What Comes to a Manager's Mind: Theory of Local Thinking

This article develops a model of local thinking in managerial decision making. According to the concept, attention is drawn by selectively salient factors or recalls in specific decision-making contexts. Although decision makers are aware of the changing conditions, they do not make a sufficient mental correction for the fact that the relevance of these factors is not generalized. They overestimate the importance of an option that easily comes to one's mind: They excessively extrapolate from their experiences and extreme news, succumb to reference points and imprinting. The usefulness of the concept of local thinking in explaining decisions taken by managers is demonstrated by a short conceptual review of several empirical studies on local economic and natural shocks, negotiation of bank loans, expert forecasts, workers' compensations, and gender equality. The conclusion brings speculations about further implications of the theory for organizational research.