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Predicting a firm's forecasting ability: the roles of organizational illusion of control and organizational attention

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  • Rodolphe Durand

Abstract

Recent research shows that forecasting ability is an organizational distinctive competence. We propose and test a model accounting for interfirm differences in forecasting ability. After controlling for reciprocal effects, we find that two principal firm‐level factors (i.e., organizational illusion of control and organizational attention) influence both bias and magnitude of errors in estimates. High organizational illusion of control increases positive forecast bias. As for organizational attention, higher relative investments in market information appear to reduce positive forecast bias and magnitude of errors; they also moderate forecast bias due to illusion of control. Finally, higher relative investments in employee capability increase both negative forecast bias and, unexpectedly, magnitude of errors for the majority of observed cases. Copyright © 2003 John Wiley & Sons, Ltd.

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  • Rodolphe Durand, 2003. "Predicting a firm's forecasting ability: the roles of organizational illusion of control and organizational attention," Strategic Management Journal, Wiley Blackwell, vol. 24(9), pages 821-838, September.
    • Handle: RePEc:bla:stratm:v:24:y:2003:i:9:p:821-838
    DOI: 10.1002/smj.339
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    Cited by:

    1. De Baets, Shari & Harvey, Nigel, 2018. "Forecasting from time series subject to sporadic perturbations: Effectiveness of different types of forecasting support," International Journal of Forecasting, Elsevier, vol. 34(2), pages 163-180.
    2. Essuman, Dominic & Bruce, Patience Aku & Ataburo, Henry & Asiedu-Appiah, Felicity & Boso, Nathaniel, 2022. "Linking resource slack to operational resilience: Integration of resource-based and attention-based perspectives," International Journal of Production Economics, Elsevier, vol. 254(C).
    3. Simon, Mark & Shrader, Rodney C., 2012. "Entrepreneurial actions and optimistic overconfidence: The role of motivated reasoning in new product introductions," Journal of Business Venturing, Elsevier, vol. 27(3), pages 291-309.
    4. Pettit, Nathan C. & Doyle, Sarah P. & Kim, Hee Young & Hurwitz, Anat, 2022. "Rank extrapolation: Asymmetric forecasts of future rank after rank change," Organizational Behavior and Human Decision Processes, Elsevier, vol. 169(C).
    5. Biru, Ashenafi & Filatotchev, Igor & Bruton, Garry & Gilbert, David, 2023. "CEOs’ regulatory focus and firm internationalization: The moderating effects of CEO overconfidence, narcissism and career horizon," International Business Review, Elsevier, vol. 32(3).
    6. Larsen, Marcus M., 2016. "Failing to estimate the costs of offshoring: A study on process performance," International Business Review, Elsevier, vol. 25(1), pages 307-318.
    7. Titus Jr., Varkey K. & Covin, Jeffrey G. & Slevin, Dennis P., 2011. "Aligning strategic processes in pursuit of firm growth," Journal of Business Research, Elsevier, vol. 64(5), pages 446-453, May.
    8. Shinkle, George A. & Hodgkinson, Gerard P. & Gary, Michael Shayne, 2021. "Government policy changes and organizational goal setting: Extensions to the behavioral theory of the firm," Journal of Business Research, Elsevier, vol. 129(C), pages 406-417.
    9. Meissner, Philip & Wulf, Torsten, 2017. "The effect of cognitive diversity on the illusion of control bias in strategic decisions: An experimental investigation," European Management Journal, Elsevier, vol. 35(4), pages 430-439.

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