AN ANALYSIS OF SHAREHOLDER AGREEMENTS

Shareholder agreements govern the relations among shareholders in privately held firms, such as joint ventures and venture capital‐backed companies. We provide an economic explanation for key clauses in such agreements—namely, put and call options, tag‐along and drag‐along rights, demand and piggy‐back rights, and catch‐up clauses. In a dynamic moral hazard setting, we show that these clauses can ensure that the contract parties make efficient ex ante investments in the firm. They do so by constraining renegotiation. In the absence of the clauses, ex ante investment would be distorted by unconstrained renegotiation aimed at (i) precluding value‐destroying ex post transfers, (ii) inducing value‐increasing ex post investments, or (iii) precluding hold‐out on value‐increasing sales to a trade buyer or the IPO market. (JEL: G34)     

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.     

Evidence‐based Management in Practice: Opening up the Decision Process,Decision‐maker and Context

Evidence‐based management (EBM) has been subject to a number of persuasive critiques in recent years. Concerns have been raised that: EBM over‐privileges rationality as a basis for decision‐making; ‘scientific’ evidence is insufficient and incomplete as a basis for management practice; understanding of how EBM actually plays out in practice is limited; and, although ideas were originally taken from evidence‐based medicine, individual‐situated expertise has been forgotten in the transfer. To address these concerns, the authors adopted an approach of ‘opening up’ the decision process, the decision‐maker and the context (Langley et al. ( 1995 ). ‘Opening up decision making: the view from the black stool’, Organization Science, 6, pp. 260–279). The empirical investigation focuses on an EBM decision process involving an operations management problem in a hospital emergency department in Australia. Based on interview and archival research, it describes how an EBM decision process was enacted by a physician manager. It identifies the role of ‘fit’ between the decision‐maker and the organizational context in enabling an evidence‐based process and develops insights for EBM theory and practice.     

COMPETITIVE MARKETS WITH ENDOGENOUS HEALTH RISKS

We study an economy where agents' productivity and labor endowment depend on their health status, and indivisible occupational choices affect individual health distributions. We show that Pareto efficiency requires cross‐transfers across occupations. Moreover, workers with relatively less safe jobs must get positive transfers whenever labor supply is not very reactive to wages, a condition in line with the findings of a large empirical literature. In these instances, compensating wage differentials equalizing the utilities of ex‐ante identical workers in different jobs undermine ex‐ante efficiency. Moreover, competitive equilibria where only assets with deterministic payoffs are traded are not first‐best. Finally, we show that simple transfer schemes, implemented through linear subsidies to health insurance, enhance efficiency.     

Marginal Contributions and Externalities in the Value

Our concern is the extension of the theory of the Shapley value to problems involving externalities. Using the standard axiom systems behind the Shapley value leads to the identification of bounds on players' payoffs around an “externality‐free” value. The approach determines the direction and maximum size of Pigouvian‐like transfers among players, transfers based on the specific nature of externalities that are compatible with basic normative principles. Examples are provided to illustrate the approach and to draw comparisons with previous literature.     

Let's be PALS: User‐Driven Organizational Change in Healthcare*

This paper explores user‐driven organizational change in the National Health Service (NHS). The NHS Plan ( Department of Health, 2000 ) created Patient Advice and Liaison Services (PALS) to provide information, solve problems and drive user‐led change. Evidence is drawn from a study of PALS in London acute, primary care, mental health and specialist trusts, drawing on discussion forums, interviews with PALS officers and documentation. From context and role profiles, two conclusions are evident. First, organizational instability, boundary disputes, variable management support, resource limitations, financial insecurity and multi‐site working characterize the context in which PALS operate, and the officer role is characterized by problem diversity, overlap with complaints systems, monitoring problems, relationship building and ‘serial users’. Second, these context and role attributes restrict PALS to ‘repair and maintenance’, ensuring that established systems work correctly. While PALS sit on the bottom rung of a ‘participation ladder’, their contribution is more than tokenistic. However, a processual perspective demonstrates how a fluid, networked, and diversified context isolates PALS structures from management decision‐making, constraining their power base, and inhibiting the promotion of substantive change agendas.     

Top Management Team Members’ Decision Influence and Cooperative Behaviour: An Empirical Study in the Information Technology Industry

Organizational leadership is generally distributed between the chief executive officer (CEO) and the top management team (TMT) members. Building on this observation, we present an empirical investigation of the cues for CEOs to delegate decision‐making influence to particular TMT members. In the literature, explanations both based on expertise and driven by similarity are described. In this study, we reconcile both explanations by examining the moderating role of the TMT's level of ‘cooperative behaviour’ (collaboration and information exchange). We analyse when and in what circumstances TMT members’ expertise and similarity to the CEO regarding his/her functional background and/or locus‐of‐control predict their decision‐making influence. We postulate that TMT cooperative behaviour will advance the effect of expertise on TMT members’ decision influence but impede the effect of similarity to the CEO. Our hypotheses are tested on a data set of 135 TMT members from 32 Dutch and Belgian information technology firms. Overall, we find that our proposed research model is confirmed for technology‐oriented decisions. Furthermore, we draw exploratory conclusions about the effect of TMT cooperative behaviour on the systematic distribution of decision influence in TMTs.     

Collective Intuition: Implications for Improved Decision Making and Organizational Learning

This article establishes the foundation for research on collective intuition through a study of decision making and organizational learning processes in police senior management teams. We conceptualize collective intuition as independently formed judgement based on domain‐specific knowledge, experience and cognitive ability, shared and interpreted collectively. We contribute to intuition research, which has tended to focus its attention at the individual level, by studying intuition collectively in team settings. From a dual‐process perspective, we investigate how expert intuition and deliberation affect decision making and learning at various levels of the organization. Furthermore, we contribute to organizational learning research by offering an empirically derived elaboration of the foundational 4I framework, identifying additional ‘feed‐forward’ and ‘feedback’ loop processes, and thereby providing a more complete account of this organizational learning model. Bridging a variety of relevant but previously unconnected literatures via our focal concept of collective intuition, our research provides a foundation for future studies of this vitally important but under‐researched organizational phenomenon. We offer theoretical and practical implications whereby expert intuitions can be developed and leveraged collectively as valuable sources of organizational knowledge and learning, and contribute to improved decision making in organizations.     

Community Resilience and Decision Theory Challenges for Catastrophic Events

Extreme and catastrophic events pose challenges for normative models of risk management decision making. They invite development of new methods and principles to complement existing normative decision and risk analysis. Because such events are rare, it is difficult to learn about them from experience. They can prompt both too little concern before the fact, and too much after. Emotionally charged and vivid outcomes promote probability neglect and distort risk perceptions. Aversion to acting on uncertain probabilities saps precautionary action; moral hazard distorts incentives to take care; imperfect learning and social adaptation (e.g., herd‐following, group‐think) complicate forecasting and coordination of individual behaviors and undermine prediction, preparation, and insurance of catastrophic events. Such difficulties raise substantial challenges for normative decision theories prescribing how catastrophe risks should be managed. This article summarizes challenges for catastrophic hazards with uncertain or unpredictable frequencies and severities, hard‐to‐envision and incompletely described decision alternatives and consequences, and individual responses that influence each other. Conceptual models and examples clarify where and why new methods are needed to complement traditional normative decision theories for individuals and groups. For example, prospective and retrospective preferences for risk management alternatives may conflict; procedures for combining individual beliefs or preferences can produce collective decisions that no one favors; and individual choices or behaviors in preparing for possible disasters may have no equilibrium. Recent ideas for building “disaster‐resilient” communities can complement traditional normative decision theories, helping to meet the practical need for better ways to manage risks of extreme and catastrophic events.     

Revenue Management vs. Newsvendor Decisions: Does Behavioral Response Mirror Normative Equivalence?

We study and compare decision‐making behavior under the newsvendor and the two‐class revenue management models, in an experimental setting. We observe that, under both problems, decision makers deviate significantly from normative benchmarks. Furthermore, revenue management decisions are consistently higher compared to the newsvendor order quantities. In the face of increasing demand variability, revenue managers increase allocations; this behavior is consistent with normative patterns when the ratio of the selling prices of the two customer segments is less than 1/2, but is its exact opposite when this ratio is greater than 1/2. Newsvendors' behavior with respect to changing demand variability, on the other hand, is consistent with normative trends. We also observe that losses due to leftovers weigh more in newsvendor decisions compared to the revenue management model; we argue that overage cost is more salient in the newsvendor problem because it is perceived as a direct loss, and propose this as the driver of the differences in behavior observed under the two problems.     

权重信息未知情况下的多属性群决策方法及其拓展

本文针对群决策中专家权重及指标权重难以确定的问题,提出一种在权重信息完全未知情况下的基于证据距离和模糊熵权变换的多属性群决策方法,其核心在于如何仅通过决策矩阵客观地确定决策者权重及指标权重。通过信息熵和证据距离确定专家权重,并利用模糊变换原理,将专家权重向量与指标熵权矩阵合成,得到统一的群体决策指标权重;最后使用线性加权法集成所有专家对备选方案的评价信息,得到整个方案集的排序。实验结果及相关讨论表明,该方法概念清晰,计算量适中,具有较强的客观性,而且易于机器实现,是一种可行、有效的多属性群决策方法。最后将该方法推广到属性值由精确数、语言值、区间数、直觉模糊数等多种形式构成的混合型多属性群决策中。     

Evaluation of Legal Liability for Technological Risks in View of Requirements for Peaceful Coexistence and Progress

Legal liability for risk‐generating technological activities is evaluated in view of requirements that are necessary for peaceful human coexistence and progress in order to show possibilities for improvement. The requirements imply, given that political decision making about the activities proceeds on the basis of majority rule, that legal liability should be unconditional (absolute, strict) and unlimited (full). We analyze actual liability in international law for various risk‐generating technological activities, to conclude that nowhere is the standard of unconditional and unlimited liability fully met. Apart from that there are enormous differences. Although significant international liability legislation is in place for some risk‐generating technological activities, legislation is virtually absent for others. We discuss fundamental possibilities and limitations of liability and private insurance to secure credible and ethically sound risk assessment and risk management practices. The limitations stem from problems of establishing a causal link between an activity and a harm; compensating irreparable harm; financial warranty; moral hazard in insurance and in organizations; and discounting future damage to present value. As our requirements call for prior agreement among all who are subjected to the risks of an activity about the settlement of these difficult problems, precautionary ex ante regulation of risk‐generating activities may be a more attractive option, either combined with liability stipulations or not. However, if ex ante regulation is not based on the consent of all subjected to the risks, it remains that the basis of liability in the law should be unconditional and unlimited liability.     

Decision Making and the Price Setting Newsvendor: Experimental Evidence

We present an experimental study of the price‐setting newsvendor problem, which extends the traditional framework by allowing the decision maker to determine both the selling price and the order quantity of a given item. We compare behavior under this model with two benchmark conditions where subjects have a single decision to make (price or quantity). We observe that subjects deviate from the theoretical benchmarks when they are tasked with a single decision. They also exhibit anchoring behavior, where their anchor is the expected demand when quantity is the decision variable and is the initial inventory level when price is the decision variable. When decision makers set quantity and price concurrently, we observe no significant difference between the normative (i.e., expected profit‐maximizing) prices and the decision makers’ price choices. Quantity decisions move further from the normative benchmarks (compared to when subjects have a single decision to make) when the ratio of cost to price is less than half. When this ratio is reversed, there is no significant difference between order levels in single‐ and multi‐task settings. In the multidecision framework, we also observe a tendency to match orders and expected demand levels, which subjects can control using prices.     

Information Acquisition and Efficient Mechanism Design

We consider a general mechanism design setting where each agent can acquire (covert) information before participating in the mechanism. The central question is whether a mechanism exists that provides the efficient incentives for information acquisition ex‐ante and implements the efficient allocation conditional on the private information ex‐post. It is shown that in every private value environment the Vickrey‐Clark‐Groves mechanism guarantees both ex‐ante as well as ex‐post efficiency. In contrast, with common values, ex‐ante and ex‐post efficiency cannot be reconciled in general. Sufficient conditions in terms of sub‐ and supermodularity are provided when (all) ex‐post efficient mechanisms lead to private under‐ or over‐acquisition of information.     

System dynamics: Portraying bounded rationality

This paper examines the linkages between system dynamics and the Carnegie School in their treatment of human decision making. It is argued that the structure of system dynamics models implicitly assumes bounded rationality in decision making and that recognition of this assumption would aid system dynamicists in model construction and in communication with other social science disciplines. The paper begins by examining Simon's ‘principle of bounded rationality’ which draws attention to the cognitive limitations on the information gathering and processing powers of human decision makers. Forrester's ‘Market Growth Model’ is used to illustrate the central theme that system dynamics models are portrayals of bounded rationality. Close examination of the model formulation reveals decision functions involving simple rules of thumb and limited information content. Finally, there is a discussion of the implications of Carnegie philosophy for system dynamics as it affects communication, model structuring, model analysis and future research.     

Decision Making in Cross‐Functional Teams: The Role of Decision Power*

Through a series of game‐theoretical models, this study systematically examines decision making in cross‐functional teams. It provides a framework for the design of an organization‐specific decision‐making process and for the alignment of a team's microdecision with the “optimal” decision that maximizes the firm's payoff. This study finds that even without changing the team leader, firms could change and even dictate the team's microdecision outcome via adjusting the team member's seniority, empowering team members with veto power or involving a supervisor as a threat to overrule the team decision. This finding implies that to reposition products in the marketplace, structuring cross‐functional teams’ microdecision‐making processes is essential.     

Generalized Reduced‐Form Auctions: A Network‐Flow Approach

We develop a network‐flow approach for characterizing interim‐allocation rules that can be implemented by ex post allocations. Our method can be used to characterize feasible interim allocations in general multi‐unit auctions where agents face capacity constraints, both ceilings and floors. Applications include a variety of settings of practical interest, ranging from individual and group‐specific capacity constraints, set‐aside sale, partnership dissolution, and government license reallocation.     

Methodology‐as‐Technique and the Meaning of Rigour in Globalized Management Research

This paper analyses the genre of ‘methodology‐as‐technique’, which we suggest provides the underpinning logic for a particular conception of scientific rigour that is increasingly regarded as normal in globalized management research. Based on a qualitative interview study of management researchers in the peripheral context of India, we associate the methodology‐as‐technique genre with social scientific methods of organizing, conducting and disseminating knowledge founded on Western neo‐imperialism and colonialism. Our analysis draws attention to the consequences of the genre of methodology‐as‐technique which relate to a narrowing and displacement of research goals, erasure of context, and devaluation and marginalization of alternatives. By providing insight into how methodology‐as‐technique comes to dominate in peripheral locations such as India, we suggest that these normative constraints also present an opportunity for denaturalization, by making what is increasingly seen as normal appear alien or strange. We conclude by arguing that countering restrictive definitions of rigour in management research relies on development of a more expansive and inclusive conception of the global that fosters indigenous ways of knowing and promotes decolonizing methodologies.     

Games Played Through Agents

We introduce a game of complete information with multiple principals and multiple common agents. Each agent makes a decision that can affect the payoffs of all principals. Each principal offers monetary transfers to each agent conditional on the action taken by the agent. We characterize pure‐strategy equilibria and we provide conditions—in terms of game balancedness—for the existence of an equilibrium with an efficient outcome. Games played through agents display a type of strategic inefficiency that is absent when either there is a unique principal or there is a unique agent.     

‘Bureaucracy‐lite’ and Continuities in Managerial Work

This paper questions three frequently asserted, interrelated claims about developments in management: that centralized, regulated bureaucratic organizations characterized by hierarchy and rules are inevitably giving way to decentralized and empowered post‐bureaucratic organizations characterized by internal networks and an internal market; that, as a consequence, the traditional managerial role of command and control is being superseded by one of facilitation and coordination; and that, in turn, managerial work as routine administration of work processes is being supplanted by the ‘new managerial work’ of non‐routine leadership and entrepreneurship. It is argued that these claims often rest on caricatures of bureaucracy and network organization and are neither new nor well supported by evidence. Against these claims, the paper adduces case‐study evidence which shows that, despite claims about ‘decentralization’ and ‘empowerment’, organizational change may entail not a radical shift to network organization, but more limited change to a different form of bureaucracy in which hierarchy and rules have been retained but in an attenuated and sharper form –‘bureaucracy‐lite’. Consequently, managerial roles continue to be defined in terms of individual responsibility and vertical accountability for an organizational sub‐unit, and managerial work continues to be preoccupied with monitoring and maintaining work processes, routine direction and control of staff and processing information in order to deal with the ambiguities inherent in the dimensions of managerial ‘responsibility’.