Strategic Responses to Three Kinds of Uncertainty: Product Line Simplicity at the Hollywood Film Studios

Abstract

This paper explores the impact of Milliken’s (1987) three kinds of uncertainty on product line simplicity--specifically on the range of product variations a firm offers. Environmental state uncertainty represents an inability to forecast industry or market events; it results in part from the demand and competitive volatility facing aU firms equally in an industry. Organizational effect uncertainty represents an inability to predict the effect of any given environmental state or event on one’s own firm; it results in part from a lack of skills, knowledge and resources that couM help managers understand or influence market reactions. Finally, decision response uncertainty represents an inability to predict the consequences of a specific decision. It derives from the ignorance and risks perceived in making individual decisions. The thesis of this research is that whereas environmental state uncertainty will give rise to product variations, paradoxically, organization effect and decision response uncertainty will discourage such variations. These ideas are explored and largely supported in a study of the film genres of the major Hollywood film studios between the years 1936 and 1965.