A Polynomial Optimization Approach to Principal–Agent Problems

This paper presents a new method for the analysis of moral hazard principal–agent problems. The new approach avoids the stringent assumptions on the distribution of outcomes made by the classical first‐order approach and instead only requires the agent's expected utility to be a rational function of the action. This assumption allows for a reformulation of the agent's utility maximization problem as an equivalent system of equations and inequalities. This reformulation in turn transforms the principal's utility maximization problem into a nonlinear program. Under the additional assumptions that the principal's expected utility is a polynomial and the agent's expected utility is rational in the wage, the final nonlinear program can be solved to global optimality. The paper also shows how to first approximate expected utility functions that are not rational by polynomials, so that the polynomial optimization approach can be applied to compute an approximate solution to nonpolynomial problems. Finally, the paper demonstrates that the polynomial optimization approach extends to principal–agent models with multidimensional action sets.     

Does merger & acquisition (M&A) strategy matter? A contingency perspective

This paper takes a contingency approach to investigate whether there are market performance variations for different types of M&A. Eight different types of M&A are identified in a typology based upon the conjunction of three contextual dimensions: external environmental, acquiring firm level strategy and CEO motivation. Drawing upon a sample of 1,926 domestic UK deals we evaluate the typology to determine whether the financial markets distinguish between different types of M&A. Results indicate significant market and risk-adjusted performance differences by M&A type. These confirm that a contingency approach to M&A performance has merit. We suggest that the proposed integrated typology, that recognizes the importance of multiple aspects of strategic fit to M&A performance, addresses the paradox that M&A practitioners continue to pursue deals despite widespread acceptance that they result in high failure rates.     

Reducing differences between profiles of weights: A “peer-restricted” cross-efficiency evaluation

This paper deals with the selection of the profiles of weights to be used in cross-efficiency evaluations. In an attempt to prevent unrealistic weighting schemes, one of the issues of main interest that we address here is that of the zero weights, since their use implies that some of the variables considered are excluded from the assessments to be made. In the calculation of cross-efficiency scores, we propose to ignore the profiles of weights of the DMUs that cannot make a choice of non-zero weights among their alternate optima. The different units are therefore assessed in a peer-evaluation that does not consider the profiles of weights of some inefficient DMUs. This approach is referred to as “peer-restricted” cross-efficiency evaluation. Aside from avoiding zero weights, the choice of weights that we make also seeks to reduce the differences between the weights profiles selected as much as possible. Thus, in the “peer-restricted” cross-efficiency evaluation in the present paper we also try to avoid that the different DMUs attach very different weights to the same variable. Finally, we extend this approach to derive a common set of weights by exploiting the idea of similarity between profiles of weights.     

Shipping in crisis: A trial run for ‘live’ application of the hypergame approach

Hypergame analysis has been developed recently as an aid to the understanding of complex situations in which several parties are in conflict. Until now, the approach has been applied successfully to a range of post hoc case studies. In this paper, we describe an attempt to take the approach one stage further, by applying it to a current problem with some involvement with one of the parties concerned. In this case the problem studied was a crisis in the shipping world. The original analysis was performed two years ago. Having outlined the analysis itself here, we discuss retrospectively its accuracy and usefulness in the light of further developments of the crisis. It is concluded that the approach performed a valuable role in helping to build up an understanding of the problem. As a result of this exercise some comments are made about the way in which we believe this sort of analysis should be used in practice by analysts to give help to their clients.     

Managing Corporate Knowledge Experiences with SODA and V·I·S·A

It is often said that success in today's competitive environment depends on the acquisition and application of sound, relevant knowledge. This paper introduces two management science approaches that have been used for the effective management of knowledge, towards the development of strategy, planning and decision making, in a wide range of organizational settings. Both approaches make use of computer technology to provide a flexible and interactive environment incorporating a visual representation of the problem. The paper briefly describes each approach, together with a case study illustrating its use in practice. A number of common themes relevant to the management of knowledge are identified and discussed. The themes highlight the benefits which arise through the use of computer technology alongside a number of issues relevant to the management of the group process.     

A Reexamination of ‘Measuring the Congruence Between Market Requirements and Manufacturing: A Methodology and Illustration'*

This paper reexamines the idea of developing an index of manufacturing fit with market requirements. Bozarth and Berry's (1997) recent work provides a starting point. Several conceptual and methodological issues relating to the Bozarth and Berry approach are raised. It is argued that the indifference profile concept suggested by the authors bears reexamination.     

Corporate planning—A systems view

This paper examines the, often disregarded, fact that the very inprecision of language often obscures basic underlying conceptual differences between corporate planning as expressed in theory and in practice. Few of the claims that confusions result both from a lack of explicit definitions and from the lack of differentiation between ‘theories of planning’ and ‘theories in planning’.

The purpose of this paper is to propose such a theory of corporate planning through discussion of the following topics: (1) Problems in concepts of corporate planning; (2) The concept of an approach of corporate planning; (3) Propositions that form the basis of a theory or model of planning, relying heavily on a systems framework; and (4) a proposed corporate planning system.     

A ‘No Blame’ Approach to Organizational Learning

In high‐reliability organizations (HROs) even minor errors can seriously hinder the very existence of the firm and the safety of employees and customers. Field studies have shown that HROs encourage the reporting of errors and near misses, exploiting these incidents to improve their operative processes. In this paper, we describe this practice as a ‘no blame’ approach to error management, and link it to learning theory, showing how no blame practices can enhance organizational learning. By taking a cognitive perspective of organizations, we draw on existing contributions and on a set of empirical case studies to discuss the characteristics of no blame practices, and their applicability in traditional, non‐HROs. Our findings show that, in exploiting information from error‐reporting, no blame practices are beneficial in environments where learning and reliability issues are particularly relevant. Empirical evidence suggests that a no blame approach can be extremely constructive for organizations that want to enhance their learning processes. We conclude that a no blame approach is a valuable way to achieve an organization that has flexibility and variability. However, no blame practices imply a set of organizational issues and costs that pose significant challenges to firms operating in non‐high‐reliability settings. The findings from our study contribute to the literature on HROs and organizational learning.     

Green supply‐chain management: A state‐of‐the‐art literature review

There is a growing need for integrating environmentally sound choices into supply‐chain management research and practice. Perusal of the literature shows that a broad frame of reference for green supply‐chain management (GrSCM) is not adequately developed. Regulatory bodies that formulate regulations to meet societal and ecological concerns to facilitate growth of business and economy also suffer from its absence. A succinct classification to help academicians, researchers and practitioners in understanding integrated GrSCM from a wider perspective is needed. Further, sufficient literature is available to warrant such classification. This paper takes an integrated and fresh look into the area of GrSCM. The literature on GrSCM is covered exhaustively from its conceptualization, primarily taking a ‘reverse logistics angle’. Using the rich body of available literature, including earlier reviews that had relatively limited perspectives, the literature on GrSCM is classified on the basis of the problem context in supply chain's major influential areas. It is also classified on the basis of methodology and approach adopted. Various mathematical tools/techniques used in literature vis‐à‐vis the contexts of GrSCM are mapped. A timeline indicating relevant papers is also provided as a ready reference. Finally, the findings and interpretations are summarized, and the main research issues and opportunities are highlighted.     

STATISTICAL VERSUS SALES FORCE–EXECUTIVE OPINION SHORT RANGE FORECASTS: A TIME SERIES ANALYSIS CASE STUDY

This paper presents a comparison of statistical techniques versus a sales force-executive opinion approach to forecasting single item demand over a five year period for a single company. Three statistical techniques are used: Winter's three parameter exponential smoothing model, Brown's harmonic model, and Box-Jenkins methodology. These techniques are compared against the company's forecasts and actual sales for a five year period. The results indicate an interesting area for further research.     

A multicriteria sorting approach based on data envelopment analysis for R&D project selection problem

In this paper, multiple criteria sorting methods based on data envelopment analysis (DEA) are developed to evaluate research and development (R&D) projects. The weight intervals of the criteria are obtained from Interval Analytic Hierarchy Process and employed as the assurance region constraints of models. Based on data envelopment analysis, two threshold estimation models, and five assignment models are developed for sorting. In addition to sorting, these models also provide ranking of the projects. The developed approach and the well-known sorting method UTADIS are applied to a real case study to analyze the R&D projects proposed to a grant program executed by a government funding agency in 2009. A five level R&D project selection criteria hierarchy and an assisting point allocation guide are defined to measure and quantify the performance of the projects. In the case study, the developed methods are observed to be more stable than UTADIS.     

Mapping the changes in management science: A review of ‘soft’ OR/MS articles published in Omega (1973–2008)

The paper proposes a framework to map the development of management science (MS) and uses it to survey the MS literature published in Omega, the International Journal of Management Science. The management science discourse over the last 35 years is mapped in four paradigms: (1) optimisation/normative; (2) interpretative/learning; (3) critical; and (4) a post-modern management science approach. Using a set of keywords and authors’ names associated with the main features of each MS discourse, articles published between 1973 and 2008 are grouped. Results seem to suggest that Omega, a US-based journal, has been mainly developing publications under the optimisation paradigm; only very few papers adhering to the interpretative/learning and critical paradigms have been given space in Omega. The handful of papers from the interpretative paradigm are seen as attempts of UK-based academics to open some space for ‘soft’ operational research (OR) or ‘problem structuring methods’ in a positivistic outlook that seems to pervade US management science practice. Results of the survey and features of MS literature published in Omega are discussed. The paper aims to raise awareness amongst management scientist, systems and operational researchers of the differences between the MS/OR practice in both countries.     

Adversarial Risk Analysis with Incomplete Information: A Level‐k Approach

This article proposes, develops, and illustrates the application of level‐k game theory to adversarial risk analysis. Level‐k reasoning, which assumes that players play strategically but have bounded rationality, is useful for operationalizing a Bayesian approach to adversarial risk analysis. It can be applied in a broad class of settings, including settings with asynchronous play and partial but incomplete revelation of early moves. Its computational and elicitation requirements are modest. We illustrate the approach with an application to a simple defend‐attack model in which the defender's countermeasures are revealed with a probability less than one to the attacker before he decides on how or whether to attack.     

Two New Conditions Supporting the First‐Order Approach to Multisignal Principal–Agent Problems

This paper presents simple new multisignal generalizations of the two classic methods used to justify the first‐order approach to moral hazard principal–agent problems, and compares these two approaches with each other. The paper first discusses limitations of previous generalizations. Then a state‐space formulation is used to obtain a new multisignal generalization of the Jewitt (1988) conditions. Next, using the Mirrlees formulation, new multisignal generalizations of the convexity of the distribution function condition (CDFC) approach of Rogerson (1985) and Sinclair‐Desgagné (1994) are obtained. Vector calculus methods are used to derive easy‐to‐check local conditions for our generalization of the CDFC. Finally, we argue that the Jewitt conditions may generalize more flexibly than the CDFC to the multisignal case. This is because, with many signals, the principal can become very well informed about the agent's action and, even in the one‐signal case, the CDFC must fail when the signal becomes very accurate.     

A Context‐sensitive Approach to Analysing Talk in Strategy Meetings

The talk of managers in meetings is central to organizational life and crucial to research in strategic management, as well as managerial and organizational cognition, sensemaking and decision‐making. To achieve full understanding, both the text and the context of discussion require systematic analysis, but most approaches treat context as everything that is known and observed beyond the immediate text. This obscures different readings of the text of meetings. To resolve this problem, the discourse historical approach (DHA) to critical discourse analysis is outlined as a framework within which researchers can analyse the text and context of talk in meetings. The primary contribution of this paper is to isolate four ‘levels of context’ as a heuristic framework within which discursive practices, strategies and texts can be located. By making explicit the levels of contextual analysis that are implicit in other methods, and illustrating the DHA using an episode of strategic discussion from a multinational company, this paper shows how researchers can use the approach to analyse the naturally occurring talk of senior managers in meetings, which is arguably the most important but yet under‐explored venue for strategizing.     

Coordinated Contract Decisions in a Make‐to‐Order Manufacturing Supply Chain: A Stochastic Programming Approach

One of the important objectives of supply chain S&OP (Sales and Operations Planning) is the profitable alignment of customer demand with supply chain capabilities through the coordinated planning of sales, production, distribution, and procurement. In the make‐to‐order manufacturing context considered in this paper, sales plans cover both contract and spot sales, and procurement plans require the selection of supplier contracts. S&OP decisions also involve the allocation of capacity to support sales plans. This article studies the coordinated contract selection and capacity allocation problem, in a three‐tier manufacturing supply chain, with the objective to maximize the manufacturer's profitability. Using a modeling approach based on stochastic programming with recourse, we show how these S&OP decisions can be made taking into account economic, market, supply, and system uncertainties. The research is based on a real business case in the Oriented Strand Board (OSB) industry. The computational results show that the proposed approach provides realistic and robust solutions. For the case considered, the planning method elaborated yields significant performance improvements over the solutions obtained from the mixed integer programming model previously suggested for S&OP.     

Kurt Lewin's Field Theory: A Review and Re‐evaluation

Field theory was central to Kurt Lewin's work yet, after his death, interest in it declined significantly until the 1990s when a variant, force field analysis, became widely used. This paper examines the origins, purpose and continuing relevance of field theory. It especially looks at the influences of gestalt psychology, topology and Ernst Cassirer's philosophy of science on its development. It argues that Lewin's attempt to replace conventional topology with his own Lewinian mathematics‐based topology in pursuit of scientific rigour resulted in the undermining of its relevance. The paper also compares force field analysis with Lewin's original conception of field theory and shows that it has significant weaknesses in terms of rigour. It concludes that a return to Lewin's original conception of field theory, based on gestalt psychology and conventional topology, can provide academics and practitioners with a valuable and much‐needed approach to managing change.     

A Multi‐level Dialectical–Paradox Lens for Top Management Team Strategic Decision‐Making in a Corporate Venture

This paper aims to critique the process of corporate‐owned, high‐tech start‐up strategizing through an inductive, longitudinal, case study of ‘UK‐Research‐Tech’. Insights are given through the combined ‘dialectical–paradox’ concept, thereby focusing on where ‘dialectic’ and ‘paradox’ theorizing overlap. This linked iterative, ‘dialogical–dialectic’ research approach also reflects chief executive officer/top management team (CEO/TMT) start‐up dynamics over time. These foci fill important gaps that impede better understanding of dialectical, dialogical and paradoxical forces within strategic decision‐making. As an interpretative tool, they illuminate CEO/TMT strategizing and changing interrelationships affected by broader, volatile, techno‐economic contexts and parent‐company influences on ventures. In this case study, it was found that the CEO's relatively autocratic, parent‐framed approach combined with TMT members' contradictory reactions to create ‘dialectical–paradox’ oppositional forces, eventually only resolved through ‘eleventh hour’ business strategy changes to rescue the venture. This research contributes to more nuanced understandings of corporate‐constrained ventures during early business development from start‐up strategic decisions at parent‐company level to subsequent conditions of more independent dynamic equilibrium. The ‘dialectical–paradox’ conceptual lens contributes an innovative critique of processes affecting strategic decision‐making dynamics. Another important contribution is the empirically inspired conceptual model, developed for use both to guide subsequent case‐study research analyses and as a reflective tool for CEO/TMT strategic decision‐making, especially within corporate‐inspired start‐ups.     

Managing Co‐creation Design: A Strategic Approach to Innovation

Co‐creation offers firms and their network of actors significant opportunities for innovation, as each actor offers access to new resources through a process of resource integration. However, despite the significant advantages that co‐creation can offer, there is surprisingly little research providing a strategic approach for identifying the most advantageous co‐creation opportunities, especially when many possible options are available. Recently, scholars have called for research that develops tools and processes related to co‐creation. This study addresses these priorities, making two contributions. First, in contrast to previous work considering co‐creation more generally, or focusing on one specific form only, e.g. co‐production, this paper offers a detailed and granular approach to co‐creation design. A co‐creation design framework is developed, which incorporates multiple design dimensions and categories that can reveal new co‐creation opportunities. Second, the research extends the application of a design approach, specifically within the context of co‐creative activities. The authors use field‐based research with senior executives to develop a framework that includes key co‐creation design elements. A morphological approach is used to explore how a lead firm can identify attractive co‐creation opportunities. An innovation solution in one organization provides an illustration of how the co‐creation design framework can be applied.