KOREASCHOLAR

Although the internationalization decision making process amongst managers from developed nations has been extensively studied, this phenomenon has been sporadically explored among managers from newly opened and transition economies. Given the risks and commitment inherent in international market entry, a thorough understanding of the decision making process of managers in such dynamic markets becomes crucial in charting the firms’ future direction. Hence, drawing on concepts from cognitive science, this study aims to explore cognitive biases and mental models for international market entry decision making among managers from a transition economy, namely Myanmar.
Myanmar is recognized as Asia’s last large economy to become globally linked. Myanmar has long posted a negative trade balance, with the import value nearly double that of exports. The country’s population of 54 million, its abundance of natural resources, and its economic integration in the fastest growing region of the world have attracted firms of global brands such as KFC and VISA, who strive to gain market access. After decades of military rule, Myanmar’s ‘open’ economy is dominated by state-run enterprises in heavy industries, with growing opportunities for the private sector to aid in the growth of the domestic market as well as to exploit foreign market opportunities.
Scholars from a diverse range of disciplines have argued that elements of an organization’s international strategic abilities stem from managers’ cognitive processes that balance national, industry, organizational and functional issues (Prahalad & Doz, 1987). This study explores Myanmar decision-makers’ strategic cognition, which describes the information-filtering or sense-making process by which strategic issues are interpreted (Finkelstein, Hambrick & Cannella, 2009). The fact that management and marketing research in Myanmar contexts is virtually nonexistent, understanding the strategic decision making processes of managers in Myanmar is warranted, given the significant business opportunities for and within this country in transition.
Strategic cognition describes the how cognitive structures relate to the decision process in terms of strategy formulation and implementation (Narayanan & Zane, 2011). Cognitive structures refer to the manager’s beliefs about the environment, the state of the organization, and the business portfolio. The strategic cognition perspective presumes that managers rely on their belief structures when undertaking a strategic decision task (Hambrick & Mason, 1984). According to Finkelstein et al. (2009), managers’ ability to deal with complex decisions is inhibited by cognitive biases as well as interpretive frames. Such biases, in part, influence which information is attended to and how it is interpreted. ‘Biases’ and ‘frames’ in decision making receive considerable attention in the strategic decision making literature because they often lead to committing decision errors. While there are a number of cognitive biases, our interest lies in framing bias (Kahneman & Tversky, 1984) because the interpretation of economic gains and losses are highly relevant for strategic decision making. Framing bias occurs when modifications in the way a decision problem is presented, focusing either on the potential gains or on the potential losses of alternatives, result in a change in the decision-makers’ initial preference, such as when a decision maker becomes risk-averse when gains are highlighted while becoming more risk-taking when losses are.
Two propositions are tested in this study. First, if we assume that framing bias influences strategic decision making under complex and uncertain contexts, we should discover substantive differences in managers’ risk preferences. More specifically, differences should be found when managers are presented with alternative versions of elaborated problem scenarios that are the same in all aspects except for the fact that the alternatives have been systematically manipulated in terms of (1) the potential gains (positive presented version) or (2) the potential losses (negative presented version). Second, prior research reports that strategic cognition is influenced by personal characteristics (e.g. educational background) and values as well as organizational characteristics (e.g. firm size, firm age) (Finkelstein et al., 2009; Hambrick & Mason, 1984). With this in mind, we should observe significant differences in risk preferences between participants of different demographic and trait groups.
This study implemented an experimental investigation into the potential framing and priming effects arising from a strategic marketing decision problem of whether to develop a new marketing plan to serve the home market or to commit marketing resources to the export market. The stimuli were adapted from those developed by Hodgkinson et al. (1999), which were crafted to solicit responses to a case scenario that described a convincing strategic investment decision encountered by a firm that provides innovative automotive vehicle fast paint-drying systems. This scenario was deemed appropriate for the Myanmar context given that the participants were familiar with automobiles and auto painting services. The scenario was moderately adapted to suit the Myanmar context, with a fictitious local firm, Yannawa Co., which was faced with domestic intensified competition and up-and-coming advanced technology product substitution. The case scenario was explained with about 260 words that describe Yannawa’s 10-year history, the domestic industry environment and Yannawa’s objective to achieve a profit of $3 million. A photo of a modern fast-drying automotive painting system was included in the stimuli. Participants were instructed to assume the role as one of Yannawa’s board of directors and were asked to choose one option between a ‘less-risky’ alternative (focus on the domestic market) with a higher likelihood of occurrence and a ‘riskier’ alternative (invest in overseas markets) that had two possible outcomes that had different likelihoods of occurrence.
Framing effects were manipulated as positively and negatively worded versions. In the negatively framed version, participants had to choose between (A) developing a new marketing plan to serve its home market with a 100% chance this option will lead to profits of US$1 million below management’s targeted level or (B) committing its marketing to the export market overseas, with a 33% chance to reach the targeted level and a 66% chance to earn profits of US$3 million below management’s targeted level.
In contrast, in the positively stated version, participants were asked to choose between (A) developing a new marketing plan to serve its home market with a 100% chance to earn profits of US$1 million or (B) committing to the export market with a 33% chance for profits of US$3 million and a 66% chance to make no profits at all.
To control for potential priming effects, the presentation order of the alternatives varied, with the ‘less-risky’ higher likelihood of occurrence alternative presented first in the stimuli followed by the ‘riskier’ alternative, and vice versa in the other versions. Altogether, we developed four experimental conditions: positively versus negatively framed decision scenarios, with lower risk versus higher risk in alternate sequence. The research instrument also included items asking participant demographic characteristics.
The decision task was also accompanied by a free-elicitation method to capture a mental model of the variables that the participant considered while making the decision. In other words, participants were asked in an open-ended question, “Please write in sequence the variables that you thought about while making your decision.” Unlike the stimuli of Hodgkinson et al. (1999), which provided a list of 18 variables, which participants could rely on to complete the cognitive mapping task, our free-elicitation method was deemed necessary in order to gain better insights to Myanmar managers’ thought processes.
Both studies involved Myanmar professionals who were enrolled in a global MBA program being offered at campuses in Yangon and Mandalay where English is used as the medium of instruction. Study 1 comprised a sample of 118 students enrolled in the Marketing Management course, which is the first course taken in the program. The sample comprises 35 (29.7%) males and 83 (70.3%) females, with a majority (72%) within the age range of 22 to 31 years, and 62 (52.5%) with a Science education, 26 (22%) in Economics/Business and 21 (17.8%) in Arts/Language. A count of 46 (39.0%) occupy top/senior management positions, 36 (30.5%) are business owners, and the remaining 36 (30.5%) hold entry-level organization positions.
Each participant was assigned randomly one of the four stimuli versions. The task was administered in class and participants were given 30 minutes to provide their responses. Study 2 replicated and extended these findings on a sample of 81 final semester MBA students in the same program. The sample composition of Study 2 is similar to that of Study 1. Data were analyzed using nonparametric approaches to test the significance of joint frequency distribution of cases.
The statistical analyses indicate that the distribution of risk preferences are consistent in both Study 1 (i.e. participants new to the MBA program) and Study 2 (i.e. more experienced MBA students) (χ2 = 0.64, p = 0.27), which is similar to the findings of Bateman and Zeithaml (1989). Also, the risk preferences are consistent in both Yangon and Mandalay subgroups (χ2 = 0.00, p = 0.57). Thus, the data collected from both studies were pooled for further analyses. As for the control of priming effects, we find a significant difference in risk preferences (χ2 = 5.32, p = 0.04, 113 vs. 86), with a larger proportion of the second listed marketing alternative (i.e. more recent) being selected, irrespective of whether that alternative is higher-risk or lower-risk. With respect to a test of our first proposition of a framing effect, we found no support (χ2 = 0.32, p = 0.35) of a systematic association between framing and decision choice. The distribution of decisions shows that irrespective of whether the alternative was positively framed or negatively framed, a larger proportion of the participants chose to higher-risk alternative to focus on exporting. As for testing our second broad proposition that there would be significant risk preference differences between demographic groups in the sample, we found no support for sex (χ2 = 0.58, p = 0.27), age (χ2 = 0.29, p = 0.96), education background (χ2 = 2.40, p = 0.30), and no support for occupation (χ2 = 7.33, p = 0.11).
The qualitative responses obtained from the free-elicitation section of the instrument, were analyzed by categorizing responses as either concrete, i.e. a greater focus on specific details (e.g. mention of numbers, such as ‘a 100% chance’, ‘a 33% chance’ and ‘$1 million below’, ‘profits of US$3 million’) or abstract, i.e. focus on the bigger picture (e.g. such as ‘more competition’, ‘threat of new products’). Based on this approach, we find that 138 (69.3%) of the participants began their mental model with an abstraction and 105 (52.8%) of those participants relied on a mental model that was entirely abstract, absent of specific details. In contrast, 33 (16.6) of the participants constructed mental models that were completely concrete, while the remaining 61 (30.7%) of the participants developed mental models comprising both abstract and concrete information inputs. Interestingly, a statistical test of an association between these three different mental models and risk preference show no significant association (χ2 = 2.80, p = 0.25).
This exploratory study contributes to the management and international marketing literature by providing initial evidence and insights of the strategic cognition of Myanmar managers. The fact that there were no framing effects nor any differences in the risk preferences between different demographic groups suggest that participants in our study may be relying on a common heuristic (i.e. rule of thumb) that guides them towards the option to seek foreign market opportunities. The marketing doctrine concept introduced by Challagalla, Murtha and Jaworski (2014), is indicative of the influence of institution-wide principles that guide all decision-makers throughout the institution. In the case of Myanmar, national trade policies emphasizing export initiatives and increased export promotion activities may be regarded as fundamental drives for economic growth. As such, managers may be adopting this national principle to simplify their decision task and therefore prefer to pursue foreign market opportunities. Relatedly, it is worth noting that among the participants that opted to focus on the home market, nearly half were employed by a non-government organization (NGO) operating in Myanmar. This reiterates earlier findings of the influence of organizational characteristics on the strategic cognition of managers (Finkelstein et al., 2009; Hambrick & Mason, 1984). From our sample, we found that managers working for a NGO may be accustomed to adhering to their own organizational principles, which emphasize the needs of the domestic market. From a practical perspective, caution should be taken when decision managers rely largely on a heuristic approach to decision making. Although recent studies report that heuristics can be a valuable approach in the wake of overwhelming data and information (e.g. Patterson et al., 2012 ), others show that accurate mental models bring about better decision rules (e.g. Gary & Wood, 2011). To ensure that the decisions made by managers align both their personal preferences and the logic of rational choice, a deliberate model designed to compare the underlying costs and benefits of the decisions must be carefully developed in such a way to prevent decision makers from minor distractions.
To date, our study is the first to gain insights on the ‘black box’ of decision making among a sample of managers from Myanmar. Despite the valuable insights provided from our exploratory study, it is not without limitations. Although our sample comprises businesspeople from two major cities in Myanmar and represents businesspeople from a diverse range of industries and demographic characteristics, the generalizability of our findings is still limited. In addition, we only designed and implemented one hypothetical business scenario in our study due to the complex nature of the decision task. Using one hypothetical case may further limit the generalizability. Moreover, our results revealing the absence of framing effects but the presence of priming effects seem inconsistent with prior studies that have reported that such effects alter individual perceptions. Based on our preliminary findings, future studies are called upon to verify, confirm, and extend this current study to other contexts in Myanmar and other emerging and transition economies.

• Olimpia C. Racela(Mahasarakham University, Thailand)