Samuel Graves

• Boston College

Purpose This paper aims to propose and test a modified interpretation of long-standing issues on the corporate responsibility (CR)–corporate financial performance (CFP) relationship: companies involved in CR are in general no better and no worse in their level of financial performance than companies without such engagement because of the trade-off...

We examine the effects of overconfidence in venture capital investing. Overconfidence in financial decision making is a robust, well‐established finding, and its consequences for decisions by equity market investors, startup entrepreneurs, and CEO's of large firms have been comprehensively examined and documented. This paper considers the behaviora...

Overconfidence in economic decision-making is a well-established phenomenon; however, assessment of its scale and impact are largely absent from the literature. This paper uses Bell's disappointment metric to quantify its impact on individual decision-makers in a risky investment setting. We are able to quantify the sensitivity of disappointment to...

Evidence strongly indicates that human decision makers discount the future using a hyperbolic function instead of following an exponential, which has been the long-standing assumption. We compare the exponential and hyperbolic models in evaluation of a simple research and development project selection problem, finding that the exponential function...

This chapter presents a new algorithm that solves a class of project selection problems with uncertain objectives, partial funding, interdependencies in the objectives, and constraints with a linear structure. In general, this class of project selection problems can be modeled as a stochastic multiobjective linearly constrained program (SMOLCP). Th...

This paper is a tutorial which demonstrates the current state-of-the-art methods for incorporating risk into project selection decision making. The projects under consideration might be R&D, IT, or other capital expenditure programs. We will show six decision making methods: 1. mean-variance (MV), 2. mean-semivariance, 3. mean-critical probability,...

In acceptance sampling, producer's and consumer's risk are traditionally based on assumed fixed values of p, the proportion of the lot which is defective. A more useful definition of producer's risk would be the probability of rejecting a lot in which the proportion defective falls within some range of acceptable values. Similarly, a more useful de...

In the project selection problem a decision maker is required to allocate limited resources among an available set of competing projects. These projects could arise, although not exclusively, in an R&D, information technology or capital budgeting context. We propose an evolutionary method for project selection problems with partially funded project...

One of the intriguing unanswered research questions is what is the impact of mergers and acquisitions (M&A) on corporate responsibility This study examines that question empirically. In pre-merger firms, few statistically significant stakeholderrelated performance differences exist between the acquirer and target; acquirers show more strengths in t...

In this study, we present a timely research with regard to managers' opportunistic behaviors - financial statement manipulation. We inquire as to whether the performance-based compensation (PBS) granted to managers influences managerial opportunism. We further examine whether firm performance reduces managerial opportunism. Specifically, we investi...

OVERVIEW: This considerably simplified method for finding optimal R&D portfolios requires a minimum of information about the individual projects, namely the probability of a successful/unsuccessful project and the monetary returns in each case. The model requires only the assumption that the decision maker is risk averse. Linear programming, which...

This study provides preliminary empirical evidence that shareholder activists target companies because of their size as well as specific stakeholder-related practices. The data show that shareholder activists target companies with shareholder resolutions demanding changes in corporate behaviors for companies producing problematic products and where...

To date no single model has been published which fully satisfies the needs for a practical R&D project selection technique. Some earlier models cannot handle risk well, while others do not provide efficient portfolios. This paper will present a model, adapted from the literature of financial portfolio optimization, which provides a practical means...

In Chapter 8 we described a sampling based procedure for stochastic multiobjective mathematical programming problems. In this chapter we will present a procedure which also uses sampling but in a more structured approach. The method presented here is an interactive procedure based on Box’s complex search. It requires the decision maker to provide p...

This chapter builds on concepts introduced in Chapter 2 and continues the discussion of risk introduced in Chapter 4. Here we explore a source of bias that is present in standard analytical methods used to evaluate projects. This bias results from the practice of analyzing each individual project in isolation, rather than considering the risk-reduc...

This chapter introduces multiobjective mathematical programming concepts in the context of the project selection problem. We compare goal programming and multiobjective mathematical programming and show the advantages of the latter. We illustrate by applying goal programming, multigoal programming and multiobjective programming to the same example...

The first two chapters of this book present techniques for choosing among projects with cash flows which occur over several time periods. The first chapter uses multiobjective methods to choose the combination of projects with the highest net present value (NPV). The second chapter describes and illustrates the behavioral limitations of NPV and pre...

Chapters 5 and 6 showed models for deciding which projects to add to or remove from an existing portfolio. These models, however, did not necessarily generate an efficient portfolio of projects. This chapter will describe a model, adapted from the literature of financial portfolio optimization, which provides a practical means of developing preferr...

Chapter 1 of this book illustrated the use of multiobjective mathematical programming methods in the project selection problem. Embedded in the multiobjective models presented, was an objective function for profit that was expressed in terms of net present value. Net present value is commonly used because it allows a series of cash flows to be expr...

In Chapter 5 we described a method for deciding which projects to add to or remove from an existing portfolio. That treatment was restrictive in that it required knowledge of the decision maker’s utility function. This chapter moves toward a more practical methodology for the selection of projects to add to or remove from an existing portfolio. The...

Businesses today are experiencing profound pressures to reform and improve stakeholder-related practices and their impacts on stakeholders and the natural environment - in short, to manage responsibly as well as profitably. Pressures for expanding the emphasis on profits to managing responsibly derive from three general sources: primary stakeholder...

This paper describes a methodology for the selection of research and development (R&D) projects to add to or remove from an existing R&D portfolio. The analysis uses the criterion of conditional stochastic dominance to make selection recommendations. This criterion takes into account the effect of a given project on the risk and return of the exist...

This paper presents a method for generating nondominated solutions for stochastic multiobjective mathematical programming problems which is applicable to both continuous and zero–one variables. The method is based on the assumption that the objective function coefficients are random variables with probability distributions that are known or can be...

R&D managers continue to report their dissatisfaction with currently-available R&D portfolio management models and the need for better and simpler modeling approaches. This article presents a simple, yet theoretically rigorous, method for designing optimal R&D portfolios, those that minimize risk for a given level of return. The model requires only...

Socially responsible investment is a growing movement. The authors ask how we can evaluate social performance. They investigate both the financial and social performance of companies included in socially responsible and traditional investment portfolios. Companies that successfully pass a social screen (screened-in companies) outperform screened-ou...

This paper examines tradeoffs between two means of improving system reliability. These are: (1) increasing component reliability through more stringent acceptance sampling, and (2) improving system reliability through increases in component redundancy. The paper also demonstrates methods for generating probability distributions on system reliabilit...

R&D managers express displeasure with the state of the art in portfolio decision models and are often doubtful about their firm's current portfolio of projects. Many feel that conventional portfolio decision models are impractical, requiring data that are almost impossible to estimate, or fail to take into account the risk-mitigating effects of div...

Examines the trade-off between system redundancy and acceptance sampling as alternative means to improve system reliability. We assume that components of the system follow an exponential failure law and investigate expected times to failure of systems of various levels of component redundancy which have been exposed to acceptance sampling plans of...

This research note advances understanding of the possible link between social and financial performance by using a financial-halo- removed measure of quality of management as control variable, along with more traditional controls of size, risk, and industry. The control, quality of management, is found to be highly associated with financial perform...

This article presents a study of corporate-stakeholder relationships using an empirical technique called Data Envelopment Analysis (DEA) to assess company "best practices" with respect to five primary stakeholders at an industry level of analysis. Five key stakeholder domains are considered: community relations, employee relations, environment, cus...

This article presents an integrative conceptual framework for linking corporate social performance, stakeholders, and quality of management, then tests this framework empirically. Results provide strong support for the hypothesis that perceived quality of management can be explained by the quality of performance with respect to specific primary sta...

Strategic managers are consistently faced with the decision of how to allocate scarce corporate resources in an environment that is placing more and more pressures on them. Recent scholarship in strategic management suggests that many of these pressures come directly from sources associated with social issues in management, rather than traditional...

This study considers the productivity of R&D expenditures on an international and multi-industry basis. Using 1992 data reported by Business Week on 117 companies in the United States, Europe, and Japan, we examined two measures of innovative output, patents and impact-adjusted patents, in relationship to R&D spending. Our results clearly show a de...

This paper presents improved methods for measuring a consumer's and producer's risk in acceptance sampling. We define Bayesian risks for both the consumer and producer. A Bayesian consumer's risk is defined as the probability that a lot which is accepted will contain more than a designated level of defectives, as opposed to the traditional measure...

For years suspicions have abounded that institutional investors are notoriously short-sighted when it comes to making their investment decisions. Faced with performance assessment on a monthly if not daily basis, institutional investors need to show timely results and hence may be under considerable pressure to improve short-term payoff at the expe...

In this study, we hypothesize that institutions invest more heavily in companies with strong corporate social performance. Analysis indicated a significant, positive relationship between social performance and the number of institutions holding the shares of a company and a positive but insignificant relationship between social performance and the...

Industry performance and investment patterns in capital equipment and research and development for 42 industries were examined. Superior performance was significantly associated with high levels of R&D investment in half the industries, but was unrelated to capital investment in these industries over the 20-year period studied. Implications of thes...

This study represents a first attempt to empirically examine the impact of data relating to corporate social performance (CSP) on institutional ownership. Findings, though not statistically significant, are consistent with the hypothesis that institutional investors increase ownership when CSP data are positive and, minimally, do not decrease inves...

This study shows that firms in the pharmaceutical industry experience decreasing returns to scale in R & D as the level of R & D expenditures rises. The paper presents the results of our study of the innovative output of 16 pharmaceutical firms over a 19 year period. Given the strong correlation between R & D budgets and firm size, our study sugges...

In the multiobjective problem it is not uncommon that solution methodologies produce a large number of nondominated alternatives. The decision maker is then left with the difficult task of choosing from this set. In this paper we present five methods for assisting the decision maker in this choice by reducing the set of all nondominated solutions t...

Chapters 1 and 3 presented multiobjective models for the project selection problem. In multiobjective problems it is not uncommon that solution methodologies produce a large number of nondominated alternatives. The decision maker is then left with the difficult task of choosing from this set. In the prior chapters we noted that methods are availabl...

This study represents a first attempt to empirically examine the impact of data on corporate social performance on institutional ownership. Findings, though not statistically significant, are consistent with the hypothesis that institutional investors increase ownership when CSP data are positive and, minimally, do not decrease investment.

As mergers and acquisitions continue throughout the pharmaceutical industry, firms grow larger. Yet, in pharmaceutical research, bigger is not necessarily better. Evidence from a 19-year study of new product output across 31 firms suggests that the number of new chemical entities produced per R&D dollar is not enhanced by ever-increasing firm size....

Numerous studies have examined the validity of Schumpeter's hypothesis that innovative output increases with firm size. Nonetheless, conclusive acceptance or rejection of the hypothesis has not been possible. The pharmaceutical industry, in particular, provides conflicting evidence. Using a new set of data for that industry, our study leads to a co...

An alternative to the net present value (NPV) formulation of the objective in problems involving choice between cash flows over time is presented. This approach is illustrated in an R&D project selection problem. It is shown that the NPV formulation is a special case of optimizing a multiattribute value function. This special case requires restrict...

This paper describes a study of the effect of institutional ownership on corporate R&D investment for 133 companies in six U.S. industries over the time period 1965–1984. Whereas previous studies have been conducted at the industry level, this study shows that the relationship between institutional ownership and R&D investment varies by firm, and t...

Institutional owners are taking a more active role in strategic decision-making in American corporations. In this article, the research that has been done in this area is summarized. We argue that the impact of institutional ownership on strategic management may not be neutral, as institutional investors may have a shortened timeframe for critical...

The study examined R&D and capital spending in 45 industries. For each investment, the industries were classified into four quadrants on stability-intensity axes. Two industries from each quadrant were selected for further investigation. These showed higher performance associated with higher levels of R&D and unrelated to capital investment.

A multi-objective model of the project-selection problem is described. The model departs from an earlier goal-programming formulation of the problem, which suggested Delphic methods for selection of priorities and aspiration levels. It is shown that the multiobjective formulation yields multiple nondominated solutions for the same problem solved by...

This paper provides a literature review which describes the current state of knowledge regarding the tradeoff between completion time and development cost in Research and Development projects. A review of the theoretical literature suggests a strictly convex curve, with more severe compressions of project duration being purchased at increasingly hi...