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Project Selection Decision Making Linked to a Dynamic Environment

Author

Listed:
  • G. Edward Fox

    (American Airlines, P.O.B. 619616, MD2C55 8DQ, Dallas/Fort Worth Airport, Texas 75261-9616)

  • Norman R. Baker

    (College of Business Administration, University of Cincinnati, Cincinnati, Ohio 45221)

Abstract

A simulation model that attempts to include simplified market and production characteristics of a hypothetical firm and a specific project selection decision mechanism is constructed. Three types of projects are assumed to exist---projects whose impact is to increase market share, decrease production cost and increase production capacity. An experiment aimed at two questions is conducted. The questions are (1) Do different market conditions affect project selection decisions and (2) over time, what patterns of project selection emerge. In the model and experiment, an attempt is made to capture the essence of Abernathy and Utterback's model of the innovation process so that it may be applied to more specific settings. Observed project selection patterns over time indicate an apparent relationship between market share increasing and production cost decreasing projects and Abernathy and Utterback's concept of product innovation, and similarly between capacity increasing projects and process innovation. The model can be viewed as an attempt at developing a linkage between the environment of a firm and an "iterative decision mechanism" as proposed by Baker and Sweeney.

Suggested Citation

  • G. Edward Fox & Norman R. Baker, 1985. "Project Selection Decision Making Linked to a Dynamic Environment," Management Science, INFORMS, vol. 31(10), pages 1272-1285, October.
    • Handle: RePEc:inm:ormnsc:v:31:y:1985:i:10:p:1272-1285
    DOI: 10.1287/mnsc.31.10.1272
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    Cited by:

    1. Scott A. Shane & Karl T. Ulrich, 2004. "50th Anniversary Article: Technological Innovation, Product Development, and Entrepreneurship in Management Science," Management Science, INFORMS, vol. 50(2), pages 133-144, February.
    2. Christoph H. Loch & Stylianos Kavadias, 2002. "Dynamic Portfolio Selection of NPD Programs Using Marginal Returns," Management Science, INFORMS, vol. 48(10), pages 1227-1241, October.
    3. Boguslaw Nowak & Maciej Nowak & Tadeusz Trzaskalik, 2011. "Multicriteria decision aiding in project planning using dynamic programming and simulation," RePAd Working Paper Series UQO-DSA-wp2202011, Département des sciences administratives, UQO.

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