Managerial Optimism Level and Investment Decision: Decision Tree Analysis

This paper deals with the relationship existing between the emotional aspect and decision-making. More specifically, it examines the links between managerial optimism, and effectiveness of the investment decision. We introduce an approach based Decision Tree analysis with a series of semi-directive interviews. CEO optimism level was measured using a questionnaire with several items. As for the selected sample was composed of 100 Tunisian managers. The originality of this research paper is guaranteed since it traits the behavioral corporate policy choice in emergent markets. In the best of our knowledge, this is the first study in the Tunisian context that explores such area of research. Our results show that Tunisian optimistic leader who seeks the pioneering advantage for him and his company is encouraged to adjust its specific investment decision (investment, overinvestment or under-investment in the short term or long term ...) to ensure that advantage pioneer.

Being the first entrant and getting stuck in the middle

Purpose This paper aims to examine how pioneering advantage interacts with the compromise effect generated by new product entries. Building on prior work on pioneering advantage and extreme aversion, this research moves toward understanding how the choice share of a pioneer realigns as a consequence of new product entries generating compromise-like scenarios. Design/methodology/approach The authors run three experiments to test their propositions. The authors present one study which documents the effect. The second study provides process evidence. The third study suggests how brands can neutralize the adverse effect on their share generated by the followers’ entry/positioning. Findings In three studies, the authors showed that when a pioneering product becomes intermediate in a choice set, its share is more adversely affected than when it becomes extreme. The authors show that this depends on consumers’ propensity to use non-compensatory decision rules in the presence of a pioneering alternative. The authors also document that the relative disadvantage of the intermediate pioneer can be overcome when the reasons for selecting an intermediate alternative based on a compensatory decision rule are restored. Practical implications The research provides guidelines for managers wanting to enter product categories where a pioneer already exists. The authors show that opting for an extreme position that renders the pioneer intermediate can be rewarding. In contrast, being the second extreme player in a market where the pioneer becomes extreme reduces the expected share of this last entrant. Originality/value The authors’ contribution is in showing that this decision strategy can clash with the rule consumers generally use in a compromise setting and that this clash generates two different effects when the pioneer becomes intermediate or extreme.

A Study Of Corporate Venturing And Sustainability Of First Mover Advantages During Technological Disruption In The U.S. Mobile Wireless Data Industry

This study tests the impact of corporate venturing (CV) forms on the sustainability of pioneering advantage. Using the Miles and Covin 2002 classification of CV forms, this study shows that performance of early entrants is twice as much higher than performance of lagers. However, the effect of parent support prior to entry is substantially larger than the pioneering effect. Companies entering a market via direct external CV perform twenty five to fifteen times better than companies entering via direct internal CV. Hence, the sustainability of first mover advantage is challenged in the face of new entrants with superior resources.

What Factors Influence Pioneering Advantage of Companies?

Rapid rate of change in technologies, markets, and other environmental factors makes order of entry as one of the most crucial decisions for business survival and performance in today's world. Pioneering (first-mover) is an important strategy for a firm in today's dynamic and competitive environment. Researchers have shown that, in the developed markets of the world, the pioneers have better performance and profitability than the followers. In this paper, the authors develop a conceptual framework to explain the various factors that might influence a firm's pioneering efforts in the Indian market. They propose specific hypotheses regarding the effect of order of entry on performance (market share, sales, return on investment, and profit before tax) and strategic components (R&D, advertising, promotion, and distribution). They also propose additional hypotheses to examine the association between the strategies and performance, variations within the pioneers group, and the moderating effect of competitive environment on the other relationships. The authors use secondary data from the CMIE PROWESS database to test the various hypotheses. The sample consists of 394 companies across 32 industry segments which include consumer goods industries such as fast-moving consumer goods, beverages, and consumer durables and industrial goods industries such as cables and mining. They have used the same sample of companies at three different points of time (1993, 1997, and 2001) to test the various hypotheses. The sampling frame is the list of Top 500 Indian companies (Business World, October 7, 2002). The results confirm the following aspects: In general, the pioneers perform better than the followers and firms which enter early into the market have larger sales, market share, and profit than followers. Firms which enter first into the market are generally more aggressive in pursuing various strategies such as R&D, advertising, promotion, and distribution. Investments in strategies create entry barriers for competitors who may find it difficult to compete with existing firms as resource requirements are quite high in this scenario. Pioneering advantage seems to be a long-term competitive advantage for busi- nesses as pioneers' performance is consistently better than that of the followers over the years. Although the pioneering effect starts reducing over time in terms of market share, profit margins for pioneers are higher even after considerable length of time. The authors find that there are large variations in the performance within the pioneers group itself which indicates that there are other factors also, apart from order of entry, with potential bearing on firm's performance. The results show that performance (market share) and strategic variables are closely related and dependent upon each other. Further, they find that the effect of order of entry on performance is stronger for those firms that operate in less intense competitive environment than those that operate in more intense competitive environment.