Abstract:
Building on over a decade of research on firefighters, I report findings from three studies (two qualitative, one quantitative) that illustrate: (a) the fundamental nature of assessing others’ “work orientations” (e.g., do you have a calling or are you here for the paycheck?); (b) how perceived work orientations are used for determining trust and predicting performance; and (c) how disparate cues are used in building an understanding of others’ work orientations. Firefighters provide an interesting case study for this research as the need for trust at a fire scene is very high; however, the number of fires that firefighters actually fight has gone down dramatically in recent years. Consequently, issues of trust often have to be made based on “small cues” that may have very little direct relevance to fighting fires. I draw upon multiple literatures, including meaning of work and trust, and provide implications for both theory and practice.

Abstract:
To our knowledge, ours is the first study to offer non-experimental evidence on the effects of pay inequality on agent actions. We study how pay inequalities affect (i) the likelihood that an individual non-CEO manager (VP) will voluntarily resign, and (ii) a firm’s rate of VP turnover. We consider pay inequalities that a VP faces relative to (i) the CEO in her own firm, (ii) other VPs in the firm, and (iii) VPs in benchmark firms. We use a unique hand-collected dataset of over 1,000 voluntary managerial resignations and find that pay inequality is an important determinant of managerial turnover. We find that managers are more likely to resign when their pay relative to their peers in the firm and outside the firm is lower; and firms with greater levels of internal pay inequality and greater pay inequality relative to benchmark firms experience higher VP turnover.

Abstract:
Scientific pricing incorporates process and data-driven intelligence into a company’s selling process. It fundamentally uses the law of supply and demand; however, its applications vary considerably based on many factors, including product characteristics, data availability, business requirements, managerial objectives, and competitive environments. High-tech products are characterized by rapid price erosions, super high price sensitivity, short and unpredictable lifecycles, strong tendency of cannibalization and extreme competition. This presentation provides a brief overview of scientific pricing and discusses key challenges in its application for the high-tech products.

Abstract:
This paper explores commonalities across asset-pricing anomalies. In particular, we assess implications of financial distress for the profitability of anomaly-based trading strategies. Strategies based on price momentum, earnings momentum, credit risk, dispersion, idiosyncratic volatility, and capital investments derive their profitability from taking short positions in high credit risk firms that experience deteriorating credit conditions. Such distressed firms are highly illiquid and hard to short sell, which could establish nontrivial hurdles for exploiting anomalies in real time. The value effect emerges from taking long positions in high credit risk firms that survive financial distress and subsequently realize high returns. The accruals anomaly is an exception - it is robust amongst high and low credit risk firms as well as during periods of deteriorating, stable, and improving credit conditions

Abstract:
Cities are often modeled as thick and fluid environments in which individuals have better access to markets, public goods and services, and more diverse social networks. However, rapid urbanization in developing countries has created “mega cities” that cover large geographic areas and often have poor public transportation, segregated housing, and uneven provision of public goods. Does spatial and social distance within such cities affect the economic mobility and well-being of the urban poor? In this paper, we exploit a relocation program in a large Indian city, which used a lottery to select which households would be offered the opportunity to purchase a subsidized home in a relatively distant, residential complex, to examine how spatial and social distance shape networks and household ability to use networks for risk-sharing and collective action. We find that winners of the housing lottery are more spatially isolated from centers of economic activity and public services approximately 14 years after the relocation. Winners have more occupational ties but fewer caste/religious ties within neighborhoods compared to non-winners, and winners report greater collective action but less social insurance. We interpret this pattern as a change in the shape of networks, reducing costs for local cooperation, but increasing the correlation of risk within networks

Abstract:
This paper identifies the effect of corporate networks on firms’ financial investment and executive pay decisions. Corporate networks arise through board interlocks, which provide a frequent and important channel for non-market interactions amongst firms. Using panel data for all publicly traded companies in India I estimate peer effects in firm policies, defining each firm’s reference group as the set of all other firms with whom it shares one or more directors. Identification of dynamic network peer effects, which derive from endogenous associations, is achieved by exploiting natural breaks in network evolution that exogenously change the composition of peers. These breaks occur as a result of local network shocks – death or retirement of shared directors – that are stochastic and external to the network formation process. I find significant network peer effects that are positively associated with firms’ investment strategy and executive compensation.I also explore heterogeneity in peer effects by distinguishing between network peers who belong to the same industry from those that do not, and find a greater effect of across-industry network peers.

Abstract:
This paper examines whether a worker's wage is based in part on information about the performance of her personal contacts. Embedding a sibling model into an employer learning framework, I develop a theory of labor markets with symmetric but imperfect information among employers in which workers are organized into disjoint social groups and workers in the same reference group have correlated abilities. I study wage determination under two alternative belief formation processes: individual learning, under which employers observe only a worker's own schooling and performance, and social learning, under which employers also observe those of her personal contacts. Using data on the AFQT scores of siblings in the NLSY79, I test for a form of statistical nepotism in which a sibling's performance is priced into a worker's wage. If learning is social, then an older sibling's test score should typically have a larger adjusted impact on a younger sibling's log wage than vice versa. By contrast, if learning is individual, then no such asymmetry should be present. The empirical findings provide strong support for the central prediction of the social learning model. Furthermore, I perform several exercises to identify social learning as the leading explanation for the main results, largely ruling out other potential factors, such as asymmetric skill formation, human capital transfers, and role model effects.

Abstract:
We consider a flexible policy for a single location, single item inventory under rather general assumptions. Under the (Q,R,S) policy, orders are placed in multiples of Q units, at review epochs that are spaced R time units apart, and such that after ordering the inventory position is as close to but no larger than S units of product. By choosing Q = 0 (or 1 for discrete demand), the policy reduces to a base stock policy, and by choosing R = 0, continuous review results. Hence the general (Q,R,S) policy includes periodic review base stock and (r,nQ) policies and continuous review one-for-one and order point order quantity policies as special cases. The model therefore allows fair comparisons of costs between all these policies. We provide a unified derivation of the inventory related costs for the (Q,R,S) policy and completely characterize its (joint) convexity properties. We also study review and ordering costs incurred under the (Q,R,S) policy, and compare optimality conditions and costs for the periodic review base stock policy and continuous review order point-order quantity policies. Finally, we provide some real life examples where it is natural to use (Q,R,S) policies.

Abstract:
We develop a theoretical model of the pricing of a new durable good to determine the conditions under which the seller can utilize inferences about the buyer’s willingness to pay based not only on her decision to trade in the old good but also on its characteristics. We test the predictions of our theory using transaction data for new car purchases that includes information on the vehicles that new car buyers traded in. The results show that dealers infer a higher willingness to pay and charge higher prices to consumers who traded in a used vehicle than to those who did not. We also find that dealers charge even higher prices to those consumers who trade in used cars that were of the same make and model as the new one. We show that ignoring the information available in the type of trade-in can inflate the estimated value of the trade-in effect

Abstract:
Various theoretical models assume that information seeking behavior of investors has an impact on prices. However, it is very difficult to empirically test this, since the actual information acquisition process of the investors is unobservable. Using a unique data set from Google Trends, I construct a search index and use it to proxy for the information seeking behavior of retail investors. I find that abnormal search index predicts future buying pressure on the stock of a company. The portfolio with the highest increase in the search index has positive and significant alphas. The search index also predicts earnings surprises and is associated with the pre-earnings announcement drift. My results are robust to alternative specifications of CAR windows, past returns, news coverage, information available to investors prior to the release of earnings numbers, and the information environment surrounding the earnings announcements. Overall, my results are in line with the hypothesis that retail investors’ trades have information content relevant to stock prices.

Abstract:
Limit order revisions, which involve decisions about when and how to modify or cancel prevailing limit orders, account for a significant proportion of limit order activity in exchanges around the world. This paper examines the determinants of traders' decisions to revise orders, and the profitability of traders' order revision strategies using a unique dataset which provides complete information on trades, orders, trader identification codes, and trader categories. The analysis provides three important results. One, informed traders and traders who function as voluntary market makers revise orders most intensely. Two, along with changes in market prices and other market conditions, changes in traders' inventories, including inventories of correlated stocks, influence order revision strategies. Three, informed traders reduce the execution costs of their order portfolios through active order revisions; the benefit is especially pronounced on earnings announcement days, when the value of private information is high. That traders employ revisions to mitigate their order submission, inventory, and adverse selection risks indicates that order revisions are a valuable feature of the rapidly proliferating electronic limit order markets.

Abstract:
This paper investigates whether managers’ discretionary spending for political purposes enhances shareholder value. I exploit exogenous shocks to campaign finance regimes, in particular the McConnell v. FEC Supreme Court decision of 2003, to show that on average, restrictions on firms’ abilities to contribute to national political parties reduce shareholder value by $10.28 million to $87.67 million. Overall, the results suggest that political contributions are value-enhancing investment projects, and restrictions on managers’ discretionary spending for political purposes are detrimental to shareholder value.

Abstract:
Many judgments consumers make occur within a sequence of evaluations and therefore are likely to be influenced by context effects. Assimilation (contrast) refers to a positive (negative) relationship between the value people place on a target and the value they place on the context. Past work on assimilation and contrast in sequential evaluation presupposes only one or the other occurs. We propose that stimuli experienced within a sequence may be influenced simultaneously by assimilation and contrast to stimuli experienced earlier in the sequence, and we estimate a hierarchical Bayesian model that confirms these simultaneous effects within a unique, real-world dataset. We find individual evaluations (scores) are influenced by contrast effects to the scores of their immediate predecessors and to extreme scores within the sequence, while simultaneously influenced by assimilation to the first score. This work is the first to document that multiple assimilation and contrast effects simultaneously influence sequential hedonic evaluations.

Abstract:
Over the recent two decades substantial effort has been placed in expands our theoretical understanding of Analytics (machine learning, data mining, etc.). However, the necessity of a sound theoretical understanding of any analytical methodology is only a part of the overall vision. In thistalk we focus on the operationalisation of Analytics, that is how do we take these approaches and marry them into business requirements. What are the key ingredients to operationalise analytical methodologies? And why would one want to operationalise Analytics in the first place?

Abstract:
We study how the risk of disruption impacts the performance of a supply chain with a goal of identifying policy recommendations for designers. A classic example is that of a fire in a supplier plant shutting down production at Ericsson for 30 days and resulting in $400 million of lost revenue. There are two questions we focus on in a context like this. The first relates to the fact that the risk of disruption is very hard estimate. There is now way that Ericsson could have estimated the probability of this fire. How should it account for estimation error when designing its supply network? The second question relates to the idea of “integrating” supply chains using policies such as common parts, single suppliers, centralized inventories. In each case, the supply chain action improves performance when faced with recurrent risk (for example demand fluctuations) but makes the supply chain more fragile when faced with disruptive risk. We identify factors that influence the fragility of a supply chain. Sunil Chopra (joint with Achal Bassamboo, Mark Daskin, Michael Lim)

Abstract:
The literature suggests that brand equity can be split into two parts - an attribute-based equity and a non-attribute based one that captures consumer preferences beyond the utility offered by individual attributes. In addition to measuring attribute-based equity, firms deploying portfolios of products within complex branding structures often seek to measure the presence, distribution and evolution of these potentially heterogeneous non-attribute based unique branding associations - labelled 'residual equity' – at each distinct layer of a product’s brand hierarchy. The authors develop and operationalize a robust and flexible Bayesian semiparametric model to first separate the attribute-based equity from latent residual equity, to jointly estimate this multi-level residual equity and to allow residual equity to exhibit statedependence using a random-walk prior. The model is empirically illustrated on syndicated US national beer sales data. The authors find significant, heterogeneous and temporally stable residual equity presence across the brand hierarchy and highlight some substantive implications arising therein.

Abstract:
The defining figure of neoclassical economic theory, the homo oeconomicus, has long been challenged by both experimental economics and social psychology. People are, as we now know from many experimental studies on dictator games, ultimatum games or public good games, not own-payoff maximising egoists, but compassionate social beings who care about fairness and the well-being of others. However, the focus on kind behaviour in the literature may be inappropriately one-sided. In a series of experiments presented here we ask whether there is also adark side of human behaviour. We show that nastiness, which we define as a genuine pleasure derived from lowering the well-being of others, is a common trait in humans. We explore strategic situations in which spite and nastiness can result in disastrous outcomes, and which institutional arrangements exacerbate or harness the effects of nastiness.

Abstract:
We consider an approach for estimating substitute and lost retail demand when only sales transaction data are available and not all products are available in all periods (e.g., due to stock-outs or availability controls imposed by the seller). Our method combines a multinomial logit (MNL) demand model with a Poisson model of arrivals over multiple periods. The problem we consider is how to jointly estimate the parameters of this combined model using only sales transaction data. Our key idea is to view the problem in terms of primary demand (or first-choice) demand -- that is, the product choices that customers would have made if all products were available in all periods -- and to treat the observed sales as incomplete observations of primary demand. We then apply the expectation-maximization (EM) method to this incomplete, primary demand model and show that it leads to a simple, highly efficient iterative procedure for estimating the model which provably converges to a stationary point of the log-likelihood function. We illustrate the estimation procedure on several industry data sets and discuss extensions of the approach to non-parametric models of preference. Garrett van Ryzin (Joint work with Gustavo Vulcano, NYU and Richard Ratliff, Sabre Holdings)

Abstract:
Although firms spend substantial amounts of money to build and maintain brand equity, brand equity is fragile to product-harm crises such as product recalls. Product-harm crises can adversely affect consumer perceptions and preferences as well as weaken the effectiveness of marketing activities (Van Heerde et al. 2007). Despite the potentially devastating effects of these crises, most firms are inadequately informed and underprepared to handle them (Dawar and Pilluta 2000). How do product recalls affect brand equity? How do they influence the effectiveness of different types of advertising, such as product feature advertising, product model advertising and sponsorship advertising? How should firms allocate their advertising spending across different types? The answers to these questions will enable firms make better advertising allocation decisions and rebuild brand equity in response to product recalls. In this study, we develop a state space model of brand equity based on Kalman filtering to capture the dynamics related to spending on different types of advertising. We then integrate the Kalman filter with a random coefficient demand model based on Berry, Levinsohn, and Pakes (1995). The model allows us to capture the direct effects of product recall on brand equity as well as the indirect effects of recall on brand equity through the effectiveness of different advertising types. We estimate our model on a carefully compiled dataset on the automobile industry, comprising 35 auto companies that had a total of 1,206 recalls during 1997-2002. The dataset includes advertising data on five types, product feature advertising, recalled product model advertising, non-recalled product model advertising, promotional advertising, and sponsorship advertising. Using in a holdout sample, we perform counterfactuals to show how our proposed model and its parameter estimates can be used to improve the allocation of advertising budget across the different types.Our results reveal that product recall has no direct effect on brand equity. However, it has significant negative influence on the effectiveness of each advertising type, with sponsorship advertising suffering the most. The reallocated advertising budget based on our model is associated with higher sales and profits. In addition, our results have other important managerial implications. They suggest that, in response to product harm crises, firms should avoid advertising the recalled model, cut sponsorship advertising, and spend more on product feature advertising. Keywords: Advertising, Brand equity, Product harm crisis, Kalman filter, BLP approach.

Abstract:
Organizational knowledge management has become a critical competitive capability for professional services (engineers, doctors, lawyers, etc.). Professional service firms are grappling with how best to manage knowledge flows within the firm; and the flow of knowledge in and out of the firm. Understanding knowledge flows and leveraging it translates to faster (and cheaper) client solutions. Specifically, I will be talking about two on-going projects. The first involves the dynamics of the transfer of knowledge within business units of the firm. If one business unit of the firm is working on a client problem, for example, how well is it able to leverage not only all of its prior work, but by other business units in the firm. Another related project investigates if professional service firms are able to leverage the experience of their sub-contractors. They use but do not own the work product - can firms leverage this type of knowledge? The focus of this talk will be on the issues related to leveraging such “distributed knowledge” within the firm via empirical estimation of learning curve models. We will report preliminary results based on our experience with an Architectural/Engineering design firm. Ram Ganeshan (joint work with Tonya Boone and Robert L. Hicks)

Abstract:
If a government has ability and willingness to redistribute the surplus created by an external investor, why do we still observe resistance to such investment, sometimes in the form of destruction of productive assets? We explain such surplus destruction as a credible signal sent to the government by an affected group of its low valuation of investment. The information-constrained government values such a signal and uses it to implement a better redistribution scheme: thus resistance can be interpreted as a demand for redistribution. The extent of destruction is decreasing in the extent that the government cares for the affected group. While resistance has an informational value, it has two distinct costs: it directly reduces surplus and also reduces the investor’s incentives to create surplus. The government uses a tax/subsidy on the investment to maximize weighted social surplus, and we show that the possibility of destruction may force the government to be too soft in its negotiation with the investor. A protection for the investor either legal (banning signaling) or financial (compensation for losses incurred due to resistance) can improve the society’s welfare

Abstract:
This paper focuses on contractual provisions in external sourcing of innovative services. Such agreements require protection of key knowledge assets, whilst simultaneously providing incentives for heuristic search to enable problem solving and knowledge transfer. We conceptualize two distinct dimensions of knowledge in the inter-organizational context: problem solving complexity and the need for synthesis of knowledge bases across organizational boundaries. Integrating explanations from transaction cost economics, incomplete contracting theory and knowledge-based research, we analyze a sample of IT outsourcing contracts to investigate the role of three contractual provisions: joint decision making rights, intellectual property safeguards, as well as the intensity of the incentives. Contracts for bilateral agreements that involve high problem solving complexity contain stronger and more clearly elucidated joint decision rights, which rely less on measurable outcomes, in conjunction with strong IP safeguards and low powered incentives. When prior experience of the vendor is critical for fulfillment of the contracted task, contracts include joint decision rights. Exchanges characterized by complementarity in knowledge bases across firms are more likely to be governed by high powered incentives contracts while exchanges characterized by co-specialization are governed by contracting arrangements involving joint decision rights in conjunction with low powered incentives.

Abstract:
We propose an approach to prioritize service improvements based on the twin objectives of higher customer value and lower cost. The approach involves (1) conducting qualitative customer studies to identify a list of possible service improvements, (2) conducting a quantitative, conjoint-like survey to determine values customers attach to each of the improvements, (3) collecting data on the costs of making the service improvements, and (4) putting the data in (2)–(3) together to prioritize improvements using a “bang for the buck” rule. The approach also allows for maximizing the likely increased service usage resulting from any subset of service improvements subject to a budget constraint. We illustrate the proposed approach in the context of improving passenger train service between a pair of cities in India. An adaptive self–explicated approach is used for obtaining customer values and cost estimates. The customer values so elicited display substantial face validity.

Abstract:
In this session I will describe some of the projects that I’ve been working on while at ISB. They include the following: • Sustainability in Healthcare: Towards a Theory of Environmental Capabilities. This project draws on research in operations strategy and resource based view of the firm to develop a model that describes how healthcare organizations are developing capabilities that support sustainable operations. • Investigating the Alignment of Sustainability Perspectives in the Retail Fashion Supply Chain (with R. Batra). This project empirically examines the congruence in attitudes about sustainability among consumers, retailers and designers. • Exploratory Study of Sustainable Luxury (with R. Batra). This project uses qualitative methods to define sustainable luxury, identify the tradeoffs and the implications for service design and delivery.

Abstract:
The spread of social media has meant that User-generated Content (UGC) has become an important form of communication. Most of the past research in social media has concentrated on analyzing message virality or the causes of why certain messages go viral. We posit that accounting for media virality, a phenomenon where messages are transferred beyond the original media they were carried in, has become imperative. In this paper we argue that media virality is a function of product characteristics and propose a framework for capturing this type of virality using just two dimensions, the inter media elasticity and inter media duration, together referred to as an entity’s Inter Media Reactivity (IMR). We illustrate the application of our concept using data on movie stars across several media. We calculate the IMR for each star, and demonstrate how media virality differs across each, and also analyze the starspecific characteristics that drive media virality. Subsequently, we relate the media virality of stars to the performance of their movies. Our research thus provides a theoretical contribution to the literature by exploring media virality while also providing several managerially relevant substantive insights about the motion picture industry. Key Words: Social media, advertising, motion picture industry

Abstract:
It is possible for fingerprints from two different persons to be closely matched with each other. A spurious match such as this should be detected to avoid a false positive identification. Given a match between a fingerprint pair, we would like to quantify the extent of this match statistically. This is possible to do if the variability of the underlying processes are accounted for and modeled adequately. The extent of a match depends on two sources of variability: (1) inter-class variability arising from the spatial configuration of fingerprint features, and (2) intra-class variability arising from image quality, variability due to the fingertip placement on the sensor and elastic distortion of the skin. To adequately capture feature variability, we develop distributions on the feature space based on marked point processes that model clustering tendencies and spatial correlations between neighboring marks. Inference is carried out in a Bayesian MCMC framework. The proposed class of models is fitted to real fingerprint images to demonstrate the flexibility of fit to different kinds of fingerprint feature patterns arising in practice. Evidence of a Paired Impostor Correspondence (EPIC) is developed as a measure of fingerprint uniqueness, and its predictive value is obtained using simulation from the fitted models to quantify the extent of an observed match.

Abstract:
We study the impact of Corporate Social Responsibility (CSR) on bank loans. Findings suggest CSR has a negative impact on loan spread.In addition, CSR negatively moderates the effect of loan characteristics such as maturity, and firm characteristics such as leverage.We also findCSR positively moderates the effect of a firm’s growth opportunities on spread. Our study implies CSR acts as a form of collateral which the firm‘puts on the line’ when transacting with stakeholders including banks.But CSR also consumes scarce managerial resources which may temper its beneficial effects by leading to tradeoffs with economic opportunities.

Abstract:
Abstract: Does information technology (IT) enable firms to globalize their operations and achieve higher foreign revenues and foreign profits? Although several studies have argued that IT can help firms globalize their operations, few studies have empirically tested this conjecture. We identify and discuss three mechanisms that explain why IT investments enable firms to globalize their operations – value chain coordination, value chain configuration, and local responsiveness. Using data on 259 multinational firms for an 8-year period (1999 – 2006), we find that aggregate IT investments are positively associated with higher levels of foreign revenues and lower levels of total costs. In turn, the increase in foreign revenues and reduction in total costs mediate profits from foreign operations. IT investments also help to increase domestic revenues and domestic profits. On the whole, we find that IT contributes to globalization both through higher revenues and lower total costs. These findings provide indirect evidence for the relative importance of underlying theoretical mechanisms that explain why IT helps firms to achieve higher foreign revenues and foreign profits, two key measures of a firm’s globalization. For example, results suggest that IT allows firms to increase foreign revenues through a local adaptation mechanism, and spread total costs over a larger revenues base through globalization efforts through value chain coordination and/or value chain configuration mechanisms. By documenting how IT creates value for firms through enabling globalization, we extend the business value of IT and international business literatures that have so far touched on firm-level globalization benefits from IT investments only in passing. This study is also important from a managerial perspective, because an understanding of how IT influences foreign revenues and foreign profits can help firms make appropriate changes in their IT strategies and IT investments to improve competitiveness. Key words: IT investments, globalization, multinational corporations, foreign revenues, foreign profits, value chain, coordination, configuration, responsiveness, business value of IT.

Abstract:
I present three studies from our research program on dynamic cognitive network activation (Smith, Menon,& Thompson, 2011; Menon &Smith, working paper). Networks are not simply social structures, they are also cognitive structures that can dynamically shift as a function of people’s emotions and identities. Our first two studies show that high and low socioeconomic status people spontaneously activate, or call to mind, different subsections of their networks when faced with job threat. Using a multi-method approach (General Social Survey data and a laboratory experiment), we find that, under conditions of job threat, people with low status exhibit a winnowing response (i.e., cognitively activating smaller and tighter subsections of their networks), whereas people with high status exhibit a widening response (i.e., activating larger and less dense subsections of their networks). A third study theoretically and empirically links identity and emotional state to network activation. We show that confirmed identities (both high status people whose high power was confirmed and low status people whose low power was confirmed) lead to widen their networks, as compared to conflicted identities (people facing a mismatch between their socioeconomic status and primed power). The emotional signature of having confirmed identities was comfort and control, which mediated respondents' network activation. One implication is that narrowing the network in response to threat might reduce low-status group members’ access to new information, harming their chances of finding subsequent employment and exacerbating social inequality. We also consider the psychological challenges that empowerment-based policies may present.

Abstract:
Marketing science can claim many successes in directing management decision making in practice. Segmentation and mapping tools, conjoint and discrete choice models, and econometric analyses of promotional scanner data represent a few of the area in which analytical techniques have influenced the planning and execution of marketing activities. However, when one looks at the level of penetration of these tools, I argue that the picture is considerably less rosey. This seminar firstly examines the level of impact on practice that marketing science has had from the perspectives of academics, consultants and managers (Roberts, Kayande, and Stremersch 20111) and then digs deeper into the characteristics of that work which has had the most impact, as measured by the finalists in the Gary Lilien Marketing Science Practice Prize (Lilien, Roberts, and Shankar 20112). 1 Roberts, John H., Ujwal Kayande, and Stefan Stremersch (2011) “From Academic Research to Marketing Practice: Exploring the Marketing Science Value Chain” Working Paper, The Australian National University. 2 Lilien, Gary L., John H. Roberts, and Venkatesh Shankar (2011) “Effective Marketing Science Applications: Insights from ISMS–MSI Practice Prize Finalist Papers and Projects” Marketing Science Institute Working Paper Series, Report No. 11-101

Abstract:
After a decade of rapid globalization, there is increased interest to bring offshored production closer to home. A key driver behind global sourcing has been its ability to increase margins by using cheap labor and materials. However, those benefits do not come for free: offshoring suffers from higher transaction costs, long and complicated logistics that are sensitive to increased volatilities in demand, supply, currency exchange rates and oil prices, and political and environmental criticism. In addition, responding to customers' new-product requests, shorter delivery times, and swift corrections to improve designs and quality has magnified the need for responsive and agile supply chains. A complete reversal to local sourcing, however, is unlikely and ill-advised. Indeed, the concepts of global and local sourcing are not mutually exclusive. Rather, the combined use of multiple supply sources, each of which is different and possesses unique advantages, might be better than any single sourcing strategy. The main contribution of this paper is to provide the first exact and analytically-tractable analysis of a dual sourcing policy that is easy to implement. This policy allows us to design an ordering policy that allocates the order volume to both sources so as to optimally trade-off cost and responsiveness. We present a tight approximation for the optimal volume fraction ordered from the slow but cheap source, which we refer to as the strategic base or offshoring allocation, and its corresponding total landed cost. The strategic allocation is characterized by a simple formula that provides structural insight on the impact of financial, operational and demand parameters, and a starting point for data-driven decision making.

Abstract:
Although the short-run response of the financial markets to announcements of marketing investments has been well-established in the extant literature, less is known about how the basic information inherent in these announcements flows from the “black box” of the firm to external market participants. In response, we conceptualize that since marketing investments are determined by individuals with the best knowledge of the firm’s future environment, announcements of a marketing investment provide valuable information about the future productivity of that marketing investment. Our analysis yields two distinct predictions. First, market reaction to an investment decrease announcement will be less pronounced than market reaction to an investment increase announcement, a result that stands in sharp contrast to received theory. This is because the mean-shifting and uncertainty-reducing aspects of new information tend to mitigate each other for decrease announcements but reinforce each other for increase announcements. Second, the information content of marketing investment announcements will be intimately related to investors’ prior information; consequently, firms that announce similar marketing investments can provoke markedly different market reactions. Examining a sample of sales force size change announcements by 131 firms in the pharmaceutical industry, we find broad support for our analytical conceptualization.

Abstract:
This study proposes that the institutional environmentimpacts the level of female representation within a firm’s board of directors. Based on proxy data for the top 150 Fortune 500 companies of 2006, hypotheses concerning the three forms of isomorphism through which the institutional environment may impact a company’s board gender diversity are put forward and tested.Our results show support for the impact of two hypothesized forms of coercive isomorphism and for normative isomorphism on female board representation. Our findings contribute to furthering research onboard composition and institutional theory by helping to explain the integral role that institutional mechanisms play in shaping board composition and by identifying possible antecedents of female board representation that have previously been absent from the governance literature.

Abstract:
Entrepreneurship research is dominated by two theories of opportunity formation: discovery and creation. The specific entrepreneurial actions leading to identification and exploitation of each likely differ. We explore entrepreneurs’ alignment of human resources, and specifically advice networks. Extant research favors diversity within advice networks as a source of idea generation and pursuit. However, we argue that diversity may not always be advantageous. Drawing from literature on entrepreneurial opportunities, social network theory, and cognitive psychology, we suggest that diversity within advice networks may benefit entrepreneurs pursuing discovery opportunities but similarity within advice networks may benefit entrepreneurs pursuing creation opportunities. Further, we argue that proper alignment between opportunity type and advice network results in superior performance. We test these assertions using publically available survey data to classify entrepreneurial opportunities and advice networks.

Abstract:
In this paper we attempt to understand how capabilities may be developed so as to provide a sustainable basis for competitive advantage in the context of the global IT services industry. Using detailed project-level data from a large Indian IT services multinational we find that speed of project execution follows a quadratic relation with project margin and a linear relationship (negative) with project revenue productivity. Increasing offshore work increases project margin without impacting revenue productivity. Change of scope in the middle of project significantly increases revenue productivity, but does not impact project margin. The results indicate how service delivery capabilities can be used successfully by execution focused service providers to increase margin without increasing cost to customer even in the face of changing requirements.

Abstract:
Consumer reviews are becoming increasingly important in consumers’ purchase decision process and in the success of new products. Prior literature acknowledges that consumer reviews impact product sales but are divided on the impact of the three metrics – valence, volume, and dispersion of consumer reviews – on product sales. The underlying thesis of the current paper is that these differences in findings are driven by the evolution of these metrics over time. Traditional models, which do not account for this evolution(shape) may fail to incorporate potentially vital information, and thereby lead to divergent conclusions. In this paper, using 395,297 online movie reviews collected from Yahoo and IMDB on 405 movies released from Feb. 1999 to Dec. 2010, we seek answers to the following questions: 1) Do consumer reviews matter i.e. can consumer reviews be used to predict box office sales? 2) How to quantify consumer reviews? Which metric – valence, volume or dispersion is more informative? 3) How do consumer reviews evolve? Does the shape of one metric influence the shape of another? Does their shape matters? We use functional data analysis to study the above questions, including the interactions among these eWOM matrics

Abstract:
Firms are increasingly facing consumers with a heightened focus on the social, employee, and environmental consequences of their marketing activities and stakeholders with a greater capacity to exert influence on firm and customer behavior. This trend points to a need for marketers to find competitive advantage and differentiation by evolving from a single minded customer focus towards an understanding of a broader set of stakeholder requirements. The emerging Stakeholder Marketing literature has articulated such a need and proposed an initial formulation of its implications for firm behavior and performance. However, consensus on the capabilities required by firms to adopt a stakeholder orientation has not been reached nor the consequences of such actions tested. This research draws on depth interviews of managers and a theory-in-use approach to introduce Constituents-Based Marketing (CBM) as the capability to develop product offerings that can address the needs of multiple constituencies at the same time. An empirical test across 44 countries uses instrumental variable regression and finds CBM capability to be positively associated with sales growth, employee engagement, and company trust. The analysis finds the CBM effects to be stronger in highly networked as well as competitive conditions. External stakeholder pressures serve as a motivator, while firm cross functional processes and market orientation provide the ability for a firm to develop CBM capabilities. The results are robust to estimation methods and endogeniety concerns. We present theoretical implications and managerial guidelines for the generation of market intelligence and the design of marketing organizations.

Abstract:
In this paper we explore the role of related alliance experience, diversity in alliance experience, and information technology enabled knowledge integration capabilities in value creation in alliances. We conceptualize alliance experience in terms of relatedness and diversity and further identify the functional focus and industry of the partner as defining the nature of alliance experience. We theorize that both type-based and partner-industry based related experience will have a positive effect on alliance value. We also theorize that both type-based and partner-industry based diversity in alliance experience will have a positive effect on alliance value. Further, we theorize that while alliance experience enhances a firm’s knowledge, such knowledge has to be integrated, institutionalized and made accessible for it to be used effectively in future alliances. Hence firms with higher IT-enabled knowledge integration capabilities are more likely to do so and thereby enhance alliance value. Using data from 1030 alliances made by 89 firms across 11 industries, we test our research propositions. We find that type-based related experience is positively related to value gains in alliances whereas partner industry-based related experience affects alliance value negatively. We also find that a firm’s IT enabled knowledge integration positively moderates the effects of both related and diverse experience on value creation in alliances. Our findings highlight that while knowledge gained through learning by doing is important, complementary capabilities that enables firms to leverage and utilize such knowledge are also necessary for successful value creation in alliances. We interpret these findings and discuss their implications for research in both strategic management and information systems areas.

Abstract:
Multiple theoretical perspectives offer varied and often paradoxical accounts of women¹s incongruent status in male-dominated work groups. Integrating these varied perspectives, I tested distinct mechanisms by which women¹s incongruent status (i.e., situations where women have acquired high status) influences expertise identification and utilization in science and engineering research groups. Across three studies in this setting, applying hierarchical linear modeling techniques, I found that women were more likely than men to devalue the expertise of women in high status positions (Study 1). However, this in-group devaluation was mitigated by gender identification among women and exacerbated by perceived legitimacy of gender based status differences (Study 2). Further, perceived expertise predicted expertise utilization in groups and the demographic context of the group minimized the negative effects of incongruent status on women¹s expertise utilization. Women¹s expertise, in general, was more likely to be utilized in gender balanced groups and in academic units with a gender-balanced department faculty. At the group level, the presence of high status females in the group was associated with higher research productivity when groups were embedded in academic units with a gender-balanced faculty (Study 3). These findings provide compelling evidence that variations in the demographic context signal the legitimacy of individuals in incongruent status positions and shape both interpersonal attributions and information-processing in groups

Abstract:
We present an asymmetric information model to examine private placements issued to owner-managers. Our main conclusion is that allowing private placements to insiders can mit- igate, if not eliminate, the underinvestment problem. Our model predicts that announcement period returns for private placements should be: (1) positive; (2) dependent on regulatory constraints that determine the issue price; (3) positively related to volatility; (4) negatively related to leverage; (5) negatively related to owner-managers’ shareholdings (6) inversely re- lated to proxies of manipulation; and (7) negatively related to illiquidity. We empirically test our model’s predictions, along with others from literature, on a sample of private placements issued in the Indian capital markets during 2001-09 and report empirical evidence largely consistent with the model.

Abstract:
Many organizations (DMUs) are comprised of networked sub-DMUs or departments, i.e., the outputs of some departments serve as inputs to others and vice versa. For example, in media-platform firms like newspaper companies, the outputs of the editorial department are inputs to the advertising department and vice versa. Extant approaches for efficiency analysis either ignore the network effects or make parametric assumptions to enable statistical inference on the estimated efficiencies. Hence, we develop a new method that incorporates the network effects and furnishes nonparametric inference on efficiencies. Applying the proposed method to the US daily newspaper industry, we not only demonstrate that it outperforms existing approaches, but also that it yields new insights into department-level efficiencies. Keywords: Efficiency Analysis, Sliced Inverse Regression, Media-Platforms, Networked DMUs

Abstract:
Concierge Medicine is the most visible implementation of a new trend of introducing a fee-based premier option in a service offering. This is usually done for the purposes of segmenting customers based on their willingness or ability to wait for the service. Using a realistic yet representative model setup, we perform a detailed analysis to (i) determine the conditions (fees, cost structure, etc.) under which the concierge option is profitable for the service provider, (ii) quantify benefits accrued by the premier customers; and (iii) evaluate the resulting impact on the other customers. We show that, under a wide range of system parameters, introducing a concierge option benefits everyone and also compute the magnitude of these benefits. These benefits are larger when the variance in the customer waiting costs is high and the system utilization is high. We complement these results with data on the adoption of MDVIP (the most popular concierge medical service in the US) service and show that the service has been adopted in areas where the median income is significantly larger and the population is older. Both income and age are good proxies for the waiting cost that a customer attributes to waiting for receiving medical service.

Abstract:
A potential strength and weakness of the MNE is that it is characterized by a heterogeneous workforce that is geographically dispersed, and embodied by location-specific human capital. This paper develops a framework of the processes by which firms engage in knowledge retention, exchange and combination in order to create a firm-specific and globally relevant body of knowledge. We explore HR practices that may facilitate both new value creation and capture for subsidiaries and the MNE.

Abstract:
Should embankments be used to control floods? This is a question of great importance in the eastern Gangetic plain where embankment breaches cause severe flood damage every year, and huge damages due to major breaches every few years. Critics of the embankment policy have called for a strategy of living with floods by building dispersed infrastructure to cope with floods. However, no cost-benefit analysis of alternative strategies is available.This paper makes a first pass at evaluating embankments. Using two years or more of data from 504 households in 28 villages in the floodplain of the Kosi river in north Bihar, I compare agricultural output, wage incomes, unemployment, and other indicators of well-being between villages subject to flooding from rivers and villages not subject to such flooding. I find that, for the most part, villages subject to river flooding are no worse off than villages not subject to such flooding. Thus, the evidence provides no support for the embankment strategy.

Abstract:
Public policy in modern Indian features affirmative action—policies intended to reduce persistent inequality stemming from a centuries-old caste structure. We study the effects of one such affirmative action program. Specifically, we examine the consequences of an admissions policy to engineering colleges that fixes percentage quotas, common across 214 colleges, for each of six disadvantaged castes. We have obtained access to exceptionally rich data for study of this affirmative action program—data that include the test scores that were used to administer admissions decision rules, as well as detailed independent ability metrics that did not influence admissions decisions. Our analysis indicates that for targeted students the program has significant and substantial positive effects both on college attendance and first-year academic achievement.

Abstract:
Are employees that use flexible work arrangements (FWAs) good organizational citizens? Business and scholarly discourse suggest that flexible workers risk being labeled as bad organizational citizens: employees using FWAs are perceived as lacking dedication to their organization and as unavailable when their colleagues need help. However, research so far has not empirically examined the impacts of FWAs on citizenship behaviors. Our study develops and tests a theoretical model linking FWAs to employee contextual performance. Findings suggest that FWAs have positive effects on employee contextual performance by enhancing perceptions of autonomy.

Abstract:
Economic performance of the illegal immigrants is a central issue in the debate over illegal immigration. In this paper I estimate the wage gain from legalization of a previously illegal immigrant in the U.S. I use propensity score matching and data from New Immigrant Survey 2003. The wages of legal immigrants provide a valid control for the wages of illegal immigrants. Since the wages of the treatment and the control group both before and after the legal permanent residency are available, Difference-in-Difference matching estimators are implemented to account for potential (time invariant) unobserved heterogeneity. Estimates suggest a wage gain of 19% to 32% from legalization of previously illegal immigrants. Finally I discuss potential policy implications of this result

Abstract:
This paper analyses whether in developing countries mass education is the key or a highly well educated elite should be more beneficial for growth. Using the Indian census data as a benchmark and enrollment rates of different levels of schooling we compute annual attainment levels for a panel of 16 Indian states from 1961 to 2001.Results show that one standard deviation increment in the share of population with tertiary education is 3 times more beneficial for growth than a one standard deviation increment in literacy. Using simulations we consider two alternate policies: one that doubles the increments to the literacy rates (relative to its baseline rate of increase)and another that doubles the annual increments to the share of adult population with tertiary education. We show that at the end of 35 years, the state following the latter policy has a per capita GDP 1.5 time more than the state that emphasizes the former.

Abstract:
With the recent explosion of choices available to us in every walk of our life, capturing the choice behavior exhibited by individuals has become increasingly important to many businesses. At the core, capturing choice behavior boils down to being able to predict the probability of choosing a particular alternative from an offer set, given historical choice data about an individual or a group of "similar" individuals. For such predictions, one uses what is called a choice model, which models each choice occasion as follows: given an offer set, a preference list over alternatives is sampled according to a certain distribution, and the individual chooses the most preferred alternative according to the sampled preference list. Most existing literature, which dates back to at least the 1920s, considers parametric approaches to choice modeling. The goal of this thesis is to deviate from the existing approaches to propose a nonparametric approach to modeling choice. Apart from the usual advantages, the primary strength of a nonparametric model is its ability to scale with the data -- certainly crucial to applications of our interest where choice behavior is highly dynamic. Given this, our main contribution is to operationalize the nonparametric approach and demonstrate its success in several important applications. Specifically, we consider two broad setups: (1) solving decision problems using choice models, and (2) learning the choice models. In both setups, data available corresponds to marginal information about the underlying distribution over rankings. So the problems essentially boil down to designing the `right' criterion to pick a model from one of the (several) distributions that are consistent with the available marginal information. First, we consider a central decision problem in operations management (OM): find an assortment of products that maximizes the revenues subject to a capacity constraint on the size of the assortment. Solving this problem requires two components: (a) predicting revenues for assortments and (b) searching over all subsets of a certain size for the optimal assortment. In order to predict revenues for an assortment, of all models consistent with the data, we use the choice model that results in the `worst-case' revenue. We derive theoretical guarantees for the predictions, and show that the accuracy of predictions is good for the cases when the choice data comes from several different parametric models. Finally, by applying our approach to real-world sales transaction data from a major US automaker, we demonstrate an improvement in accuracy of around 20% over state-of- the-art parametric approaches. Once we have revenue predictions, we consider the problem of finding the optimal assortment. It has been shown that this problem is provably hard for most of the important families of parametric of choice models, except the multinomial logit (MNL) model. In addition, most of the approximation schemes proposed in the literature are tailored to a specific parametric structure. We deviate from this and propose a general algorithm to find the optimal assortment assuming access to only a subroutine that gives revenue predictions; this means that the algorithm can be applied with any choice model. We prove that when the underlying choice model is the MNL model, our algorithm can find the optimal assortment efficiently. Next, we consider the problem of learning the underlying distribution from the given marginal information. For that, of all the models consistent with the data, we propose to select the sparsest or simplest model, where we measure sparsity as the support size of the distribution. Finding the sparsest distribution is hard in general, so we restrict our search to what we call the `signature family' to obtain an algorithm that is computationally efficient compared to the brute-force approach. We show that the price one pays for restricting the search to the signature family is minimal by establishing that for a large class of models, there exists a "sparse enough'' model in the signature family that fits the given marginal information well. We demonstrate the efficacy of learning sparse models on the well-known American Psychological Association (APA) dataset by showing that our sparse approximation manages to capture useful structural properties of the underlying model. Finally, our results suggest that signature condition can be considered an alternative to the recently popularized Restricted Null Space condition for efficient recovery of sparse models.

Abstract:
Abstract: The current studies examine the effects of excuses on reactions to misbehavior. Results indicated that excuses reduce the likelihood that behavior is perceived as wrong and reported when the event clearly violates prescribed rules or norms but actually increases the likelihood that the behavior is perceived as wrong and reported when the situation is ambiguous

Abstract:
Using a unique dataset we provide new evidence on the impact on client fund performance of cross trading related conflicts of interest (CINT)experienced by mutual fund advisers. Our results suggest that the cross trading practices of advisers impose a significant performance penalty on their client funds. A portfolio of funds managed by advisers in the top CINT quintile significantly underperforms the portfolio of funds managed by advisers in the bottom CINT quintile by 0.83% per year, over the period 1995-2007. We evaluate the response of investor flows to different CINT measures and document that flows are generally insensitive to them. We also show that the incentives of advisers to engage in cross trading are directly related to their opportunities for generating revenues from trading operations, and that adviser governance plays an important monitoring role for cross trading. Our results highlight the need for heightened awareness among investors and regulators of the potential costs associated with these transactions.

Abstract:
Stores often follow a certain pricing strategy. They vary their prices because of several reasons – as a response to changing inventory levels, competitor pricing, change in costs on the supply side, nearing expiration date of perishable goods, manufacturer’s promotion or at times as a strategy to increase store foot-falls. This varying of prices is reflected as – EDLP (Every Day Low Price, where prices are kept at a constant level and Wal-Mart is one successful example) or Hi-Lo (where prices fluctuate due to frequent promotions and this is followed by well-known grocery chains like Dominick’s Finer Foods in Chicago). Stores also differ in the frequency by which they change prices. A pricing decision may be both short term and long term (Shaffer and Zhang, 2002). For instance, on a short-term, a retailer could use price discounts to compete against weaker brands, price discriminate among brand switchers or increase consumption (Bronnenberg, et al, 2006). On a long-term, the price change could reflect the changes in overall cost structure, demand or market structure. A retailer might also use discounts to drive category or store level profitability. Often the frequency of price change is also a result of the planning horizon set by a particular retailer (Bronnenberg, et al, 2006). Of late, researchers like Kadiyali, Sudhir and Rao (2001); Pauwells, et al, 2004; Bronnenberg, et al, 2006 have emphasized the need to study this frequency of price change. Pauwells, et al, 2004, for instance mention “as there is increasing evidence that the same relationship need not hold among two variables at different frequencies, various substantive marketing problems may warrant further investigation along that dimension”. From a customer’s perspective, she is able to explain some of this variability while not able to explain other. For instance, a customer is likely to explain why the price of milk is the highest close to the date of manufacture and why is it at a huge discount closer to the date of expiration. She is likely to have an explanation for seasonal discounts during festival times. However, other instances of price variations go unexplained. In this study we examine only unexplained variability (both depth and frequency of price change) From a customer’s perspective, unexplained volatility, both magnitude (depth) and frequency in price, is likely to be perceived as bad. It is likely to erode the ‘trust’ a customer has on the store and its offerings. A customer is likely to doubt the store’s quality, integrity or benevolence as a consequence of unexplained volatility. This is also likely to affect her decision to buy the store’s own brand. Some evidence of this effect can be found in the existing literature like Dhar and Hoch, 1995 who look at EDLP (low price variability) vs. Hi-Lo (high price variability) strategy of stores’ impact on store brand penetration. They find a significant relationship between the two. Using scanner panel data (from IRI) of two categories – diapers and deodorants, we also found a significant negative correlation between weekly price variation and store brand penetration. The literature on store brands penetration has focused on two aspects – understanding the cross category variation in store brand penetration through analysis of scanner panel data (Dhar and Hoch, 1995; Hoch and Banerjee, 1993; Sethuraman, 1992) and understanding the store brand customer using consumer-level data (Ailawadi and Neslin). When we say volatility is ‘generally’ is perceived by consumers as bad, we say this because certain consumers may not regard it as bad. For instance, Deal-prone consumers have been shown to value transaction utility rather than, or in addition to, the acquisition utility associated with buying on deal (i.e., buying on deal has psychological benefits irrespective of the financial consequences, Lichtenstein, Netemeyer, & Burton, 1990). Such customers are likely to welcome variability in pricing rather than look at it as an irritant. Customers are reluctant to buy store brands in product categories where the perceived risk is higher (Batra and Sinha 2000; Narasimhan and Wilcox 1998). Some of the product categories have well-established higher perceived risk (for example, cold and flu medicine) than others (for example, gift wrap). The effect of variability in pricing and frequency of price change on trust and subsequently store brand purchase is likely to be greater in product categories where trust is relatively more important. Based on the above, this study proposes to ask the following questions: Does store price volatility (magnitude, frequency, explained/ unexplained) effect store brand penetration? 1. Does ‘Trust’ play a mediating role between them? 2. Do customer characteristics (deal-proneness) play a moderating role in the relationship? 3. Does the trust associated with the product category also moderate the relationship?

Abstract:
Prof. Sharique Hasan, Assistant Professor - Stanford University will present a talk on 12th Sep, 2011 Abstract: In this article, we study the career effects of getting diverse versus specialized experience. Existing research on social categorization in labor markets has found that specialized experience is privileged in external labor markets. That research has suggested that in internal labor markets characterized by managerial rotation, generalists should not be penalized. We examine the relationship between specialized experience and career outcomes using rich longitudinal data on the careers of Indian Administrative Service Officers, members of the Republic of India’s elite bureaucratic organization. Contrary to prior theory, our results show that diversified experience is penalized at both early and late career stages. We theorize that the differentiation of jobs is sufficient to introduce bias in favor of specialists even in the presence of full information and collective norms that favor generalists

Abstract:
Professor Luis Martin, Associate Professor - McCombs School of Business will present a talk on ‘Bridging Difference and Distance in Global Virtual Work: The Role of Social Identification’ Abstract Global virtual work arrangements have been growing in prominence over the last three decades. Research and anecdotal findings suggest that such arrangements struggle for effectiveness against the forces of dispersion and demographic difference. However, the processes underlying those challenges are not well understood. To address the gap, this research uses social identity theory and the contact hypothesis to examine the role played by interpersonal identification in explaining the effects of nationality differences on performance in global virtual supervisor-subordinate dyads. It proposes that a difference in nationality between a supervisor and subordinate will have a negative effect on subordinate performance, which will be mediated by subordinate identification with the supervisor. Furthermore, based on the contact hypothesis, it proposes that the effects of nationality difference on identification will be moderated by the nature of contact between the subordinate and supervisor. It introduces the idea of “contact richness” as an important construct in virtual work, and proposes that it will explain additional variance over and above that explained by the primary dimensions of contact proposed by the contact hypothesis. Support for the research model was found in two field studies conducted using global virtual dyads in the software development industry. The findings suggest several implications for future theoretical development on the effects of demographic diversity in virtual settings, and provide actionable guidelines for managers engaged in global virtual work.

Abstract:
Team formation is investigated in two studies that use sport-related archival data culled from the Internet. Unlike team formation in organizational decision-making situations, when individuals form teams they tend to use their relational ties as a heuristic even when the decision-making is unconstrained. Thus there appears to be a relational bias in team formation decision making that is more generic than is suggested by sociology and entrepreneurship research. In line with the leadership literature this relational bias is more pronounced when the decision maker is also the team leader. Further, the leader’s role interdependence impacts the extent to which there is a relational bias, both to the team as a whole, and to the sub-unit that “backs up” the leader’s role.

Abstract:
While product modularity is often advocated as a design strategy in the operations management literature, little is known about how customers respond to modular products. In this research we undertake several experiments to explore consumer response to modularly upgradeable products in settings featuring technological change. We consider both the initial product choice (between a modularly upgradeable product and an integral one) and the subsequent upgrade decision (replacement of a module vs. full product replacement). We uncover the following paradox: while modularity might seem to be most-advantageous for a short life-cycle product (because a modular design would avert having to fully replace the product after only a short time), such a product faces two strikes: first, consumers tend to excessively discount the cost savings associated with the modular upgrade, and second, we observe a preference reversal between the initial purchase and the point of upgrade (at the point of initial purchase, people foresee making a full product replacement in the future, yet, when faced with the actual upgrade decision, they are more likely to revert to a modular upgrade). On the other hand, consumers insufficiently discount cost savings when the time-to-upgrade is long. Finally, we discuss and test several pricing and product design strategies that the firm can use to respond to these cognitive biases.

Abstract:
We look for necessary properties of shareholder-value maximizing corporate boards when shareholders face a trade-o¤ between improving information sharing between the board and management and reducing distortions in decision-making arising out of managerial agency. We draw a distinction between the alignment of preferences of the board with management (which a¤ects information ‡ows) and the allocation of authority to the board or management (which a¤ects ex-post decisions). We show that it is in general suboptimal to allocate authority to management. Authority should be held by a supervisory board that may be imperfectly aligned with both shareholders and management. Indeed, even when management has captured all au- thority and the board only has an advisory role, the optimal board may be designed to withold information from management. An optimal advisory board must however be su¢ ciently aligned with management in order to create ex-post consensus and ensure authority is irrelevant. Given optimal board alignment, the value of the board’s authority equals the cost of requiring consen- sus. Shareholders may hold ultimate decision-making authority within an optimal supervisory board without any loss in welfare and in many cases this is strictly optimal.

Abstract:
Many hospitals in the United States seek to lower their procurement costs by joining Group Purchasing Organizations (GPOs). GPOs operate as supply chain intermediaries - they do not buy or sell products; instead, they establish contracts with vendors on behalf of member hospitals. In a typical scenario, hospitals become members of a GPO; the GPO negotiates product prices with vendors on behalf of all its member hospitals in order to get deeper volume discount. However, there is evidence that some member hospitals further negotiate directly with the same vendors and contract at a price lower than the GPO price. Such contracts established directly between the same vendor and member hospitals are commonly known as custom contracts. The common perception is that hospitals benefit from these custom contracts because they yield lower prices. Using a game-theoretic model, we surprisingly find that exactly the opposite is true: the provision for custom contracts benefits vendors at the expense of hospitals. We also find that uncertainties in market prices largely drive the market outcomes. When the GPO shares indicative information on market price with its member hospitals in an effort to better educate them, it increases not only the social surplus but also the profitability of the GPO vendor. Our research makes significant contribution towards the literature on group buying as well as intermediaries - we show how with the provision for custom contracts, GPOs expectedly act as demand aggregators for relatively small hospitals, while for the rest, they unexpectedly play the role of information intermediaries. We drew our example from the healthcare sector; however, our results can be applied to any other industry in the context of group purchasing.

Abstract:
We examine transshipment incentives in a decentralized supply chain where a monopolist distributes a product through independent retailers. A key insight is that the transshipment price determines whether the firms benefit from, or are hurt by, transshipment. In particular, we show that the manufacturer prefers to set the transshipment price as high as possible, while retailers prefer a lower transshipment price. Given the important role of the transshipment price in determining the benefits that each firm gets from transshipment, it is useful to consider transshipment in the case where retailers are under joint ownership (a “chain store”) and the transshipment price does not play a role. This comparison yields two surprising results. First, if decentralized retailers control the transshipment price, they will choose a relatively low transshipment price as a way to mitigate the manufacturer's ability to extract profits by increasing wholesale prices; therefore, the manufacturer may prefer dealing with the chain store which does not have a transshipment price rather than with decentralized retailers. Similarly, the decentralized retailers can use a low transshipment price to achieve higher total profits than a chain store.

Abstract:
We examine resource allocation issues in a setting with uncertain task resolution times. Using software maintenance requests as a context, we model task resolution times in corrective software maintenance process using multiple hazard distributions. we present a hazard model to capture the decrease in the marginal likelihood of successful resolution of a task as the number of effort-cycles expended on the task increases. We estimate the model parameters using real-life data from a systems software product. We demonstrate that the model fits real-life data very closely. Using the model, we numerically analyze implications for capacity planning and service execution in the context studied. Specifically, we demonstrate that imposing temporal cut-off policies in task resolution substantially reduces waiting times for incoming MRs in the system while minimally impacting the rate of successful MR resolution. Further, we show that these approaches can be used to improve productivity and resource utilization, and reduce the occurrence of “firefighting” behavior commonly encountered in this environment. We demarcate the diverse tradeoffs that managers need to evaluate during resource allocation in order to enhance the overall performance of the software maintenance operations. Finally, we discuss other managerial settings in which the modeling approach can be applied.

Abstract:
This paper modeled the dynamic inter-relationships between average salary, bonus, and stock options granted to top executives of 700 U.S. firms in 1996-2005 using a merged ExecuComp and Compustat database. Comprehensive models were also estimated for firms’ share repurchases and research and development and investment expenditures, taking into account simultaneity and distributional misspecification issues. Simple autoregressive models showed that while salaries increased steadily, time profiles of bonus and stock options were complex. Second, firms’ total assets, intangible assets, market-to-book value, and share repurchases were positively associated with the values of stock options granted. Third, stock options exercised in the previous year were significant predictors of share repurchases indicating that firms avoided dilution of earnings per share. Fourth, share repurchases were negatively associated with expenditures on research and development and short-term investments. From a policy standpoint, the results suggest that high levels of stock options granted to executives and share repurchases by U.S. firms are unlikely to have beneficial effects for raising future productivity.

Abstract:
A major constraint in scaling up large scale treatment programs in resource-limited settings is the unavailability of appropriate diagnostic devices that can inform clinical decisions in a timely manner. Most existing devices, due to their technical complexity, are placed in a few central laboratories serving hundreds of remote health facilities. Such centralized diagnostic networks are characterized by long delays in providing results and consequent poor patient retention. Several point-of-care (POC) devices that aim to obviate the need for such complex diagnostic networks are under development. Occasional attempts at evaluating POC devices have focused on technical dimensions such as accuracy. However, this approach does not incorporate the key value proposition of POC devices{improved access through timely provision of test results. In this paper, we develop a mathematical model that explicitly incorporates the tradeoff between accuracy and access to evaluate the network-level effectiveness of POC devices. Using this framework, we argue that the key operational decision at the policy maker's disposal is placement of the devices: Which facilities should receive the device under resource constraint? We compare the optimal placement solution with rules of thumb that are followed in practice and/or are suggested in practitioner literature. Our analysis suggests that these heuristics can result in significant loss of effectiveness in general. However, their relative performance depends on device characteristics and network characteristics. We characterize conditions under which these rules of thumb are optimal. We apply our methodology to infant HIV diagnosis and calibrate our model using representative data from a sub-Saharan country.

Abstract:
We develop an economic model that examines whether a vendor or client should own the assets underlying service delivery in an IT outsourcing relationship. Prior research has argued that the vendor should own the assets to provide incentives for investment on the production assets. We allow for investment in innovation that can benefit both client and vendor in the relationship. Our model offers an explanation for the empirically observed heterogeneity in asset ownership structure using Incomplete Contracts Theory. We find that optimal ownership structure can vary due to the different incentives of the client and vendor and differences in the available set of investment opportunities. Interestingly, we find that scenarios exist where both the client and vendor agree on the ownership structure and where they disagree. When investment in innovation enables new services and features, the client should retain ownership of the assets. When investment leads to cost savings, the vendor should own the assets. The parties disagree on asset ownership structure when the investment opportunities yield similar levels of benefits to both vendor and client. In this case neither party wants to own the assets. When there are multiple investment opportunities with payoffs in new services and in cost reduction, both client and vendor prefer to own the assets. We extend the model to allow renegotiation and find, counter-intuitively, that when renegotiation is allowed the parties always disagree on the ownership structure. In contrast, in the absence of renegotiation, the client and vendor agree on the ownership structure in most cases. We find that allowing renegotiation leads to greater investment in innovation but also results in more gaming between the parties with ex post surplus extraction and more free-riding.

Abstract:
Manufacturers typically sell consumer products through retailers and the presence of intermediaries has interesting ramifications for their product variety and pricing decisions. Retailers may want higher variety to help reduce price competition but the costs of variety are borne by the manufacturer. The increased variety may increase demand and profits for the manufacturer too but this depends on market-specific factors as well as costs. We explore these interactions through a model wherein a manufacturer sells multiple product variants at a wholesale price to two retailers who in turn compete for consumers. Consumers choose between the retailers based on the price and variety offered by each retailer. Several insights emerge from the analysis. We find that some retailer differentiation benefits the retailers (not the manufacturer) but too much differentiation hurts both the retailers and the manufacturer. If the market is fully covered, then the channel is coordinated even with a simple wholesale pricing contract. If the retailers incur costs to sell the product, the manufacturer loses out more than the retailers and in fact absorbs some or all of the retailer costs. Finally, asymmetry between retailers has some interesting consequences.

Abstract:
Using a linear principal agent model with endogenous status concerns, the paper shows that it is individually rational for agents in a rm to develop and exhibit status concerns vis-a-vis each other. Workers are, by their choices of status concerns, able to transfer surplus from the the rm to themselves. Further, relative concerns are shaped by the relative strengths and weaknesses of the workers in the rm. Finally, and surprisingly, a rm's prot is reduced (relative to the benchmark moral-hazard model) by workers who exhibit such \endogenous" relative concerns.

Abstract:
Algorithmically matching items to users in a given context is essential for the success and profitability of large scale recommender systems like content optimization, computational advertising, web search, shopping, movie recommendation and so on. Developing such match-making algorithms is a new scientific sub-discipline that involves strong interactions among several disciplines like computer science, statistics, machine learning, economics, optimization. This talk will discuss mathematical formulations, the progress made, and the big challenges that lie ahead. Throughout, I will use examples from real-world recommender systems in content optimization and computational advertising at Yahoo!

Abstract:
In this paper, we investigate the causal effect of position in search engine advertising listings on outcomes such as click-through rates and sales orders. Since the position is typically determined through an auction, there are significant selection issues in measuring position effects. Correlational results are likely to be biased due to the selection in position induced by strategic bidding by advertisers. Additionally, experimentation is rendered difficult in this situation by competitors’ bidding behavior, which induces selection biases that cannot be eliminated by randomizing the bids for the focal advertiser. We show that a regression discontinuity approach is a feasible approach to measure causal effects in this important context, where other approaches to obtaining causal effects are typically infeasible. and apply it to a dataset of 23.7 million daily observations containing information on bids, search advertising results and linked outcomes. Our data set is unique in that it contains information not only for the firm but also its major competitors who are advertising in the same category. We find in our empirical application that causal position effects are significantly underestimated if the selection of position is ignored. The data set also contains information on two advertising targeting options offered by Google: Exact and Broad match and our causal estimates provide insights into the value of this type of semantic targeting. We find important differences in the effects of position for exact vs. broad match keywords, with exact match keywords showing strong position effects at the top most position, and broad match keywords having strong position effects only lower down.We are also able to study weekday and weekend effects and find that position effects are lower on the weekend than on weekdays.

Abstract:
This paper investigates the common but unproven claim that firm performance suffers because managers are myopic about long-term investments. We use accounting data on the expected life of equipment purchases to measure temporal orientation for over 1000 publicly-traded US manufacturing firms, and find a positive relation between temporal orientation and financial returns. As predicted, however, we also find diminishing marginal returns for temporal orientation. In addition, we show that firms in relatively short horizon industries fall farther short of optimal levels of temporal orientation than firms in long horizon industries. These results confirm the intuition that myopia hurts performance, but also identify important limits on the value of lengthening a firm's temporal orientation.

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In this presentation, we deal with the issue of how the continued growth of peer-to-peer (P2P) used goods markets for durable products interacts with channel returns policies and affects pricing and product introduction strategies. We do so through two separate papers - while a P2P used goods market is there in both papers, they differ in terms of returns policies that are considered. In the first paper we focus on extra-channel returns policies, i.e., returns policies offered to the end customers by the retailer, while in the second one we concentrate on intra-channel returns policies, i.e., those offered by the manufacturer to the retailer. Our analysis in the first paper establishes that frequent product upgrades and rising retail prices in many durable product sectors are indeed due to the emergence of the P2P used goods market and how this market interacts with the extra-channel returns policy in altering the relative powers of the channel partners. We also provide empirical support for our theoretical result regarding product upgrades using data from the college textbook industry. In the second paper, we show that a stronger P2P used goods market generally increases the likelihood of an intra-channel returns policy to be the equilibrium strategy. This insight contradicts the burgeoning managerial trend to replace returns contracts with price-only ones for products having rapidly growing used goods markets. Furthermore, we show that when the customers are forward-looking, viability of a manufacturer returns policy is, in fact, negatively impacted by such behavior.

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This study focuses on the impact of the California Non-Profit Integrity Act (2004) (hereafter, the Act or regulation) on executive compensation in affected non-profit organizations in California. The Act, closely modelled after the Sarbanes-Oxley Act (SOX) of 2002, requires charitable organizations in California reporting to the Attorney General’s office to compulsorily form an audit committee and get their financial statements audited by a practicing public accountant. The Act also requires boards of directors of non-profit organizations to approve the compensations of the chief executive officer and the chief financial officer and ensure that the compensation paid is just and reasonable. This study examines whether the Act has really been able to reign in excessive executive compensation in affected non-profits. The issue of the impact of regulation on non-profits is a very interesting one. This is because the absence of an alienable residual claimant makes agency conflict issues in the not-for-profit sector different to those of for-profit sector, making the mechanical extension of latter sector’s research findings to the former questionable. Also, the not-for-profit sector forms a significant part of the US economy, generating $ 1.9 trillion in revenue (about 13% of the US GDP) in 2008. Using Ohio firms as a control for California charities, we find that not only has executive compensation not reduced in the wake of the Act, non-profits seem to be paying more to their executives, on the contrary, after the enactment of the Act. Recognizing that increase in executive compensation is not necessarily bad if non-profits can achieve cost savings elsewhere, we then examine changes in administrative costs and program ratio after the Act. We do not find any evidence to suggest that these two cost items have changed significantly after the Act. We also rule out cost shifting as a potential explanation for the increased compensation costs. Thus, our results call into question the necessity for imposing SOX-like regulation on a sector which clearly has different dynamics than the for-profit sector, for which SOX was intended. Our results have serious policy implications since many states in the USA have already implemented or are planning to implement similar legislation.

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We investigate the relative influence of human capital, distribution, opening week revenues and movie attributes on how long movies last in theaters. The focus of our investigation is the Italian market. We use a survival model with a parametric proportional hazards specification for our analysis. We also account for unobserved heterogeneity, endogeneity of opening week revenues, and a stochastic censoring mechanism, in our model and take a Bayesian approach for our analysis. Our results suggest that the quality and breadth of experience of actors, and the number of screens that a movie is initially released in, have a negative effect on longevity. Opening week revenues and attributes such as the quality of screenwriters, running time, some genres and some types of content ratings such as PG-14 , however, have a positive effect. Implications of the research and opportunities for future research are also discussed. Keywords: movies, playability, survival analysis, proportional hazards, stochastic censoring, Bayesian analysis.

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In this paper we examine the learning rates of individuals working under normal workload conditions vs. those working under time-pressure conditions. We find that those working under time pressure learn much less than those working under normal time. We also find evidence for significant forgetting by individuals. We suggest that this is one mechanism by which time compression diseconomies affect capability accumulation processes in firms. We also discuss implications for the literature on learning curves: specifically to our understanding of why learning curves may be heterogeneous across organizations and to our understanding of why knowledge may depreciate even in organizations that are continuously operating.

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We analyze the choice of delivery system for a firm that sells make-to-order physical goods and/or services. The market consists of two segments that differ in their preference for product quality as well as their disutility from waiting time. The firm chooses between -- two dedicated delivery systems one for each market segment, and a flexible (pooled) delivery system that serves both segments. While pooled system allows firm to reduce operational cost of delivering products, dedicated systems allow firm to increase revenues by price discriminating customers more effectively. We characterize the optimal choice as a function of market scale, segment ratios, and performance deterioration that may result from mix variability. Our research highlights the effect of market cannibalization on the operations strategy decision of delivery system design.

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Consider the estimation problem for the multiple linear regression (MLR) setup, under balanced loss function (BLF), where both goodness of fit and precision of estimation are modeled using either squared error loss (SEL) or linear exponential (LINEX) loss functions. We derive the minimum risk estimates for two different variants of BLF and prove for both the cases the existence of the ubiquitous SEL and LINEX estimates at the boundary conditions. Conclusions draw from the exhaustive simulation runs prove the general nature of our proposed theorems.

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We estimate the joint impact of frequency reward and customer tier components of a loyalty program on customer behavior and the corresponding sales. We provide an integrated analysis and measurement of a loyalty program incorporating customers’ purchase and cash-in decisions, points pressure and rewarded behavior effects, heterogeneity, and forward-looking behavior. We focus on measuring these effects for a hotel loyalty program. The results suggest interesting insights: for example, both components produce net gains in sales, but do not synergize, i.e., they are not complements in terms of incremental sales. We find strong evidence for points pressure, for both the customer tier and frequency reward components, using both model-based and model-free evidence. We find a two-segment solution revealing a “service-oriented” segment that highly values cash-ins for room upgrades and staying in “luxury” hotels, and a “price-oriented” segment that is more price sensitive and highly values the frequency reward aspects of the loyalty program. We conduct policy simulations that vary the reward structure and use the results to recommend adjustments in frequency reward and customer tier program requirements that improve firm revenues. We predict that compared with the existing program, an alternative design more stringent in awarding the frequency-based reward but more generous in awarding the tier-based reward increases the revenue by 8.99%.

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Revenue management practices often include overbooking capacity to account for customers who make reservations but do not show up. In this paper, we consider the network revenue management problem with no-shows and overbooking, where the show-up probabilities are specific to each product. We propose a randomized linear program to jointly make the capacity control and overbooking decisions with product-specific no-shows. We establish that our formulation gives an upper bound on the optimal expected total profit and that this upper bound is tighter than a deterministic linear programming bound that appears in the existing literature. We describe how the randomized linear program can be used to obtain a bid price control policy. Numerical experiments indicate that our approach is fast, able to scale to industrial-size problems, and can provide significant improvements over standard benchmark methods. This is joint work with Kalyan Talluri(UPF) and Huseyin Topaloglu(Cornell).

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Recent papers have shown that, in contrast to ―the Long Tail‖ theory, movie sales remain concentrated in a small number of hits. These papers have argued that concentrated sales can be explained, in part, by he-terogeneity in quality and increasing returns from social effects. Our research analyzes an additional ex-planation: how incomplete information may skew sales patterns. We use the movie broadcast on pay-cable channels as an exogenous shock to the availability of information, and analyze how this shock changes the resulting sales distribution. Our data show that the pay-cable broadcast shifts the distribution of DVD sales toward ―Long Tail‖ mov-ies, suggesting an information spillover from the broadcast. We further develop a learning-based model of DVD demand to precisely quantify the lost DVD sales due to incomplete information. Our study contri-butes to the academic literatures on information provision and market outcomes, and the dynamics of long tail markets. Keywords: Incomplete information, product discovery, multichannel distribution, movie indus-try, learning model, Long Tail.

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We study competitive positioning and pricing strategies in conspicuous goods markets. For conspicuous products, each consumer values the product less as more consumers own it, thus exhibiting negative consumption externalities. We incorporate the effect of consumption externality for each consumer to be dependent on their location vis-à-vis the location of the firm. Specifically, we assume that a customer ‘closer’ to a firm may feel more let down if that firm caters to too many customers. Our work extends the existing literature by formally recognizing that consumers are heterogeneous in their sensitivity to product exclusivity. We find that for conspicuous goods, product differentiation is lower; a finding that explains otherwise counterintuitive empirical results in the literature. We also show that under some conditions, price competition can be higher in markets with negative consumption externalities. When firms are asymmetric with respect to consumption externality effects, we show that a firm which exerts higher externality tends to charge lower prices. Finally, firms may be better off if they reduce heterogeneity in their consumers’ sensitivity to consumption externality. Keywords: Negative Consumption Externalities, Conspicuous Goods, Pricing, Hotelling Models.

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Indian immigrants in the United States and other wealthy countries are successful in entrepreneurship. Using Census data from the three largest developed countries receiving Indian immigrants in the world -- the United States, United Kingdom and Canada -- we examine the performance of Indian entrepreneurs and explanations for their success. We find that business income of Indian entrepreneurs in the United States is substantially higher than the national average and is higher than any other immigrant group. Approximately half of the average difference in income between Indian entrepreneurs and the national average is explained by their high levels of education while industry differences explain an additional 10 percent. In Canada, Indian entrepreneurs have average earnings slightly below the national average but they are more likely to hire employees, as are their counterparts in the United States and United Kingdom. The Indian educational advantage is smaller in Canada and the United Kingdom contributing less to their entrepreneurial success. Keywords: entrepreneurship, immigration, Indian migrants

Abstract:
Internet retailers have been making significant investments in advanced technologies, e.g., zoom, color swatch, and alternative photos, that are capable of providing detailed product-related information and, thereby, mitigating the lack of “touch-and-feel,” which, in turn, is expected to lower product returns. However, a clear understanding of the impact of these technologies on product returns is still lacking. This study attempts to fill this gap by using several econometric models to unravel the relationship between product-related technology usage and product returns. Our unique and rich dataset allows us to measure technology usage at the product level for each consumer. The results show that zoom usage has a negative and weakly significant coefficient, suggesting that a higher use of the zoom technology leads to fewer returns. Color swatch, on the other hand, does not seem to have any impact on product returns. Interestingly, we find that the use of alternative photos increases the likelihood of returns. Thus, our findings show that different technologies have different effects on product returns. Moreover, with a higher use of alternative photos, loyal consumers are more likely to return, whereas the effect on non-loyal consumers is insignificant. We provide explanations for all these findings based on the extant literature on customer satisfaction. We also conduct a number of tests to ensure the robustness of the findings.