Wise Choices: How Thoroughness of Opportunity Appraisal, Incentives, and Performance Evaluation Fit Together

Firms need to invest their scarce resources into the most promising new business opportunities (e.g., new engineering technologies). Yet, the literature on strategic entrepreneurship pays little attention to how, and how thoroughly, firms appraise potential opportunities based on technical as well as managerial criteria. Given that such evaluation takes considerable time, energy, attention, and skill on the part of employees, we propose that firms need to establish a fit between the thoroughness of opportunity appraisal and their reward as well as performance evaluation practices. Evidence from a double-respondent sample of 565 Danish firms supports our theoretical expectations.