., Fletcher, D., Verbeke, W. and Barnett, J.
(2016), “Consumers’ avoidance of information on red meat risks: information exposure effects on
attitudes and perceived knowledge”, Journal of Risk Research, Vol. 19, pp. 533-549.
Geers, A.L. and Lassiter, G.D. (2002), “Effects of affective expectations on affective experience: the
moderating role of optimism–pessimism”, Personality and Social Psychology Bulletin, Vol. 28,
pp. 1026-1039.
Gerstner, W.-C., K€onig, A., Enders, A. and Hambrick, D.C. (2013), “CEO narcissism, audience
engagement, and organizational adoption of technological discontinuities”, Administrative
Science Quarterly, Vol. 58, pp. 257-291.
Gibson, B. and Sanbonmatsu, D.M. (2004), “Optimism, pessimism, and gambling: the downside of
optimism”, Personality and Social Psychology Bulletin, Vol. 30, pp. 149-160.
Gupta, V. and Singh, S. (2014), “Psychological capital as a mediator of the relationship between
leadership and creative performance behaviors: empirical evidence from the Indian R&D
sector”, The International Journal of Human Resource Management, Vol. 25, pp. 1373-1394.
Haans, R.F.J., Pieters, C. and He, Z.-L. (2016), “Thinking about U: theorizing and testing U- and
inverted U-shaped relationships in strategy research”, Strategic Management Journal, Vol. 37,
pp. 1177-1195.
Hair, J.F., Babin, B.J., Anderson, R.E. and Black, W.C. (2014), Multivariate Data Analysis, 7th ed.,
Pearson New International Edition, Pearson, Harlow, Essex.
Hambrick, D.C. (2007), “Upper echelons theory: an update”, Academy of Management Journal, Vol. 32,
pp. 334-343.
Hayes, A.F. and Preacher, K.J. (2010), “Quantifying and testing indirect effects in simple mediation
models when the constituent paths are nonlinear”, Multivariate Behavioral Research, Vol. 45,
pp. 627-660.
Haynes, K.T., Campbell, J.T. and Hitt, M.A. (2010), “Greed, hubris and board power: effects on firm
outcomes”, Academy of Management Proceedings, pp. 1-6.
Hayward, M.L.A. and Hambrick, D.C. (1997), “Explaining the premiums paid for large acquisitions:
evidence of CEO hubris”, Administrative Science Quarterly, Vol. 42, pp. 103-127.
Hayward, M.L.A., Shepherd, D.A. and Griffin, D. (2006), “A hubris theory of entrepreneurship”,
Management Science, Vol. 52, pp. 160-172.
Helgeson, J.G. and Ursic, M.L. (1993), “Information load, cost/benefit assessment and decision strategy Strategic
variability”, Journal of the Academy of Marketing Science, Vol. 21, pp. 13-20.
decision
Hiller, N.J. and Hambrick, D.C. (2005), “Conceptualizing executive hubris: the role of (hyper-) core self-
evaluations in strategic decision-making”, Strategic Management Journal, Vol. 26, pp. 297-319.
outcomes
Hitt, M.A. and Tyler, B.B. (1991), “Strategic decision models: integrating different perspectives”,
Strategic Management Journal, Vol. 12, pp. 327-351.
Huang, L. and Luthans, F. (2015), “Toward better understanding of the learning goal orientation- 319
creativity relationship: the role of positive psychological capital”, Applied Psychology, Vol. 64,
pp. 444-472.
Hutzschenreuter, T. and Kleindienst, I. (2006), “Strategy-process research: what have we learned and
what is still to be explored”, Journal of Management, Vol. 32, pp. 673-720.
Isen, A.M. (2001), “An influence of positive affect on decision making in complex situations: theoretical
issues with practical implications”, Journal of Consumer Psychology, Vol. 11, pp. 75-85.
Jacoby, J., Speller, D.E. and Kohn, C.A. (1974), “Brand choice behavior as a function of information
load”, Journal of Marketing Research, Vol. 11, pp. 63-69.
Jeong, S.-H. and Harrison, D.A. (2017), “Glass breaking, strategy making, and value creating: meta-
analytic outcomes of women as CEOs and TMT members”, Academy of Management Journal,
Vol. 60, pp. 1219-1252.
Jones, S.K., Yurak, T.J. and Frisch, D. (1997), “The effect of outcome information on the evaluation and
recall of individuals’ own decisions”, Organizational Behavior and Human Decision Processes,
Vol. 71 No. 1, pp. 95-120.
Khatri, N. and Ng, A.H. (2000), “The role of intuition in strategic decision making”, Human Relations,
Vol. 53, pp. 57-86.
Kiat, J.E. and Belli, R.F. (2018), “The role of individual differences in visual\verbal information
processing preferences in visual\verbal source monitoring”, Journal of Cognitive Psychology,
Vol. 30 No. 7, pp. 701-709.
Kim, J. and Noh, Y. (2016), “The effects of psychological capital and risk tolerance on service workers’
internal motivation for firm performance and entrepreneurship”, International Entrepreneurship
and Management Journal, Vol. 12, pp. 681-696.
Larson, M. and Luthans, F. (2006), “Potential added value of psychological capital in predicting work
attitudes”, Journal of Leadership and Organizational Studies, Vol. 13, pp. 45-62.
Leung, B.T.K. (2020), “Limited cognitive ability and selective information processing”, Games and
Economic Behavior, Vol. 120, pp. 345-369.
Levin, I.P., Huneke, M.E. and Jasper, J.D. (2000), “Information processing at successive stages of
decision making: need for cognition and inclusion-exclusion effects”, Organizational Behavior
and Human Decision Processes, Vol. 82, pp. 171-193.
Li, J. and Tang, Y. (2010), “CEO hubris and firm risk taking in China: the moderating role of
managerial discretion”, Academy of Management Journal, Vol. 53, pp. 45-68.
Lind, J.T. and Mehlum, H. (2010), “With or without U? The appropriate test for a U-shaped
relationship”, Oxford Bulletin of Economics and Statistics, Vol. 72, pp. 109-118.
Liu, F., Jarrett, M. and Maitlis, S. (2021), “Top management team constellations and their implications
for strategic decision making”, The Leadership Quarterly, p. 101510, In press.
Locke, E.A. and Latham, G.P. (2004), “What should we do about motivation theory? Six
recommendations for the twenty-first century”, The Academy of Management Review,
Vol. 29, p. 388.
Lubatkin, M.H., Simsek, Z., Ling, Y. and Veiga, J.F. (2006), “Ambidexterity and performance in small-
to medium-sized firms: the pivotal role of top management team behavioral integration”,
Journal of Management, Vol. 32, pp. 646-672.
JSMA Luthans, F. and Youssef, C.M. (2004), “Human, social, and now positive psychological capital
management: investing in people for competitive advantage”, Organizational Dynamics, Vol. 33,
15,2 pp. 143-160.
Luthans, F., Avey, J.B., Avolio, B.J., Norman, S.M. and Combs, G.M. (2006a), “Psychological capital
development: toward a micro-intervention”, Journal of Organizational Behavior, Vol. 27,
pp. 387-393.
Luthans, F., Youssef, C.M. and Avolio, B.J. (Eds) (2006b), Psychological Capital: Developing the Human
320 Competitive Edge, Oxford University Press, Oxford.
Luthans, F., Avolio, B.J., Avey, J.B. and Norman, S.M. (2007), “Positive psychological capital:
measurement and relationship with performance and satisfaction”, Personnel Psychology,
Vol. 60, pp. 541-572.
Luthans, F., Avey, J.B. and Patera, J.L. (2008), “Experimental analysis of a web-based training
intervention to develop positive psychological capital”, Academy of Management Learning and
Education, Vol. 7, pp. 209-221.
Luthans, F., Youssef, C.M. and Rawski, S.L. (2011), “A tale of two paradigms: the impact of
psychological capital and reinforcing feedback on problem solving and innovation”, Journal of
Organizational Behavior Management, Vol. 31, pp. 333-350.
Maheswaran, D. and Chaiken, S. (1991), “Promoting systematic processing in low-motivation settings:
effect of incongruent information on processing and judgment”, Journal of Personality and
Social Psychology, Vol. 61 No. 1, p. 13.
Malhotra, S., Reus, T.H., Zhu, P. and Roelofsen, E.M. (2018), “The acquisitive nature of extraverted
CEOs”, Administrative Science Quarterly, Vol. 63, pp. 370-408.
Malmendier, U. and Tate, G. (2008), “Who makes acquisitions? CEO overconfidence and the market’s
reaction”, Journal of Financial Economics, Vol. 89, pp. 20-43.
Mart
ınez, I.M., Youssef-Morgan, C.M., Chambel, M.J. and Marques-Pinto, A. (2019), “Antecedents of
academic performance of university students: academic engagement and psychological capital
resources”, Educational Psychology, Vol. 39 No. 8, pp. 1047-1067.
Masten, A.S. (2001), “Ordinary magic: resilience processes in development”, American Psychologist,
Vol. 56, pp. 227-238.
McManus, J. (2018), “Hubris and unethical decision making: the tragedy of the uncommon”, Journal of
Business Ethics, Vol. 149, pp. 169-185.
Meissner, P. and Wulf, T. (2014), “Antecedents and effects of decision comprehensiveness: the role of
decision quality and perceived uncertainty”, European Management Journal, Vol. 32,
pp. 625-635.
Meissner, P., Poensgen, C. and Wulf, T. (2020), “How hot cognition can lead us astray: the effect of
anger on strategic decision making”, European Management Journal, Vol. 39, pp. 434-444.
Miller, D. and Droge, C. (1986), “Psychological and traditional determinants of structure”,
Administrative Science Quarterly, Vol. 31, p. 539.
Miller, A. and Judge, W.Q. (1991), “Antecedents and outcomes of decision speed in different
environmental contexts”, Academy of Management Journal, Vol. 34, pp. 449-463.
Mintzberg, H., Duru, R. and Th
eor^et, A. (1976), “The structure of ‘un-structured’ decision processes”,
Administrative Science Quarterly, Vol. 21, pp. 246-275.
Mueller, A. and Brettel, M. (2012), “Impact of biased pecking order preferences on firm success in real
business cycles”, Journal of Behavioral Finance, Vol. 13, pp. 199-213.
Narayanan, V.G. (2014), “Strategy simulation: the balanced scorecard”, Harvard Business School
Simulation, Teaching Note, Harvard Business School Press, Boston, MA.
Newman, A., Ucbasaran, D., Zhu, F. and Hirst, G. (2014), “Psychological capital: a review and
synthesis”, Journal of Organizational Behavior, Vol. 35, pp. 120-138.
Nguyen, T.D. and Nguyen, T.T.M. (2012), “Psychological capital, quality of work life, and quality of Strategic
life of marketers”, Journal of Macromarketing, Vol. 32, pp. 87-95.
decision
Nolzen, N. (2018), “The concept of psychological capital: a comprehensive review”, Management
Review Quarterly, Vol. 32, p. 128.
outcomes
Norman, S.M., Avey, J.B., Nimnicht, J.L. and Graber Pigeon, N. (2010), “The interactive effects of
psychological capital and organizational identity on employee organizational citizenship and
deviance behaviors”, Journal of Leadership and Organizational Studies, Vol. 17, pp. 380-391.
321
O’Reilly, C.A., Doerr, B. and Chatman, J.A. (2018), “See you in court: how CEO narcissism increases
firms’ vulnerability to lawsuits”, The Leadership Quarterly, Vol. 29, pp. 365-378.
Ong, A.D., Bergeman, C.S., Bisconti, T.L. and Wallace, K.A. (2006), “Psychological resilience, positive
emotions, and successful adaptation to stress in later life”, Journal of Personality and Social
Psychology, Vol. 91, pp. 730-749.
Pandey, J., Gupta, M. and Hassan, Y. (2021), “Intrapreneurship to engage employees: role of
psychological capital”, Management Decision, Vol. 59, pp. 1525-1545.
Papenhausen, C. (2010), “Managerial optimism and search”, Journal of Business Research, Vol. 63,
pp. 716-720.
Park, S.H., Westphal, J.D. and Stern, I. (2011), “Set up for a fall: the effects of insidious flattery and
opinion conformity toward corporate leaders”, Administrative Science Quarterly, Vol. 56,
pp. 257-302.
Parker, S.K. (1998), “Enhancing role breadth self-efficacy: the roles of job enrichment and other
organizational interventions”, The Journal of Applied Psychology, Vol. 83, pp. 835-852.
Patel, P.C. and Cooper, D. (2014), “The harder they fall, the faster they rise: approach and avoidance
focus in narcissistic CEOs”, Strategic Management Journal, Vol. 35, pp. 1528-1540.
Peterson, S.J., Luthans, F., Avolio, B.J., Walumbwa, F.O. and Zhang, Z. (2011), “Psychological capital
and employee performance: a latent growth modeling approach”, Personnel Psychology, Vol. 64,
pp. 427-450.
Petty, R.E. and Cacioppo, J.T. (1986), “Message elaboration versus peripheral cues”, in Communication
and Persuasion, Springer, New York, NY, pp. 141-172.
Phillips, W.J., Fletcher, J.M., Marks, A.D.G. and Hine, D.W. (2016), “Thinking styles and decision
making: a meta-analysis”, Psychological Bulletin, Vol. 142, pp. 260-290.
Podsakoff, P.M., MacKenzie, S.B., Lee, J.-Y. and Podsakoff, N.P. (2003), “Common method biases in
behavioral research: a critical review of the literature and recommended remedies”, The Journal
of Applied Psychology, Vol. 88, pp. 879-903.
Polivy, J. and Herman, C.P. (2002), “If at first you don’t succeed: false hopes of self-change”, American
Psychologist, Vol. 57, pp. 677-689.
Powell, T.C., Lovallo, D. and Fox, C.R. (2011), “Behavioral strategy”, Strategic Management Journal,
Vol. 32, pp. 1369-1386.
Radcliffe, N.M. and Klein, W.M.P. (2002), “Dispositional, unrealistic, and comparative optimism:
differential relations with the knowledge and processing of risk information and beliefs about
personal risk”, Personality and Social Psychology Bulletin, Vol. 28, pp. 836-846.
Richard, P.J., Devinney, T.M., Yip, G.S. and Johnson, G. (2009), “Measuring organizational performance:
towards methodological best practice”, Journal of Management, Vol. 35, pp. 718-804.
Richardson, O.C. (2000), “Racial diversity, business strategy, and firm performance: a resource-based
view”, Academy of Management Journal, Vol. 43, pp. 164-177.
Russo, J.E. and Schoemaker, P.J.H. (1992), “Managing overconfidence”, Sloan Management Review,
Vol. 33, pp. 7-17.
Sanders, W.G. and Hambrick, D.C. (2007), “Swinging for the fences: the effects of CEO stock options on
company risk taking and performance”, Academy of Management Journal, Vol. 50, pp. 1055-1078.
JSMA Scheier, M.F. and Carver, C.S. (1985), “Optimism, coping, and health: assessment and implications of
generalized outcome expectancies”, Health Psychology, Vol. 4, pp. 219-247.
15,2
Scheier, M.F. and Carver, C.S. (1992), “Effects of optimism on psychological and physical well-being:
theoretical overview and empirical update”, Cognitive Therapy and Research, Vol. 16,
pp. 201-228.
Schwenk, C.R. (1984), “Cognitive simplification processes in strategic decision-making”, Strategic
Management Journal, Vol. 5, pp. 111-128.
322
Segerstrom, S.C. (2001), “Optimism and attentional bias for negative and positive stimuli”, Personality
and Social Psychology Bulletin, Vol. 27, pp. 1334-1343.
Seligman, M.E.P. (1998), Learned Optimism, Pocket Books, New York.
Seligman, M.E.P. and Csikszentmihalyi, M. (2000), “Positive psychology: an introduction”, American
Psychologist, Vol. 55, pp. 5-14.
Shepherd, N.G. and Rudd, J.M. (2014), “The influence of context on the strategic decision-making
process: a review of the literature”, International Journal of Management Reviews, Vol. 16,
pp. 340-364.
Shin, J., Taylor, M.S. and Seo, M.-G. (2012), “Resources for change: the relationships of organizational
inducements and psychological resilience to employees’ attitudes and behaviors toward
organizational change”, Academy of Management Journal, Vol. 55, pp. 727-748.
Simon, M. and Houghton, S.M. (2003), “The relationship between overconfidence and the introduction
of risky products: evidence from a field study”, Academy of Management Journal, Vol. 46,
pp. 139-149.
Siu, O.L., Bakker, A.B. and Jiang, X. (2014), “Psychological capital among university students:
relationships with study engagement and intrinsic motivation”, Journal of Happiness Studies,
Vol. 15, pp. 979-994.
Siu, O.L., Cheung, F. and Lui, S. (2015), “Linking positive emotions to work well-being and turnover
intention among Hong Kong police officers: the Role of Psychological Capital”, Journal of
Happiness Studies, Vol. 16, pp. 367-380.
Smerecnik, C.M.R., Mesters, I., Candel, M.J.J.M., Vries, H.D. and Vries, N.K.D. (2012), “Risk perception
and information processing: the development and validation of a questionnaire to assess self-
reported information processing”, Risk Analysis, Vol. 32, pp. 54-66.
Snyder, C.R., Harris, C., Anderson, J.R., Holleran, S.A., Irving, L.M., Sigmon, S.T., Yoshinobu, L., Gibb,
J., Langelle, C. and Harney, P. (1991), “The will and the ways: development and validation of an
individual-differences measure of hope”, Journal of Personality and Social Psychology, Vol. 60,
pp. 570-585.
Snyder, C.R., Sympson, S.C., Ybasco, F.C., Borders, T.F., Babyak, M.A. and Higgins, R.L. (1996),
“Development and validation of the state hope scale”, Journal of Personality and Social
Psychology, Vol. 70, pp. 321-335.
Spirrison, C.L. and Gordy, C.C. (1993), “The constructive thinking inventory and detecting errors in
proofreading”, Perceptual and Motor Skills, Vol. 76, pp. 631-634.
Stajkovic, A.D. and Luthans, F. (1998), “Social cognitive theory and self-efficacy: going beyond
traditional motivational and behavioral approaches”, Organizational Dynamics, Vol. 26,
pp. 62-74.
Stone, D.N. (1994), “Overconfidence in initial self-efficacy judgements: effects on decision processes
and performance”, Organizational Behavior and Human Decision Processes, Vol. 59, pp. 452-474.
Tugade, M.M. and Fredrickson, B.L. (2004), “Resilient individuals use positive emotions to bounce
back from negative emotional experiences”, Journal of Personality and Social Psychology,
Vol. 86, pp. 320-333.
Wagnild, G.M. and Young, H.M. (1993), “Development and psychometric evaluation of the resilience
scale”, Journal of Nursing Measurement, Vol. 1, pp. 165-178.
Weick, K.E. and Sutcliffe, K.M. (2006), “Mindfulness and the quality of organizational attention”, Strategic
Organization Science, Vol. 17, pp. 514-524.
decision
Westphal, J.D. and Bednar, M.K. (2005), “Pluralistic ignorance in corporate boards and firms’ strategic
persistence in response to low firm performance”, Administrative Science Quarterly, Vol. 50,
outcomes
pp. 262-298.
Woltman, H., Feldstain, A., MacKay, J.C. and Rocchi, M. (2012), “An introduction to hierarchical linear
modeling”, Tutorials in Quantitative Methods for Psychology, Vol. 8 No. 1, pp. 52-69.
323
Wood, R., Bandura, A. and Bailey, T. (1990), “Mechanism governing organizational performance in
complex decision-making environments”, Organizational Behavior and Human Decision
Processes, Vol. 46, pp. 181-201.
Zhang, L., Ren, S., Chen, X., Li, D. and Yin, D. (2020), “CEO hubris and firm pollution: state and market
contingencies in a transitional economy”, Journal of Business Ethics, Vol. 161 No. 2, pp. 459-478.
Zhu, D.H. and Chen, G. (2015), “Narcissism, director selection, and risk-taking spending”, Strategic
Management Journal, Vol. 36, pp. 2075-2098.
JSMA Appendix 1
PsyCap questionnaire
15,2
PsyCap (Luthans et al., 2006b)

Below are statements that describe how you might think about yourself right now.
324 Please use the following scales to indicate your level of agreement or disagreement with each statement.
Please respond to all statements.

1 = strongly disagree, 2 = disagree, 3 = somewhat disagree, 4 = somewhat agree, 5 = agree, 6 = strongly agree

1 2 3 4 5 6
I feel confident analyzing a long-term problem to find a solution.

I feel confident in representing my work area in meetings with management.

I feel confident contributing to discussions about the company’s strategy.
I feel confident helping to set targets/goals in my work area.
I feel confident contacting people outside the company (e.g., suppliers, customers) to discuss problems.
I feel confident presenting information to a group of colleagues.
If I should find myself in a jam at work, I could think of many ways to get out of it.

At the present time, I am energetically pursuing my goals at work.

There are lots of ways around any problem.
Right now I see myself as being pretty successful at work.
I can think of many ways to reach my current work goals.
At this time, I am meeting the work goals that I have set for myself.
When I have a setback at work, I have trouble recovering from it, moving on.

I usually manage difficulties one way or another at work.

I can be “on my own,” so to speak, at work if I have to.
I usually take stressful things at work in stride.
I can get through difficult times at work because I’ve experienced difficulty before.
I feel I can handle many things at a time at this job.
When things are uncertain for me at work, I usually expect the best.

If something can go wrong for me work-wise, it will.

I always look on the bright side of things regarding my job.
I’m optimistic about what will happen to me in the future as it pertains to work.
In this job, things never work out the way I want them to.
I approach this job as if “every cloud has a silver lining”.
Appendix 2 Strategic
Questionnaire heuristic information processing
decision
outcomes
Heuristic Information Processing (Smerecnik et al., 2012)

Please read the following statements and select the level of agreement
that best indicates your approach during the “Balanced Scorecard Simulation”
Please respond to all statements.
325

1 = completely disagree, 7 = completely agree

1 2 3 4 5 6 7
I skimmed through the information.

I did not spend much time thinking about the information.

The provided material did not contain useful information on which I based my decision.
While reading the information I did not think about the arguments presented in the information.
The information contained too many conflicting data.

Corresponding author
Torsten Wulf can be contacted at: [email protected]

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: [email protected]