Project portfolio implementation under uncertainty and interdependencies: A simulation study of behavioural responses

Abstract

Even though systems thinking has been highlighted in portfolio management theory, independent project control logic still dominates its implementation process. This paper constructs a system dynamics model for portfolio monitoring and control. Considering the on-going portfolio as a complex social system, the impacts of project interdependencies (PIs) on portfolio decision-making are investigated under a behavioural paradigm. Our findings indicate the remedial actions, affected by behavioural factors like planning fallacy and “Pet project” effects, may generate escalation of commitment under specific levels of uncertainty and interdependencies. Thus, portfolio coordination decisions should be made from a strategic perspective with the consideration of complexities embedded in the system and behavioural responses from portfolio managers.

Keywords:

• System dynamics
• behavioural OR
• project portfolio
• uncertainty

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

National Natural Science Foundation of China (Grant ID 71425002).