Päivi Karhu COGNITIVE AMBIDEXTERITY: EXAMINATION OF THE COGNITIVE DIMENSION IN DECISION-MAKING DUALITIES Thesis for the degree of Doctor of Science (Economics and Business Administration) to be presented with due permission for public examination and criticism in the Auditorium 2310 at Lappeenranta University of Technology, Lappeenranta, Finland on the 25th of August, 2017, at noon. Acta Universitatis Lappeenrantaensis 756 Supervisor Professor Paavo Ritala LUT School of Business and Management Lappeenranta University of Technology Finland Supervisor Professor Liisa-Maija Sainio LUT School of Business and Management Lappeenranta University of Technology Finland Supervisor Professor Robert E. Morgan Cardiff University Cardiff Business School Wales, UK Reviewers Professor Aaron C.T. Smith Graduate School of Business and Law RMIT University Australia Assistant Professor Alexander Zimmermann Institute of Management University of St. Gallen Switzerland Opponent Professor Leona Achtenhagen Business Administration Jönköping International Business School Sweden ISBN 978-952-335-108-0 ISBN 978-952-335-109-7 (PDF) ISSN-L 1456-4491 ISSN 1456-4491 Lappeenrannan teknillinen yliopisto Yliopistopaino 2017 Abstract Päivi Karhu Lappeenranta 2017 171 pages Acta Universitatis Lappeenrantaensis 756 Diss. Lappeenranta University of Technology ISBN 978-952-335-108-0, ISBN 978-952-335-109-7 ISSN-L 1456-4491, ISSN 1456-4491 This doctoral thesis addresses the cognitive dimension of the various dualities that especially managers confront when making decisions. The study demonstrates how similar decision-making situations can be perceived differently: where one decision- maker may identify a challenge, another may find a way to channel tensions toward creative purposes. The two distinct yet interrelated literature streams of dualities and organizational ambidexterity have recognized the need for managers to respond to conflicting internal and external demands, which exposes them to a myriad of cognitive challenges. This thesis contributes to the discussion by building a framework of cognitive ambidexterity, which is defined as the ability to engage in parallel mental processes that are paradoxical or contradictory. Whereas duality scholars have been interested in the relationship of the poles of the dualities calling those for instance paradoxes and dilemmas, ambidexterity scholars have discussed the organizations’ ability to manage the opposing demands of exploration and exploitation – which is one type of duality discussed in this thesis – through spatial, temporal or contextual and behavioral solutions. Thus far, little exploration has been done about micro-foundations of ambidexterity and the cognitive processes related to dualities in decision-making. The aim of this thesis is to understand the micro-foundations of dualities, and the strategies that enable managers to handle the opposite demands of such decision-making pairs. To do this, the study draws from managerial cognition literature, which helps to explain how decision-makers identify, assess and cope with dualities and the tensions that arise from the incompatibilities within them. Altogether this study suggests that cognitive ambidexterity can fill a gap that is acknowledged across different research fields—namely, the lack of understanding about the micro-foundations of dualities like paradoxes and dilemmas, which is a limitation that may preclude the achievement of organizational ambidexterity. In addition to providing a conceptual illustration of cognitive ambidexterity, this thesis explores the identified research gaps empirically with qualitative and experimental methods. The qualitative studies operationalize and extend a widely cited tension framework, and test analogical reasoning in the context new product development, providing insights on different types of dualities and creative ways of coping with them. The laboratory experiment appears to be the first to explore decision-makers’ performance in facing dualities that have varying levels of cognitive complexity and their preference regarding dilemma or paradox solutions; it also sheds light on the opportunities and challenges related to different types of dualities. Extant literature on dualities and individual ambidexterity often highlights the superiority of simultaneous paradoxical solutions as opposed to dilemma solutions; this study showcases the usefulness of separate and sequential coping mechanisms in the light of cognitive demands. Altogether this study illuminates the cognitive dimension of decision-making by merging knowledge from distinct literature on dualities, organizational ambidexterity and managerial cognition; it addresses that business environments are, and will continue to be, characterized by dualistic demands. This thesis suggests that through active awareness of the unconscious cognitive processes that hinder or aid decision-making, managers can break from path-dependent patterns, reframe perceived threats to potential business opportunities and build ambidexterity into organizations in a way that prepares them to respond optimally to the dualities that they become inevitably confronted with. Keywords: organizational ambidexterity, individual ambidexterity, cognitive ambidexterity, dualities, paradox, analogical thinking Acknowledgements “You’ve spent the same amount of time on your dissertation as you did on your elementary school education”: my dear dad dared to make this observation when the thesis began to show signs of near-completion. It has indeed been a colorful—and indisputably long—way, with fluctuations in concentration and dedication to reaching the finish line. It feels fantastic to realize how much this journey has taught me about academic research, but also about more than that. I would not have finished this project without such amazing support from many people. I owe my greatest gratitude to those who have been involved in one way or another. First, I would like to thank my supervisors: Professor Bodo Schlegelmilch, for accepting me to start this journey at WU Vienna and introducing me to ‘ambidexterity’; Professor Robert E. Morgan from Cardiff University, for being so supportive and encouraging me to continue on the ‘ambidexterity path’; Professor Liisa-Maija Sainio, for standing by me at all times and for making it possible for me to continue this project back home in Finland under your supervision at LUT. And last but not least, thank you to Professor Paavo Ritala, for helping me to reach the goal: The last phrase of this project was characterized by close to unrealistic schedules, long hours and a great deal of trial and error; nevertheless my main takeaway from the last year and a half has been that research can be tremendously fun. My warmest thank you to Professor Leona Achtenhagen. It is a great honor to have you as my opponent. I was honored to receive feedback from Professor Aaron Smith from RMIT University and Assistant Professor Alexander Zimmermann from University of St. Gallen, who acted as my examiners. I am grateful for the time and effort you both put into the review of my dissertation. Your constructive comments significantly improved the quality of my work. A big, collective thank you to everyone at LUT for making the days brighter here in – not just dark, but especially cold – Finland! I special thank you to Jenni and Tommi, it has been a great pleasure to share with you not only the office space, but also all the ups and downs of the PhD life; your support has meant so much to me. A warm thank you to the co-PhD students for allowing me to share my thoughts with you and for making the days so enjoyable at the university: Heini, Henna, Maaren, Aino, Rahul, Tamara, Samira and so many others! Thank you to my co-authors, Azzurra, Päivi M-K, Arash and Antti, as well as to the other faculty members, Joona, Anssi, Maija, Sanna-Katriina, Hanna, Kirsimarja and many others. Thank you to Sami, Ari and Juha. Thank you to Terttu and Eva for your help with all the practicalities as well as Merilin and Sari for the study- related matters. A thank you as well to Dr. Yiannis Kouropalatis from Cardiff University for your collaboration throughout the journey and Professor Luigi Mittone from University of Trento for co-authorship. I also want to thank my former colleagues at Erste Group in Vienna for the support: Ryan, Roland, Eli, Gabor and Alfred. It was not easy to leave the team. I would also like to express my gratitude to my amazing former colleagues at WU Vienna. I am grateful for the financial support I have received from Liikesivistysrahasto and KAUTE. I am also thankful to the Erasmus+ for funding my research exchange. And to my dear friends in Finland and abroad: I am forever thankful for your understanding, patience and support. A special thanks (not in any particular order) to Jenni, Teija, Miisa, Jaakko, Jaana, Kaarina, Anna M., Anna K., Minna, Essi, Jennifer, Inna, Reetta, Lotta and Kaisa for making the limited free time I had during the last and critical year of my dissertation project so great. I have the great privilege of having a supportive and caring family around me. Thank you to Ella-äiti, Veijo-iskä, Paula, Pauliina and Veli-Matti, as well as Antti-Pekka and Elina. A huge hug to the youngest member of the family, Viljami, who has brought so much joy to Päivi-auntie during his first year on this planet. Thank you to Mirja-mummu, Matti- ukki and Kerttu, as well as to other relatives who have accompanied me on this journey. And Ville, we make a great team: “[t]ogether,