How do real options come into existence? A step toward an option- based theory of the firm

To be relevant to a firm a real option needs to fit into a theory of the firm explaining its existence, exercise conditions and value. We make a step toward an option based-theory of the firm by describing the emergence of a firm’s options and the strategic building of new competences for exercising these options. We explain the creation of a real option as an entrepreneurial process which transform inventive ideas into profitable innovation. The subsequent development of competence necessary to exercise the option gives boundaries, based on theories of the firm, for the often overoptimistic real option evaluation.Real Option, Theory of the Firm, Capabilities

Supply chain control: Trade-offs and system requirements

The official published version can be accessed from the link below.A paper describes the underlying forces which drive change in manufacturing enterprises and supply chains. It sets out the complexities in modern capitalism and global economics and illustrates the trade-offs that can be made. IT systems which are required to assist improvements to both customer service and enterprise manufacturing performance are explained, alluding to the special case for the semiconductor industry. Arguments are presented showing how the new tools being developed with the ESPRIT project 20544, X-CITTIC, will satisfy the control needs for a virtual enterprise. This paper describes the underlying forces which drive change in manufacturing enterprises and supply chains. It sets out the complexities in modem capitalism and global economics and illustrates the trade-offs that can be made. IT systems which are required to assist improvements to both customer service and enterprise manufacturing performance are explained alluding to the special case for the semiconductor industry. Finally it shows how the new tools being developed with the ESPRIT project 20544, XCITTIC, will satisfy the control needs for a virtual enterprise

Resource assignment in short life technology intensive (SLTI) new product development (NPD)

Enterprises managing multiple concurrent New Product Development (NPD) projects face significant challenges assigning staff to projects in order to achieve launch schedules that maximize financial returns. The challenge is increased with the class of Short Life Technology Intensive (SLTI) products characterized by technical complexity, short development cycles and short revenue life cycles. Technical complexity drives the need to assign staffing resources of various technical disciplines and skill levels. SLTI products are rapidly developed and launched into stationary market windows where the revenue life cycle is short and decreasing with any time-to-market delay. The SLTI-NPD project management decision is to assign staff of varying technical discipline and skill level to minimize the revenue loss due to product launch delays across multiple projects. This dissertation considers an NPD organization responsible for multiple concurrent SLTI projects each characterized by a set of tasks having technical discipline requirements, task duration estimates and logical precedence relationships. Each project has a known potential launch date and potential revenue life cycle. The organization has a group of technical professionals characterized by a range of skill levels in a known set of technical disciplines. The SLTI-NPD resource assignment problem is solved using a multi-step process referred to as the Resource Assignment and Multi-Project Scheduling (RAMPS) decision support tool. Robust scheduling techniques are integrated to develop schedules that consider variation in task and project duration estimates. A valuation function provides a time-value linkage between schedules and the product revenue life cycle for each product. Productivity metrics are developed as the basis for prioritizing projects for resources assignment. The RAMPS tool implements assignment and scheduling algorithms in two phases; (i) a constructive approach that employs priority rule heuristics to derive feasible assignments and schedules and (ii) an improvement heuristic that considers productivity gains that can be achieved by interchanging resources of differing skill levels and corresponding work rates. An experimental analysis is conducted using the RAMPS tool and simulated project and resource data sets. Results show significant productivity and efficiency gains that can be achieved through effective project and resource prioritization and by including consideration of skill level in the assignment of technical resources

Analyzing Flexibility as a Risk Management Strategy in Agricultural Systems

Agricultural businesses deal with uncertainty of all kinds. Uncertainty arising from variability in resources, markets, human factors, and regulatory policy can be sources of significant risks. Acquiring or building flexibility in an operation is one of the ways suggested to manage risk and uncertainty—reducing the impact of negative outcomes and increasing the benefit of positive outcomes. Although flexibility has been repeatedly encouraged for businesses, the definition of flexibility and its value remains ambiguous after more than 80 years of research. Flexibility is often described as a multi-dimensional ability to effectively deal with change in the business operating environment. Flexibility can also be described as an ability to switch to alternative means that allow the same objectives to be reached. Thus, maintaining flexibility requires active and ongoing management to retain its effectiveness for mitigating risk. The goal of the first chapter is to present a compilation of literature discussing flexibility in general in an attempt to define, measure, and value flexibility in isolation. In the second chapter, flexibility in agricultural systems will be explored as a risk management strategy and, through a series of applied examples, described both in isolation and together with other risk management strategies. The emphasis will be placed on agricultural scenarios, but non-agricultural cases will be visited as well. In the third chapter, the theory of flexibility will be illustrated in depth through a natural resource management example. Building on the framework of real options, different approaches for cross fencing a pasture for grazing will be used to identify the value of flexibility to alter land use. Advisor: Jay Parson

Resources, Capabilities, and Routines in Public Organization

States, state agencies, multilateral agencies, and other non-market actors are relatively under-studied in the strategic entrepreneurship literature. While important contributions examining public decision makers have been made within the agency-theoretic and transaction-cost traditions, there is little research that builds on resource-based, dynamic capabilities, and behavioral approaches to organizations. Yet public organizations can be usefully characterized as stocks of physical, organizational, and human resources; they interact with other organizations in pursuing a type of competitive advantage; they can possess excess capacity, and may grow and diversify in part according to Penrosean (dynamic) capabilities and behavioral logic. Public organizations may be managed as stewards of resources, capabilities, and routines. This paper shows how resource-based, (dynamic) capabilities, and behavioral approaches shed light on the nature and governance of public organizations and suggests a research agenda for public entrepreneurship that reflects insights gained from applying strategic management theory to public organization.

Innovativeness and Innovation: Implications for the Renewable Materials Supply Chain

innovativeness, innovation, supply chain management, triple bottom line, corporate social responsibility, Agribusiness, Agricultural Finance, Demand and Price Analysis, Financial Economics, Q10, Q27, Q42, Q47,

DEA-Based Incentive Regimes in Health-Care Provision

A major challenge to legislators, insurance providers and municipalities will be how to manage the reimbursement of health-care on partially open markets under increasing fiscal pressure and an aging population. Although efficiency theoretically can be obtained by private solutions using fixed-payment schemes, the informational rents and production distortions may limit their implementation. The healthcare agency problem is characterized by (i) a complex multi-input multi-output technology, (ii) information uncertainty and asymmetry, and (iii) fuzzy social preferences. First, the technology, inherently nonlinear and with externalities between factors, yield parametric estimation difficult. However, the flexible production structure in Data Envelopment Analysis (DEA) offers a solution that allows for the gradual and successive refinement of potentially nonconvex technologies. Second, the information structure of healthcare suggests a context of considerable asymmetric information and considerable uncertainty about the underlying technology, but limited uncertainty or noise in the registration of the outcome. Again, we shall argue that the DEA dynamic yardsticks (Bogetoft, 1994, 1997, Agrell and Bogetoft, 2001) are suitable for such contexts. A third important characteristic of the health sector is the somewhat fuzzy social priorities and the numerous potential conflicts between the stakeholders in the health system. Social preferences are likely dynamic and contingent on the disclosed information. Similarly, there are several potential hidden action (moral hazard) and hidden information (adverse selection) conflicts between the different agents in the health system. The flexible and transparent response to preferential ambiguity is one of the strongest justifications for a DEA-approach. DEA yardstick regimes have been successfully implemented in other sectors (electricity distribution) and we present an operalization of the power-parameter p in an pseudo-competitive setting that both limits the informational rents and incites the truthful revelation of information. Recent work (Agrell and Bogetoft, 2002) on strategic implementation of DEA yardsticks is commented in the healthcare context, where social priorities change the tradeoff between the motivation and coordination functions of the yardstick. The paper is closed with policy recommendations and some areas of further work.Data Envelopment Analysis, regulation, health care systems, efficiency, Health Economics and Policy,

Outsourcing of Production:The Valuation of Volume Flexibility in Decision-Making

Background: Outsourcing remains a central mechanism for improving manufacturing supply chains, with volume flexibility being a frequently targeted objective. However, outsourcing decision-making remains focused on static cost estimations, while the value of volume flexibility is subject to managerial valuation, thus imposing a risk of estimation errors. This paper tests whether decision-makers systematically under- or overvalue volume flexibility when deciding on outsourcing. Methods: Four outsourcing decision made by an OEM operating with seasonality and boom and bust cycles are analyzed to assess if decision-makers' intrinsic valuation of volume flexibility is biased. This was done by utilizing a previously developed mixed integer linear programming model for tactical planning. The model jointly considers production planning, workforce adjustments and capital investment, while respecting upstream supplier constraints, thereby encompassing both positive and negative effects of production outsourcing on volume flexibility. Combining the model with detailed knowledge of how the production system would be impacted, enabled a quantification of the value from volume flexibility, which could then be compared to the decisions made. Results: Augmenting existing static cost estimations with the value of flexibility did not reveal systematic estimation errors. However, the results suggest that the value of volume flexibility is situational, and on average comparable to direct labor cost. Conclusions: The results emphasize the importance of accurately and case-specific valuation of volume flexibility in cost-driven production outsourcing.Wstęp: Outsourcing pozostaje głównym mechanizmem poprawy funkcjonowania łańcucha dostaw, przy szacowaniu elastyczności jako głównym mierniku oceny. Niemniej, proces podejmowania decyzji odnośnie outsourcingu jest głównie skupiony na estymacjach kosztów statycznym, podczas gdy szacowanie elastyczności podlega ocenie wartości zarządzania, a co jest z tym związane, ryzykiem estymacji błędów. Prezentowana praca przedstawia ocenę wyceny elastyczności procesu podejmowania decyzji w sprawach dotyczących outsourcingu. Metody: Poddano analizie cztery decyzji podjęte prze OEM przy występującej sezonowości, wzrostu oraz spadu w celu określenia istotności oszacowania podejmowanych decyzji z punktu widzenia elastyczności. Analizę tą wykonano przy zastosowaniu połączenia modelu zintegrowanego programowania liniowego dla planowania taktycznego. Model ten obejmuje planowanie produkcji, zarządzanie zasobami oraz inwestowania kapitałem przy uwzględnieniu ograniczeń w łańcuchu dostaw, co oznacza uwzględnianie wpływu zarówno pozytywnych jak i negatywnych efektów outsourcingu produkcji na oszacowanie elastyczności. Połączenie tego modelu z wiedzą dotyczącą prawidłowego funkcjonowania procesu produkcyjnego pozwoliło na skwantyfikowanie elastyczności. Otrzymane wyniki posłużyły do analizy porównawczej podjętych decyzji. Wyniki: Zwiększanie estymacji istniejących kosztów statycznych z wartością elastyczności nie wyjaśnia błędów systematycznych estymacji. Niemniej jednak wyniki sugerują, że wartość elastyczności ilości jest zależna od sytuacji i średnio porównywalna z kosztem bezpośrednim robocizny. Wnioski: Otrzymane wyniki wskazują na istotność dokładnej i precyzyjnej wyceny wartościowej elastyczności ilości w outsourcingowej produkcji w ujęciu kosztowym

Three Essays on the Effect of Scarcity on Consumer Behavior and Firm Performance

Studies have consistently shown that scarcity plays a significant role in shaping decision making. Under conditions of scarcity, individuals tend to behave impulsively, and firms are inclined to redefine their set of priorities and strategies, ultimately impacting their performance. Considering the scant investigation of the mechanisms and effects of scarcity in the supply chain management literature, this dissertation aimed to investigate the roles of scarcity in shaping consumer behavior and firm strategy in three essays. The first essay investigated the effect of post-stockout scarcity disclosures on consumer responses to stockouts through the lens of product scarcity and signaling theory. The results of the experimental analysis indicate that post-stockout disclosures increase consumer perceived scarcity, reduce consumer satisfaction with the stockout situation, yet increase consumer purchase intention. However, the results of a time-effect analysis show that consumers\u27 perceived scarcity and purchase intention decrease over time when stockouts persist. These results indicate that effectively communicating the reasons for the stockout, as well as actions being undertaken for replenishing the product can serve as a powerful tool to retain customers exposed to stockouts. The second essay explored the role of retail product rationing (limit buys) in preventing stockpiling of essential products at retail stores during natural disasters through the lens of regret theory and anchoring effect. Results of an experimental investigation through manipulation of the number of items a consumer can buy and the presence/absence of disclosures highlighting social norms – or nudges, indicate that when consumers\u27 needs were less than the retailer\u27s set purchase limit, the purchase limit increased consumer stockpiling propensity. Additionally, though no significant effect of social nudges in the presence of a purchase quantity limit was found, social nudges significantly reduced consumer stockpiling propensity when no limits were placed. The third essay studied the effect of a firm\u27s financial and operational slack on its green supply chain management (GSCM) performance by using the natural resource-based view and conceptualizing slack as a capability needed by a firm to reach its green supply chain goals. Results of a random effect model analysis indicate that the firm\u27s absorbed slack and unborrowed slack (financial slacks), and capacity slack (operational slack) have a positive effect with diminishing returns on its GSCM performance. In contrast, inventory slack (a different kind of operational slack) has a negative effect with diminishing returns on a firm\u27s GSCM performance. Moreover, we found that the firm\u27s operating environment scarcity positively moderates the relationship between inventory slack and absorbed slack on GSCM performances GSCM performance. Environmental scarcity promotes a more efficient use of slack resources in the pursuit of green SCM efforts