Strategy Selection and Performance Measurement Choice When Profit Drivers Are Uncertain

Ronald A. Dye ()
Additional contact information
Ronald A. Dye: Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, Illinois 60208

Management Science, 2004, vol. 50, issue 12, 1624-1637

Abstract: This paper studies a manager's attempt to maximize his firm's discounted expected profits by choosing what strategic actions to select and what performance measurement system to employ in a setting where the manager is uncertain about what variables ÜdriveÝ the firm's profits, the firm's profit drivers remain stationary over time, and strategic actions differ in the amount of information they produce about the firm's profit drivers. For each available performance measurement system, this paper identifies necessary and sufficient conditions for experimentationÔthat is, deviating from the firm's short-run expected profit-maximizing actionÔto be optimal. In addition, the paper determines what factors influence a firm's preferred performance measurement system, and it explains why the preferred performance measurement system is likely to change over time.

Keywords: business models; bandit problems; experimentation; learning-by-doing; profit drivers (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.1030.0160 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:50:y:2004:i:12:p:1624-1637

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().