Faculty Research

The School’s extraordinary “intellectual capital” rankings from nationally-recognized publications attests to the faculty’s large volume of research published in leading journals. 
 

Recent Research Publications

• Accounting
• Economics / Public Policy
• Finance
• Information Systems Management
• Marketing
• Operations & Decision Technologies
• Organization and Management
• Strategy

ACCOUNTING

ECONOMICS / PUBLIC POLICY

Professor Kerry Vandell and Major Coleman IV, Ph.D. Student
Title: “Subprime lending and the housing bubble: Tail wags dog?”
Accepted at: Journal of Housing Economics 
Co-author(s):  Michael LaCour-Little (CSU Fullerton)
November 2008
  
The cause of the ‘‘housing bubble” associated with the sharp rise and then drop in home prices over the period 1998–2008 has been the focus of significant policy and research attention. The dramatic increase in subprime lending during this period has been broadly blamed for these market dynamics. In this paper we empirically investigate the validity of this hypothesis vs. several other alternative explanations. A model of house price dynamics over the period 1998–2006 is specified and estimated using a cross-sectional time-series data base across 20 metropolitan areas over the period 1998–2006. Results suggest that prior to early 2004, economic fundamentals provide the primary explanation for house price dynamics. Subprime credit activity does not seem to have had much impact on subsequent house price returns at any time during the observation period, although there is strong evidence of a price-boosting effect by investor loans (Non-owner occupied mortgages). However, we do find strong evidence that a credit regime shift took place in late 2003, as the Fannie Mae and Freddie Mac were displaced in the market by investment banks and hedge funds as originators and buyers of new mortgage products. Market fundamentals became insignificant in affecting house price returns, and the price-momentum conditions characteristic of a ‘‘bubble” were created. Thus, rather than causing the run-up in house prices, the subprime market may well have been a joint product, along with house price increases, (i.e., the ‘‘tail”) of the changing institutional, political, and regulatory environment characteristic of the period after late 2003 (the ‘‘dog”).


Renee Rottner, Ph.D. Student
Title:  “Innovation Policy and Nanotechnology Entrepreneurship”
Accepted at:  Entrepreneurship Theory and Practice           
Co-author(s): Jennifer L. Woolley (doctoral alumnus)
November 2008
 
In this article, we explore the relationship between innovation policy and new venture creation in the United States. Specifically, we examine two components of innovation policy in nanotechnology—science and technology (S&T) initiatives and economic initiatives—and their relationship with the founding of nanotechnology firms. We find strong support relating new firm formation to S&T and economic initiatives. States with both S&T and economic initiatives had six times as many firms founded than those states without such initiatives. We also find evidence of a first-mover advantage as states with the earliest innovation policies had higher rates of related firm foundings over time. These findings suggest that states that are most attractive to entrepreneurs not only pursue technological innovation and provide resources, but also encourage and legitimize commercial development. Implications for public policy makers and scholars are provided.

 

FINANCE

Professors David Hirshleifer and Siew Hong Teoh
Title: “Driven to Distraction: Extraneous Events and Underreaction to Earnings News”    
Accepted at: Journal of Finance
Co-authors: Lim, S.
December 2008
   
Recent studies propose that limited investor attention causes market underreactions.  This paper directly tests this explanation by measuring the information load faced by investors.  The investor distraction hypothesis holds that extraneous news inhibits market reaction to relevant news.  We find that the immediate price and volume reaction to a firm’s earnings surprise is much weaker, and post-announcement drift much stronger, when a greater number of same-day earnings announcements are made by other firms.  We evaluate the economic importance of distraction effects through a trading strategy, which yields substantial alphas.  Industry-unrelated news and large absolute earnings surprises have a stronger distracting effect.


Professor Christopher Schwarz
Title: “Mandatory Disclosure and Operational Risk: Evidence from Hedge Fund Registration”      
Accepted at: Journal of Finance
Co-authors: Stephen Brown, William Goetzmann and Bing Liang
January 2009
 
Mandatory disclosure is a regulatory tool intended to allow market participants to assess operational risk. We examine the value of disclosure through the controversial SEC requirement, since overturned, which required major hedge funds to register as investment advisors and file Form ADV disclosures. Leverage and ownership structures suggest that lenders and equity investors were already aware of operational risk. However, operational risk does not mediate flow-performance relationships. Investors either lack this information or regard it as immaterial. These findings suggest that regulators should account for the endogenous production of information and the marginal benefit of disclosure to different investment clienteles.


Professor Christopher Schwarz
Title: “Estimating Operational Risk for Hedge Funds: The ω-Score”           
Accepted at: Financial Analysts Journal
Co-authors: Stephen Brown, William Goetzmann and Bing Liang
February 2009

Using a complete set of the SEC filing information on hedge funds (Form ADV) and the TASS data, we develop a quantitative model called the ω-Score to measure hedge fund operational risk. The ω-Score is related to conflict of interest issues, concentrated ownership, and reduced leverage in the ADV data. With a statistical methodology, we further relate the ω-Score to readily available information such as fund performance, volatility, size, age, and fee structures. Finally, we demonstrate that while operational risk is more significant than financial risk in explaining fund failure, there is a significant and positive interaction between operational risk and financial risk. This is consistent with rogue trading anecdotes that suggest that fund failure associated with excessive risk taking occurs when operational controls and oversight are weak.


Professor Lu Zheng
Title: “Investor Flows and Stock Market Returns”
Accepted at: Journal of Empirical Finance
Co-authors: Brian Boyer
April 2009

This study simultaneously analyzes the relation between aggregate stock market returns and cash flows (net purchases of equity) from a broad array of investor groups in the United States over a long period of time from 1952 to 2004. We find strong evidence that quarterly flows are autocorrelated for each of the different investor groups.  We further document a significant and positive contemporaneous relation between stock market returns and flows of Mutual Funds and Foreign Investors.


Professor Ashley Wang                
Title: “Mispricing Return Premium”
Co-authors: Michael Brennan                                                           
Accepted at: Review of Financial Studies
June 2009

We show that when stock prices are subject to stochastic mispricing errors, as a result of Jensen's inequality, expected rates of return may depend not only on the fundamental risk that is captured by a standard asset pricing model, but also on the type and degree of asset mispricing, even when the mispricing is zero on average. Empirically, the mispricing induced return premium, either estimated using a Kalman filter or proxied by the volatility and variance ratio of residual returns, is shown to be significantly associated with realized risk adjusted returns.

 
Professor Ashley Wang and Gaiyan Zhang, PhD Student                                               
Title: “Institutional Ownership and Credit Spreads: An Information Asymmetry Perspective” 
Accepted at: Journal of Empirical Finance
June 2009

Recent literature has documented a link between institutional equity ownership (IO) and cost of debt capital, and interpreted it as a corporate governance effect. However, institutional equity investors may also affect cost of debt through their influence on information asymmetry condition of firms. To distinguish between the two effects, we break down institutional investors into different groups: transient institutional investors (TRA) who are sensitive to information asymmetry but unlikely to participate in corporate governance, and the dedicated ones (DED) who act oppositely. Based on a most up-to-date and comprehensive bond data set spanning the past 20 years, we find that credit spreads narrow (widen) with an increase in equity ownership by TRA (DED). The effects are most prominent among short-term bonds, bonds with lower ratings, higher leverage and higher volatilities. The results persist after controlling for potential endogeneity and other information asymmetry measures, and are unlikely due to an asset substitution effect. Overall, our findings provide strong support for the effect of information asymmetry on credit spread, and highlight the importance of distinguishing various types of institutional investors.

 

INFORMATION SYSTEMS MANAGEMENT

Professor Vidyanand Choudhary
Title: “Use of Pricing Schemes for Differentiating Information Goods”
Accepted at: Information Systems Research 
November 2008
 
When undifferentiated firms sell commoditized products in a friction-free market with fully informed buyers, the equilibrium price falls to unit cost and the sellers do not earn any profit. This well-known result from Economics is known as the Bertrand equilibrium. Prior research has established that the Bertrand equilibrium may not hold under some conditions. In this paper, I show that under conditions that are expected to yield the Bertrand equilibrium, firms may be able to earn large (monopoly) profits. This can occur when buyers are heterogeneous in their demand and sellers can offer different pricing schemes. The paper demonstrates the existence of a Pareto-dominant equilibrium where competing firms adopt different pricing schemes even though they sell the same product. At optimal prices, different consumers' surplus is maximized under different pricing schemes. Since certain pricing schemes are only available from certain sellers, this creates differentiation among the sellers allowing otherwise undifferentiated firms to earn large profits. This finding has implications for sellers, consumers and regulators. The paper also offers an explanation for the observed diversity in pricing schemes (such as per-user pricing and site licensing) offered by sellers of information goods. It shows that when competitors are weakly differentiated, each seller should offer a single pricing scheme that is different from that of its competitor. When the sellers are strongly differentiated, each seller should offer multiple pricing schemes.


Professor Sanjeev Dewan
Title: “Information Technology and Firm Boundaries: Impact on Firm Risk and Return Performance.”
Co-authors: Fei Ren (former Ph.D. student)
Accepted at: Information Systems Research
September 2009

In this paper, we empirically investigate the impact of information technology (IT) investment on firm return and risk financial performance, emphasizing the moderating role of the firm boundary strategies of diversification and vertical integration. While the direct effect of IT capital is to increase firm risk for a given level of return, we find that suitable boundary strategies can moderate the impact of IT on firm performance in a way that increases return and decreases risk, at the margin. This moderation effect is strongest in service firms, in firms with high levels of IT investment intensity, and in more recent time periods. These results provide new insights into how IT and firm boundary strategies interact to affect the risk and return performance of firms.


Professors Sanjeev Dewan and Ken Kraemer
Title: “Complementarities in the Diffusion of Personal Computers and the Internet: Implications for the Global Digital Divide”     
Accepted at: Information Systems Research
Co-author(s): Dale Ganley (doctoral alumnus)
November 2008
   
This paper studies the cross-country diffusion of personal computers (PCs) and the Internet, and examines how the diffusive interactions across these technologies affect the evolution of the global digital divide. Whereas prior research has focused on factors that explain the existence or widening of the digital divide between developed and developing countries, we focus on a factor that we believe contributes to the narrowing of the global digital divide, which is the complementarity in the diffusion of personal computers (PCs) and the Internet. We adopt a generalized diffusion model that incorporates the impact of one technology’s installed base on the diffusion of the other technology. We estimate the model on data from 26 developing and developed countries over the period 1991-2005. We find that the co-diffusion effects between PCs and the Internet are complementary in nature and the impact of PCs on Internet diffusion is substantially stronger in developing countries as compared to developed ones. Further, our results suggest that these co-diffusive effects are a significant driver of the narrowing of the digital divide. We also examine the policy implications of our results, especially with respect to how complementarities in the diffusion of PC and Internet technologies might be harnessed to further accelerate the narrowing of the global digital divide.


Professor Ken Kraemer
Title: “Who Captures Value in a Global Innovation Network? The Case of Apple’s iPod.”
Co-authors: Greg Linden and Jason Dedrick
Accepted at: Communications of the ACM
September 2009

Innovation is often touted as a key driver of economic growth, but when firms operate within production and innovation networks that span national and firm boundaries, the question arises as to who actually benefits from innovation.  Is it the home country of the innovating firm, the country where the innovative product is manufactured, or the countries that supply the key high value components? To unravel that question, we move away from macroeconomics and down to a micro-level analysis of one well-known innovative product, the Apple iPod.  The iPod is designed and marketed by an American company, assembled by Taiwanese manufacturers in China, and includes key parts from Japanese, Korean and U.S. suppliers.  So who captures the value generated by this hugely successful innovation?  This paper develops a framework for analysis based on financial measures of value capture, and uses that framework to study one iPod model to provide one perspective on these questions.
 

Professor Ken Kraemer
Title: “One Laptop Per Child: Vision vs. Reality.”
Co-authors: Jason Dedrick and Prakul Sharma
Accepted at: Communications of the ACM
September 2009

In January 2005, at the World Economic Forum in Davos, Switzerland, Nicholas Negroponte unveiled the idea of One Laptop Per Child (OLPC), a $100 PC that would transform education for the world's disadvantaged school children by providing the means for them to teach themselves and each other.  Negroponte estimated there could be 100-150 million of these laptops shipped every year by the end of 2007 (BBC News, 2005), but as of January 2009, only a few hundred thousand laptops had been distributed and OLPC had scaled down its ambitions dramatically. This paper analyzes the OLPC experience, focusing on (1) the successes and failures of OLPC in understanding and adapting to the developing country environment, and (2) the unexpectedly aggressive reaction by the PC industry, including the industry’s superpowers Intel and Microsoft, to defeat or co-opt the OLPC effort.  We find that OLPC created a novel technology, the XO laptop, developed with close attention to the needs of students in poor rural areas.  Yet it failed to anticipate the social and institutional problems that would arise in trying to diffuse that innovation in the developing country context.  In addition, OLPC has been stymied by underestimating the aggressive reaction of the PC industry to the perceived threat of a $100 laptop being widely distributed in places that the industry sees as emerging markets for its own products. 


Professor Ken Kraemer
Title: “Who profits from innovation in global value chains? A study of iPods and notebook PCs.”
Co-authors: Jason Dedrick and Greg Linden
Accepted at: Industrial and Corporate Change
September 2009

This article analyzes the distribution of financial value from innovation in the global supply chains of iPods and notebook computers. We find that Apple has captured a great deal of value from the innovation embodied in the iPod, while notebook makers capture a more modest share of the value from PC innovation. In order to understand these differences, we employ concepts from theories of innovation and industrial organization, finding significant roles for industry evolution, complementary assets, appropriability, system integration, and bargaining power.

MARKETING

Professor Imran Currim
Title: “Multi-stage purchase decision models:  Accommodating response heterogeneity, common demand shocks, and endogeneity using disaggregate data”
Co-authors: Rick L. Andrews
Accepted at: International Journal of Research in Marketing
September 2009

The most comprehensive models of purchase behavior for frequently purchased supermarket items explain households’ purchase incidence decisions (whether to buy), brand choice decisions (what to buy), and purchase quantity decisions (how much to buy).  In this study we develop a three-stage purchase incidence/brand choice/purchase quantity model for household-level data in which all three stages are specified with (i) random coefficients distributions for model covariates and (ii) random effects distributions to account for unobserved factors affecting demand (known as common demand shocks), while also (iii) controlling for the effects of endogeneity in prices.  Compared to current state-of-the-art models for multi-stage purchase decisions, the results show improvements in fit and forecasting accuracy when purchase behaviors are modeled with all of these components in combination. Perhaps more importantly, when common demand shocks are ignored, substantial differences in parameter estimates and diagnostic information about consumer behavior are likely (median differences in parameter estimates are 10% and 20% in two product categories), which impact managerial deliberations about price and promotion policies.  Further, failure to account for common demand shocks affect the mean and variance of random coefficients distributions in unpredictable directions, which could produce results that encourage managers to pursue inappropriate and costly micro-level product marketing strategies.


Professor Imran Currim
Title: “Amalgamation of Partitions from Multiple Segmentation Bases: A Comparison of Non-Model-Based and Model-Based Methods”
Co-authors: Rick L. Andrews and Michael J. Brusco
Accepted at: European Journal of Operational Research
September 2009

The segmentation of customers on multiple bases is a pervasive problem in marketing research.  For example, segmentation service providers partition customers using a variety of demographic and psychographic characteristics, as well as an array of consumption attributes such as brand loyalty, switching behavior, and product/service satisfaction.  Unfortunately, the partitions obtained from multiple bases are often not in good agreement with one another, making effective segmentation a difficult managerial task.  Therefore, the construction of segments using multiple independent bases often results in a need to establish a partition that represents an amalgamation or consensus of the individual partitions.  In this paper, we compare three methods for finding a consensus partition.  The first two methods are deterministic, do not use a statistical model in the development of the consensus partition, and are representative of methods used in commercial settings, whereas the third method is based on finite mixture modeling.  In a large scale simulation experiment the finite mixture model yielded better average recovery of holdout (validation) partitions than its non-model-based competitors. This result calls for important changes in the current practice of segmentation service providers that group customers for a variety of managerial goals related to the design and marketing of products and services.

 
Professor Mary Gilly
Title: “Consumer Identity Renaissance: The Resurgence of Identity Inspired Consumption in Retirement” 
Accepted at: Journal of Consumer Research
Co-authors: Hope Jensen Schau and Mary Wolfinbarger (Ph.D. program alums)
January 2009
 
Using multi-method data, we investigate retirement as a life stage centered on consumption, where cultural scripts are particularly contested and in flux, and where we witness an increase in breadth and depth of identity-related consumption which we term consumer identity renaissance. While prior research on older consumers focuses on corporeal and cognitive decline and its impact on individual decision making situations, our attention is drawn to the competency and growth potential of those who have exited their formal productive stage, and privilege consumption as a means to create and enact identity. Contrary to the received view of older consumers simply reviewing and integrating their already developed identities, we find retirement can be a time of extensive identity work with multiple revived and emergent inspirations weaving across all time orientations (past, present and future) and involving intricate consumption enactments.


Professor Mary Gilly
Title: “Employees as Internal Audience: How Advertising Affects Employees’ Customer Focus”
Co-authors: Mary Wolfinbarger
Accepted at: Journal of the Academy of Marketing Science
September 2009

Ad campaigns target consumers with information about the company, its products, and sometimes its employees. Ads also reach the organization’s employees and may contain information useful to employees in meeting customer needs. Results from a study involving a high-tech firm indicate that when employees believe ads are effective and value congruent, their customer focus increases. Pride completely mediates the effects of value congruence and effectiveness on customer focus. Organizational identification of employees generally results in a more favorable reaction to ads. A second study involving a regional health facility replicates and extends these findings to include employee portrayal accuracy when employees are featured in ads. Employee portrayal accuracy affects promise accuracy, effectiveness and value-congruence. In addition, employee portrayal accuracy has a direct effect on customer focus.


Professors Mary Gilly and John Graham
Title: “Gender Differences in the Pricing of Professional Services: Implications for Income and Customer Relationships”            
Accepted at: Organizational Behavior and Human Decision Processes
Co-authors: William Cron and John Slocum
January 2009
   
This study extends our understanding of the effects of gender on both pricing behavior and owner income by examining both relationships in an experimental simulation involving owners of veterinary practices. Consistent with prior research, women owners are found to employ “compassionate pricing” more than men, even when the same services are offered. The process by which gender influences price, however is found to depend in part on one’s relationship orientation. Specifically, women are found to have a higher relationship orientation than men and relationship orientation is found to directly bias women’s transactional pricing towards more compassionate pricing. The relationship between role orientation, pricing, and income, however, is rather complex. While lower prices have a negative relationship with owner income, relationship orientation is found to have a positive direct influence on income. As a result, the net influence of relationship orientation on income is found to be both negative, due to lower prices, and positive, due possibly to the resulting customer loyalty.


Professor Loraine Lau-Gesk
Title: “Emotional Persuasion: When the Valence Versus the Resource Demands of Emotions Influence Consumers’ Attitudes”
Co-authors: Joan Meyers-Levy                                                          
Accepted at: Journal of Consumer Research
May 2009
 
Can properties of emotions other than valence influence consumers’ responses to emotional ads? If so, when? We show that consumers’ processing motivation moderates whether their attitudes are based on either the valence of or the resource demands imposed by the featured emotion. When motivation is low, consumers respond more favorably to positively versus negatively-valenced emotional ads. But when motivation is high, attitudes are most favorable when the magnitude of allocated resources matches that required to process the ad. Three studies identify three distinct properties of emotions (univalence, purity, and self-consciousness) that can influence the resource demands of an ad.


Professor Loraine Lau-Gesk
Title: “The Interactive Effects of Duality Expertise and Coping Frames on Responses to Ambivalent Messages”
Co-authors: Kramer, Thomas and CY Chiu                                      
Accepted at: Journal of Consumer Psychology
May 2009

We examine the interactive effects of biculturals’ duality expertise and externally provided coping resources on their attitudinal responses to ambivalence. Three studies reveal that ambivalence is associated with greater discomfort for biculturals more (vs. less) conflicted about their cultural duality and with limited exposure to accessing their two cultural knowledge systems simultaneously. Among biculturals with greater feelings of conflictedness about their cultural duality and more limited simultaneous exposure, the availability of a coping frame significantly lowers their negative evaluation of a message that elicits ambivalence. This appears to be the case because coping frames help these biculturals resolve the discomfort associated with ambivalence. In contrast, provision of a coping frame does not impact attitudinal responses to ambivalence of biculturals who feel less conflicted about their cultural duality and those with greater simultaneous exposure to both cultures. 


Professor Cornelia Pechmann
Title:  “Effects of Indirectly and Directly Competing Reference Group Messages and Persuasion Knowledge: Implications for Educational Placements”           
Accepted at: Journal of Marketing Research 
Co-author(s): Liangyan Wang (doctoral alumnus)
November 2008
 
Two experiments were conducted among 2,850 adolescents where versions of a real television program with an antismoking educational placement were tested against a control. Educational placements increasingly replace public service announcements but their efficacy is questioned because they invariably contain mixed messages. In an antismoking program, there are typically three indirectly competing messages about referents: smokers are attractive and prevalent but disapproved of. Experiment 1 tested program versions with these messages and found that the disapproval message dominated and elicited negative smoker thoughts and beliefs, despite an otherwise potent smoker attractiveness message. Experiment 2 found corresponding effects on intent but showed that adding a directly competing smoker approval message nullified the effects. Further, Experiment 2 tested an educational epilogue that was designed to reinforce the disapproval message but instead it boomeranged among smokers. For smokers, the educational placement was counterattitudinal. Thus when the epilogue disclosed the placement and evoked persuasion knowledge, smokers actually generated more positive smoker beliefs and intent. The findings contribute to the literatures on competing referent messages, disclosures and persuasion knowledge.


Professor Alladi Venkatesh
Title: “Digital Home Technologies and Transformation of Household”
Accepted at: Information Systems Frontiers 
November 2008
 
The basic issue I examine here is whether and how contemporary home life is being transformed with the arrival of new digital technologies. As new technologies diffuse into the home, new terminology has begun to emerge as, for example, in smart homes, home automation, digital home, digital living, networked home, home of the future, smart appliances and so on. To simplify the terminology, in this paper, I use the term “digital home technologies” and smart home technologies interchangeably to describe all of them. Although digital home technologies have developed in different directions because of the types of industry players involved, some common themes underlie these developments. They all seem to point to a great sense of anticipation that home life as we have understood in the past two or three decades will undergo some fundamental changes. It is claimed that some of the changes may be the result of advances at the technological frontier.  Based on a twenty year trajectory of theoretical and empirical work, this paper will identify the triumphs and failures.


Professor Alladi Venkatesh
Title: “Using Lexical Semantic Analysis to Derive Online Brand Positions: An Application to Retail Marketing Research”
Accepted at: Journal of Retailing
Co-author(s): Praveen Aggarwal, Rajiv Vaidyanathan
November 2008
  
This paper provides an innovative approach to brand tracking in the context of online retail shopping by deriving meaning from the vast amount of information stored in online search engine databases.  The method draws upon research in lexical text analysis and computational linguistics to gain insight into the structural schema of online brand positions.  The paper proposes a robust yet simple-to-use method that managers can utilize to assess their brand’s positioning relative to that of their competitors’ in the online environment.


Professor Alladi Venkatesh
Title: “Perceiving Images and Telling Tales: A Visual and Verbal Analysis of the Meaning of the Internet”
Co-authors: Annamma Joy, John Sherry Jr., and Jonathan Deschenes
Accepted at: Journal of Consumer Psychology
October 2009

This paper uses visual and verbal analysis to delve into the multi-faceted ways in which individuals construct their own meanings and shape their own experiences with the Internet. We build on the Zaltman Metaphor Elicitation Technique, and the principles of visual rhetoric to show how perceptual processes affect picture choices, and how these choices contribute to the narrative imagination. Numerous perceptual principles [abstraction, concept formation, perceptual problem solving, constancy, closure, symmetry and balance] are identified in the choice and organization of visual images. The argument we make is that images and words (visual and textual processes) provide deeper insights into our understanding of consumer online experiences.

OPERATIONS & DECISION TECHNOLOGIES

Professor L. Robin Keller
Title: “Modeling Multi-Objective Multi-Stakeholder Decisions: A Case-Exercise Approach”
Accepted at: INFORMS Transactions on Education           
Co-author(s): Tianjun Feng (doctoral alumnus), Xiaona Zheng (former doctoral student)
November 2008
 
The multi-objective multi-stakeholder decision modeling methodology is an effective way to describe and aid context-rich idiosyncratic organizational decision making situations that traditional single attribute decision methodologies can not tackle. The purpose of this paper is to demonstrate how to teach students this methodology as a decision making tool to analyze real-life decision problems using two business decisions as examples (the StarKist decision and the Home Depot case). In particular, we discuss the specific skills students are expected to learn, such as dynamic sensitivity analysis, and typical student questions and errors during case discussion. This methodology has been taught successfully in decision analysis courses both for MBA (including full-time MBA students, business and health care executive MBA students) and undergraduate students.


Professor L. Robin Keller
Title:  “Assessing Stakeholder Evaluation Concerns:  An Application to the Central Arizona Water Resources System”    
Accepted at: Systems Engineering     
Co-author(s): Craig W. Kirkwood (Arizona State University), and Nancy S. Jones, (Baltimore Metropolitan Council)
November 2008
 
We present an approach for efficiently assessing stakeholder evaluation concerns in the first stage of problem structuring for decisions involving complex systems.  We used a web survey to assess the appropriateness of a set of evaluation concerns for evaluating Central Arizona water resources system policies and to gather information on stakeholder priorities.  The resulting set of concerns brings a “decision focus” to the modeling efforts of the NSF-funded Decision Center for a Desert City at Arizona State University.  This problem structuring approach, the set of evaluation concerns, and the analysis of variations among stakeholder group priorities can serve as a starting point for other similar policy settings.


Professor Rick So
Title: “The Effect of Supply Reliability in a Retail Setting with Joint Marketing and Inventory Decisions”       
Accepted at: Manufacturing and Service Operations Management
Co-author(s):  Shaoxuan Liu (doctoral alumnus) (Shanghai Jiao Tong University) and Fuqiang Zhang (Washington University)
November 2008 
 
Our paper studies the impact of supply reliability on a retail firm's performance under joint marketing and inventory decisions. The firm sells a product in a single selling season and can exert marketing effort to influence consumer demand. We develop a modeling framework to quantify the value of improving supply reliability and investigate how this value depends on different model parameters.  Our results provide useful insights into how firms should make investment decisions on adopting new technologies to improve supply reliability. First, we establish a necessary and sufficient condition under which the maximum unit cost a firm is willing to pay to improve supply reliability increases in product price. We further show that this condition would hold in most practical situations. Thus, with some caveats, our result supports the intuition that a firm is willing to pay more to improve supply reliability for products with a higher price. Next we show that for two products with the same price, a firm is willing to pay more to improve supply reliability for the product with a higher product cost. This implies that it is not necessarily true that emerging technologies for improving supply reliability should be first adopted for products with the highest unit contribution margin. Finally, we show that a product with a lower marketing cost function always benefits more from improved supply reliability than a product with a higher marketing cost function. This finding suggests that the priority of adopting new technologies should be given to situations where the firm can effectively induce greater demand through promotional effort.


Professor Carlton H. Scott
Title: “Geometric Programming Models for Multiple Resource Allocation in Project Management”            
Accepted at: International Journal of Operations and Quantitative Management.
Co-authors: T.R. Jefferson and S. Jorjani
December 2008
 
A convenient way of representing precedence relationships in a multi-activity project is with a network diagram where each node represents an independent activity of certain duration and arcs denote the direction of time. An activity time can generally be reduced by the addition of resources to an activity.  In this paper, we assume that the activity duration is a function of multiple resources and that a finite amount of each resource is available for distribution over the entire project. The objective is to allocate multiple resources to each activity so that the critical path is as short as possible. We give two geometric programming formulations of this problem.  The first is a path formulation to which we derive geometric programming dual.  The second is a more traditional node-arc formulation which results in a different geometric program.  A numerical example and conclusions are given.


Professor Carlton H. Scott
Title: “Location of a Facility Minimizing Nuisance to or from a Planar Network”  
Accepted at: Computers and Operations Research
Co-authors: Z. Drezner and T. Drezner
December 2008
   
In this paper we investigate the location of a facility anywhere inside a planar network. Two equivalent problems are analyzed. In one problem it is assumed that the links of the network create a nuisance or hazard and the objective is to locate a facility where the total nuisance is minimized. An equivalent problem is locating an obnoxious facility where the total nuisance generated by the facility and inflicted on the links of the network is minimized. Exact and approximate solution methods for its solution are proposed and tested on a set of planar networks with up to 40,000 links yielding good results.


Jay Simon, Ph.D. Student
Title:  “Decision Making with Prostate Cancer: A Multiple-Objective Model with Uncertainty”
Accepted at: Interfaces 
November 2008
 
A man diagnosed with prostate cancer faces a difficult decision.  Treatments have varying cure rates and a wide range of side effects.  This paper discusses a multiple-objective decision model under uncertainty, which will be shaped by the preferences and personal characteristics of the individual.  This quantitative process incorporates both user input and medical data, and allows an individual prostate cancer patient to meaningfully compare treatments.  In addition to expected utilities, the model also provides intermediate results which allow for user feedback and increase the transparency of the analysis.


Professor Shuya Yin
Title: “Durable Products with Multiple Used Goods Markets: Product Upgrade and Retail Pricing Implications”
Co-authors: Saibal Ray, Haresh Gurnani, Animesh Animesh
Accepted at: Marketing Science
October 2009

Used goods markets are nowadays important transaction channels for durable products. For some durable products, such markets first appeared when retailers started buying back used products from “old” customers and selling them to new ones for a profit (retail used goods market). The growth of electronic peer-to-peer (P2P) markets opened up a second, frictionless used goods channel where new customers can buy used products directly from “old” ones (P2P used goods market). Both these markets compete with the original primary market whereby retailers sell unused products procured from the manufacturer. This paper focuses on understanding the role that the sequential emergence of the above two used goods markets plays in shaping the product upgrade strategy of the manufacturer and the pricing strategy of the retailer. We do so in the context of a decentralized, dyadic channel dealing with a renewable set of consumers. Our analysis establishes that frequent product upgrades and rising retail prices in durable product sectors of our interest are due to the emergence of the P2P used goods market and how it interacts with the retail used goods source in altering the relative powers of the channel partners. Moreover, contrary to popular belief, we show that the initial introduction of the retail used goods channel actually discourages introduction of new versions and restrains the rise in retail prices. We also comment on how the two used goods markets affect the profits of the channel partners. We then provide empirical support for our theoretical result regarding product upgrades using data from college textbook industry, a durable product which fits our model setup.


Professor Shuya Yin
Title: “Alliance Formation among Perfectly Complementary Suppliers in a Price-Sensitive Assembly System”
Co-authors:
Accepted at: Manufacturing and Service Operations Management (MSOM)
November 2009

Independent parties who produce perfectly complementary components may form alliances (or coalitions or groups) to better coordinate their pricing decisions when they sell their products to downstream buyers. This paper studies how market demand conditions (i.e., the form of the demand function, demand uncertainty, and price-sensitive demand) drive coalition formation among complementary suppliers. In the model with deterministic demand, we show that for an exponential or iso-elastic demand function, suppliers always prefer selling in groups; while for a linear-power demand function, suppliers may all choose to sell independently in equilibrium. These results are interpreted through the pass-through rate associated with the demand function. In the model with uncertain demand, we show that, in general, the introduction of a multiplicative stochastic element into demand has an insignificant impact on stable coalitions, and that an endogenous retail price (i.e., demand is price-sensitive) increases suppliers' incentives to form alliances relative to the case with a fixed retail price. We also consider the impact of various other factors on stable outcomes in equilibrium, e.g., sequential decision making by coalitions of different sizes, the cost effect due to alliance formation (either cost savings or additional costs), and a system without an assembler.

ORGANIZATION AND MANAGEMENT

Professor Kristin Behfar
Title: “How to manage your negotiating team: The biggest challenge may be on your own side of the table.”
Co-authors: Jeanne Brett and Ray Friedman
Accepted at: Harvard Business Review
August 2009
 
Team members, often unwittingly, routinely undermine one another and thus their team’s across-the-table strategies. We studied 45 negotiating teams from a wide array of industries, including finance, health care, publishing, manufacturing, telecom, and nonprofit. And they told us that their biggest challenges came from their own side of the table. Drawing on the lessons learned from the experiences of these teams, we offer advice on how to manage the two major obstacles to a negotiating team’s success: aligning the conflicting interests held by members of your own team and implementing a disciplined strategy at the bargaining table.


Professor Cristina Gibson
Title: “What Results When Firms Implement Practices: The Differential Relationship Between Specific Practices, Firm Financial Performance, Customer Service, And Quality”    
Accepted at: Journal of Applied Psychology  
Co-author(s): Porath, Benson and Lawler
November 2008
 
In the article, we examine an age-old debate through fresh eyes and using a comprehensive data set of over 200 Fortune 1000 firms.  Previous research on organizational practices is replete with contradictory evidence regarding their effects.  Here, we argue that these contradictory findings may have occurred because researchers have often examined complex practice combinations, and have failed to investigate a broad variety of firm-level outcomes.  Thus, past research may obscure important differential effects of specific practices on specific firm-level outcomes.  Extending this research, we develop hypotheses about the effects of practices that 1) enable information-sharing, 2) set boundaries, and 3) enable teams on three different firm-level outcomes:  financial performance, customer service, and quality.  Results indicate that information-sharing practices are positively related to financial performance one year following implementation of the practices; boundary-setting practices are positively related to firm-level customer service; and team-enabling practices are related to firm-level quality.  No one set of practices predicted all three firm-level outcomes, indicating practice-specific effects. Our findings help resolve the theoretical tension in the literature regarding the effects of organizational practices, and offer guidance as to how to best target practices to increase specific work-related outcomes. Implications for theory, research, and practice are discussed.


Professor Cristina Gibson
Title: “Do You See What We See?  The Complex Effects Of Perceptual Distance Between Leaders And Teams”     
Accepted at: Journal of Applied Psychology  
Co-author(s): Cooper and Conger
November 2008
 
In the article, we use a unique application of a rigorous analytical technique (quadratic polynomial regression with response surface modeling) to develop a new organizational concept (perceptual distance) that provides innovative insight to the issue of how differences in perceptions effect organizational outcomes.  Previous distance-related theories and concepts (e.g., social distance) have failed to address the sometimes wide disparity in perceptions between leaders and the teams they lead.  Drawing from the extensive literature on teams, leadership, and cognitive models of social information processing, we develop the concept of leader-team perceptual distance, defined as differences between a leader and a team in perceptions of the same social stimulus. We investigate the effects of perceptual distance on team performance, operationalizing the construct using three distinct foci, goal accomplishment, constructive conflict, and decision making autonomy. Analyzing leader, member, and customer survey responses for a large sample of teams in the pharmaceutical industry, we demonstrate that perceptual distance between a leader and team regarding goal accomplishment and constructive conflict have a nonlinear relationship with team performance.  Greater perceptual differences are associated with decreases in team performance.  Moreover, this effect is strongest when team perceptions are more positive than the leader’s (as opposed to the reverse). This pattern illustrates the pervasive effects that perceptions can have on team performance, highlighting the importance of developing awareness of perceptions in order to increase effectiveness.  Implications for theory, practice, and research are delineated.  Methodologically, we note that the use of quadratic polynomial regressions and response surface methodology provided important insights not elucidated with traditional approaches such as squared difference terms and two dimensional graphic representations.
 
 
Professor Jone Pearce and Ph.D. Students Rebekah Dibble and Kenji Klein
Title: “The Effects of Governments on Management and Organization”
Accepted at: The Academy of Management Annals, Volume 3, 2009
August 2009
  
We review and integrate existing research from organization theory, strategy, organizational behavior, economics, sociology and political science on the effects of governments on organization and management, with a focus on  how governing ideology and government capability influence independent organizations’ forms, strategies, and their participants’ behavior. When brought together these works suggest significant research opportunities in the fields of management and organization, as well as new perspectives on public policy challenges. Several avenues of potentially profitable empirical research include more attention to the influence of government on corporate strategies, more research on the strategies of pursuing corruption and government capture for competitive advantage, the role of government in fostering innovation and the growth of entrepreneurial organizations, and extra-organizational contextual effects on managerial and employee organizational behavior.  Possible public policy implications are illustrated with an application to the role of organizations in national wealth generation and dispersion.
 
 
Professor Claudia Bird Schoonhoven
Title: “Intercommunity relationships and community growth in China’s High Technology Industries 1988-2000.”
Accepted at: Strategic Management Journal
Co-authors: A. Zhang & H. Li
March 2009
 
This paper reports on a unique panel study of 53 national technology development zones in China spanning 1988 - 2000.   Conceptually zones are organizational communities which contain several related industries.  The zones’ primary purpose is to promote technological innovation in ten areas considered new and “high technology” in China.  The first zone was founded in Beijing in 1988, and by 1994, 52 zones had been established in cities throughout China. In ten years, the zones grew dramatically with collective revenues of 460 billion RMB, however the communities have grown differentially.  The question we address is what predicts community revenue growth?  We examine how inter-community relationships affect the revenue growth of organizational communities, controlling for community age, provincial versus central government origin, R&D and export intensiveness, political importance of city location, local city GDP, cities' degrees of industrialization, city foreign direct investment, city colleges, and calendar year to control for China’s substantial development since 1988. 
We found that greater community density (number of zones in a given region), a community’s geographic proximity to the nearest community and its domain overlap with the nearest community all have an inverted U-shaped relationship with community growth.  These non-monotonic findings support our argument that organizational communities are interdependent and that they share both mutualistic and competitive relationships, which in turn have a significant impact on community growth.  For example all else being equal, a community’s expected sales revenue would be 235% times greater if domain overlap with the nearest zone were to increase from 0 to 94% but any further increases would significantly decrease revenues.  These findings have both policy and managerial significance which are developed in the paper.


Professor Claudia Bird Schoonhoven
Title: “The Next Wave of Entrepreneurship Research.”
Accepted at: Advances in the Study of Entrepreneurship, Firm Emergence, and Growth
Co-authors: Elaine Romanelli
March 2009

 

STRATEGY

Professor Philip Bromiley
Title: “A Prospect Theory Model of Resource Allocation”               
Accepted at: Decision Analysis
April 2009
 
Many papers in organization theory and strategy use prospect theory, but few derive their hypotheses from prospect theory’s formal model.  This paper develops a prospect theory model of resource allocation under risk where projects have both positive and negative adjusted payoffs.  The model assumes consistent value (rather than profit) maximizing behavior and demonstrates how resources, risk propensity, and reference levels interact to determine allocations to risky projects.  The analysis shows that prospect theory's parameters interact in complex ways to influence risk-taking which makes simple predictions difficult.  Overall, loss aversion and the reference point dominate the results with curvature of the value function playing a secondary role and the maximum risk aversion occurring for firms near their reference points, not for firms above their reference points.


Professor Yan Gong
Title: “Vicarious learning and inferential accuracy in adoption processes”
Accepted at: Academy of Management Review
Co-author(s): Ann Terlaak, Assistant Professor, UW-Madison
November 2008
 
We develop a model of inferential vicarious learning that explicates how firms can learn whether to adopt a practice whose value varies across organizations. We first theorize how firms can infer this variation from samples of adopters, nonadopters, abandoners, and nonabandoners. Surprisingly, incomplete samples may allow more accurate inferences than complete ones. We then propose how firms, equipped with an understanding of the variation, can select referent organizations that differ from those identified in previous research.


Professor David Obstfeld
Title: “Creative projects: A less-routine approach toward getting new things done”                             
Accepted at: Organization Science
May 2009

This paper presents a framework for action that accounts for both how organizations get routine things done and pursue markedly new things through “creative projects.”  Based on this framework, organizational routines and creative projects are viewed as trajectories occurring along a continuum of interdependent action differing in degree of repetitiveness, not in kind; functionally different, but sharing the same representational space.  An ethnographic case study of an automotive prototype purchasing process and two initiatives to redesign that process is used to compare an organizational routine with creative projects occurring within the same organizational setting, and to further explicate the framework.  Case analysis reveals how projection and planning (the ostensive aspect), as well as combinatorial action, knowledge articulation, and contingency management (the performative aspect), unfold differentially in organizational routines and creative projects.  This paper contributes to our understanding of different forms of organizational change and provides a framework to examine the role of non-routine organizing at several levels of organizational analysis.


Professor Margarethe Wiersema
Title: “The Use of Limited Dependent Variable Techniques in Strategy Research: Issues and Methods”    
Accepted at: Strategic Management Journal
Co-authors: Harry P. Bowen
March 2009
 
Strategy researchers are increasingly turning their attention from examining the impact of strategic choices on firm performance to examining the factors that determine strategic choices at the firm level.  This shift of research orientation has meant that researchers are increasingly faced with a limited dependent variable that takes a limited number of usually discrete values, for which methods such as Logit or Probit are required.  Despite their growing popularity, there appears to be widespread problems in the analysis of models using limited dependent variables. The purpose of this paper is to augment general guidelines with a more pragmatic approach for utilized these techniques. Toward this goal, this paper first considers the research design issue of when a limited dependent variable model is appropriate.  It then presents and illustrates the essential methods for analyzing and interpreting the results from these models via simple examples that use the binary Logit model - the most common limited dependent variable model used in the strategy literature.  In taking a pragmatic approach, this paper complements and contributes to the growing stream of articles in the strategy literature that highlight general methodological and statistical issues and, more specifically, recent papers that have raised awareness of key problems and offered general guidelines to foster the correct use of limited dependent variable methods.


Professor Margarethe Wiersema
Title: “Stock Market Reaction to CEO Certification: The Signaling Role of CEO Background”     
Accepted at: Strategic Management Journal
Co-authors: Anthea Zhang
March 2009
   
As a direct result of the corporate scandals that started with Enron and led to general unrest in the financial markets, the Securities and Exchange Commission (SEC) required chief executive officers (CEOs) and chief financial officers (CFOs) of large publicly traded companies with revenues greater than $1.2 billion to certify their financial statements by August 14th of 2002.  We utilize the SEC ruling to define a natural experiment that allows us to investigate the signaling role of the characteristics of the CEO to investors. Since it is not possible to fully ascertain the truthfulness of the firm’s financial statements from the act of CEO certification, we utilize market signaling theory to propose that attributes of the CEO send important signals to the investment community as to the credibility of the CEO certification and thus the quality of the firm’s financial statements, which in turn impact the stock market reaction to the CEO certification.  Consistent with prior research that has found that investors utilize attributes of the firm’s top management team to differentiate the quality of IPOs, there was a significant positive response by the stock market to CEO certification for firms where the CEO had larger shareholdings and held a greater number of external directorships.  Results of this study also show there was a significant negative response by the stock market to CEO certification for firms where the CEO was associated with his/her company’s prior financial restatements (i.e., restatements were filed during the CEO’s tenure) suggesting that these certifications were less trustworthy to investors.   Our investigation contributes to upper echelon research by examining the signaling role of the characteristics of the CEO in affecting investors’ response to his/her actions.