Hart Posen - Academia.edu (original) (raw)
Papers by Hart Posen
Social Science Research Network, 2019
Decision-making that leverages the collective knowledge of multiple individuals is ubiquitous in ... more Decision-making that leverages the collective knowledge of multiple individuals is ubiquitous in organizations, occurring in settings such as groups, committees, top management teams, and boards. Research has examined how decision-making structures (e.g., plurality voting) aggregate individuals’ beliefs into a single organizational choice. We argue that decision-making structures play another role beyond just aggregating individuals' beliefs — they also shape the learning of the individuals who participate in decision making. Learning-by-participating is distinct from learning-by-doing (i.e., experiential learning) in that individuals receive feedback not on their own choices, but rather on the choice made by the organization. We develop a theoretically grounded conceptual framework to characterize different decision-making structures, together with a computational model of organizational decision-making, to examine the impact of learning-by-participating across different such structures. We find that decision-making structures vary across two critical outcomes — their efficacy in aggregating information and their efficacy in shaping individual learning, and that these outcomes may be inversely related. Adjudicating among these two outcomes is the way in which organizations utilize the knowledge of organizational contrarians, individuals who favor choices that differ from that of the organization. A key implication is that the choice of a decision-making structure requires taking the learning context into account. Structures that are effective in settings where the potential for learning is limited may be less effective when individual learning is important. We discuss further implications for research on organizational decision making, learning, top management teams, and the wisdom of organizational crowds.
Academy of Management Proceedings
This paper develops a realistic real option theory of resource allocation decisions in strategic ... more This paper develops a realistic real option theory of resource allocation decisions in strategic factor markets. We build on extant financial and managerial theories, real option theories of decisi...
Academy of Management Annals
Academy of Management Review, 2021
The existence of a learning curve in which a firm’s costs decline with cumulative experience sugg... more The existence of a learning curve in which a firm’s costs decline with cumulative experience suggests that early entry provides learning opportunities that create advantage by reducing future costs...
Academy of Management Proceedings, 2019
SSRN Electronic Journal, 2016
This paper develops a realistic real option theory of resource allocation decisions in strategic ... more This paper develops a realistic real option theory of resource allocation decisions in strategic factor markets. Competitive advantage in factor markets is underpinned by market failures that allow firms to acquire assets at less than their value in use. We recognize that market failure may result from uncertainty regarding the current and/or future value of an asset, which map, respectively, to uncertainty as modeled in the feedback learning and real options literatures. The realistic real option framework we develop grafts insights from the strategic factor market, feedback learning, and real option valuation literatures. We argue that competitive advantage may emerge not only from luck, or ex ante differences in information or complementary assets, but also because firms differ in a specific type of learning ability — the ability to integrate new information to exercise a contingent claim on an asset in a factor market. We dimensionalize these differences in terms of information processing and belief updating, argue that these differences lead to different resource allocation decisions, and suggest how these decisions may generate competitive advantage.
SSRN Electronic Journal, 2013
ABSTRACT Learning from experience is a central theme in the management literature. While in gener... more ABSTRACT Learning from experience is a central theme in the management literature. While in general experiential learning is viewed as efficacious, the literature increasingly points to the difficulties inherent in the learning process — many of which stem from a deficit of information about the merits of alternative solutions. It seems plausible that larger organizations, with their capacity to simultaneously pursue a variety of potential solutions to a given challenge, may overcome this deficit. Such a perspective suggests that the efficacy of an organization's learning process should be an increasing function of organizational size. While this logic is intuitively appealing, we find that it does not fully capture the nuances of the organizational learning process. We employ a computational model and find that larger organizations, as characterized by their scale in pursuing parallel initiatives: (a) explore less than smaller organizations, (b) are less likely to discover the very best alternative, and yet (c) on average identify better alternatives. Increasing the number of parallel initiatives guides the search process towards viable alternatives, but it does so at the cost of inhibiting search breadth. Thus, in our model, the characteristics of learning by larger organizations do not result from differences in inertia or incentives that may impede learning and innovation, but rather from the properties of the organizational learning process itself.
We examine the joint processes of organizational development and population selection to highligh... more We examine the joint processes of organizational development and population selection to highlight a dynamic interaction overlooked when considering the processes in isolation. Selection does not operate on quasi-stable traits directly, but rather on contemporaneous performance. Consequently, stable search strategies may be favored by selection on bases other than long-run performance, such as intertemporal performance stability and the rate of performance improvement. Using a computational model of firm innovative efforts guided by stable search strategies under alternative selection regimes, we find that the relative efficacy of alternative search strategies is reversed depending upon the inclusion or exclusion of selection.-2
Ann Arbor, 2008
... tendency for precedents to become normative standards (and) exchange relations with other o... more ... tendency for precedents to become normative standards (and) exchange relations with other organizations (Hannan and Freeman, 1984: 149). ... used widely in empirical work on reinforcement learning (cf., Camerer and Ho, 1999; Weber, Shafir, and ...
Organization Science
Organizational decision making that leverages the collective wisdom and knowledge of multiple ind... more Organizational decision making that leverages the collective wisdom and knowledge of multiple individuals is ubiquitous in management practice, occurring in settings such as top management teams, corporate boards, and the teams and groups that pervade modern organizations. Decision-making structures employed by organizations shape the effectiveness of knowledge aggregation. We argue that decision-making structures play a second crucial role in that they shape the learning of individuals that participate in organizational decision making. In organizational decision making, individuals do not engage in learning by doing but, rather, in what we call learning by participating, which is distinct in that individuals learn by receiving feedback not on their own choices but, rather, on the choice made by the organization. We examine how learning by participating influences the efficacy of aggregation and learning across alternative decision-making structures and group sizes. Our central ins...
SSRN Electronic Journal, 2014
We develop a behavioral theory of real options that relaxes the informational and behavioral assu... more We develop a behavioral theory of real options that relaxes the informational and behavioral assumptions underlying applications of financial options theory to real assets. To do so, we augment real option theory's focus on uncertain future asset values (prospective uncertainty) with feedback learning theory that considers uncertain current asset values (contemporaneous uncertainty). This enables us to incorporate behavioral bias in the feedback learning process underlying the option execution/termination decision. The resulting computational model suggests that firms that inappropriately account for contemporaneous uncertainty and are subject to learning biases may experience substantial downside risk in undertaking real options. Moreover, contrary to the standard option result, greater uncertainty may decrease option value, making commitment to an investment path more effective than remaining flexible.
Management Science, 2012
A common justification for organizational change is that the circumstances in which the organizat... more A common justification for organizational change is that the circumstances in which the organization finds itself have changed, thereby eroding the value of utilizing existing knowledge. On the surface, the claim that organizations should adapt by generating new knowledge seems obvious and compelling. However, this standard wisdom overlooks the possibility that the reward to generating new knowledge may itself be eroded if change is an ongoing property of the environment. This observation in turn suggests that environmental change is not a self-evident call for strategies of greater exploration. Indeed, under some conditions the appropriate response to environmental change is a renewed focus on exploiting existing knowledge and opportunities. We develop a computational model based on the canonical multi-armed bandit formulation of exploration and exploitation. We endeavor to understand the mechanisms by which environmental change acts to make purposeful efforts at organizational adaptation less (or more) valuable.
Administrative Science Quarterly, 2007
This paper develops and tests a model of the effectiveness of selection processes in eliminating ... more This paper develops and tests a model of the effectiveness of selection processes in eliminating less fit organizations from a population when organizations are undergoing adaptive change. Stable organizational traits, such as a search strategy or routine, do not imply that an organization's performance will remain stable over time or that cross-sectional differences in performance will persist. These properties create the possibility that population-level selection processes will be inefficient in that organizations with potentially superior long-run performance will be selected out. We theorize that organizational-level adaptation often results in fluctuations in current performance across time. These fluctuations may attenuate the degree to which current performance differences among organizations are indicative of future performance. As a consequence, search strategies that generate systematically different performance trajectories, even if they share a common long-run outco...
Academy of Management Proceedings
Existing literature has shown that pre-entry experience is positively associated with new entrant... more Existing literature has shown that pre-entry experience is positively associated with new entrants’ survival rates and performance. However, whether the initial advantage of pre-entry experience er...
The literature on network effects has a longstanding controversy regarding the possibility that m... more The literature on network effects has a longstanding controversy regarding the possibility that markets may lock into an inferior technology. This controversy was triggered by Arthur’s (1989) model of positive feedback (success begets more success) in markets with competition between incompatible technologies. Critics point to the lack of compelling evidence for such lock-in. This confusion, in part, stems from a hidden assumption in the Arthur model influence of adopters never decays. We shed new light on this confusion by examining the implications of influence that decays over time. In the absence of influence decay, there is a good possibility that a market will lock-in to an inferior technology, as shown by prior work. However, when the influence of earlier adopters decays over time, the possibility of lock-in to an inferior technology is substantially attenuated. Despite the existence of positive feedback, this decay triggers a protracted period of technology competition, whic...
Knowledge is a central construct in the modern strategy literature because it contributes to perf... more Knowledge is a central construct in the modern strategy literature because it contributes to performance differences across firms. In the Carnegie School tradition, knowledge is the outcome of a process of search and learning by which firms discover better solutions to the challenges they face. Knowledge can be interpreted as more accurate beliefs about the merits of alternative policy choices which we term first-order knowledge. Such knowledge may be employed to allocate resources across alternative investment opportunities, for example, new plants, new drug molecules, or venture capital investments. Yet knowledge has a second dimension related to a firm's confidence in its beliefs. Intuition suggests that accuracy has limited value without confidence, and confidence has limited value without accuracy. We term accuracy-confidence matches second-order knowledge. We identify conditions under which low second-order knowledge (a confidence mismatch high confidence in inaccurate bel...
Experiential learning is a central idea in the management literature ? and its general efficacy i... more Experiential learning is a central idea in the management literature ? and its general efficacy is a taken-for-granted element of management thought. However, we also know that history is not generous with experience, and this experience constraint engenders errors and myopia in the process of experiential learning. We consider the implications of relaxing the experience constraint ? by increasing the number of agents in the organization to make possible parallel search. Employing a computational model, we find three stylized facts about larger, less constrained, organizations: (a) they explore less than smaller organizations, (b) they are less likely to discover the very best alternative, and (c) they
Social Science Research Network, 2019
Decision-making that leverages the collective knowledge of multiple individuals is ubiquitous in ... more Decision-making that leverages the collective knowledge of multiple individuals is ubiquitous in organizations, occurring in settings such as groups, committees, top management teams, and boards. Research has examined how decision-making structures (e.g., plurality voting) aggregate individuals’ beliefs into a single organizational choice. We argue that decision-making structures play another role beyond just aggregating individuals' beliefs — they also shape the learning of the individuals who participate in decision making. Learning-by-participating is distinct from learning-by-doing (i.e., experiential learning) in that individuals receive feedback not on their own choices, but rather on the choice made by the organization. We develop a theoretically grounded conceptual framework to characterize different decision-making structures, together with a computational model of organizational decision-making, to examine the impact of learning-by-participating across different such structures. We find that decision-making structures vary across two critical outcomes — their efficacy in aggregating information and their efficacy in shaping individual learning, and that these outcomes may be inversely related. Adjudicating among these two outcomes is the way in which organizations utilize the knowledge of organizational contrarians, individuals who favor choices that differ from that of the organization. A key implication is that the choice of a decision-making structure requires taking the learning context into account. Structures that are effective in settings where the potential for learning is limited may be less effective when individual learning is important. We discuss further implications for research on organizational decision making, learning, top management teams, and the wisdom of organizational crowds.
Academy of Management Proceedings
This paper develops a realistic real option theory of resource allocation decisions in strategic ... more This paper develops a realistic real option theory of resource allocation decisions in strategic factor markets. We build on extant financial and managerial theories, real option theories of decisi...
Academy of Management Annals
Academy of Management Review, 2021
The existence of a learning curve in which a firm’s costs decline with cumulative experience sugg... more The existence of a learning curve in which a firm’s costs decline with cumulative experience suggests that early entry provides learning opportunities that create advantage by reducing future costs...
Academy of Management Proceedings, 2019
SSRN Electronic Journal, 2016
This paper develops a realistic real option theory of resource allocation decisions in strategic ... more This paper develops a realistic real option theory of resource allocation decisions in strategic factor markets. Competitive advantage in factor markets is underpinned by market failures that allow firms to acquire assets at less than their value in use. We recognize that market failure may result from uncertainty regarding the current and/or future value of an asset, which map, respectively, to uncertainty as modeled in the feedback learning and real options literatures. The realistic real option framework we develop grafts insights from the strategic factor market, feedback learning, and real option valuation literatures. We argue that competitive advantage may emerge not only from luck, or ex ante differences in information or complementary assets, but also because firms differ in a specific type of learning ability — the ability to integrate new information to exercise a contingent claim on an asset in a factor market. We dimensionalize these differences in terms of information processing and belief updating, argue that these differences lead to different resource allocation decisions, and suggest how these decisions may generate competitive advantage.
SSRN Electronic Journal, 2013
ABSTRACT Learning from experience is a central theme in the management literature. While in gener... more ABSTRACT Learning from experience is a central theme in the management literature. While in general experiential learning is viewed as efficacious, the literature increasingly points to the difficulties inherent in the learning process — many of which stem from a deficit of information about the merits of alternative solutions. It seems plausible that larger organizations, with their capacity to simultaneously pursue a variety of potential solutions to a given challenge, may overcome this deficit. Such a perspective suggests that the efficacy of an organization's learning process should be an increasing function of organizational size. While this logic is intuitively appealing, we find that it does not fully capture the nuances of the organizational learning process. We employ a computational model and find that larger organizations, as characterized by their scale in pursuing parallel initiatives: (a) explore less than smaller organizations, (b) are less likely to discover the very best alternative, and yet (c) on average identify better alternatives. Increasing the number of parallel initiatives guides the search process towards viable alternatives, but it does so at the cost of inhibiting search breadth. Thus, in our model, the characteristics of learning by larger organizations do not result from differences in inertia or incentives that may impede learning and innovation, but rather from the properties of the organizational learning process itself.
We examine the joint processes of organizational development and population selection to highligh... more We examine the joint processes of organizational development and population selection to highlight a dynamic interaction overlooked when considering the processes in isolation. Selection does not operate on quasi-stable traits directly, but rather on contemporaneous performance. Consequently, stable search strategies may be favored by selection on bases other than long-run performance, such as intertemporal performance stability and the rate of performance improvement. Using a computational model of firm innovative efforts guided by stable search strategies under alternative selection regimes, we find that the relative efficacy of alternative search strategies is reversed depending upon the inclusion or exclusion of selection.-2
Ann Arbor, 2008
... tendency for precedents to become normative standards (and) exchange relations with other o... more ... tendency for precedents to become normative standards (and) exchange relations with other organizations (Hannan and Freeman, 1984: 149). ... used widely in empirical work on reinforcement learning (cf., Camerer and Ho, 1999; Weber, Shafir, and ...
Organization Science
Organizational decision making that leverages the collective wisdom and knowledge of multiple ind... more Organizational decision making that leverages the collective wisdom and knowledge of multiple individuals is ubiquitous in management practice, occurring in settings such as top management teams, corporate boards, and the teams and groups that pervade modern organizations. Decision-making structures employed by organizations shape the effectiveness of knowledge aggregation. We argue that decision-making structures play a second crucial role in that they shape the learning of individuals that participate in organizational decision making. In organizational decision making, individuals do not engage in learning by doing but, rather, in what we call learning by participating, which is distinct in that individuals learn by receiving feedback not on their own choices but, rather, on the choice made by the organization. We examine how learning by participating influences the efficacy of aggregation and learning across alternative decision-making structures and group sizes. Our central ins...
SSRN Electronic Journal, 2014
We develop a behavioral theory of real options that relaxes the informational and behavioral assu... more We develop a behavioral theory of real options that relaxes the informational and behavioral assumptions underlying applications of financial options theory to real assets. To do so, we augment real option theory's focus on uncertain future asset values (prospective uncertainty) with feedback learning theory that considers uncertain current asset values (contemporaneous uncertainty). This enables us to incorporate behavioral bias in the feedback learning process underlying the option execution/termination decision. The resulting computational model suggests that firms that inappropriately account for contemporaneous uncertainty and are subject to learning biases may experience substantial downside risk in undertaking real options. Moreover, contrary to the standard option result, greater uncertainty may decrease option value, making commitment to an investment path more effective than remaining flexible.
Management Science, 2012
A common justification for organizational change is that the circumstances in which the organizat... more A common justification for organizational change is that the circumstances in which the organization finds itself have changed, thereby eroding the value of utilizing existing knowledge. On the surface, the claim that organizations should adapt by generating new knowledge seems obvious and compelling. However, this standard wisdom overlooks the possibility that the reward to generating new knowledge may itself be eroded if change is an ongoing property of the environment. This observation in turn suggests that environmental change is not a self-evident call for strategies of greater exploration. Indeed, under some conditions the appropriate response to environmental change is a renewed focus on exploiting existing knowledge and opportunities. We develop a computational model based on the canonical multi-armed bandit formulation of exploration and exploitation. We endeavor to understand the mechanisms by which environmental change acts to make purposeful efforts at organizational adaptation less (or more) valuable.
Administrative Science Quarterly, 2007
This paper develops and tests a model of the effectiveness of selection processes in eliminating ... more This paper develops and tests a model of the effectiveness of selection processes in eliminating less fit organizations from a population when organizations are undergoing adaptive change. Stable organizational traits, such as a search strategy or routine, do not imply that an organization's performance will remain stable over time or that cross-sectional differences in performance will persist. These properties create the possibility that population-level selection processes will be inefficient in that organizations with potentially superior long-run performance will be selected out. We theorize that organizational-level adaptation often results in fluctuations in current performance across time. These fluctuations may attenuate the degree to which current performance differences among organizations are indicative of future performance. As a consequence, search strategies that generate systematically different performance trajectories, even if they share a common long-run outco...
Academy of Management Proceedings
Existing literature has shown that pre-entry experience is positively associated with new entrant... more Existing literature has shown that pre-entry experience is positively associated with new entrants’ survival rates and performance. However, whether the initial advantage of pre-entry experience er...
The literature on network effects has a longstanding controversy regarding the possibility that m... more The literature on network effects has a longstanding controversy regarding the possibility that markets may lock into an inferior technology. This controversy was triggered by Arthur’s (1989) model of positive feedback (success begets more success) in markets with competition between incompatible technologies. Critics point to the lack of compelling evidence for such lock-in. This confusion, in part, stems from a hidden assumption in the Arthur model influence of adopters never decays. We shed new light on this confusion by examining the implications of influence that decays over time. In the absence of influence decay, there is a good possibility that a market will lock-in to an inferior technology, as shown by prior work. However, when the influence of earlier adopters decays over time, the possibility of lock-in to an inferior technology is substantially attenuated. Despite the existence of positive feedback, this decay triggers a protracted period of technology competition, whic...
Knowledge is a central construct in the modern strategy literature because it contributes to perf... more Knowledge is a central construct in the modern strategy literature because it contributes to performance differences across firms. In the Carnegie School tradition, knowledge is the outcome of a process of search and learning by which firms discover better solutions to the challenges they face. Knowledge can be interpreted as more accurate beliefs about the merits of alternative policy choices which we term first-order knowledge. Such knowledge may be employed to allocate resources across alternative investment opportunities, for example, new plants, new drug molecules, or venture capital investments. Yet knowledge has a second dimension related to a firm's confidence in its beliefs. Intuition suggests that accuracy has limited value without confidence, and confidence has limited value without accuracy. We term accuracy-confidence matches second-order knowledge. We identify conditions under which low second-order knowledge (a confidence mismatch high confidence in inaccurate bel...
Experiential learning is a central idea in the management literature ? and its general efficacy i... more Experiential learning is a central idea in the management literature ? and its general efficacy is a taken-for-granted element of management thought. However, we also know that history is not generous with experience, and this experience constraint engenders errors and myopia in the process of experiential learning. We consider the implications of relaxing the experience constraint ? by increasing the number of agents in the organization to make possible parallel search. Employing a computational model, we find three stylized facts about larger, less constrained, organizations: (a) they explore less than smaller organizations, (b) they are less likely to discover the very best alternative, and (c) they