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Article
Publication date: 1 March 2002

Aviv Shoham and Avi Fiegenbaum

A growing body of literature has emphasized the importance of innovative strategy as a source of competitive advantage. Drazin and Shoonhoven summarized the literature…

Abstract

A growing body of literature has emphasized the importance of innovative strategy as a source of competitive advantage. Drazin and Shoonhoven summarized the literature using multilevel theoretical perspectives (community, population, and organization) that affect organizational innovative behavior. In parallel, Fiegenbaum et al. developed an organizational level theory, based on prospect theory, to explain how risky strategies are determined within organizations. They argued that organizational reference points delineate organizational attitudes toward risk‐taking into two polarized regimes: risk‐aversive whereas below it is risk‐assertive. They described the organizational mechanism that converts attitudes toward risk‐taking into actual risk‐aversive and risk‐assertive strategic behavior. A three‐dimensional space is provided that illustrates the spectrum of strategic reference points (SRP). The current study extends SRP theory. It is proposed that the nature of the industry, organizational strategy, and performance impact the kind of reference points used, which, in turn, impact risk‐taking behavior towards innovative strategy.

Details

Management Decision, vol. 40 no. 2
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 1 March 2010

Abstract

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Journal of Public Budgeting, Accounting & Financial Management, vol. 22 no. 3
Type: Research Article
ISSN: 1096-3367

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Book part
Publication date: 20 November 2018

Dorian Jullien

This chapter conducts a systematic comparison of behavioral economics’s challenges to the standard accounts of economic behaviors within three dimensions: under risk, over…

Abstract

This chapter conducts a systematic comparison of behavioral economics’s challenges to the standard accounts of economic behaviors within three dimensions: under risk, over time, and regarding other people. A new perspective on two underlying methodological issues, i.e., inter-disciplinarity and the positive/normative distinction, is proposed by following the entanglement thesis of Hilary Putnam, Vivian Walsh, and Amartya Sen. This thesis holds that facts, values, and conventions have inter-dependent meanings in science which can be understood by scrutinizing formal and ordinary language uses. The goal is to provide a broad and self-contained picture of how behavioral economics is changing the mainstream of economics.

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Article
Publication date: 7 June 2011

Martin Larraza‐Kintana, Luis R. Gomez‐Mejia and Robert M. Wiseman

This paper seeks to analyze how compensation framing influences the risk‐taking behavior of the firm's chief executive officer (CEO), and the mediating role played by risk bearing.

Abstract

Purpose

This paper seeks to analyze how compensation framing influences the risk‐taking behavior of the firm's chief executive officer (CEO), and the mediating role played by risk bearing.

Design/methodology/approach

The study employs a sample of 108 US firms that issued an initial public offering in 1993, 1994 and 1995. Data from a survey filled out by the CEO of the firm are completed with secondary information. A structural equation model is estimated which explicitly considers the mediating effect of risk bearing on the compensation framing‐risk taking relationship.

Findings

The analyses indicate that while the performance targets included in the CEO's compensation contract indirectly influence the riskiness of the CEO's strategic decisions through its influence on the employment risk component of executive risk bearing, the level of compensation relative to peers does not. It shows that not all reference points are equally relevant in determining the CEO's willingness to take risk, nor do all the elements of risk bearing play the same role in that partial mediation.

Research limitations/implications

The paper provides a refinement of previous work on modelling the risk‐taking behavior of managers.

Practical implications

The paper provides a guideline to think about the behavioral consequences of the pay level in the market for executives and the performance targets included in the compensation contracts.

Originality/value

The paper proposes and tests a model on how different reference points used to frame compensation influence CEO risk taking. It also provides the first test of a central proposition of the behavioral agency model: risk bearing partially mediates the influence of compensation framing on risk taking.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 9 no. 1
Type: Research Article
ISSN: 1536-5433

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Article
Publication date: 12 March 2018

Chunguang Bai, Purvi Shah, Qingyun Zhu and Joseph Sarkis

The purpose of this paper is to identify how organizations can evaluate the green product deletion decision within an environmentally sustainable consumption and…

Abstract

Purpose

The purpose of this paper is to identify how organizations can evaluate the green product deletion decision within an environmentally sustainable consumption and production environment through a hybrid multistage multiple criteria evaluation approach.

Design/methodology/approach

This paper proposes a decision-making model by integrating “soft computation” using neighborhood rough set theory, fuzzy cluster means, and cumulative prospect theory. Literature is used to identify various factors for the decision environment. An illustrative problem provides insights into the methodology and application.

Findings

The results indicate that green products can be evaluated from both their relative environmental burdens and benefits. Sustainable consumption and production factors that play a role in this multifactor decision are identified. The results show that a comprehensive evaluation can capture an effective overall picture on which green product(s) to delete.

Research limitations/implications

The opaqueness of the proposed methodology may cause less acceptance by management. The methodology made a number of assumptions related to the data. An actual application of the tool rather than just an illustrative example is needed.

Originality/value

The main contribution of this study is the novel integration of supply chain perspectives, both upstream (supply and production) and downstream (demand/usage), with green product deletion decision making. The hybrid multistage technique has advantages of being able to incorporate many factors that have a variety of quantitative and qualitative characteristics to help managers address green product deletion issues as well as its impact on greening of supply chains and organizational environmental sustainability. This paper adds value to product deletion, supply chain management, and sustainable production and consumption literatures.

Details

Industrial Management & Data Systems, vol. 118 no. 2
Type: Research Article
ISSN: 0263-5577

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Book part
Publication date: 8 April 2015

John B. Davis

This paper argues that since the utility function representation of the individual is derived from standard rationality theory, the view that rationality is bounded…

Abstract

This paper argues that since the utility function representation of the individual is derived from standard rationality theory, the view that rationality is bounded implies that individuality should be seen to be bounded as well. The meaning of this idea is developed in terms of two ways in which individuality is bounded, with one bound associated with bounded rationality in Kahneman and Tversky’s prospect theory and another bound associated with bounded rationality in Simon’s thinking. The two bounds on individuality are argued to be employed in agent-based modeling and social identity theory. How bounded individuality might be formally modeled is illustrated in an account of Kirman’s Marseille fish market analysis.

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Article
Publication date: 1 March 2010

Donald Lien and Pamela C. Smith

The U.S. government mandates taxpayers remit taxes through a "pay as you go" system. Research indicates employees continue to overpay interim taxes, despite the…

Abstract

The U.S. government mandates taxpayers remit taxes through a "pay as you go" system. Research indicates employees continue to overpay interim taxes, despite the inefficiencies of this form of forced savings. Theory holds that a rational individual would choose the minimum amount of withholdings prescribed by the tax code. We adopted Kahneman-Tversky (1979) prospect theory to show that, under reasonable conditions, individuals will continue to choose excessive withholdings. This paper is not an attempt to statistically justify prospect theory however; we argue that withholdings increase when the income tax rate increases and when beforetax income increases. Our model extends the income tax withholding literature by modeling a framework to determine an optimal withholding decision for taxpayers.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 22 no. 3
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 20 November 2007

George Panagiotou

The concept of strategic groups is a central theme in the field of strategic management, and over time it has been used by a considerable body of theoretical and empirical…

Abstract

Purpose

The concept of strategic groups is a central theme in the field of strategic management, and over time it has been used by a considerable body of theoretical and empirical literature to examine different aspects of competitive strategy. However, to date, there has been little systematic investigation that examines aspects associated with competitive benchmarking and the impact and effect that this has on strategy development. Thus despite the level of knowledge that has been accumulated over the years regarding the dynamics of competitive landscapes, our understanding of the impact and effect of this particular matter on decision making is limited. More importantly, studies that have addressed the topic are either theoretical alone in contents or have only used secondary data. Equally, these studies have approached the subject mostly from an impersonal mathematical perspective and practitioners' views on the issue have been overlooked. This paper aims to address these weaknesses in the literature. In doing so, it seeks to place attention on the individual, which has been overlooked by previous examinations.

Design/methodology/approach

The research is cross‐sectional and it is based on primary methodology, having employed qualitative techniques for analysis. It involves face‐to‐face semi‐structured interviews combined with the repertory grid technique. The industry investigated is the UK mainstream leisure foreign package holidays. The sample size is near to the sampling frame of the research and the investigation took place between March and August 2003.

Findings

It was found that managers of firms from the same strategic group consider their group as a reference point in their decision‐making process and as a result of their benchmarking observations they adjust their firms' competitive strategies to reflect their group's strategic behaviour. It was also found that firms of the same strategic group are more likely to respond to market conditions and events in a similar manner.

Originality/value

This paper examined issues associated with benchmarking, in the context of strategic groups, having employed primary qualitative research strategies in order to add “fresh” data on a topic that so far has merely been investigated quantitatively through secondary sources alone. As such, it has initiated a much needed contents dimension on the topic to complement the activity and process‐oriented only studies in the area. The research not only tested earlier propositions in order to accumulate more evidence in the field and enable better generalisations on the subject but it has also expanded current theories in the area.

Details

Management Decision, vol. 45 no. 10
Type: Research Article
ISSN: 0025-1747

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Abstract

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Documents from the History of Economic Thought
Type: Book
ISBN: 978-0-7623-1423-2

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Article
Publication date: 24 April 2020

Muhittin Sagnak, Yigit Kazancoglu, Yesim Deniz Ozkan Ozen and Jose Arturo Garza-Reyes

The aim of the present study is to overcome some of the limitations of the FMEA method by presenting a theoretical base for considering risk evaluation into its assessment…

Abstract

Purpose

The aim of the present study is to overcome some of the limitations of the FMEA method by presenting a theoretical base for considering risk evaluation into its assessment methodology and proposing an approach for its implementation.

Design/methodology/approach

Fuzzy AHP is used to calculate the weights of the likelihood of occurrence (O), severity (S) and difficulty of detection (D). Additionally, the prospect-theory-based TODIM method was integrated with fuzzy logic. Thus, fuzzy TODIM was employed to calculate the ranking of potential failure modes according to their risk priority numbers (RPNs). In order to verify the results of the study, in-depth interviews were conducted with the participation of industry experts.

Findings

The results are very much in line with prospect theory. Therefore, practitioners may apply the proposed method to FMEA. The most crucial failure mode for a firm's attention is furnace failure followed by generator failure, crane failure, tank failure, kettle failure, dryer failure and operator failure, respectively.

Originality/value

The originality of this paper consists in integrating prospect theory with the FMEA method in order to overcome the limitations naturally inherent in the calculation of the FMEA's RPNs.

Details

International Journal of Quality & Reliability Management, vol. 37 no. 6/7
Type: Research Article
ISSN: 0265-671X

Keywords

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