Decision Centralization and Learning from Experience in Groups: Separating Context from Aggregation Effects

Strategy & Business Policy

Speaker: Phanish Puranam

Professor - INSEAD Singapore

Conference  Jouy-en-Josas T015

ABSTRACT

Organizational learning frequently involves groups that learn from feedback on their decisions over time (also known as “learning by doing” or “learning from experience”). While organizational learning is frequently assumed to resemble individual learning from experience, there is limited evidence to validate this assumption. Furthermore, groups in organizations often have centralized rather than decentralized decision making, but we know little about how they differ in learning from experience. Using a combination of experimental data and computational modelling, we compare individuals to groups that are either decentralized or centralized in their decision making. We find that centralized groups behave like hyper-individuals: they update and explore more than individuals (who in turn update and explore more than decentralized groups). Our evidence shows that not only do groups differ from individuals because of aggregation processes but also that individuals change their behaviors simply by virtue of being in a group (a context effect). Implications are drawn for how this might alter the way we conceptualize and model organizational learning.