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To Go or Not to Go? Can Executive Committees Choose the 'Right' Projects?

30 Pages Posted: 28 Aug 2012 Last revised: 16 Jul 2017

Nektarios Oraiopoulos

University of Cambridge - Judge Business School

Stelios Kavadias

University of Cambridge - Judge Business School

Date Written: July 4, 2017

Abstract

Executive committees are organizational structures that are often called upon to make strategic decisions about highly important and uncertain projects. As such, they are prone to the two fundamental types of decision errors: failing to support a project that would have been successful, or pursuing projects that eventually fail. We study how the presence of diverse member perspectives affect these two error probabilities. We disentangle the effects of diverse perspectives that stem from a priori different preferences (e.g., perceived opportunity cost or value), to the different interpretations of the new project information (e.g., the extent that information is perceived as accurate). We explicitly account for strategic considerations among the committee members. Each member knows that her payoff is determined by the decisions of her peers, and she factors such contingencies into her decision. We show that diverse perspectives are rarely "averaged out". Specifically, different preferences are always detrimental for the organization's ability to select the right projects. On the contrary, the effect of diverse perspectives due to different interpretive lens enhances the decision quality.

Keywords: project management, project termination decision, executive committees, strategic voting, diversity

Suggested Citation

Oraiopoulos, Nektarios and Kavadias, Stelios, To Go or Not to Go? Can Executive Committees Choose the 'Right' Projects? (July 4, 2017). Available at SSRN: https://ssrn.com/abstract=2136927 or http://dx.doi.org/10.2139/ssrn.2136927

Nektarios Oraiopoulos (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Stylianos Kavadias

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, Cambridgeshire CB2 1AG
United Kingdom

HOME PAGE: http://www.jbs.cam.ac.uk/research/kavadiass.html

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