Individual and cultural differences in newsvendor decision making

Abstract

Purpose

The purpose of this paper is to investigate cultural and individual differences in newsvendor decision making.

Design/methodology/approach

The online experiment, programmed in the PHP scripting language, had 107 participants: local managers of four large, well-known and supply chain–intensive firms in China (Lenovo, Shenhua, CMST and GM).

Findings

The authors find that, as compared with American subjects, Chinese subjects engage in more demand chasing, order quantities that are closer to the mean demand, have a lower expected profit and exhibit greater variance in order quantities. However, these observations may not hold when the cross-cultural comparison is conducted for each pair of ethnic subgroups whose members have the same cognitive reflection test score, a measure of individual differences. Moreover, cultural differences also affect how individual differences manifest in newsvendor decisions.

Practical implications

The authors findings have important implications for employee selection, training and management in any cross-cultural business environment.

Originality/value

Little attention has been paid, in the behavioural operations literature, to individual differences and how they interact with culture. This paper is the first to examine the interaction effects of cultural and individual differences in newsvendor decisions, and it highlights an important research area that is currently understudied in operations management.

Citation

Li, X., Chen, L.G. and Chen, J. (2019), "Individual and cultural differences in newsvendor decision making", International Journal of Operations & Production Management, Vol. 39 No. 1, pp. 164-186. https://doi.org/10.1108/IJOPM-01-2018-0042