This paper presents findings from a laboratory experiment on human decision making in a complex combinatorial task. We draw on the canonical NK model to depict tasks with varying complexity and find strong evidence for a behavioral model of adaptive search. Success narrows down search to the neighborhood of the status quo, whereas failure promotes gradually more exploratory search. Task complexity does not have a direct effect on behavior but systematically affects the feedback conditions that guide success-induced exploitation and failure-induced exploration. The analysis also shows that human participants were prone to overexploration, since they broke off the search for local improvements too early. We derive stylized decision rules that generate the search behavior observed in the experiment and discuss the implications of our findings for individual decision making and organizational search.

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Research Abstract Exploration and exploitation in strategic decision‐making entails decisions about whether and where to search for new alternatives to improve the status quo. Prior research has not explored how decisions about whether to continue search (vs. stop search or satisfice) and where to search (near vs. far) are interrelated. We report laboratory experiment results on how individuals decide whether and where to search in a complex, combinatorial task. We find that different feedback variables influence the decision to stop search from decisions regarding how broadly to search. Our results suggest that not accounting for the decision to continue (or stop) searching, separately from breadth of search, can lead to incorrect predictions regarding how feedback influences search behavior. Managerial Abstract Managers concerned about the performance of their company face two challenges—they have to find out what potential performance is feasible given their business environment and which organizational policies to implement to realize it. We use a stylized laboratory experiment to better understand how feedback from experimentation informs such a learning process. We find that early‐stage feedback has a lasting impact on performance aspirations and managerial expectations about feasible performance. Superior early feedback thereby motivates more sustained experimentation with organizational policies. In contrast, more recent feedback guides the extent to which managers are willing to engage in more radical policy adjustments, especially in the latter stages of a learning process.

Supply chain effectiveness and general societal prosperity, as well as economic and ecological productivity will be highly affected in the next decades, entailing challenges for the supply chain and logistics sector. Thereby this sector plays a significant role within the transformation process of economic systems, yet the capacities of it remain up till now underestimated. This paper suggests a holistic approach to assess transformation potential of the supply chain and logistics sector towards more sustainable economic systems while defining innovative business strategies to meet future macroeconomic developments. This is achieved through an integrated assessment of production and consumption systems, considering the interests of the key stakeholders. Moreover, the paper combines advanced methods to develop future macroeconomic scenarios and to assess the strategic business opportunities of the supply chain and logistics sector addressing societal developments, e.g. new consumption patterns. The analysis relies on modern theories of Environmental and Ecological Economics, contributing to transformation theories. Moreover, the innovative role of supply chain and logistics management in achieving sustainable macroeconomic goals at regional and international levels is addressed. The results of the scenario analysis show that the innovation potential is the highest if the consumers exert pressure on the industry and the global governance policy sets favorable conditions for the supply chain/logistics sector to implement innovative and sustainable strategies. To address this scenario, the logistics service providers should extend their business portfolios, becoming a "lead sustainability service provider" (6 PL). If both governmental regulations and consumer requirements for sustainability are at a low level, the innovation rate in the sector can slightly increase, if the logistics service providers focus solely on economic performance indicators, such as cost and time efficiency, by applying new technologies or management methods. This scenario represents a realistic case, since the logistics providers are forced to innovate their business models to a certain extent, due to high competition in the sector. Based on the findings, a strategy roadmap of the supply chains and logistics sector is developed in the sense of a transformative force to address future potential macroeconomic changes, providing managerial implications and policy recommendations.

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