Article ID: | iaor2008597 |
Country: | United States |
Volume: | 52 |
Issue: | 3 |
Start Page Number: | 395 |
End Page Number: | 409 |
Publication Date: | Mar 2006 |
Journal: | Management Science |
Authors: | Elhedhli Samir, stebro Thomas |
Keywords: | decision: studies |
We investigate the decision heuristics used by experts to forecast that early-stage ventures are subsequently commercialized. Experts evaluate 37 project characteristics and subjectively combine data on all cues by examining both critical flaws and positive factors to arrive at a forecast. A conjunctive model is used to describe their process, which sums ‘good’ and ‘bad’ cue counts separately. This model achieves a 91.8% forecasting accuracy of the experts' correct forecasts. The model correctly predicts 86.0% of outcomes in out-of-sample, out-of-time tests. Results indicate that reasonably simple decision heuristics can perform well in a natural and very difficult decision-making context.