Modeling Strategic Acquisition Policies: A Simulation of Executives' Acquisition Decisions

Behavioral decision theory serves as the basis for modeling executives' acquisition decision-making processes. It is proposed that linear additive models of the multicriteria decision process are most appropriate for the study of decision makers' policies. To test decision makers' insight into their policies, 42 executives were asked to rate the attractiveness of 33 hypothetical acquisition candidates according to their performance on each of 6 acquisition criteria. Respondents were asked to state the relative importance they accorded to each criterion. These subjective criteria weights were compared to the actual weights they attached to each criterion in the simulated acquisition decision experiment. Variations between subjects in both stated and actual policies suggest that acquisition policies are firm- or individual-specific rather than universal. However, subjects were found to have little insight into their policies, as evidenced by the variations between their stated and actual weightings for decision criteria.