Project Portfolio Selection with Strategic Buckets—The Role of Naïve Diversification

Andreas Fügener (), Sebastian Schiffels () and Ulrich W. Thonemann ()
Additional contact information
Andreas Fügener: Department of Operations Management, University of Cologne, 50923 Cologne, Germany
Sebastian Schiffels: Faculty of Business and Economics, University of Augsburg, 86135 Augsburg, Germany
Ulrich W. Thonemann: Department of Operations Management, University of Cologne, 50923 Cologne, Germany

Manufacturing & Service Operations Management, 2025, vol. 27, issue 4, 1242-1257

Abstract: Problem definition : A company’s project portfolio is an important success factor. Employing strategic buckets to segment the overall budget into budgets for different project types is a commonly used approach for managing project selection. Strategic buckets typically refer to sets of projects of a certain type, such as safe and risky projects. A strategic bucket specification defines the number of buckets and thresholds between them. This paper addresses the question of how different strategic buckets specifications affect decision makers’ project selection behavior. Methodology/results : We develop a behavioral model of the effect of strategic buckets on project selection and use laboratory experiments to analyze how bucket specifications affect project selection decisions. For various strategic bucket specifications where a rational decision maker would allocate the budget to projects of the project type matching their risk preference only, we find that actual decision makers have the tendency to allocate the budget evenly among buckets and among project types within buckets. This observation can be explained by the naïve diversification bias, and we observe this effect in experimental settings with different selection processes, project definitions, and subject pools. Managerial implications : Our findings allow companies to better understand the effect of buckets guidelines on actual project selection behavior and to manage their project portfolio selection by choosing the right bucket specification.

Keywords: project selection; strategic buckets; naïve diversification; information asymmetry (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/msom.2020.0373 (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:ormsom:v:27:y:2025:i:4:p:1242-1257

Access Statistics for this article

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