Forward-looking Reasoning and Persuasion: Resistance and Readiness in Revising Managerial Beliefs

Strategy in novel and changing environments requires generating and thinking through alternative and possibly conflicting courses of action rather than merely relying on prior experience. We develop an analytic model that depicts alternatives as logically consistent ""theories"" and use it to predict when managers are persuaded of a particular new theory. We model persuasion as belief revision and show how persuasion depends on both readiness for and overcoming resistance against a new theory. We find that ""what-if"" beliefs, which are beliefs about possible characteristics of the environment, are central to persuasion because they enable imagination and understanding of possible futures and thus influence value creation and bargaining. Our results point to strategic thinking as a neglected mechanism that contributes to firm heterogeneity.