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Research Article

The Effect of Constraints in the Decision-Making Process on Firm Performance

Lee, Yeongjae · Lee, Juhwang

Published: January 1999 · Vol. 28, No. 1 · pp. 167-184
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Abstract

At a time when existing research on the relationship between decision-making constraints and firm performance remains limited, this study empirically examined the effects of constraints in the decision-making process on firm performance. First, existing research materials on decision-making constraints were collected and the variables were organized into cognitive and relational constraints. Based on this, an ideal research model was established to test the significant correlation between constraints and firm performance, and the degree of constraints was collected through a survey of mid-level executives at firms. Analysis of the collected data revealed that constraints in the decision-making process had a significant relationship with sales growth, while no significant relationship was found with net income. Furthermore, the degree of impact that each constraint had on sales growth differed, with organizational factors within the firm and external political factors having a greater impact on firm performance than constraints at the individual level. Setting aside the limitations of not reflecting time-series data and the lack of universal applicability across all industry sectors, these findings provide factors that firms can more proactively address to improve productivity in their business activities.