Too early to execute the strategic scenario planning: hyperbolic discounting and psychological biases of Indonesian SMEs' managers

Abstract

Purpose

Using the hyperbolic discounting approach in qualitative manner, the purpose of this paper is to explore the linkage of the time preference bias towards the too early execution of strategic focused planning. The paper also investigates the role of psychological bias in explaining the early execution.

Design/methodology/approach

This research use qualitative methods to explore the role of hyperbolic discounting in driving the psychological bias towards too early strategic scenario planning, and its rationalization. The authors conducted a face‐to‐face survey going door‐to‐door of the small to medium‐sized enterprises (SMEs). The samples in this research are Indonesian SMEs from the northern part of Sumatra.

Findings

This research found most of the SMEs' managers are time preference biased due to hyperbolic discounting. This hyperbolic discounting awoke manager's psychological bias and resulted in too early decision making. This psychological bias might be due to prospect theory, or the representative effect, or framing bias, or the adaptive bias.

Research limitations/implications

The sample is only taken from Northern part of Indonesia. To have a robust generalization, the research should be conducted in the whole of Indonesia.

Practical implications

This paper can be used by practitioners to understand their behaviour towards strategic decision making. Further, practitioners will know if their time preference bias will not generate better result.

Citation

Brahmana, R., Verawaty Siregar, W. and Hsb, A. (2013), "Too early to execute the strategic scenario planning: hyperbolic discounting and psychological biases of Indonesian SMEs' managers", Business Strategy Series, Vol. 14 No. 2/3, pp. 50-59. https://doi.org/10.1108/17515631311325105