Time Allocation Strategies for Entrepreneurial Operations Management

This dissertation investigates three key operational issues that entrepreneurial firms encounter during their growth phases: (1) project selection via learning, (2) process improvement, and (3) hiring. In particular, we focus on entrepreneurial firms in an organizational life cycle in which the innovative product or service of the firm have found a market niche (and therefore has passed the survival phase), and the primary goal is to maximize growth. In this high-growth phase, the increasing number of tasks requiring the entrepreneur's attention places an overwhelming demand on the time of the entrepreneurs, who is in charge of all the decision making. Motivated by the theory of constraints, we provide insights to the above three key problems in operations management by examining the entrepreneur's time allocation decisions.;The first essay examines the project selection problem under uncertainty and learning leadtime, modeled by the discrete time bandit problems with stochastic response delays. It provides theoretical contribution to the extant restless bandit literature by proving that such class of bandit problems satisfies the indexability criterion as long as the delayed responses do not cross over. Thus, the problem is made practically solvable (near optimally) by employing the resulting marginal productivity index (MPI)-based heuristic. The result holds for infinite or finite horizon and holds for arbitrary delay lengths and infinite state spaces. We compute the resulting MPI's for the Beta-Bernoulli Bayesian delayed learning model, formulate and compute a tractable upper bound, and numerically validate the MPI-policy's near optimal performance.;The second essay investigates how entrepreneurial firms should invest time in process improvement decisions during growth. For many entrepreneurial firms during the growth phase, their main bottleneck resource is the entrepreneur's time, rather than cash. We classify an entrepreneur's daily activities into four categories: fire-fighting (spending time to attend to random urgent disruptions), process improvement (investing time to reduce future fire-fighting frequency), revenue enhancement (investing time to enhance the revenue stream), and revenue generation (spending time to harvest revenue at the prevailing rate), and analyze a stylized dynamic time allocation problem for maximizing long-term expected profits. We find that entrepreneurs should first invest time in process improvement until the process reliability reaches a certain threshold, then in revenue enhancement until the revenue rate reaches a certain threshold, and only then spend time generating revenue. Moreover, the greater the relative growth opportunities the entrepreneur foresee, more time should be spent upfront on process improvement to create a greater upfront safety-stock of time which can be used during growth. Furthermore, we find that entrepreneurs with higher prevailing revenue rate encounter the tradeoff between investing time in process improvement and investing time in revenue-related activities earlier than their counterparts with lower prevailing revenue rates, which leads them to settle at a lower process reliability and revenue rate than their counterparts. Thus, while they invest time optimally, the leader will ultimately lose their role as the leader, suggesting that it is not necessarily the complacency of the leader that causes the leader and follower reversal.;The third essay presents a formalized model of the entrepreneurial production and provides insights into the entrepreneurial firms' hiring decision by examining how the inputs of time and money interact. Entrepreneurs' time and money are two key complementary inputs for any entrepreneurial firm's production, and the lack of either resource constrains the firm's growth. We demonstrate that the shadow value of time always becomes greater than the shadow value of money, making time the key bottleneck resource. Viewing hiring as an opportunity for trading off money against time, we characterize the optimal timing of the hiring decisions faced by entrepreneurial firms. We establish that there is a unique cash level threshold above which it is optimal to hire. We find that this hiring threshold is non-monotonic in the hiring setup time, due to the tradeoff between the need to preserve the growth momentum and the need to hire before the shadow value of time becomes too large. On the other hand, entrepreneurs should delay hiring if the setup cost increases, suggesting the importance of differentiating setup cost and setup time in the hiring decisions. Finally, we find that the optimal timing of hiring maximizes (rather than minimizes) the post-hire shadow value gap between time and money.