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...     

A model depicting the relations among perceived stressors,role conflict and organizational commitment: A comparative analysis of Hong Kong and the United States

As managers and employees from different cultures begin to encounter one another in the workplace, the need arises to understand how organizational variables relate differentially based on one's culture. This study attempts to provide a preliminary examination of the relationship between stressors, sources of conflict and job commitment across two differing cultures, specifically the United States and Hong Kong. Although more similarities than differences between the two cultures were found, this study provides at least preliminary evidence that members of different cultures may perceive some stressors differently and exhibit different relationships between stressors and work attitudes.     

An analytical theory of multi-echelon production/distribution systems

In this paper, we study inventory control problems arising in multi-echelon production/distribution chains. In these chains, material is delivered by outside suppliers, proceeds through a number of manufacturing stages, and is distributed finally among a number of local warehouses in order to meet market demand. Each stage requires a fixed leadtime; furthermore, we assume a stochastic, stationary end-item demand process.
The problem to balance inventory levels and service degrees can be modelled and analyzed by defining appropriate cost functions. Under an average cost criterion, we study the three most important structures arising in multi-echelon systems: assembly systems, serial systems and distribution systems. For all three systems, it is possible to prove exact decomposition results which reduce complex multi-dimensional control problems to simple one-dimensional problems. In addition, we establish the optimality of base-stock control policies.     

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.     

STRATEGY AND CONTROL IN SUPPLIER–DISTRIBUTOR RELATIONSHIPS: AN AGENCY PERSPECTIVE

This paper examines the influence of competitive strategy on the relationship between suppliers and their distribution networks. Drawing on agency theory, hypotheses are developed specifying the appropriate match between manufacturer strategies and systems of control within distribution channels. Cluster analysis is used to show distinct differences in channel management and structure for the three generic strategies of cost leadership, differentiation and focus. Results suggest that variation in control relationships may be explained by the demands posed by manufacturers' competitive strategies. This study therefore extends the applicability of Porter's typology to the specific structure of distribution channels and shows that agency theory can provide insights into the economic basis of interorganizational relationships.