Economic Decision-Making in Private Corporations Versus Public Sector: How to Compare Both Sectors

Economic Decision-Making in Private Corporations Versus Public Sector: How to Compare Both Sectors

Brian J. Galli (Department of Engineering, Hofstra University, Hempstead, USA)
DOI: 10.4018/IJSSMET.2020010106
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Abstract

This research takes a comparative analysis approach to study the process of economic decision-making within the private sector and the public sector. There are four main research objectives that guided this article. First, it aims to identify the different kinds of decision-making methods. Second, this article analyzes the economic decision-making processes that stakeholders have to make in public and private firms. Third, this r seeks to illustrate that establish effective decision-making and financial performance relate. Lastly, the article will offer effective economic decision-making procedures in private and public organizations, so as to make recommendations and to guide these businesses. To do so, there is a literature review in this research to find the best economic decision-making processes. Data collection tools were created in reference to the literature review that directed the structuring of the variables, and the study based the quantitative analysis on the adopted descriptive methodology. The sample was comprised of 100 respondents from China, and since 95% responded, that was a total of 95 responses. Based on the formulated study hypothesis and the research objectives, the collected data was examined for descriptive and inferential statistical analysis. In general, the findings showed that cost-benefit analysis was the favored economic evaluation method, and the respondents specified that they their internal and external economic decisions directly influence the company's operations. When focusing on how organizational performance is affected by effective economic decisions, the findings established that there was a key component for a better economic analysis outcome in the public and private firms: accounting information. Additionally, evaluating the number of processes in public and private firms led to findings that revealed the following: every decision in the public sector requires many approvals. These approvals greatly hinder economic decisions and decision-making. Social, cultural, and environmental aspects influence the decision process significantly, so they must be addressed immediately.
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1. Introduction

1.1. Background to the Study

The most common task of managers and executives is decision-making (Kerzner, 2013). So, by providing appropriate decision support, there would be enhancement of managerial decision-making. Making better-faster decisions, and implementing more decisions, leads to the organizational success. Generally, good decision outcomes arise from a good decision process (Pettigrew, 2014).

According to Hammond et al. (2015), for an organization to make strategic decisions, it must gather intelligence, set directions, uncover alternatives, assess these alternatives to choose an action plan, and, finally, implement the plan. Many scholars agree that the key step in the process is assessing alternatives (Hammond et al., 2015; Anderson et al., 2015; Velasquez & Hester, 2013).

There are notable differences that occur when decisions are made by public organizations versus private organizations (Galli, 2017; Gwartney et al., 2014: Eden & Ackermann, 2013). The decision-making processes for private organizations are smoother compared to public organizations, which experiences more turbulence, interruptions, or even conflicts. The attribution of these differences, by a number of scholars, depends on the roles played by private and public business units in the society. The primary role for private sector organizations is creating wealth for their shareholders, through the provision of services and goods in the markets. The government sector has its main role of providing services to the public through contracts and collecting information regarding people’s needs, leaving a call for a public response (Agrawal & Sharma, 2014). Thus, different approaches for decision-making are needed in these two sectors due to the divergent responsibility varied extent of expectancy and accountability (Boyne, 2002).

In distinction private and public business entities, a variety of schemes have been used. These schemes used to highlight these differences include transactional, environmental, and process (Galli, 2017; Gatti, 2013). To account for strategic decision-making, these dynamics, and some peculiarities they identify, have been deeply illustrated in this paper. The focus of this study is to compare decision-making for senior management of private firms and of public firms, because it is vital to see how they both view prospects of budget approval and for people to learn about the risks associated.

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