Enhancing Entrepreneurial DecisionMaking in SMEs with Data Envelopment Analysis DEA

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Enhancing Entrepreneurial Decision-Making in SMEs
with Data Envelopment Analysis (DEA)

• IFORS Triannial Conference
• Sandton 2008

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Introduction
Technische Universität München
Decision making in (family-controlled) small
enterprises
wish
Homini oeconomici in a world of hard facts,
with fixed preferences, without emotions,
Optimal solution can be determined
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Content

• Introduction Problems of decision making in
  (family-controlled) small enterprises
• Proposal Interpretive-Approach-DEA to jointly
  evaluate quantitative and qualitative data
• Examples Input- and output-attributes, DMUs,
• Discussion and Summary

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Referential Theory Interpretive Approach
Output
Input
Cognitive Maps
Compo-nents of attitudes actions
stakeholder ps search activities
Learning activities
Hard soft facts of an entrepreneuri-al situation
Interpretation by stakeholder p
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Determination of how a single stakeholder
perceives an enterprises stability (5 DMUs)
Target situation with S0opt x0opt(x10opt,,xm0opt
) y0opt(y10opt,,yn0opt)
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Alternative 2 with S2 x2(x12,,xm2) y2(y12,,yn2
)
Current situation with S0 x0(x10,,xm0) y0(y10,
,yn0)
Evaluationwith DEA
Perceived stability
Alternative 1 with S1 x1(x11,,xm1) y1(y11,,yn1
)
Worst case with S0crit x0crit(x10crit,,xm0crit)
y0crit(y10crit,,yn0crit)
0
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Referential Theory Interpretive Approach and DEA
Output
Input
Cognitive Maps
Compo-nents of attitudes actions
stakeholder ps search activities
Learning activities
Hard soft facts of an entrepreneuri-al situation
Interpretation by stakeholder p
ratio scaled performance figures as output
Perceived Stability SStakeholder ps perception
of a certain entrepreneurial situation (h)
Interpretations of various stakeholders
Various situations of the enterprise
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Example of one DMU Input-attributes x
interpreted by stakeholder p leading to
output-attributes y related to a certain strategy
h
big concern no 0
100
big concern no 0
100
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Simplified example
Two stakeholders have to choose between 2
alternative investments. Alternative 1 requires a
credit of 0,5 Mio EurosAlternative 2 requires a
credit of 1 Mio Euros
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Simplified example
Two stakeholders have to choose between 2
alternative investments. Alternative 1 requires a
credit of 0,5 Mio EurosAlternative 2 requires a
credit of 1 Mio Euros
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Simplified example
Stakeholder 2
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Simplified example
compromise
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Using Interpretations and Analysis of Dissent for
Enterprise Planning
Decision
Hard Facts
Simulations,LP,
Motives, Emotions, Attitudes,
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Using Interpretations and Analysis of Dissent for
Enterprise Planning
Decision
Hard Facts
Simulations,LP,
Motives, Emotions, Attitudes,
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Discussion and Summary

• Advantages of Interpretive-Approach-DEA
• Interpretations based on economic, psychological,
  sociological and legal factors
• Computation of the perceived stability as a new
  performance figure
• Difficult for single stakeholders to dominate
  deliberately
• Projections to the efficient frontier
• Limitations
• Dimension of the model
• Learning-effects
• CCR-model
• Future Research
• Most important relevant factors
• Fuzziness of input and output attribute values
• Testable hypothesis

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What are your questions about Enhancing
Entrepreneurial Decision-Making in SMEs with Data
Envelopment Analysis (DEA)?Contact
Ulrich.Bodmer_at_tum.de