articles+ search results

Decision making, Management, Bayesian analysis, Executives, Training of executives, Strategic planning, and Uncertainty

Decision making requires managers to constantly estimate the probability of uncertain outcomes and update those estimates in light of new information. This article provides guidance to managers on how they can improve that process by more explicitly adopting a Bayesian approach. Clear understanding and application of the Bayesian approach leads to more accurate probability estimates, resulting in better informed decisions. More importantly, adopting a Bayesian approach, even informally, promises to improve the quality of managerial thinking, analysis, and decisions in a variety of additional ways. [ABSTRACT FROM AUTHOR]

Theory of the firm, Business enterprises, Labor incentives, Industrial management, Twenty-first century, and Uncertainty

The article discusses the theory of the firm, or business enterprises, throughout the 21st century, including firm ownership, value creation and uncertainty. Other topics include business management, the use of artificial intelligence in business, incentives in industry and the social aspects of businesses.

Industrial management, Uncertainty, and Theory of knowledge

An introduction is provided to articles within the issue on organizational and corporate uncertainty, or indeterminacy, imagination and managerial choice within the context of limited knowledge.

Industrial management, Business planning, Risk management in business, Uncertainty, and Theory of knowledge

A response is provided to the article "Carving the nature of uncertainty at its joints," by T. Holmes and R. Westgren, which appeared in the issue. It discusses the difference between what is referred to as aleatory, or random, uncertainty and epistemic uncertainty in corporate management. Business strategies for lessening uncertainties and managing risk are discussed.

Forecasting, Supervisors, Uncertainty, Choice (Psychology), and Theory of knowledge

A response is provided to the article "On the Mitigability of Uncertainty and the Choice between Predictive and Non-Predictive Strategy," by M.D. and B.B. Clark within the issue. It discusses epistemic uncertainty, or the indeterminacy which can be understood through knowledge, including managers' perspectives on uncertainty.

Business planning, Business research, Theory of knowledge, Uncertainty, and Psychological adaptation

Despite the longstanding recognition of the importance of uncertainty in strategy, strategy researchers have given limited attention to the distinct challenges and processes involved in strategy making under uncertainty. To address this gap, we build on Knight's and Shackle's seminal ideas about how strategists address the incomplete knowledge problems that uncertainty poses. We argue that strategists adopt two distinct strategic postures when crafting strategies in uncertain markets—shaping and adapting—and theorize their constituent elements: intentions, epistemologies, and enactment strategies. Our framework extends current understanding of strategy under uncertainty by integrating research on adapting strategies, based on scientific epistemologies, which guide continuous experimentation and learning, with research on shaping strategies, based on design epistemologies, which guide significant symbolic and resource investments intended to create new market orders. [ABSTRACT FROM AUTHOR]

Commercial law, Industrial management, Organizational behavior, Organizational goals, and Uncertainty

Across all fields of management research, uncertainty is largely considered an aversive state that people and organizations cope with unwillingly and generally aim to avoid. However, theories based on principles of uncertainty reduction overlook opportunities arising from uncertainty creation. Building on recent research in management, cognition, and neuroscience, we expand current conceptualizations of uncertainty by introducing a model of uncertainty regulation where individuals employ opening and closing behaviors to achieve alignment between preferred and experienced levels of uncertainty and with exogenous requirements for effectiveness. We derive propositions for uncertainty regulation and work performance that extend existing concepts of adaptation in uncertain environments to include deliberate uncertainty creation and expansive agency. We discuss implications for dynamic models of agentic goal striving, organizational support for individuals' uncertainty regulation, and extensions to team- and organization-level phenomena. [ABSTRACT FROM AUTHOR]

Entrepreneurship, Economic opportunities, Curiosity, Cognition, and Uncertainty

Creation theory suggests that opportunity formation is endogenous to the actions of entrepreneurs. However, this characterization of the opportunity formation process suggests at least two important questions that have yet to be fully addressed in the literature—one pertaining to early on in the opportunity formation process, and one to later in this process. The present paper proposes to address these two questions—in particular, through the integration of the theories of cognition with the creation theory of opportunities. The first question is as follows: "Given that individuals have no rational, profit-maximizing reason to begin the process of forming an opportunity under conditions of Knightian uncertainty, why do they do so?" The present paper suggests that entrepreneurial curiosity sparks the creation of opportunities. The second question is this: "In later stages of the opportunity formation, how do individuals create the many possible ways to exploit this opportunity?" Here, this papers posits that creating entrepreneurial opportunities under Knightian uncertainty includes the cognitive generative processes of entrepreneurs. These theoretical arguments, which extend the creation theory of opportunities, also have implications for the valuation and governance of creation opportunities. [ABSTRACT FROM AUTHOR]

Assets (Accounting), Value chains, Value creation, Technological innovations, and Uncertainty

The role of complementary assets across the different stages of a firm's value chain in facilitating value creation and value appropriation from technological innovation remains a key area of interest in strategy and entrepreneurship research. However, current thinking on complementary assets operates with an unstated boundary condition—that relevant assets and asset configurations are relatively well known to the innovating firm. This assumption is applicable under conditions of "risk," wherein decision-makers can know outcomes and probabilities. It is less clear, though, how current insights apply under conditions of "Knightian uncertainty," in which neither outcomes nor probabilities are knowable. The purpose of this paper is to advance a complementary assets theory that accounts for conditions of Knightian uncertainty, thus aligning theory with the contemporary realities surrounding innovating firms. This article highlights an important intertemporal trade-off that existing literature ignores—without accounting for Knightian uncertainty, firms may unknowingly direct complementary assets in ways that favor current value appropriation at the expense of future value creation. We discuss theoretical implications for research on the microfoundations of dynamic capabilities and opportunities for future research on complementary asset configurations across geographic boundaries and across organizations in innovation ecosystems. [ABSTRACT FROM AUTHOR]

Supervisors, Forecasting, Uncertainty, Choice (Psychology), Voluntarism (Philosophy), Employee psychology, and Free will & determinism

Managers face a critical issue in deciding when to employ a predictive planning approach versus a more adaptive and flexible strategic approach. We suggest that determining which approach is ideal for a given context hangs on the extent to which uncertainty is, or might be, mitigable within that context. To date, however, the mitigability of uncertainty has not been adequately distilled. Here, we take on this issue, distinguishing mitigable ignorance of pertinent but knowable information (i.e., "epistemic uncertainty") from immitigable indeterminacy (i.e., "aleatory uncertainty"). We review the current state of the debate on the existence of free will, because the acceptance or rejection of conscious agents as a true first cause has fundamental implications. A critical examination of the arguments for and against the free will hypothesis land us on the side of voluntarism, which implies immitigable indeterminacy (but not complete unpredictability) wherever conscious actors are involved. Accepting the existence of immitigable or aleatory uncertainty, then, we revisit the determination of strategic logics and produce important theoretical nuance and key boundary conditions in the normative choice between predictive and nonpredictive strategies. [ABSTRACT FROM AUTHOR]

Customer cocreation, Customer relations, Automation, Business-to-business transactions, Virtual reality, Uncertainty, and Disruptive technologies

Industrial co-creation projects are often complex and ambiguous, involving high levels of interpretive uncertainty over processes and outcomes. To boost the effectiveness of such projects, firms have increasingly adopted virtual reality (VR) technology and have experienced unique benefits by utilizing digital artifacts—interactive objects in digital environments, such as factory installation layouts or design visualizations. This article provides case evidence demonstrating how VR-enabled digital artifacts support firms to effectively implement tailor-made solutions in robotics and automation projects. The adoption of new digital co-creation practices redefines the traditional customer-provider roles in industrial co-creation, increasing engagement, reducing uncertainty, and improving project outcomes. [ABSTRACT FROM AUTHOR]

Consumer preferences, Consumption (Economics), Decision making, Product attributes, Brand choice, Inference (Logic), Uncertainty, and Ignorance (Theory of knowledge)

When a consumer realizes that information relevant to a consumption decision is missing, such uncertainty can be attributed to ignorance (i.e., the information has never been observed and is unknown) or to memory failure (i.e., the information has been observed and is forgotten). Although research has examined inferences about unknown attributes, no prior work has examined inferences about forgotten attributes. Across six experiments in the lab and in the field, we find that when uncertainty is attributed to ignorance, consumers often make inferences about unknown attributes based on existing correlational evidence (e.g., a brand comparison sheet that could indicate a positive or negative correlation between the unknown attribute and observable attributes). However, when uncertainty is attributed to memory failure, consumers tend to ignore such existing correlational evidence and instead make inferences about forgotten attributes that tend to be positively correlated with known attributes. This process occurs partly because when consumers believe that an attribute was forgotten, they falsely retrieve an impression about the attribute that tends to be consistent with their overall product evaluation. Overall, believing that an attribute is forgotten and believing that it is unknown can lead to opposite inferences and choices. [ABSTRACT FROM AUTHOR]

Risk assessment, Industrial ecology, Risk society, Novelty (Perception), Uncertainty, Familiarity (Psychology), and Bisphenol A

The contemporary "risk society" is associated with the emergence of a wide range of risks characterized by uncertainty and unfamiliarity. These "novel" risks pose a major challenge for organizations: their negative effects may be significant, but prevailing risk-assessment techniques are limited in their ability to identify these effects. Building on our prior work on the chemical bisphenol A (BPA), this study examines how organizations deal with novel risks. It finds that organizations engage in "risk translation" by translating equivocality associated with the novel risk into more familiar risks, providing them with a clearer basis and guide for action. As multiple organizations take actions to manage these translated risks, the interactive effects result in an "ecology of risks" that evolves over time, allowing for the construction of a novel risk. The study contributes to research on organizing and risk by theorizing how organizations respond to novel risks, as well as by highlighting the role of translated organizational risks in constructing novel risks and shaping societal responses to grand challenges. [ABSTRACT FROM AUTHOR]

Pay equity, Coworker relationships, Job performance, Labor turnover, Wage differentials, Wages & labor productivity, Group identity, and Uncertainty

We draw upon relational demography and social identity perspectives to argue that working with teammates who are dissimilar in pay grade can help individual team members reduce social uncertainty in their work relationships within the team, subsequently influencing their identification with the team, performance, and turnover intention. This effect is more pronounced for team members in a lower pay grade because they are more sensitive to social influence owing to their lower status in the team. We test these arguments through a three-part survey of 203 employees from 33 work teams of a telecommunication company in China. Our data show that pay grade dissimilarity is associated with lower relational uncertainty, more for individuals with a lower pay grade, and that lower relational uncertainty, in turn, is associated with higher task performance, higher identification with the team, and lower intent to leave the team. This paper contributes to the literature on pay dispersion by highlighting the importance of relative pay, especially for individuals who are lower paid than others, and uncovering the social identity-related process underlying its effects. Post hoc analysis suggests that these effects are present especially when the pay system is perceived to be legitimate. [ABSTRACT FROM AUTHOR]

Asset allocation, Portfolio management (Investments), Capitalists & financiers, Risk aversion, Risk-return relationships, Time-varying systems, and Uncertainty

We study the implications of predictability on the optimal asset allocation of ambiguity-averse long-term investors and analyze the term structure of the multivariate risk–return trade-off considering parameter uncertainty. We calibrate the model to real returns of U.S. stocks, long-term bonds, cash, real estate, and gold using the term spread and the dividend–price ratio as additional predictive variables, and we show that over long horizons, the optimal asset allocation is significantly influenced by the covariance structure induced by estimation errors. The ambiguity-averse long-term investor optimally tilts his or her portfolio toward a seemingly inefficient portfolio, which shows maximum robustness against estimation errors. [ABSTRACT FROM AUTHOR]

Weight loss preparations and Uncertainty

Most previous studies about online product recommendation sources (recommendation agents [RAs], consumers, and experts) have been limited to the evaluation by a single source on a website. Thus, the relative influence of convergent recommendations from different sources on consumers' acceptance of the advice remains largely unknown. We draw upon and extend the product uncertainty model to theorize how the convergence of recommendations from various sources differentially influences customers' acceptance of recommendations. Our experiments show that the recommendation convergence between RAs and experts leads to the greater recommendation acceptance of the jointly recommended products than the convergence between experts and consumers or convergence between RAs and consumers. The rationale is that RAs best reduce fit uncertainty, and experts best reduce description and performance uncertainties. Experts and RAs complement each other by reducing all three dimensions of product uncertainty. Online merchants are advised to incorporate multiple sources into their websites, including sources (i.e., RAs and experts) that play complementary roles in reducing product uncertainty. [ABSTRACT FROM AUTHOR]

Customer feedback, Software license agreements, Consumer preferences, Valuation, Durable consumer goods, Pricing, Uncertainty, and Subscription services

This paper studies how an important feature of software adoption impacts a software vendor’s preference between perpetual and subscription-based licensing: Customers are uncertain about their valuation of the software prior to adoption. We show that customer valuation uncertainty causes the equilibrium outcome to depart from that of standard durable-goods theories in two aspects: (1) Contrary to the conventional wisdom of durable-goods theories that subscription-based licensing is optimal, perpetual licensing can be more profitable for the vendor than subscription-based licensing under some conditions. This result offers a possible explanation for the historical prevalence of perpetual licensing in many software markets. (2) When subscription-based licensing is optimal, our theory suggests a low-then-high variable pricing path. In contrast, standard durable-goods theories suggest charging the monopoly leasing price in each period. Such a variable pricing path and the resulting adoption pattern are consistent with market observations (e.g., pricing strategy by Adobe Systems). We also examine a variation of subscription-based licensing in which the vendor offers a menu of subscription options varying in license duration and shows that customer valuation uncertainty is critical for this strategy to outperform perpetual licensing under some conditions. Moreover, we find that customer valuation uncertainty can cause the vendor to prefer a licensing strategy that is not socially optimal. [ABSTRACT FROM AUTHOR]

Consumer psychology, Subscription services, Self-perception, Identity (Psychology), Uncertainty, and Motivation (Psychology)

Whether it is clothing, meals or an exercise regimen, consumers purchase a wide range of goods on a recurring basis using a subscription model. While past research indicates that people continue to subscribe to these services even when they rarely use them, no work to date has examined how identity considerations affect preferences in this domain. Building on research on signaling and self-concept structure, we propose that quitting an ongoing subscription can threaten the stability of the self-concept by signaling a change in identity. Consumers who are uncertain about their self-concept (i.e., low self-concept clarity) and motivated to maintain a stable self-concept are thus more likely to keep unused subscriptions than those who are more certain. In support of the underlying mechanism, we demonstrate that self-concept clarity affects choices only for identity-relevant subscription choices, and that it affects choices for subscriptions, but not one-shot product choices that are a weaker signal of identity. Finally, because signing up for a new subscription also signals an identity change that can threaten the stability of the self, consumers with low self-concept clarity are also less likely to subscribe to a new service compared to those with more certain self-concepts. [ABSTRACT FROM AUTHOR]