Can LLMs Help Improve Analogical Reasoning For Strategic Decisions? Experimental Evidence from Humans and GPT-4
It addresses the problem of improving strategic decision-making for organizations by highlighting a division of labor between AI and humans, though it is incremental in advancing theory on analogical reasoning.
This study investigated whether GPT-4 can match human analogical reasoning in strategic decisions, finding that GPT-4 achieves high recall but low precision due to superficial matching, while humans show high precision but low recall with stronger causal alignment.
This study investigates whether large language models, specifically GPT4, can match human capabilities in analogical reasoning within strategic decision making contexts. Using a novel experimental design involving source to target matching, we find that GPT4 achieves high recall by retrieving all plausible analogies but suffers from low precision, frequently applying incorrect analogies based on superficial similarities. In contrast, human participants exhibit high precision but low recall, selecting fewer analogies yet with stronger causal alignment. These findings advance theory by identifying matching, the evaluative phase of analogical reasoning, as a distinct step that requires accurate causal mapping beyond simple retrieval. While current LLMs are proficient in generating candidate analogies, humans maintain a comparative advantage in recognizing deep structural similarities across domains. Error analysis reveals that AI errors arise from surface level matching, whereas human errors stem from misinterpretations of causal structure. Taken together, the results suggest a productive division of labor in AI assisted organizational decision making where LLMs may serve as broad analogy generators, while humans act as critical evaluators, applying the most contextually appropriate analogies to strategic problems.