The hidden traps in decision making

Bad decisions can often be traced back to the way the decisions were made--the alternatives were not clearly defined, the right information was not collected, the costs and benefits were not accurately weighted. But sometimes the fault lies not in the decision-making process but rather in the mind of the decision maker. The way the human brain works can sabotage the choices we make. John Hammond, Ralph Keeney, and Howard Raiffa examine eight psychological traps that are particularly likely to affect the way we make business decisions: The anchoring trap leads us to give disproportionate weight to the first information we receive. The statusquo trap biases us toward maintaining the current situation--even when better alternatives exist. The sunk-cost trap inclines us to perpetuate the mistakes of the past. The confirming-evidence trap leads us to seek out information supporting an existing predilection and to discount opposing information. The framing trap occurs when we misstate a problem, undermining the entire decision-making process. The overconfidence trap makes us overestimate the accuracy of our forecasts. The prudence trap leads us to be overcautious when we make estimates about uncertain events. And the recallability trap leads us to give undue weight to recent, dramatic events. The best way to avoid all the traps is awareness--forewarned is forearmed. But executives can also take other simple steps to protect themselves and their organizations from the various kinds of mental lapses. The authors show how to take action to ensure that important business decisions are sound and reliable.     

Business strategy and firm location decisions: testing traditional and modern methods

Business Economics - For nearly a century, economists have relied upon the neoclassical principle of a “profit-maximizing firm.” Two modern challenges to this principle have arisen: the...     

Effectiveness and Efficiency of Cross-Border Knowledge Transfer: An Empirical Examination

abstract    Based on a sample of 102 US organizations, this study examines the impact of knowledge characteristics, recipient learning intent, source attractiveness, and relationship quality on the effectiveness and efficiency of knowledge transfer from the international business affiliates of these organizations. Findings indicate that recipient learning intent and source attractiveness positively impact the effectiveness of knowledge transfer. In addition, recipient learning intent was found to have a positive effect on knowledge transfer efficiency. In particular, results highlight the strong positive impact that the quality of the relationship between the source and the recipient has on both the efficiency and effectiveness of cross-border knowledge transfer. The study also indicates that knowledge value is positively associated with recipient learning intent and that knowledge value, rarity and non-substitutability influence source attractiveness. Finally, findings suggest that the relationship between knowledge characteristics and knowledge transfer is partially mediated by recipient learning intent and source attractiveness.