Information Systems Project Continuation in Escalation Situations: A Real Options Model

Software project escalation has been shown to be a widespread phenomenon. With few exceptions, prior research has portrayed escalation as an irrational decision‐making process whereby additional resources are plowed into a failing project. In this article, we examine the possibility that in some cases managers escalate their commitment not because they are acting irrationally, but rather as a rational response to real options that may be embedded in a project. A project embeds real options when managers have the opportunity but not the obligation to adjust the future direction of the project in response to external or internal events. Examples include deferring the project, switching the project to serve a different purpose, changing the scale of the project, implementing it in incremental stages, abandoning the project, or using the project as a platform for future growth opportunities. Although real options can represent a substantial portion of a project's value, they rarely enter into a project's formal justification process in the traditional quantitative discounted cash‐flow‐based project valuation techniques. Using experimental data collected from managers in 123 firms, we demonstrate that managers recognize and value the presence of real options. We also assess the relative importance that managers ascribe to each type of real option, showing that growth options are more highly valued than operational options. Finally, we demonstrate that the influence of the options on project continuation decisions is largely mediated by the perceived value that they add. Implications for both theory and practice are discussed.     

Designing Products for Adaptability: Insights from Four Industrial Cases

Developing products that are more easily adaptable to future requirements can increase their overall value. Product adaptability is largely determined by choices about product architecture, especially modularity. Because it is possible to be too modular and/or inappropriately modular, deciding how and where to be modular in a cost‐effective way is an important managerial decision. In this article, we gather data from four case studies to model effects of firms’ product architecture decisions at the component level. We optimize an architecture adaptability value (AAV) measure that accounts for both the benefits of more architecture options and the costs of interfaces. The optimal architecture prompted each firm to rearchitect an existing product to increase its expected future profitability. Several insights emerged from the case evidence during this research. (i) Although decomposing an architecture into an increasing number of modules increases product adaptability, the amount of modularity is an insufficient predictor of the adaptability value of a system. AAV, which also accounts for interface costs, provides an improved measure of appropriate modularity. (ii) Managers can influence the path of architectural evolution in the direction of increased value. This influence may diminish but does not disappear as products become more mature. Also, modularity and innovations coevolved, as the new modularizations suggested by AAV optimization prompted and guided searches for further innovations. (iii) When presented with the concepts of options, interface costs, and AAV, the firms’ designers and managers were initially skeptical. However, in each case, the modelers were able to rearchitect an actual product not only with increased AAV by our model (theoretical improvement) but also with actual future benefits for their firm. Postproject reports from each firm confirmed that the AAV modeling and optimization approaches were indeed helpful, equipping them to increase the adaptability, cost‐efficiency, lifespan, and overall value of actual products. The evidence suggests that firms can benefit from designing products for adaptability, but that how they do so matters. This study expands our understanding of modularity and adaptability by illuminating managerial decisions and insights about appropriate approaches to each.     

The Myth of Restructuring, ‘Competent’ Managers and the Transition to a Market Economy: a Romanian Tale

A great deal of rhetoric surrounds the transformation from socialism to free-market capitalism. This paper explores to what extent the restructuring of Romanian companies has been an attempt to pay lip-service to prevailing rhetoric and to what extent it has been premised upon economic rationality. To restructure along structural, technological, financial but primarily managerial fronts has become a cultural value which is applauded, praised and heralded as the only way forward by the Romanian institutions of the transition. The companies under the study subscribe to such rhetoric only when they regard it as being embedded in economic rationality, as is the case with structural, financial and technological restructuring. Managerial restructuring, on the other hand, is not regarded as a technical necessity, given the view held by existing senior managers that skills and qualities acquired in the socialist regime are still appropriate to run a business successfully in the free-market economy.     

Social Connections and Incentives in the Workplace: Evidence From Personnel Data

We present evidence on the effect of social connections between workers and managers on productivity in the workplace. To evaluate whether the existence of social connections is beneficial to the firm's overall performance, we explore how the effects of social connections vary with the strength of managerial incentives and worker's ability. To do so, we combine panel data on individual worker's productivity from personnel records with a natural field experiment in which we engineered an exogenous change in managerial incentives, from fixed wages to bonuses based on the average productivity of the workers managed. We find that when managers are paid fixed wages, they favor workers to whom they are socially connected irrespective of the worker's ability, but when they are paid performance bonuses, they target their effort toward high ability workers irrespective of whether they are socially connected to them or not. Although social connections increase the performance of connected workers, we find that favoring connected workers is detrimental for the firm's overall performance.     

Risk Uncertainty and Supply Chain Decisions: A Real Options Perspective

Supply chain risk uncertainty can create severe repercussions, thus it is not surprising that research interest in supply chain risk has been growing. While extant inquiry is informative, there is a lack of investigations that center on supply chain investment decisions when facing high levels of risk uncertainty. Given the potential dollar value involved in these decisions, an understanding of how these supply chain decisions are made is of significant theoretical and practical importance. Real options theory, with its focus on decision making under conditions of uncertainty, is an appealing theoretical lens for this endeavor. In essence, real options theory asserts that managerial decisions center on creating and then exercising or not exercising certain opportunities. To date, theorizing about and investigations of real options have used firms as their focus. Not yet examined are real options within supply chains that cross firm boundaries and drive much of the competitive activity in the modern economy. Accordingly, we extend real options theory to the supply chain context by examining how different types of options are approached relative to supply chain project investments. Specifically, we theorize how the options will be related to perceived value under conditions of high supply chain risk uncertainty. Overall, our investigation builds knowledge by extending real options theory to the supply chain context and by providing evidence suggesting some options operate differently in supply chains than they do in firms.     

How Managers Talk about their Consumption of Popular Management Concepts: Identity,Rules and Situations

This paper analyses how top managers account for their consumption of popular management concepts. By ‘consumption’ we refer to managers acting as active users of popular management concepts within their organizations. After reviewing the relevant literature, we argue that the logic of appropriateness is a better theoretical perspective to view, understand and analyse managers' accounts of concept consumption than is the logic of consequence. We apply this perspective to extensive interviews we conducted with top managers in Germany. Based on the managers' own accounts of how they understand and apply popular management concepts, we identified four discourse categories: (1) learning from others' experiences, (2) controlling organizational change, (3) gaining external legitimacy and (4) collective sensemaking. We argue that these discourse categories all draw on the social norm of rationality central to managerial identity, while differing in socially defined rules about how rationality is realized in typical management situations. Our findings strongly encourage researchers, when investigating popular management concepts in the future, to take into account the situational nature of rationality that circumstantiates the consumption of concepts.     

Acquired middle managers’ strategy roles and value creation in cross-border acquisitions

Middle managers (MMs) are important organisational players. In intra-organisational settings, their enactment of strategy roles has been linked to value creation. In this paper, we study this question in the context of acquisitions. An acquisition removes the acquired MMs' upward links towards top management and introduces new players (i.e., acquiring MMs) who influence their work. This paper explores whether acquired MMs are able to enact their strategy roles in the post-acquisition era, and if so, how this contributes to acquired-unit value creation. Adopting an actor-based, mixed-methods research design studying cross-border acquisitions, our findings contribute to the debate on managerial roles and acquisition value creation. We found that value-creating transactions are represented by acquired MMs' enactment of the strategy roles of implementing and championing, while value-declining transactions are represented by acquired MMs' enactment of the synthesising role. Notwithstanding, the relationship between acquired-firm value creation and acquired MMs' strategy role enactment is contingent upon acquired and acquiring MMs' relationships. Going forward, we call for more research on managers’ effects on acquisition value creation.     

Managing Supply Chain Execution: Monitoring Timeliness and Correctness via Individualized Trace Data

Improvements in information technologies provide new opportunities to control and improve business processes based on real‐time performance data. A class of data we call individualized trace data (ITD) identifies the real‐time status of individual entities as they move through execution processes, such as an individual product passing through a supply chain or a uniquely identified mortgage application going through an approval process. We develop a mathematical framework which we call the State‐Identity‐Time (SIT) Framework to represent and manipulate ITD at multiple levels of aggregation for different managerial purposes. Using this framework, we design a pair of generic quality measures—timeliness and correctness—for the progress of entities through a supply chain. The timeliness and correctness metrics provide behavioral visibility that can help managers to grasp the dynamics of supply chain behavior that is distinct from asset visibility such as inventory. We develop special quality control methods using this framework to address the issue of overreaction that is common among managers faced with a large volume of fast‐changing data. The SIT structure and its associated methods inform managers on if, when, and where to react. We illustrate our approach using simulations based on real RFID data from a Walmart RFID pilot project.     

Work value orientations and patterns: A comparison of future managers with manager and non-manager groups

This study uses the Values for Working questionnaire to classify the primary value systems and value patterns of 501 senior business school students (future managers). The students' scores on six value systems measured by the questionnaire are compared to national data on blue collar and clerical workers and on managerial and professional workers. The business students scored in the average range for four of the six value systems when compared to the manager group, but for only one of the value systems when compared to the non-manager group. Of the business students who had a primary value system, 82 percent wereexistential ormanipulative. There were significant differences in the value systems scores by sex but not by business major.     

Cultural Intelligence and Institutional Success: The Mediating Role of Relationship Quality

As managerial rationality is always bounded, managers utilise their cognitive abilities and social relations to manage their operational environmental uncertainties. We posit that relationship quality (RQ) mediates the association between cultural intelligence (CQ) and success in managing challenges arising out of differences in the institutional environments i.e. institutional success. Our CQ measure comprises cognitive, metacognitive, motivational and behavioural CQs. We included the interactive effects of two inter-related mental capabilities, namely cognitive and metacognitive CQs, and motivational and behavioural CQs while examining the mediating role of RQ between CQ and institutional success. Based on data from 186 Indian senior managers doing business with New Zealand, we find mixed support for our hypotheses. We find indirect-only mediation effects for interactive effects of cognitive and metacognitive CQs, and complementary mediation effects for motivational CQ. Contrary to expectations, we find negative direct-only non-mediation effects of behavioural CQ.     

The Social Lives of Products: Analyzing Product Demography for Management Theory and Practice

Abstract

Despite the centrality of products in many strategic and managerial theoretical frameworks, little is known systematically about how and why specific products come and go from markets. We argue that narrowing this gap will likely enhance management theory, and we propose that research on product demography—the social lives of products—is a promising way to proceed. For organizing various theoretical ideas used in prior studies, we offer a classification framework. It defines four broad theoretical perspectives on product demography: market rationality, firm rationality, organizational bounded rationality, and institutional rationality. We also outline an approach to product demography that studies empirically the rates of product launch, growth, and withdrawal using stochastic models and data on all products ever appearing in bounded industrial domains. Finally, we discuss the challenges presented by such a fragmented approach to research on product demography and propose a generic research program intended to avoid stagnation.     

A Review of the Contemporary Transfer Pricing Literature with Recommendations for Future Research

A transfer price is a value placed on the goods or services which are traded between divisions of an organization. This paper attempts to make the subject of transfer pricing accessible to researchers and others interested in managerial problems so that a very real managerial problem can be studied in a broader managerial context. The not insubstantial literature that has grown up in the transfer pricing area is reviewed and, in particular, a critical evaluation of recent writings in the field is provided. It is shown that little which is unequivocal is known about transfer pricing and that the choices made by managers with regard to transfer pricing are little understood, both with regard to the factors which drive choice and the differences between choice in practice and theoretical interpretations. It is suggested that progress in the area will require a richer understanding of the realities confronting practising managers. Research by means of field studies, particularly case studies, is recommended to provide this. A series of hypotheses and issues, representing the dilemmas facing managers, is provided as a theoretical grounding for such research.     

Some Implications for Management Development of Research into Managers' Moral Dilemmas

In this paper, we present two cases of moral dilemmas as told by the managers who had faced them. We analyse the cases, drawing on frameworks developed by Toffler (1986), Kohlberg (1981) and Maclagan (1990). We also comment on the broader findings of the research from which the cases were taken. These analyses and findings and those of other researchers (e.g. Waters et al., 1986) suggest a number of requisite ‘moral attributes’ for managers and have, we argue, significant implications for the curriculum for ethical education and development for managers and intending managers. One is that case material needs to reflect more strongly the actual experiences of practising managers; another is that there is scope for wider use of experiential methods on management ethics courses. We conclude with a call for a multifaceted approach to ethical education as a lifespan process entailing the development of personal and interpersonal skills and qualities, and self-knowledge as well as cognitive skills. While we acknowledge that ethical education needs to take account of learners' differing levels of prior experience, stages of moral development and levels of learning maturity, our over-riding concern is that learners are prepared for and helped to live through the very ‘real’ dilemmas that they are likely to experience in managerial work.     

Managerial commitment to the status quo and corporate divestiture: Can power motivate openness to change?

CEOs' commitment to the status quo (CSQ) is a prominent psychological factor leading to their resistance to organizational change. In this study we focus on the moderating role of managerial power, a central element in strategic choice, in the relationship between CEOs' CSQ and corporate divestiture activity. Drawing from the resource dependence perspective of power, we identify multiple aspects of power (structural, ownership, prestige/social, and expert power) that reduce CEOs' resistance to corporate change arising from CSQ. This study contributes to the strategic leadership and organizational change literatures by underscoring the importance of considering how different power bases shape the decision making of top managers who may have tendencies to hold onto firm assets when the situation warrants change. With a better understanding of how various power bases may uniquely influence strategic outcomes in the presence of managerial psychological bias, we can more accurately assess the impact of power on firms' strategic actions.     

基于中国上市公司的实物期权价值创造的实证检验

以1998年以前上市的657家上市公司为样本,对实证检验实物期权的价值创造功能做了探索性研究。研究结论表明,内含有价值实物期权的上市公司,即具有高管理弹性(灵活性),同时又面临高度不确定性市场环境的上市公司,获得了显著高的收益率,为股东创造了更多的财富,从而证实了实物期权的价值创造功能。     

Opportunism in Capital Budget Recommendations: The Effects of Past Performance and Its Attributions*

This study uses an experiment to examine the separate and combined effects of managers' loss aversion and their causal attributions about their divisions' performance on tendencies to make goal‐incongruent capital budget recommendations. We find that managers' recommendations are biased by their loss aversion. In particular, managers of high‐performing divisions are more likely than managers of low‐performing divisions to propose investments that maximize their division's short‐term profits at the expense of the firm's long‐term value. We also find that managers' recommendations are biased by their causal attributions. In particular, managers are more likely to propose investments that maximize their division's short‐term profits at the expense of the firm's long‐term value when they attribute their division's performance to external causes (e.g., task difficulty or luck) rather than to internal causes (e.g., managerial ability or effort). Further, the effects of causal attributions are greater for managers of high‐performing divisions than for managers of low‐performing divisions. The study's findings are important because loss aversion and causal attributions are often manifested in firms. Thus, they may bias managers' decisions, which in turn may be detrimental to the firms' long‐term value.     

Behavioural determinants of perceived managerial and leadership effectiveness in Argentina

The purpose of this empirical study was to explore the perceptions of Argentinean managers and non-managerial employees about managerial and leadership effectiveness, and the extent to which the findings are generalized to other countries. The central research question addressed was as follows: How do people employed in Argentinean companies behaviourally distinguish effective managers from ineffective managers, and to what extent are the findings culture-specific or context-general? A total of 42 employees from private and public sector organizations in Cordoba, Argentina, were interviewed using critical incident technique. The interviews generated 302 critical incidents of which 155 were examples of positive (effective) managerial behaviour, and 147 of negative (ineffective) managerial behaviour. The findings suggest that Argentineans perceive as effective those managers who are supportive, considerate, motivating, caring, good decision makers, approachable, participative, fair-minded, communicative, actively involved, and who act as role models. This challenges the widely held belief that Argentineans prefer authoritarian managers over democratic ones.     

The Translational Role of Hybrid Nurse Middle Managers in Implementing Clinical Guidelines: Effect of,and upon,Professional and Managerial Hierarchies

Our study uses qualitative and interpretative design to analyse what hybrid nurse middle managers do in their managerial practice, what affects this, and to what effect, focusing upon implementing policy‐driven guidelines on the clinical frontline. Examining two comparative hospital cases and drawing upon Scandinavian institutionalism, we conceive their role as one of ‘translation’. On the one hand, they exhibit strategic agency. On the other hand, their managerial role not only influences, but is influenced by, professional and managerial hierarchies. In both hospitals, in the short term we see how hybrid nurse middle managers are able to mediate professional and managerial hierarchies and implement clinical guidelines through translational work. However, in one case, they less effectively accommodate policy‐driven, managerial pressure towards compliance with government regulations and financial parsimony. In this case, the outcome of their translational work is not sustained in the longer term, as professional and managerial hierarchies reassert themselves. Drawing upon the example of their managerial role in healthcare, we highlight that hybrid middle managers enact a strategic translational role and outline situational constraints that impact this more strategic role.     

学习和控制行为与企业成长价值——我国上市公司的实证检验

本文以中国上市公司为样本,以实物期权理论为基础,实证分析了企业的学习(以研发费用为代表)和控制行为(以广告费用为代表),管理者的学习行为(以管理经验和社会网络关系为代表)对企业成长价值的影响.结果表明,管理者的学习行为与企业成长价值显著正相关;在一定支出水平下,企业的学习行为和控制行为与企业成长价值正相关;学习行为相对于控制行为而言更为重要.部分行业存在研发支出和广告支出的临界支出水平.     

Dual Objective Segmentation to Improve Targetability: An Evolutionary Algorithm Approach**

Cluster‐based segmentation usually involves two sets of variables: (i) the needs‐based variables (referred to as the bases variables), which are used in developing the original segments to identify the value, and (ii) the classification or background variables, which are used to profile or target the customers. The managers’ goal is to utilize these two sets of variables in the most efficient manner. Pragmatic managerial interests recognize the underlying need to start shifting from methodologies that obtain highly precise value‐based segments but may be of limited practical use as they provide less targetable segments. Consequently, the imperative is to shift toward newer segmentation approaches that provide greater focus on targetable segments while maintaining homogeneity. This requires dual objective segmentation, which is a combinatorially difficult problem. Hence, we propose and examine a new evolutionary methodology based on genetic algorithms to address this problem. We show, based on a large‐scale Monte Carlo simulation and a case study, that the proposed approach consistently outperforms the existing methods for a wide variety of problem instances. We are able to obtain statistically significant and managerially important improvements in targetability with little diminution in the identifiability of value‐based segments. Moreover, the proposed methodology provides a set of good solutions, unlike existing methodologies that provide a single solution. We also show how these good solutions can be used to plot an efficient Pareto frontier. Finally, we present useful insights that would help managers in implementing the proposed solution approach effectively.