**2. Theoretical background**

Strategic decision making deals with poorly structured decision‐making problems for which there is no clear procedure on how to solve them, leading to the decision [1].

The strategic decision for the company is considered to be the choice of the overall strategic orientation of the company which is followed by the decomposition of strategic decisions and consequently the tactical nature [2]. Effective strategic decisions are the result of a gradual, step‐by‐step on‐going analysis of information [3].

The economic crisis has strongly affected the economy in this area, and thousands of small corporations declared bankruptcy. Most of them are dependent on a limited number of cus‐ tomers or subscribers and sales further decline. It is likely that in the form in which they are

It was found that effective strategic decision making significantly increases performance, suc‐ cess, and survival of small and very small corporations. Insight into the process of strategic decision‐making small corporations is therefore important professional experience and litera‐ ture. It presents a topic that received insufficient attention in comparison with the process of

The following reasons brought us to explore the strategic decision‐making process in small

• Strategic decision making in small corporations is significantly complicated by limited sourc‐ es given by their organizational structure which represents low number of employees, they have few or no permanent employees, they have limited capital assets and simple technolo‐ gies and processes, they do not have the capacity to use economies of scale, and they suffer from how to gain financial sources and how to survive in competition of bigger businesses.

• They are economically important, and they represent a high share of all the businesses.

• They are labor‐intensive, informal, simple, and flexible; they are highly motivated to be successful following their ownership, lack of bureaucracy, and continuity thanks to the

• They remain unrepresented in professional literature of the strategic decision making, thus

Research on strategic decision making was and mostly is focused on large businesses. There, we found a big research gap in the way the small corporations make their strategic decisions considering their difficult source limitation. We focused on small enterprises and mainly on

The pilot survey was conducted in 2012 on a sample of 70 small businesses. Subsequently, in 2015–2016, we have carried out major research project VEGA no.: 1/0109/17—"Innovative approaches in the management of their impact on the competitiveness and success of business

Our aim is to find answers to the following questions: Is the strategic decision making part of their management? Which areas are covered by the strategic decisions of micro‐ and small enterprises? What models of the strategic decision making are dominant in these companies? What affects the profile of this process? What are the mechanisms used by managers of small

Strategic decision making deals with poorly structured decision‐making problems for which

there is no clear procedure on how to solve them, leading to the decision [1].

working now, they will not be able to survive the economic pressure of competitors.

strategic decision making in large enterprises.

88 Corporate Governance and Strategic Decision Making

corporations:

possibility of succession.

in conditions in the Globalizing Economy."

corporations who make strategic decisions?

**2. Theoretical background**

micro‐enterprises.

there is an opportunity for further research in this area.

Strategic decisions are intended to provide a competitive advantage and try to change the overall scope and direction of the company [4]. They are important for organizational health and survival [5].

In most businesses, however, strategic decision making is not about making those decisions. This is the documentation of the options which have already been made and often random. Therefore, leading companies reviewed approach to policy‐making, so that their decisions are better and faster [6]. Solving strategic problems affects a large number of factors both inside the company and its surroundings. Many of them cannot be accurately quantified, exist between the complex and varying bond, and are difficult to interpret the information necessary for decision [7]. Adoption and implementation of strategic decisions is fundamental not only for large but also for small and micro‐corporations, because they increase their performance [8].

Many theoretical models and approaches as well as the studies conducted in strategic deci‐ sion making are focused primarily on large enterprises. Among the strategic decision of large and small corporations, however, there are some differences that result from the specific small corporations.

In a large enterprise, strategic decision covers three groups of people. They are business own‐ ers focused on the board or supervisory board, top management, and strategic management department. Among them, there is some division of labor. The process of strategic decision making takes place mostly in teams, whose composition is heterogeneous in terms of edu‐ cation, gender, age, experience, and functional jurisdiction. Top teams work to bring many ideas, constructive criticism, and influence other managers and also prevent the action of various cognitive errors, deviations from rationality, and personality traits of managers. Therefore, it is a large‐scale enterprise that is more difficult for the head of the senior team to dominate the process of strategic decision making.

In small corporations, a strategic decision is focused on one or two persons (owner‐manager or silent partner) and therefore is heavily influenced by the personality of the decision maker, its characteristics, subjective attitudes, and motivation [8]. Manager, often the owner, must have a managerial role as decision making and interpersonal or information. Who does not delegate a wide range of activities necessary for strategic decision making. An entrepreneur solver disputes allocator of resources, negotiators, leaders, coordinators, representatives, observers in one person, and at the same time should think strategically and be visionary.

In small corporations, there is no formal model of strategic decision making. Decision making is less complicated, passes through a few levels of management, therefore, is more central‐ ized, it does not require extensive formal procedures, bureaucratic records, or documentation. Equal implementation requires significant and complex processes associated with communi‐ cation and coordination activities. Small corporations have a few people on the acquisition, processing, and interpretation of vast amounts of information that are often ambiguous and it is necessary to understand them.

Based on the specific features stated above of strategic decision making in small corporations, it is necessary to adapt the generally applicable models and approaches to strategic decision making to these conditions.

#### **2.1. Model approaches to the strategic decision‐making process**

Model approaches to the strategic decision making are different in many ways. The widely used criterion is the degree of application of rationality and exactness on the one hand and the use of intuition and experience of managers on the other.

#### *2.1.1. Model approach: rational approaches*

The majority of managers are convinced that their decision is rational and thus pursue consis‐ tent choices, maximizing value within certain limits. On the assumption of rationality‐based normative theory, objective rationality presupposes full awareness of decision makers. It requires that the decision maker is able to determine the preferences of the elections and they are consistent. It is necessary to examine all the options to solve the problem and have all the necessary information. These assumptions result in a variant providing maximum utility [9]. Economically rational entity systematically tries to seek the best possible solution to the prob‐ lem, and so maximizes their profit [10].

#### *2.1.2. Model approach: limited‐rational approaches*

Due to unrealistic assumptions, achieving the objective rationality recognizes the limited rationality [11]. Also problematic is the requirement of full awareness of decision makers on all variants and their consequences, as well as the weak link between the information and the final decision [12]. Therefore, the limited rationality is considering working with the informa‐ tion, according to the decision maker at the moment sufficient and true [13]. Part of bounded rationality is a social rationality, which introduces elements of ethics in decision making [1] and emphasizes the ethical aspects as satisfactory and satisfying for the decision. Rewarding it is also called formal rationality, which requires adaptation to standards group, which is the decision‐maker representatives [1]. Limited‐rational approach applies the principle of satisfac‐ tion when the manager does not seek to achieve maximum effect, but only satisfactory solu‐ tion that is better than originally expected. The effort to create more options is small. Especially in micro‐owners‐managers do not always reflect its objectives explicitly, and they tend to rely more on personal interests than economic. Such behavior is characterized by "satisfactory to the objectives" that leads to disobligingness to initiate changes in his/her business [14].

#### *2.1.3. Model approach: intuitive approaches*

On one hand, the need for the use of rationality is emphasized by the authors and that is in the sense of acceptance of the decisions based on the exact methods, which consist of the choice between the alternatives that are specified beforehand and which effects are known and calcu‐ lable. On the other hand, broad application of rationality in strategic decision making is ques‐ tioned and rationalized by the specific features of strategic decision making and inapplicability of many methods especially in conditions of uncertainty and difficulty of the outside envi‐ ronment. Therefore, intuition and experience take place. Intuitive approaches are used with strategic decisions concerned with people [15], with the detection of environmental threats and searching for opportunities in new situations, when the best ideas are needed. Strategic intuition is as important as strategic analysis and strategic planning [16].

Based on the specific features stated above of strategic decision making in small corporations, it is necessary to adapt the generally applicable models and approaches to strategic decision

Model approaches to the strategic decision making are different in many ways. The widely used criterion is the degree of application of rationality and exactness on the one hand and the

The majority of managers are convinced that their decision is rational and thus pursue consis‐ tent choices, maximizing value within certain limits. On the assumption of rationality‐based normative theory, objective rationality presupposes full awareness of decision makers. It requires that the decision maker is able to determine the preferences of the elections and they are consistent. It is necessary to examine all the options to solve the problem and have all the necessary information. These assumptions result in a variant providing maximum utility [9]. Economically rational entity systematically tries to seek the best possible solution to the prob‐

Due to unrealistic assumptions, achieving the objective rationality recognizes the limited rationality [11]. Also problematic is the requirement of full awareness of decision makers on all variants and their consequences, as well as the weak link between the information and the final decision [12]. Therefore, the limited rationality is considering working with the informa‐ tion, according to the decision maker at the moment sufficient and true [13]. Part of bounded rationality is a social rationality, which introduces elements of ethics in decision making [1] and emphasizes the ethical aspects as satisfactory and satisfying for the decision. Rewarding it is also called formal rationality, which requires adaptation to standards group, which is the decision‐maker representatives [1]. Limited‐rational approach applies the principle of satisfac‐ tion when the manager does not seek to achieve maximum effect, but only satisfactory solu‐ tion that is better than originally expected. The effort to create more options is small. Especially in micro‐owners‐managers do not always reflect its objectives explicitly, and they tend to rely more on personal interests than economic. Such behavior is characterized by "satisfactory to

the objectives" that leads to disobligingness to initiate changes in his/her business [14].

On one hand, the need for the use of rationality is emphasized by the authors and that is in the sense of acceptance of the decisions based on the exact methods, which consist of the choice between the alternatives that are specified beforehand and which effects are known and calcu‐ lable. On the other hand, broad application of rationality in strategic decision making is ques‐ tioned and rationalized by the specific features of strategic decision making and inapplicability

**2.1. Model approaches to the strategic decision‐making process**

use of intuition and experience of managers on the other.

*2.1.1. Model approach: rational approaches*

lem, and so maximizes their profit [10].

*2.1.3. Model approach: intuitive approaches*

*2.1.2. Model approach: limited‐rational approaches*

making to these conditions.

90 Corporate Governance and Strategic Decision Making

Another reason is the reality that currently there are no "facts" oriented managers, which creates the pressure for using for the occasion approaches and experience‐based approaches, the so‐called experience‐based management [17]. Especially managers in micro‐businesses have the tendency to combine casually acquired information, heuristics, and other mental shortcuts into intuitive decision‐making methods.

Beside the mentioned model approaches—rational, restricted‐rational, and intuitive—there are other approaches in business literature that try to combine or diffuse the approaches men‐ tioned above or try to incorporate other factors into the models of strategic decision making. Hitt, Tyler allocated three conceptual models of strategic decision making [18]: rational‐nor‐ mative model—it prefers objective index figures in strategic decision making, which emerge from the analysis of inner and outer business environment. Another one is a strategic choice model, which emerges from a limited rationality during strategic decision making. This means that the key agents are the subjective influence and the personality of the manager. The last model is external control model, which emphasizes the influence of external environ‐ ment on strategic decision making. It is definitely not an easy task to prefer only one of these models. Even the authors themselves suggest that the trend is headed toward the integration of the abovementioned models. Elbanna and Child [19] developed an integrated model of the rationality of strategic decision making, which consists of three views affecting rationality nature of the environment, business, and decision making itself. Calabretta et al. [20] simi‐ larly accept rational and intuitive accession like paradoxical thinking, developing outcomes through paradoxical thinking, not like an alternative decision operation. Rahman and De Feis [21] allocated model approaches toward strategic decision making based on two dimensions, which are time pressure and complexity of the environment. By doing this, they define incre‐ mental model (combining individual minor decision‐making processes) and a Garbage Can Model which is based on the absence of traditional decision‐making process from a problem to a solution; mutual separation of problems and solutions; tendency of businesses to produce many solutions, which are rejected for the reason of lack of the problems and their consecu‐ tive search in the "garbage can"; decisions are the results of the stream of several independent events under raised time pressure and elevated complexity of the environment. According to the scientific studies, exactly these two model approaches are used for strategic decision making by small corporations and micro‐businesses. Emotions and decision making for stra‐ tegic change under time pressure are analyzed by Treffers and Klarner [22], who demonstrate their findings, which they discuss, that negative rather than positive emotions influence stra‐ tegic decision making and that their influences vary across decision‐making phases. Their study contributes to strategy practice and strategy process research by integrating emotions as embodied practices during the strategic decision‐making process. Kaufmann et al. [23] dis‐ cuss that the key is rational processing and intuitive modes play a complementary role. They recommend that managers will use multiple decision‐making models.
