Jeffrey S. Petty

THE DYNAMICS OF VENTURE CAPITAL DECISION MAKING.

The article focuses on research into the dynamics of investment analysis and decision making in venture capital (VC) financing. The four criteria for VC investment decisions, six activities in the VC decision process, and two characteristics of VC decision research are discussed as well as constraints on the VC firm or the knapsack problem. Dynamic aspects of the VC decision-making process that the author says should be added to the established models of the VC process include multiple feedback loops.

Managerial Decision Making and Lead Times: The Impact of Cognitive Illusions

In this paper, we consider the impact of cognitive illusions on decision making in the operations management field, in areas ranging from product and process development to project management. Psychologists have studied the effects of overconfidence, the planning fallacy, illusions of control, anchoring, confirmation bias, hindsight bias, and associative memory illusions on individual judgment, thinking, and memory in many experiments, but little research has focused on operations management implications of these biases and illusions. Drawing on these psychological findings we discuss several of these cognitive illusions and their impact on operations managers, plant workers, technicians and engineers alike in a variety of operational settings. As in other contexts, these cognitive illusions are quite robust in operations management, but fortunately the impact of selected illusions can be substantially reduced through debiasing techniques. The examples discussed in this paper highlight the need for more operations-management-based research on the impact of cognitive illusions on decision making.

Quick Response Service: The Case of a Non-Profit Humanitarian Service Organization

The focus of this paper is to explore and discuss the applicability of traditional operations management principles within the context of humanitarian service operations (HSO), illustrated by a nonprofit humanitarian service organization (HNPSO). We want to make two major contributions related to performance improvement based on lead time reduction and performance measurement. First, we develop an improvement framework to analyze and reduce the service lead time in parallel with provision of an improved capacity management. The results of this study show that lead time reduction strategies in combination with queuing theory based modeling techniques (Suri, 1998, 2002; Reiner, 2009) help the HNPSO managers effectively manage their service providing processes. Such an integrated and profound capacity management enables organization to deal with short-term demand fluctuations and long-term growth. In this way managers can find the balance between the provision of daily operations as well as the maintenance of monetary income to secure the growth of the organization and continuous improvement. Furthermore, we highlight the benefits and challenges of an aggregated performance measurement approach in a HNPSO. Our approach links operational, customer oriented, and financial performance measures, gives management competitive advantage more relevant than that of a traditional performance system. Considering the relatively limited operations management applications in nonprofit performance measurement systems, this paper contributes to both research and practice.

Is There a Relationship Between VC Firm Business Process Flow Management and Investment Decisions

This study on the management of business process flows of venture capital (VC) firms explores the relationship between the utilization rate of the human resources within the VC firm and deal (project) rejection rate under consideration of contextual factors. We employ an exploratory research design (a historical case analysis) as well as quantitativemodel oriented research based on empirical data in order to understand what is really going on in terms of VC firm processes with regard to their system dynamics. We utilize a longitudinal data set comprising 11 years of archival data covering 3,340 investment decisions collected from a European-based VC firm. The results indicate that, over time, there are considerable dynamics in the VC decision making process. Specifically, the investment decisions of venture capitalists are influenced by firm-specific factors related to the human capital resources of the firm, namely management capacity. Implications of these results for research and practice, in venture capital as well as other service industries, are discussed.