The trials and tribulations of addressing global organizational ignorance

European Management Journal Vol. 17, No. 4, pp. 431–443, 1999 1999 Elsevier Science Ltd. All rights reservedPergamon

Printed in Great Britain0263-2373/99 $20.00 1 0.00PII: S0263-2373(99)00023-7

The Trials andTribulations ofAddressing GlobalOrganizational IgnoranceMICHAEL HARVEY, University of OklahomaMILORAD NOVICEVIC, University of Oklahoma

The dynamic process of globalizing an organiza-tion’s business activities is marked with uncertaintyand high risk due to, in part, the global organiza-tional ignorance of management. In this paper, theauthors examine the nature and forms of globalorganizational ignorance as well as the environ-mental factors contributing to its emergence. Draw-ing on the body of theoretical developments andempirical findings the authors identify specificmanagerial errors and contexts associated with thephenomena of probabilistic and pluralistic ignor-ance. The authors summarize a means of classifyingthe causes of ignorance into a practical frameworkin an effort to facilitate managerial attention to theissue of global organizational ignorance. 1999Elsevier Science Ltd. All rights reserved

Introduction

Ignorance emerges when we decide what we should know.

Chaotic changes created by the globalization of busi-ness activities may be one of the most dauntingissues of the 21st century. The changes in externaland internal dimensions of the organization areoccurring in almost every facet of the knowledgedomains: (1) political changes (the end of commu-nism in Eastern Europe and the former USSR); (2)economic changes (regionalization of multinationalmarket groups (i.e. EU, NAFTA) and the prominenceof emerging markets in developing countries (China,India, Malaysia, Indonesia, etc.); (3) market demandchanges and globalization of consumer expectations(convergence of global expectations concerning uni-

European Management Journal Vol 17 No 4 August 1999 431

form pricing, product quality, service, etc.); (4)employment changes (increased workforce diversityand need for global competencies); (5) technologicalchanges (technology transfer and comodification oftechnology along with acceleration of informationexchange); and (6) environmental changes (decline ofenvironmental boundaries bring about concern onthe ‘tragedy of the commons’ and globalization ofenvironmental issues).

This ‘quickening’ of change in the global competitiveenvironment, frequently one of the central character-istics of hyper-competition, necessitates a rethinkingof the traditional template used by organizationaldecision-makers (D’Aveni, 1994). The world outsideand inside global organizations has become so fluidand changeable that it is impossible to rely on theold certainties of doing business as usual. As a result,if a company wants to ‘manage change,’ it has to treatthe issue of acquiring new knowledge and using thisknowledge as critical to make informed globaldecisions. Brian Baldock, Deputy Chairman of theglobal drinks company, Guinness PLC, headquart-ered in UK, says, ‘We were all trained basically tomanage growth. But, now market changes are dis-continuous — the past is no guide to the future. Thismeans that thinking the unthinkable should becomethe norm. Only companies which recruit, train,develop and organize people on reducing organiza-tional ignorance will survive.’

The speed at which these frame-breaking globalchanges are taking place necessitates that multi-national corporations (MNCs) restructure theirknowledge reference of how to successfully competein the global marketplace and how to effectively

THE TRIALS AND TRIBULATIONS OF ADDRESSING GLOBAL ORGANIZATIONAL IGNORANCE

build global competitive advantage and core com-petencies. Overall, the acceleration of change acrossthe globe is irreversibly transforming the basic prem-ises and context of the managerial thinking in organi-zations leaving global managers in a state of sus-pended animation of ‘not knowing what one doesnot know.’

Global organizations, as we have known them, havelost one of their most fundamental qualities, thatbeing, the framework of relative certainty in decision-making. In many cases, the traditional organizationaldecisional framework has been clouded with uncer-tainty leaving the decision-makers with heightenedlevels of ambiguity and risk once decisions have beenmade. As a result, many organizations haveaddressed the problem through the infusion of vastamounts of data and/or information, shared amongorganizational constituents, which in many cases hasblurred the boundary between what is internalizedas knowledge and what is internalized as ignorance.Thus, information about the world, but not necessar-ily global knowledge, replaces uncertainty (Drucker,1998) creating a false shared sense of certainty.

The non-linear changes taking place in the organiza-tion and its environment make obsolete the stake-holders’ ‘more or less homeostatic state or the classicreturn-to-equilibrium model of business of the past’.Though a model of decision-making, based on theknowledge of past certainty, served as the reliableplatform for market orientation of industrial organi-zations, it is becoming obsolete in the chaotic turbu-lent hyper-competitive environment of the knowl-edge-based global economy. The emerging digitalglobal economy, which has transformed exchange ofatoms into exchange of concepts, necessitates a recon-ceptualized model of decision-making in the globalbusiness environment. This non-linear model mustcapture the recognition of changing uncertainty,which allows decision-makers to reliably discrimi-nate the ‘signals’ of knowledge from the ‘noise’ ofignorance.

Just as the ability to create new knowledge hasbecome a primary driving strategic force for organi-zations to effectively compete in a global context, sotoo has the ability to recognize when shared ignor-ance exists in the competitive context of a globalorganization. Specifically, one of the emerging formsof competitive advantage in the global marketplaceemanates from an organization’s ability to recognizethe ignorance shared among its competitors. Thisshared ignorance may result from their misinterpret-ations of data specific to the rapidly changing anddiverse global market and their inability to integratethis diversity of information into their strategicthrusts. The organization’s ability to recognize themistakes made by its global competitors provides theorganization with a cognitive advantage to identifyspecific information needs and to develop a uniquedynamic capability based upon identifying which

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information is data and which information is knowl-edge.

The goal of this paper is to examine the concept oforganizational ignorance engendered in the processof globalizing an organization’s strategic businessactivities. The paper is divided into six sections: (1)understanding the nature of global organizationalignorance; (2) delineation of pluralistic ignorance; (3)delineation of probabilistic ignorance; (4) focusing onenvironmental factors engendering organizationalignorance; (5) examining factors engendering globalorganizational ignorance; and (6) developing a top-ology of global organizational ignorance. Each ofthese sections will be discussed in detail.

Understanding the Nature of GlobalOrganizational Ignorance

Both a global organization’s knowledge and its refer-ent organizational ignorance are representations ofwhat exists and does not exist in the organization’spast experiences (i.e. in shared organizationalmemory). When an organization’s stakeholders areunaware of the organization’s global ignorance theydo not recognize the liabilities associated with theacquisition of organizational knowledge as theorganization evolves into the global competitivearena. First, stakeholders must recognize that theacquired false knowledge becomes unaware ignor-ance socially constructed in the organization’s realm(Smithson, 1993). Second, the process of specifyingglobal ignorance might persuade organization’sstakeholders to start viewing historic domesticorganizational knowledge from a different perspec-tive, that being, challenging the accepted conven-tional wisdom in managing a domestic organizationand focusing on the reframed requirements for com-peting in a globally competitive marketplace. Finally,once the organization’s stakeholders recognize thenature of the global organizational ignorance, therealization of the enormity of the task of what needsto be learned creates a new problem of communicat-ing these unique insights to multiple constituents inthe organization. The problem is that the ignoranceembedded in competing domestically along with theassociated investments and commitments in thedomestic strategies of the organization, constrainsdecision-makers to delineate the past vested interestfrom future global demands.

Frequently, executives may promulgate globalorganizational ignorance because of the trade-offsbetween the promising signals of opportunities in theemerging global market and their personal investi-ture in the certainties of the domestic successes of thepast. In this way these key influential stakeholdersbecome ignorant of the subtleties in the nature of glo-balizing the organization. Their strategic ignorance


results from the deliberate acts of the social influencein the process of developing a rationale for undertak-ing a global strategy. In other words, the subversivedimensions of the stakeholders’ ignorance becomenormalized through institutionalized learning of theemerging ‘knowledge’ relative to the global market(i.e. these dimensions become socially constructedand embedded in existing relationships of socialdependence and social trust as ‘ignorancearrangements’) (Smithson, 1989).

This perpetuation of ignorance could most likelyoccur in the strong corporate cultures (i.e. IBM, Nike,Microsoft, ICI, Wal-Mart, McDonalds and the like)where there is an inordinately high level of conform-ity to the domestic cultural norms and, as a result,the stakeholders will deprive themselves of anyknowledge about the global marketplace, which chal-lenges the existing strategy/culture. In effect, thisignorance becomes embedded in the organization’sinterpretative framework for evaluating globalopportunities.

In effect, organizational global ignorance, in somecontexts, may become an accepted deviance in anorganization’s norms due to the stakeholder’s limitedaccess to the referent sources of verifiable infor-mation. The data on global opportunities is filteredby the value perspective of the influentials’ (keymanagers) interpretations which might belimited/biased relative to their domestic mindset.These influential executives may use various ethical,legal, proprietary and organizational means to per-petuate past domestically oriented organizationalnorms and knowledge which, however, may gener-ate socially constructed dysfunctional global ignor-ance. For stakeholders, being bound by this type ofinstitutionalized ignorance is the worst form of ‘notknowing what to know’ because they may beinclined to interpret their ignorance as a conventionalcorporate wisdom. Furthermore, many stakeholders

Figure 1 Managing Toward Global Knowledge Creation


may become bitter advocates of institutionalizedignorance as it becomes a part of their vested careerinterests and commitments.

The bias associated with these decision-makers isparticularly evident when the ignorance is tied to thefundamental premises of maintaining the internal-ized values of the corporate culture or the past suc-cessful domestic corporate strategic thrust. Nowhereis this type of rigidity more evident than when oneobserves the behavior of founding entrepreneurswhen their organization is faced with the need toundertake a reframing change to go global. Fre-quently, the entrepreneur’s final line of defense forrefusing to change the domestic logic is, ‘we didn’tget where we are today by changing our successfulapproach/strategy, we made our money doing it thisway.’ The vested interest in the past success in thedomestic marketplace can, however, have the sameeffect on the reluctance to change in organizationswhen global opportunities are assessed.

Figure 1 illustrates the nature of knowledge gaps thatwiden in an organization particularly when theenvironmental context (globalization) of decision-making is changing dramatically. A first type ofknowledge gap emerges when managers managefrom knowledge (proven and based upon pastexperience). They have a knowledge base to makefuture decisions as long as the environment and con-text do not change significantly. As managers recog-nize that their knowledge base is inadequate toaddress the changes in the marketplace, they mustundertake the acquisition of new referent knowledge.This new referent knowledge then becomes theimpetus for changing the decision-makers’ orien-tation. The fundamental characteristics of managingfrom knowing is recognizing the importance ofknowledge and to what degree that knowledge canbe ‘stretched’ for use in making decisions in thenew environment.

Stakeholders need to be

aware of their ignorance of

ignorance


A second type of knowledge gap refers to managingfrom unknowing and recognizes that managers areunaware of knowledge (i.e. tacit knowledge, notknowing how to articulate the information) thatwould be useful in a global context. This form ofunknowing frequently occurs when information pre-viously gathered is not properly codified. Infor-mation that would be helpful for decision-makers toeffectively manage in a global context is overlookedbecause it is not recognized that the data could beuseful.

Global organizational ignorance often stems from thefact that the critical business processes are known toonly one or two people in the organization and,therefore, becomes tacit knowledge in the organiza-tion. For example, British Petroleum Explorationbecame aware of this type of ignorance problemwhen it decided to raise the performance of some gascompressors working in an oil-field in Columbiafrom 65 to 90 per cent of the theoretical maximum toa 95 per cent target. The experience of the operatorwas the key factor, but the best operators were fullyoccupied in the Alaskan operations. And the manu-facturers based in Italy, ‘wouldn’t speak to theColumbians directly.’ Eventually, BP Exploration hadto set up a network of desktopvideo conferencing units tointerface their managers withthe knowledge and the Colum-bians that needed it to startsolving the problem of its glo-bal organizational ignorance.

As managers move into the global paradigm, theyexperience ignorance of ignorance (i.e. not knowingwhat they do not know). This lack of awareness isfrequently referred to as tacit ignorance. The lack ofrecognition of the limitation of their existing knowl-edge base makes these managers most susceptible toenacting inappropriate strategies in the global mar-ketplace and not being aware of their global incom-petence for an extended time. These misconceivedstrategies are most risky and costly because manage-ment never questions the ‘knowledge’ that thedecision was based on (i.e. the tacit domestic formulafor success).

A third type of knowledge gap that appears is actu-ally caused by the decision-maker by suppressingknowledge because it conflicts with managementconventional wisdom (i.e. taboos and/or denials, ‘wejust don’t question that, it is a given’). This type ofmanaging from ignorance can happen in strong cor-porate cultures which are referred to as the ‘knowing’organizational cultures (McGill and Slocum, 1993).These organizations use a formula which has beensuccessful in the past and adhere to this approach bynot questioning its basic tenets regardless of changesin the environmental context. This type of ignoranceis referred to as pluralistic or ignorance based uponcollectively shared false beliefs.


Fourth, in a global context, biased decisions about theprobability of differences in conducting business in adomestic and in a global arena creates anotherknowledge gap. Probabilistic ignorance in makingdecisions refers to using heuristics that are stronglybiased and, therefore, do not reflect the marketreality. Due to the lack of experience of domesticmanagers when they receive data on global marketsthey are not as skeptical of the data as they shouldbe. Domestically, data are scientifically collected andbias in the data as well as interpretation attempts tobe minimized. Not so in many of the global markets,where data are used to support governmental doc-trines or central plans as was done in Russia andChina for decades. Probabilistic ignorance may beinflated by heuristic use of this flawed data to makedecisions relative to the strategic thrust of the organi-zation.

Stakeholders need to become aware of their ignor-ance of ignorance (i.e. to become aware of the need tounlearn the institutionalized ignorance of operatingconventional wisdom). Unlearning is difficultbecause it requires reversibility of prior learning anda recognition of the limited value of past knowledgegiven the necessary changes to be successful in the

global competitive arena(McGill and Slocum, 1993).

McDonalds responded to theeconomic recession in the Euro-pean Union in the early 1990swith numerous efficiencyimprovement programs. Oper-

ational efficiency has always been the core com-petency of McDonalds, Inc. in its domestic US mar-ket. McDonalds was reluctant to acknowledge anyother strategy. However, a major market researchstudy revealed that customers in the EU thought thatMcDonalds was uncaring, complacent, insensitiveand insincere. They wanted warmth and friendlinessmore than clinical efficiency and speed, and thatdemanded a radical change. Paul Preston, CEO ofMcDonalds in the UK, instituted reorganizationtoward a learning company, in which operationalplans dovetailed with learning and systems to stimu-late development of knowledge. This successfulchange contributed to McDonalds’ unlearning of itspast domestic conventional wisdom which in the glo-bal context had turned into its organizational ignor-ance.

To see through the dysfunctional consequences ofignorance normalized as the institutionalized ignor-ance, stakeholders should not first examine the fore-ground of what they perceive as knowledge butrather, must focus on the background of what theythink they do not know. This seeming paradox maybe illustrated by the use of the Stocking’s metaphorof stakeholders as artists: to see the detail of an object,they must not look at the object they wish to drawbut they must examine the spaces around the object


(Stocking, 1998). Concentrating on the empty spacesaround the organizational knowledge (i.e. concen-trating on organizational ignorance) provides theappropriate frame-of-reference for the stakeholdersto reveal what they truly do not know and what mustbe undertaken to learn what is not known.

When various groups of the organization’s stake-holders begin to better understand their level ofignorance about what is not known, the managementcan then begin to acquire the insight and understand-ing of the breadth and depth of their ignorance on atopic as complex as competing in a global business.This knowledge informs them that the organizationalignorance may take two distinct forms: (1) pluralisticignorance; and (2) probabilistic ignorance. Pluralisticignorance stems from the false beliefs shared amongorganization’s stakeholders derived from their misin-terpretations of the nature of different social contexts,whereas, probabilistic ignorance stems from thedecision-makers’ use of heuristics when makingchoices about different probabilistic social contexts inglobal markets.

Delineating Pluralistic Ignorance

Pluralistic ignorance is a social phenomenon ident-ified in the 1920s (Allport, 1924) which reflects a ‘situ-ation where people operate within a false socialworld’ (Fields and Schuman, 1976, p. 427) creating‘patterns of false beliefs’ (O’Gorman, 1986, p. 335)that are either individually inferred or collectivelyshared. This phenomenon belongs to the social com-parison-based family of psychological states (i.e. suchas false consensus, false uniqueness, actor–observerbias, and spiral of silence) which reveal themselveswhen one examines the perceived similarities anddifferences between one’s self and others. The emerg-ence of pluralistic ignorance has been found indiverse contexts such as racial relations (Fields andSchuman, 1976), voting preferences (Shamir, 1986),bystander reactions to people in distress (Latane andDarley, 1970), students’ alcohol abuse (Prentice andMiller, 1993), student radicalism (Korte, 1972) andchildren’s sex stereotyping (Prentice and Miller,1996).

Pluralistic ignorance is initiated by inconsistencybetween a group member’s public behavior and priv-ate thoughts brought about by the group’s behavioraladherence to an implicit or explicit social norm. Inthese instances, individuals recognize this inconsist-ency for themselves but do not assume it for others.Therefore, they believe that the actions of others trulyreflect the others’ individual thoughts and senti-ments. For example, managers recognize the growingimportance of global markets but do not observe anyindications from top management that there is a glo-bal strategic intent of the organization. Therefore, themanagers assume that globalization will not be a


future strategic thrust of the organization, thoughprivately they believe that going global is the propercourse of action.

The underlying structure of the diverse set of plural-istic ignorance examples in organizational settings isthe willingness of stakeholders to escalate theirbehavioral commitment to the corporate norm,despite their contrary private beliefs, caused by thealmost dogmatic adherence to the established stan-dards of the corporate culture and organizationalsuccess. When governed by the corporate norms,stakeholders ‘ignorantly’ assume that ‘norm-congru-ent behavior reveals more private acceptance of thenorms by their fellow members than they are feelingthemselves’ (Prentice and Miller, 1996, p. 164). Inother words, stakeholders, motivated to behave in anorm-congruent manner, are ‘ignorant’ in recogniz-ing the social motive force of organizational identifi-cation in their colleagues. Either they fail to under-stand how much their own behavior is influenced bytheir organizational identification or they fail tounderstand that behavior of their fellow members isalso socially motivated.

The phenomenon of pluralistic ignorance raises anintriguing research question relative to organiza-tional behavior: ‘Can the behavior of individuals instrong corporate cultures which lack a global orien-tation, be explained as a pluralistic ignorancephenomenon?’ Could this explain, to a degree, thedifficulty these organizations face when attemptingto reorient their corporate strategy when it is stronglyembedded in the corporate culture yet, necessitatesresponsiveness to the changes in the competitivelandscape such as the globalization of an industry(e.g. the difficulties of IBM, ICI, Wal-Mart, Disneyand the like in competing globally)? (Peterson, 1998.)

In external organizational contexts, the ‘ignorance’component is viewed as collective rather than per-sonal distortion of reality inferred by the stake-holders. This perspective emphasizes ‘ignorance’ assystematic and invalid rather than as random andunreliable (Fields and Schuman, 1976). Contrary tothe individual perspective, which views pluralisticignorance as caused by the stakeholders biased infor-mation processing because of cognitive limitations orself-serving biases, the social perspective viewspluralistic ignorance as caused by error-prone mess-ages about the corporate globalization communicatedto the macro-environment. The social perspective ofpluralistic ignorance refers to instances when con-sumers and investors contrive pluralistic ignorance.Studying inadequate, misleading, and false infor-mational cues about the globalization activities of aspecific corporation may entail information trans-parency and institutionalized biases on which con-sumers and investors rely in cases of their plural-istic ignorance.

As a rule, clear social norms constrain the stake-

Rational decision-making

is inefficient in the case of the

non-linear progression from

domestic to global competitive

strategy


holders’ pluralistic ignorance during times of econ-omic stability. However, vague social norms, domi-nant during times of significant and/or rapideconomic change, cause pluralistic ignorance toemerge when ‘the change in attitudes has had noclear and salient manifestation, and public opinionperceptions are still under the impressions of the pastsocial structures, norms, and old practices, which areno longer good indicators of public opinion’ (Shamirand Shamir, 1997, p. 231). In particular, media mayhave a concomitant influence on the emergence ofpluralistic ignorance among stakeholders when theirperceptions change before their attitudes are modi-fied (Noelle-Neuman, 1991). The media frequentlytends to pursue two often contradictory goals: (1) tosustain the perception of the existing economic orderand pertinent social norms; and (2) to overrepresentthe extreme, surprising, graphic, and provocativegroups, events, and views (Hall, 1982). When the con-sumers’ and investors’ private attitudes and confi-dence have not yet changed, such cues primed bythe media can be the basis for misperception of theiropinion-generating pluralistic ignorance.

Some structural cues in the social environment maybe generated with the purpose of preventing trans-parency of the effects of theorganization’s globalization —for example, the cues generatedby a rumor. A rumor is an overtor spontaneous improvisedpublic communication thatserves the same function asofficial information but theaccess to such information isrestricted (Pendleton, 1998).External to global organization,rumors, such as negative mar-ket signals, are often deliberately planted and spreadin the business environment by competitors or someother interest groups to elicit pluralistic ignoranceamong stakeholders and the public relative to thefocal organization. Deliberate business-relatedrumors, which eventually may get visible mediaattention, include rumors about Wall Street events(Powell, 1987), investment banks (Taylor, 1989), retailchains (Zinn, 1991), and various corporate activities(Moshavi, 1990; Lafayette, 1990; Light and Lander,1990). Because of its ignorance-generating socialpower, a business-related rumor is a ‘precious com-modity in the marketplace of social exchange’(Rosnow and Fine, 1976, p. 1), particularly in today’sderegulated, hyper-competitive, global businessenvironment.

The rumor phenomenon is a vivid example that, insome contexts: (1) stakeholders’ ignorance may over-power their knowledge; and (2) stakeholders’ ignor-ance may have a significantly higher diffusion ratethan their knowledge. In cases of rumor, ignorance,which is cognitively more efficient than knowledge,may become pluralistic and capable of rationalizing


some actions in an organization, which arise becauseof the lack of transparency in a particular corporateinformation. At the same time rumors may be usedinside the organization to undermine the organiza-tion’s global strategy or faction of management.These rumors have the same characteristics as onesthat are external to the organization, but their impactmay be even greater. In summary, rumors may pro-vide an easy ‘fix’ but false socially constructed cogni-tive shortcut to interpretation of specific organiza-tion’s information, which otherwise cannot be easilyunderstood by stakeholders not intimately involvedwith the organization’s plan about global activities.

Delineating Probabilistic Ignorance

Organization science has traditionally viewed thecognitive dichotomy between organizational knowl-edge and organizational ignorance as arising fromthe alternative views of stakeholder’s rationalitybased on the stakeholder’s deterministic and proba-bilistic judgment models. In the deterministic judg-ment model, stakeholders are assumed as knowl-edgeable to make accurate, testable predictions about

organizations and their globalmarket plans. This assumptionof complete economic ration-ality carries significant norma-tive implications about thestakeholders’ actions. In theabsence of negative exter-nalities, stakeholders’ rationalactions generate efficient out-comes for the organization, aswell as for society as a whole.This type of rational decision-

making becomes inordinately difficult when discon-tinuous radical change (i.e. globalization) is occurringwhich complicates the positioning of the organiza-tion appropriately for the future. Rational decision-making is inefficient in the case of the non-linear pro-gression from domestic to global competitive strat-egy. Mere linear extrapolation of domestic successinto the global context will frequently bring about aglobal strategy which will be less than optimal fromthe perspective of economic rationality.

In the probabilistic view of ignorance, global contex-tual changes elicit stakeholder’s behaviors that have atendency to bound their economic rationality. Whenstakeholders’ tasks become probabilistic because ofthe contextual changes, the stakeholders rely on alimited number of heuristic principles that generatesatisficing or sub-optimal organizational and societaloutcomes (Tversky and Kahmeman, 1981). Specifi-cally, in some contexts, three common heuristics: rep-resentativeness, availability, and anchoring, lead tothe stakeholders’ decisional anomalies generatingorganizational ignorance instead of knowledge. First,representativeness heuristic implies that stake-


holders, when evaluating the probability of a globalsuccess, may rely on its perceived similarity to a classof domestic success. This heuristic explains ignorancegenerated by misperceptions of ‘regression to themean’ (i.e. the stakeholders falsely perceiving that anextreme event will be followed by another extremeevent). For example, a new product introductiondomestically exceeds forecasted sales dramatically,therefore, management assumes that the productwould be widely accepted by global consumers. Thesuccess in one market falsely encourages manage-ment to extrapolate this experience into anotherenvironmental context which is not similar.

Second, the availability heuristic implies that stake-holders, when evaluating the probability of a globalaction, may rely on the ease or rate at which thataction comes to mind. Availability explains ignorancegenerated by the stakeholders’ arising from theirjudgment based on their familiarity with the wrongevent-related cues. For example, when assessing thepotential in the global market, decision-makers mayattempt to use domestic research/data and methodswhich are not applicable in the global marketplace.

Third, the anchoring heuristic implies that stake-holders, when evaluating the probability of a success-ful global move, may base their judgment on thereliability of their initial ‘guesses’ and, therefore, biasor anchor their subsequent ‘guesses’ to be consistentwith their initial ‘guesses.’ This heuristic explains thestakeholders’ overconfidence in guessing the rel-evance of probabilistic events for their organizationparticularly in dynamic global environment. Thedomestically oriented decision-maker assumes thatthe length of time to effectively introduce a new pro-duct or to implement a brand positioning strategywill be similar to the time frame experienced dom-estically. The decision-makers’ frame-of-reference islimited and, therefore, they anchor non-lineardecisions in a time perspective that they are comfort-able with because it has happened in the past in thedomestic market.

This was observed when EU automotive companieswere carefully watching each other’s moves when theCentral European economies opened up for foreignacquisition in early 1990s. However, it would appeartheir global organizational ignorance prevented themfrom keeping their eyes on the Asian competitors.While the EU companies were positioning their stra-tegic thrusts, Daewoo invested $1.5 billion andbought car makers in the Czech Republic, Romaniaand Poland. According to Judith Cherry, KPMGresearch fellow at Sheffield University, UK: ‘SomeKorean companies regard Eastern Europe as the backdoor to the EU. It combines the immediate advantageof low-cost labor with the prospect of eventual EUmembership.’ The hyper-ignorance of the EU auto-motive companies thus contributed not only to losingextraordinary opportunities for global expansion butalso to having a future formidable competitor at theirhome turf.


In summary, the examples of pluralistic and proba-bilistic ignorance illustrate that stakeholders of anorganization characterized by a strong ethnocentricculture may acquire very little experiential learningon how to change their deterministic view of theworld. Probabilistic tasks related to globalization ofthe organization’s activities may not be perceived asbeing of value because they conflict with the existingnormative views shared in the organization. Stake-holders need to be brought to a realization that theyshare global ignorance. However, this awarenessrequires a considerable amount of stakeholder cogni-tive development in terms of learning the process ofnon-linear thinking. Non-linear thinking or discon-tinuous learning can be internalized only if the stake-holders recognize the heightened dynamics of theglobal environment and, therefore, the fallacy of fol-lowing the past domestic conventional wisdom ofmanagement. This requires stakeholders to face theirignorance in non-linear environments that providethe information from which they can truly learn.

Environmental Factors EngenderingGlobal Organizational Ignorance

The environmental factors engendering globalorganizational ignorance are related to decision-mak-ing and evaluations under the conditions rangingfrom assumed certainty, through interpreted risk anduncertainty, to global market ignorance. The tran-sition from perceived certainty to uncertainty isdefined as the degree to which ‘probabilities are ill-defined’ (Laibson and Zeckhauser, 1998, p. 27). Glo-bal market ignorance, however, may be defined assituations which involve ‘contexts where even the setof states is not defined, or impossible to identifyexhaustively’ (ibid, p. 27). The researchers ofbehavioral economics view the market-based ignor-ance applicable to both future states of the world andimmediate actions because, ‘with ignorance, non-rational behavior would be most likely, though alsomost difficult to document’ (ibid, p. 27).

Building on the economic research on comparativeignorance (Fox and Tversky, 1995) and field datavalidation of experimental findings in behavioral eco-nomics (Zeckhauser, 1986; Laibson and Zeckhauser,1998), which recognizes that it is possible to identifywhich environments are most likely to engenderignorance effects, the following environmental fac-tors, relevant to the global organizational ignoranceare identified as relevant:

1. Low accountability in acquisition of globalorganizational knowledge: low stakes in account-ability associated with knowledge acquisitionengender hurried or heuristic judgments. How-ever, increased stakes decrease the level of biases(i.e. decrease global organizational ignorance);


2. Low frequency of global organizational learningopportunities: rare learning outcomes in globalorganizations create incompetent stakeholderswho make ignorant judgment of organizationalchoices;

3. Scarce opportunities to receive expert advice onglobal opportunities: lack of advice or vicariouslearning opportunities in global organizationsleads to the suboptimal judgments by the organi-zation’s stakeholders;

4. Lack of arbitraging actions upon knowledgeacquisition in global organization: lack of opport-unities to recognize how some third parties canprofit from the stakeholder ignorance insti-tutionalizes suboptimal judgment in globalorganization;

5. Multidimensional issues in global knowledgeacquisition: when multidimensional issues areincorporated in the global organizational learn-ing process, such issues escape comparison andincrease ignorance of the stakeholders who lackthe conceptual capital necessary to grasp thoseissues;

6. Fluid contexts of global organizational learningand unlearning: fluid global contexts oflearning/unlearning, when offered by ‘judges’instead by ‘guides’ and when offering guaranteesof learning instead of guidance in learning, maygenerate global organizational ignorance;

7. Qualitative instead of economic valuation of glo-bal organizational learning: reasoning in qualityor quantity units instead of in price/value unitsof acquired global organizational knowledgeleads to suboptimal judgments of how to act onthat knowledge;

8. Bargained or negotiated knowledge acquisitionin global relationships: negotiations and bar-gaining distort the ‘price-taking’ rationality ofglobal organizational knowledge acquisition par-tially engendering global organizational ignor-ance instead;

9. Lack of competing interests for knowledge acqui-sition on a global scale: lack of competing interestdilutes the stakeholders’ judgment on the rel-evance of the acquired global organizationalknowledge;

10. Dominance of social over economic exchange inglobal relationships: social norms like reciprocityand fairness distort the true market value of theknowledge acquired through global relation-ships;

11. Exchange based on interpersonal ties within andoutside the boundaries of a global organization:exchange based on interpersonal ties, such asfriendship, may engender global organizationalignorance in terms of the true market value ofthe exchange outcome;

12. Frequent emotional conflicts among decision-makers: frequent emotional conflicts amongexecutives in a global organization, as affect-


based nonrational behavior, may shift theexchange equilibrium from the functionalrational to the dysfunctional behavioral level.

These environmental factors tend to embed ambi-guity into the context of an organization globalizingits business activities. The organization’s share-holders show different levels of aversion to this ambi-guity when they judge specific domestic opportunityin isolation vs. when they judge it in comparison toglobal opportunities about which they are ignorant.The comparative ignorance hypothesis (Fox andTversky, 1995) posits that the global organizationalignorance may have a paradoxically functionalinfluence on the stakeholders’ judgments aboutfuture domestic opportunities. In particular, whenthe stakeholders compare their knowledge about aspecific opportunity in domestic vs global context,they produce better judgments than when they judgethat specific opportunity for a domestic action withinthe isolated domestic context. As the result, the ignor-ance of the global scope improves the knowledgeabout local actions.

Focusing the Managerial IssuesSurrounding Global OrganizationalIgnorance

The basis of ignorance centers on the lack of referentinformation or on incorrect interpretation of the datathat are available. In an effort to focus the issues sur-rounding global organizational ignorance, the prob-lems associated with collecting/interpreting data canbe used to heighten awareness of how organizationalignorance can occur. An analogy common to errorscommitted by researchers who are collecting primarydata may provide insights into the issues of organiza-tional ignorance. The tie between research error andorganizational ignorance is that, before ignorance canbe reduced information will have to be assembledand assessed relative to reducing the level of anorganizational ignorance. There are four errors com-monly recognized as being committed by researchersin an attempt to collect data to reduce ignorance:

1. Type I Error: this type of error entails falselyrejecting information/hypotheses that are actuallycorrect (i.e. knowledge is disregarded/discarded).

2. Type II Error: this type of error allows erroneousinformation to be integrated into the body ofknowledge accepted in the organization (i.e. infor-mation is retained when, in fact, it is inadequate,misleading or time-locked relative to futuredecision-making).

3. Type III Error: this type of error occurs by sel-ecting the right answer for the wrong reason orconversely, correctly rejecting knowledge for thewrong reason (i.e. the final decision outcome is


correct but the logical/rationale/information usedin the decision are flawed).

4. Type IV Error: the data or information may beaccurate but due to the use of ‘wrong’ analysis(technique/interpretation) the true conclusion isnot found (i.e. the data are correct but the meansused to devise the ‘answer’ or knowledge is inap-propriate drawing the decision-maker to falselyconclude an answer).

In an effort to gain insight into the role that researcherrors play in ongoing global organizational ignor-ance, Figure 2 is presented. Figure 2 illustrates thefour most common types of errors made therebyincreasing/extending organizational ignoranceunder the two broad types of ignorance (i.e. plural-istic and probabilistic). Each cell of Figure 2 has anexample in a global context of how decision-makerscan extend ignorance into making global strategicdecisions. For example, a Type One Error underpluralistic ignorance addresses the fundamentalissues of adaptation of successful domestic strategiesto the potentially dramatic environmental differencesfacing the organization in the global context. Thequestion which needs to be addressed is, ‘whichfunctions/strategies need to be adapted and to whatdegree do these functions/strategies need to bemodified in which markets?’ The pluralistic ignor-ance of domestically oriented decision-makers wouldbe if existing functions/strategies have been success-ful domestically, given the fundamental consistencyof need/desires among consumers, we can imaginethe same functions/strategies in a global context. Astandardization strategy would be invoked by themarketing team based upon the universality of needsfor their product and would suffer from pluralisticignorance. This type of ignorance may be observedin culturally distant countries when the company glo-balizing does not understand the differences in distri-buting products in an emerging market.

For example, one of the world’s leading pharmaceut-

Figure 2 Type of Information Error


ical companies, Glaxo, UK (merged with Boroughs-Wellcome in 1996), thought that it had integrated itsglobal organizational knowledge when it entered theChinese market in 1988. Glaxo-Wellcome made allconventional choices in a well-thought out and ana-lyzed manner: (1) chose appropriate J/V partners,Southwest No. 3 Pharmaceutical Factory and ChinaNational Pharmaceutical Foreign Trade Corp.; (2)chose the appropriate location, the north-western cityof Xian, where Johnson & Johnson had located themost successful pharmaceutical joint venture inChina; (3) properly estimated the consumer demandfor asthma inhalators, the J/V product, and priced itaffordably for consumers at about 20 per cent dis-count to the average international price; and (4) thejoint venture obtained a 3-year tax-free grace periodstarting its first year of profitability. However, duringthe 1991–1996 time period of its operation, Chongqu-ing Glaxo did not manage to start exercising its tax-free privilege. What, then, has gone to ChongquingGlaxo? Glaxo-Wellcome had checked all of its ‘usualunknowns,’ but did not check the most critical,China-specific ‘unknown’ — that the distributors, notthe consumers, drive the market. In China, the priceaffordable to consumers is not attractive to distribu-tors. Glaxo-Wellcome has thus learned an importantlesson that the global organizational ignorance comesin a detail.

Another illustration of emerging organizationalignorance can be illustrated by examining a Type IVError in a pluralistic ignorance context. In this situ-ation, the ignorance of the management relative tothe global decision is that the data on the marketplacewere not interpreted accurately due to the lack ofunderstanding of management. Developing a rel-evant frame-of-reference for a variety of market situ-ations is paramount to reducing global organiza-tional ignorance.

S.C. Johnson Wax took advantage of the probabilisticignorance of its competitors who used the official


data to estimate the sales potential inCentral/Eastern Europe. Its sales volume in Polandafter just five years are up to 50 per cent of those inSpain where it has operated for 30 years. The com-petitors of S.C. Johnson Wax looked at the officialdata which showed that Russia and Poland areranked below Spain on per capita GDP. However,actual purchasing power in most East Europeancountries is much higher than reported. The officialdata failed to take into account the black economy,which is estimated to generate between 25 and 50 percent of all income. S.C. Johnson Wax capitalized onthe ignorance of this fact shared among its competi-tors.

Figure 2 is meant to demonstrate how operationalignorance occurs when decision-makers do notrecognize their past experiences and knowledge is nolonger applicable to the new dynamic environment.Without a clear understanding of the type of errorsthat can be committed when collecting information,ignorance can be perpetuated in the organization.

The commission of one of the four types of errorsmay result either from the use of associated uncer-tainty or from the ignorance about the requirementfor successfully competing in the global marketplace.The transition from certainty to uncertainty isdefined as the degree to which probabilities are ill-defined (Zeckhauser, 1986). Therefore, uncertaintygives birth to relative ignorance or incompleteknowledge. However, the situations, which involvecontexts where even the set of states is not defined,or impossible to identify exhaustible (Laibson andZeckhauser, 1998), give birth to factual ignorance orlack of knowledge. For example, the global organiza-tion’s assessment of the success of entering into astrategic alliance with a well-known competitor isassociated with relative ignorance: however,assessing the market potential in a newly formednation of distant culture and very low economicdevelopment is more associated with absolute ignor-ance. Both relative and absolute ignorance entail non-rational behavior of the global organization.

Besides these exogenous, endogenous factors alsocause nonrational behavioral effects in global organi-zations (i.e. when organizational ignorance ratherthan rationality affects organizational knowledge).The intra-organizational factors that are most likelyto engender ignorance in global organizationsinclude: (1) low accountability in knowledge acqui-sition; (2) low frequency of learning opportunities; (3)lack of auditing actions upon knowledge acquisition;(4) ambiguity in the acquired knowledge; and (5)preference to social over economic outcomes in cer-tain organizational domains. The endogenous factors,particularly when reinforced by the exogenous fac-tors, may engender the four types of errors of com-mission and omission thus embedding ignorance intothe global organization’s context.


Developing a Topology of GlobalOrganizational Ignorance

In an effort to develop a means to address organiza-tional global ignorance, we outline the topology ofthe problem. The general concept of global ignorancemay be subdivided into six categories: (1) Identifi-cation of global knowledge that management mem-bers know they need to know to successfully com-pete in the global marketplace (known unknowns);(2) Identification of global knowledge that manage-ment members do not know that they do not know(unknown unknowns); (3) Recognition of global mis-information that management members think theyknow but do not (errors, false ‘truths’); (4) Realiz-ation of all that is known by management concerningthe globalization of the organization (tacitknowledge); (5) Recognition of knowledge that man-agement is not to know or that is hidden from thembut might be useful in the globalization process(taboos, withheld information); and (6) Understand-ing that some information and/or knowledge may bedestructive to core elements in the organization andtherefore are excluded from the knowledge basemaintained by management (denial of facts or mana-gerial insights). To provide guidance on how to stra-tegically address these various categories of ignor-ance each will be briefly discussed.

Identification of Knowledge That is Needed byManagement

When decision-makers take on a new project or insti-tute a change in the organization’s strategic thrustthere are certain ‘givens’ that need to be learned. Fre-quently, these are the demographics (i.e. vitalstatistics) associated with the new project. Whenexpanding into the global marketplace managersshould know that they need countries, regions, popu-lations divided up to provide insight into the poten-tial demand for the organization’s products and/orservices. Managers know information they need tomake ‘normal’ business decisions. These data needsare referred to as the known unknowns.

Identification of Knowledge That ManagementDoes Not Know They Need

When undertaking a new project that has littleorganizational history, managers must determinewhat is different in the decision context that theyhave not experienced in their past decisions. Thissense of recognizing the differences in seeminglysimilar situations may be referred to as intuition or‘street smarts.’ This intuitive sensemaking manager’sapproach accepts that what is being explored is trueterra incognita (i.e. the land of the unknown). Thismapping of unknowns is an openness to unfamiliarsituations and circumstances similar to recognizing


reoccurring puzzles that do not fit neatly into themanagers historic frame-of-reference. As a mentaladventure is often a very circuitous route to dis-covering what is not known. The observation skills ofmanagers and their wondering, whimsy, pondering,puzzling, musing, and sensing provides the windowto minimizing the unknown unknowns (Kerwin,1993).

Recognition of Misinformation That is Viewed asFact

One of the major forms of ignorance is using infor-mation that was useful in the past in one environ-mental context in the future in another situation. Thismisuse of knowns is hard for managers to recognizebecause their experience tells them that the infor-mation is right and was successfully used in the past.Many times routines and decision processes turn intodogma which is championed by successful managers.Unlearning is a critical dimension of successfullyaddressing the dimensions of ignorance and the will-ingness to accept that the ‘facts’ of the day may bedisproven in the future or do not apply to anenvironment which is significantly different (McGilland Slocum, 1994). The ‘truths’ of decision-makingmust be judged in the context and time of the situ-ation.

Realization of the Level of Tacit Knowledge Heldin the Corpse of Organization

Organizations are repositories of knowledge butidentifying and co-ordinating the knowledge base ofan organization is a daunting task. The entire field ofmanagement information systems has grown out ofthe desire of management to collect, categorize andanalyze data relevant to making effective andefficient decisions. The notion that the organizationis a learning entity has prompted significant inquiryin the last several decades (Argyris and Schon, 1978,1982; Senge, 1990; McGill and Slocum, 1994; Barrett,1995). But, the missing element in the concept of thelearning organization is how to implement such asystem throughout the entire organization (Harvey etal., 1998). The device to remain up-to-date and man-age the significant influx of new data into the organi-zation requires a great deal of attention. In addition,making information available throughout the organi-zation needs to be addressed as a systemic issue toreduce ignorance. Assembling the experience base ofthe managers in the organization and making thatfoundation of experimental knowledge accessible toother managers requires a systematic and on-goingapproach to the problem.

Identification of Knowledge Management is Notto Know

While it is difficult to envision information that man-agers should not know, there are cases where the


data may hurt decision-making. This realm of‘dangerous’ or ‘forbidden’ knowledge seems to bethe antithesis of reducing ignorance but in some situ-ations the information may create a dysfunctionalreaction in the manager attempting to reduce ignor-ance. An example of this hidden knowledge may berelated to the level of turnover or risk associated witha particular country and/or assignment. Dwelling onnegative aspects of a global issue such as terrorismin the host country may reduce the willingness ofmanagers to relocate overseas. It is not that infor-mation should be withheld relative to the safety andwell-being of managers assigned overseas, but ratherthat the information is not given disproportionateemphasis relative to the risk. This type of informationis most dysfunctional when the manager has not hadto address it in past decision-making situations andtherefore, does not know to calibrate the informationinto the decision-making process.

Understanding the Distinctive Nature of SomeKnowledge

This facet of information may be too painful to knowand denial is a form of protection against suchinsights (Kerwin, 1993; Silverman, 1993). Informationthat feels like a threat to the individual oraccomplishment of the project. Frequently, thisknowledge is referred to as ‘guilty knowledge’ andit is suppressed to maintain mental equilibrium andto hide it from others in the organization. Knowingthat you are leaving the organization for another jobopportunity is a stressful decision for managers.They have a tendency to withhold the informationfrom others and even suppress the thoughts fromtheir own conscious level to reduce dissonance intheir present position. Withholding information maybe defended in a temporal manner...‘in the short-runit is better they do not know.’ This contorting ofreality is a self-defense mechanism used to reduceculpability and fallibility which keep us from actingin certain situations.

Conclusion

Global organizational ignorance is emerging as alegitimate construct corollary to that of organiza-tional learning/knowledge. Today’s hyper-competi-tive global environment blurs the boundary betweenobjectivity and subjectivity in organizationaldecision-making opening up the possibility foremergence of pluralistic or probabilistic ignorance inthose organizations. The transition from asset-basedto knowledge-based economy has caused a shift inthe nature of organizational outcomes — fromefficient market-based to effective resource-basedoutcomes. However, organizational stakeholders areoften ignorant of the causal structures underlying


knowledge necessary to produce effective outcomes.As a result, the boundary between organizationalknowledge and organizational ignorance havebecome fluid, permeable, and invisible to the stake-holders. Organizational ignorance has thus becomethe referent of organizational knowledge becausestakeholders lack any other base for decision-makingunder uncertainty. Specifying the nature of organiza-tional ignorance, organizational stakeholders canrecognize their shared false beliefs about theassumed organizational knowledge and act on theunknown to reveal what is to be known. From theresearch perspective, the recognition and under-standing of the multidimensional construct of organi-zational ignorance may reveal new perspectives andenrich our understanding of complex organizationalphenomena such as corporate culture, organizationalresponse, escalation of commitment and the like.

Contrary to global organizational knowledgeresearch that is oriented toward studying the antici-patory power of knowledge integration, globalorganizational ignorance research should take theopposite orientation toward the archeology of cog-nition to identify referents of human choice processesand thereby explain the underlying mechanisms thatshape the framing of human decisions in knowl-edge acquisition.

We anticipate that the global management researchwill ultimately integrate the constructs of globalorganizational knowledge and organizational ignor-ance into a quasi-knowledge synthesis. Such syn-thesis will identify when and where the framing oforganizational and stakeholders’ choices influencethe emergence of global organizational ignorance andstudy how such ignorance is generated in actualorganizational environments. Better explanations andpredictions of organizational quasi-knowledge willbe the result because the standard framework ofknowledge capital will be complemented by the cor-responding ignorance liabilities. The research goal isto identify global contexts in which ignorance liab-ilities are salient and influential.

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MICHAEL HARVEY, MILORADCollege of Business Admin- NOVICEVIC, Michael F.istration, University of Price School of Business,Oklahoma, 307 W. Brooks, University of Oklahoma,206A Adams Hall, Norman, Division of Management,Oklahoma 73019-0450, 307 W. Brooks, Room 6B,USA. Norman, Oklahoma 73019-

4006, USA.Michael Harvey currentlyholds the Puterbaugh Chair Milorad Novicevic is a Doc-of American Free Enterprise, toral Candidate in manage-and is Director of the Man- ment at the Michael F. Price

agement Division at the University of Oklahoma. His College of Business at the University of Oklahoma. Histeaching interests are in global business strategy and previous research has appeared in The Internationalinternational human resource management, and he is Journal of Human Resource Management, Humana member of several journal Editorial Boards. Resource Management Review, and Human

Resource Planning, among others.


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The trials and tribulations of addressing global organizational ignorance

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