The Pennsylvania State University The Graduate School The Mary Jean and Frank P. Smeal College of Business SHAPING THE FUTURE: PROSPECTIVE SENSEMAKING IN A PIONEERING FIRM A Dissertation in Business Administration by Shubha Divakar Patvardhan © 2014 Shubha Divakar Patvardhan Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy August 2014 ii The dissertation of Shubha Divakar Patvardhan was reviewed and approved* by the following: Dennis A. Gioia Chair of Management and Organization Klein Professor of Management Smeal College of Business Dissertation Advisor Chair of Committee Donald C. Hambrick Evan Pugh Professor and Smeal Chaired Professor of Management Smeal College of Business Vilmos Misangyi Associate Professor of Management Smeal College of Business Susan G. Strauss Associate Professor of Applied Linguistics, Asian Studies, Education, and Linguistics *Signatures are on file in the Graduate School iii ABSTRACT Prospection or forward-looking thought and action is fundamental to managing an enterprise strategically (Gavetti, 2012; Hambrick & Mason, 1984; Hamel & Prahalad, 1994; Mintzberg, 1985; Sinclair, Sadler-Smith and Hodgkinson, 2010; Tsoukas and Shepherd, 2009). Although scholars have called for the need to study “foresight” (Hamel and Prahalad, 1996; Tsoukas and Shepherd, 2009), “prescience” (Corley and Gioia, 2011), and pursuit of “cognitively distant opportunities” (Gavetti, 2012), and suggested that organizations not only attempt to “predict” the future landscape but they also try to “shape” it (Corley & Gioia, 2011; Gavetti, 2012; Ghemawat, 2010; Hamel and Prahalad, 1996; Narayanan and Fahey, 2004; Tsoukas and Shepherd, 2009), the processes that might enable prospective behavior have not been adequately theorized or studied. A fundamental barrier appears to be foundational assumptions about managerial cognition (Gavetti, 2012; Porac & Tschang, 2013)—a situation that scholars acknowledge has led to an incomplete and impoverished view of decision-makers (see Bromiley, 2005; Porac and Tschang, 2013) and left the field with a rather pronounced “backward looking” view of strategy and much in need of a “forward-looking” sensibility (Gavetti, Greve, Levinthal, & Ocasio, 2012: 26). With the larger agenda of stimulating and shaping discourse around “forward-looking” or prospective behavior in strategy literature, I pursued the theoretically and pragmatically important questions: How do firms organize for the future? Specifically, by what processes might firms shape or influence the future? Given limited literature on prospection, and the inadequacy of the prevalent cognitive paradigm to explain the phenomenon, I employed a grounded theory approach (Glaser and Strauss, 1967) to empirically investigate the thought and action of a pioneering handloom retail organization that, over five decades, has shaped and transformed the landscape of its industry. iv The primary contribution of this study is an empirically grounded theoretical model of prospective sensemaking in a pioneering firm. The model serves to make three theoretical contributions. First, it makes a fundamental contribution to the sensemaking literature by making an empirically grounded case for “Prospective Sensemaking”, thereby extending extant sensemaking perspective—that is typically rooted in retrospective processes—to account for prospection or forward-looking activities. Second, it contributes to the strategic management and strategy-making literature by extending the dominant narrative of strategic behavior of firms beyond “adapting” to environments —to “shaping” environments. Third, by illuminating the central role of imagination and the “constructive” capabilities of the managerial mind, this study makes a fundamental contribution to the literature on the microfoundations of strategic management by making a case that managerial cognition is not only marked by “bounded rationality”, but also by “creative rationality”. These findings also inform literature on entrepreneurship. Key words: forward-looking, prospecting, future, sensemaking, prospective sensemaking, creative enactment, imagination, bounded rationality, creative rationality, managerial cognition, strategy-making, innovation, entrepreneurship v TABLE OF CONTENTS LIST OF TABLES ................................................................................................................... vii LIST OF FIGURES ................................................................................................................. viii ACKNOWLEDGEMENTS ..................................................................................................... ix Chapter 1 Introduction ............................................................................................................ 1 Research question ............................................................................................................. 3 Contributions .................................................................................................................... 4 Chapter 2 Literature Review ................................................................................................... 7 Overview and Definition .................................................................................................. 7 Literature Review Approach ............................................................................................ 8 Temporal-Distance Perspective ....................................................................................... 10 Dealing with uncertainty. ......................................................................................... 10 Controlling orientation. ............................................................................................ 11 Reacting orientation. ................................................................................................ 12 “Cognitive-Distance” Perspective .................................................................................... 14 Dealing with ambiguity. ........................................................................................... 15 Projecting orientation. .............................................................................................. 16 Experimenting orientation. ....................................................................................... 18 Retrospective-projecting orientation. ....................................................................... 20 Predicting orientation. .............................................................................................. 23 Other literatures. ............................................................................................................... 26 “Prospector” strategy ................................................................................................ 26 Entrepreneurship. ..................................................................................................... 27 Summary .......................................................................................................................... 28 Taking a social-construction approach. .................................................................... 29 Unpacking sensemaking. .......................................................................................... 31 Empirical approach .................................................................................................. 31 Chapter 3 Methodology .......................................................................................................... 33 Description of Research Setting ....................................................................................... 33 Historical Context of Business Landscape. ...................................................................... 35 Study Design .................................................................................................................... 39 Data Sources and Data Collection Procedure .................................................................. 41 Data Analysis ................................................................................................................... 44 Chapter 4 Findings .................................................................................................................. 46 Guiding the Reader .......................................................................................................... 47 Preview of Grounded Model ............................................................................................ 48 Narrative of Findings ....................................................................................................... 51 vi Landscape status quo (Dimension 1). ...................................................................... 51 Aspiring to shift status quo (Dimension 2) .............................................................. 55 Creating pathways to the imagined alternate (Dimension 3) ................................... 63 Evaluating Emergent Outcomes (Dimension 4). ...................................................... 73 Formalizing strategy (Dimension 5). ....................................................................... 84 Transforming status quo of landscape (Dimension 6). ............................................ 89 Summary .......................................................................................................................... 96 Chapter 5 Discussion .............................................................................................................