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Organizational Design and Resource Evaluation

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  • Michael Christensen
  • Thorbjørn Knudsen
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    Abstract

    A crucial problem of evaluating, discovering, and creating the value of resources remains at the center of the subject of business strategy. The present article draws on reliability theory to advance an analytical platform that can address part of this problem, the evaluation of resource value. Reliability theory offers a way to model managerial ability and to derive the evaluation properties of organizations, boards, teams and committees. It is shown how the problem of resource evaluation can be remedied by proper evaluation structures. An evaluation structure that is build out of a very few agents can achieve significant improvements. A simulation of the classical n-armed bandit problem shows how evaluation structures can help managers select innovations of better economic value.

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    File URL: http://www3.druid.dk/wp/20060005.pdf
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    Bibliographic Info

    Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 06-05.

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    Date of creation: 2006
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    Handle: RePEc:aal:abbswp:06-05

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    Web page: http://www.druid.dk/

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    Keywords: Reliability theory; resource value;

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    1. Jan W. Rivkin & Nicolaj Siggelkow, 2003. "Balancing Search and Stability: Interdependencies Among Elements of Organizational Design," Management Science, INFORMS, INFORMS, vol. 49(3), pages 290-311, March.
    2. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and Sustainability of Competitive Advantage," Management Science, INFORMS, INFORMS, vol. 35(12), pages 1504-1511, December.
    3. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers, C.E.P.R. Discussion Papers 70, C.E.P.R. Discussion Papers.
    4. Levinthal, Daniel & March, James G., 1981. "A model of adaptive organizational search," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 2(4), pages 307-333, December.
    5. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(6), pages 1119-58, December.
    6. Nicolai J Foss & Thorbjørn Knudsen, . "The Ressource-Based Tangle: Towards a Sustainable Explanation of Competitive Advantage," IVS/CBS Working Papers, Department of Industrial Economics and Strategy, Copenhagen Business School 00-1, Department of Industrial Economics and Strategy, Copenhagen Business School.
    7. Ben-Yashar, Ruth C & Nitzan, Shmuel I, 1997. "The Optimal Decision Rule for Fixed-Size Committees in Dichotomous Choice Situations: The General Result," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 175-86, February.
    8. Sah, Raaj Kumar & Stiglitz, Joseph E, 1988. "Committees, Hierarchies and Polyarchies," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 98(391), pages 451-70, June.
    9. Joseph E. Stiglitz, 2002. "Information and the Change in the Paradigm in Economics," American Economic Review, American Economic Association, American Economic Association, vol. 92(3), pages 460-501, June.
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