Research In Progress II
Thursday, April 22nd, 2021 at 9:00 am Eastern Time
"More is Different: The Effect of Preference Diversity on Exploration"
Models of organizational learning under uncertainty tend to assume that organizations are composed of either one single agent or multiple agents whom all share their points of view – homogeneous preferences. In this paper, I relax this assumption and study how organizations composed of people with diverse views of the world – diverse preferences – learn from their uncertain environments. I find that preference diversity can lead to large and nontrivial changes in the exploration rate of organizations. Preference diversity is a double-edged sword. It can lead to both increased exploration rates but also decreased exploration. The key behind an increase or decrease in exploration is given by the specific preference range, bias, and polarization of the organization. A manager who wishes its organizations to explore more has two routes for achieving higher exploration through preference diversity. First, the manager can create measures that promote the agent’s preference polarization. Conversely, the manager could incentivize polarization and create measures to control the preference bias. However, even small deviations on a single agent’s preferences can erode the organization’s exploration rate in polarized organizations. Polarized and biased organizations, explore much less than organizations whose agents share their preferences.
Jose P. Arrieta, PhD at ETH Zurich starting soon as Assistant Professor of Strategy at the University of Amsterdam's Business School.
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