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Optimal Time Allocation for Process Improvement and Growth for Entrepreneurs

33 Pages Posted: 26 Jun 2013  

Onesun Steve Yoo

University College London - Department of Management Science and Innovation

Guillaume Roels

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area

Charles J. Corbett

University of California, Los Angeles - Anderson School of Business

Date Written: October 1, 2012

Abstract

For many growth-oriented entrepreneurial firms, the entrepreneur's time is one of the more salient resource constraint. Classifying the entrepreneurs' activities into four categories based on their revenue-related or process-related impact and short-term or long-term effects, we present a dynamic time allocation model for process improvement in growth-oriented entrepreneurial firms, and characterize the optimal time allocation policy and its impact on firm growth. We find that the optimal time allocation path consists of three phases, focusing first on long-term process improvement activities with temporal returns, and then on those with financial returns, before finally harvesting profi t. In particular, entrepreneurs with lower initial revenue rate should invest more time upfront on long-term process improvement activities, which enable them to ultimately grow faster. We adapt these insights to the cases with uncertainty in growth and with limited financial resources. We benchmark the optimal policy to two commonly practiced time allocation heuristics.

Keywords: Entrepreneurship, Process Improvement, Time Allocation, Dynamic Programming

JEL Classification: M11, M13

Suggested Citation

Yoo, Onesun Steve and Roels, Guillaume and Corbett, Charles J., Optimal Time Allocation for Process Improvement and Growth for Entrepreneurs (October 1, 2012). Available at SSRN: https://ssrn.com/abstract=2285219 or http://dx.doi.org/10.2139/ssrn.2285219

Onesun Steve Yoo (Contact Author)

University College London - Department of Management Science and Innovation ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Guillaume Roels

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Charles J. Corbett

University of California, Los Angeles - Anderson School of Business ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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