24 May 2010

Interesting Graph

"Comprehensiveness" basically means how good a job you do gathering all the relevant information about your industry and firm.

"CE" is corporate entrepreneurship, which is more or less how good the firm is at doing new stuff.

As comprehensiveness increases, so does CE, which makes sense.  But it does so faster for low-risk firms, which at high comprehensiveness engage in more CE than high-risk firms.

The chart comes from Heavey, G., Simsek, Z., Roche, F. & Kelly, A. (2009), Decision Comprehensiveness and Corporate Entrepreneurship:  The Moderating Role of Managerial Uncertainty Preferences and Environmental Dynamism, Journal of Management Studies, 46:8, 1289-1314.


Bret said...

Why do "low-risk" firms end up being more entrepreneurial than "high-risk" firms at "high-comprehensiveness"? When I looked at the graph, I wondered whether those lines should really be so straight or whether they should approach a horizontal asymptote with the high-risk firms always being at least as entrepreneurial as the low-risk firms.

Harry Eagar said...

How do you know when you've gathered a lot, vs. a little, of the relevant information? Isn't that always a known unknown?

Susan's Husband said...

I think Mr. Eagar has the root of the problem.

High risk firms tend to be in areas where the risks are, well, high, usually because so much is unknown and can't be known. So additional information gathering doesn't help much with governance.

In contrast, low risk firms tend to operate in areas where far more can be known, so information gathering is much more useful.

Bret said...

Sounds plausible.

Harry Eagar said...

My brother, the engineeering professor, likes to say that in engineering you never have all the information you need, but a good engineer knows when it's time to go ahead anyway.