Evaluating the New: The Contingent Value of a Pro-Innovation Bias
27 Pages Posted: 20 Oct 2010 Last revised: 2 Jul 2014
Date Written: October 19, 2010
It is a central tenet in the literature on organizational change that firms need to explore novel courses of action in order to adapt and survive. Should firms thus exhibit a “pro-innovation bias” when evaluating novel decision alternatives? Or should firms rather assess new opportunities as objectively as possible? And why, then, do we often see organizations that exhibit a “status quo bias,” being reluctant to change even in the face of superior alternatives? Building on the behavioral accounts of organizational decision making that envision firms to evolve through adaptive search, we develop a simulation model to address these questions. We find that a pro-innovation bias can have exploration-enhancing effects that increase long-run performance in complex and stable environments, but can also decrease performance substantially if it becomes too distinct. Under most other conditions, however, an unbiased, objective evaluation of novel opportunities is preferable. Furthermore, we identify a set of contingency factors that strongly affect the value of a pro-innovation bias and that may explain why it is that we see so few firms with such a bias.
Keywords: Organizational Exploration and Adaptation, Organizational Search, Organizational Decision Making, Innovation
JEL Classification: C63, D83, D21, O31
Suggested Citation: Suggested Citation