Antecedents to Decision‐Making Quality and Agility in Innovation Portfolio Management

Innovation portfolio management (IPM) is a dynamic decision‐making process, in which projects are evaluated and selected, and resources are allocated. Previous research has developed an understanding of IPM success and its influencing factors. However, little research investigated the quality of the decision‐making process and the ability to quickly adapt the portfolio. This study focuses on the antecedents of decision‐making quality and agility (i.e., responsiveness to changes in the environment). Based on a decision‐making framework, five structural and cultural IPM components are derived as important antecedents of decision‐making quality, which in turn influences agility. The structural components (1) clarity of strategic goals, (2) formality of the IPM processes, and (3) controlling intensity serve a coordinating function. The cultural components (4) innovation climate and (5) risk climate serve a motivating function in IPM. An analysis of a sample of 179 firms and their innovation portfolios through structural equation modeling using a double‐informant design documents that these five components all positively influence portfolio decision‐making quality, which in turn positively influences agility. Results further show that environmental turbulence moderates some of these relationships. While the positive effect of process formality is weakened under increasing turbulence, the effects of controlling intensity and climate for innovation are strengthened by environmental turbulence. The findings have theoretical implications for the understanding of IPM as a dynamic capability and practical implications for the management of portfolios in turbulent environments.     

Innovation Performance in New Product Development Teams in China's Technology Ventures: The Role of Behavioral Integration Dimensions and Collective Efficacy

In emerging markets, technology ventures increasingly rely on new product development (NPD) teams to generate creative ideas and to mold these innovative ideas into streams of new products or services. However, little is known about how behavioral integration (a behavioral team process) and collective efficacy (a motivational team process) jointly facilitate or inhibit team innovation performance in emerging markets—especially in China, the world's largest emerging‐market setting with collectivist and high power distance cultures. Drawing on social cognitive theory and behavioral integration research, this article elucidates the relationships between behavioral integration dimensions (i.e., collaborative behavior, information exchange, and joint decision‐making) and innovation performance and also examines how collective efficacy moderates these relationships in China's NPD teams. Results from a sample of 96 NPD teams in China's technology ventures reveal that information exchange is positively associated with innovation performance. Collaborative behavior positively but marginally influences innovation performance, whereas joint decision‐making does not relate to innovation performance. Moreover, collective efficacy demonstrates an important moderating role. Specifically, both collaborative behavior and joint decision‐making are more positively associated with innovation performance when collective efficacy is higher. In contrast, information exchange is less positively associated with innovation performance when collective efficacy is higher. This study makes important theoretical contributions to the literature on team innovation and behavioral integration in emerging markets by offering a better understanding of how behavioral and motivational team processes jointly shape innovation performance in China's NPD teams. This study also extends social cognitive theory by identifying collective efficacy as a boundary condition for the overall effectiveness of behavioral integration dimensions. In particular, this study highlights the condition under which behavioral integration dimensions facilitate or inhibit NPD team innovation performance in China.     

Passion for Work,Nonwork‐Related Excitement,and Innovation Managers’ Decision to Exploit New Product Opportunities

This article investigates the role of affect in innovation managers’ decision to exploit new product opportunities—a decision central to the innovation process. The model proposes that different types of passion can trigger managers’ exploitation decisions but that this effect is contingent on experiencing excitement from events outside their work environment. A field experiment with 90 owner–managers of young firms located in an innovation context (business incubators) shows that passion for work and nonwork‐related excitement levels interdependently impact innovation managers’ decision to exploit new product opportunities. Specifically, harmonious passion has a general positive effect on managers’ propensity to exploit. In contrast, the effect of obsessive passion is more complex and contingent on the additional excitement managers experience such that the positive relationship between obsessive passion and the decision to exploit is more positive with higher levels of excitement. These findings extend the product innovation management literature by acknowledging that decision‐makers’ affective experiences influence innovation decisions and provide a first step toward understanding the role of affect and passion in the product innovation context. Second, the finding that obsessive passion and nonwork‐related excitement interact in explaining opportunity exploitation decisions highlights the need to incorporate contingency relationships in models of innovation decision‐making. Third, in drawing on a field experiment and the experimental manipulation of managerial affect during the decision‐making task, this article answers a recent call in the project management literature to pursue less common methodological approaches and develop “broader theoretical schema” in order to enhance our understanding of innovation management. Finally, this study also has implications for practitioners because it can help innovation managers understand their own decision policies. To the extent that innovation managers are able to regulate their affective experiences, this improved understanding might prevent them from premature and faulty decision‐making.     

Opening the Black Box of Upper Echelons in China: TMT Attributes and Strategic Flexibility

Many scholars have suggested that strategic flexibility is a critical firm capability to survive in today's competitive arena. The decision to take strategic actions to make the firm more strategically flexible typically originates in the top management team (TMT). As the principal decision‐making unit of the firm, TMT members' information acquisition and processing capabilities and subsequent interpretation of environmental changes critically influence the decision to make the firm more strategically flexible to achieve a better fit with its market environment. Therefore, in order to understand how firms can adapt to environmental changes, scholars must study the sociopsychological processes of interaction among members of the TMT. This study examines the relationships between TMT's sociopsychological attributes (shared vision, social integration, and political ties) and strategic flexibility, which is decomposed into organizational flexibility and technological flexibility. The study further investigates how the level of competitive intensity can moderate the relationships. All the hypotheses are tested using structural equation models based on the survey data from 227 firms in China. The results show that organizational flexibility mediates the impact of TMT's social integration and political ties on technological flexibility. Surprisingly, a TMT's shared vision for the firm neither impedes nor facilitates the firm's effort in attaining the desired degree of organizational flexibility. However, TMT's shared vision does have a positive and direct impact on technological flexibility. Moreover, intense competition amplifies the positive impact of TMT social integration on the degree of organizational flexibility, but there is no significant moderating effect of competitive intensity on the relationship between a TMT's political ties and organizational flexibility. The results extend previous research by highlighting the importance of TMTs' sociopsychological attributes in driving technological flexibility, through the mediating impact of organizational flexibility.     

Tell me a story: The role of narrative transportation and the C-suite in B2B advertising

This research investigates stories about buyer-seller experiences in B2B advertising. In two studies, the authors explore the impact of stories and narrative transportation in advertising on decision makers’ attitudinal responses. In Study 1, findings from a Fortune 100 company’s buyer panel indicate that stories told using narrative advertising were positively related to the decision maker’s trust in the supplier, ability to form personal connections with the supplier and the tendency to advocate for the supplier. Moreover, the organizational status of the decision maker (C-suite versus non-C-suite executives) was examined. Results demonstrate that the effect of these relationships were stronger for C-level decision makers than non-C-level decision makers. In Study 2, depth interviews were conducted with C-level decision makers. Findings reinforce results from Study 1 and provide additional insight into C-level decision makers’ perspectives on stories and narrative transportation. Implications for how stories about buyer-seller relationships can benefit organizational decision making are discussed.     

Improving Screening Decision Making through Transactive Memory Systems: A Field Study

In screening decisions, senior managers from various disciplines need to collaborate to evaluate innovation project proposals and decide about the allocation of scarce resources to selected projects. Screening decisions are complex and made under high levels of uncertainty, and are considered to be one of senior management's most challenging tasks. In the present field study, screening decision making is investigated from the perspective of a Transactive Memory System (TMS). TMS theory explains how cross‐disciplinary groups of people in interdependent relationships gain, store, combine, and utilize their knowledge in solving complex problems. According to this theory, a TMS emerges to the extent that team members manage to synchronize three core socio‐cognitive processes—specialization, building credibility, and coordination—to achieve team objectives. A theoretical model summarizing antecedents and consequences of the emergence of a TMS in a screening context is proposed and investigated using structural equation modeling. Data from 136 screening committees were used. Results show that the degree to which a committee acts as a TMS is positively related to decision‐making effectiveness as well as efficiency in a screening context. Transformational leadership and an open organizational climate are shown to act as antecedents of TMS emergence. Theoretical and managerial implications of these findings are discussed.     

Getting the most out of cross-functional cooperation: Internal structural change as a trigger for customer information use

Using customer information in the decision making of R&D and production is vital for industrial firms to survive and prosper in an increasingly competitive marketplace. Previous studies show that cross-functional cooperation may have both negative and positive effects on information use. The authors hypothesize that internal structural change positively moderates the relationship between cross-functional cooperation and information use. However, structural change also decreases the quality of cross-functional cooperation. Cross-functional knowledge increases both cross-functional cooperation and customer information use. These hypotheses are tested and supported using a data set consisting of 221 manufacturing and R&D managers in large industrial firms. The findings imply that although internal structural change increases the benefits of cooperative, cross-functional relationships in terms of customer information use, managers in volatile organizations should continue to strengthen cooperative relationships by maintaining and improving sales and marketing contact people's knowledge of manufacturing and R&D.     

Causal or effectual? Dynamics of decision making logics in servitization

This study explores servitization as an innovative market strategy for manufacturers and investigates how the decision making logics change over time in the servitization transformation process. Effectuation theory is applied to examine servitization as a new theoretical exploration. A longitudinal case study of a global heavy vehicle manufacturer's servitization process in China reveals that the decision makers adjust their decision making logics depending on the stage of the servitization process and associated risk patterns. As the servitization process evolves into a more sophisticated stage, decision makers will change their decision making logics from a causation dominant logic to an effectuation dominant logic in order to cope with the increased risks. Effectuation theory originally developed from entrepreneurship research is found to be a valid theory for the explanation of the risk and uncertainty control behaviors in the servitization transformation process of manufacturing firms.     

RELATIVE RISK CHARACTERISTICS OF ROLLING HORIZON HEDGING HEURISTICS FOR CAPACITY EXPANSION

This paper applies measures of risk to capacity expansion decisions made under uncertainty. Eight different decision making rules are constructed by varying both the frequency of the forecast updates and the hedge against uncertainty in a rolling horizon heuristic procedure. Using demand, capacity, and cost data from the utility division of a manufacturing company, the risk characteristics of each decision making rule are evaluated by simulation. The results indicate that annual forecast revisions hedged by ninety percent prediction limits are preferred over decision rules with less frequent forecast revisions or fixed-width hedges.     

Sequential price and quantity decisions under supply and demand risks

Firms need to deal with not only risks from stochastic demand but also risks from supply side. The supply side risk may be due to parts/service outsourcing, third party logistics, or random yield in production processes. In this paper, we study how firms sequentially make price and quantity decisions under these two risks. The first question we try to answer is how these two risks affect the decisions and profits of the firm. We find that increased supply risk usually causes increased quantity/stocking decision, however, there exists a threshold level of supply risk above which the firm reduces quantity/stocking amount as supply risk increases. This observation may be used in a supply chain setting, where reduction of the supply risk can cause higher delivered quantity and improve supply chain performance. This observation also provides support and insights on prioritizing the risk reduction efforts from marketing and operations to achieve better coordination. At the same time, reduction of the risks help not only firms but also consumers as the optimal price decreases. To further improve decision making process under both uncertainties, we study the impact from information revelation and postponement of decisions. We compare results from different sequential decision making cases. As illustrated in the paper, firms gain competing advantage when decision postponement is available and this advantage becomes further significant as the risks increase. Our numerical examples also indicate that price postponement strategy is usually preferred but the relative profit difference between price postponement and quantity postponement become smaller as consumers become more sensitive to the price.     

实物期权定量分析方法在风险投资决策中的应用

在风险投资项目中，不确定性对风险项目投资评价、决策起到了决定性的作用。运用实物期权原理分析了不确定性对风险投资项目评价和决策的影响，通过风险中性概率方法将这些影响予以定量化，并进一步对实际投资行为作出解释。     

The Decentralization of Decision Making and Employee Involvement within the Workplace: Evidence from Four Establishment Datasets

Participatory work practices, like teams, quality circles and joint consultative committees (JCCs) can, but do not necessarily, decentralize decision making and increase worker autonomy. We use broad, cross‐sectional establishment data from the European Union and three Commonwealth countries to measure the extent of decision making by workers across these countries, and to analyse how this measure varies with the use of participatory practices. Within Europe, workers in Sweden, Germany, France, the Netherlands and Ireland are most likely to be given the authority to make decisions. In Spain, Portugal and Italy, decentralized decision making is more unusual. While decision making is generally higher in establishments with teams, JCCs and quality circles, this result does not hold across all countries. Even where the relationships are significant, use of participatory practices explains a surprisingly small amount of the overall variation in decision making.     

Antecedents and Consequences of Reflexivity in New Product Idea Screening*

Pre‐development activities, such as new product idea screening, are considered to play an important role in innovation success. At the screening stage, a management team evaluates new product and service ideas and makes a first go/no‐go decision under high levels of uncertainty and ambiguity. Paying more attention to the decision‐making process in the screening stage appears important because too rigorous a use of rigid evaluation criteria and inflexible methods have been shown to have an adverse effect on market performance of novel products. The present study proposes and tests a model of team‐level antecedents and consequences of reflexivity—the explicit evaluation and discussion of working methods, tools, and criteria within a team. Recently, researchers have proposed that cognitive style and leadership style are major antecedents of decision‐making performance. This study posits that reflexivity offers an explanation of how transformational leadership and cognitive style can eventually affect decision‐making performance in the context of new product idea screening. Results of a survey among 126 top managers from large international firms show that the positive effects of transformational leadership and procedural rationality on the effectiveness and efficiency of screening decision making are largely mediated by reflexivity at the team level. This suggests that screening teams can improve their decision making in the following ways: committee chairs are advised to stimulate openness, develop a stop‐and‐think attitude among screening committee members, and support argument‐based discussion in order to adapt available decision tools, models, and checklists whenever needed. The paper concludes with implications, limitations of the study, and suggestions for further research.     

Strategic decision making in business relationships: A dyadic agent-based simulation approach

This study employs agent-based simulation to model strategic decision making in business relationships, examining the influence of two important strategy drivers in business relationships (performance and power) on relationship success (relationship survival and performance). The study offers insights into the complex and evolutionary interaction and feedback effects between networking strategy choice, relationship performance and power. Findings show that although certain strategies may be desirable for firms to manage their business relationships, they are not necessarily as successful in all situations. Results indicate that a trade-off exists between relationship context and performance which needs to be considered in strategic networking decisions. Further, the study shows that too many strategy changes cause relationships to become unstable and thus negatively affect performance. The authors refer to this phenomenon as strategy volatility — the rate at which actors change their networking strategies within relationships. This phenomenon arises when too many variables influence firms' decision making and thus cause firms to frequently change their strategy. Although strategy volatility has a relationship safeguarding effect in the short term, this effect diminishes over time.     

Innovation in conservative and entrepreneurial firms: Two models of strategic momentum

Two very different models of product innovation are postulated and tested. The conservative model assumes that innovation is performed reluctantly, mainly in response to serious challenges. It therefore predicts that innovation will correlate positively with environmental, information processing, structural and decision making variables that represent, or help to recognize and cope with these challenges. In contrast, the entrepreneurial model supposes that innovation is always aggressively pursued and will be very high unless decision makers are warned to slow down. Thus negative correlations are predicted between innovation and the variables that can provide such warning. Correlational and curvilinear regression analyses revealed that each model was supported by conservative and entrepreneurial sub-samples, respectively, in a diverse sample of 52 Canadian firms.     

Measuring and Utilizing Corporate Risk Tolerance to Improve Investment Decision Making

Strategic investment decisions are generally characterized by financial risk as well as an irrevocable commitment of significant amounts of capital. The firm's willingness to undertake financial risks plays an important role in the investment decision making process. A comprehensive economic decision analysis to evaluate strategic investment decisions requires a measure of the firm's tolerance for financial risk. This article describes a decision analysis–based technique for assessing managerial risk tolerance as well as managers' ability to be consistent in terms of their financial risk taking. These assessments are then utilized to assist the firm in establishing a corporate risk policy that can guide strategic decisions under uncertainty. The study firm is a business unit within a U.S.-based major oil company with an annual capital budget of approximately $400 million. Our findings suggest that managers are generally risk averse but struggle in terms of being consistent in their financial risk-taking decisions. This work enabled the firm to implement a financial risk tolerance that could be utilized in the economic decision analysis of investment decisions.     

The interplay of task allocation patterns and governance mechanisms in industrial distribution channels

Task allocation involves the placement and performance of distribution subtasks among participants on an on-going basis in the channel. The authors offer an extended conceptualization of task allocation and examine its interplay in varying environmental conditions with shared decision making, pseudo-vertical integration, and dependence. They test the hypothesized relationships with three-stage least squares regression on a sample of farm equipment dealers. Results show that contractually based pseudo-vertical integration facilitates task allocation and, in turn, enlarged dealer task allocation patterns result in pseudo-vertical integration. Firm size has a significant influence on pseudo-vertical integration. In turbulent environments, dealers rely more heavily on shared decision making to allocate tasks than they do in stable environments. Although dependence increases pseudo-vertical integration, its effects on other factors are minimal. The results suggest that task allocation is an important construct that relates to several commonly observed channel characteristics.     

Pioneering Advantages and Entrepreneurs' First‐mover Decisions: An Empirical Investigation for the United States and China

New ventures are often launched for the purpose of pioneering an innovative new product or service in the marketplace. Entrepreneurs or founders of new ventures thus often have to make the decision whether to be the market pioneer or the first mover. While being a first mover potentially is advantageous, it also involves taking risks and facing uncertainties. Entrepreneurs must assess the benefits and risks of pioneering in the first‐mover decision‐making process to realize the potential competitive advantages associated with being a pioneer. Previous research has shown how entrepreneurs perceive potential gains and losses associated with exploring opportunities as the key defining element of entrepreneurial decision‐making. Past studies have also indicated that cultural and business environmental factors affect both perceptions and decision‐making. However, studies to date have insufficiently addressed the relationship between entrepreneurs' perceived pioneering advantages/disadvantages and their first‐mover decisions, with little attention to cross‐national differences. This study includes hypotheses postulating how entrepreneurs' perceived advantages and disadvantages of pioneering affect the number of first‐mover decisions made by entrepreneurs in two different cultural contexts, the United States and China. We collect data from 152 U.S. entrepreneurs and 140 Chinese entrepreneurs over a four‐year period and carry out empirical tests on the hypotheses using Poisson regression models. Our results provide insight on how culture affects perceptions of advantages and disadvantages of pioneering, and how these perceptions impact the likelihood of making a first‐mover decision. We find that a higher level of perceived advantages will drive first‐mover decisions, whereas perceived disadvantages will deter first‐mover decisions. The negative effect of perceived erosion disadvantages on the number of first‐mover decisions was higher for Chinese entrepreneurs, consistent with the high risk‐aversion culture in China. However, this effect was not found for perceived uncertainty disadvantages, suggesting that the risk‐averse characteristics of Chinese entrepreneurs is an oversimplification, and that the Chinese cultural, business, and legal environment helps offset uncertainty disadvantages. We also find an interesting positive moderating effect of perceived advantage on the relationship between perceived disadvantages and the number of first‐mover decisions in China only. That is, if perceived advantages are low, Chinese entrepreneurs are more risk averse than U.S. entrepreneurs; but if perceived advantages are high, Chinese entrepreneurs are more risk‐seeking than U.S. entrepreneurs. This finding again challenges the risk aversion conclusion found by previous studies of Chinese managers.     

The contingent effects of political strategies on firm performance: A political network perspective

Research Summary: We examine the performance impact of corporate political strategies by analyzing the relationships among firms and various government institutions. While a firm's political connections to a focal government with decision‐making authority enhance performance, connections to a rival government competing with the focal government harm performance, particularly when the rivalry is intense. Firms can neutralize the negative effect from this political rivalry by using direct or indirect connections to a constraining government with power over the focal government. We find support for our conjectures based on an analysis of interactions among Chinese steel firms and the central and provincial governments in acquisition decisions during the industry's consolidation period of 1999–2010. Managerial Summary: Firms invest in political capital in order to influence public policies in their favor. However, the government is a not a monolithic entity and the relationships among various government institutions can alter and even reverse the effects of a firm's political strategy. This research shows that a firm's political connections can be both an asset and a liability. That is, although firms benefit from their connections to governments with decision‐making authority, they can be caught in the crossfire when there is a rivalry between governments. Furthermore, our research suggests that firms can cope with the negative impact from political rivalry by taking advantage of the structural relationships within the political system and influencing governments that have constraining power.     

MACHINE TOOL PRODUCTION IN DEVELOPING COUNTRIES by M. M. Huq and C. C. Prendergast,Scottish Academic Press,Edinburgh, Scotland, 1983, xlll + 132 pp.

Engineering economics courses and textbooks have typically acknowledged the existence of the role of risk in economic decision making, but often in a peripheral way. The approach has been to suggest the existence of risk and uncertainty in engineering decisions, and to quantify that risk. The world of financial decision making includes many more powerful tools and techniques for risk management, rather than just risk measurement. The techniques of risk management include diversification, hedging, insuring, the capital asset pricing model (CAPM), futures contracts, options, and other investments. These portfolio tools are useful to engineering decision making, and the engineering economics community would be well served to include these topics in engineering economics undergraduate education.