J. Richard Harrison

Decision Making and Postdecision Surprises.

J. Richard Harrison and James G. March Most ideas of intelligent choice assume that decision making involves estimating the probable future values of currently available alternatives and choosing the best of them. Sometimes chosen alternatives turn out to be better than anticipated; sometimes they turn out to be worse. The difference between the predecision estimated value of a chosen alternative and its postdecision value, determined after some of its consequences have been experienced, can be defined as postdecision surprise. This paper examines a systematic bias in the distribution of postdecision surprises attributable to the structure of intelligent choice itself. It is shown that unbiased, random errors in estimation result in a structural tendency toward postdecision disappointment, which will be most characteristic of decision situations in which variation among the true values of alternatives is relatively small, the ambiguity or uncertainty in evaluation is relatively high, and the number of alternatives considered is relatively large. The decision dilemma is clear. Choosing apparently better alternatives will, on average, produce higher returns; however, in the absence of behavioral adjustments, higher expected benefits will be associated with greater expected disappointments. The effects are illustrated with results computed for the special case of normally distributed values and errors. Some implications are suggested for understanding postdecision surprise and the development of social norms of intelligent choice in individuals and organizations.*

On the Historical Efficiency of Competition Between Organizational Populations

Much organizational theory and research uses an equilibrium assumption known as historical efficiency. This assumption implies that observed distributions of organizations at any point in time reflect the unique outcomes of underlying systematic processes, independent of historical details. In an attempt to assess the plausibility of this assumption in the context of organizational evolution, the authors use a well-established model to simulate trajectories of competing organizational populations. The findings show that path-dependent processes can often generate outcomes other than those implied by historical efficiency. Implications for theory and research are discussed.

The Strategic Use of Corporate Board Committees

Much recent attention has been focused on committees of corporate boards of directors—particularly the audit, compensation, and nominating committees—as mechanisms for monitoring management and protecting shareholder interests. Board committees can also serve strategic purposes for the firm. This article discusses some of the strategic uses of board committees and focuses on their role in maintaining corporate legitimacy, protecting directors from excessive exposure to liability, and contributing to the formulation of corporate strategy. In particular, it examines the role of the boards strategy committee.

National Culture and the Composition and Leadership Structure of Boards of Directors

When considering board composition and leadership structure, it is important to consider national culture norms. The findings of the study also have important implications for multinational firms setting up boards for their subsidiaries in different countries. The predictive accuracy of the culture variables provides strong support for the argument that norms embedded in a societys culture affect organizational structure, at least at the board level. The results of the study contribute to our understanding of institutional theory in explaining observed variations in corporate board composition and leadership structure across countries. By linking board composition to the cultural environment, institutional theory provides an explicit framework for analyzing variations in board structure across national boundaries. Societal norms about corporate structure are treated as components of national culture. Hofstedes measures of national culture were shown to predict the board composition and leadership structure of firms based in that culture. The hypotheses were tested with data on 399 multinational manufacturing firms based in 15 industrial countries. The results suggest that national culture can have strong effects on corporate governance and should be considered in any transnational study. How and to what extent does national culture influence the composition and leadership structure of the boards of directors of multinational firms? Empirical: How and to what extent does national culture influence the composition and leadership structure of the boards of directors of multinational firms? Societal norms about corporate structure are treated as components of national culture. Hofstedes measures of national culture were shown to predict the board composition and leadership structure of firms based in that culture. The hypotheses were tested with data on 399 multinational manufacturing firms based in 15 industrial countries. The results suggest that national culture can have strong effects on corporate governance and should be considered in any transnational study.The predictive accuracy of the culture variables provides strong support for the argument that norms embedded in a societys culture affect organizational structure, at least at the board level. The results of the study contribute to our understanding of institutional theory in explaining observed variations in corporate board composition and leadership structure across countries. By linking board composition to the cultural environment, institutional theory provides an explicit framework for analyzing variations in board structure across national boundaries. When considering board composition and leadership structure, it is important to consider national culture norms. The findings of the study also have important implications for multinational firms setting up boards for their subsidiaries in different countries.

Corporate governance and national culture: a multi‐country study

Purpose – The purpose of this paper is to show that corporate governance structures differ significantly across countries. Using agency theory and institutional theory, it examines how ownership structure and national culture influence the size and leadership structure of the corporate boards of multinational firms based in industrial countries.Design/methodology/approach – The hypotheses are tested with data on 399 multinational manufacturing firms based in 15 industrial countries. The authors use ownership concentration, bank control, and state ownership to represent ownership structure. They view institutional structural norms as components of national culture and infer the nature of these norms for governance structure from Hofstedes national culture dimensions.Findings – The findings show that national culture has a dominant influence on corporate governance structure, and its emphasis is recommended in future cross‐national organizational research.Research limitations/implications – Although the mo...

The Dynamics of Cultural Influence Networks

This article investigates the behavior of cultural influence networks over time, using a computer simulation based on a formal model of cultural transmission in organizations. In the formal model, every organizational member exerts some cultural influence on, and is influenced by, every other member; these influence paths constitute a dense social network and the weights of paths (ties) vary throughout the network. Over time, each organizational members enculturation level changes in response to influence from other members, and the influence weight of each path changes in relationship to the cultural similarity of the individuals connected by the path. Virtual experiments explore the configuration and evolution of the cultural influence network under varying demographic conditions and influence principles. Demographic effects are studied by varying organizational size, hiring selectivity and turnover rates. Two principles for determining initial influence path weights are examined, cohort-based influence and random influence. The simulations show that the cultural influence network evolves over time to a robust configuration, fluctuating around a stable dynamic equilibrium as individuals enter and leave the organization. As turnover rates rise, cohort-based influence strengthens the influence network and reduces network inequality. In this model, cohort-based influence processes promote cultural stability in organizations.

Come together? The organizational dynamics of post-merger cultural integration

Cultural integration of two organizations following an acquisition depends on the compatibility of the contents of their respective cultures as well as the demographic flows of persons into and out of the new entity. Conducting simulations using an established formal demographic model of the enculturation process, we find that negative growth promotes cultural integration while positive growth impedes it, and that cultural integration proceeds more rapidly when the acquiring firm is large relative to the acquired firm. We also find that cultural recovery for merged firms experiencing either positive or negative growth is slower than for firms with zero growth.

Evolution among competing organizational forms

Abstract The relative roles of chance and competition in organizational evolution are assessed using computer simulation methods. Two competing organizational populations are simulated within the framework of organizational ecologys density‐dependent model of legitimation and competition. The findings show that chance plays a major role in affecting competitive outcomes, sometimes producing what seems to be an irrational result. Implications for theory and research on organizations are discussed.

Differentiation, Variation and Selection: Evolutionary Implications of Technical Change Among the Worldwide Population of Hard Disk Drive Makers, 1956-1998

This paper describes a dynamic analysis of technological advances among hard disk drive (HDD) manufacturers in the areal density of their products across the history of the industry. The study provides (additional) evidence supporting a view of technological racing with leap-frogging rather than with persistent leadership domination in the HDD context - like others, we find that technology leaders in one year are less likely to innovate in the next year than those firms right behind them in technology. We also uncover new evidence that technological laggards do not disappear as quickly as expected by technology racing metaphors where a winner-take-all outcome is expected. Our efforts to explain this pattern of persistent heterogeneity with the usual kind of strategic positioning stories and specifications were not notably successful. But we did find evidence that technological innovation in HDD follows a trajectory consistent with a proportionate random process (akin to a Gibrat process) that favors technology leaders but only stochastically. We demonstrate through simulation that evolution in a population with selection favoring a characteristic evolving as a proportionate random process generates increased variation. This contrasts with a common social science framework for viewing evolution that assumes a fixed characteristic and implies decreasing variation.

Modeling innovative search processes with PR landscapes

This paper develops and analyzes a stylized simulation model of the process of innovation, with emphasis on the differences in outcomes for innovation strategies having a high tolerance for ambiguity and those with a low tolerance. The model is implemented in the context of new product development (NPD). The market value of potential products is represented by the height of a PR landscape, where P is the number of peaks and R is the ruggedness or narrowness of the peaks on the landscape. Innovation teams search the landscape for the best product concepts, but can observe only noisy estimates of the value of a landscape position. At each point, teams consider possible interpretations of their observations in determining their next move. Teams also incur costs during the search process. Teams with a high tolerance for ambiguity, as opposed to those with a low tolerance, are likely to take larger steps across the landscape and to move to new locations more quickly. Since high and low tolerance for ambiguity can be associated with tendencies for exploration and exploitation, we then turn to the consideration of the decomposition of exploration and exploitation into search depth and search breadth or scope.