Functional fixation refers to the tendency to view the functions or uses we assign to objects as fixed or stable so that we do not see the properties of the stimulus that might be useful in problem-solving. Functional fixation occurs when top-down processing is over-activated because we depend too much on our previous concepts, expectations, and memories. Thus, one perceives an object in terms of its most general use. Because objects in the world have a fixed function, a strategy of using one tool for one task and another for another is usually appropriate. Therefore, functional fixation is a basic mistake made in the cognitive process and is often the result of a fundamentally rational strategy.
We use problem-solving when we want to reach a particular goal, but we often don’t immediately figure out the proper path to the goal. For problem-solving, we can think about the four main aspects: problem understanding, problem-solving strategies, factors that influence problem-solving, and creativity. Factors affecting problem-solving include bottom-up and bottom-up processing, which are important for effective problem-solving. Upstream processing emphasizes information about stimuli registered in sensory receptors. Top-down processing, on the other hand, emphasizes concepts, expectations, and memories from past experiences. Experts make good use of well-developed top-down processing techniques. They take full advantage of their accumulated concepts, expectations, and knowledge. However, excessive use of top-down processing sometimes hinders effective problem solving, such as functional fixation and set-of-mind.

We rely too much on previous concepts, expectations, and memories when solving problems. Functional fixation means that we tend to view the functions or uses we assign to objects as fixed or stable. Thus, we do not see the properties of the stimulus that might be useful in problem-solving. That is, functional fixation arises because of the tendency to perceive an object in terms of its most general use.
For example, a person may be moving boxes in an apartment, and he may feel uncomfortable because there is no foot to secure the door, but he may not realize that one of the boxes can be used for that same purpose. Similarly, many people don’t realize that a coin or a blade can be used as a screwdriver in an emergency. As such, functional fixation reflects perceptual rigidity.
The basic mistakes made in cognitive processes are often the result of very rational strategies. Normally, objects in the world have a fixed function. We use a screwdriver to tighten the screws, and we use coins to buy something. In general, a strategy of using one tool for one task and another for another task is appropriate. Each tool is designed specifically for its unique task. But when we rigidly apply such strategies, functional fixation occurs. For example, without a driver, you don’t realize that a coin can take over its function. Similarly, it is generally a wise strategy to use the knowledge you have learned while solving previous problems to solve your current dilemma.
The purpose of the hammer is a tool used to drive nails, but it can also be used as a hammer to put the paper on top so that it does not fly off. To break free from functional fixation like this, we need to increase the flexibility of our thinking.

Reference

https://psu.instructure.com/courses/2130474/modules/items/33027172