Research in Action 2015

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RESEARCH IN ACTION


TA B L E O F C O N T E N T S

2ND EDITION

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RIPE FOR DISRUPTION

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RESEARCH IN ACTION A NOTE FROM THE DEAN

Welcome to the second edition of The Paul Merage School of Business at UC Irvine Research In Action publication which contains recent studies published by our world-renowned faculty, as well as feature articles and research summaries exploring topics from global digital transformation to the dangers of overthe-counter drugs. Research is one of the many qualities that sets the Merage School apart from other business schools. The caliber of research conducted and the quality of teaching delivered by our faculty are what prepare our graduates for the realities of a constantly changing global business environment. For full copies of the research highlighted within, or to discuss future research collaboration, visit merage.uci.edu/go/faculty. Enjoy,

Eric R. Spangenberg Dean and Professor of Marketing

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RIPE FOR

I U O by Laurie McLaughlin

4 | THE PAUL MERAGE SCHOOL OF BUSINESS


®

ARTICLES

Blockbuster and Borders are dead. Amazon’s market cap exceeds Walmart’s. Apple is the most valuable company in the world. Yet, many companies still don’t see the need to embrace the digital age. Now that we are well into the “digital age,” it may come as a surprise that many CIOs still say their companies do not view digital transformation as critical to their businesses. In fact, 44 percent of CIOs polled in a recent survey held that view. ´%HFDXVH PDQ\ FRPSDQLHV DUHQ·W DEOH WR DGDSW WR WKLV QHZ HQYLURQPHQW WKH\ DUH LQ GDQJHU RI ORVLQJ WKHLU PDUNHW SRVLWLRQV µ VDLG Vijay Gurbaxani, founding director of the Center for Digital Transformation and Taco Bell Professor of Business and Computer Science, who conducted the survey and co-authored the report with Debora Dunkle, director of research at the Center.

VISION COMES FROM THE TOP While we can learn from the misfortunes of others, according WR *XUED[DQL WKHUH·V PRUH WR JDLQ IURP WKH FRPSDQLHV ZKR GR believe that digital transformation is a critical mandate. ,V WKH GULYH WRZDUG GLJLWDO WUDQVIRUPDWLRQ coming from the top of the organization? Is the CEO involved, knowledgeable and an active champion of transformative digital initiatives? ,V WKH FRPSDQ\·V RYHUDOO FXOWXUH IURP the CEO down, embracing innovation and risk-taking? ,V WKH RUJDQL]DWLRQ LQYHVWLQJ LQ DWWUDFWLQJ the most skilled talent?

N E W P L AY E R S D I S R U P T T H E O L D G UA R D There are plenty of well-established industries that did not prepare for the digital age. For example, the app-based rideshare service Uber has traditional taxi services in a jam. “Uber is only possible because of widespread distribution of smartphones. Uber saw a huge opportunity and built a sophisticated platform for riders and drivers to connect. Their ingenuity and insight opened the door to an entirely new world,” said Gurbaxani. “A very young company, Uber is now reported to be doing RYHU PLOOLRQ D \HDU LQ UHYHQXHV MXVW in San Francisco alone. Taxicab revenues, LQ WKH VDPH DUHD ZHUH RQO\ DURXQG million.” What this demonstrates is that there was massive demand for service that ZDVQ·W EHLQJ PHW XVLQJ WUDGLWLRQDO PHWKRGV D EOLQG VSRW DFURVV the transportation sector. In a similar fashion, Airbnb, an online EXVLQHVV WKDW ÀUVW ODXQFKHG E\ KHOSLQJ FXVWRPHUV ÀQG ORGJLQJ LQ RWKHU SHRSOH·V KRPHV DQG ,QVWDFDUW DQ RQOLQH JURFHU\ GHOLYHU\ service, are challenging and changing the established hotel and supermarket industries, respectively. These sharing-economy companies are taking the under-utilized capacity—of our cars DQG KRPHV³DQG ÀQGLQJ FRPPHUFLDO XVHV IRU WKHP

“Some companies don’t see an immediate threat, but disruption is often closer than they think.”

$UH WKH\ LQQRYDWLQJ VROHO\ ZLWKLQ WKHLU FRPSDQLHV RU DUH WKH\ leveraging an ecosystem? GE, for example, has partnered with Frost Data Capital, an incubator and venture capital ÀUP LQ 2UDQJH &RXQW\ WR JURZ QHZ VWDUWXSV LQ WKUHH years. These companies will help GE meet its business QHHGV ´7KDW·V DQ H[DPSOH RI WKH SDFH DW ZKLFK FRPSDQLHV must evolve,” said Gurbaxani. “Very few companies can go it alone.”

Vijay Gurbaxani, Taco Bell Endowed Professor of Information Systems and Computer Science; Director of the Center for Digital Transformation

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:KLOH ZLWQHVVLQJ WKHVH ZHOO NQRZQ GLVUXSWLRQV ZK\ DUHQ·W FRPSDQLHV OLNH WKH SHUFHQW LQ WKH &HQWHU·V VXUYH\ VFXUU\LQJ to catch up? Gurbaxani said there are many possible reasons. 6RPH FRPSDQLHV GRQ·W VHH DQ LPPHGLDWH WKUHDW EXW GLVUXSWLRQ is often closer than they think. Take the slow-moving health care sector. Leap, a new healthcare company, offers house calls by physicians within an hour for $99. Who would have predicted WKLV" ,W·V YHU\ ULVN\ EHFDXVH ZH DUHQ·W WDONLQJ DERXW SLHFHPHDO digital initiatives but business reinvention. Third, the dynamics of competition are different. Traditional companies are used to perfecting a product before putting it on the market. Within the tech world, products and services are frequently released when they are minimally viable and improved later. “There is often ÀUVW PRYHU DGYDQWDJH ,W·V VHOI UHLQIRUFLQJ 7KHVH LQQRYDWLYH GLJLWDO GLVUXSWHUV JHW WR PDUNHW ÀUVW OHDUQ TXLFNO\ DQG JHW EHWWHU DQG ELJJHU IDVW $QG WKH\ EHFRPH GLIÀFXOW WR GLVORGJH µ

T H E R I S K - AV E R S E M AY B E L E F T BEHIND Established corporate cultures can squash innovation and risk-takers—especially if they put the current cash cows at risk. ,W·V WKHVH RUJDQL]DWLRQV WKDW PD\ EH GRRPHG WR JR WKH ZD\ RI the fax machine, despite the many and various articles, statistics and cautionary tales their business leadership consumes. This reluctance is shaped by a number of factors: 6RPHWLPHV ´ LW·V D JHQHUDWLRQDO WKLQJ µ VDLG *XUED[DQL DQG WKHUH LV D OHDUQLQJ FXUYH ´7KH JHQHUDWLRQ WKDW·V UXQQLQJ D ORW RI WKHVH FRPSDQLHV GLGQ·W JURZ XS ZLWK GLJLWDO µ ,I D FRPSDQ\ LV SURÀWDEOH LQ LWV WUDGLWLRQDO EXVLQHVV ERWK leadership and stockholders are reluctant to cannibalize FXUUHQW SURÀWV WR H[SORUH H[SHQVLYH DQG ULVN\ LQYHVWPHQWV LQ digital for uncertain future gains.

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)HZ ZDQW WR LQQRYDWH WKHPVHOYHV RXW RI D MRE ´<HDUV DJR IRU example, traditional sales channel managers were hostile to online sales, because it cost them sales and reduced commissions,” said Gurbaxani. )LQDOO\ NHHSLQJ XS UHTXLUHV WHQDFLW\ 2QFH \RX·YH HPEDUNHG on the cycle of technological innovation, no matter how VXFFHVVIXO \RX DUH WKHUH·V QR VWRSSLQJ WR UHVW ´8EHU LV building a self-driving car,” said Gurbaxani. “How many ÀYH \HDU ROG FRPSDQLHV GR \RX NQRZ WKDW DUH WKLQNLQJ RI disrupting themselves?” Vijay Gurbaxani is the Taco Bell Endowed professor of Information Systems and Computer Science and director of the Center for Digital Transformation (CDT) at The Paul Merage School of Business at the University of Californina, Irvine. His research, teaching and consulting interests are at the nexus of business strategy and information technology (IT). He focuses on analyzing how emerging information technologies enable business model innovation, on developing and evaluating business-driven strategies for the sourcing of information services, and on valuing IT investment. His approach is distinctive in its use of economic principles as the lens with which to analyze strategic PDQDJHPHQW TXHVWLRQV

The study, “Time for a Reboot,” was issued at the “Road to Reinvention: Leadership in the Digital Age” conference presented by the Merage School Center for Digital Transformation in March 2015. The respondents were anonymous and represented a cross-section of industries. To view the report, visit centerfordigitaltransformation.org/assets/Time-For-a-Reboot-DigitalReadiness-Survey-Report-from-Center-for-Digital-Transformation-at-UCIrvine.pdf.


ARTICLES

T H E D I G I TA L J O U R N E Y CONTINUES “Digital technologies are fundamentally changing the underlying economics of all industries. Businesses are facing new and unexpected competition and must continuously reinvent themselves,” said Vijay Gurbaxani, director for the Merage School Center for Digital Transformation (CDT). “This transition will require a new mindset. Smart business leaders understand this and are moving ahead of their competitors. Our FRQIHUHQFH LV GHVLJQHG WR KHOS \RX UHÁHFW RQ \RXU MRXUQH\ LQ DQ evolving digital world.” ,Q 0DUFK WKH &'7 KHOG LWV LQDXJXUDO VLJQDWXUH conference, Road to Reinvention: Leadership in the Digital Age. Structured as a one-day forum, the conference provided a sophisticated understanding of the key elements in a senior management agenda for business reinvention and included guests from companies like Marriott, Walmart, United Healthcare, Edmunds, Trulia, Cognizant, Instacart, OpenTable, :HOOWRN DQG ,%0 :DWVRQ &RSLHV RI WKH &'7·V ODWHVW UHVHDUFK 7LPH IRU D 5HERRW 1HDUO\ +DOI RI &RPSDQLHV $UHQ·W 5HDG\ IRU Digital Transformation, were provided to conference participants. ´7RGD\·V GLJLWDO HQYLURQPHQW UHTXLUHV EXVLQHVV OHDGHUV to undertake a profound and systematic rethinking of how their companies will compete,” said Gurbaxani. “Through our annual signature conference, we will continue to examine how businesses can leverage the different economics of an evolving digital world and build successful digital enterprises.” The second signature Road to Reinvention conference is slated for 7KXUVGD\ 0DUFK DW WKH 8& ,UYLQH %HFNPDQ &HQWHU The Center for Digital Transformation works to advance the competitiveness and productivity of businesses in the digital economy. Guided by a distinguished and talented external advisory board, we provide executives with a better understanding of the dynamics of the digital revolution and what these forces mean for their industries and organizations. For more information, go to merage.uci.edu/go/cdt.

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Imran Currim &KDQFHOORU·V 3URIHVVRU RI 0DUNHWLQJ 'LUHFWRU RI WKH %HDOO &HQWHU IRU ,QQRYDWLRQ DQG (QWUHSUHQHXUVKLS

B I G D ATA : U N D E R S TA N D I N G T H E PAT H T O PURCHASE by Laurie McLaughlin

8 | THE PAUL MERAGE SCHOOL OF BUSINESS

Collecting data and the art of analyzing it has been a burgeoning industry over the last 15 years. Thanks to our “always online” lifestyles and a massive amount of posting and clicking, the digital data bank could top 44 trillion gigabytes of information by 2020. That’s 10 times the total digital data created through 2013. The challenge for companies is harnessing this staggering amount of data and applying the right analyses to put it to work.


ARTICLES ´,W·V RQH WKLQJ WR FROOHFW LQIRUPDWLRQ EXW LW·V DQRWKHU WR XVH LW LQWHOOLJHQWO\ µ VDLG ,PUDQ &XUULP FKDQFHOORU·V SURIHVVRU DQG director of the Beall Center for Innovation and Entrepreneurship at the Merage School. “When collected strategically and DQDO\]HG LQWHOOLJHQWO\ µ DGGHG &XUULP ´VXFK ¶ELJ GDWD· FDQ JLYH companies the customer-centric understanding they need to out-compete their rivals.” &XUULP KDV DVVHUWHG WKDW D FRPSDQ\·V PDMRULW\ IRFXV VKRXOG be on their customers rather than their products. “I advocate WKDW DW OHDVW SHUFHQW RI WKH FRPSDQ\·V DWWHQWLRQ EH FXVWRPHU focused, which is not usually the case,” he said. “Normally, the majority emphasis is on creating a better product, not on XQGHUVWDQGLQJ WKH FXVWRPHU·V RQOLQH MRXUQH\ WRZDUG EX\LQJ WKDW product.” In a research study Currim co-authored and published in WKH LVVXH RI WKH Journal of Interactive Marketing, he and his co-authors worked with a well-known online retail site and monitored the actions of customers shopping for a product similar to a tablet. They tracked customer activity by requiring shoppers to click on product information (size, color, battery life, etc.) they chose to read. They then analyzed the data and developed models to predict which attributes future customers would want in a product. The results gave the manufacturer/ retailer a better understanding of what product information was LPSRUWDQW WR HDFK RI WKH VWXG\·V VKRSSHUV ZKHWKHU WKH\ made a purchase or not. ´6KRSSHUV GRQ·W ORRN DW DOO RI WKH LQIRUPDWLRQ MXVW VRPH RI LW µ said Currim about general browsing habits. Right now, models DUH EDVHG RQ DOO WKH LQIRUPDWLRQ DYDLODEOH WR WKH EX\HU &XUULP·V model evaluates only the exact information a buyer accesses. “The data derived from where the eyeball lands is valuable, and companies can integrate customer-preference clicking

models similar to the one used for this study into their online SURJUDPPLQJ µ &XUULP VDLG ´<RX FDQ HDVLO\ UHZRUN \RXU websites and track what information customers want during multiple visits, then tailor products, sales and marketing accordingly.” For three decades, Currim has established a world-wide UHSXWDWLRQ IRU GHYHORSLQJ FRQGXFWLQJ DQG DQDO\]LQJ D VKRSSHU·V path to purchase with smart use of data to strengthen the focus on customers. “Look at it this way,” he said, “would an investor prefer you have a better product than the competition, or would they prefer you have more customers?” Imran Currim LV FKDQFHOORU·V SURIHVVRU RI Marketing and director of the Beall Center for Innovation and Entrepreneurship at The Paul Merage School of Business at the University of California, Irvine. In previous roles, Currim has served as associate dean of the Merage 6FKRRO 8QGHUJUDGXDWH 3URJUDP ² DQG SULRU WR that, associate dean for Marketing & Student Relations for the ([HFXWLYH 0%$ 3URJUDPV ² DQG DVVRFLDWH GHDQ RI WKH 0DVWHUV 3URJUDPV ² He is the recipient of two of the highest honors in marketing: WKH $PHULFDQ 0DUNHWLQJ $VVRFLDWLRQ :LOOLDP 2·'HOO $ZDUG IRU ´WKH DUWLFOH MXGJHG WR KDYH PDGH WKH PRVW VLJQLÀFDQW ÀYH \HDU contribution to marketing theory, methodology, and practice,” DQG WKH $PHULFDQ 0DUNHWLQJ $VVRFLDWLRQ +RXJKWRQ 0LIÁLQ Distinguished Teaching in Marketing Award “for contributions to teaching excellence.” Professor Currim is recognized as an international expert in the area of design and marketing of products and services, and market research.

Information Accessed or Information Available? The Impact on Consumer Preferences Inferred at a Durable Product E-commerce Website. Imran Currim, University RI &DOLIRUQLD ,UYLQH 2IHU 0LQW] 0HUDJH 6FKRRO 3K' · $VVLVWDQW 3URIHVVRU /RXLVLDQD 6WDWH 8QLYHUVLW\ 6 6LGGDUWK 8QLYHUVLW\ RI 6RXWKHUQ &DOLIRUQLD

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ARTICLES

D O A S I S AY, NOT AS I DO N E W R E S E A R C H F I N D S A D O L E S C E N T S M O R E L I K E LY N O T T O S M O K E W H E N C I G A R E T T E A D S F E AT U R E O L D E R A D U LT S

By Anne Warde

For decades, the tobacco and alcohol industries have been accused of advertising their products to kids. Tremendous public pressure has prompted the implementation of strict guidelines. Today, tobacco and alcohol advertising are among the most highly regulated forms of marketing in existence. But, are all of the rules having any effect on the adolescents we seek to protect? ,Q D VWXG\ SXEOLVKHG LQ WKH Journal of Consumer Psychology, researchers found that regulators may want to rethink the guidelines they apply to the alcohol and tobacco industries. The study titled, “The effects of advertising models for age-restricted products and self-concept discrepancy on advertising outcomes among young adolescents,” was written by Cornelia Pechmann, a marketing professor at UC Irvine

Paul Merage School of Business, and two Merage School 3K'V 7RGG 3H]]XWL 3K' · ZKR QRZ WHDFKHV LQ WKH ,QGXVWULDO Engineering Department at the University of Chile and Dante 3LURX] 3K' · ZKR WHDFKHV DW WKH ,YH\ %XVLQHVV 6FKRRO DW Western University in London, Canada. “Advertising policy is based on the assumption that certain similarities between the models used in alcohol and tobacco ads and the consumers who view the ads are what drive persuasion, especially, similarity in age. On the surface, psychological research and theory seems to support this view,” said Pechmann. “However, our study, titled, Current Practices in the Advertising of Age-restricted Products, indicates that adolescents respond differently when the advertised product LV DJH UHVWULFWHG 7KLV LV DQ LPSRUWDQW ÀQGLQJ DV LW PD\ VLJQLI\ a need to change the way we approach advertising guidelines for certain products to protect young people from predatory advertising practices. Cigarette and alcohol industry guidelines state they will use young adult ad models who are 25 years of age or older to protect adolescents, which seems reasonable, but in fact, 14- and 15-year-old adolescents are most persuaded to smoke and drink by those 25-year-old models that they use.”

Cornelia (Connie) Pechmann, Professor of Marketing RESEARCH IN ACTION | 11


D O A S I S A Y, N O T A S I D O

T H E R E S E A R C H A N D R E S U LT S During the study, Pechmann and her colleagues conducted a series of experiments which involved giving a group of adolescents professionally produced mock magazines, then KDYLQJ WKHP DQVZHU TXHVWLRQV DERXW WKH PDJD]LQH·V FRQWHQW The line of questioning included personal inquiries about the VXEMHFWV· LQWHQW WR VPRNH LQ WKH IXWXUH 7KH PDJD]LQHV LQFOXGHG different advertisements to test the research hypotheses. 5HVXOWV RI WKH ÀUVW H[SHULPHQW VKRZHG WKDW DGYHUWLVHPHQWV featuring young (17-year-old) cigarette models actually GHFUHDVHG WKH DGROHVFHQWV· LQWHQW WR VPRNH :KHQ WKH DGV IHDWXUHG \RXQJ DGXOW PRGHOV \HDUV ROG WKH DGROHVFHQWV· intent to smoke increased. Interestingly enough, when mid-aged adult models (45 years old) were used, the advertisements had QR HIIHFW RQ WKH VXEMHFW JURXS·V LQWHQW WR VPRNH “What we found in the second experiment illustrates how adolescents diverge from other adolescents and follow young adults when ads are selling age-restricted products, like cigarettes,” said Pechmann. “This same result was not true for unrestricted products, like clothing. In fact, when the product was unrestricted, adolescents conformed to the behavior of other adolescents rather than young adults.” ´7KH VLJQLÀFDQFH RI RXU ÀQGLQJV LV WKDW ZKLOH FLJDUHWWH and alcohol industries have agreed to use models that appear to be 25 years of age or older to protect adolescents, their efforts may be having the exact opposite effect,” said Pechmann. “Advertisements for age-restricted products may prompt adolescents to respond to dissatisfaction with their age by behaving like young adults. In the case of tobacco advertisements, more young people may be choosing to smoke as a result.” In a third experiment, the researchers found that the level to which adolescents conformed to young adults and diverged from other adolescents, after exposure to cigarette advertisements, depended on the level of dissatisfaction the adolescents felt toward their age.

REASONS WHY CURRENT P R A C T I C E S M AY B E H A R M I N G ADOLESCENTS One reason adolescents might respond differently than expected is that they are facing unique life challenges such as understanding and attaining the freedom and independence

12 | THE PAUL MERAGE SCHOOL OF BUSINESS

that come with young adulthood. The limitations and restrictions adolescents face may be causing dissatisfaction with their DJH ,W·V LPSRUWDQW WR QRWH WKDW PXFK UHVHDUFK KDV EHHQ GRQH surrounding how consumers respond to personal dissatisfaction. Cueing dissatisfaction leads to tension, which consumers can try to avoid or reduce. “For example, adolescents can reduce the tension resulting from dissatisfaction with age limitations by behaving more like and identifying more with young adults,” said Pechmann. “Cigarette advertisements, may elicit tension by reminding adolescents of their age limitations and prompting them to follow the actions of the young adults they see.”

W H AT ’ S I T A L L M E A N ? Contrary to the logic guiding the advertising practices of the manufacturers of cigarettes and other age-restricted products, like alcohol, adolescent desire for such products seems to increase when the model is a young adult rather than a similar DGROHVFHQW %DVHG RQ WKH ÀQGLQJV RI WKHVH WKUHH H[SHULPHQWV the best policy for protecting adolescents from the advertising of age-restricted products is to use models that appear to be 45 years of age or older. Cornelia (Connie) Pechmann (MS, MBA, PhD) is a professor of marketing at The Paul Merage School of Business, University of California Irvine. She studies the effects of advertising, social media, product labeling, brand names and retail store locations on consumers, and VKH KDV SXEOLVKHG RYHU DUWLFOHV UHSRUWV DQG SDSHUV Professor Pechmann has received numerous grants and over 0 WR VWXG\ \RXWKV· UHVSRQVHV WR SUR DQG DQWL VPRNLQJ DGV and product placements in movies. This research persuaded movie studios to place anti-smoking ads on movie DVDs if the movies target youth and depict smoking. She is currently studying how to form effective online communities on Twitter for VPRNLQJ FHVVDWLRQ IXQGHG E\ D 0 LQQRYDWLRQ JUDQW IURP 1,+ She is the recipient of the Pollay Prize for Public Interest Research and has also received the best journal article award from the Journal of Consumer Research.


ARTICLES

A R E Y O U TA K I N G T O O M U C H NYQUIL? N E W ST U DY E X A M I N E S T H E SU R P R I S I N G F U T I L I T Y OF DRU G L A B E L I N G

By Anne Warde

According to a new study titled, “Dangerous Double Dosing: How Naive Beliefs Can Contribute to Unintentional Overdose with Overthe-Counter (OTC) Drugs,” consumers may not be considering active ingredients in medicines and thus risking overdose when taking two or more OTC drugs concurrently. Co-authored by Marketing Professor Connie Pechmann, Merage School PhD alumnus Jesse Catlin (now at California State University, Sacramento), and UCLA Professor Eric P. Brass, the study was announced by the American Marketing Association and is forthcoming in the Journal of Public Policy and Marketing. “A consumer who takes a cold medicine containing, for instance, acetaminophen, may see nothing wrong with taking an additional medicine that also contains acetaminophen,” write authors Catlin, Pechmann and Brass. “But in that case, he or VKH ZLOO OLNHO\ LQJHVW DW OHDVW PJ RI DFHWDPLQRSKHQ DQG LI those doses are repeated every four to six hours, the consumer ZLOO WDNH LQ DW OHDVW PJ RI DFHWDPLQRSKHQ SHU GD\ ZHOO RYHU the limit.” Study participants included people with and without medical expertise. They were asked to read the labels on the packages

of two different OTC drugs and report whether the two contained the same active ingredients. They were also asked to judge the risks of taking the two drugs at the same time. Both groups RI SDUWLFLSDQWV ² WKRVH ZLWK DQG ZLWKRXW PHGLFDO H[SHUWLVH ² correctly determined if the two drugs contained the same active ingredients, but only participants with medical expertise used that information to weigh the risks of taking two medications together. For more information about the study, contact Jesse R. Catlin, jesse.catlin@csus.edu, or Mary-Ann Twist, mtwist@ama.org. Cornelia (Connie) Pechmann (MS, MBA, PhD) is a professor of marketing at The Paul Merage School of Business, University of California Irvine. She studies the effects of advertising, social media, product labeling, brand names and retail store locations on consumers and VKH KDV SXEOLVKHG RYHU DUWLFOHV UHSRUWV DQG SDSHUV Professor Pechmann has received numerous grants and over 0 WR VWXG\ \RXWKV· UHVSRQVHV WR SUR DQG DQWL VPRNLQJ DGV and product placements in movies. This research persuaded movie studios to place anti-smoking ads on movie DVDs if the movies target youth and depict smoking. She is currently studying how to form effective online communities on Twitter for VPRNLQJ FHVVDWLRQ IXQGHG E\ D 0 LQQRYDWLRQ JUDQW IURP 1,+ She is the recipient of the Pollay Prize for Public Interest Research and has also received the best journal article award from the Journal of Consumer Research.

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LA AT E S T P U B L I C AT TIONS B Y M E R A G E S C H O O L FA F C U LT Y M E M B E R S

14 | THE PAUL MERAGE SCHOOL OF BUSINESS


undertaken by the preceding generation. Participants in Session , WKH ÀUVW JHQHUDWLRQ UHFHLYHG QR ÀQDQFLDO KLVWRU\ ZKHUHDV participants in the subsequent Sessions II-V received a report WKDW VXPPDUL]HG WKH ÀQDQFLDO KLVWRU\ RI WKH LPPHGLDWHO\ preceding session. Thus, Sessions I and II replicate the original Berg et al. (1995) study, and Sessions III-V extend that study. In general, the results across sessions indicate that entropy declined in both the amounts sent by Investors and the percentage returned by Stewards, but these patterns are weaker and mixed compared to those in the Berg et al. (1995) study. The concluding section discusses the implications of the results DQG LGHQWLÀHV RSSRUWXQLWLHV IRU IXWXUH UHVHDUFK

PUBLICATIONS

ACCOUNTING

P R O F E S S O R R A D H I K A L U N AWAT

Title: “The Impact of Financial Histories on Individuals and Societies: A Replication and Extension of Berg et. al. (1995)” Co-authors: Xu Jiang and Brian Shapiro Accepted at: Research in Experimental Economics This paper studies how successive generations of laboratory VRFLHWLHV RUJDQL]H WKHPVHOYHV ZKHQ JLYHQ UHSRUWV RI ÀQDQFLDO WUDQVDFWLRQV IURP SUHYLRXV JHQHUDWLRQV 7KH DXWKRUV GHÀQH DQ increase in societal organization as a reduction in the entropy of the distribution of amounts sent and returned by successive generations of players in the Investment Game. Their entropy analysis of data from Berg, Dickhaut, and McCabe (Games DQG (FRQRPLF %HKDYLRU SS LQGLFDWHV WKDW WKH SURYLVLRQ RI D ÀQDQFLDO KLVWRU\ VLJQLÀFDQWO\ UHGXFHG WKH entropy of the amounts sent by Investors and amounts returned by Stewards, and marginally reduced the entropy in the joint Investor/Steward distribution. The authors replicated the Berg. et al. (1995) setting and gathered data from three additional societal generations to further test the predictive power of the hypothesis that successive generations of individuals in laboratory societies will increasingly organize themselves RYHU WLPH ZKHQ WKH\ UHFHLYH UHSRUWV RI ÀQDQFLDO WUDQVDFWLRQV

P R O F E S S O R T E R RY S H E V L I N

Title: “Measuring Income Tax Accrual Quality” Co-authors: Preeti Choudhary and Allison Koester Accepted at: Review of Accounting Studies This paper develops and validates a measure of tax accrual quality. Tax accrual quality captures variation in the extent to which the income tax accrual maps into income tax-related cash ÁRZV ZLWK ORZHU YDULDWLRQ LQGLFDWLQJ D KLJKHU TXDOLW\ WD[ DFFUXDO Low tax accrual quality arises from management estimation HUURU DQG ÀQDQFLDO UHSRUWLQJ VWDQGDUGV WKDW OHDG WR GLIIHUHQFHV EHWZHHQ LQFRPH WD[ H[SHQVH DQG LQFRPH WD[ FDVK ÁRZV QRW captured by deferred tax assets and liabilities. The authors

RESEARCH IN ACTION | 15


validate their tax accrual quality measure by showing it is DVVRFLDWHG ZLWK ÀUP FKDUDFWHULVWLFV WKDW FDSWXUH ERWK FRQVWUXFWV and by demonstrating it predicts future tax-related restatements and internal control material weaknesses. They also illustrate the importance of the measure by showing that investors view WD[ H[SHQVH DV PRUH LQIRUPDWLYH LQ ÀUPV ZLWK EHWWHU WD[ DFFUXDO quality. The empirical results are incremental to controlling for working capital accruals quality and measures of tax avoidance, tax risk, and tax-related earnings management. Researchers can use this tax accrual quality measure to address questions related to estimation error in the income tax account.

ECONOMICS AND PUBLIC POLICY

P R O F E S S O R T E R RY S H E V L I N

Title: “Market (In)Attention and the Strategic Scheduling and Timing of Earnings Announcements” Co-authors: Ed deHaan and Jake Thornock Accepted at: Journal of Accounting and Economics This paper investigates whether managers “hide” bad news by announcing earnings during periods of low attention, or by providing less forewarning of an upcoming earnings DQQRXQFHPHQW 7KH ÀQGLQJV DUH FRQVLVWHQW ZLWK PDQDJHUV reporting bad news after market hours, on busy days, and with less advance notice, and with earnings receiving less attention LQ WKHVH VHWWLQJV 3DUDGR[LFDOO\ WKH ÀQGLQJV LQGLFDWH WKDW managers also report bad news on Fridays, but the researchers GLG QRW ÀQG ORZHU DWWHQWLRQ RQ )ULGD\V )XUWKHU WKH\ IRXQG QHJDWLYH UHWXUQV ZKHQ WKH PDUNHW LV QRWLÀHG RI DQ XSFRPLQJ Friday earnings announcement, which is consistent with investors inferring forthcoming bad news.

16 | THE PAUL MERAGE SCHOOL OF BUSINESS

PROFESSOR MIREILLE JACOBSON

Title: “The Effect of Medicare on Medical Expenditure Risk and Financial Strain” Co-authors: Silvia Barcellos Accepted at: American Economic Journal: Economic Policy Authors of this study sought to estimate the current impact RI 0HGLFDUH RQ PHGLFDO H[SHQGLWXUH ULVN DQG ÀQDQFLDO VWUDLQ 7KURXJK WKHLU UHVHDUFK WKH DXWKRUV IRXQG DW DJH RXW RI SRFNHW H[SHQGLWXUHV GURS E\ SHUFHQW DW WKH PHDQ DQG percent among the top 5 percent of spenders, and the fraction of the population with out-of-pocket medical expenditures above LQFRPH GURSV E\ PRUH WKDQ KDOI 0HGLFDO UHODWHG ÀQDQFLDO VWUDLQ such as problems paying bills, is dramatically reduced. Using a stylized expected utility framework, the gain from reducing RXW RI SRFNHW H[SHQGLWXUHV DORQH DFFRXQWV IRU SHUFHQW RI WKH VRFLDO FRVWV RI ÀQDQFLQJ 0HGLFDUH 7KLV FDOFXODWLRQ LJQRUHV WKH EHQHÀWV RI UHGXFHG ÀQDQFLDO VWUDLQ DQG GLUHFW KHDOWK improvements due to Medicare.


PUBLICATIONS

F I NA N C E

PROFESSOR LU ZHENG

P R O F E S S O R D AV I D H I R S H L E I F E R

Title: “Editorial: Cosmetic Surgery in the Academic Review Process” Accepted at: Review of Financial Studies Has the academic review process become excessive? In this paper, Hirshleifer describes a model in which reviewers who seek reputations with editors for high skill recommend the repair RI PHUH EOHPLVKHV DV ZHOO DV VLJQLÀFDQW ÁDZV 5HYLHZHU VLJQDO MDPPLQJ LV SURÀWDEOH LI HGLWRUV KDYH WURXEOH GLVWLQJXLVKLQJ WKH two, leading in equilibrium to insistence upon cosmetic surgery. Indeed, if there is a chance that blemishes are not removable, in equilibrium editor and reviewer demands sometimes cause good papers to remain unpublished. This implies a socially valuable role for active editing. Signal-jamming incentives may especially VXSSUHVV LQQRYDWLYH SDSHUV DV ZHOO DV H[WHUQDO YHULÀFDWLRQ E\ means of follow-up papers. This perspective strongly suggests that the increased burden of the review process is undesirable. In conclusion, Hirshleifer offers tentative thoughts about what to do about it.

Title: “Does Media Coverage of Stocks Affect Mutual Funds’ Trading and Performance?” Co-authors: Lily H. Fang and Joel Peress Accepted at: Review of Financial Studies This paper examines the relation between mutual fund trades DQG PDVV PHGLD FRYHUDJH RI VWRFNV 5HVHDUFKHUV ÀQG WKDW funds exhibit persistent differences in their propensity to buy media-covered stocks. Moreover, this propensity is related negatively to their future performance. Funds in the highest propensity decile underperform funds in the lowest propensity GHFLOH E\ SHUFHQW WR SHUFHQW SHU \HDU 7KHVH UHVXOWV GR QRW H[WHQG WR IXQG VHOOV OLNHO\ GXH WR IXQGV· LQDELOLW\ WR VHOO VKRUW 2YHUDOO WKH ÀQGLQJV VXJJHVW WKDW SURIHVVLRQDO LQYHVWRUV DUH subject to limited attention.

RESEARCH IN ACTION | 17


I N F O R M AT I O N S Y S T E M S

ZLWK ORZHU ,7 UHWXUQV LQ ERWK SURGXFWLYLW\ DQG SURÀWDELOLW\ EXW also with lower IT risk. Finally, a higher rate of technological change induces both higher IT returns and higher IT risk. A variety of tests indicate that our results are robust and together, they shed light on factors that drive variation in IT performance across industries, and provide useful industry-level performance benchmarks of the return and risk impacts of IT investments.

P R O F E S S O R S A N J E E V D E WA N

Title: “What Explains the Variation? Industry-Level Analysis of Information Technology Risk and Return” Co-authors: Fei Ren (PhD Alumna) Accepted at: Journal of Management Information Systems Motivated by the wide dispersion in IT returns across industries, researchers conducted an industry- level examination of IT return and risk, focusing on the moderating roles of industry competition, regulation and technological change. They addressed the following research questions: What is the impact of IT investment on the return and risk dimensions of LQGXVWU\ ÀQDQFLDO SHUIRUPDQFH" +RZ GR LQGXVWU\ FKDUDFWHULVWLFV moderate the relationship between IT investment and industry SHUIRUPDQFH" 7KHLU DQDO\VLV RI WKHVH TXHVWLRQV ÀQGV WKDW KLJKHU levels of industry competition are associated with higher IT productivity (contribution of IT to value-added output), lower IT SURÀWDELOLW\ FRQWULEXWLRQ RI ,7 WR LQGXVWU\ DYHUDJH 52$ DQG higher IT risk (contribution of IT to ex ante variability of ROA). This is consistent with the notion that competition induces riskier IT investments, despite the fact that competition may evaporate returns. Higher levels of industry regulation are associated

18 | THE PAUL MERAGE SCHOOL OF BUSINESS

P R O F E S S O R V I J AY G U R B A X A N I

Title: “Social Capital and Contract Duration in Buyer-Supplier Networks for Information Technology Outsourcing” Co-authors: Kiron Ravindran (PhD Alumnus), Anjana Susarla and Deepa Mani Accepted at: Information Systems Research This paper presents new evidence on the role of embeddedness in predicting contract duration in the context of Information Technology (IT) Outsourcing. Contract duration is a strategic decision that aligns interests of clients and YHQGRUV SURYLGLQJ WKH EHQHÀWV RI EXVLQHVV FRQWLQXLW\ WR FOLHQWV DQG LQFHQWLYHV WR XQGHUWDNH UHODWLRQVKLS VSHFLÀF LQYHVWPHQWV for vendors. Considering the salience of this phenomenon, there has been limited empirical scrutiny into how contract duration is awarded. These researchers posit that clients DQG YHQGRUV REWDLQ WZR EHQHÀWV IURP EHLQJ HPEHGGHG LQ DQ


MARKETING

PUBLICATIONS

inter-organizational network. First, the learning and experience accumulated from being embedded in client-vendor network could mitigate the challenges in managing longer-term contracts. Second, the network serves as a reputation system that can stratify vendors according to their trustworthiness and reliability, which is important in longer-term arrangements. In particular, the researchers attempt to make a substantive contribution in theorizing about embeddedness at four distinct levels: structural embeddedness at the node level, relational embeddedness at the dyad level, contractual embeddedness at the level of a QHLJKERUKRRG RI FRQWUDFWV DQG ÀQDOO\ SRVLWLRQDO HPEHGGHGQHVV at the level of the entire network. They analyzed a dataset of RXWVRXUFLQJ FRQWUDFWV LPSOHPHQWHG EHWZHHQ DQG 7KH\ IRXQG WKDW FRQWUDFW GXUDWLRQ LV LQGHHG DVVRFLDWHG ZLWK VWUXFWXUDO DQG SRVLWLRQDO HPEHGGHGQHVV RI SDUWLFLSDQW ÀUPV with the relational embeddedness of the buyer-seller dyad and with the duration of other contracts to which it is connected WKURXJK FRPPRQ ÀUPV *LYHQ WKH QDWXUH RI WKHLU GDWD LGHQWLÀFDWLRQ XVLQJ WUDGLWLRQDO 2/6 EDVHG DSSURDFKHV LV GLIÀFXOW given the unobserved errors being clustered along two nonQHVWHG GLPHQVLRQV DQG WKH DXWRFRUUHODWLRQ LQ D ÀUP·V GHFLVLRQ (here the contract) with those of contracts in its reference group. They employed a multi-way cluster robust estimation and a network auto-regressive estimation to address these issues. Implications for literature and practice are discussed.

PROFESSOR IMRAN CURRIM

Title: “When Does Metric Use Matter Less? How Firm and Managerial Characteristics Moderate the Relationship between Metric Use and Marketing Mix Performance” Co-authors: Ofer Mintz (PhD Alumnus) Accepted at: European Journal of Marketing In an effort toward building a contingent theory of drivers and consequences of managerial metric use in marketing mix decisions, this paper develops a conceptual framework to test whether the relationship between metric use and marketing PL[ SHUIRUPDQFH LV PRGHUDWHG E\ ÀUP DQG PDQDJHULDO FKDUDFWHULVWLFV %DVHG RQ UHYLHZV RI WKH PDUNHWLQJ ÀQDQFH PDQDJHPHQW DQG DFFRXQWLQJ OLWHUDWXUHV DQG KRPRSKLO\ ÀUP resource based, and decision maker based theories, and 22 managerial interviews, a conceptual model is proposed. The model is tested via generalized least squares seemingly XQUHODWHG UHJUHVVLRQ HVWLPDWLRQ RI PDQDJHULDO GHFLVLRQV PDGH E\ PDQDJHUV 5HVXOWV VXJJHVW WKH LPSDFW RI PHWULF XVH RQ PDUNHWLQJ PL[ SHUIRUPDQFH LV ORZHU LQ ÀUPV ZKLFK DUH more market oriented, larger, and with worse recent business performance; and for marketing and higher level managers; while organizational involvement has a lesser nuanced effect. 5HVXOWV DOORZ LGHQWLÀFDWLRQ RI VHYHUDO FRQGLWLRQDO PDQDJHULDO strategies to improve marketing mix performance based on metric use.

RESEARCH IN ACTION | 19


P R O F E S S O R S R E YA K O L AY

Title: “Manufacturer-Provided Services vs. Retailer-Provided Services: Effect on Product Quality, Channel Profits and Consumer Welfare” Accepted at: International Journal of Research in Marketing Demand-enhancing services and activities such as advertising, technical support, delivery and installation services are routinely offered to consumers by manufacturers or retailers or both. Examples of such advertising include Verizon Wireless advertising the Samsung Galaxy 4 smartphone versus Samsung advertising the Galaxy 4 smartphone by itself, and examples RI VXFK VHUYLFHV LQFOXGH %HVW %X\·V *HHN 6TXDG SURYLGLQJ technical support versus the manufacturer providing the technical support for its product. This paper develops a game theoretic model to examine how the identity of the channel member (manufacturer or retailer) providing the demand-enhancing services can have a different LPSDFW RQ WKH PDQXIDFWXUHU·V SURGXFW TXDOLW\ GHFLVLRQV DQG resultant channel and consumer welfare. In their analysis, researchers take the identity of who provides services in the FKDQQHO ² WKH UHWDLOHU RU WKH PDQXIDFWXUHU ² DV GHWHUPLQHG E\ exogenous circumstances like location of the manufacturer or prior negotiations, and study the strategic implications of manufacturer-provided services versus retailer-provided services.

20 | THE PAUL MERAGE SCHOOL OF BUSINESS

The researchers show that when a manufacturer wishing to sell its product line through a retailer provides demandenhancing services to consumers, then it chooses higher SURGXFW TXDOLW\ OHYHOV DQG FKDQQHO PHPEHU SURÀWV DQG consumer welfare are higher. However, when the retailer VHOOLQJ WKH PDQXIDFWXUHU·V SURGXFW OLQH LV WKH RQH ZKR SURYLGHV the demand-enhancing services, then the manufacturer may FKRRVH D ORZHU SURGXFW TXDOLW\ OHYHO DQG UHWDLOHU SURÀW DQG FRQVXPHU ZHOIDUH PD\ EH ORZHU 7KH UHWDLOHU·V DELOLW\ WR FKRRVH LWV RZQ GHVLUHG VHUYLFH OHYHOV DOORZV LW WR VHFXUH KLJKHU SURÀW levels in situations where it carries the partial product line, i.e., in situations not desired by the manufacturer. This in turn necessitates larger inducements paid by the manufacturer to the retailer for it to choose to carry the entire product line. The manufacturer internalizes this potential retailer opportunism in its product design stage and adjusts product quality downward LQ RUGHU WR UHGXFH WKH SURÀWDELOLW\ RI WKH UHWDLOHU IURP WDNLQJ those undesired paths. This product quality decision in turn KDV DGYHUVH UDPLÀFDWLRQV IRU FKDQQHO PHPEHUV DV ZHOO DV consumers. Our results therefore indicate that a manufacturer should not simply look at cost savings arising from shifting service responsibilities from itself to the retailer. Similarly, a UHWDLOHU VKRXOG QRW H[SHFW WR DOZD\V EHQHÀW IURP VLWXDWLRQV where it has secured the ability to choose its own desired levels of services to be provided to consumers.


To address this concern, this paper develops cost allocation mechanisms that induce participation in collective systems and PD[LPL]H FRVW HIÀFLHQF\ 7KH FRVW DOORFDWLRQ PHFKDQLVPV ZH propose consist of adjustments to the widely used return share method, and include the weighing of return shares based on processing costs and the rewarding of capacity contributions to collective systems. Researchers validate their theoretical results using Washington state EPR implementation data and provide insights as to how these mechanisms can be implemented in practice.

PUBLICATIONS

O P E R AT I O N S A N D D E C I S I O N TECHNOLOGIES

O R G A N I Z AT I O N A N D M A NAG E M E N T PROFESSOR LUYI GUI

Title: “Efficient Implementation of Collective Extended Producer Responsibility Legislation” Co-authors: Atalay Atasu, Ozlem Ergun and Beril Toktay Accepted at: Management Science Extended Producer Responsibility (EPR) is a policy tool WKDW KROGV SURGXFHUV ÀQDQFLDOO\ UHVSRQVLEOH IRU WKH SRVW XVH collection, recycling and disposal of their products. Many EPR LPSOHPHQWDWLRQV DUH FROOHFWLYH ² D ODUJH FROOHFWLRQ DQG UHF\FOLQJ QHWZRUN &51 KDQGOHV PXOWLSOH SURGXFHUV· SURGXFWV LQ RUGHU WR EHQHÀW IURP VFDOH DQG VFRSH HFRQRPLHV 7KH WRWDO FRVW LV WKHQ allocated to producers based on metrics such as their return shares by weight. Such weight-based proportional allocation mechanisms are criticized in practice for not taking into account WKH KHWHURJHQHLW\ LQ WKH FRVWV LPSRVHG E\ GLIIHUHQW SURGXFHUV· products. The consequence is cost allocations that impose higher costs on certain producer groups than they can achieve independently, which may lead some producers to break away from collective systems, resulting in fragmented systems with KLJKHU WRWDO FRVW <HW FRVW HIÀFLHQF\ LV D NH\ OHJLVODWLYH DQG producer concern.

P R O F E S S O R C H R I S T O P H E R W. B A U M A N

Title: “Diverse According to Whom? Racial Group Membership and Concerns About Discrimination Spare Diversity Judgments” Co-authors: Sophie Trawalter and Miguel M. Unzueta Accepted at: Personality and Social Psychology Bulletin People often treat diversity as an objective feature of situations that everyone perceives similarly. Current research shows, however, that disagreement often exists over whether a group is diverse. These researchers argue that diversity

RESEARCH IN ACTION | 21


judgments diverge because they are social perceptions that UHÁHFW LQ SDUW LQGLYLGXDOV· PRWLYDWLRQV DQG H[SHULHQFHV including concerns about how a group would treat them. Therefore, whether a group includes in-group members should affect how diverse a group appears because the inclusion or apparent exclusion of in-group members signals whether perceivers can expect to be accepted and treated fairly. Supporting their claims, three experiments demonstrate that racial minority group members perceive more diversity when groups included racial in-group members rather than members of other racial minority groups. Moreover, important differences exist between Asian Americans and African Americans, which underscore the need for more research to explore uniqueness rather than commonalities across racial minority groups.

P R O F E S S O R C H R I S T O P H E R W. B A U M A N

Title: “Revisiting External Validity: Concerns about Trolley Problems and Other Sacrificial Dilemmas in Moral Psychology” Co-authors: A. Peter McGraw, Daniel M. Bartels and Caleb Warren Accepted at: Social and Personality Psychology Compass 6DFULÀFLDO GLOHPPDV HVSHFLDOO\ WUROOH\ SUREOHPV KDYH UDSLGO\ EHFRPH WKH PRVW UHFRJQL]DEOH VFLHQWLÀF H[HPSODUV RI moral situations; they are now a familiar part of the behavioral VFLHQWLÀF OLWHUDWXUH DQG DUH IHDWXUHG SURPLQHQWO\ LQ WH[WERRNV and the popular press. These researchers were concerned that VWXGLHV RI VDFULÀFLDO GLOHPPDV PD\ ODFN H[SHULPHQWDO PXQGDQH and psychological realism and therefore suffer from low external validity. Their apprehensions stemmed from three observations DERXW WUROOH\ SUREOHPV DQG RWKHU VLPLODU VDFULÀFLDO GLOHPPDV L they are amusing rather than sobering, (ii) they are unrealistic and unrepresentative of the moral situations people encounter in the real world, and (iii) they do not elicit the same psychological processes as other moral situations. The researchers believed it would be prudent to use more externally valid stimuli when testing descriptive theories that aim to provide comprehensive accounts of moral judgment and behavior.

22 | THE PAUL MERAGE SCHOOL OF BUSINESS

PROFESSOR JONE PEARCE

Title: “Cronyism and Nepotism Are Bad for Everyone: The Research Evidence” Accepted at: Industrial and Organizational Psychology A review of systematic and rigorous research provides strong evidence to support the experience-based perceptions of practitioners that nepotism and cronyism damage employees, their supervisors and produce poorer organizational performance. This is because nepotism places loyalty and REOLJDWLRQV WR RQH·V IDPLO\ RYHU REOLJDWLRQV WR RQH·V HPSOR\HU It is not reasonable to expect people to abandon the love and support of their families, the primary sources of our identities, HPRWLRQDO VRFLDO DQG ÀQDQFLDO VXSSRUW IRU D SDUWLFXODU MRE )XWXUH UHVHDUFK PLJKW IRFXV RQ IDYRULWLVP VLJQLÀFDQWO\ PRUH complicated than nepotism and entwined with meritocracy in ways not yet fully understood.


PUBLICATIONS

PROFESSOR JONE PEARCE

Title: “Managing the Unknowable: The Effectiveness of Early-Stage Investor Gut Feel in Entrepreneurial Investment Decisions” Co-authors: Laura Huang (PhD Alumna) Accepted at: Administrative Science Quarterly %DVHG RQ DQ LQGXFWLYH WKHRU\ GHYHORSPHQW VWXG\ D ÀHOG H[SHULPHQW DQG D ORQJLWXGLQDO ÀHOG WHVW UHVHDUFKHUV GHYHORSHG DQG WHVWHG WKH HIIHFWLYHQHVV RI DQJHO LQYHVWRUV· DFFRXQWV RI WKHLU criteria for investment decisions. Building on existing decision making, entrepreneurial and organizational theory to propose theoretical contributions to early-stage investment decisions when risks are unknowable, how angels use both intuition and formal analysis to achieve their objective of few extraordinarily SURÀWDEOH LQYHVWPHQWV UDWKHU WKDQ PD[LPL]LQJ RQ HDFK GHFLVLRQ 7KH UHVHDUFKHUV GLVFRYHUHG WKDW DQJHO LQYHVWRUV· GHFLVLRQV have several characteristics that have not been adequately captured in existing work: angel investors have clear objectives H[WUDRUGLQDULO\ SURÀWDEOH LQYHVWPHQWV RU ´KRPH UXQVµ 5DWKHU than seeking to maximize return on each investment, they rely on a combination of expertise-based intuition and formal analysis in which the formal analysis does not undermine intuition, and their reported criteria accurately predict H[WUDRUGLQDULO\ SURÀWDEOH YHQWXUH VXFFHVV IRXU \HDUV ODWHU 7KH researchers developed this theory by examining situations in ZKLFK XQFHUWDLQW\ LV VR H[WUHPH WKDW LW TXDOLÀHV DV XQNQRZDEOH but in this case investors actively seek out such investments because they believe this is where the extraordinary returns can be found. Researchers propose using the term of “gut feel,” to GHVFULEH LQYHVWRUV· G\QDPLF HPRWLRQ FRJQLWLRQV EDVHG RQ WKH interplay of intuition and analysis that is dominated by intuition, DQG HIIHFWLYHO\ SUHGLFW H[WUDRUGLQDULO\ SURÀWDEOH LQYHVWPHQWV when risks are unknowable.

P R O F E S S O R S H U YA Y I N

Title: “Joint Selling of Complementary Components Under Brand and Retail Competition” Co-authors: Yuhong He (PhD Alumna) Accepted at: Manufacturing and Service Operations Management Suppliers of complementary goods often package their items together when selling to downstream retailers. One motivation behind this behavior is to reduce double marginalization through FRRUGLQDWHG SULFLQJ VR WKDW V\VWHP HIÀFLHQF\ LV LPSURYHG DQG LQGLYLGXDO PHPEHUV FDQ DOVR EHQHÀW 7KH REMHFWLYH RI WKLV SDSHU is to understand how competition in supply chains would impact such joint selling partnerships among complementary suppliers. 5HVHDUFKHUV ÀUVW PRGHOHG FRPSHWLWLRQ DW WKH VXSSO\ OHYHO ZKLFK is generated from the existence of multiple partially substitutable brands (or suppliers) for a particular component. They then extended the analysis to a model which also involves retail competition that is caused by decentralization among retailers ZKR DVVHPEOH VXSSOLHUV· FRPSRQHQWV LQWR ÀQDO SURGXFWV DQG VHOO to customers. The analysis of a model with two complementary components, one of which has multiple brands, indicates that the supply level competition discourages joint selling of complementary goods. That is, when competing brands become more alike (or substitutable), complementary suppliers act more independently in pricing and selling their items. However, retail competition leads to an opposite effect: Competition among retailers would actually encourage complementary suppliers to package their goods together and act jointly.

RESEARCH IN ACTION | 23


FA C U LT Y I N THE NEWS T H E S E N E W FA C U LT Y M E M B E R S R E C E N T LY H AV E B E E N M E N T I O N E D I N T H E N E W S

24 | THE PAUL MERAGE SCHOOL OF BUSINESS


.H\QRWH 6SHDNHU 5HVHDUFK LQ %HKDYLRXUDO )LQDQFH &RQIHUHQFH (UDVPXV 8QLYHUVLW\ 5RWWHUGDP “Moral Attitudes and Financial Decision-Making.”

JOHN TURNER, A S S I S TA N T P R O F E S S O R , OPS. & DECISION TECH.

L. ROBIN KELLER, PROFESSOR, OPS. & DECISION TECH.

3UHVLGHQW RI ,1)2506 7KH ,QVWLWXWH IRU Operations Research and the Management Sciences). )UDQN 3 5DPVH\ 0HGDO ZLQQHU IRU OLIHWLPH FRQWULEXWLRQV WR WKH ÀHOG RI GHFLVLRQ DQDO\VLV 7KH Frank P. Ramsey Medal is the highest award of the Decision Analysis Society of INFORMS. Named in honor of Frank Plumpton Ramsey, a Cambridge University mathematician who was one of the pioneers RI GHFLVLRQ WKHRU\ LQ WKH WK FHQWXU\ WKH PHGDO LV DFFRPSDQLHG E\ D KRQRUDULXP

LIBBY WEBER, A S S I S TA N T P R O F E S S O R , S T R AT E G Y

JUDY ROSENER, P R O F E S S O R E M E R I TA

5HFHLYHG WKH ² 8& ,UYLQH $FDGHPLF 6HQDWH Distinguished Faculty Award for Mentorship. Only a few of these awards are given out each year, and this LV WKH ÀUVW WLPH RQH KDV EHHQ JLYHQ IRU 0HQWRUVKLS

,1)2506 :LOOLDP 3LHUVNDOOD %HVW 3DSHU Award in Health Care Management Science for “Simultaneous Location of Trauma Centers and Helicopters for Emergency Medical Service Planning,” now published in Operations Research with coauthors Soo-Haeng Cho (Carnegie Mellon), Hoon Jang .$,67 DQG 7DHVLN /HH .$,67

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D AV I D H I R S H L E I F E R , P R O F E S S O R, F I NA N C E

5HFHLYHG WKH %XVLQHVV 3ROLF\ 6WUDWHJ\ Distinguished Paper Award at the Academy of Management for her solo-authored paper titled “Jekyll & Hyde Effect of Learning to Contract: Impact of Frames & Attribution on Future Transactions.” (OHFWHG WR WKH %XVLQHVV 3ROLF\ 6WUDWHJ\ ([HFXWLYH Committee in the Academy of Management by the BPS membership.

MARGARETHE WIERSEMA, DEAN’S P R O F E S S O R , S T R AT E G I C M A NAG M E N T

$SSRLQWHG DV 6HQLRU (GLWRU *OREDO 6WUDWHJ\ -RXUQDO ,QYLWHG 3OHQDU\ 6SHDNHU ´&RPSHWLQJ LQ *OREDO Markets: The Impact of Corporate Governance” Strategic Management Society Conference, Santiago, &KLOH 0DUFK

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WELCOME N E W FA C U LT LT Y MEMBERS T H E S E N E W FA C U LLT Y M E M B E R S R E C E N T LY J O I N E D T H E PA U L M E R A G E S C H O O L O F BUSINESS.

26 | THE PAUL MERAGE SCHOOL OF BUSINESS


Professor Joseph received his BA from Muhlenberg College, his MBA from The Wharton School at University of Pennsylvania and his PhD in management and organizations from Northwestern University. An assistant professor at the Fuqua School at Duke University, his research focuses on how organizational structures shape managerial decision- making.

S H A R O N K O P P M A N, A S S I S TA N T P R O F E S S O R , O P E R AT I O N S M G M T. Professor Koppman received her BA from UC Santa Barbara and MA and PhD in sociology from University of Arizona. Her research incorporates organization theory and cultural sociology to examine career processes in cultural and creative industries, and use of culture as a resource in intergroup processes.

BEN LOURIE, A S S I S TA N T P R O F E S S O R , ACCOUNTING

T I N G T I N G N I A N, A S S I S TA N T P R O F E S S O R , I N F O R M AT I O N S Y S T E M S Professor Nian received her BS from Tsinghua University in Beijing and her PhD in information systems from the Stern 6FKRRO DW 1HZ <RUN 8QLYHUVLW\ +HU UHVHDUFK OLHV DW WKH intersection of economics of digital technology, analytical modeling, econometrics and machine learning, with a focus on social media, digital advertising and online communities.

D AV I D YA N G , A S S I S TA N T P R O F E S S O R , F I NA N C E David Yang received an AB in applied mathematics from Harvard before pursuing his PhD in business economics, also DW +DUYDUG +LV UHVHDUFK IRFXVHV RQ ÀQDQFLDO HFRQRPLFV LQ SDUWLFXODU IULFWLRQDO ÀQDQFH DQG EHKDYLRUDO ÀQDQFH

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JOHN JOSEPH, A S S I S TA N T P R O F E S S O R , S T R AT E G Y

Professor Lourie received his BA in economics from Tel Aviv University and his PhD in accounting from The Anderson School of Management at UCLA. His research focuses on ÀQDQFLDO DQDO\VLV HDUQLQJ TXDOLW\ FRUSRUDWH JRYHUQDQFH HTXLW\ valuations and managerial accounting.

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3HUHLUD 'ULYH ,UYLQH &$

RESEARCH IN ACTION