IDEAS home Printed from https://ideas.repec.org/a/eee/techno/v124y2023ics0166497223000524.html
   My bibliography  Save this article

Authoritarianism versus participation in innovation decisions

Author

Listed:
  • Sáenz-Royo, Carlos
  • Lozano-Rojo, Álvaro

Abstract

Why do innovation projects fail? The most common answers are (A) the implementation differs from what was planned; (B) despite positive expected payoffs, there is an ex-ante positive probability that payoff can be negative (risk). As a third option, we consider the fallibility of individuals who evaluate innovation projects using their limited information-processing capabilities (bounded rationality). Furthermore, we compare the overall organizational performance of two decision mechanisms. First, an informal Collective Decision as an unanimity participative mechanism to decide on technological innovation adoption and, second, a centralized Authority decision. Authority-based decision-making results in higher commission errors (acceptance of projects that an unbounded rational decision-maker would reject) and lower omission errors (rejection of projects that an unbounded rational decision-maker would accept) than Collective Decision. In a dynamic technological adoption process where a sequence of randomly generated innovation projects is evaluated using the two mechanisms, the simulations show that, in the short-term, omission errors dominate and Authority is preferred to Collective Decision; however, in the mid and long terms, commission errors dominate and Collective Decision is preferred to Authority, especially if Collective Decision does not incorporate social influence. With Collective Decision, the ratio of projects that fail is lower, more innovation projects are rejected, and fewer innovation projects are accepted, which can be interpreted as resistance to innovation.

Suggested Citation

  • Sáenz-Royo, Carlos & Lozano-Rojo, Álvaro, 2023. "Authoritarianism versus participation in innovation decisions," Technovation, Elsevier, vol. 124(C).
    • Handle: RePEc:eee:techno:v:124:y:2023:i:c:s0166497223000524
    DOI: 10.1016/j.technovation.2023.102741
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0166497223000524
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.technovation.2023.102741?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Milton Harris & Artur Raviv, 2010. "Control of Corporate Decisions: Shareholders vs. Management," The Review of Financial Studies, Society for Financial Studies, vol. 23(11), pages 4115-4147, November.
    2. Milton Harris & Artur Raviv, 2005. "Allocation of Decision-making Authority," Review of Finance, European Finance Association, vol. 9(3), pages 353-383.
    3. Farzin, Y. H. & Huisman, K. J. M. & Kort, P. M., 1998. "Optimal timing of technology adoption," Journal of Economic Dynamics and Control, Elsevier, vol. 22(5), pages 779-799, May.
    4. Felipe A. Csaszar & J. P. Eggers, 2013. "Organizational Decision Making: An Information Aggregation View," Management Science, INFORMS, vol. 59(10), pages 2257-2277, October.
    5. Christina Fang & Jeho Lee & Melissa A. Schilling, 2010. "Balancing Exploration and Exploitation Through Structural Design: The Isolation of Subgroups and Organizational Learning," Organization Science, INFORMS, vol. 21(3), pages 625-642, June.
    6. Cristopher Moore & M. E. J. Newman, 2000. "Epidemics and Percolation in Small-World Networks," Working Papers 00-01-002, Santa Fe Institute.
    7. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-817, August.
    8. Wouter Dessein, 2002. "Authority and Communication in Organizations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 811-838.
    9. Milton Harris & Artur Raviv, 2008. "A Theory of Board Control and Size," The Review of Financial Studies, Society for Financial Studies, vol. 21(4), pages 1797-1832, July.
    10. Seo, Hangyeol & Chung, Yanghon & Yoon, Hyungseok (David), 2017. "R&D cooperation and unintended innovation performance: Role of appropriability regimes and sectoral characteristics," Technovation, Elsevier, vol. 66, pages 28-42.
    11. Paul S. Adler & Kim B. Clark, 1991. "Behind the Learning Curve: A Sketch of the Learning Process," Management Science, INFORMS, vol. 37(3), pages 267-281, March.
    12. Willard I. Zangwill & Paul B. Kantor, 1998. "Toward a Theory of Continuous Improvement and the Learning Curve," Management Science, INFORMS, vol. 44(7), pages 910-920, July.
    13. Haridimos Tsoukas & Robert Chia, 2002. "On Organizational Becoming: Rethinking Organizational Change," Organization Science, INFORMS, vol. 13(5), pages 567-582, October.
    14. Sah, Raaj Kumar & Stiglitz, Joseph E, 1986. "The Architecture of Economic Systems: Hierarchies and Polyarchies," American Economic Review, American Economic Association, vol. 76(4), pages 716-727, September.
    15. Felipe A. Csaszar, 2013. "An Efficient Frontier in Organization Design: Organizational Structure as a Determinant of Exploration and Exploitation," Organization Science, INFORMS, vol. 24(4), pages 1083-1101, August.
    16. Frank M. Bass, 1969. "A New Product Growth for Model Consumer Durables," Management Science, INFORMS, vol. 15(5), pages 215-227, January.
    17. Milton Harris & Artur Raviv, 2005. "Allocation of Decision-making Authority," Review of Finance, Springer, vol. 9(3), pages 353-383, September.
    18. Sridhar Seshadri & Zur Shapira, 2003. "The flow of ideas and timing of evaluation as determinants of knowledge creation," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 12(5), pages 1099-1124, October.
    19. Carlos Sáenz-Royo & Francisco Chiclana & Enrique Herrera-Viedma, 2022. "Functional Representation of the Intentional Bounded Rationality of Decision-Makers: A Laboratory to Study the Decisions a Priori," Mathematics, MDPI, vol. 10(5), pages 1-17, February.
    20. Saerom Lee & Felipe A. Csaszar, 2020. "Cognitive and Structural Antecedents of Innovation: A Large-Sample Study," Strategy Science, INFORMS, vol. 5(2), pages 71-97, June.
    21. Kim, Linsu, 1980. "Organizational innovation and structure," Journal of Business Research, Elsevier, vol. 8(2), pages 225-245, June.
    22. Thorbjørn Knudsen & Daniel A. Levinthal, 2007. "Two Faces of Search: Alternative Generation and Alternative Evaluation," Organization Science, INFORMS, vol. 18(1), pages 39-54, February.
    23. A. Georges L. Romme, 2004. "Unanimity Rule and Organizational Decision Making: A Simulation Model," Organization Science, INFORMS, vol. 15(6), pages 704-718, December.
    24. Dolata, Ulrich, 2009. "Technological innovations and sectoral change: Transformative capacity, adaptability, patterns of change: An analytical framework," Research Policy, Elsevier, vol. 38(6), pages 1066-1076, July.
    25. Wright, Christopher & Sturdy, Andrew & Wylie, Nick, 2012. "Management innovation through standardization: Consultants as standardizers of organizational practice," Research Policy, Elsevier, vol. 41(3), pages 652-662.
    26. Gavin Sinclair & Steven Klepper & Wesley Cohen, 2000. "What's Experience Got to Do With It? Sources of Cost Reduction in a Large Specialty Chemicals Producer," Management Science, INFORMS, vol. 46(1), pages 28-45, January.
    27. Kellermanns, Franz W. & Walter, Jorge & Floyd, Steven W. & Lechner, Christoph & Shaw, John C., 2011. "To agree or not to agree? A meta-analytical review of strategic consensus and organizational performance," Journal of Business Research, Elsevier, vol. 64(2), pages 126-133, February.
    28. Esser, James K., 1998. "Alive and Well after 25 Years: A Review of Groupthink Research," Organizational Behavior and Human Decision Processes, Elsevier, vol. 73(2-3), pages 116-141, February.
    29. Archishman Chakraborty & Bilge Yılmaz, 2017. "Authority, Consensus, and Governance," The Review of Financial Studies, Society for Financial Studies, vol. 30(12), pages 4267-4316.
    30. Michael Christensen & Thorbjørn Knudsen, 2010. "Design of Decision-Making Organizations," Management Science, INFORMS, vol. 56(1), pages 71-89, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tim Baldenius & Xiaojing Meng & Lin Qiu, 2021. "The value of board commitment," Review of Accounting Studies, Springer, vol. 26(4), pages 1587-1622, December.
    2. Leitner, Yaron & Yilmaz, Bilge, 2019. "Regulating a model," Journal of Financial Economics, Elsevier, vol. 131(2), pages 251-268.
    3. Felipe A. Csaszar & J. P. Eggers, 2013. "Organizational Decision Making: An Information Aggregation View," Management Science, INFORMS, vol. 59(10), pages 2257-2277, October.
    4. Harsh Ketkar & Maciej Workiewicz, 2022. "Power to the people: The benefits and limits of employee self‐selection in organizations," Strategic Management Journal, Wiley Blackwell, vol. 43(5), pages 935-963, May.
    5. Oliver Baumann, 2015. "Models of complex adaptive systems in strategy and organization research," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 14(2), pages 169-183, November.
    6. Manouchehrabadi, Behrang & Letizia, Paolo & Hendrikse, George, 2021. "Governance of collective entrepreneurship," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 370-389.
    7. Yaron Leitner & Bilge Yilmaz, 2016. "Regulating A Model," Working Papers 16-31, Federal Reserve Bank of Philadelphia.
    8. Isaka, Naoto, 2017. "When are uninformed boards preferable?," Pacific-Basin Finance Journal, Elsevier, vol. 46(PA), pages 191-211.
    9. Hart E. Posen & Sangyoon Yi & Jeho Lee, 2020. "A contingency perspective on imitation strategies: When is “benchmarking” ineffective?," Strategic Management Journal, Wiley Blackwell, vol. 41(2), pages 198-221, February.
    10. Paola Rovelli & Vincenzo Butticè, 2020. "On the organizational design of entrepreneurial ventures: the configurations of the entrepreneurial team," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 47(2), pages 243-269, June.
    11. Silva Marchesi & Laura Sabani & Axel Dreher, 2009. "Agency and communication in IMF conditional lending: theory and empirical evidence," Ibero America Institute for Econ. Research (IAI) Discussion Papers 183, Ibero-America Institute for Economic Research.
    12. Axel Dreher & Sarah Langlotz & Silvia Marchesi, 2017. "Information Transmission And Ownership Consolidation In Aid Programs," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1671-1688, October.
    13. Silvia, Marchesi & Tania, Masi, 2019. "Allocation of implementing power: Evidence from World Bank projects," Working Papers 399, University of Milano-Bicocca, Department of Economics, revised Jan 2019.
    14. Mike Burkart & Salvatore Miglietta & Charlotte Ostergaard, 2023. "Why Do Boards Exist? Governance Design in the Absence of Corporate Law," The Review of Financial Studies, Society for Financial Studies, vol. 36(5), pages 1788-1836.
    15. Scott C. Ganz, 2018. "Ignorant Decision Making and Educated Inertia: Some Political Pathologies of Organizational Learning," Organization Science, INFORMS, vol. 29(1), pages 39-57, February.
    16. Marchesi, Silvia & Sabani, Laura & Dreher, Axel, 2011. "Read my lips: The role of information transmission in multilateral reform design," Journal of International Economics, Elsevier, vol. 84(1), pages 86-98, May.
    17. Nektarios Oraiopoulos & Stylianos Kavadias, 2020. "Is Diversity (Un-)Biased? Project Selection Decisions in Executive Committees," Manufacturing & Service Operations Management, INFORMS, vol. 22(5), pages 906-924, September.
    18. Michael Christensen & Thorbjørn Knudsen, 2020. "Division of roles and endogenous specialization," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 29(1), pages 105-124.
    19. Murali Agastya & Parimal Kanti Bag & Indranil Chakraborty, 2014. "Communication and authority with a partially informed expert," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 176-197, March.
    20. Silvia Marchesi & Tania Masi, 2021. "Delegation of implementation in project aid," The Review of International Organizations, Springer, vol. 16(3), pages 655-687, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:techno:v:124:y:2023:i:c:s0166497223000524. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.sciencedirect.com/science/journal/01664972 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.