This research is about decision-making by managers with a focus on decisions where a conflict between short-term and long-term is present (also known as the problem of intertemporal choice). The discussion in this area has been an ongoing one for many years. Many critics argue that managers focus too much on short-term because of increasing pressure from institutional investors which leads to suboptimal long-term development of their company. But there are other reasons which favour a short-term orientation. In the course of research on this topic, I found that it is not yet clear which factors are the most important ones for managers and their ultimate decisions. Therefore, the main goal of this research is to discover the most important influencing factors and to analyse their relevance.
This research is driven by an explorative approach and includes an extensive literature review combined with ten interviews with managers from different companies. The background is that a great deal of research has been done on this topic, but seldom with a broad approach such as this. Often research focuses on one factor, e.g. pressure from financial markets, bonuses, or others. One finding is that influencing factors stem from many areas and an interdisciplinary approach is necessary for further research. The findings of this research represent a good basis for that by exploring the most important factors that influence managers. It categorizes the influencing factors into indirect and direct factors, the latter representing the economic, organizational, and individual dimension. In addition, four findings are emphasized: too much pressure from financial markets result in the question whether quarterly earnings statements and predictions are still necessary; the importance of corporate strategy and its communication, the need for interdisciplinary research (e.g. combined with psychology), and the importance of developments in society and their interaction with management decisions.
At a glance
- Ten manager interviews inform the qualitative research
- Includes the interview guide and a complete sample interview transcript
- Uses Miles and Hubermann’s data display and analysis approach
- 113 sources in the bibliography
- 9 figures
Table of Contents
ABSTRACT
Table of Contents
1 Introduction
1.1 Management decisions – influenced by intertemporal choice
1.2 Research background
1.3 Research aim
1.4 Research question and objectives
1.5 Overview
2 Literature review
2.1 Introduction
2.2 Definitions
2.3 The starting point
2.4 Recent developments
2.5 Current state of research
2.5.1 Economic factors
2.5.2 Organizational factors
2.5.3 Individual factors
2.6 Measures
3 Research design and methodology
3.1 Research strategy
3.2 Design and methodology
3.3 Sources of data
3.4 Data analysis
3.5 Ethics
3.6 Applicability, reliability, replication and validity
3.6.1 Applicability
3.6.2 Reliability
3.6.3 Replication
3.6.4 Validity
3.6.5 Summary
4 Findings
4.1 Introduction, interview topic, and reaching an understanding
4.2 Influencing factors
4.3 Case studies
4.4 Summary
4.5 Measures
5 Analysis, discussion, interpretation
5.1 Relevant influencing factors
5.2 Relevance and grouping of influencing factors
5.3 Relevance of indirect factors
5.4 Relevance of direct factors
5.4.1 Economic factors
5.4.2 Organizational factors
5.4.3 Individual factors
5.5 Discussion of measures
5.5.1 Indirect factors
5.5.2 Economic factors
5.5.3 Organizational factors
5.5.4 Individual factors
6 Conclusion and recommendations
6.1 Conclusion
6.2 Highlights
6.3 Relevance
6.4 Recommendations
Aim and Topics
This dissertation explores which factors most influence managers when short-term and long-term considerations conflict. It combines a literature review with interviews to examine the relative importance of economic, organizational and individual influences and to discuss measures that might support managers’ preferred time orientation.
- Intertemporal choice and managerial short-termism
- Financial markets, earnings guidance and corporate governance
- Corporate strategy, stakeholders and sustainability
- Managerial incentives, career concerns and psychological influences
- Qualitative interviews and investment decision scenarios
Excerpt from the Book
1.3 Research aim
This field of discussion has existed for a long period of time. Many publications have dealt with the discussion of specific reasons for management to decide in one or the other direction. Most of this research deals with specific reasons for the behaviour, e.g. pressure from financial markets to give quarterly earnings guidance. Taking into account the amount of literature available, I have found more statements that criticize short-termism than support it. Even Jack Welch stated in an interview with the Financial Times (Guerrera, 2009) that he ‘never meant to suggest that setting, and meeting profit expectations quarter after quarter in an effort to boost a company's share price should be the main goal of corporate executives’.
In addition, many measures which work against a management orientation focused too much on short-term success have been worked out. But, in my opinion, two areas have not been sufficiently dealt with to enable one to start implementing measures.
First, only few analyses focus on the individuals whose job it is to make decisions, namely managers. This is also stated by Laverty (1996, p.847) who has said: ‘understanding how managers form, interpret, and resolve problems of intertemporal choice is critical to advancing the debate. In general, there has been a limited study of ways in which executives deal with the future’. Not much has changed since this remark was made.
Second, this topic is influenced by many factors and touches on different fields of science (for example, management, behavioural finance, psychology, sociology, and many others). Therefore, it is a topic which from the start requires a much broader research approach. Before going into in depth discussions and analysis of specific influencing factors and the resulting measures that can be taken, an awareness of the main drivers is necessary. Seldom has a research project on this topic begun with a broad analysis of whether the appropriate factors have been analyzed. And very often relevant research has been done only in the field in which the researchers were educated.
Chapter Summaries
1 Introduction: Introduces intertemporal choice, the background to the research and its central question and objectives.
2 Literature review: Defines key concepts and examines economic, organizational and individual influences, together with proposed measures addressing short-termism.
3 Research design and methodology: Explains the qualitative, cross-sectional design, interview process, data analysis and ethical considerations.
4 Findings: Presents the interview material, including managers’ views on influencing factors, decision scenarios and possible measures.
5 Analysis, discussion, interpretation: Brings the interviews into dialogue with the literature and discusses direct and indirect influences and potential responses.
6 Conclusion and recommendations: Summarizes the research, considers its relevance and recommends directions for further investigation.
Keywords
managerial decision-making, intertemporal choice, short-termism, long-term orientation, corporate governance, financial markets, earnings guidance, corporate strategy, managerial incentives, sustainability, stakeholder interests, qualitative interviews, behavioural finance
Frequently Asked Questions
What is this dissertation about?
It examines how managers make decisions when short-term and long-term considerations conflict.
What are its central themes?
The work considers financial-market pressure, corporate governance, strategy, incentives, sustainability and individual influences on decisions.
What is the main research question?
It asks which factors most influence managerial decision-making when a conflict exists between the short term and the long term.
What research method does the author use?
The author combines a literature review with qualitative, semi-structured interviews in a cross-sectional research design.
What does the main body cover?
It reviews relevant research, explains the methodology, presents interview findings and discusses influencing factors and possible measures.
Which keywords characterize the work?
Key terms include intertemporal choice, short-termism, corporate governance, financial markets, strategy, incentives and sustainability.
How are influencing factors organized?
The analysis distinguishes indirect influences from direct economic, organizational and individual factors.
What decision scenarios are used in the interviews?
Interviewees discuss scenarios involving an unbudgeted research and development investment and an unbudgeted sustainability investment.
What research material is included?
The appendices contain interview guidelines and a complete sample interview transcript.
- Quote paper
- Nicolas Breitfeld (Author), 2010, Decisions of Managers in Conflict between the Short-Term and the Long-Term, Munich, GRIN Verlag, https://www.grin.com/document/182404
