Abductive Reasoning in Strategy

Strategic tools and frameworks mostly analyze past and current situations as the basis for forecasts about future potential. The analyses themselves rely primarily on deductive/inductive logic, however the creation of hypotheses about future opportunities cannot be solely explained by deductive/inductive logics. Here we analyze differences in strategies’ underlying logics. Using a content analysis study of S-1 filings, we elaborate on ways executives reason through such situations as the basis for the formation of the strategy for the firm. We contribute to existing research on the logic of reasoning in strategy, which has yet to provide analytical instruments to observe abductive reasoning. In addition, we introduce the notion of observation horizons and show how analogies, anomalies, and paradoxes prompt abductive reasoning.