The Effects of Individual Horizon Preferences and Project Horizon on Managers’ Resource Allocation Decisions under a Subordinate-Superior Framework

We examine the effects of subordinate managers’ and their superiors’ individual horizon preferences along with the effects of project horizon on managers’ resource allocation decisions. We define horizon preference as an individual’s general preference for long-term versus short-term results. Project horizon is the period it takes to realize substantially all the benefits from a project. In our experiment, business students assume the role of project managers who must allocate a budget to two projects. One project offers the possibility of significant immediate benefits but with limited future benefits, while the other offers the possibility of limited immediate benefits but with significant future benefits. Holding employment horizon constant, the case where managers share the same horizon preference with their superior is straightforward. However, when preferences diverge we predict and find that short-term oriented managers will be more likely to adapt their decisions to their superiors’ preferences than will long-term oriented managers