Idea generation and selection are fundamental activities in innovation. Scholars in many disciplines have written about these activities, addressing diverse perspectives. In this study, we synthesize the research findings most applicable to the management of technology. First, we present findings on the process of idea generation: the importance of problem recognition and the many decisions made in organizing the effort. Second, we present findings about the process of idea selection, focusing on the different types of information that can be used in that decision. Third, we turn our attention to the organizational context in which both idea generation and selection occur: the corporate culture, use of incentives, organizational structure, and use of teams. Finally, we conclude, emphasizing that although idea generation and selection are as old as human decision making, changes in technology still affect these fundamental processes.

To cite this article: Jeremy Hutchison-Krupat, Stylianos Kavadias (2015) Strategic Resource Allocation: Top-Down, Bottom-Up, and the Value of Strategic Buckets. Management Science 61(2):391-412. http://dx.W hen senior managers make the critical decision of whether to assign resources to a strategic initiative, they have less precise initiative-specific information than project managers who execute such initiatives. Senior management chooses between a decision process that dictates the resource level (top-down) and one that delegates the resource decision and gives up control in favor of more precise information (bottom-up). We investigate this choice and vary the amount of information asymmetry between stakeholders, the "penalty for failure" imposed upon project managers, and how challenging the initiative is for the firm. We find that no single decision process is the "best." Bottom-up processes are beneficial for more challenging initiatives. Increased organizational penalties may prompt the firm to choose a narrower scope and deter the approval of profitable initiatives. Such penalties, however, enable an effective decision process known as "strategic buckets" that holds the potential to achieve first-best resource allocation levels.

M ost organizations employ collaborative teams to manage innovation projects. Although the use of collaborative innovation teams is a good starting point, an organization's ability to innovate can be enhanced by managing risktaking behavior through monetary incentive schemes and through an organizational culture that tolerates failure. This article reports the results of two controlled experiments aimed at understanding how tolerance for failure and incentives impact the decisions of individuals engaged in a collaborative innovation initiative. A key element of our experiments is the notion of endogenous project risk, which we define as the explicit link between resources allocated to a project and the likelihood of project success. We observe that when penalties are low, the amount of risk an individual assumes is fairly insensitive to the rewards that are offered. In an analogous result, when individuals make decisions alone (rather than collaboratively), higher tolerance for failure does little to increase the amount of risk an individual is willing to take. Taken together, these results highlight the importance of implicit incentives that are created as a result of project and organizational characteristics.

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