HHL Research Brief

Research Brief: Convergence of Public Value Theory and Dual Process Theory

by Aljoscha Roloff | July 23, 2021
The public value concept provides a unique way for companies to create value for society oriented to their values and needs. The study showed that heuristics have an influence on the creation of public value and that five heuristics in the management decision and five heuristics in the individual evaluation of actions are of particular importance.

Convergence of Public Value Theory and Dual Process Theory: An Analysis of Possible Impacts of Heuristics on Public Value Oriented Decision Making

By Aljoscha Roloff I Dr. Arend Oetker Chair of Business Psychology and Leadership

Executive Summary: The public value concept provides a unique way for companies to create value for society oriented to their values and needs. In order to create public value, decisions are needed from companies to perform public value-oriented actions and from individuals who evaluate the actions accordingly. So far, however, there has been a lack of research on the effect of heuristics for the creation of public value – this is where this study begins and combines decision theories (esp. heuristics research) with public value theory. The study showed that heuristics have an influence on the creation of public value and that five heuristics in the management decision and five heuristics in the individual evaluation of actions are of particular importance.

Introduction

Companies need to fulfill a specific social purpose and have to satisfy a specific need of a society, community, or individual (Drucker, 1973). Public value theory can provide guidance to companies in striving for their social purpose and expands the orientation of a company from a purely financial-economic orientation to a broader concept of value creation that maintains and influences individual well-being as well as societal progress (Meynhardt, 2019). In this context, value is created for a subject (a person) if the subject’s basic values are positively impacted and value is destroyed for a subject if its basic values are negatively impacted by the evaluated object (Meynhardt & Fröhlich, 2019). Basic values are a composite of interrelated, yet not substitutable basic value dimensions, namely moral-ethical, political-social, utilitarian- instrumental, and hedonistic- aesthetical values (Meynhardt, 2009).

In a practical sense, actions of companies impact the values of individuals in a positive or negative sense. If the values are influenced positively, public value is created. In this understanding, companies perform actions and are evaluated by individuals along their basic values. Hence, there are two dimensions that contribute significantly to the generation of public value: individuals, who evaluate the actions of companies, and companies, which carry out actions. This conception directly results in the two phases of investigation of this research: the subjective evaluation of an individual (‘subject’- phase) and the decision for certain public value-oriented actions in a company (‘object’-phase).

The purpose of this thesis is to enhance decision making processes in order to make public value-oriented decisions and to communicate them effectively. To do so, the research is guided by the research question: ‘How do decision-making processes (i.e. heuristics) influence the creation of public value?’. Since the public value theory shows two levels of decision making – the subjective evaluation and the managerial decision making – two phases are distinguished: the ‘subject’-phase and the ‘object’-phase. Accordingly, two sub-research questions are posed:

RQ-A (‘subject’-phase): How do heuristics influence public value creation in terms of influencing the subjective evaluation if basic values are positively impacted or not?

RQ-B (‘object’-phase): How do heuristics influence public value creation in terms of influencing managerial decision making (i.e. the active subject within an object) to positively impact the subjects basic value dimension?

Research Methodology

To answer the research questions, a single case study with embedded multiple units of analysis was conducted. This involved conducting two separate surveys for each phase. 12 heuristics were identified for the ‘subject’-phase and 19 heuristics for the ‘object’- phase.

In the ‘subject’-phase, 256 data sets were collected, with participants first evaluating a specific company – the savings bank – on the basis of the four basic value dimensions resulting in the public value score. Then they had to evaluate how they arrived at this public value score for the savings bank. For this purpose, heuristics were presented in the form of statements, which could be agreed or disagreed with.

In the ‘object’-phase 29 data sets were collected, with managers valuing a specific action they had to recall along the basic value dimensions. Similar to the ‘subject’-phase they had then to evaluate their decision making with agreeing or disagreeing to heuristics as statements.

The quantitative analysis of the surveys was carried out in a multivariate regression analysis (‘subject’-phase) and in a correlation analysis (‘object’- phase).

Results

The evaluation of the case studies showed that in each of the two phases, five heuristics have an influence on the creation of public value. Hence, heuristics in general do have an influence on the creation of public value and are applied towards public value-oriented decisions. In the ‘subject’-phase the following heuristics influence the individual in decisions towards public value creation: Halo Effect, Imitate the Majority, Representativeness Heuristic, Satisficing, Status Quo. While, in the ‘object’-phase the following heuristics influence managers in making public value-oriented decision: Default Heuristic, Fluency Heuristic, Imitate the Successful, Primacy Effect and Representativeness Heuristic.

Conclusion

Overall, heuristics are important in the decision-making process for creating public value. Companies can understand how managers decide when thinking about public value-oriented actions. Furthermore, companies can now better understand how the relevant society evaluates them and perceives their actions.

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