Human Behavior in Project Portfolio Selection: Insights from an Experimental Study

Abstract

ABSTRACTChoosing the right subset from a set of candidate projects is a key driver of success and failure in new product development (NPD). In many cases, managers make these decisions based on intuition or simple rules. We investigate how human decision makers act in the context of project portfolio selection conducting experimental studies based on the knapsack problem. We address the question about which decision rules people apply to select a portfolio and how cognitive limitations influence their selection process. Grounded in portfolio selection practice, we investigate subjects' adherence to four heuristics. Decision making is partially explained by adherence to one simple decision rule, but decision makers' cognitive capacity limits the application of this heuristic. Subjects' cognitive deficits can be avoided by offering basic decision support, thereby increasing their heuristic adherence and their performance.