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The evidence is disturbingly clear: Most major business initiatives--mergers and acquisitions, capital investments, market entries--fail to ever pay off. Economists would argue that the low success rate reflects a rational assessment of risk, with the returns from a few successes outweighing the losses of many failures. But two distinguished scholars of(More)
When an executive makes a big bet, he or she typically relies on the judgment of a team that has put together a proposal for a strategic course of action. After all, the team will have delved into the pros and cons much more deeply than the executive has time to do. The problem is, biases invariably creep into any team's reasoning-and often dangerously(More)
Previous research on capital investment has identified a tendency in multibusiness firms toward cross-subsidization from well-performing to poorly performing divisions, a phenomenon that has previously been attributed to principal-agent conflicts between headquarters and divisions (Stein, 2003). In this paper, we argue that cross-subsidization reflects a(More)
T he Economist recently reported that infrastructure spending is the largest it is ever been as a share of world GDP. With $22 trillion in projected investments over the next ten years in emerging economies alone, the magazine calls it the “biggest investment boom in history.” The efficiency of infrastructure planning and execution is therefore particularly(More)
Film studios occasionally withhold movies from critics before their release. Since the unreviewed movies tend to be below average in quality, this practice provides a useful setting in which to test models of limited strategic thinking: Do moviegoers seem to realize that no review is a sign of low quality? A companion paper showed that in a set of all(More)
Film studios occasionally withhold movies from critics before their release. These cold openings provide a natural setting to apply laboratory-developed models of limited strategic thinking to the field. In a set of 1303 widely released movies, cold opening is correlated with a 10–30 percent increase in domestic box-office revenue, and a pattern of fan(More)
A reference price is an internal price that consumers are believed to use to compare actual prices. Reference effects for price have been demonstrated in many settings. Reference effects for quality also have been demonstrated using scanner data. Here we present experimental evidence. Firstly, it is shown that high quality goods will be valued more by(More)
Behavioral strategy merges cognitive and social psychology with strategic management theory and practice. Despite much progress, the aims and boundaries of behavioral strategy remain unclear. In this paper we define behavioral strategy and identify the main unsolved problems. We propose a unifying conceptual framework for behavioral strategy and conclude by(More)
Film distributors occasionally withhold movies from critics before their release. Cold openings provide a natural field setting to test models of limited strategic thinking. In a set of 856 widely released movies, cold opening produces a significant 15% increase in domestic box office revenue (though not in foreign markets and DVD sales), consistent with(More)
Pursuing a merger or acquisition is inherently difficult. Things get even harder when executives are blind to their own faulty assumptions, say Lovallo--a professor at the University of Western Australia Business School and a senior adviser to McKinsey--and three of his McKinsey colleagues. The authors identify biases that can surface at each step of the(More)