Managing Resource Allocation: Personal Reflections From a Managerial Perspective

Abstract

The problem of resource allocation is central to economics. It is also central to the strategic management of companies. Despite considerable research by management scholars describing the process in firms first carried out in the 1960s and continuing since then, management theory of the process remains wedded to a financial model of capital budgeting that poorly fits the problem facing companies. Consulting firms stepped into the gap with models of business portfolios that helped frame the resource allocation choices among business units. But over time, changes in the capital markets, in the flows of technology, and in the patterns of global competition have meant that the dilemmas facing company managements are far more complex than the models and concepts academic researchers use to describe them. This may well be because the forces that must be taken into account are cognitive, organizational, and interpersonal as well as economic and thus cross the lines of academic disciplines, while the time horizon of these problems exceeds the scope of a typical academic research project. There is important research to be done.