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Working Paper

The sequence effect on the selection of R&D projects in panel decision-making

Bocconi University Management Research Paper
Forthcoming in Organization Science.
Paola Criscuolo, Linus Dahlander, Thorsten Grohsjean, Ammon Salter (2020)
Technology, R&D management
Sequence effect, law of small numbers, gambler’s fallacy, contrast effect, quota model, R&D project selection, innovation, decision-making, panel, professional service firm
We examine how groups fall prey to the sequence effect when they make choices based on informed assessments of complex situations; for example, when evaluating research and development (R&D) projects. The core argument is that the temporal sequence of selection matters because projects that appear in a sequence following a funded project are themselves less likely to receive funding. Building on the idea that selecting R&D projects is a demanding process that drains participants’ mental and emotional resources, we further theorize the moderating effect of the influence of the timing of the panel meeting on the sequence effect. We test these conjectures using a randomization in sequence order from several rounds of R&D project selection at a leading professional service firm. We find robust support for the existence of a sequence effect in R&D as well as for the moderating effect. We further explore different explanations for the sequence effect and how it passes from the individual to the panel. These findings have broader implications for the literatures on innovation and search in general and on group decision-making for R&D, specifically, as they suggest that a previously overlooked dimension affects selection outcomes.