Signals or Shackles? The Effect of Patents on Inventor Mobility and Entrepreneurship

Host(s): Professor John Joseph
Speaker(s): Justin Frake, Ph.D. Candidate
University: Robert H. Smith School of Business, University of Maryland
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Monday, December 11, 2017, 10:30 am – 12:00 pm

How do patents affect the probability that an inventor will leave their employer to join or start another firm? Building on theories of appropriability and firm-specificity, prior studies support the notion that patents constrain inventors. I argue, using signaling theory, that patents will increase inventor mobility and entrepreneurship by acting as signals of inventor quality. I further argue that the positive effects of patenting are exacerbated for university inventors and inventors working on discrete technologies. Instead of relying on patent records to measure mobility, which leads to sampling and misclassification bias, I match US patent data with linked employee-employer Census microdata. This novel dataset allows me to observe the near-complete patent, wage, and employer history of most US inventors between 1995 and 2008. To causally identify the effect of patenting, I use the historical leniency of quasi-randomly assigned patent examiners to instrument for whether a patent is granted. I challenge prior work by finding support for the signaling, rather than constraining, effects of patents. To test whether signaling is the operant mechanism, I show that patenting also increases the inventor’s wages and future productivity. My findings reveal an interesting paradox for innovative firms: by patenting an inventor’s idea, firms dramatically increase the probability that the inventor will leave to join or start another firm.

---

Peer Firm Disclosure Response to Takeover Threat

Host(s): Assistant Professor Elizabeth Chuk
Speaker(s): Shuping Chen, Professor of Accounting
University: McCombs School of Business, University of Texas at Austin
Location: SB1 2321 Judy B. Rosener Classroom
Time: Friday, December 8, 2017, 3:00 pm – 4:00 pm

We examine how firms subject to a takeover threat change their voluntary disclosure behavior. We exploit the exogenous control shock experienced by firms upon the hostile takeover announcements of rival firms in the same industry, and perform difference-in- difference analyses to test shocked firms’ disclosure reaction relative to control firms. We find that, after the control shock, treatment firm managers provide more forecasts and issue more 8-Ks and the expanded disclosure contains more bad news. In addition, the expanded disclosure is of a higher precision as evidenced by managers’ conference call language that is easier to understand and that contains less obfuscation component. Treatment firms also provide more quantitative but not qualitative earnings forecasts, and their 10-Ks contain fewer uncertainty words. Taken together, our combined results are consistent with treatment firms expanding voluntary disclosure and increasing the transparency of the associated disclosure in response to the control shock. Our study contributes to the voluntary disclosure literature by providing much needed causal evidence on voluntary disclosure changes.

---

The Social Foundations of Creativity: Evidence From Popular Music, 1955-2000

Host(s): Assistant Professor Sharon Koppman
Speaker(s): Noah Askin, Assistant Professor of Organizational Behavior
University: INSEAD Business School Fontainebleau Campus
Location: SB1 5200 Porter Colloquia Room & Executive Terrace
Time: Friday, December 8, 2017, 10:30 am – 12:00 pm

Creativity is central to cultural production, but what makes certain producers more likely to innovate than others? More specifically, what are the different sources of social influence that drive variation in creative output, and through what mechanisms do these sources operate? To answer these questions, we leverage original data on over 25,000 musical artists and 600,000 songs recorded and released between 1955 and 2000, using fine-grained musical features to construct a continuous measure of creative output (i.e., song novelty). We then test whether artists draw creative inspiration through the recombination of diverse ideas, or are instead stimulated by the creativity of their musical neighbors. We find that both of these mechanisms explain an artist’s propensity to write and release novel songs, but in systematically different ways: creative artists tend to recombine material from diverse genres that they encounter through their collaboration networks, while they draw inspiration from—and are granted legitimacy by—other creative artists with shared genre, record label, and/or geographic affiliations. This pattern holds even after controlling for an individual or group’s historical propensity to produce novel songs. These findings suggest that the likelihood of generating new ideas is influenced not only by direct interaction and collaboration with others, but also through indirect exposure via shared cultural, organizational, and geographic contexts. Understanding when and how creative potential travels across these “spheres of influence” sheds new light on the production of novelty in music and the social foundations of creativity more generally.

---

Sourcing and procurement cost allocation in multi-division firms

Host(s): Associate Professor John Turner
Speaker(s): Assistant Professor of Management, Fang Fang
University: College of Business and Economics, California State University at Los Angeles
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Friday, December 8, 2017, 10:30 am – 12:00 pm

Problem definition. Through Central Procurement Organizations (CPOs), large firms with multiple divisions have begun adopting a center-led sourcing approach that allows firms to centralize strategic sourcing activities, while permitting decentralized execution by divisions, allowing the firm to leverage large purchase volumes with vendors. This new center-led procurement environment has brought a new decision requirement: How can a CPO select vendors for each division’s requirements to minimize the firm’s total procurement cost and simultaneously develop a fair and alignment-inducing mechanism to allocate the costs (and savings) of company-wide procurement to the divisions? Academic/Practical relevance. Past research and current practice have not addressed this linkage between vendor selection and cost allocation in multi-division firms. Methodology. We model this sourcing and procurement cost allocation (SPC) decision problem facing CPOs of large firms as a mixed-integer optimization problem. This model is flexible and permits us to incorporate and examine alternative divisional participation schemes and commonly used fair cost allocation rules. Results. Although the SPC problem is NP-hard, our analysis characterizes important aspects of the optimal solution to reveal that (a) the CPO could incur a significant additional cost in ensuring fair cost allocation, (b) selecting vendors first and then setting appropriate transfer prices (in a sequential, rather than simultaneous manner) could cause large deficits for the CPO, and (c) of two common fairness rules (uniform pricing and proportional savings allocation), one does not uniformly dominate another, and similarly neither of two participation schemes (flexible and all-or-nothing) dominates the other in all cases. Managerial implications. This work shows that sourcing and procurement cost allocation are interlinked, highlighting the need for managers to make these decisions jointly. CPOs have several choices (participation schemes and fairness rules) in organizing multi-division procurement; this research helps construct a framework for managers to understand the relative impact of their choices. Keywords: Procurement, Cost allocation, Applied optimization

---

Platform Competition under Network Effects: Piggybacking and Optimal Subsidizing

Host(s): Assistant Professor Tingting Nian
Speaker(s): Professor of Information Technology Management, Dongjun Wu
University: Scheller College of Business, Georgia Institute of Technology
Location: SB1 5200 Lyman Porter Colloquia Room
Time: Thursday, December 7, 2017, 2:30 pm – 4:00 pm

A repeated challenge in launching the two-sided market platform is how to solve the “chicken-and-egg” problem. Subsidizing one side of the market to jumpstart the platform adoption process has often been suggested in the literature as the solution. In this paper, using a game-theoretic framework, we study piggybacking -- importing users from external networks as a new approach to launch platforms. First, we solve for the platforms' optimal pricing strategies and identify conditions under which each competing platform should subsidize users in the presence of piggybacking. Benchmarked with the case of no-piggybacking, we find that piggybacking does not change the condition of but only the degree of platform subsidizing. Second, we discover when subsidizing is complementary to piggybacking. Third, we show that the platform with stronger piggybacking capabilities tends to monetize more aggressively the side with stronger network effects, while the opponent platform has to monetize the other side. These findings are robust to an extension when piggybacking is endogenized. Finally, we extend our model to examine fabricated piggybacking such as zombie users and fake profiles in platform competition. We show that fabricated piggybacking may affect the platforms' subsidizing conditions, and it always undermines the opponent platform’s profit. These results contrast sharply to findings under authentic piggybacking. Managerial implications for platform practitioners are also discussed. (This is joint work with Yifan Dou.)

---

Wealth Management and Financial Advisory Services in the Asia-Pacific Region

Host(s): Associate Professor Christopher Schwarz
Speaker(s): Professor of Finance, Lujer Santacruz
University: School of Commerce, University of Southern Queensland
Location: SB1 5200 Lyman Porter Colloquia Room
Time: Friday, December 1, 2017, 12:00 pm – 1:30 pm

The present paper is an industry study of wealth management and financial advisory services in the Asia-Pacific region, recognising the strong growth in personal wealth in this region. It aims to gain an understanding of the structure of the industry, current directions and opportunities thereof. The paper starts with a look at the wealth management and financial advisory services industry in the US, on which the practices in other countries are patterned and given that US financial entities are major players in the Asia-Pacific region. Examining the US industry is also a good way of introducing the terminologies used in the industry worldwide. The paper then examines the industry in Australia, which has a relatively well developed financial advisory environment before examining the industry in other major Asia-Pacific countries. For each country, the paper looks at the industry participants and the regulatory environment. Finally, the paper examines the general trends and directions that impact the industry and identifies potential opportunities.

---

Adaptive Thinking: Why some Directors exert an Outsized Influence on Strategic Change in New Ventures at IPO

Host(s): Dean’s Professor Margarethe Wiersema
Speaker(s): Razvan Lungeanu, Assistant Professor of Management and Organization
University: Smeal College of Business, Penn State
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Thursday, November 30, 2017, 10:30 pm – 12:00 pm

This study addresses the oft-debated questions of whether, when, and how corporate board members help shape firm strategy by advancing a new perspective on heterogeneous director influence that introduces the notion of the deep/broad director. Specifically, we build upon research in strategy/organization theory and human cognition to suggest that deep/broad new outside directors, whose expertise results from a blend of depth and breadth of experience, will have an outsized influence in shaping firm strategy. We test our theory using an extensive multi-year dataset that tracks all firms that went through an IPO in the U.S. across multiple business cycles (1997, 2001, and 2004) until 2011. Focusing on new outside directors in their first year of service (and controlling for selection issues), our results support our main prediction that those directors whose prior experiences are both deep and broad are the most influential directors for strategic change. We find this result to be robust for multiple indicators of strategic change. We also explore whether the outsized influence of the deep/broad director on strategic change may vary by differences in a board’s openness to strategic change. We conclude by highlighting the relevance of our approach and findings for future research and debates on director selection and director expertise.

---

Attention Biases in Social Networks

Host(s): Dean’s Professor Margarethe Wiersema
Speaker(s): Luke Rhee, Assistant Professor of Technology Management and Innovation
University: Tandon School of Engineering, New York University
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Monday, November 27, 2017, 10:30 am – 12:00 pm

This study introduces the notion of attention allocation in social networks to examine how people receive high performance evaluations in innovation projects. Using survey data on communication networks among software engineers at a mobile service company, we find that independent of their network structure, engineers who allocate their attention to information coming from brokers receive higher performance evaluations in innovation projects than those who pay no (or little) attention to that information. Although individuals should pay attention to information shared by brokers for better innovation performance, our data reveal that individuals typically pay less attention to information coming from brokers than they do to information shared by other work colleagues. Consequently, there is a mismatch between the communication partners to whose information people normally pay attention and to whose information they should be paying attention for innovation. These findings about attention bias in social networks make a number of contributions to behavioral theories of networks and innovation in an organization.

---

The Persistence and Pricing of Merger-Related Transitory Growth and Its Implications for Growth Anomalies and Asset Pricing Models

Host(s): Assistant Professor Liz Chuk
Speaker(s): Daniel Collins, Professor and Department Executive Officer Henry B. Tippie Research Chair in Accounting
University: The University of Iowa, Tippie School of Business
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, November 17, 2017, 3:00 pm – 4:30 pm

Prior literature in financial economics and accounting measures asset growth as year-over-year nominal growth in total assets. Such growth estimates are upward biased when firms engage in mergers and acquisitions. We decompose asset growth into merger-related and organic growth components, and find that merger-related growth is less persistent than organic growth. We find that merger-related growth is a strong predictor for future returns after controlling for other return predictors in cross-sectional tests. Asset pricing tests reveal that priced risk factors do not explain this merger-related growth pricing anomaly. We also documents that merger-related growth is positively associated with analysts’ optimism in earnings forecasts and stock recommendations. Furthermore, such return predictability is exhibited by firms that do not transparently disclose the merger-related and organic growth components, and is more pronounced for stocks with high transaction costs and arbitrage risk. Finally, the return predictability of merger-related growth dissipates within one year. Collectively, these findings are consistent with the performance over-extrapolation hypothesis and investors with limited attention playing a role in mispricing.

---

Emphasizing feasibility and near optimality in first-order methods: A level-set method with a feasible solution path

Host(s): Associate Professor John Turner
Speaker(s): Assistant Professor, Negar Soheili Aza
University: University of Illinois at Chicago
Location: SB1 5200 Lyman Porter Colloquium Room
Time: Friday, November 17, 2017, 2:00 pm – 3:30 pm

Large-scale constrained convex optimization problems arise in several application domains, including data mining and machine learning, nonlinear resource allocation problems in operations management, and circuit and layout design. First-order methods are good candidates to tackle such problems due to their low iteration complexity and memory requirement. These features have led to revived interest in first-order methods from academics and commercial software developers (e.g., TensorFlow). However, the success of first-order methods has been greatest for problems with simple feasible sets. Current bundle and level-set approaches attempt to extend the applicability of these methods to more complicated objectives and constraint sets but either rely on the solution of challenging subproblems or do not guarantee a feasible solution, especially if the procedure is terminated before convergence, for example, due to time limits in an online environment. Infeasibility may void the implementation of a solution in real-world situations where constraints capture operating conditions that must be satisfied.

This status-quo motivates our research. We develop a level-set method that finds a feasible and near (relative) optimal solution to a constrained convex optimization problem with a fairly general objective function and set of constraints, maintains a feasible solution at each iteration (i.e., a feasible solution path), and only relies on calls to first-order oracles. We establish the iteration complexity of our approach, also accounting for the smoothness and strong convexity of the objective function and constraints when these properties hold. The dependence of our complexity on the optimality guarantee is similar to the analogous dependence one can obtain in an unconstrained setting, which is not known to be true for other level-set methods in the literature.

---

Optimizing Two-Sided Promotion for Transportation Network Companies: A Structural Model with Conditional Bayesian Learning

Host(s): Assistant Professor Mingdi Xin
Speaker(s): Yong Tan, Neal and Jan Dempsey Professor of Information Systems
University: Foster School of Business, University of Washington
Location: SB1 2321 Judy B. Rosener Classroom
Time: Friday, November 17, 2017, 10:30 am – 12:00 pm

The mobile app of a transportation network company (TNC) allows the TNC platform to run aggressive and diverse two-sided sales promotions to help to introduce new products. We examine how two-sided sales promotion affects drivers’ willingness to use the TNC app and how the TNC develops its optimal promotion strategies accordingly. To investigate the effects of sales promotion, we estimate a structural model of drivers’ decisions to accept orders and to cancel generated orders and their perception of passengers’ willingness to utilize a sales promotion. Bayesian learning processes are introduced to account for decisions under uncertainty as the app is introduced. We find measurable evidence of drivers’ learning about the value of the attributes of the transportation network app. The results indicate that the substantial value of early promotion not only encourages current usage but also fosters learning that sustains drivers’ use of the app afterward. Our results also show that revealed tips from passengers signal low quality of service and that platform cashback to passengers has a positive effect on drivers by increasing drivers’ chances of being rewarded. Given the estimated parameters, we run simulations to explicitly measure the indirect effects of the sales promotion, as supported by learning, and show how cashback for passengers affects the decisions of drivers. Finally, our experimental promotion policies show improved performance with regard to drivers’ willingness to use the app as well as its cost effectiveness.

---

Social Comparison and Employee Mobility

Host(s): Associate Professor Libby Weber
Speaker(s): Teppo Felin, Professor of Strategy
University: University of Oxford, Saïd Business School
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, November 3, 2017, 2:00 pm – 3:30 pm

In this paper we study the nexus of social comparison, wage inequality, and employee mobility. Extant research has largely focused on how within-firm social comparison of wages—using aggregate measures such as firm-level wage inequality (e.g., Gini coefficient)—impact employee satisfaction, productivity and mobility. We argue that social comparison is “personal” in the sense that it is a function of one’s relative standing within and across firms, rather than a function of more aggregate measures (e.g., overall wage inequality, average wages of the firm, the firm’s ranking in terms of average wage within the industry). We utilize a more fine-grained measure of social comparison, that is, a focal employee’s relative standing or rank both within and across firms. Using a large-scale, multi-year and multi-industry dataset we show that both within and across-firm employee wage rank is negatively correlated with mobility. We also theoretically argue and empirically show that industry-level social comparison matters more than firm-level comparison—suggesting a need to broaden the scope of the social comparison literature to include the set of other firms that an employee might move to. Across-firm social comparisons are salient due to a number of factors, including the professional ties and embeddedness of employees in networks outside the firm. We replicate extant findings of firm-level wage inequalities and mobility, and provide a more nuanced discussion of why and how wage inequality shapes employee mobility. We also highlight and discuss the implications of wage inequality and mobility on firm performance. key words: employee mobility, social comparison, strategy, performance.

---

Lenders’ Use of Analyst Earnings Forecasts When Establishing Debt Convenant Thresholds

Host(s): Assistant Professor Elizabeth Chuk
Speaker(s): Andrew Call, Associate Professor
University: Arizona State University, School of Accountancy
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, October 27, 2017, 3:00 pm – 4:30 pm

We examine whether lenders use analyst forecasts of the borrowing firm’s future earnings when establishing covenant thresholds in private debt contracts. We find greater proximity between the analysts’ consensus earnings forecast and the future earnings performance required by the contract among borrowers whose analysts historically issue accurate earnings forecasts, consistent with our hypothesis that lenders use analyst earnings forecasts when establishing debt covenant thresholds. These results are robust to firm and year fixed effects as well as an instrumental variable approach that addresses potential correlated omitted variables. We also find that the likelihood that the borrower violates a debt covenant following a decline in creditworthiness is increasing in the extent to which the debt covenant threshold is set closer to analyst expectations, suggesting that lenders’ use of analyst research increases the effectiveness of debt covenants in transferring contingent control rights. Our results provide new evidence on the role of analyst earnings forecasts in debt contracting and inform the literature on the information used by lenders when establishing debt covenant thresholds.

---

Stage-Gate Selection In Innovation

Host(s): Professor John Joseph
Speaker(s): Ronald Klingebiel, Professor of Finance
University: Frankfurt School of Finance and Management
Location: SB1 3410, Center for Investment and Wealth Management
Time: Wednesday, October 25, 2017, 10:30 am – 12:00 pm

We use a hybrid inductive method to examine resource-allocation decision making at stage gates of the innovation process at former handset maker Sony Ericsson. We particularly focus on project discontinuation, a key objective in organizing innovation as selective funnels. We provide three insights with implications for escalation theory. First, initial uncertainty constrains the articulation and tracking of projects’ commercial attractiveness. This means that escalation can be an unknowable process as well as a decision bias, limiting the usefulness of selection gates early in development. Second, we document a reluctance to search and update business cases as projects near completion. This suggests the presence of a new mechanism that might inadvertently have been captured in escalation studies of self-justification and goal-substitution effects. Third, we reveal a strong form of escalation, whereby projects, whose deteriorating commercial prospects are reflected in downward business-case revisions, are more likely to be continued than projects with stable or improving business cases. This suggests a counter-intuitive effect of attention on commitment escalation. Our findings contribute to a better understanding of both the nature of escalation decisions and the stage-gate organization of innovation under uncertainty.

---

Relative Valuation and the Production of Information

Host(s): Assistant Professor David Yang
Speaker(s): Alan Moreira, Assistant Professor of Finance
University: Simon Graduate School of Business, University of Rochester
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, October 20, 2017, 2:00 pm – 3:00 pm

We study the problem of an investor that allocates analysts to assets to learn about future asset values. We show that when analysts are better at relative rather than absolute asset valuations the optimal matching of analysts to assets displays a balancedness property in which pairs of distinct assets are covered by a similar number of analysts. A balanced allocation allows the investor to efficiently aggregate information using the relative value between assets, eliminating the effect of the analyst-specific component. We show that the optimal matching of analysts to assets and the optimal portfolio decision depends on the structure of the analyst coverage network - the bipartite graph where the vertices are the firms and the edges are all the pairs of distinct firms that are covered by at least one common analyst. For example, capital is only reallocated between firms that are connected in the network, and the intensity of the reallocations depends on both the value of relative asset recommendations and the strength of the connection between the assets.

---

Business Models: Toolkits for Sensemaking in a Post – Chandlerian Economy

Host(s): Professor John Joseph
Speaker(s): William Ocasio
University: Kellogg School of Management, Northwestern University
Location: SB1 5200, Porter Colloquia Room and Executive Terrace
Time: Friday, October 20, 2017, 10:30 am – 12:00 pm

The business model concept is increasingly used by practitioners, but our understanding of its origins and development is limited. Using a combination of inductive text analysis and historical narrative, we trace the evolution of the concept from 1990 to 2016. Our analysis shows that the concept began in semiconductors, computers, and e-business firms as they transitioned away from vertically integrated organizations towards greater specialization and horizontal collaboration. The concept expanded in usage and became institutionalized but its precise application was quite varied. Paradoxically this ambiguity in meaning facilitated sensemaking and strategizing across a variety of industries responding to changes in to technology, globalization, and customer demands in a post-Chandlerian economy.

---

Asset Pricing in the Quest for the New El Dorado

Host(s): Associate Professor David Yang
Speaker(s): Bruce Carlin
University: Anderson Graduate School of Business, University of California, Los Angeles
Location: SB1 5200, Porter Colloquia Room and Executive Terrace
Time:Friday, October 13, 2017, 10:00 am – 11:30 am

Creative destruction not only involves bringing new technology to market, it imposes higher risk on the future of existing assets. We characterize the asset pricing implications of creative destruction when investors compete for market share. Compared to first best, the quest for oligopoly rents leads to overinvestment in uncertain projects, spikes in asset prices and risk premia, and an aftermath in which prices fall steeply as uncertainty resolves. If competition for rents is sufficiently aggressive, the elevated price-dividend ratio predicts negative future expected returns. This resembles a bubble ex post, but arises solely from competitive behavior and does not require heterogeneous beliefs, behavioral biases, or financial frictions. Our analysis yields novel empirical predictions and we discuss how financial innovation might be used to predict bubbles ex ante.

---

Does PCAOB Regulatory Enforcement Deter Non-Sanctioned Auditors?

Host(s): Assistant Professor Elizabeth Chuck
Speaker(s): Phillip Lamoreaux, Assistant Professor of Accounting
University: Arizona State University
Location: SB1 2321 Judy B. Rosener Classroom
Time:Friday, September 29, 2017, 3:00 pm – 4:00 am

We investigate whether public enforcement by the PCAOB against an audit firm influences the audit quality of nonsanctioned audit firms. PCAOB enforcement activities are publicized with the intent to serve a deterrence function for other auditors. However, the effect of public enforcement on non-sanctioned audit firms has not been empirically investigated. Exploiting this exogenous event to non-sanctioned firms, we hypothesize and find that non-sanctioned auditors improve the quality of their audits after a publicized PCAOB enforcement action against a competing auditor. Specifically, clients of these non-sanctioned audit firms have a lower incidence of client misstatement, but a higher incidence of reported internal control deficiencies. We also find that these non-sanctioned auditors charge higher audit fees postenforcement. Taken together, these results are consistent with non-sanctioned auditors making costly efforts to improve the quality of their audits as a result of PCAOB enforcement.

---

Out-of-Town Home Buyers and City Welfare

Host(s): Associate Professor David Yang
Speaker(s): Stijn Van Nieuwerburgh, Professor of Finance
University: Leonard N. Stern School of Business, New York University
Location: SB1 2321, Judy B. Rosener Classroom
Time: Wednesday, September 20th, 2017, 2:00 pm – 3:30 pm

The major cities of the world have attracted a flurry of out-of- town (OOT) home buyers. Such capital inflows affect housing affordability, the spatial distribution of residents, construction, labor income, wealth, and ultimately welfare. We develop a spatial equilibrium model of a city with substantial heterogeneity among residents. We calibrate the model to the New York and Vancouver metro areas. The observed increase in OOT purchases is associated with 1.1% (5.0%) higher house prices and a 0.1% (0.34%) welfare loss in New York (Vancouver). Taxing OOT buyers can turn welfare losses into gains when tax revenues finance a local public good.

---

Internet Adoption and Knowledge Diffusion

Host(s): Associate Professor MIngdi Xin
Speaker(s): Chris Forman, Peter and Stephanie Nolan Professor of Strategy, Innovation, and Technology
University: Charles H. Dyson School of Applied Economics and Management, Cornell University
Location: SB1 2321, Judy B. Rosener Classroom
Time: Wednesday, September 20th, 2017, 10:30 am – 12:00 pm

What is the capacity of ICT to reduce the (geographical and technological) localization of knowledge? In this paper, we analyze the impact of Internet adoption within US firms on knowledge spillovers. More specifically, we investigate the impact of basic Internet access on the likelihood that patents invented at a given R&D establishment cite patents invented elsewhere within the same firm. Our findings suggest that adoption of Internet significantly fosters cross-location citations in a significant way, and that these effects are proportional to the technologically proximity of the establishments. This positive effect holds even when excluding collaborative patents or controlling for earlier collaborations, and suggests that Internet adoption has helped in reducing the spatial localization of knowledge but not in the ability to draw from new knowledge sources (i.e., across different technological areas).

---

Supply Risk Mitigation via Supplier Diversification and Improvement: An Experimental Evaluation

Host(s): Assistant Professor Luyi Gui
Speaker(s): Basak Kalkanci, Professor at Georgia Institute of Technology
University: Georgia Institute of Technology
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Thursday, August 3rd, 2017, 3:00 pm – 4:30 pm

The agriculture industry plays a critical role in the U.S. economy and various industry sectors depend on the output of farms. A salient challenge in farming is uncertainty in the farm yield, which depends on the weather conditions (and other unpredictable factors) during the growing season and   impacts farmers' profit. To protect and raise farmers' income, the U.S. government offers two subsidy programs to farmers: the Price Loss Coverage (PLC) program which pays farmers a subsidy when the market price of a crop falls below a reference price, and the Agriculture Risk Coverage (ARC) program which pays a subsidy when farmers' revenue is below a guaranteed level. Given the unique features of PLC and ARC, in this paper we develop models to analyze the effects of these programs on consumers, farmers, and the government. Our analysis generates several insights. First, while PLC always motivates farmers to plant more acres compared to the no-subsidy case, farmers may plant less acres under ARC, leading to a lower crop supply. Second, despite the prevailing intuition that PLC benefits farmers only if the crop price remains very low for several years, we show that both farmers and consumers can be better off with PLC for a large range of parameter values, even when the reference price represents the historical average market price.  Third, we show that the two-sided structure of the ARC subsidy may induce farmers to utilize the subsidy in two different ways, depending on the crop and market characteristics. This is used to explore the implications of each subsidy regime on different stakeholders. Fourth, our analysis reveals that the government's cost of maximizing social welfare can be lower under PLC. Finally, we calibrate our model with USDA data and provide insights about the effects of crop characteristics and market characteristics on the relative performance of PLC and ARC. Our findings are corroborated by USDA's statistics for farmers' enrollment in the subsidy programs.

---

Price vs. Revenue Protection: An Analysis of Government Subsidies in the Agriculture Industry

Host(s): Assistant Professor Luyi Gui
Speaker(s): Foad Iravani, Assistant Professor of Operations Management
University: Foster School of Business, University of Washington  
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Thursday, May 18, 2017, 12:30 pm – 2:00 pm

The agriculture industry plays a critical role in the U.S. economy and various industry sectors depend on the output of farms. A salient challenge in farming is uncertainty in the farm yield, which depends on the weather conditions (and other unpredictable factors) during the growing season and   impacts farmers' profit. To protect and raise farmers' income, the U.S. government offers two subsidy programs to farmers: the Price Loss Coverage (PLC) program which pays farmers a subsidy when the market price of a crop falls below a reference price, and the Agriculture Risk Coverage (ARC) program which pays a subsidy when farmers' revenue is below a guaranteed level. Given the unique features of PLC and ARC, in this paper we develop models to analyze the effects of these programs on consumers, farmers, and the government. Our analysis generates several insights. First, while PLC always motivates farmers to plant more acres compared to the no-subsidy case, farmers may plant less acres under ARC, leading to a lower crop supply. Second, despite the prevailing intuition that PLC benefits farmers only if the crop price remains very low for several years, we show that both farmers and consumers can be better off with PLC for a large range of parameter values, even when the reference price represents the historical average market price.  Third, we show that the two-sided structure of the ARC subsidy may induce farmers to utilize the subsidy in two different ways, depending on the crop and market characteristics. This is used to explore the implications of each subsidy regime on different stakeholders. Fourth, our analysis reveals that the government's cost of maximizing social welfare can be lower under PLC. Finally, we calibrate our model with USDA data and provide insights about the effects of crop characteristics and market characteristics on the relative performance of PLC and ARC. Our findings are corroborated by USDA's statistics for farmers' enrollment in the subsidy programs.

---

New Organizational Forms, Intermediaries, And Alternative Work Arrangements That Lie Beyond Employment: Research And Practical Opportunities

Host(s): Assistant Professor Maritza Salazar
Speaker(s): John Boudreau, Professor of Management and Organization
University: Marshall School of Business, University of Southern California
Location: SB1 5100 Corporate Partners Executive Boardroom
Time: Friday, April 28, 2017, 10:30 am - 12:00 pm

Organization success, worker behaviors and leadership will increasingly involve optimizing work that includes, but goes well beyond traditional employment.  Cascio and Boudreau (in press) and Boudreau, Jesuthasan and Creelman (2015) note evidence that a larger proportion of work is and will be done by individuals working outside the traditional regular full-time employment relationship, through arrangements such as alliances, talent-trading, tours of duty, freelancers, along with familiar options of outsourcing, temporary employment and contractors.  Yet virtually all present laws, organizational systems and human resource processes and most research focuses on regular full-time employees.  This gap raises important questions about the future of research on work, employment, human resources, strategy and organizational design, such as: What are the fundamental dimensions of this new world, and how can they help leaders make better decisions about work and talent? Will they be as committed as full-timers? Will their rapid turnover require extensive orientation and training of new ones? Will they stick around long enough to develop the kind of depth of understanding of people and operations that will enable them to contribute meaningfully? Can work arrangements appropriately protect workers and balance worker and organizational rights and needs?  This talk will describe examples of emerging non-standard work arrangements, as the context for a review of research on nonstandard work through the lens of the talent-management lifecycle.  We set out to discover where research has been plentiful and sparse, and whether research frameworks applied to nonstandard work are similar to those applied to traditional, regular fulltime employment, and the implications for future research.

---

Relative Target Setting and Cooperation

Host(s): Assistant Professor Radhika Lunawat
Speaker(s): Michal Matejka, Associate Professor of Accounting
University: W.P. Carey School of Business, Arizona State University 
Location: SB1 5200, Porter Colloquia Room & Executive Terrace
Time: Friday, April 21, 2017, 3:00 pm - 4:30 pm

A large stream of work on relative performance evaluation highlights the benefits of using information about peer performance in contracting. In contrast, the potential costs of discouraging cooperation among peers have received much less attention. The purpose of our study is to examine how the importance of cooperation affects the use of information about peer performance in target setting, also known as relative target setting. Specifically, we use data from 111 business units of an industrial services company where managers need to share specialized equipment and staff with their peers to manage bottlenecks in their capacity. We construct several empirical proxies for the importance of cooperation and examine their effect on target setting. We find robust evidence that the sensitivity of target revisions to past peer (own) performance is lower (higher) when the importance of cooperation is higher, which is consistent with the theory that compensation contracts incorporating information about peer performance discourage cooperation.

---

The Group Dynamics of Interorganizational Relationships: Collaborating with Multiple Partners in Innovation Ecosystems

Host(s): Assistant Professor John Joseph
Speaker(s): Jason Davis, Associate Professor of Entrepreneurship and Family Enterprise
University: INSEAD Asia in Singapore
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, April 21, 2017, 2:00pm - 3:30pm

This paper examines how organizations collaborate with multiple partners, such as when they develop innovative and complex product platforms like smartphones, servers, and MRI machines that rely on technologies developed by organizations in three or more sectors. Research on multipartner alliances often treats them as a collection of independent dyads, neglecting the possibility of third-party influence and interference in dyads that can inhibit innovation. Using a multiple-case, inductive study of six groups, each composed of three organizations engaged in technology and product development in the computer industry, I examine the collaborative forms and processes that organizations use to innovate with multiple partners in groups. Groups that used the collaborative forms of independent parallel dyads or single unified triads generated mistrust and conflict that stemmed from expectations about third-party participation and overlapping roles and thus had low innovation performance and weaker ties. Other groups avoided these problems by using a dynamic collaboration process that I call “group cycling,” in which managers viewed their triad as a small group, decomposed innovative activities into a series of interlinked dyads between different pairs of partners, and managed third-party interests across time. By temporarily restricting participation to pairs, managers chose which ideas, technologies, and resources to incorporate from third parties into single dyads and ensured that the outputs of multiple dyads were combined into a broader innovative whole.

---

Inattention and Inertia in Household Finance: Evidence from the Danish Mortgage Market

Host(s): Assistant Professor David Yang
Speaker(s): John Y. Campbell, Morton L. and Carole S. Olshan Professor of Economics
University: Harvard University
Location: SB2 116
Time: Friday, April 21, 2017, 2:00 pm – 3:30 pm

A common problem in household finance is that households are often inactive in response to incentives. Mortgages are generally the largest household liability, and mortgage refinancing is an important channel for monetary policy transmission, so inactivity in this setting can be socially costly. We study how the Danish population responds to mortgage refinancing incentives between 2010 and 2014, building an empirical model that identifies two important sources of inactivity: inattention (a low probability of responding to a refinancing incentive in a given quarter), and inertia (a psychological addition to the financial cost of refinancing). Inertia is hump-shaped in age and generally increasing in socioeconomic status, while inattention is highest for older households and households with low income, education, housing wealth, and financial wealth, making it the key determinant of low refinancing among households with low socioeconomic status. Our model highlights the importance of policies to make such households aware of refinancing opportunities or to refinance mortgages automatically.

---

Merchant Energy Trading in a Network

Selvaprabu (Selva) Nadarajah at University of Illinois at Chicago and
Nicola Secomandi at Tepper School of Business, Carnegie Mellon University

Host(s): Assistant Professor John Turner
Speaker(s): Selvaprabu (Selva) Nadarajah, Assistant Professor of Information and Decision Sciences
University: University of Illinois at Chicago
Location: SB1 5200 Porter Colloquia Room and Executive Terrace
Time: Friday, April 7, 2017, 10:30 am – 11:30 am

We formulate the merchant trading of energy in a network of storage and transport assets as a Markov decision process with uncertain energy prices, generalizing known models. Because of the intractability of our model, we develop heuristics and both lower and dual (upper) bounds on the optimal policy value estimated within Monte Carlo simulation. We achieve tractability using linear optimization, extending near optimal approximate dynamic programming techniques for the case of a single storage asset, versions of two of which are commercially available. We propose (i) a generalization of a deterministic re-optimization heuristic, (ii) an iterative version of the least squares Monte Carlo approach, and (iii) a perfect information dual bound. We apply our methods to a set of realistic natural gas instances. The combination of our re-optimization heuristic and dual bound emerges as a practical approach to nearly optimally solve our model. Our iterative least squares Monte Carlo heuristic is also near optimal. Compared to our other heuristic, it exhibits slightly larger optimality gaps and requires some tuning, but is faster to execute in some cases. Our methods could enhance single storage asset software and have potential relevance beyond our specific application.

---

Negative Affect Management in Service Interactions

Host(s): Dean’s Professor Jone Pearce
Speaker(s): Xiao-Yu Liu, Professor of Human Resource Management and Organizational Behavior
University: University of International Business and Economics
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, April 7, 2017, 3:00 pm - 4:00 pm

How do service employees deal with customers with negative affect at the start of a service encounter? We attempt to answer this question by drawing on prior research on affect transference and proactive personality. This study firstly examines the reciprocal process by which restaurant customers and servers influence each other’s affect in a daily study of customer service interactions. Data from 180 customer-employee dyads supported the hypotheses proposing that employee proactive personality buffers the relationship between customer negative affect before service and employee negative affect during service, as well as the relationship between employee negative affect during service and subsequent customer ratings of service quality after service. Employee proactive personality also moderated the indirect effect of initial customer negative affect on service quality through employee negative affect during service. In addition, employee proactive personality was associated with employee negative affect during service. These findings highlight the potential for employee proactive personality in limiting negative affective transfer in service encounters. Then, based on interviews with 18 service employees and data from 250 customer-employee dyads in barber shops, this study further examined how proactive employees manage their own affective states in response to negative customer affect before service and how employees manage affective displays in such a way as to influence customer affective experience and service quality.

---

Flow and the Quality of Life

Host(s): Associate Professor Loraine Lau-Gesk
Speaker(s): Mihaly Csikszentmihalyi, Distinguished Professor of Psychology and Management
University: School of Social Science, Policy & Evaluation
Time: Friday, March 24, 2017, 3:30 pm – 5:00 pm
Location: SB1 5200 Porter Colloquia Room and Executive Terrace

Professor Csikszentmihalyi will introduce the concept of flow — the optimal experience of full engagement with what one is doing -- and some of its applications to such activities as work, creativity, education and life in general — based on 45 years of research conducted around the world.

---

Employee Non-Compete Agreements and External Knowledge Sourcing: The Paradoxical Impact of Potential Employee Mobility

Host(s): Assistant Professors John Joseph and Libby Weber 
Speaker(s): Deepak Somaya, Associate Professor of Business Administration, Stephen V. and Christy C. King Faculty Fellow
University: College of Business at Illinois, University of Illinois at Urbana-Champaign 
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, March 17, 2017, 2:00 pm – 3:30 pm

Prior research assumes that because non-compete agreements impede employee mobility, they negatively impact external knowledge sourcing, defined as the use of external knowledge in firms’ internal innovation. In this paper, we examine the proposition that non-competes may paradoxically have the opposite effect. When firms innovate by building on external knowledge, they may face higher risks of losing valuable R&D talent due to both reduced firm-specificity and diminished labor market frictions. By mitigating such potential talent losses, enforceable non-competes may therefore encourage firms to engage in more (rather than less) external knowledge sourcing. Empirically, we leverage a natural “quasi-experiment” created by a sudden and unexpected change in non-compete law in Michigan 1985, and employ a differences-in-differences empirical methodology to help identify causal effects. We find that stronger non-compete enforceability increased the extent to which firms drew on external knowledge, especially from local (within-state) sources and in industries that otherwise have weaker appropriability.

---

Using An Experiment To Learn About Selection, Treatment Effect Heterogeneity, And External Validity

Host(s): Assistant Professor Mireille Jacobson
Speaker(s): Amanda Kowalski, Associate Professor of Economics
University: Yale School of Management, Yale University
Location: Social Sciences Plaza A, Room 3132
Time: Wednesday, March 14, 2017, 3:30 pm - 5:00 pm

I examine treatment effect heterogeneity within an experiment to inform external validity. The local average treatment effect (LATE) gives an average treatment effect for compliers. I bound and estimate average treatment effects for always takers and never takers by extending marginal treatment effect methods. I use these methods to separate selection from treatment effect heterogeneity, generalizing the comparison of OLS to LATE. Applying these methods to the Oregon Health Insurance Experiment, I find that the treatment effect of insurance on emergency room utilization decreases from always takers to compliers to never takers. Previous utilization explains a large share of the treatment effect heterogeneity. Extrapolations show that other expansions could increase or decrease utilization.

---

Using Games to Teach Auction Theory to Students

Host(s): Professor Philippe Jorion
Speaker(s): Charles Cuny, Senior Lecturer in Finance
University: Olin Business School, Washington University in St. Louis
Location: SB1 5200 Porter Colloquia Room and Executive Terrace
Time: Monday, March 13, 2017, 3:30 pm – 5:00 pm
 
Abstract is not available.

---

Modern Disclosure Theory

Host(s): Assistant Professor Radhika Lunawat
Speaker(s): Ron Dye, Professor of Accounting Information and Management
University: Kellogg School of Management, Northwestern University
Location: SB1 5200, Porter Colloquia Room & Executive Terrace
Time: Friday, March 10, 2017, 3:00 pm - 4:30 pm

Abstract available upon request to the speaker. 

---

Using An Experiment To Learn About Selection, Treatment Effect Heterogeneity, And External Validity

Host(s): Professor Rick So
Speaker(s): Saif Benjaafar, Distinguished McKnight University Professor; Director, Initiative on the Sharing Economy
University: College of Science and Engineering, University of Minnesota
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, March 10, 2017, 11:00 am - 12:30 pm

We describe an equilibrium model of peer-to-peer product sharing, or collaborative consumption, where individuals with varying usage levels make decisions about whether or not to own. Owners are able to generate income from renting their products to non-owners while non-owners are able to access these products through renting on as needed basis. We characterize equilibrium outcomes, including ownership and usage levels, consumer surplus, and social welfare. We compare each outcome in systems with and without collaborative consumption and examine the impact of various problem parameters including rental price, platform's commission fee, cost of ownership, owner's moral hazard cost, and renter's inconvenience cost. Our findings indicate that, depending on the rental price, collaborative consumption can result in either lower or higher ownership and usage levels, with higher ownership and usage levels more likely when the cost of ownership is high. We show that consumers always benefit from collaborative consumption, with individuals who, in the absence of collaborative consumption, are indifferent between owning and not owning benefiting the most. We also show that the platform's profit is not monotonic in the cost of ownership, implying that a platform is least profitable when the cost of ownership is either very high or very low. (Joint work Xiang Li, Guangwen Kong, and Costas Courcoubetis).

---

The Making of Hawks and Doves: Inflation Experiences and Voting on the FOMC

Host(s): Assistant Professor David Yang
Speaker(s): Stefan Nagel, Michael Stark Professor of Finance and Economics
University: Ross School of Business, University of Michigan, Ann Arbor
Location: SB1 2321, Dr. Judy B. Rosener Classroom 
Time: Friday, March 3, 2017, 2:00 pm - 3:15 pm

We show that personal experiences of inflation strongly influence the hawkish or dovish leanings of central bankers. For all members of the Federal Open Market Committee (FOMC) since 1951, we estimate an adaptive learning rule based on their lifetime inflation data. The resulting experience-based forecasts have significant predictive power for members’ FOMC voting decisions, the hawkishness of the tone of their speeches, as well as the heterogeneity in their semi-annual inflation projections. Averaging over all FOMC members present at a meeting, inflation experiences also help to explain the federal funds target rate, over and above conventional Taylor rule components.

---

Stuck in the Shell: Middle-Stage Goal Pursuers Avoid (But Need) Social Reference Point

Host(s): Professor Connie Pechmann
Speaker(s): Szu-chi Huang, Assistant Professor of Marketing
University: Stanford Graduate School of Business, Stanford University
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, March 3, 2017, 3:30 pm - 5:00 pm

When people arrive in the middle stage of goal pursuit, they deliberately avoid social reference points that could potentially outperform them—a phenomenon we term “stuck-in-the-shell effect.” We use the frequency of head turns, eye movements, and direct choices to document this U-shaped pattern of avoidance behavior and show that this behavior is indeed driven by a fear of being outperformed: Middle-stage goal pursuers avoid social reference points that are relevant, proximal, and potentially superior. Paradoxically, however, in both individual and collective goal contexts, we found that the very social reference points that middle-stage goal pursuers attempt to avoid could ultimately restore their motivation and pull them out of the slump. Our findings connect the psychophysics of goal pursuit with information avoidance literature and shed light on why middle-stage goal pursuers get stuck in an environment that is rich with social information.

---

Asset Pricing With Return Extrapolation

Host(s): Assistant Professor David Yang
Speaker(s): Lawrence Jin, Assistant Professor of Finance
University: California Institute of Technology
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, February 24, 2017, 2:00 pm – 3:15 pm

We develop a representative agent general equilibrium model with return extrapolation and recursive preferences. The model can serve as a quantitative benchmark for the comparison between belief-based behavioral asset pricing models and more traditional models. Our model matches in magnitude investors' extrapolative beliefs and their memory structure derived directly from survey evidence. Also, the model generates a large and countercyclical equity premium, a low and procyclical interest rate, low interest rate volatility, strong excess volatility and predictability for equity returns, persistence of price-dividend ratios, as well as low correlations between consumption growth and stock returns. Extrapolative beliefs generate perceived persistence in dividend and consumption growths that, under recursive preferences, help explain some of our model predictions.

---

The Dominant Logic of Matching: Finding Acquisition Targets

Host(s): Professor John Joseph
Speaker(s): Henrich Greve, Professor of Entrepreneurship, The John H. Loudon Chaired Professor of International Management
University: INSEAD, Singapore Campus
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 24, 2017, 2:00 pm - 3:30 pm

Acquisitions are preceded by a search for targets and assessment of whether a potential target is a good fit. While prior research has emphasized resource fit and search costs, we argue that the dominant logic of the acquirer is a source of direction and constraint in the search. Based on this theory, cognitive schema and myopia by the dominant coalition can shape top management strategic analysis and conception of the firm, and are important influences in resource allocations such as acquisitions. They are likely to narrow down their search to targets that resonate with them on the mental construction of the firm environment. As a result, firms match not only on resources, but also on characteristics that are likely to be a source of cognitive schema that are influential in the dominant logic, such as nature of governance, ownership structure, and board composition. We derive new hypotheses on target selection in acquisitions from this theory, and our findings support the hypotheses by showing strong influences from this mechanism on target selection in acquisitions in China.

---

When Two Bodies Are (Not) a Problem: Gender and Relationship Status Discrimination in Academic Hiring

Host(s): Assistant Professor Sharon Koppman
Speaker(s): Sharon Koppman, Assistant Professor of Organization & Management
University: Kellogg School of Management, Northwestern University
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 24, 2017, 10:30 am - 12:00 pm

Although junior faculty search committees serve as gatekeepers to the professoriate and play vital roles in shaping the demographic composition of academic departments and disciplines, how committees select new hires has received minimal scholarly attention. In this paper, I highlight one mechanism through which committees evaluate applicants and contribute to gender inequalities in academic careers: relationship status discrimination. Through a comparative, ethnographic case study of junior faculty search committees at a large R1 university, I show that committees actively considered women’s—but not men’s—relationship status when selecting hires. Drawing from gendered scripts of career and family that present men’s careers as taking precedence over women’s, committee members believed that heterosexual women whose partners held academic or high-status jobs were not “moveable” and excluded such women from offers, when there were viable male or single female alternatives. Conversely, male applicants’ relationship status was discussed infrequently, and all female partners were seen as moveable. Consequently, I show that the “two-body problem” is a gendered phenomenon embedded in cultural stereotypes and organizational practices that can disadvantage women in academic hiring. I conclude by discussing the implications of such relationship status discrimination for sociological research on labor market inequalities and faculty diversity.

---

Monetary Stimulus and Bank Lending

Host(s): Assistant Professor David Yang
Speaker(s): Itay Goldstein, Professor of Finance and Economics
University: Wharton School, University of Pennsylvania
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, February 17, 2017, 10:30 am - 11:45 am

The U.S. Federal Reserve purchased both agency mortgage-backed securities (MBS) and Treasury securities to conduct Quantitative Easing (QE). Using micro-level data, we find that banks benefiting from MBS purchases increase mortgage origination, compared to other banks. At the same time, these banks reduce commercial lending and firms that borrow from these banks decrease investment. The effect of Treasury purchases is different: either positive or insignificant in most cases. Our results suggest that MBS purchases caused unintended real effects and that Treasury purchases did not cause a large positive stimulus to the economy through the bank lending channel.

---

Short-Sales Constraints and Aftermarket IPO Pricing

---

Wish Upon a Star? How Network Proximity to Stars Influences the Attainment of Stardom

Host(s): Professor John Joseph
Speaker(s): Joel A.C. Baum, Professor of Strategic Management
University: Rotman School of Management, University of Toronto
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, February 10, 2017, 2:00 pm - 3:30 pm

Third-party awards that identify and rank “star performers” are important for ordering actors in crowded, complex markets. Because such awards are typically bestowed annually, however, stardom is more closely tied to recent performance and less stable than hierarchical orderings based on status. In such conditions, proximity to stars may inform attributions of close rivals’ quality, but the nature of these “spillovers” is debatable. When one actor receives an award, for example, a film actor wins an Oscar or a musician wins a Grammy, how does this stardom affect the fates of the winner’s closest rivals? Are close rivals elevated too, gaining spillovers of attention and recognition from the increased notoriety of the winner? Or conversely, are they lost in the shadow of the winner’s notoriety and forced to compete more intensely for attention and recognition that they would have garnered otherwise? We investigate this question in a study of US equity analysts. Using the stock co- coverage network to gauge analysts’ proximity, we examine the impact of an analyst being named to Institutional Investor’s “All-America Research Team”, the magazine’s annual ranking of sell-side equity analysis, on the subsequent likelihood of analyst’s closest rivals’ being named to a “Team” as well. We also examine the efficacy of rivals’ competitive responses to an alter’s ascension to stardom.

---

Do ETFs Increase The Commonality In Liquidity Of Underlying Stocks?

Host(s): Assistant Professor David Yang
Speaker(s): Vikas Agarwal, Professor of Finance
University: J. Mack Robinson College of Business, Georgia State University, GA
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, February 10, 2017, 2:00 pm - 3:15 pm

We examine the impact of ETF ownership on the commonality in liquidity of the stocks held by ETFs, while controlling for the ownership by other institutional investors. Our results indicate that ETF ownership significantly increases the liquidity commonality on account of the arbitrage mechanism inherent in ETFs that ensures that ETF prices are in line with the prices of the underlying stocks. We show that greater arbitrage activities in both the primary and secondary markets of ETFs are associated with an increase in the effect of ETF ownership on commonality in liquidity. We exploit a quasi-natural experiment based on ETF trading halts to establish a causal relation between ETF ownership and liquidity commonality. Taken together, our results show that ETFs reduce the ability of the market participants to diversify liquidity shocks.

---

Momentum, Reversals and other Puzzles in Farma-MacBeth Cross-Sectional Regressions

Host(s): Assistant Professor David Yang
Speaker(s): Mark Kamstra, Professor of Finance
University: Schulich School of Business, York University
Location: SB1 5200, Porter Colloquia Room & Executive Terrace
Time: Tuesday, February 7, 2017, 12:00 pm - 1:00 pm

The existence of reversals and momentum in equity returns has challenged proponents of efficient markets for over 30 years. Although explanations for momentum profits based on cross-sectional return dispersion have been proposed, evidence of time-series autocorrelation from Fama-MacBeth cross-sectional regressions persists without any good risk/return explanation. In this paper I show that common implementations of the Fama-MacBeth procedure will yield upward biased estimates of time-series autocorrelation coefficients. Even in absence of autocorrelation, the bias is strictly positive, leading to apparent momentum when there is, in fact, none. Perhaps more interestingly, this biased implementation of the Fama-MacBeth procedure has found its way into a great many other studies and may, similarly, lead to apparent effects when there are none. I outline conditions under which this bias occurs and prove the existence of bias under these conditions. I also provide a Monte Carlo simulation demonstrating the magnitude of the bias. Finally, I provide demonstrations of the impact of this bias with reference to published results in the literature, demonstrating how correcting this bias can overturn results.

---

What are We Really Good at? Product Strategy with Uncertain Capabilities

Host(s): Professor Sreya Kolay
Speaker(s): Dr. Matthew Selove, Associate Professor
University: The George L. Argyros School of Business & Economics, Chapman University
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, February 3, 2017, 3:00 pm - 4:30 pm

Firms often learn about their own capabilities through their products’ successes and failures. This paper explores the interaction between such learning from experience and product strategy in a formal model. We consider a firm that can launch a sequence of products, where each product’s performance depends on the fit between the firm’s capabilities and the product. A successful new product always causes the firm to become more optimistic about the capability most relevant for that product; however, it can also cause the firm to become less optimistic about some of its other capabilities, including capabilities the new product does not use. A product launch generates useful information for future decisions if it leads to learning about capabilities used by potential future products. We find that a product sharing few or even no capabilities with potential future products may generate more useful information than a product with greater overlap.

---

How Emotions Move Us: An Action-Readiness Account of the Effects of Emotions on Decision-Making

Host(s): Professor Gerardo Okhuysen
Speaker(s): Maia Young, Associate Professor of Management and Organizations
University: Anderson School of Management, University of California, Los Angeles
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 3, 2017, 10:30 am - 12:00 pm

In this talk, I’ll present findings on anger and two common decision biases: confirmation bias and anchoring. I find that anger can improve decision making when task success requires the decision maker to be confrontational. In the case of confirmation bias, people often erroneously focus on information that confirms their opinion and ignore information that disconfirms it. However, people who are angry are more prone to seek disconfirming information, attenuating the bias. Paradoxically, people who are angry seek information about opponents’ claims to refute them, but exposure to the information moderates their position. In the case of anchoring bias, people’s numeric estimates of unknown values are overly influenced by salient values that are unlikely to be accurate. However, people who are angry are less prone to anchoring bias. For both confirmation and anchoring biases, anger reduces the bias because it motivates confrontation. Whereas the dominant model of emotions and decision-making asserts that cognitive appraisals that accompany emotions affect decision making, my research suggests that emotions can also affect decision making by changing motives.

---

Vote Avoidance and Shareholder Voting in Mergers and Acquisitions

Host(s): Assistant Professor Chong Huang
Speaker(s): Kai Li, Professor of Finance
University: University of British Columbia, Sauder School of Business, Vancouver, BC, Canada
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, December 2, 2016, 2:00 pm - 3:30 pm

Using a hand-collected sample of U.S. stock deals over the period 1995-2015, we examine whether and how the requirement of acquirer shareholder voting affects deal quality. We find that acquirer management substitutes stock with cash to bypass shareholder voting, and that deals bypassing shareholder voting have lower announcement returns than those requiring shareholder voting. Employing a regression discontinuity design in a setting without managerial discretion, we show a positive causal effect of shareholder voting on deal quality. Moreover, this positive value effect is concentrated among acquirers with higher institutional ownership and among acquirers buying targets with more severe information problems. We conclude that shareholder voting mitigates the agency problems in mergers and acquisitions.

---

Cost-Benefit Analysis of Resource Allocation in The United States: Models and a 1980-2011 Case Study

Host(s): Assistant Professor Luyi Gui
Speaker(s): Dr. Jun Zhuang, Associate Professor and Director of Undergraduate Studies, Department of Industrial and Systems
University: University at Buffalo, The State University of New York
Location: SB1 2321, Judy B. Rosener Classroom
Time: Friday, December 9, 2016, 2:00 pm - 3:30 pm

Fire-related hazards and incidents are an everyday phenomenon, and firefighting in the United States owe to more than one million firefighters in about 30,000 fire departments across the country. The estimated total cost of fire was $329 billion in 2011. Leveraging the National Fire Incident Response System (NFIRS) data set, we conduct a data-driven study to propose empirical and theoretical models to assess risk levels and quantitatively measure effectiveness of investments. We then study the optimal risk-reduction strategies, and optimal resource allocation strategies given a total budget constraint. We will also discuss public-private partnership, equity, and optimal routing in fire protection. This study would benefit policymakers and analysts in fire protection and safety, to save lives and other losses.

---

Casting A Wider Net: How Increasing the Proportion of Women Applicants Affects the Hiring of Female Freelancers in an Online Labor Market

Host(s): Assistant Professor Sharon Koppman
Speaker(s): Ming Leung, Assistant Professor of Management of Organization
University: Haas School of Business, University of California, Berkeley
Location: SB1 5200, Lyman Porter Colloquia Room and Executive Terrace
Time: Friday, December 2, 2016, 10:30 am - 12:00 pm

It is well-understood that women and men work in distinctly different jobs, contributing to substantial disparity in earnings. Less well-understood are the mechanisms generating these uneven outcomes – hampering remediation efforts. Explanations oscillate between whether employers are biased against certain applicants and whether women and men vary in their likelihood of applying to certain jobs. Conclusions are difficult to draw because researchers rarely account for how many women and men apply. This is critical because employment outcomes result from a two-sided process: applicants first decide to apply then employers decide to hire. I argue that accounting for the proportion of women applying to jobs significantly alters the conclusions we can draw. Analyses of 792,650 job postings, by 249,506 employees who received 7,699,370 job applications from 292,518 freelancers on an online market for contract labor demonstrate my contention. Regression analyses first reveal that equally qualified women are more likely to be hired for female-type jobs and less likely to be hired for male-type jobs of IT & Programming, than men. However, this differential hiring is completely mediated once the proportion of women applying to these jobs is accounted for. Most strikingly, for every 1% increase in proportion of women applying to a job, there is a commensurate 1% increase in the proportion of female freelancers hired – for all job-types. These findings advocate for a focus on the challenges women face in applying to traditionally male-type jobs. I also provide insight into the burgeoning phenomenon of online hiring and the gig-economy.

---

Bank Capital & Monitoring: Evidence from Loan Quality

Host(s): Assistant Professor Radhika Lunawat
Speaker(s): Hemang Desai, Robert B. Cullum Professor of Accounting
University: Edwin L. Cox School of Business, Southern Methodist University
Location: SB1 5200, Lyman Porter Colloquia Room and Executive Terrace
Time: Friday, November 4, 2016, 3:00 pm - 4:30 pm

There are two competing theoretical perspectives on whether bank capital improves or adversely affects banks’ monitoring incentives. We show that bank capital is positively associated with loan quality, an outcome of bank’s monitoring effort, after controlling for other determinants of loan quality. Importantly, using two ex-ante measures of bank’s monitoring effort that capture quality and quantity of labor input into monitoring, we show that bank capital is positively related to monitoring efforts. Our evidence is consistent with the prediction in Mehran and Thakor (2011) that bank capital strengthens monitoring incentives which in turn increases the value of its loan portfolio.

---

When Transparency Improves, Must Prices Reflect Fundamentals Better?

Host(s): Assistant Professor Radhika Lunawat
Speaker(s): Assistant Professor Snehal Banerjee
University: Rady School of Management, University of California, San Diego
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, October 28, 2016, 3:00 pm - 4:30 pm

No. A common regulatory response to high market uncertainty is to increase transparency by making access to fundamental, payoff-relevant information cheaper. We study the impact of such policies on how informative prices are about fundamentals in a setting where investors can endogenously choose to learn about asset fundamentals and liquidity trading by others. When liquidity demand is price-dependent (e.g., due to forced deleveraging), we show that higher transparency, even if exclusively targeting fundamentals, can make prices less informative. As such, regulatory changes which make learning easier may exacerbate the very problems they are intended to address.

---

How Do Complementors Respond to the Threat of Platform Owner Entry? Evidence from the Mobile App Market

Host(s): Professor Tingting Nian
Speaker(s): Assistant Professor Feng Zhu
University: Harvard Business School, Harvard University
Location: SB1 5200, Lyman Porter Colloquia Room and Executive Terrace
Time: Thursday, October 27, 2016, 2:30 pm - 4:00 pm

How do complementors respond to the threat of platform owner entry, and how do such responses differ from the responses to actual entry? Using the mobile platform Android as our research setting, we examine how app developers on Android adjust their rate and direction of innovation efforts and prices in response to Google’s entry threat and actual entry into to the app markets. Based on a difference-indifferences empirical framework, we find that app developers that are affected by Google’s entry reduce their innovation efforts on affected apps after entry threats increase; after Google’s actual entry, they reduce innovation efforts on affected apps further and also increase these apps’ prices. However, we find that affected app developers do not withdraw from the platform completely—once the threat occurs, they shift innovation efforts from affected apps to other unaffected apps, as indicated by an increase in updates on unaffected apps during both the entry-threat and actual-entry period.

---

RFQ, Sequencing, and the Most Favorable Bargaining Outcome

Host(s): Assistant Professor Luyi Gui
Speaker(s): Leon Y. Zhu, Associate Professor
University: University of Southern California, Marshall School of Business
Location: SB1 5200, Porter Colloquia Room and Executive Terrace
Time: Friday, October 21, 2016, 12:30 pm - 2:00 pm

When suppliers are imperfect substitutes, it is usually the best interest of a buyer to procure from various suppliers to match the needs of different customers. Motivated by prescription drug affordability practices, we study quantity-dependent pricing contracts with exclusion clauses in a dual-sourcing setting. We show that the quantity-dependent pricing contracts coordinate the supply chain, but introducing exclusion clauses may lead to various equilibriums in profit allocation. As a result, we analyze the negotiations between a buyer and two suppliers both with and without a request for quotation (RFQ) stage that precedes the negotiation. We show that the buyer can leverage the RFQ stage even under a full information setting when the negotiation sequence is endogenously determined by the final quotations of the RFQ process. Specifically, the buyer's equilibrium payoff with RFQ dominates the most favorable equilibrium under bargaining without RFQ.

---

The Impact of Affordable Care Act Medicaid Expansion on Medicaid Revenue, Uncompensated Care, and Hospital Financial Position

Host(s): Associate Professor Mireille Jacobson
Speaker(s): Tom Buchmueller, Professor of Business Economics and Public Policy
University: Ross School of Business, University of Michigan
Location: SB1 5200, Porter Colloquia Room and Executive Terrace
Time: Monday, October 17, 2016, 11:00 am - 12:30 pm

In debates over the Affordable Care Act, hospitals argued forcefully for Medicaid expansions with the hope that favorable changes in payer mix would reduce uncompensated care and consequently improve financial performance. Although uninsured discharges fell in Medicaid expansion states relative to non-expansion states, little is known about how expansions affected hospital financial performance. We estimate the impact of expansion on Medicaid payments, uncompensated care costs, net income, and operating margins using the 2011-2015 Medicare cost reports. Relative to hospitals in non-expansion states, Medicaid revenues increased and uncompensated care fell for hospitals in expansion states. Comparing all expansion states to non-expansion states suggests that net operating income and operating margins increased slightly. However, this result masks heterogeneity among expansion states. The improved financial performance was limited to states where the ACA expansion represented a major change in eligibility standards and a large increase in insurance coverage. Among hospitals in states in which childless adults above the Federal Poverty Line (FPL) were already eligible for Medicaid, changes in Medicaid revenues and uncompensated care were smaller and net income and operating margins did not improve relative to the trend in non-expansion states. We provide theoretical and empirical evidence that worsened financial position in these states could be explained by high levels of crowd-out of private hospital discharges.

---

Prompting the Benefit of the Doubt: The Joint Effect of Auditor-Client Social Bonds and Measurement Uncertainty in Audit Adjustments

Host(s): Professor Radhika Lunawat
Speaker(s): Professor Steven Kachelmeier
University: University of Texas, Austin
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, September 30, 2016, 3:00 pm - 4:30 pm

We design an incentivized experiment to test the extent to which measurement uncertainty elevates the risk that social bonds between auditors and reporters compromise audit adjustments. Results indicate that, when audit evidence is characterized by some residual uncertainty, the adjustments our auditor-participants require is sensitive to whether they have an opportunity to form a modest but friendly social bond with reporters. In contrast, although auditors do not adjust fully even when misstatements are known with certainty, social bonding has no effect in this scenario. Accordingly, our experiment contributes beyond the main effects of social bonding and measurement uncertainty demonstrated in prior research by showing that these forces are interdependent. A practical implication is that audit firms’ expanded use of in firm specialists and concurring partners when determining audit adjustments to complex accounts can confer both technical benefits from expertise and social benefits from a more distanced assessment that is less influenced by day-to-day interactions with client personnel.

---

The Self-Fulfilling Cycle of Coercive Surveillance

Host(s): Professor Sharon Koppman
Speaker(s): Professor Michel Anteby
University: Boston University
Location: SB1 5200, Lyman Porter Colloquia Room and Terrace
Time: Friday, September 30, 2016, 10:30 am - 12:00 pm

In the past few decades, the growth of surveillance has become a fixture of organizational life. Past scholarship has largely explained this growth as the result of managerial demands for added control over workers, coupled with newly available cheap technology (such as cameras). We draw on identity work literature to complement this view, suggesting that workers can also drive the growth in surveillance. We show that workers under surveillance can feel constantly observed and seen, but they also feel largely unnoticed and uncared for as individuals by management. This paradoxical experience leads them to interpret the surveillance as coercive and to engage in invisibility practices to attempt to go unseen and remain unnoticed. Management, in turn, views these attempts as justification for even more surveillance, thus creating a self-fulfilling cycle of coercive surveillance. Our analysis therefore links in part the growth of surveillance to workers’ own identity work, while also identifying a unique form of identity work attached to such surveillance. Overall, our study offers one of the first endogenous explanations for the growth of surveillance and carries important implications for the literature on surveillance and identity work.

---

A Dynamic Model of Two-Sided Markets (with Anna Ingster Adachi)

Host(s): Professor Tingting Nian
Speaker(s): Professor Luis Cabral
University: New York University
Location: SB1 5200, Lyman Porter Colloquia Room and Terrace
Time: Wednesday, September 21, 2016 10:30 am - 12:00 pm

We introduce a dynamic framework to analyze two-sided markets. The (single) platform owner sets prices at the beginning of each period. Agents (buyers, sellers, readers, consumers, merchants, etc.) make usage decisions every period and platform membership decisions occasionally. We show that optimal platform prices result from an extension of the canonical elasticity rule that also accounts for (a) the externality of two-sided markets and (b) the dynamic value of attracting new platform members. We provide analytical results relating prices to the size of each platform side. We also examine the determinants of equilibrium platform size, showing that the stationary distribution may be bi-modal, that is, with some probability the platform remains very low or takes very long to increase in size.

---

Emotions are Contagious: Social Network and Mood-Induced Stock Returns

Host(s): Professor David Hirshleifer
Speaker(s): Qiguang Wang
University: University of California, Irvine
Location: SB2 Conference Room 306
Time: Friday, August 19, 2016, 1:00 pm - 2:30 pm

Aggregate stock market experiences mood-induced return movements. Moreover, there are also substantial cross-sectional variations in individual stocks’ reaction to these mood events. This paper tests the hypothesis that social interactions amplify the mood effects. I estimate social interactions for the local population of firms’ headquarters using Spatial Model and the U.S. census data. I show that cross-sectionally, stocks with higher local social interactions exhibit higher Friday returns and pre-holiday returns. This effect cannot be explained by stock and firm characteristics or existing return seasonalities, and is stronger for small, retail, and volatile stocks. The evidence strongly supports the notion that emotion contagion is a key determinant for mood-induced stock returns.

---

CEO Power and Nonconforming Reference Group Selection

Host(s): Assistant Professor John Joseph
Speaker(s): Professor Pino Audia
University: Dartmouth College
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, June 3, 2016, 2:00 pm - 3:30 pm

By integrating insights from social psychological research on power and organizational research on legitimacy, we examine the influence of CEO power on organizations’ selections of nonconforming reference groups and the impact of these selections on analysts’ stock recommendations and coverage. Our empirical analyses rely on reference group selections manually coded from stock performance graphs of 10-K filings within the U.S. chemical industry. Consistent with previous studies, our data reveal that the majority of reference groups selected are well-known indexes favored by the SEC, analysts, and investors. At the same time, fourteen percent of the reference groups used by organizations in our sample are nonconforming custom peer groups generally regarded with suspicion by outsiders. Consistent with our predictions, we find that organizations with powerful CEOs are more likely to use custom peer groups and that the use of custom peer groups has a negative influence on analysts’ stock recommendations and coverage. We contribute to research on the choice of reference groups by calling attention to CEO power as a driver of the choices of nonconforming reference groups and by highlighting the negative effects of such choices.

---

What Is a Digital Cookie Worth?

Host(s): Professor VC Choudhary
Speaker(s): Professor Rahul Telang
University: Carnegie Mellon University
Location: SB1 5200, Lyman Porter Colloquia Room and Terrance
Time: Monday, May 23, 2016, 10:30 am - 12:00 pm

Tracking a user’s online browsing behavior to target them with relevant ads has become pervasive. There is an ongoing debate about the value of such tracking and the associated loss of privacy experienced by users. We inform this debate by quantifying the value of using different kinds of potentially intrusive information in targeted advertising. We collect a large proprietary dataset with over 1.3 million individual impression-bid-level observations. The data has detailed cookie information, as well as the bids placed by the firm for serving ad impressions. We also know whether a user saw the ad and whether a purchased occurred. First, we find that using more information from cookies increases the accuracy of prediction of purchases, but at a decreasing rate. We also find that firm’s bidding decision (how much to bid for an ad) can be accurately predicted by cookie information. We then estimate the effect of an ad on a user’s purchase probability. In particular, we examine whether users who have a high baseline purchase probability are also more likely to be influenced by ads. We find that on average ads do not have a statistically significant impact on purchase probabilities of consumers. However, individuals who have a high baseline purchase probability, do respond positively to ads and ads can increase their purchase probability by up to 2.7 percentage points. To overcome potential endogeneity in ad placement, we use an instrumental variable and find that these results are robust. Finally, we simulate different policy regimes by restricting different kinds of user information from being used for targeted advertising and quantify the impact such restrictions have on sales. We find that restricting more intrusive variables for targeting lowers ad effectiveness and leads to fewer potential purchases.

---

Simple Pricing for Services and Information Goods

Host(s): Mingdi Xin
Speaker(s): Professor Hemant Bhargava
University: University of California, Davis
Location: SB1 3410, Elisabeth and Paul Merage Conference Room
Time: Thursday, May 12, 2016, 11:00 am - 12:30 pm

The first part of my talk will cover results from the attached working paper "Pricing Digital Goods: Valuation vs. Appetite'' which analyzes "simple pricing''---where firms face a large market of heterogeneous consumers, but offer either a single “Pay as you Go” plan (one per-unit price), a single “All you can Eat” plan (one buffet price), or a combination of both (either a two-part tariff, or a choice between per-unit and buffet price). We show that appetite heterogeneity, caused by variation in rate of satiation, is far more consequential in plan design than the more commonly analyzed valuation heterogeneity. The profit advantage of a two-part tariff over per-unit and buffet pricing is significant only under moderate RAH (appetite heterogeneity relative to valuation heterogeneity). The 2PT also has higher profit vs. giving consumers a choice between per-unit and buffet prices, but the combination dominates on market coverage and consumer surplus. Per-unit pricing works quite well when RAH is high, while buffet pricing does well when RAH is low. But when a firm is uncertain about RAH, or has numerous products with different RAH, then the per-unit plan is less risky compared to the buffet plan, sacrificing less profit across the spectrum of scenarios, and producing higher market share. The second part of my talk (based on a paper that is in draft form) extends the analysis to three-part tariffs (F, Q, s) - fixed fee, allowance, per-unit overage fee) which is also very common in practice, and considered the most efficient way to price discriminate when users consume multiple units. Intuitively, this should be more profitable than 2PT. But we show that for all log-concave distribution of valuations (the most common assumption in modeling valuation heterogeneity), the optimal 3PT reduces to a 2PT, and a 3PT is not any more profitable. But a 3PT does produce higher profit under other conditions, e.g., the market has a bimodal distribution, or when consumers have uncertain valuations.

---

Resource Interdependence and Appropriability: A Study of Product and Process Inventions

Host(s): Professor John Joseph
Speaker(s): Professor Gautam Ahuja
University: University of Michigan, Stephen M. Ross School of Business
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, May 6, 2016, 2:00 pm - 3:30 pm

We examine how building interdependence between a firm's activities enhances a firm’s appropriation of returns to its inventions. The strategy literature has argued that higher levels of interdependence between a firm's activities can protect a firm from imitation and thereby enhance appropriability. We evaluate this argument recognizing that firms have access to multiple different mechanisms to enhance appropriability and increasing interdependence is just one of them. Specifically we examine three routes to appropriating value from your inventions described in the literature - building enhanced levels of interdependence between your activities, investing in substantial production capacity and building access to multiple markets. Using a new measure of interdependence based on textual coding of patent claims, we demonstrate that building increased interdependence between a firm’s product and process inventions deters imitation and improves firm performance. However, this effect is most significant when the firm has more limited access to alternative scale-based mechanisms (production capacity, market access) for value appropriation. Further, firms systematically differ in their usage of these three different mechanisms in theoretically predictable ways and not all firms choose to use enhanced interdependence as a mechanism for increased appropriability. Thus, we develop a contingent model that identifies the limits to complexity and interdependence as a source of protection from imitation.

---

Making Transparency Transparent: Productivity and Behavioral Implications of Observability at Work

Host(s): Professor Luyi Gui
Speaker(s): Assistant Professor Ethan Bernstein
University: Harvard Business School
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Thursday, April 21, 2016, 1:30 pm - 3:00 pm

We are increasingly observed and observing at work. Advances in technology, from increased use of smart cameras to wearable tracking devices, are enabling “Super Vision” (Gilliom & Monahan, 2012) far beyond any level of supervision envisioned when Frederick Taylor (1911) touted the benefits of managerial oversight through scientific management. That has had profound implications for compliance, both within organizations and beyond. In this talk, I explore the conditions which, when present, might make workplaces designed with zones of privacy (rather than full observability) more productive and, ironically, more transparent—a result I term the “transparency paradox.” After reviewing several studies that investigate different aspects of the transparency paradox, I will then relate the results back to my own experiences in the regulation of consumer financial products in the United States.

---

Entry, Exit and the Potential for Resource Redeployment

Host(s): Professor Libby Weber & Professor John Joseph
Speaker(s): Professor Marvin Lieberman
University: UCLA Anderson School of Management
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, April 8, 2016, 2:00 pm - 3:30 pm

Combining the concept of resource relatedness with the economic notion of sunk costs, we assess how the potential for resource redeployment affects market entry and exit by multi-business firms. If the performance of a new business falls below expectations, a diversified firm may have more flexibility if it is able to redeploy its resources back into related businesses. In effect, relatedness reduces the sunk costs associated with a new business, which facilitates exit. This, in turn, has implications for entry: by decreasing the cost of failure, the potential for redeployment justifies the undertaking of riskier entries and greater experimentation. These dynamic benefits of relatedness are distinct from standard notions of ‘synergy.’ To show support for this idea, we provide a mathematical model, descriptive data, and company examples.

---

The Role of Tacit Knowledge In Auditor Expertise and Human Capital Development

Host(s): Professor Ben Lourie
Speaker(s): Dr. Jasmijn Bol
University: Tulane University, Freeman School of Business
Location: SB1 5200, Lyman Porter Colloquia Room and Terrace
Time: Friday, April 8, 2016, 3:00 pm - 4:30 pm

Prior audit research predicts and finds that tacit managerial knowledge is associated with better annual performance evaluations, but only for relatively experienced auditors (Tan and Libby [1997]). By contrast, and based on the increasing importance of social skills in today’s audit ecology, we predict and find that tacit knowledge is now also valued in relatively inexperienced auditors. In particular, audit firms reward both tacit managerial knowledge and tacit audit quality knowledge in relatively inexperienced auditors via career opportunities, better performance evaluations, and bonus compensation. Shifting to relatively experienced auditors, we predict that better supervision of subordinate auditors is one way in which tacit managerial knowledge enhances relatively experienced auditors’ performance. We find that, consistent with this prediction, supervisors with higher tacit managerial knowledge better develop this knowledge in their subordinates, value tacit knowledge more when evaluating subordinates’ annual performance, and strengthen the firm commitment of higher tacit knowledge subordinates to the firm.

---

Power as an Emotional Liability: Implications for Perceived Authenticity and Trust after a Transgression

Host(s): Professor Gerardo Okhuysen
Speaker(s): Professor Peter Kim
University: University of Southern California
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, April 1, 2016, 3:00 pm - 5:00 pm

People may express a variety of emotions after committing a transgression. Through four empirical studies, we investigated how the perceived authenticity of such emotional displays and resulting levels of trust are shaped by the transgressor's power. Past findings suggest that individuals with power tend to be perceived as more authentic. Yet our findings reveal that: a) a transgressor’s display of emotion is perceived to be less authentic when that party’s power is high than low, b) this perception of emotional authenticity, in turn, directly influences (and ultimately mediates) the level of trust in that party, and c) these effects lead perceivers to exert less effort when asked to make a case for leniency toward high than low power transgressors. This tendency to discount the emotional authenticity of the powerful was, furthermore, found to arise from power increasing the transgressor’s perceived level of emotional control and strategic motivation. These results were found across different types of emotions, different expressive modalities, different operationalizations of the transgression, and different types of participants.

---

Why Strategic Management Scholars Must Adopt a Stakeholder Perspective

Host(s): Professor Libby Weber & Professor John Joseph
Speaker(s): Professor Jay Barney
University: Eccles School of Business, University of Utah
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Thursday, March 31, 2016, 11:30 am - 1:00 pm

Despite calls for integrating a stakeholder perspective more completely into strategic management research and practice, most strategic management scholars continue to build on the assumption that shareholders are a firm’s only residual claimant. This paper shows that scholarly efforts designed to explain the existence of expected economic profits logically requires that stakeholders, besides a firm’s shareholders, are residual claimants, and thus that strategic management research must incorporate multiple stakeholders in its analysis of expected economic profits. This conclusion has a variety of important implications for several research traditions, including stakeholder theory, strategic management, entrepreneurship, and finance.

---

Lessons Learned From Hybrid [In-Person & Online] Teaching

Host(s): Professor Connie Pechmann
Speaker(s): Lecturer Raymond Pirouz
University: University of California, Irvine
Location: SB1 2100, Experian Case Study Classrooms
Time: Monday, March 14, 2016, 12:00 pm - 1:00 pm

Over a six-year period, Raymond Pirouz has taken his “Marketing on the Internet” MBA elective from a standard 10-week in-person course to a hybrid offering wherein the class meets in-person for the first and final session with all other class sessions held completely online. Through trial and error, Raymond has adopted a unique mix of technologies and approaches resulting in key learnings & best practices centered around the pursuit of one central objective: To replicate a “University of” teaching & learning experience in a digital context.

---

Supply and Demand Functions in Inventory Models

Host(s): Professor Shuya Yin
Speaker(s): Professor Annabelle Feng
University: Purdue University
Location: SB1 5100
Time: Friday, March 4, 2016, 1:30 pm - 3:00 pm

The heart of an inventory model is the modeling of the supply and demand functions. To allow for analytical tractability, the existing literature focuses on almost surely linear supply and demand functions, which greatly limits the applicability of the models. The goal of this paper is to provide a unified approach to analyze general random supply and demand functions. By transforming the problem into one defined on a higher dimension, we show that many of the seemingly highly nonlinear supply and demand functions (in the almost sure sense) are linear in the stochastic sense. With this new notion of linearity, called the stochastic linearity in mid-point, our ability to analyze inventory and supply chain problems is much enhanced. We are able to prove the concavity of the profit function in the transformed inventory and pricing decisions for a general class of supply and demand functions that cover and go much beyond the ones studied in the existing literature. We further show that when the supply functions are stochastically increasing in the dispersive order, a condition satisfied by almost all the supply functions analyzed in the existing literature, the optimal ordering decision follows an almost threshold policy—When the inventory level is above a threshold, no order is placed to the supplier; otherwise, a positive order is issued to the supplier with exception over a set of inventory levels with zero Lebegue measure. If, in addition, the demand distribution is continuous, this policy reduces to a strict threshold policy and it is optimal to select the suppliers based on per unit cost of delivery. To demonstrate the applicability of these theoretical developments, we analyze several known and new examples of supply and demand functions. We also present a nonparametric approach to show how one can empirically estimate and verify the stochastic properties of the supply and demand functions. This is a joint work with J. George Shanthikumar.

---

The Potlatch Revisited: Distinction and Destruction among the New Global Elite

Host(s): Professor Sharon Koppman, Co-Sponsored by: The Department of Sociology
Speaker(s): Associate Professor Ashley Mears
University: Boston University
Location: SB1 5200
Time: Friday, March 4, 2016, 12:00 pm - 1:30 pm

This paper draws its conceptual lens from the sociology of expectations and from market studies to investigate the relationship between hype cycles and how future markets are formed. Through discourse analysis we interrogate a body of 462 publicly accessible texts from the period 2005 to 2015 around digital health technologies and markets across newspapers, internet sources and public policy documents, tracing: the content of the discourse, the promises made and warnings sounded, who contributes to the hype, and its effects on the shaping of the digital healthcare landscape. We find that the digital health technology hype follows an hourglass pattern, where the early market impetus around cost savings in healthcare systems finds itself replaced by a technology development frenzy in a second phase before settling down into a more mature third phase where technologies are integrated into a wider socio-economic discourse again.

---

From Electronic Health Records to Mindful Cyborgs: How Expectations Shape Markets

Host(s): Professor Alladi Venkatesh
Speaker(s): Professor Susi Geiger
University: UCD Dublin
Location: SB1 5200
Time: Friday, March 4, 2016, 12:00 pm - 1:30 pm

This paper draws its conceptual lens from the sociology of expectations and from market studies to investigate the relationship between hype cycles and how future markets are formed. Through discourse analysis we interrogate a body of 462 publicly accessible texts from the period 2005 to 2015 around digital health technologies and markets across newspapers, internet sources and public policy documents, tracing: the content of the discourse, the promises made and warnings sounded, who contributes to the hype, and its effects on the shaping of the digital healthcare landscape. We find that the digital health technology hype follows an hourglass pattern, where the early market impetus around cost savings in healthcare systems finds itself replaced by a technology development frenzy in a second phase before settling down into a more mature third phase where technologies are integrated into a wider socio-economic discourse again. The paper contributes to technology marketers' understanding of how technology markets are shaped and how they can position themselves in these markets to best effect, and to marketing researchers' understanding of how complex markets form. We warn against following the 'hype', especially when it encourages companies to engage in technology development that is blinded by the promises of an untapped market and unhinged from broader systems, societal, ethical or economic concerns.

---

Spillovers Inside Conglomerates: Incentives and Capital

Host(s): Professor Chong Huang
Speaker(s): Professor Denis Sosyura
University: University of Michigan
Location: SB2 122
Time: Friday, February 26, 2016, 1:30 pm - 2:45 pm

Using hand-collected data on divisional managers at conglomerates, we find that a change in industry pay in one division generates spillovers on managerial pay in other divisions of the same firm. These spillovers arise only within the boundaries of a conglomerate. The intra-firm spillovers increase when conglomerates have excess cash and when managers have more influence over its distribution, but decline in the presence of strong governance. These spillovers are associated with weaker performance and lower firm value. Our evidence is consistent with simultaneous cross-subsidization via managerial payoffs and capital budgets and suggests that these practices arise in similar firms.

---

Value of Multi-Dimensional Rating Systems: Evidence from a Natural Experiment

Host(s): Professor Mingdi Xin
Speaker(s): Associate Professor Pei-Yu Chen
University: Arizona State University
Location: SB1 5200 5th Floor, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 19, 2016, 10:30 am - 12:00 pm

Online product ratings offer consumers information about products. However, consensus is lacking on whether or not single-dimensional ratings can efficiently convey product quality information to consumers. Some scholars have discussed the potential of designing multi-dimensional rating systems to transfer quality information because quality is often comprised of multiple dimensions. This study directly investigates whether or not, and to what extent, multi-dimensional rating systems enhance the efficiency of information transfer. Our key identification strategy hinges on a natural experiment on www.tripadvisor.com (TripAdvisor) when the website reengineered and changed its rating system from single-dimensional to multi-dimensional in January 2009. To control the unobserved quality change over time at the restaurant level, we obtain rating data on the same set of restaurants from www.yelp.com (Yelp), which allow us to identify the causal effect using a difference-in-difference approach. Results from a set of econometric analyses show that ratings in a single-dimensional rating system have a high dispersion and downward trend, in contrast to those in a multi-dimensional rating system, which support the conjecture that multi-dimensional rating systems facilitate matching between consumer preferences and product attributes. Consumers form more accurate expectations from multi-dimensional ratings and are therefore less likely to be either “disappointed,” which results in a downward trend in ratings, or “surprised,” which leads to a higher dispersion of ratings. We also conduct two randomized experiments to understand the mechanisms of how multi-dimensional rating systems enhances information transfer. Results suggest that multi-dimensional rating systems not only help consumers find products that better fit their preference, but also increase their confidence of their choice. These results support the view that multi-dimensional rating systems enhance information transfer efficiency. This study provides important implications for a good design of online rating systems that help consumers match their preferences with product attributes.

---

The Local Realities of Risk, Responsibility, and Regulatory Empowerment: A Frontline Safety Approach

Host(s): Professor Luyi Gui
Speaker(s): Assistant Professor Garry Gray
University: University of Victoria
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 12, 2016, 10:00 am - 11:30 am

In what ways do social interactions within work settings influence compliance with legal regulations? How do those on the frontline who perform day-to-day work, interpret and respond to regulations designed to specify and bound their work practices? A frontline safety approach takes seriously the relationships between people at the local level, between people and the systems/institutions in which they are embedded, and between people and their wider social and political contexts. It is vital for regulatory scholarship to recognize these issues, in particular, how conceptions of individuals (as rational, responsible, economic actors) are constructed and maintained at these levels. In this presentation, I will illustrate limitations in regulatory empowerment approaches that require citizens to speak up by drawing on field research among blue collar workers in factories and truck driving as well as professionals in white collar settings such as hospitals and universities. Power imbalances play a crucial role in the decision to speak up, however, not only among those doing manual labor, but also among highly trained professionals.

---

Do managers tacitly collude to withhold industry-wide bad news?

Host(s): Professor Ben Lourie
Speaker(s): Professor Catherine M. Schrand
University: University of Pennsylvania
Location: SB1 5200 5th Floor, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, February 12, 2016, 3:00 pm - 4:30 pm

We analyze when firms in an industry could collectively withhold adverse news about industry conditions. Intra-industry correlation in signals should increase capital market pressures to disclose, making it difficult for firms to collectively withhold adverse news. Using a strategic game framework, we predict that a cooperative withholding equilibrium is possible, but whether it is achievable depends on the structure of the industry, the nature of the industry news, and the extent to which these factors are common knowledge. Using opacity in 10-Ks as a proxy for withholding, we document a small number of cases of increased intra-industry withholding of adverse news, controlling for changes in firm fundamentals including complexity. Strategic withholding is more likely in industries with greater negative tailrisk, greater equity incentives, and trade associations that foster interpersonal connections. The analysis has implications for mandated disclosure of industry-wide news by providing an understanding when economic forces are sufficient to generate voluntary disclosure of industry-wide adverse conditions.

---

Robust Dynamic Estimation

Host(s): Professor Rajeev Tyagi
Speaker(s): Professor Prasad Naik
University: University of California, Davis
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, February 12, 2016, 3:30 pm - 5:00 pm

Managing marketing resources over time requires dynamic model estimation, which necessitates specifying some parametric or nonparametric probability distribution. When the data generating process differs from the assumed distribution, the resulting model is misspecified. To hedge against such a misspecification risk, the extant theory recommends using White’s (1980) sandwich estimator. This approach, however, only corrects the variance of estimated parameters, but not their values. Consequently, the sandwich estimator does not affect any managerial outcomes such as marketing budgeting and allocation decisions. To overcome this drawback, we present the minimax framework that does not necessitate any distributional assumptions to estimate dynamic models. Applying minimax control theory, we derive an optimal robust filter, illustrate its application to a unique advertising data set from the Canadian Blood Services, and contribute several novel findings. We discover the compensatory effect: advertising effectiveness increases and the carryover effect decreases as robustness increases. We also find that the robust filter uniformly outperforms the Kalman filter on the out-of-sample predictions. Furthermore, we uncover the existence of a profit-volatility tradeoff, similar to the returns-risk tradeoff in finance, whereby the volatility of profit stream decreases at the expense of reduced total profit as robustness increases. Finally we prove that, unlike for-profit companies, managers of non-profit organizations should optimally allocate budgets opposite of the advertising-to-sales ratio heuristic; that is, advertise more (less) when sales are low (high).

---

Improving Environmental, Health, and Safety in Supply Chains: Some Preliminary Studies

Host(s): Professor Shuya Yin
Speaker(s): Professor Chris Tang
University: University of California, Los Angeles
Location: SB1 5200, Lyman Porter Colloquium Room and Executive Terrace
Time: Friday February 5, 2016, 9:30 am - 11:00 am

Many factories in developing countries have serious Environmental, Health and Safety (EHS) issues. Due to inconsistent law enforcement, limited progress has been made. What can be done? This is an open research topic that operations management and supply chain researchers should explore. I plan to share some of my preliminary studies in this presentation.

---

Using Choice Architectue to Improve Energy Decisions

Host(s): Professor Chris Bauman
Speaker(s): Professor Rick Larrick
University: Duke University
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Monday, February 1, 2016, 3:30 pm - 5:00 pm

This talk will describe a set of cognitive biases that lead people to misunderstand their energy use. The talk will review four principles of “choice architecture” derived from cognitive and social psychology for helping decision makers make better energy decisions. Brief research examples will be given in support of each. The principles will also be illustrated more broadly as tools for helping employees and consumers make better decisions. (1) Do the calculations for decision makers. “Miles per gallon” (MPG) is a familiar efficiency metric used to evaluate automobiles in the United States. However, gas consumption is a highly curvilinear function of MPG. As a result, MPG leads people to severely underestimate the gas savings from small MPG improvements on inefficient cars. Calculating consumption for decision makers by using a measure such as “gallons per 100 miles” corrects this bias. (2) Translate energy use to important objectives such as cost and environmental impact. People often fail to map energy use to other concerns, such as cost and environmental impact, because they lack knowledge or motivation. Translations remind people of goals they care about and guide them to options they prefer. (3) Provide a meaningful relative comparison. Relative comparisons help consumers evaluate whether an ambiguous energy number is good or bad. For instance, OPower has demonstrated that people reduce their energy use when given specific comparisons to average (and best) neighbors. Other comparisons, such as ambitious but realistic goals, also lead to reduced energy use. (4) Use an expanded scale, such as lifetime cost (not daily cost). People tend to ignore small numbers. To address this issue, energy-related numbers can be scaled to large but realistic time periods. Research shows that people are more interested in energy efficient products when given costs on a longer time scale.

---

The Bright Side of Managerial Overconfidence

Host(s): Professor Shuya Yin
Speaker(s): Professor Juan Li
University: Nanjing University
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Boardroom
Time: Friday, January 29, 2016, 10:00 pm - 11:30 pm

A well-known behavior phenomenon is managers hold excessive faith that they know the truth. Managers may receive signals about market states, in which the states may be high or low, thus, the posterior probability of market state being high(low) with receiving a hit (bomb) signal is not smaller than the prior probability, managers may exhibit overconfidence on the accuracy of signals. The objective of this paper is to answer under which conditions overconfidence bias may lead to higher profits, the corresponding managerial insights for firms are whether to hire overconfident managers and how to estimate the value of signals in a competitive setting. The paper shows firms’ differentiation strategies critically depend on how costly it enter market. When the fixed cost of entry is not too high, both firms would like to hire rational managers. However, for a larger fixed cost, counterintuitively, one of firms exploits to hire overconfident manager to differentiate their competition if the market states being high is relatively large, the main reason of overconfidence leading to higher profits is benefits from ordering more with receiving the hit signal are sufficiently large compared with loss from ordering less with receiving the bomb signal. The fact that hiring overconfident managers is stable in a wide range of environments may help to explain why overconfident managers remains prevalent, even if it contributes to decision bias. Furthermore, overconfidence bias leading to higher profits are robust even when market states belong to a normal distribution.

---

Vicarious Learning In Startups: Evidence From Accelerator Programs

Host(s): Professor John Joseph
Speaker(s): Professor Chris Bingham
University: University of North Carolina
Location: SB1 5100, Corporate Partners Executive Boardroom
Time: Friday, January 29, 2016, 2:00 pm - 3:30 pm

A fundamental challenge for new startups is overcoming liabilities of newness - especially lack of experience and business understanding. Accelerators, intense, time-compressed entrepreneurial education programs, attempt to alleviate these critical liabilities by facilitating vicarious learning for participating new ventures. Yet, the organizations literature suggests that since new ventures lack experience and thus adequate levels of absorptive capacity to assimilate and integrate new knowledge, vicarious learning may be less effective. Using a multiple case, inductive study of eight US seed accelerator programs and affiliated startups, we address this tension and explore how accelerators may contribute to (or distract from) vicarious learning in startups. Our data suggest how accelerators do both. Collectively, our findings contribute to strategy by introducing intermediaries that may broker vicarious learning for others, to organization theory by suggesting how startups can build initial absorptive capacity, and to entrepreneurship by demystifying how accelerators can help or harm venture development.

---

"Only One Left - I'll Fight you for It!": Scarcity Promotion Advertising and Aggressive Behavior

Host(s): Professor Connie Pechmann
Speaker(s): Dr. Darren Dahl
University: Sauder School of Business
Location: SB1 5200, Lyman Porter Colloquia Room and Executive Terrace
Time: Monday, January 25, 2016, 1:00 pm - 2:30 pm

Marketers frequently use scarcity promotions, where a product or service is limited in either quantity or is promoted for a limited time. The present research shows that the mere exposure to scarcity promotion advertising can activate actual aggression even outside the consumption domain, when the scarce item is not even attainable. Further, exposure to scarcity promotion advertising prompts consumers to perceive other consumers (even if not physically present) as potential threats to obtaining a desired product. This threat, in turn, is shown to drive aggression towards others. Four studies using violent video game behavior to measure aggression demonstrate that firearm shooting behavior (number of shots fired), punching behavior (punches thrown), and consumer preferences for violent experiences are higher in response to such advertising.

---

Attributes of Informative Disclosures

Host(s): Professor Ben Lourie
Speaker(s): Professor Daren Roulstone
University: Ohio State University
Location: SB1 2321, Judy Rosener Flexible Classroom
Time: Thursday, January 21, 2016, 2:00 pm - 3:30 pm

Regulatory actions and academic research suggest a variety of seemingly “good” disclosure attributes: readability, amount of forward-looking information, concreteness (numerical intensity), and more disclosure in general. While all of these attributes seem intuitively desirable, there is little empirical evidence about how these disclosure attributes compare in terms of informing the readers of financial reports. We examine equity market responses to quarterly earnings announcements as a function of these disclosure attributes and find substantial variation in their effects. We find strong evidence that forward-looking disclosures represent informative disclosures, very little evidence that readability is associated with disclosure informativeness, and actually find evidence that both disclosure length and numerical intensity are negatively associated with disclosure informativeness. We provide several reasons why these measured attributes may not capture disclosure quality as expected. Overall, our results should help inform both managers and regulators making decisions about how to craft or encourage informative disclosures. Our results also suggest caution for academics using seemingly intuitive measures of disclosure quality.

---

Which Factors Matter to Investors? Evidence from Mutual Fund Flows.

Host(s): Chong Huang
Speaker(s): Professor Brad Barber
University: UC Davis
Location: SB1 5200, Lyman Porter Colloquia Room & Executive Terrace
Time: Friday, January 15, 2016, 1:30 pm - 2:45 pm

When assessing a fund manager's skill, sophisticated investors will consider all factors (priced and unpriced) that explain cross-sectional variation in fund performance. We investigate which factors investors attend to by analyzing mutual fund flows as a function of recent returns. Investors attend most to market risk (beta), but treat returns attributable to size, value, momentum, and industry factors as alpha. Flows of direct-sold funds- whose investors are likely more sophisticated than those of broker-sold funds-are less responsive to factor-related returns, which suggests sophisticated investors are aware that factor-related returns are not indicative of managerial skill.

---

Stringency, Governance, Media Coverage and Diffusion of Environmental and Social Labeling Schemes

Host(s): Professor Luyi Gui
Speaker(s): Professor Charles J. Corbett
University: University of California, Los Angeles
Location: SB1 5200, Lyman Porter Colloquia Room and Executive Terrace
Time: Friday, January 15, 2016, 10:00 am - 11:30 am

The diffusion of ecolabels has been widespread, through adoption of individual labels by firms and consumers has varied widely. Little is known about why some labeling schemes are more widely adopted than others. One might speculate that firms prefer labels with less stringent requirement, as they are less costly to adopt. Conversely, firls may prefer to associate themselves with a label that is sufficiently well-governed to minimize the risk of negative publicity emerging about other firms carrying that smae label. the notion "well-governed" itself is also not well-defined. Finally, one might speculate that labels which receive favorable coverage in the media are likely to be more widely adopted, and that labels which are more stringent and better-governed are more likely to attract such favorable coverage. We explore these linkages (between stringency, governance, and media coverage and adoption) using three sources of data. We analyze 40 environmental and social labeling schemes, using www.ecolabelindex.org and other sources to code their governance practices. We conducted a survey of 67 experts from governments, major retailers, NGOs, consultancies. and academia, around the world, to determine stringency, quality of governance, and breadth of adoption. Finally, we analyzed 3043 media articles on these 40 schemes, to determine the tenor of media coverage. We find that only accreditation of verifiers is associated with a better overall quality of governance. We also find that labels that are better-governed are also more widely adopted, consistent with the expectation that firms are more wary of joining labels with weal governance. On the other hand, labels that are more stringent are not less widely adopted, suggesting that (within the range of stringency included in our sample) labels do not suffer by imposing stricter requirements. We find that the tenor of the media coverage of a label does not depend on its stringency, on most specific governance practices, or its overall quality of governance. Only an open and consensus-based standard-setting process is associated with more favorable media coverage. More favorable media coverage is not, however, associated with wider adoption. Overall our findings point to "reassurance" as a key part pf governance of ecolabels, whether in the form of accreditation of verifiers, or participation of many stakeholders in the standard-setting process.

---