Financial benefits from quality may be derived from revenue expansion, cost reduction, or both simultaneously. The literature on both market orientation and customer satisfaction provides considerable support for the effectiveness of the revenue expansion perspective, whereas the literature on both quality and operations provides equally impressive support for the effectiveness of the cost reduction perspective. There is, however, little evidence for the effectiveness of attempting both revenue expansion and cost reduction simultaneously, and some of what little empirical and theoretical literature is available suggests that emphasizing both simultaneously may not work. In a study of managers in firms seeking to obtain a financial return from quality improvements, the authors address the issue of which quality profitability emphasis (revenue expansion, cost reduction, or both) is most effective. The authors examine firm performance using managers' reports of firm performance and longitudinal secondary data on firm profitability and stock returns. Although it is clear that no company can neglect either revenue expansion or cost reduction, the empirical results suggest that firms that adopt primarily a revenue expansion emphasis perform better than firms that try to emphasize cost reduction and better than firms that try to emphasize both revenue expansion and cost reduction simultaneously. The results have implications with respect to how both theory and practice view organizational efforts to achieve financial returns from quality improvements.

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The author develops a theory of competitive rationality that proposes a firm's success depends on the imperfect procedural rationality of its marketing planners. Theories of economic psychology and information economics are integrated with the Austrian economic school of thought and with marketing management concepts and scholarship. Implications for managers and scholars are discussed.

What effect does positive and negative feedback about past risk taking have on the future risk taking of decision makers? The results of an experimental study show that subjects who are led to believe they are very competent at decision making see more opportunities in a risky choice and take more risks. Those who are led to believe they are not very competent see more threats and take fewer risks. The feelings of self-competence and self-confidence on one task did not generalize to a similar task. Perception of opportunities was unexpectedly not related to the perception of threats. As executives bring their personal perceptual biases to firm decision making, our results identify a serious built-in bias in SWOT analysis (the analysis of firms' strengths and weaknesses as related to potential opportunities and threats). Executives who believe that they and their firm are very competent will take more risks and vice versa. Our results also provide evidence that the perceived likelihood of an event depends on whether the event is a loss or a gain. Human decision making is subject to the general bias that outcome expectations are not independent of outcome valuations.

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