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Introducing Heterogeneity of Managers' Attitude into Behavioral Risk Scoring for Software Offshoring

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  • Xiaojun Shi
  • Hiroshi Tsuji
  • Shunming Zhang

Abstract

In the spirit of Nonaka and Takeuchi's Socialization, Externalization, Combination and Internalization (SECI) model, this paper explores how to integrate the heterogeneity of managers' attitudes, as a behavioral dimension of tacit knowledge, into risk scoring for software offshoring. We propose a linear mixed model approach to make individual heterogeneity explicit within a conjoint analysis experimental framework. The model is then estimated using a data set on Japanese software outsourcing. Based on heterogeneity elicitation, an optimist–pessimist categorizing of managerial attitudes towards risk reveals the drivers of such heterogeneity. We find that experience and the criteria used for selecting vendors are the key drivers. Our behavioral risk scoring, incorporating the attitude heterogeneity, outperforms the ordinary least square (OLS) estimate in risk prediction and yields real benefits in terms of risk reduction, forgone benefits saving and profits improving. Copyright © 2011 John Wiley & Sons, Ltd.

Suggested Citation

  • Xiaojun Shi & Hiroshi Tsuji & Shunming Zhang, 2012. "Introducing Heterogeneity of Managers' Attitude into Behavioral Risk Scoring for Software Offshoring," Systems Research and Behavioral Science, Wiley Blackwell, vol. 29(3), pages 299-316, May.
    • Handle: RePEc:bla:srbeha:v:29:y:2012:i:3:p:299-316
    DOI: 10.1002/sres.1096
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    References listed on IDEAS

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    1. John D. Hey, 1984. "The Economics of Optimism and Pessimism," Kyklos, Wiley Blackwell, vol. 37(2), pages 181-205, May.
    2. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Eliciting Risk and Time Preferences," Econometrica, Econometric Society, vol. 76(3), pages 583-618, May.
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    4. Liu, Xu-Qing & Rong, Jian-Ying & Liu, Xiu-Ying, 2008. "Best linear unbiased prediction for linear combinations in general mixed linear models," Journal of Multivariate Analysis, Elsevier, vol. 99(8), pages 1503-1517, September.
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    Cited by:

    1. Pui‐Sze Chow & Tsan‐Ming Choi & Bin Shen & Jinhui Zheng, 2014. "Supply Contracting with Risk‐Sensitive Retailers under Information Asymmetry: An Exploratory Behavioral Study," Systems Research and Behavioral Science, Wiley Blackwell, vol. 31(4), pages 554-564, July.
    2. Godfrey Cadogan, 2014. "Chaos in a Large System of Decision‐Makers with Heterogeneous Beliefs with Application to Index Option Prices," Systems Research and Behavioral Science, Wiley Blackwell, vol. 31(4), pages 487-501, July.

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