Search for the best alternative: An experimental approach

Author:

Özkan‐Seely Gülru F.1,Hall David C.2,Hutchison‐Krupat Jeremy3

Affiliation:

1. School of Business Operations Management and Information Systems, School of Business University of Washington Bothell, 18115 Campus Way NE Bothell, WA 98011

2. Raj Soin College of Business Information Systems and Supply Chain Management, Wright State University, 3640 Colonel Glenn Hwy Dayton, OH 45435

3. Innovation and Operations Management Judge Business School, University of Cambridge, Trumpington Street Cambridge, UK CB2 1AG

Abstract

ABSTRACTEffectively implementing any dimension of a company's strategy requires a careful balance between ensuring a sufficient number of opportunities have been explored and the execution has taken place in a timely manner for a specific initiative. Naturally, the importance of specific characteristics of an initiative will vary according to the strategic objective. Alternatives vary in their likelihood of success, how sensitive their value is to time, and the resources required to explore additional options. Extant research has established optimal rules for what constitutes a sufficient degree of exploration, and how to go about exploring alternatives. Yet, how individuals vary their behavior according to the characteristics of an initiative is not well understood. We use a controlled experiment to study how individuals' decisions are impacted by these characteristics. As expected, individuals perform significantly worse than optimal behavior would predict. However, the underlying drivers of this performance deviation critically depend on the characteristics of the initiative. Individuals who face simple initiatives that lack sensitivity to time tend to evaluate far too many options. In contrast, when a simple initiative's value is sensitive to time, individuals tend to evaluate far too few options. When the individuals face more difficult initiatives, they do not exhibit such extreme tendencies in terms of how many alternatives they evaluate. Rather, for the most challenging initiatives, individuals exhibit near optimal behavior in terms of how many alternatives they evaluate. Our findings help to provide insight to managers on where they should focus their attention in terms of pushing for more or less exploration.

Publisher

Wiley

Subject

Management of Technology and Innovation,Information Systems and Management,Strategy and Management,General Business, Management and Accounting

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