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Managerial Applications of Judgmental Biases and Heuristics
In: Journal of management education: the official publication of the Organizational Behavior Teaching Society, Band 10, Heft 4, S. 1-20
ISSN: 1552-6658
Heuristic methods as a powerful managerial tool for enterprise in times of uncertainty
In: Kwartalnik nauk o przedsiębiorstwie, Band 63, Heft 1, S. 57-70
ISSN: 2719-3276
In managing enterprise, uncertainty belongs to the attributes of the decision making processes. In competitive environments, where success depends on high-quality decisions, taking the wrong steps can lead to loss of market share or even contribute to running out of business. That is why it is important to choose from the many alternatives those methods which will be most effective in solving problems in a simple and quick way, and heuristics offer such a solution, which has proved its usefulness in uncertain business environments. The aim of this study is to present and evaluate heuristic methods and show their specificity and applicability in management science for enterprises in times of uncertainty. In this article, the theoretical aspect of managerial heuristics is presented, and the emphasis is also placed on presenting practical examples of applying heuristics in companies with times of uncertainty, but also in these times of the Covid-19 pandemic. The study also offers conclusions and provides practi al recommendations.
Near‐optimal heuristics and managerial insights for the storage constrained, inbound inventory routing problem
In: International journal of physical distribution and logistics management, Band 42, Heft 2, S. 152-173
ISSN: 0020-7527
PurposeThe purpose of this paper is to develop efficient heuristics for determining the route design and inventory management of inbound parts which are delivered for manufacturing, assembly, or distribution operations and for which there is limited storage space. The shipment frequencies and quantities are coordinated with the available storage space and the vehicle capacities.Design/methodology/approachTwo heuristics that generate near optimal solutions are proposed. The first heuristic has an iterative routing phase that maximizes the savings realized by grouping suppliers together into routes without considering the storage constraint and then calculates the pickup frequencies in the second phase to accommodate the storage constraint. The second heuristic iteratively executes a routing and a pickup frequency phase that both account for the storage constraint. A lower bound is also developed as a benchmark for the heuristic solutions.FindingsNear optimal solutions can be obtained in a reasonable amount of time by utilizing information about the amount of storage space in the route design process.Practical implicationsThe traditional emphasis on high vehicle utilization in transportation management can lead to inefficient logistics operations by carrying excess inventory or by using longer, less efficient routes. Route formation and pickup quantities at the suppliers are simultaneously considered, as both are important from a logistics standpoint and are interrelated decisions.Originality/valueThe two proposed heuristics dynamically define seed sets such that the solutions to the capacitated concentrator location problem (CCLP) are accurately estimated. This increased accuracy helps in generating near‐optimal solutions in a practical amount of computing time.
Exploring the heuristics behind the transition to a circular economy in the textile industry
In: Management decision
ISSN: 1758-6070
PurposeThe transition to a circular economy (CE) is a known concern in the context of the textile industry, in which business actors attempt to facilitate circular activities such as textile recycling. However, a lack of established business relationships and networks creates uncertainty for textile circulation. In such business environments, managerial decisions regarding CE may depend not only on normative behaviour but also on heuristics that guide their choices. Since business relationships for textile circularity require interactions between business actors, this study explores how managerial heuristics are shaped in the CE transition within the textile industry and their impact on actors' interactions within business relationships and networks.Design/methodology/approachEmpirically, this qualitative study is based on interviews with managers representing companies and organisations engaged in business relationships and networks aimed at a CE transition in the textile industry, as well as on publicly available secondary data.FindingsThe findings indicate that managerial decisions promoting circularity can be influenced by, besides normative information assessment, factors predominant in (1) the business and regulatory environment, (2) managers' experience and knowledge obtained during interactions within business networks and (3) the internal strategic approaches of business organisations. This study identifies adaptation, experience, interaction and strategy heuristics that may be utilised by managers in making decisions in the context of uncertainty, such as the industrial transition to a CE.Originality/valueThis study expands the knowledge of heuristics applied to managerial decision making in interacting business firms and institutional organisations aiming to facilitate textile recycling and proposes a heuristics toolbox. The study provides an insight into business actors' interactions, as well as various factors inside and outside the organisations shaping the managerial decisions. By doing this, the study adds to the literature, highlighting the importance of contextualisation and the interrelation between the individual and business environment levels in business-to-business management.
Heuristics revisited: implications for marketing research and practice
In: Marketing theory, Band 8, Heft 2, S. 189-204
ISSN: 1741-301X
The marketing literature has devoted limited attention to the nature and scope of heuristics in marketing theory development and in marketing-related decision-making processes. This is of concern because the use of heuristics can profoundly influence managerial choices and, in turn, the ability of firms to compete. The authors analyze heuristics, first in general terms by providing a review of the concept and its mechanics, and then more specifically by exploring the use of heuristics in the discipline of marketing. The market orientation and marketing concept constructs are discussed as examples of marketing tenets that, over time, have been enriched through the incorporation of heuristics. The following findings are derived from the analysis: heuristics signal the maturing of a theoretical concept; heuristics act as a measure of a discipline's impact; heuristics do not exist in isolation; effective heuristics are balanced and established; and effective heuristics evolve and adapt. Overall, the purpose of this study is to improve the understanding of the value of heuristics to marketing theory and practice and to renew research interest into heuristics in a marketing context.
Guest editorialNew challenges for business actors and positive heuristics
In: Management decision, Band 59, Heft 7, S. 1585-1597
ISSN: 1758-6070
PurposeThe purpose of this guest editorial is to present an overview of the contributions in this special issue and proposes a positive approach to heuristics deriving from the growing interest in the decision-making topic with respect to the new challenges emerging in uncertain environments in management and marketing research.Design/methodology/approachThe authors explore the reasons for a positive view of business actors' judgments and choices based on heuristics, not only in terms of effectiveness in practice, but their fit with human cognition and behavior, and the potential distinctiveness in contexts where technological devices and algorithms are more widespread, but not necessarily more appropriate.FindingsThe authors present and discuss the emergence and evolution of heuristics as a topic in the management literature, and the themes and insights proposed in the papers published in this special issue contributing to research aimed at systemizing a managerial perspective of the concepts and tools that may be useful for practitioners and researchers in this field.Originality/valueThe paper discusses the positive role that heuristics can play, offering some propositions for future research by framing heuristics as a set of tools (toolbox) for business actors in uncertain contexts, without constituting a cognitive limitation for effective solutions.
Managerial decision-making: exploration strategies in dynamic environments
In: Management decision, Band 62, Heft 5, S. 1516-1538
ISSN: 1758-6070
PurposeWe argue that a fundamental issue regarding how to search and how to switch between different cognitive modes lies in the decision rules that influence the dynamics of learning and exploration. We examine the search logics underlying these decision rules and propose conceptual prompts that can be applied mentally or computationally to aid managers' decision-making.Design/methodology/approachBy applying Multi-Armed Bandit (MAB) modeling to simulate agents' interaction with dynamic environments, we compared the patterns and performance of selected MAB algorithms under different configurations of environmental conditions.FindingsWe develop three conceptual prompts. First, the simple heuristic-based exploration strategy works well in conditions of low environmental variability and few alternatives. Second, an exploration strategy that combines simple and de-biasing heuristics is suitable for most dynamic and complex decision environments. Third, the uncertainty-based exploration strategy is more applicable in the condition of high environmental unpredictability as it can more effectively recognize deviated patterns.Research limitations/implicationsThis study contributes to emerging research on using algorithms to develop novel concepts and combining heuristics and algorithmic intelligence in strategic decision-making.Practical implicationsThis study offers insights that there are different possibilities for exploration strategies for managers to apply conceptually and that the adaptability of cognitive-distant search may be underestimated in turbulent environments.Originality/valueDrawing on insights from machine learning and cognitive psychology research, we demonstrate the fitness of different exploration strategies in different dynamic environmental configurations by comparing the different search logics that underlie the three MAB algorithms.
Exploring female entrepreneurs' marketing decisions with a heuristics and biases approach
In: Gender in management: an international journal, Band 34, Heft 8, S. 623-643
ISSN: 1754-2421
PurposeThis study furthers the body of knowledge on entrepreneurial decision-making, entrepreneurial marketing and female entrepreneurs by exploring practical implications of heuristics and biases in female entrepreneurs' marketing decisions. Heuristics and biases influence many entrepreneurial decisions. Moreover, some of the most important entrepreneurial decisions are marketing-related. Given that the entrepreneurial marketing behavior emanates from entrepreneurial thinking and decision-making, one may conclude that female entrepreneurs' marketing decisions are susceptible to heuristics and biases. This paper aims to explore the outcomes of heuristics and biases in entrepreneurial marketing decisions.Design/methodology/approachData were collected by conducting semi-structured interviews with 19 Iranian female biotech entrepreneurs and analyzed by thematic analysis.FindingsThe findings indicate that introducing pioneering products to the market, overestimating product's market appeal, unprepared entry, underestimating the competition, overcoming entry impediments, entry postponement, growth, success in incremental innovation and failure in radical innovation are the main outcomes of the identified heuristics and biases in the female entrepreneurs' marketing decisions.Practical implicationsThis paper has some precious practical implications for marketers as well as female entrepreneurs running small businesses. Generally speaking, reducing the negative impacts of the identified heuristics and biases of this study while enhancing their positive effects will increase the chances of female entrepreneurs to compete and succeed in tumultuous markets. Furthermore, our most important managerial implication is regarding overconfidence, which was very common in the female entrepreneurs' marketing decisions by having various positive and negative outcomes. Thus, female entrepreneurs should be careful of this fateful bias in their decisions by knowing the most common signs of overconfidence.Originality/valueThis paper is unique because of not only identifying the main heuristics and biases but also their major outcomes in entrepreneurs' major marketing decisions. Moreover, this paper is a pioneer in exploring heuristics and biases in female entrepreneurs' decisions.
Heuristics and biases in human–algorithm interaction and hotel revenue management override decision-making
In: International journal of contemporary hospitality management
ISSN: 1757-1049
Purpose
This study aims to provide insights into human–algorithm interaction in revenue management (RM) decision-making and to uncover the underlying heuristics and biases of overriding systems' recommendations.
Design/methodology/approach
Following constructivist traditions, 20 in-depth interviews were conducted with revenue optimisers, analysts, managers and directors with vast experience in over 25 markets and working with different RM systems (RMSs) at the property and corporate levels. The hermeneutics approach was used to interpret and make meaning of the participants' lived experiences and interactions with RMSs.
Findings
The findings explain the nature of the interaction between RM professionals and RMSs, the cognitive mechanism by which the system users judgementally adjust or override its recommendations and the heuristics and biases behind override decisions. Additionally, the findings reveal the individual decision-maker characteristics and organisational factors influencing human–algorithm interactions.
Research limitations/implications
Although the study focused on human–system interaction in hotel RM, it has larger implications for integrating human judgement into computerised systems for optimal decision-making.
Practical implications
The study findings expose human biases in working with RMSs and highlight the influencing factors that can be addressed to achieve effective human–algorithm interactions.
Originality/value
The study offers a holistic framework underpinned by the organisational role and expectation confirmation theories to explain the cognitive mechanisms of human–system interaction in managerial decision-making.
How Does De‐Globalization affect location decisions? A Study of managerial perceptions of risk and return
In: Ambos , T C , Cesinger , B , Eggers , F & Kraus , S 2020 , ' How Does De‐Globalization affect location decisions? A Study of managerial perceptions of risk and return ' , Global Strategy Journal , vol. 10 , no. 1 , pp. 210-236 . https://doi.org/10.1002/gsj.1335 ; ISSN:2042-5791
Our understanding of how managers take international location decisions is still scarce. Building on the microfoundations view, we explore managers' perceptions of risk and return in a discrete choice experiment with 2,618 decisions in 2013 (a globalizing world) and 2017 (a de‐globalizing world). While managerial perceptions vary over time due to economic and political changes, such as the current de‐globalization trend, decision heuristics remain remarkably stable: locations perceived as least risky offer the highest expected returns. We also find that distance is a good proxy for managerial perceptions. Investigating the microfoundations of decision‐making we show that international experience, risk‐taking propensity and shareholder status affect heuristics. In sum, our study provides novel insights into the microfoundations of location decisions and extends the behavioral perspective on internationalization.
BASE
The Effectiveness of Different Representations for Managerial Problem Solving: Comparing Tables and Maps
In: Decision sciences, Band 28, Heft 2, S. 391-420
ISSN: 1540-5915
ABSTRACTGeographic Information Systems (GIS) enable decision makers to view tabular data geographically, as maps. This simple yet powerful visual format appears to facilitate problem solving, yet how it does so is not clear, nor do we know the types of problems that benefit from this representation. To begin to understand the contributions of geographic representations over tabular representations, we conducted a three‐factor experiment in problem solving. The experiment contained two different representations (map and table), three different geographic relationships (proximity, adjacency, and containment), and three levels of task difficulty (low, medium, and high). We found that maps generally produced faster problem solving than tables, and that problem‐solving time increased with task difficulty. Most importantly, for the proximity and adjacency geographic relationships we found that maps kept problem‐solving time low, while tables tended to increase time dramatically. However, we found that the number of knowledge states for each task explains performance times quite well and is a useful tool for understanding performance differences and interaction effects. As tasks become more difficult, representing them as maps generally keeps the number of knowledge states small, while for tables, the number of knowledge states increases dramatically. Correspondingly, problem‐solving times increase dramatically with tables, but not with maps.In sum, as difficulty increases, maps are more effective for problem‐solving tasks. Using maps, the tasks are simplified using visual heuristics that keep problemsolving times and error rates from rising as quickly as they do with tables.
Affective states and ecological rationality in entrepreneurial decision making
In: Journal of managerial psychology, Band 31, Heft 7, S. 1182-1197
ISSN: 1758-7778
PurposeThe purpose of this paper is to explore the impact of affective appraisal dimensions on the use of two ecologically rational, social heuristics: imitate the majority (IMH) and imitate the best (IBH) during an entrepreneurial strategic decision-making process (ESDM).Design/methodology/approachThe authors test the hypotheses in a controlled field experiment, on a final sample of 98 entrepreneurs.FindingsThe study shows that entrepreneurs experiencing affect described by certainty appraisal display a preference for relying on IMH, but not on IBH. Moreover, entrepreneurs who experience unpleasant affect tend to rely more on IMH, rather than IBH. The reverse is true for the entrepreneurs who experience positive affect. Finally, the use of IMH is most likely under unpleasant and certain affect, while the use of IBH is most likely under pleasant and certain affect.Originality/valueThe main contribution of this study is that it provides initial support for the impact of affective appraisal dimensions on the use of ecologically rational heuristics (i.e. heuristics that save important resources, but bring beneficial results) during an ESDM process.
Serving the Nation: Devolution and the Civil Service in Wales
In: The British journal of politics & international relations: BJPIR, Band 14, Heft 3, S. 458-476
ISSN: 1467-856X
The article captures the evolution of the moving object of Welsh devolution over its first decade through a case study of the civil service in Wales. Three positions are proposed as heuristics for understanding politico-administrative relations in devolved Wales: these are administrative persistence, capacity-building and bureaucratic capture. Rather than set these dynamics against each other, the case study of the civil service in Wales demonstrates the value of reasoning in terms of a mix of administrative, political and managerial pressures, requiring the development of hybrid responses and skills. Although the institutional capacity-building dynamic clearly had the ascendancy during the first decade, as the post-devolution Welsh polity gradually becomes more settled, there is likely to be a revival of more generic administrative and/or managerial concerns. Adapted from the source document.
Transcending the Great Foreign Aid Debate: managerialism, radicalism and the search for aid effectiveness
In: Third world quarterly, Band 32, Heft 2, S. 199-216
ISSN: 1360-2241