ISSUE INTERPRETATION

Issue interpretation is a central concept in the studies on SIs. In their seminal paper, Dutton et al. (1983) conceived the interpretation of SIs as a process with clearly distinguishable inputs, activities, and outputs. They identified the cognitive maps and political interest of decision-makers and the characteristics of the issue as the main inputs to this process. Cognitive maps influence the data and stimuli decision-makers see as relevant to the issue, and the cause-effect relationships associated with the issue that they consider. Political interests determine the use of these cognitive maps: individuals may use them to impress others, to advance their interests and undermine the arguments and political base of their opponents. SIs vary on several dimensions: the availability and the ambiguity of information about them, the uncertainty and urgency associated with them, to name a few. The activities involved in the interpretation of SIs, by their turn, are characterized by recursiveness, retroductivity and heterarchy. By recursiveness, Dutton et al. (1983) meant the successive revisions of judgment, both convergent and divergent, that individuals involved in the interpretation of the issue go through, as new data on the issues becomes available, or as the result of debates in which different perspectives on the issue are confronted. Retroductivity refers to the type of reasoning used in the interpretation of issues; due to the ambiguous and incomplete nature of the data generally

available on them, decision makers must rely on interpretations based on similarities and inferences, stemming from past experiences and mental models, not on falsifiable hypotheses of theories of action. The last characteristic of the interpretation activities, heterarchy, expresses the fact that the collective interpretation of an issue reflects the outcome of cyclical interactions among individuals, each with his or her mental models, political interests, data, and interpretation of said issue. All participants try to influence the others, advocating their interpretations, and defending their interests regarding the issue. These interactions, which are part of a broader sensemaking process, inform the meaning individuals attribute to an SI and may eventually lead to a consensual interpretation, that, although not complete, may allow for collective cooperation and joint efforts to address it (Jalonen, Schildt, & Vaara, 2018; Rouleau

& Balogun, 2011; Weick, Sutcliffe, & Obstfield, 2005. Dutton et al. (1983) identified three outputs of the issue interpretation process: cause-effect understandings, predictive judgements, and language and labels. Cause-effect understandings are statements that express the relationships participants in the interpretation process conceive, logically relating the factors underlying the issue to its occurrence. Assumptions and cause-effect understandings are combined into predictive judgements about future consequences of the continued exposure to the issue and, eventually, about the effects of the responses implemented to deal with it.

Language and labels are the means the participants in the interpretation process use to convey their understanding of SIs to other members of the organization and to external stakeholders, and to mobilize them to act on this interpretation.

Even though interpretation initiates at the individual level, shared understandings must be achieved at the group and organizational levels. Issue interpretation at the organizational level involves more than the sum of the perceptions of key decision makers. As Daft and Weick (1984, p. 285) remarked, “organizations have cognitive systems and memories…Individuals come and go, but organizations preserve knowledge, behaviors, mental maps, norms, and values over time”. But not all issues can be addressed simultaneously: individuals, groups, and organizations have limited resources they can allocate to SIs. Only some of the issues surrounding and organization are incorporated into its issue array or strategic agenda (Dutton, 1986a). Some of the factors leading to the inclusion of issues in this agenda are associated with the issues themselves, while others are related to the organizational context. The issue-related factors that influence the placement of an issue in the strategic agenda of the organization include its salience, or relevance for the organization, and its sponsorship by powerful organizational players. Organizational factors that influence the agenda building process include the strategy of the firm, and the organizational culture. Both set of factors may increase

the chances of placement of a particular issue in the agenda of an organization, but this placement must also account for the issues already in the agenda; due to the bounded cognitive capacity of decision-makers, only a limited number of issues can be dealt with at any given time. According to Dutton (1986a), issues are ultimately placed in the strategic agenda when individuals are aware of them, i.e., they are exposed to the issues, and when they are involved with the issues, i.e., they manifest interest in the issue. High exposure issues that attract the attention of key decision makers have the greatest potential to be placed in the organization's strategic agenda.

I will present in the following sections the findings identified in the literature on issue interpretation and processing considered more significant for this study, grouped in three themes: (1) issue characteristics, (2) personal, group, and organizational factors and (3) processual factors.

8.2.1. Issue characteristics

Several characteristics of a SI affect its salience, and, therefore, affect the chances of its placement in the strategic agenda of the organization. Dutton (1986a) postulated that four characteristics affect salience of an issue: a) its magnitude, or the size of the perceived impact on the organization’s strategic goals; b) its abstractness, as it is assumed that the higher the abstractness of an issue the more exposure it achieves and the more interest it attracts, by broadening the range of potential supporters; c) complexity, considered detrimental to the placement of the issue in the strategic agenda, as complex issues may be difficult to interpret and, therefore, to act upon; and d) the immediacy of the issue – here the reasoning is that the time pressures on an issue compel decision-makers to place it in the agenda. Denison et al.

(1996) found evidence that the salience of an issue influences the relationship between the organizational context and issue interpretation. In an investigation on the interpretation of foreign investments in the US economy by CEOs of American firms, they found that for global firms operating in business sectors directly impacted by foreign investments the context had a significantly stronger influence on issue interpretation than for the total sample of firms in their study.

The qualities of the data available on the SI have important consequences for the interpretation process. For instance, issues for which data are abundant may be subjected to a more structured and rule-based interpretation process, which may be executed in a shorter

timeframe. Conversely, the more equivocal the data, the fewer number of rules used in the interpretation but, possibly, the higher the number of interactions among decision-makers, and the longer the time to achieve to a collective understanding of the issue (Daft & Weick, 1984).

The uncertainty associated with the issue is another factor affecting its consideration and interpretation: Dutton and Webster (1988) found that decision-makers are more inclined to consider issues (placing them in the strategic agenda of the firm) when the level of uncertainty associated with them is low. And finally, the variety of the data collected seems to influence the interpretation of equivocal SIs. Anderson and Nichols (2007) reviewed the literature and found conflicting perspectives on the effect of increased information gathering on the interpretation of issues: while proponents of an information processing approach argued that greater amount of information leads to changes in interpretations of issues, increasing the odds of equivocal issues to be interpreted as opportunities (Kuvaas, 2002; Thomas et al., 1993), scholars who subscribe to a behavioral decision making and social cognitive approach view the gathering of additional data as detrimental to changes in interpretation, as there is a strong tendency to consider additional data as confirmatory evidence of previous interpretations (Fiske

& Taylor, 2008). Anderson and Nichols (2007) present a hypothesis to solve this conflict: they argued that a distinction must be established between the effects of time spent looking for additional information and how diverse were the data ultimately obtained; more diverse data may provide contradictory evidence that disproves previous interpretations. The empirical results of their study show that longer searches for information tend to change the interpretation of equivocal issues to threats. Higher diversity of the information obtained in these searches, on the other hand, leads to a change to the interpretation of issues as less threatening. They found no effect either of time spent looking for information or the qualities of the information obtained on the interpretation of equivocal issues as opportunities.

Another factor affecting how an issue is processed by an organization is its perception as representing a crisis (Billings, Milburn, & Schallman, 1980). When dealing with issues perceived as crises, organizations usually increase the level of analytical comprehensiveness and resources dedicated to them, centralize control on their resolution at upper echelons of the organization and expand the level of communication and explanation related to the issues, when compared to non-crisis ones (Dutton, 1987b).

Familiarity with an issue is also a factor affecting its interpretation and response. Denison et al. (1996), in an aforementioned study on the factors influencing the interpretation, by CEOs of US firms, of foreign investment in the US economy, found a positive relationship between experience in an issue domain and the interpretation of foreign investments as an opportunity.

In a longitudinal study of how the interpretations and responses of six US pharmaceutical firms evolved in reaction to the 1962 amendments to the Food, Drug and Cosmetic Act of 1938, Barr (1998) concluded that: a) interpretation to concepts unfamiliar to the firm evolved from vague and broad-based to detailed and impact-specific, accompanying how the issue itself unfolded in the “outside world” (additions of new concepts to causal maps); b) interpretation of concepts familiar to the firm changed in terms of meaning and purpose (changes in existing causal maps and beliefs); and c) there is a complex temporal relation between interpretation and the strategic adaptation to unfamiliar events: changes in interpretation occur both before and after changes in strategy.

8.2.2. Individual, group, organizational and environmental factors

At the individual level, personal attributes such as the locus of control, emotional predispositions, and commitment to a viewpoint may affect the interpretation of an issue (Thomas et al., 1994).

Group-level factors that are not aggregates of individual-level characteristics were also found to influence the interpretation of SIs. The research conducted by Thomas and McDaniel (1990) found evidence that the information-processing structure of the TMT affects the interpretation of SIs by CEOs in different organizations; it may limit or augment the recognition of stimuli, the search for data, and identification of causal relations associated with an issue.

Thomas et al. (1994) confirmed that low information-capacity in groups is associated with strong perception of political implications of issues. They also found that groups characterized by strong identities tended to interpret issues as strategic, while weak group identities were associated to perception of the same issues being as political. Political activity within a group may also have a contextual influence on issue interpretation. For issues that capture heightened management's attention, intense levels of political conflict may decrease consensus on an interpretation (Dutton et al., 1983).

In group settings, displayed emotions may also influence the interpretation of SIs. Liu and Maitilis (2014) posited that negative emotional dynamics among members of a top team can prevent discussion of SIs and hinder strategic change. In a longitudinal study, they analyzed conversations about SIs in TMT’s meetings, and identified five types of emotional dynamics, each associated with a different type of strategizing process. The strategizing processes, in turn, varied in the patterns the authors found on issue proposal, discussion, evaluation, and decision