Research in Action 2017

Page 1

Research in Action Fourth Edition Fall 2017

3 A Note from the Dean 4 Inspired Leadership, Digitally Driven 6 IT Outsourcing 10 Competition and Value in the Digital Age 14 What’s in Your Browser? 18 Protecting Your Digital Avatar 20 Latest Publications 45 New Faculty


A Note from the Dean Welcome to the fourth edition of Research In Action, a Paul Merage School of Business at the University of California, Irvine publication. Inside you will find recent studies published by our world-renowned faculty, as well as feature articles exploring topics from outsourcing information technologies to social avatars. Our business environment is evolving rapidly and so too is the Merage School. As our focus on the realities of digital transformation intensifies, research remains 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 digitally-driven global business environment. I invite you to visit our website to view all of our faculty research and learn more about future research collaboration opportunities. Enjoy,

Eric R. Spangenberg Dean and Professor of Marketing


Redefining Our Future


Inspired Leadership, Digitally Driven: The Merage School is ushering in a new age in MBA programs


s our lives become more digitally mediated, we must adapt ourselves and the businesses we create to keep pace. It is with this vision in mind that The Paul Merage School of Business has completely reframed its MBA curriculum to give students the high-caliber, holistic preparation they need to become effective leaders in a digitally driven world. Located in the heart of Orange &RXQW\·V ´7HFK &RDVW µ WKH 0HUDJH School is surrounded by a network of innovative businesses which include an HPHUJLQJ HFRV\VWHP RI WHFK ÀUPV VXFK as Blizzard Entertainment, Broadcom and Western Digital, and digitally-savvy ÀUPV LQFOXGLQJ &DSLWDO *URXS 'LVQH\ ([SHULDQ +\XQGDL 3DFLÀF /LIH DQG 7DFR Bell. It is in this environment that the Merage School prepares students for the new opportunities and challenges being unveiled by disruptive technologies. 9LMD\ *XUED[DQL 7DFR %HOO &KDLU DQG 'HDQ·V 3URIHVVRU LQ ,QIRUPDWLRQ 6\VWHPV and his colleague Margarethe Wiersema, ZKR KROGV WKH 'HDQ·V 3URIHVVRUVKLS LQ Strategic Management, have worked closely with the Merage School faculty to redesign the MBA curriculum through the lens of emerging digital technologies, taking into consideration their impact on industry and how companies compete. The goal of the new curriculum, launched

in Fall 2017, is not only to teach students the scope of these technologies, but also the potential opportunity to create value in the marketplace through digital innovation. Core courses in the Merage School MBA programs now examine how technology is disrupting all aspects of business across a diverse range of LQGXVWULHV IURP PDQXIDFWXULQJ WR ÀQDQFH WR healthcare and retail. ´7KURXJK WKHVH FRXUVHV ZH DUH SUHSDULQJ our students to answer new questions about how to adapt as business leaders, how to invest in emerging technologies and how to manage the transformation of a company from an old way of doing business to a new one. We are preparing them to navigate the cultural shift WKDW JRHV DORQJ ZLWK WKLV WUDQVIRUPDWLRQ µ VDLG *XUED[DQL As part of the curricular initiative, Merage School faculty met with leading industry executives to determine the competencies they look for in new MBA hires and how they see their respective industries changing with WHFKQRORJ\ &XUULFXODU FKDQJHV UHÁHFW QHZ business needs in the contemporary world, focusing on actionable ideas and building a new set of competencies suited to the digital age. Experience-based decision-making skills are integrated into the curriculum with data-driven decision-making at the forefront. Experiential learning components continue to provide real world education, allowing teams of students to immerse themselves in valuable projects with real organizations.

´7KH PDQWOH RI SUHSDULQJ EXVLQHVV VWXGHQWV to deal with the digitally driven world has not been taken up at large in the business VFKRRO FRPPXQLW\ µ VDLG :LHUVHPD ´*UDGXDWH management programs are stocked with techsavvy, plugged-in people. However, to date, no school offers an MBA focused on competing in a digitally driven world that provides students with the knowledge and strategic thinking skills to address the dynamic and disruptive changes IDFLQJ EXVLQHVVHV DQG PDQDJHPHQW µ A highly impactful resource available at the Merage School is the Center for Digital Transformation (CDT). Established in 2012, the &'7 KDV EHFRPH D YLWDO FHQWHU RI LQÁXHQFH advancing the competitiveness and productivity of business in the digital economy. Each year, the CDT hosts a landmark annual conference, ´5RDG WR 5HLQYHQWLRQ µ ZKLFK EULQJV WRJHWKHU CEOs and thought leaders to discuss critical issues senior executives must consider as they guide their companies in the age of emerging technology. At the 2017 conference, CXOs of innovative businesses like Target, Lyft, Ticketmaster, Edmunds, and Warner Bros. spoke on themes of leadership, transformative technology, and reinventing business models. With a compelling new curriculum and Center for Digital Transformation, the UCI Paul Merage School of Business is poised to enter a unique leadership role in educating generations of competent, digitally-aware leaders in our age of disruptive technology.


Research Highlights

IT Outsourcing: The growth opportunity. The business risk. And the contract that best regulates it all.

by Aurora Abt

Sometimes it is best to leave technical matters to an expert. Such is the logic behind information technology outsourcing. ITO (as it is called) is the act of farming out information systems services to H[WHUQDO VHUYLFH SURYLGHUV ,W HIIHFWLYHO\ UHGXFHV D ÀUP·V RYHUKHDG DQG VWUHQJWKHQV LWV WHFKQRORJLFDO capabilities. Moreover, ITO frees management to focus more attention on marketing, sales strategies, DQG QHZ SURGXFW GHYHORSPHQW ² DUHDV WKDW EHQHÀW IURP HQKDQFHG GLJLWDO FDSDELOLWLHV DQG IHHG FRUSRUDWH UHYHQXH 7KH DUUDQJHPHQW DSSHDUV HQWLFLQJ 0DQ\ ÀUPV DUH ELWLQJ DV ,72 UHYHQXH UHDFKHG DQ HVWLPDWHG ELOOLRQ ZLWK D SHUFHQW DQQXDO JURZWK <HW ,72 LV QRW DV VLPSOH DV ÁLSSLQJ D VZLWFK ,W LV DQ XQGHUWDNLQJ WKDW UHTXLUHV SUHFLVH SODQQLQJ DQG FRPHV ZLWK VLJQLÀFDQW ULVNV The pairing of a company with a vendor LV PXFK OLNH D PDUULDJH 7KH EHQHÀWV RI WKH SDUWQHUVKLS PD\ EH REYLRXV DW ÀUVW ZLWK HDFK eager to proceed forward. However, without guidelines stated, understood, and agreed upon at the outset, discord is likely just a matter a WLPH 7KLV LV IXUWKHU FRPSOLFDWHG ZKHQ WKH ÀUP·V technology assets are transferred to the vendor. ITO is a risky business, indeed – for all involved. 6R KRZ FDQ ÀUPV DQG VHUYLFH SURYLGHUV PDQDJH ULVN DQG EHQHÀW PXWXDOO\"


Fail to plan, plan to fail A new study in MIS Quarterly examined the role of contracts in reducing the most common business risks associated with ITO deals: missed performance targets and constraints on the ability of the business to innovate. In many ITO arrangements, corporate technology assets previously used by in-house technology groups are sold to the vendor. In the study, titled, Information Technology Outsourcing: Asset 7UDQVIHU DQG WKH 5ROH RI &RQWUDFW 3URIHVVRU 9LMD\

*XUED[DQL 8&, 0HUDJH 6FKRRO DQG FR DXWKRUV Professor Young Bong Chang (Sungkyunkwan 8QLYHUVLW\ DQG 3URIHVVRU .LURQ 5DYLQGUDQ ,( Business School), link the transfer of these assets ZLWK ´RSSRUWXQLVP µ 2QFH D EXVLQHVV HQWHUV into an ITO arrangement with a vendor, even though it was selected after a rigorous bidding process, both sides become captive to the other. Perhaps the vendor overcharges for new work WKDW ZDVQ·W LQ WKH RULJLQDO FRQWUDFW RU LW GRHV QRW make the best use of assets on behalf of the client. Alternatively, the client may choose to renege on the arrangement leaving the vendor with a large investment in unneeded assets. Either way these are weighty concerns for managers tasked with spearheading and approving ITO contracts. To understand ways to reduce the risk of opportunistic behavior and increase the likelihood RI D ÀUP UHDFKLQJ LWV JRDOV *XUED[DQL DQG KLV team surveyed large-company executives who had hired a vendor to operate formerly in-house IT functions. This group represented a valuable knowledge base of executed ITO contracts. From there the survey data was separated into two groups for comparison: companies that had transferred assets to an IT vendor and those that had not. The study highlighted two consistent themes: concern for opportunistic behavior and contracts containing explicit clauses to limit risk. .H\ WR GHFLSKHULQJ WKH ÀUP YHQGRU G\QDPLF ZDV ÀUVW WR XQGHUVWDQG ZK\ WKH LVVXH RI DVVHW WUDQVIHU elicited strong reactions from both parties.

Asset Transfer: A Litmus Test for ClientVendor Relationships One reason for IT outsourcing is the cost savings it provides the client. However, certain costs – for systems maintenance and upgrades ² EHFRPH WKH YHQGRU·V UHVSRQVLELOLW\ (YHQ ZLWK DVVHW WUDQVIHU LW·V D JLYHQ WKDW DW VRPH SRLQW ÀQDQFLDO LQYHVWPHQW ZLOO EH UHTXLUHG E\ WKH external service provider. On the other hand, when assets are not transferred, the vendor GRHVQ·W KDYH WKH LQFHQWLYH WR PDNH LQYHVWPHQWV LQ DVVHWV LW GRHVQ·W RZQ 7KLQN RI LW WKLV ZD\ ZRXOG you pay to have a rental car serviced (or even ZDVKHG " 7KH UHVHDUFKHUV EHOLHYH WKH WUDQVIHU RI in-house assets goes a long way in moderating WKH YHQGRU·V H[SHQVHV DQG FDQ DFWXDOO\ PRWLYDWH better performance.

Spurring the Horse: Asset Ownership as Performance Incentive 7ZR HFRQRPLF WKHRULHV LQÁXHQFHG *XUED[DQL·V team in this study. Property rights theory suggests that vendors can be incentivized if, when transferring assets, any residual rights (including the right to ownership) are also transferred. In contrast, transaction cost economics points to the risk of transferring rights to ownership, as it may embolden the vendor to exploit the client since the client no longer has a way to quickly source services if it chooses to cancel the contract. *XUED[DQL EHOLHYHV WKHUH LV D KDSS\ PHGLXP In addition to asset ownership, he suggests


motivating vendors through a compensation scale with rewards or penalties, should they exceed or miss established performance targets. A comprehensive incentive program can also reward vendors for ongoing investment to maintain and upgrade assets. As the study team DVVHUWV ´,Q FDVHV RI DVVHW WUDQVIHU WKH FKRLFH RI ongoing investment decisions made by the vendor can result in improved performance. A client should incentivize these investments by rewarding decisions to invest in a manner consistent with its goals and by allowing the vendor to capture a VKDUH RI WKH KLJKHU QHW YDOXH µ

In cases of asset transfer, the choice of ongoing investment decisions made by the vendor can result in improved performance. A client should incentivize these investments by rewarding decisions to invest in a manner consistent with its goals and by allowing the vendor to capture a share of the higher net value.


Contracts: The “Clause” of it All An insight revealed by the survey data was WKH XQLYHUVDO XVH RI VSHFLÀF ODQJXDJH RU FODXVHV in the ITO contract. Each clause was designed to PLWLJDWH D VSHFLÀF ULVN DQG VHFXUH EHWWHU EXVLQHVV outcomes. This begs the question, which issues GR ÀUPV PRVW RIWHQ DGGUHVV LQ ,72 FRQWUDFWV" Previous research has found that contracts ² SDUWLFXODUO\ ´EHWWHU VSHFLÀHG FRQWUDFWVµ UHGXFH the likelihood of opportunistic behavior on the part RI WKH YHQGRU *XUED[DQL DQG KLV WHDP SURSRVH WKH VSHFLÀFDWLRQ RI SHUIRUPDQFH EDVHG LQFHQWLYH payments will promote cooperative behavior. More importantly, the use of direct language in a contract to address concerns of all parties has shown to lead to the success of IT outsourcing. In all, the study recorded 18 clauses, 11 of ZKLFK DUH FRQVLGHUHG ´EDVHOLQH FODXVHVµ DQG

detail the degree of management control. Seven additional clauses are designed to eliminate opportunism by the client and vendor. As the study WHDP H[SODLQV ´7KH FOLHQW UHFRJQL]LQJ XQFHUWDLQW\ in future technology costs, will want assurance of the best price via a most favored customer provision. The vendor may require a preferred supplier clause, which requires the client to negotiate exclusively with the vendor in good faith for any new business, which further incentivizes additional investments and avoids opportunistic EHKDYLRU µ $GGLWLRQDOO\ GHSHQGLQJ RQ WKH VWUDWHJLF QDWXUH RI WKH VHUYLFHV FRQWUDFWHG IRU ´WKH FOLHQW ÀUP PD\ DOVR UHVWULFW LWV YHQGRU·V UHODWLRQVKLSV with its competitors using an exclusivity clause µ The team found that contracts that did not involve asset transfer were larger in total contract value, annualized value, and the number of clauses. However, contracts with transferred DVVHWV FRYHUHG DQ DYHUDJH RI ÀYH VHUYLFHV YHUVXV WKUHH IRU FRQWUDFWV ZLWK QR DVVHW WUDQVIHU :KDW·V more, contracts with transferred assets averaged 15.7 risk-averting clauses versus 11 for its non-

asset counterpart, contract duration of 8.3 years versus 5.3 years, and 3.2 objectives versus 2.7. From this, it may be inferred that a client willing to transfer its assets to a vendor has higher expectations of meeting the contract objectives and is willing to commit for a longer period. ITO has become a standard business practice. However, risk is apparent as indicated by contract disputes and early cancellations. Such occurrences are not uncommon.* Still, the study UHVXOWV FRXOG SURYH XVHIXO WR ÀUPV E\ VKRUWHQLQJ the learning curve in how to use clauses to protect ÀUP DVVHWV DQG SURPRWH D XQLÀHG SDUWQHUVKLS ,Q turn, the study provides IT vendors with insight into potential client concerns and ways to limit their own business risk. This awareness can shorten the contract negotiation process, and perhaps reduce the amount of client-vendor FRQÁLFW DV ZHOO &KDQJ < % *XUED[DQL 9 DQG 5DYLQGUDQ . ´,QIRUPDWLRQ 7HFKQRORJ\ 2XWVRXUFLQJ $VVHW 7UDQVIHU DQG WKH 5ROH RI &RQWUDFW µ 0,6 4XDUWHUO\ 9RO 1R 6HSWHPEHU pp.960

Vijay Gurbaxani is Director of the Center for Digital Transformation and Taco Bell Endowed Professor of Information Technology and Computer Science at the UCI Paul Merage School of Business. His research interests are in the economics of digital technologies. He has authored the book Managing Information Systems Costs and published numerous articles in premier academic journals including MIS Quarterly, Information Systems Research, and Management Science.



Competition and Value in the Digital Age: Why veering off-center can land some firms in a performance sweet spot by Aurora Abt

A recent study in Information Systems 5HVHDUFK asserts that a non-conformist approach in IT strategy gives family-owned companies a competitive edge in building value. The study UHYHDOV WKH SRWHQWLDO IRU VLJQLÀFDQW JURZWK LQ VWRFN valuation for risk takers who dare to outspend competitors, as well as those who underplay digital investments. 5HVLVWLQJ WKH XUJH WR EX\ WKH ODWHVW WHFKQRORJ\ can be challenging. For consumers, purchases simply are either technology we need or UHJUHWWDEOH LPSXOVH EX\V +RZHYHU IRU ÀUPV a misstep in purchasing strategy can result in considerable consequences. While smart ,7 LQYHVWPHQWV DUH VXUH WR EXLOG D FRPSDQ\·V competitive position, can these same choices EXLOG YDOXH DV ZHOO"

“Concentrated ownership, such as founding-family ownership, is an effective ownership structure that leads firm deviation in IT investment toward increasing firm value.” – Professor Joanna L. Ho

The Red Queen Strategy: How Companies Play to Win ,Q ´6HHNLQJ 9DOXH WKURXJK 'HYLDWLRQ" (FRQRPLF ,PSDFWV of IT Overinvestment and 8QGHULQYHVWPHQW µ -RDQQD Ho, professor of accounting, examined IT investment strategies and the resulting performance of WZR FDWHJRULHV RI 6 3 ÀUPV WKRVH KDYLQJ FRQFHQWUDWHG RZQHUVKLS RU ´IDPLO\ ÀUPVµ DQG WKRVH ZLWK ODUJH PDQDJHPHQW RU ´QRQIDPLO\ ÀUPV µ +R and her co-authors Feng Tian (PhD Alum), Anne :X 1DWLRQDO &KHQJFKL 8QLYHUVLW\ 7DLSHL DQG ;LQ Sean Xu (PhD Alum), explain that before investing in new technology, typically companies consult purchasing trends in their industry to determine how much to spend and in which areas. The study WHDP UHIHUV WR WKLV SUDFWLFH DV 5HG 4XHHQ ORJLF RU WKH LQVWLWXWLRQDO YHUVLRQ RI ´NHHSLQJ XS ZLWK WKH -RQHVHV µ 5HG 4XHHQ ORJLF LV HYLGHQW DV FRPSDQLHV – eager to appear competitive – purchase IT at levels similar to the technological capabilities of its competitors. For example, a photo-sharing website offers Cloud storage to free up space on computer hard drives while keeping photos secure and organized in one location. Almost as quickly DV ´&ORXGµ FDQ EHFRPH SDUW RI RXU YHUQDFXODU Cloud services among photo-sharing websites are

then widely available. However, the researchers note that some companies venture beyond the industry IT norm – whether by overinvesting or underinvesting – and the study researchers ZRQGHUHG ´:DV WKHUH D SD\RII LQ WKH IRUP RI LQFUHDVHG YDOXH"µ

Independent Thinking Builds Value The researchers found that, in fact, making IT investment decisions in line with industry norms is not likely to improve performance. 5DWKHU WKH JUHDWHVW JDLQV in stock valuation resulted from the strategy of overinvestment, or spending more than the industry average. Surprisingly, even underinvestment yielded greater gain in company value than following the industry norm. Further, the UHVHDUFK LQGLFDWHG WKDW IDPLO\ UXQ ÀUPV ZHUH PRUH likely to take greater risks to enhance performance than their competitors. ´:KLOH XQGHULQYHVWLQJ LQ ,7 VDYHV UHVRXUFHV whether those resources are then used to gain competitive advantage through some non-IT approach, like outsourcing or partnerships, would depend on the effectiveness of management FRQWURO V\VWHPV VXFK DV FRQFHQWUDWHG RZQHUVKLS µ said Ho.


Technology Recharges Company Value IT investment deviation: Family firms edge out nonfamily firms across all studied IT investment strategies, yet overinvestment yields the greatest gain in stock value for both groups. Nonfamily firm Family firm 0.50 0.45 0.40 0.35 0.30

Tobin’s q

0.25 0.20 0.15 0.10 0.05 0.00 Underinvestment = high

No deviation (i.e., IT capital = indusrty mean)

Overinvestment = high


´:KDW PDNHV D IDPLO\ RZQHG FRPSDQ\ XQLTXH DOVR PDNHV LW PRUH VXFFHVVIXO µ VDLG +R ´$ ÀUP with fewer owners has a management team that FDQ LPPHUVH LWVHOI LQ WKH FRPSDQ\·V SDUWLFXODU mechanisms. The result is a deeper understanding of its operations and staff – warts and all. Such NHHQ LQVLJKW UHJDUGLQJ D ÀUP·V VWUHQJWKV DQG weaknesses gives tight-knit management the upper hand in effective decision-making. ´,Q FRQWUDVW µ +R DGGHG ´QRQIDPLO\ ÀUPV are often led by a revolving door of multi-tiered PDQDJHPHQW µ Still, the researchers believe that both groups are motivated by the prospect of equity-based


LQFHQWLYHV ZKLFK PD\ LQFUHDVH PDQDJHPHQW·V interest in securing increased valuation. 3URIHVVRU +R SRLQWHG RXW ´&RQFHQWUDWHG ownership, such as founding-family ownership, is DQ HIIHFWLYH RZQHUVKLS VWUXFWXUH WKDW OHDGV ÀUP GHYLDWLRQ LQ ,7 LQYHVWPHQW WRZDUG LQFUHDVLQJ ÀUP YDOXH µ Evaluating corporate IT investment is increasingly important in light of the frequency of new product offerings and digital advances. In IDFW DW WKH -DQXDU\ &(6 JOREDO WHFKQRORJ\ convention (hosted by Consumer Technology Association), more than 3,800 companies debuted new and upcoming tech products and joint digital

The researchers believe that reckless overinvestment can damage the legitimacy of firm leadership and begin to erode hard-earned valuations. However, one successful trend in IT spending – and value building – is the revamp among educational institutions with the offering of online classes.


Digital Transformation in Education One successful trend in IT spending – and value building – is the revamp among educational institutions with the offering of online classes. Feeding the pipeline for online university enrollment is K-12 homeschoolers. These non-traditional learners access online schools, which make creative use of IT, and boast live interaction using webcams, microphones, and headsets. Via a computer, students can share

D ´EODFNERDUGµ ZLWK WKHLU WHDFKHU DQG GHYHORS D research project with classmates (in real time or through messaging) all over the world. Commuting and time zones are no longer issues. An internet connection brings digital learning to the masses.

The Transformative Ability of IT Investments As the researchers found, the perceived reasonableness of IT investments can LQÁXHQFH YDOXH ,Q OLJKW RI WKLV WKH\ HQFRXUDJH ÀUPV WR share the thought process behind IT purchases with shareholders in a bid to build support and increase understanding of risk and reward. For businesses, IT investments can lead to a cost-effective platform for sharing information with consumers and employees nationally or globally. The savings from reduced travel expenses alone may be enough to substantiate purchases and garner shareholder support.

Professor Joanna L. Ho is a professor of Accounting in the UCI Paul Merage School of Business. She holds both a BBA and MBA from the National Taiwan University, and a PhD from the University of Texas at Austin. Her current research interest is the interrelationship of compensation and performance incentive plans at companies operating in a variety of countries, including the United States, China, Japan, and Taiwan.


by Aurora Abt


“Overall, we show there is significant local bias in searches and that this local bias has a significant impact on the market response around earnings announcements.”

The internet has transformed how we work, learn, shop, and communicate. However, the one thing it cannot do is alter the hard wiring of the human brain. Our propensity to favor what is in our own backyard, or local bias, is apparent in our routine choices, such as where to shop for groceries or choosing a restaurant. Local bias even extends to investor behavior, a fact that intrigued the authors of a new study published in 7KH $FFRXQWLQJ 5HYLHZ. The study investigated the impact of local bias on the investment process. As well, the results paint a picture of how seamlessly digital resources have become part of consumer behavior. Twenty years ago, the internet was a new technology, not yet in use by most households. At that time, with less access to information, investors exercised local bias, by favoring FRPSDQLHV ZLWKLQ WKHLU JHRJUDSKLF DUHD ÀUPV ZLWK D GHJUHH RI IDPLOLDULW\ ,Q ´/RFDO %LDV LQ *RRJOH 6HDUFK DQG WKH 0DUNHW 5HVSRQVH $URXQG (DUQLQJV $QQRXQFHPHQWV µ 3URIHVVRU 'HYLQ Shanthikumar and co-author Professor Sabrina Chi (Texas Tech University) contend that – even ZLWK WRGD\·V HDV\ RQOLQH DFFHVV WR ÀQDQFLDO information – local bias continues to guide investor LQWHUHVW 7KH UHVHDUFKHUV ZRQGHUHG ´:KDW GULYHV this region-based loyalty and does local bias KDYH D SRVLWLYH RU QHJDWLYH DIIHFW RQ D FRPSDQ\·V VWRFN"µ The study builds on prior research that established the fact that geographic closeness


The Impact of Local Bias on Market Activity 7KH UHVHDUFKHUV IRXQG WKDW ´WKHUH LV VLJQLÀFDQW local bias in searches and that this local bias KDV D VLJQLÀFDQW LPSDFW RQ WKH PDUNHW UHVSRQVH DURXQG HDUQLQJV DQQRXQFHPHQWV µ 7KH VWXG\ suggests that local investor bias can build or temper stock prices. The researchers assert WKDW DV D UHVXOW FRPSDQLHV EHQHÀWWLQJ IURP ELDV H[SHULHQFH PDUNHW DQRPDOLHV ² VSHFLÀFDOO\ VLJQLÀFDQW SULFH DQG WUDGLQJ YROXPHV ² EHIRUH during, and after an earnings announcement. However, there are additional factors at work. The study presents evidence that around the time of earnings announcements, companies


favored by local investors experienced an unusually high price spread (bid-ask), lower trading volumes, and lower returns than normal. However, prior to earnings announcements, locally favored companies experienced higher bid-ask spreads, higher trading volumes and returns that were in line with the eventual earnings announcement, whether it turned out to be positive, neutral, or negative. The study team calls this factor the local information advantage in that local residents may have been privy to company performance ahead of the announcement, possibly through other residents or the local press, and purchased or sold stock DFFRUGLQJO\ 3RVW HDUQLQJV WKH ÀUPV ZLWK KLJKHU local investor interest experienced higher drift, or a consistent price movement – either up or down. The researchers believe this restrained market reaction is indicative of familiarity bias, as investors seek to own stocks with which they are familiar. This group does not typically trade based on information, such as earnings reports.

Cultivating Local Bias as a Corporate Strategy The researchers believe local bias and company visibility are strongly related. However, WKH VWXG\ WHDP QRWHV WKDW ÀUP YLVLELOLW\ LV RIWHQ achieved through community outreach. Community interaction and philanthropic efforts are typically D PHDQV WR GHPRQVWUDWH DQ LQVWLWXWLRQ·V YDOXHV and integrate into the community. In fact, the


VWXG\ IRXQG ´$ ÀUP WKDW LV PRUH LQYROYHG ZLWK WKH ORFDO FRPPXQLW\ RU D ÀUP WKDW LV KHDGTXDUWHUHG in a region with stronger social ties among local residents and, thus, more local information transfer, may have higher local bias in investor interest, despite being of similar size, analyst coverage, etc., DV DQRWKHU ÀUP µ How can an organization marry visibility HIIRUWV ZLWK LWV RSHUDWLRQV" 8&, LV DQ H[DPSOH RI KRZ WKH KRPH WHDP VWURQJ YDOXHV YLVLELOLW\ Academic excellence aside, UCI is also one of the largest employers in Orange County, California. Yet it has ties to the community beyond its many employees. From hosting free educational events for elementary and high school students, public access to UCI sports and theatre events, and various outreach programs, UCI has leveraged its resources to build a highly visible presence coupled with a community partnership. One Orange County-headquartered company recently recognized for its community efforts LV 5RWK 6WDIÀQJ &RPSDQLHV QXPEHU RQ FORTUNE PDJD]LQH·V ´7KH %HVW :RUNSODFHV IRU *LYLQJ %DFN µ 7KH UDQNLQJV ZHUH EDVHG RQ more than 350,000 employee surveys detailing why their company should make the list.* 5RWK RQH RI WKH ODUJHVW SULYDWHO\ KHOG VWDIÀQJ companies in the country, operates in 100 ORFDWLRQV DFURVV VWDWHV 5RWK HPSOR\HHV DUH encouraged to give back to the community and receive paid community service hours. Each of its branches receives yearly funds to donate to

“A firm that is more involved with the local community or a firm that is headquartered in a region with stronger social ties among local residents... may have higher local bias in investor interest, despite being of similar size, analyst coverage, etc., as another firm.”

D ORFDO FKDULW\ RI WKHLU FKRLFH +RZHYHU 5RWK employees go the extra mile by also teaming up with its clients to participate in what is approaching more than 50 American Heart Association Walk Events across America.** Achievements such as WKHVH DUH IHDWXUHG RQ 5RWK·V FRPSDQ\ ZHESDJH as well as in the national press.

The Internet: Key to Information Mining Having focused on a previously unchartered DUHD 3URIHVVRU 6KDQWKLNXPDU·V WHDP RIIHUV LQVLJKW LQWR KRZ ÀUPV FDQ HQKDQFH FRUSRUDWH YLVLELOLW\ The researchers believe that image purveyors – including those in management, public relations, and investor relations – tend to focus community efforts close to home. However, the importance

RI ÀUP YLVLELOLW\ DQG SRWHQWLDO IRU LQYHVWRU LQWHUHVW span well beyond their geographic area. For the researchers, browser history proved to be a treasure trove, providing insight into how investors gather information. For companies, it can serve as a resource as they manage their internet presence. Browser history is a tool the researchers believe management has underestimated, and suggest renewed information mining strategies to leverage the potential of this resource in tandem with other key metrics.


Professor Devin Shanthikumar is an assistant professor in the Accounting area. Prior to joining the UCI Paul Merage School of Business, Shanthikumar served on the faculty at the Harvard Business School and wrote cases, which are used in accounting courses across the country. Shanthikumar earned her PhD in Business Administration with a focus in Finance from Stanford’s Graduate School of Business, where she received the Jaedicke Merit Award for outstanding academic performance. She earned her BS in Electrical Engineering and Computer Science from University of California, Berkeley. Shanthikumar also completed a post-doctoral fellowship at Harvard Business School and is a graduate of one of Harvard’s teaching-focused short programs, the Colloquium on Participant Centered Learning. Her research interest is the investing decisions of less sophisticated investors and the impact that these investors have on the market, as well as on the role of financial intermediaries, such as analysts and the press.



e live in a high-tech world, one where computing technology has diffused into virtually every aspect of human life in a relatively short amount of time. Consider that in less than a decade, we have seen the rapid evolution of social media from a mere curiosity to an indispensable tool for private and public expression. We have seen it transform social interactions around the globe, disrupt business and create entirely new industries. It has sparked the development of a sharing society and a world where privacy seems to becoming a thing of the past. In an article written by Alladi Venkatesh, professor of Management and Informatics at the UCI Paul Merage School of Business, questions surrounding consumer privacy and security in the digital world are explored. Published by the Journal of the Association of Consumer Research, WKH DUWLFOH WLWOHG ´Social Media, Digital Self, and Privacy: A Socio-Analytical Perspective of the Consumer as the Digital Avatar µ H[DPLQHV WKH implications of the social media explosion for consumer privacy. &RQVXPHUV WRGD\ DUH SHUVRQLÀHG E\ GDWD 7KHLU ´GLJLWDO DYDWDU µ FRPSOHWH ZLWK GHWDLOV RI their private lives, photos, even their opinions, is published for all to see, share, even sell. Social media companies collect vast amounts of data


capturing everything from political views and social dispositions to intimate personal preferences and details of consumer digital avatars. Databases are available that store and share this information, for a price, with marketing organizations, retail establishments, even the government and law enforcement. As more companies begin to monetize their data operations, the economic value of this information only increases. But what is concerning is the fact that much of the collected data is shared without the knowledge or consent of the consumer. Consider these recent headlines: FTC Halts Operation that Unlawfully 6KDUHG DQG 6ROG &RQVXPHUV· 6HQVLWLYH 'DWD )HGHUDO 7UDGH &RPPLVVLRQ -XO\ Google now knows when its users go to the store and buy stuff (The Washington Post, May 23, 2017) ISPs can now collect and sell your data: :KDW WR NQRZ DERXW ,QWHUQHW SULYDF\ UXOHV, (USA Today, $SULO

7KHUH LV 1R 6XFK 7KLQJ DV 7UXH 3ULYDF\ LQ WKH 'LJLWDO $JH, (Government Technology, March 10, 2017)

So, is there no place for privacy in the contemporary world? It is doubtful the rate of digital transformation

Protecting Your Digital Avatar by Anne Warde

will slow anytime soon, so we must consider how to protect our civil rights real time. We must explore ways to align our sharing society with the privacy laws of the land. The Fourth Amendment of the US Constitution reads: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon SUREDEOH FDXVH VXSSRUWHG E\ 2DWK RU DIÀUPDWLRQ and particularly describing the place to be searched, and the persons or things to be seized.”

Have consumers given up these rights? Or, more importantly, is digital privacy even covered by the Fourth Amendment? If digital privacy is a civil right, should it be safeguarded by the public or private agencies that FROOHFW LQIRUPDWLRQ DERXW LQGLYLGXDOV" 2U GRHV the responsibility for safeguarding information lie ZLWK WKH FRQVXPHU" ,I WKH FRQVXPHU LV UHVSRQVLEOH for their own privacy, the onus is on them to be mindful about what information they share either privately or publicly. However, consumers may not understand the extent to which they are sharing information when they interact via social media. Some may not even care.

As digital technologies evolve, consumer researchers must continue to examine these issues with greater vigilance and due deference to legalities and preservation of community standards if we are to preserve our right to privacy. %XW XQWLO WKH\ GR LW·V EX\HU EHZDUH

Alladi Venkatesh is professor of Management and Informatics at the UCI Paul Merage School of Business and a research affiliate of the Center for Digital Transformation. He is also Honorary Professor at the Stockholm School of Economics. Professor Venkatesh’s research focuses on two areas: 1) The networked home and how consumers and households are adapting to new technologies of information and communication. 2) Markets and culture. The focus here is on how cultural issues shape markets and consumption behaviors and how value is created and nurtured via market dynamics and actions. He is known for his work on Ethnoconsumerism based on his field work on technology diffusion among Indian households.


Research Abstracts

Latest Published Work by Merage School Faculty Members

Accounting Professor Elizabeth Chuk Title: “What Have We Learned About Earnings Management? Integrating Discontinuity Evidence” Co-authors: Dave Burgstahler Accepted at: Contemporary Accounting Research The accounting literature includes numerous examples of discontinuities at prominent benchmarks that are widely interpreted as evidence that earnings are managed to meet those benchmarks. However, there are a few examples where discontinuities do not exist, which are sometimes interpreted as inconsistent with earnings management. Alternative explanations for discontinuities have also been suggested. This paper reviews, evaluates, and integrates the available evidence and concludes that the theory that earnings are managed to meet benchmarks provides the simplest and most complete explanation for the body of discontinuity-related evidence.


Professor Radhika Lunawat Title: “Reputation Effects of Information Sharing” Accepted at: Journal of Economic Behavior & Organization This paper analyzes a model of investment and return in an economy characterized by information asymmetry between an investor and a manager. The realized value of the uncertain state RI QDWXUH LV WKH PDQDJHU·V SULYDWH LQIRUPDWLRQ 7KH SDSHU ÀUVW FRQVLGHUV DQ HFRQRP\ ZKHUH WKH manager cannot share her private information with the investor. Therefore, dividend payment is the only reputation building tool available to the PDQDJHU ,I WKH LQYHVWRU·V SULRU EHOLHIV DERXW WKH PDQDJHU·V WUXVWZRUWKLQHVV DUH VXIÀFLHQWO\ KLJK then the manager will return a dividend consistent with the lower possible state of nature having occurred and the investor will revise such beliefs downwards. However, if the beliefs are not so high, then the equilibrium will be mixed strategies. The paper then compares such a dividendonly economy with one where information sharing is an additional tool available for building reputation. Information sharing disciplines the potential opportunism accruing to a manager out of her informational advantage. It provides ex SRVW YHULÀDELOLW\ RI WKH VWDWH RI QDWXUH DQG WKHUHE\ REYLDWHV GRZQZDUG UHYLVLRQ RI DQ LQYHVWRU·V SULRU EHOLHIV DERXW D PDQDJHU·V WUXVWZRUWKLQHVV 7KLV results in a greater region of pure strategy play in the dividend-and-information-sharing economy. Since such pure strategy play implies investment

with certainty, information sharing leads to higher investment. Further, pure strategy play implies returns consistent with the actual state of nature in the dividend-and-information-sharing economy while it implies dividend consistent with the lower state of nature in the dividend-only economy and these lead to higher return in information sharing.

Professor Mort Pincus Title: “The Risk Relevance of Taxable Income” Co-authors: D. Dhaliwal, H. S. Lee, and L. Steele Accepted at: Journal of American Taxation Association Dhaliwal, Lee, Pincus, and Steele study whether taxable income (TI) provides incremental information DERXW ÀUPV· RSHUDWLQJ ULVN EH\RQG WKH YDULDQFH RI %, DQG YDULDQFH RI RSHUDWLQJ FDVK ÁRZV :H GHYHORS TI-based variance and covariance measures that are useful in assessing risk in a simple earnings predictability model. In our empirical tests these TI-based measures incrementally explain crosssectional variation in the predictability and variability of future pre-tax BI, and are associated with predictable variation in market-based measures of ÀUP ULVN 2XU ÀQGLQJV VKHG OLJKW RQ KRZ DFFRXQWLQJ LQIRUPDWLRQ LPSDFWV LQYHVWRUV· DVVHVVPHQW RI ÀUP risk as well as improving our understanding of the extent and nature of information contained in TI. An implication of our results is that conforming book and tax reporting would eliminate the ability to compute WKH YDULDEOHV ZH GHPRQVWUDWH DUH UHOHYDQW WR ÀUPV· risk assessments.

Professor Mort Pincus Title: “Material Weaknesses in Tax-Related Internal Controls and Last Chance Earnings Management” Co-authors: C. Gleason and S. Rego Accepted at: Journal of American Taxation Association ,Q *OHDVRQ 3LQFXV DQG 5HJR ZH LQYHVWLJDWH consequences of income tax-related material ZHDNQHVVHV LQ ÀUPV· LQWHUQDO FRQWUROV RYHU ÀQDQFLDO UHSRUWLQJ WKDW WKHLU H[WHUQDO DXGLWRUV identify and disclose. We hypothesize that the presence of internal control material weaknesses (ICMWs) over the tax function makes earnings PDQDJHPHQW WR PHHW RU EHDW ÀQDQFLDO DQDO\VWV· earnings forecasts through the income tax accrual VR FDOOHG ´ODVW FKDQFHµ HDUQLQJV PDQDJHPHQW HDVLHU WR LPSOHPHQW UHODWLYH WR ÀUPV ZLWK QRQ tax-related ICMWs. We also predict that the remediation of tax-related ICMWs has the effect of constraining earnings management through the tax accrual. The results provide support IRU RXU SUHGLFWLRQV :H DOVR ÀQG WKDW HDUQLQJV management using the tax accrual is concentrated in the early years of our sample period, that is, in the initial Sarbanes-Oxley Act (SOX) implementation period. The results suggest that tax-related ICMWs were initially associated with greater tax-expense management and that SOX internal control assessments, at least regarding tax-related ICMWs, subsequently reduced taxaccrual earnings management.


Professors Mort Pincus and Patricia Wellmeyer Title: “Do Clients’ Enterprise Systems Affect Audit Quality and Efficiency?” Co-authors: Feng Tian and Sean Xin Xu (PhD Alumni) Accepted at: Contemporary Accounting Research Enterprise systems (ESs) are widely used to support business processes along the enterprise value chain. It has been shown that ESs, by integrating business functions and making information about day-to-day activities available, enhance operational transparency and improve the internal information environment. However, while ES-based business infrastructures FDQ RIIHU PDQ\ EHQHÀWV WKHLU SUHYDOHQFH DQG increased complexity have also brought new challenges to external auditors. Motivated by the prominence of this issue for auditors and regulators and by the scarcity of research MRLQWO\ H[DPLQLQJ (6V DQG DXGLWRUV· ZRUN ZH investigate whether the presence and extent of FOLHQW ÀUPV· (6 LPSOHPHQWDWLRQV DUH UHODWHG WR WKH TXDOLW\ DQG HIÀFLHQF\ RI DXGLWRUV· ZRUN 8VLQJ proprietary archival data on ES implementations DQG FRQWUROOLQJ IRU VHOI VHOHFWLRQ ZH ÀQG WKDW (6 LPSOHPHQWDWLRQ LPSURYHV WKH TXDOLW\ DQG HIÀFLHQF\ RI FXUUHQW DQG IXWXUH \HDUV· DXGLW ZRUN 6SHFLÀFDOO\ there are fewer restatements, a greater likelihood of auditors issuing going concern opinions to ÀUPV WKDW GR QRW VXUYLYH KLJKHU DFFUXDOV EDVHG auditing quality, a lower likelihood of Form 10-K ÀOLQJ GHOD\V DQG JHQHUDOO\ ORZHU DXGLW IHHV :H


IXUWKHU VKRZ WKDW WKH EHQHÀWV RI (6V JHQHUDOO\ increase with the scope of implementation and are generally greater when the ES includes DFFRXQWLQJ DQG ÀQDQFH V\VWHPV ,QFRQVLVWHQW ZLWK LPSURYHPHQW LQ WKH TXDOLW\ RI DXGLWRUV· ZRUN ZH ÀQG QR HYLGHQFH WKDW (6V KHOS DXGLWRUV LGHQWLI\ material weaknesses in advance of restatement DQQRXQFHPHQWV DQG ZH ÀQG WKDW HYHQ LQ WKH presence of ESs, auditors issue an excessive number of going concern opinions to clients that survive.

Professor Terry Shevlin Title: “An Examination of Firms’ Responses to Tax Forgiveness” Co-authors: Jacob Thornock and Braden Williams Accepted at: Review of Accounting Studies This study uses state tax amnesties to H[DPLQH KRZ ÀUPV UHVSRQG WR IRUJLYHQHVV³ SDUWLFXODUO\ UHSHDWHG IRUJLYHQHVV³E\ D WD[LQJ authority. We posit that tax forgiveness programs alter taxpayer perceptions of the probability of detection by enforcers or the probability of future forgiveness programs, either of which could DIIHFW IXWXUH WD[ DJJUHVVLYHQHVV :H ÀQG WKDW ÀUPV KHDGTXDUWHUHG LQ DQ DPQHVW\ JUDQWLQJ state increase state income tax aggressiveness IROORZLQJ WKH ÀUVW LQVWDQFH RI WD[ DPQHVW\ UHODWLYH WR FRQWURO ÀUPV LQ RWKHU VWDWHV 0RUHRYHU ZH ÀQG HYLGHQFH WKDW WD[ DJJUHVVLYHQHVV incrementally increases with each additional

UHSHWLWLRQ RI D WD[ DPQHVW\ )LQDOO\ ZH ÀQG WKDW the effect of amnesties on tax aggressiveness LV PRUH SURPLQHQW IRU VPDOO ÀUPV ZKLFK IDFH less tax authority scrutiny and for which the tax aggressiveness measures are less confounded. 2XU ÀQGLQJV VXJJHVW WKDW UHSHDWHG SURJUDPV of tax forgiveness have increasingly negative implications for corporate tax collections.

Professor Terry Shevlin Title: “Does U.S. Foreign Earnings Lockout Advantage Foreign Acquirers?” Co-authors: Andrew Bird and Alex Edwards Accepted at: Journal of Accounting and Economics :H K\SRWKHVL]H DQG ÀQG HYLGHQFH FRQVLVWHQW ZLWK IRUHLJQ ÀUPV EHLQJ WD[ IDYRUHG acquirers of U.S. targets with greater lockedout earnings because they can avoid the U.S. tax on repatriations. This effect is economically VLJQLÀFDQW D VWDQGDUG GHYLDWLRQ LQFUHDVH LQ lockout is associated with a 12% relative increase in the likelihood that an acquirer is foreign. We DOVR ÀQG HYLGHQFH WKDW IRUHLJQ DFTXLUHUV RI WKH WDUJHW ÀUPV DUH PRUH OLNHO\ WR EH UHVLGHQWV RI countries that use territorial tax systems, as the WD[ DGYDQWDJHV IRU D IRUHLJQ ÀUP DFTXLULQJ D 8 6 target with locked-out earnings are even greater for these acquirers.

Professor Terry Shevlin Title: “Book-tax Conformity and Capital Structure” Co-authors: Bradley Blaylock and Fabio Gaertner Accepted at: Review of Accounting Studies We examine the effect of increased booktax conformity on corporate capital structure. Prior studies document a decrease in the informativeness of accounting earnings for equity markets resulting from higher book-tax conformity. We argue that the decrease in earnings informativeness impacts equity holders more than debt holders because of the differences in payoff structures between debt and equity investments such that increases in book-tax conformity lead WR LQFUHDVHV LQ ÀUPV· UHOLDQFH RQ GHEW FDSLWDO :H H[SORLW D QDWXUDO H[SHULPHQW LQ WKH 8 6 DQG ÀQG WKDW ÀUPV IDFLQJ DQ LQFUHDVH LQ UHTXLUHG ERRN tax conformity increase leverage relative to other ÀUPV :H DOVR SURYLGH HYLGHQFH RI DQ LQFUHDVH LQ WKH FRVW RI HTXLW\ EXW QRW RI GHEW FDSLWDO IRU ÀUPV facing an increase in required book-tax conformity UHODWLYH WR FRQWURO ÀUPV DQG WKDW WKHVH LQFUHDVHV in cost of equity capital are positively associated ZLWK DQ LQFUHDVH LQ OHYHUDJH 2XU ÀQGLQJV DUH FRQVLVWHQW ZLWK ÀUPV VXEVWLWXWLQJ DZD\ IURP HTXLW\ and towards more debt in the presence of higher book-tax conformity.


Professor Terry Shevlin Title: “Analyst monitoring, information asymmetry, and tax planning activities: Evidence from a natural experiment” Co-authors: Novia Chen and Peng-Chia Chiu (PhD Alumni) Accepted at: Contemporary Accounting Research We exploit an exogenous shock to analyst coverage as a result of brokerage house mergers DQG FORVXUHV WR H[DPLQH ZKHWKHU ÀQDQFLDO DQDO\VWV LQÁXHQFH WKH WD[ SODQQLQJ DFWLYLWLHV RI WKH ÀUPV they cover. Using a difference-in-differences design, ZH ÀQG WKDW RQ DYHUDJH ÀUPV DIIHFWHG E\ EURNHU PHUJHUV DQG RU FORVXUHV H[SHULHQFH D UHGXFWLRQ LQ WKHLU *$$3 FDVK HIIHFWLYH WD[ UDWHV RI SHUFHQW SHUFHQW UHODWLYH WR FRQWURO ÀUPV WUDQVODWLQJ LQWR DYHUDJH WD[ H[SHQVH FDVK WD[ VDYLQJV RI million. The treatment effect is more pronounced DPRQJ ÀUPV ZLWK ORZHU SUH HYHQW DQDO\VW FRYHUDJH To explore how analysts affect tax planning, we further document that the treatment effect is greater DPRQJ ÀUPV WKDW ORVH DQ DQDO\VW ZKR SURYLGHG DQ LPSOLHG (75 IRUHFDVW LQ WKH SDVW VXJJHVWLQJ WKDW DQDO\VWV LQÁXHQFH WD[ SODQQLQJ YLD WKHLU WD[ VSHFLÀF UHVHDUFK HIIRUWV ,Q DGGLWLRQ ZH ÀQG WKDW DIWHU PHUJHU FORVXUH ZHDNO\ JRYHUQHG ÀUPV LQFUHDVH WKHLU XVH RI DJJUHVVLYH WD[ VWUDWHJLHV DQG ÀQDQFLDOO\ GLVWUHVVHG ÀUPV H[SHULHQFH D ODUJHU UHGXFWLRQ RI FDVK HIIHFWLYH WD[ UDWHV UHODWLYH WR FRQWURO ÀUPV Overall, we provide evidence that a shock to analyst FRYHUDJH VXIÀFLHQWO\ FKDQJHV WKH FRVW EHQHÀW tradeoff of tax planning.


Economics/Public Policy Professor Mireille Jacobson Title: “Evaluating The Role Of Payment Policy In Driving Vertical Integration In The Oncology Market” Co-authors: Abby Alpert and Helen Hsi Accepted at: Health Affairs The health care industry has experienced massive consolidation over the past decade. Much of the consolidation has been vertical (with hospitals acquiring physician practices) instead of horizontal (with physician practices or hospitals merging with similar entities). We documented the increase in vertical integration in the market IRU FDQFHU FDUH LQ WKH SHULRG ² ÀQGLQJ WKDW the rate of hospital or health system ownership of practices doubled from about 30 percent to about 60 percent. The two most commonly cited explanations for this consolidation are a 2005 Medicare Part B payment reform that dramatically reduced reimbursement for chemotherapy drugs, and the expansion of hospital eligibility for the % 'UXJ 'LVFRXQW 3URJUDP XQGHU WKH $IIRUGDEOH Care Act (ACA). To evaluate the evidence for these explanations, we used differencein-differences methods to assess whether consolidation increased more in areas with greater exposure to each policy than in areas with less exposure. We found little evidence that either SROLF\ FRQWULEXWHG WR YHUWLFDO LQWHJUDWLRQ 5DWKHU

increased consolidation in the market for cancer care may be part of a broader post-ACA trend toward integrated health care systems.


Professor Mireille Jacobson

Title: “Innovative Originality, Profitability, and Stock Returns” Co-authors: Po-Hsuan Hsu, and Dongmei Li Accepted at: Review of Financial Studies.

Title: “Going to Pot? The Impact of Dispensary Closures on Crime” Co-authors: Tom Chang Accepted at: Journal of Urban Economics -XULVGLFWLRQV WKDW VDQFWLRQ PHGLFDO RU PRUH recently, recreational marijuana use often allow retail sales at dispensaries. Dispensaries are controversial as many believe they contribute to local crime. To assess this claim, we analyze the short-term mass closing of hundreds of medical marijuana dispensaries in Los Angeles. &RQWUDU\ WR SRSXODU ZLVGRP ZH ÀQG DQ LPPHGLDWH increase in crime around dispensaries ordered to close relative to those allowed to remain open. 7KH LQFUHDVH LV VSHFLÀF WR WKH W\SH RI FULPH most plausibly deterred by bystanders, and is FRUUHODWHG ZLWK QHLJKERUKRRG ZDONDELOLW\ :H ÀQG D similar pattern of results for temporary restaurant closures due to health code violations. A likely FRPPRQ PHFKDQLVP LV WKDW ´H\HV XSRQ WKH VWUHHWµ deter some types of crime.

Professor David Hirshleifer

We propose that innovative originality (InnOrig) is a valuable organizational resource, and that owing to limited investor attention and VNHSWLFLVP RI FRPSOH[LW\ ÀUPV ZLWK JUHDWHU ,QQ2ULJ DUH XQGHUYDOXHG :H ÀQG WKDW ÀUPV· InnOrig strongly predicts higher, more persistent, DQG OHVV YRODWLOH SURÀWDELOLW\ DQG KLJKHU DEQRUPDO VWRFN UHWXUQV ² ÀQGLQJV WKDW DUH UREXVW WR extensive controls. The return predictive power of ,QQ2ULJ LV VWURQJHU IRU ÀUPV ZLWK KLJKHU YDOXDWLRQ uncertainty, lower investor attention, and greater VHQVLWLYLW\ RI IXWXUH SURÀWDELOLW\ WR ,QQ2ULJ 7KLV evidence suggests that innovative originality DFWV DV D ¶FRPSHWLWLYH PRDW · DQG WKDW WKH PDUNHW undervalues InnOrig.


Professor David Hirshleifer Title: “Superstition and Financial Decision Making,” Co-authors: Jian Ming, and Huai Zhang Accepted at: Management Science In Chinese culture, certain digits are lucky and others unlucky. We test how such numerological VXSHUVWLWLRQ DIIHFWV ÀQDQFLDO GHFLVLRQ LQ WKH &KLQD ,32 PDUNHW :H ÀQG WKDW WKH IUHTXHQF\ RI OXFN\ numerical stock listing codes exceeds what would be expected by chance. Also consistent ZLWK VXSHUVWLWLRQ HIIHFWV QHZO\ OLVWHG ÀUPV ZLWK lucky listing codes experience inferior post-IPO abnormal returns. Further tests suggest that our conclusions are not driven by endogeneity.

Professor David Hirshleifer Title: “Opportunism as a Managerial Trait: Predicting Insider Trading Profits and Misconduct” Co-authors: Usman Ali Accepted at: Journal of Financial Economics We show that opportunistic insiders can be LGHQWLÀHG WKURXJK WKH SURÀWDELOLW\ RI WKHLU WUDGHV SULRU WR TXDUWHUO\ HDUQLQJV DQQRXQFHPHQWV 4($V and that opportunistic trading is associated with YDULRXV NLQGV RI ÀUP PDQDJHULDO PLVFRQGXFW $ value-weighted trading strategy based on (not QHFHVVDULO\ SUH 4($ WUDGHV RI RSSRUWXQLVWLF LQVLGHUV HDUQV PRQWKO\ IDFWRU DOSKDV RI RYHU – much higher than in past insider trading literature DQG VXEVWDQWLDO VLJQLÀFDQW HYHQ RQ WKH VKRUW VLGH


Firms with opportunistic insiders have higher levels of earnings management, restatements, SEC enforcement actions, shareholder litigation, DQG H[HFXWLYH FRPSHQVDWLRQ 7KHVH ÀQGLQJV suggest that opportunism is a domain-general trait.

Professors David Hirshleifer and Siew Hong Teoh Title: “How Psychological Bias Shapes Accounting and Financial Regulation” Accepted at: Behavioral Public Policy Journal Most applications of behavioral HFRQRPLFV ÀQDQFH DQG DFFRXQWLQJ UHVHDUFK WR policy focus on alleviating the adverse effects RI LQGLYLGXDOV· ELDVHV DQG FRJQLWLYH FRQVWUDLQWV e.g., through investor protection rules or nudges. We argue that it is equally important to understand how psychological bias can cause a collective dysfunction – bad accounting SROLF\ DQG ÀQDQFLDO UHJXODWLRQ :H GLVFXVV here how psychological bias on the part of the designers of regulation and accounting policy (voters, regulators, politicians, media commentators, managers, users, auditors, and ÀQDQFLDO SURIHVVLRQDOV KDV KHOSHG VKDSH H[LVWLQJ regulation, and how understanding of this process FDQ LPSURYH UHJXODWLRQ LQ WKH IXWXUH 5HJXODWRU\ ideologies are belief systems that have evolved and spread by virtue of their ability to recruit psychological biases. We examine how

several psychological factors and social processes affect regulatory ideologies.

Professor Chong Huang Title: “Bayesian Persuasion in Coordination Games” Co-authors: Itay Goldstein Accepted at: American Economic Review We analyze a coordination game of regime change where the policy maker, who tries to increase the probability of the survival of the regime, commits ex ante to abandon the regime automatically when its fundamentals are below a certain threshold. This policy acts as an information transmission mechanism: agents, who decide whether to attack the regime or not, update positively about the fundamentals of the regime when they see that it has not been abandoned, and so they are less likely to attack. Using the commitment ability, the policy maker can thus increase the overall survival probability of the regime.

Professor Chong Huang Title: “Defending against Speculative Attacks: the Policy Maker’s Reputation” Accepted at: Journal of Economic Theory This paper studies how speculative attacks and regime change arise from the interaction EHWZHHQ D SROLF\ PDNHU·V UHSXWDWLRQ IRU GHIHQGLQJ

DJDLQVW VSHFXODWLYH DWWDFNV DQG VSHFXODWRUV· OHDUQLQJ RI WKH SROLF\ PDNHU·V W\SH ,I VSHFXODWRUV receive conditionally independent and identically GLVWULEXWHG SULYDWH VLJQDOV DERXW WKH SROLF\ PDNHU·V type in every period, then no matter how precise their per-period private signals are, there can be no equilibrium with attacks. If the speculators receive private signals whose precision increases as a power function of the time with the power VWULFWO\ JUHDWHU WKDQ WZR WKHUH H[LVW LQÀQLWHO\ many equilibria with attacks, but this equilibrium multiplicity arises from the timing of the attacks only. In such a case, the set of status quos surviving in any equilibrium is strictly larger than in the case of a short-lived policy maker.

Professor Chong Huang Title: “The Real Costs of Financial Efficiency When Some Information Is Soft” Co-authors: Alex Edmans and Mirko Heinle Accepted at: Review of Finance 7KLV DUWLFOH VKRZV WKDW LPSURYLQJ ÀQDQFLDO HIÀFLHQF\ PD\ UHGXFH UHDO HIÀFLHQF\ :KLOH WKH former depends on the total amount of information available, the latter depends on the relative amounts of hard and soft information. Disclosing more hard information (e.g., earnings) increases WRWDO LQIRUPDWLRQ UDLVLQJ ÀQDQFLDO HIÀFLHQF\ DQG reducing the cost of capital. However, it induces the manager to prioritize hard information over soft by cutting intangible investment to boost earnings,


ORZHULQJ UHDO HIÀFLHQF\ 7KH RSWLPDO OHYHO RI ÀQDQFLDO HIÀFLHQF\ LV QRQ PRQRWRQLF LQ LQYHVWPHQW RSSRUWXQLWLHV (YHQ LI ORZ ÀQDQFLDO HIÀFLHQF\ LV desirable to induce investment, the manager may be unable to commit to it. Optimal government policy may involve upper, not lower, bounds on ÀQDQFLDO HIÀFLHQF\

Professor Christopher Schwarz Title: “Revisiting Mutual Fund Disclosure” Co-authors: Mark Potter Accepted at: Review of Financial Studies :H GRFXPHQW WKDW &563 DQG 7KRPVRQ contain many voluntarily reported mutual fund SRUWIROLRV WKDW DUH QRW LQ 6(& ÀOLQJV ZKLOH DGGLWLRQDOO\ &563 DQG 7KRPVRQ DUH PLVVLQJ many SEC mandated portfolios available in 6(& ÀOLQJV :H GRFXPHQW WKDW WKH YROXQWDU\ disclosures are likely driven by convenience rather than duplicity. Although mandated portfolios contain securities with more return momentum, we ÀQG XVH RI 6(& RU 7KRPVRQ GDWD OHDG WR VLPLODU HPSLULFDO ÀQGLQJV &563 KRZHYHU FRQWDLQV inaccurate position information prior to 2008. Our ÀQGLQJV KDYH LPSRUWDQW LPSOLFDWLRQV VXFK DV highlighting a 35% increase in observed manager trading by combining data sources.


Professors Zheng Sun and Lu Zheng Title: “Only Winners in Tough Times Repeat: Hedge Fund Performance Persistence over Different Market Conditions” Co-authors: Ashley Wang Accepted at: Journal of Financial and Quantitative Analysis We provide novel evidence that hedge fund performance is persistent following weak hedge fund markets but is not persistent following VWURQJ PDUNHWV 6SHFLÀFDOO\ ZH FRQVWUXFW WZR SHUIRUPDQFH PHDVXUHV 'RZQVLGH 5HWXUQV DQG 8SVLGH 5HWXUQV FRQGLWLRQHG RQ WKH OHYHO RI RYHUDOO hedge fund sector returns. After adjusting for risks, IXQGV LQ WKH KLJKHVW 'RZQVLGH 5HWXUQV TXLQWLOH outperform funds in the lowest quintile by about 7 percent in the subsequent year, whereas funds ZLWK EHWWHU 8SVLGH 5HWXUQV GR QRW RXWSHUIRUP VXEVHTXHQWO\ 7KH 'RZQVLGH 5HWXUQV FDQ SUHGLFW future fund performance over a horizon as long as three years, for both winners and losers, and for funds with few share restrictions.

Information Systems Professors Vidyanand Choudhary, Imran Currim, Sanjeev Dewan, and John Turner Title: “Evaluation Set Size and Purchase: Evidence from a Product Search Engine” Co-authors: Ivan Jeliazkov and Ofer Mintz, PhD Alumnus Accepted at: Journal of Interactive Marketing The last decade has seen a dramatic increase in the popularity of product search engines, yet the analysis of consumer behavior at such sites remains a challenging research problem despite its timeliness and importance. In this article, we develop and estimate a copula model of evaluation set size and purchase behavior employing data from 3,182 hotel searches by customers at a large travel search engine. The model allows us to jointly study purchase behavior, evaluation sets, and their antecedents. Our results reveal that evaluation set size and purchase are negatively correlated and that factors typically presumed to be associated with purchase – i.e., when users sort search results by price or quality, request many rooms, disclose that there are many guests in their party, or arrive IURP RWKHU VHDUFK HQJLQHV DQG RU SDUWQHU VLWHV ² actually relate to larger evaluation sets but lower SXUFKDVH SUREDELOLW\ ,Q FRQWUDVW ZKHQ XVHUV ÀOWHU the search results, we observe smaller evaluation sets and higher purchase probability. The theoretical

EDFNJURXQG DQG SUDFWLFDO LPSOLFDWLRQV RI RXU ÀQGLQJV suggest that efforts to increase purchases need not necessarily be predicated on cultivating larger evaluation sets.

Professor Vidyanand Choudhary Title: “Targeted Couponing in Online Auctions” Co-authors: Shivendu Shivendu Accepted at: Information Systems Research In order to study the role of targeted couponing in auctions, we develop a stylized model in which bidders have heterogeneous valuations and participation costs wherein their entry probabilities DUH HQGRJHQRXV &RXSRQLQJ LPSDFWV WKH VHOOHU·V SURÀW LQ WZR ZD\V L LPSDFW RQ ELGGHUV· HQWU\ probability including negative externalities for the bidder who does not receive a coupon and (ii) YDOXH H[WUDFWLRQ :H ÀQG WKDW WDUJHWLQJ D FRXSRQ to the low-valuation bidder can be optimal for the ÀUP HYHQ LI LW OHDGV WR D UHGXFWLRQ LQ WKH MRLQW HQWU\ SUREDELOLW\ RI WKH WZR ELGGHUV EHFDXVH RI WKH EHQHÀW from value extraction. A novel result is that in the context of auctions it can be optimal for the seller to issue targeted coupons to the high-valuation ELGGHU :H DOVR ÀQG WKDW DQ LQFUHDVH LQ WKH ELGGHUV· valuation or reduction in the participation cost FDQ OHDG WR ORZHU SURÀW IRU WKH VHOOHU 7KLV UHVXOW is driven by the non-monotonicity of the joint entry probability of the two bidders and the seller SURÀWV EHLQJ QRQ PRQRWRQH IXQFWLRQV RI ELGGHUV· valuations and participation costs.


Marketing Professor Tonya Bradford Title: “Dwelling Dynamics in Consumption Encampments: Tailgating as Emplaced Brand Community” Co-authors: John F. Sherry, Jr. Accepted at: Marketing Theory Tailgating is an institutionalized form of public revelry and emplacement of brand community that occurs within the context of a consumption encampment. In this ethnographic investigation of tailgating in an American collegiate football setting, we explore the dwelling practices of stakeholders involved in the event. In the duration of a tailgate, a city is raised, and ultimately razed. Over the course of a day, a nomadic brand community encampment arises, replete with ersatz homes, a grid of streets with ingenious address coordinates, SOD\LQJ ÀHOGV DQG FKDQQHOV RI LQIRUPDWLRQ exchange. By examining the process of dwelling, we unpack the mechanics of the space-to-place transformation that characterizes consumption encampments. We analyze the role of three architectonic pillars of tailgating – chorography, conviviality, and community - in the emplacement of brand community, and theorize the spatial essence of the collegiate brand.


Professor Tonya Bradford Title: “Weight Loss through Virtual Support Communities: A Role for Identity-Based Motivation in Public Commitment” Co-authors: Sonya A. Grier and Geraldine Rosa Henderson Accepted at: Journal of Interactive Marketing Individuals increasingly participate in virtual support communities (VSC) where they conduct numerous aspects of their lives with others whom they may never encounter in person, and they interact within these communities to attain various JRDOV 5HVHDUFK ÀQGV WKDW LQGLYLGXDOV DUH PRUH likely to achieve success with such goals when they make a public commitment to achieving them. Through our netnographic inquiry, we extend prior theorizing of VSC with an explanation of how public commitment manifests in VSC in support RI JRDO DWWDLQPHQW 0RUH VSHFLÀFDOO\ ZH ÀQG these online communities make salient a context relevant social identity which motivates behaviors that facilitate compliance to the public commitment, and hence, more effective goal pursuit. In addition, we create a typology of member roles within these 96& WKDW IXUWKHU LQÁXHQFH SXEOLF FRPPLWPHQW 2XU ÀQGLQJV FRQWULEXWH WR WKHRULHV RI 96& DQG SXEOLF commitment.

Professor Imran Currim

Professor Imran Currim

Title: “A Model for Inferring Market Preferences from Online Retail Product Information Matrices” Co-authors: Tim Gilbride, Ofer Mintz, PhD Alumnus, and S. Siddarth Accepted at: Journal of Retailing

Title: “Commitment to Marketing Spending through Recessions: Better or Worse Stock Market Returns?” Co-authors: Jooseop Lim (PhD Alumnus) and Yu Zhang Accepted at: European Journal of Marketing

This research extends information display board methods, currently employed to study information processing patterns in laboratory VHWWLQJV WR D ÀHOG EDVHG VHWWLQJ WKDW DOVR yields managerially useful estimates of market preferences. A new model is proposed based on statistical, behavioral, and economic theories, which integrates three decisions consumers must make in this context: which product-attribute to inspect next, when to stop processing, and which, if any, product to purchase. Several theoretical options are considered on how to model product attribute selection and how to treat uninspected attributes. The modeling options are empirically tested employing datasets collected at a popular H WDLOHU·V ZHEVLWH ZKLOH FXVWRPHUV ZHUH PDNLQJ product evaluation and purchase decisions. Subsequent to identifying the best model, we show how the resulting attribute preference estimates can be managerially employed to improve customer targeting of abandoned shopping carts, for follow up communications aimed at improving sales conversions.

This study addresses two unique and important questions. First, how do recessions GLUHFWO\ DIIHFW ÀUPV· PDUNHWLQJ VSHQGLQJ GHFLVLRQV" 6HFRQG DQG PRUH LPSRUWDQWO\ GR ÀUPV ZKLFK DUH PRUH FRPPLWWHG WR PDUNHWLQJ spending through past recessions achieve better VWRFN PDUNHW UHWXUQV" %DVHG RQ D FRPELQDWLRQ RI 1%(5 &203867$7 DQG &563 GDWD RQ ÀUPV EHWZHHQ DQG DQDO\]HG employing panel data based regression models ZH ÀQG WKDW ÀUPV FXW PDUNHWLQJ VSHQGLQJ GXULQJ UHFHVVLRQV 0RUH LPSRUWDQWO\ ÀUPV FRPPLWWHG to marketing spending during past recessions DFKLHYH EHWWHU VWRFN PDUNHW UHWXUQV 7KH ÀQGLQJV are found to be robust across B2B and B2C LQGXVWULHV GLIIHUHQW WLPH SHULRGV DQG ÀUPV ZKLFK vary on the proportion of their global revenue from U.S. sales. They key managerial implication is that top executives cut marketing budgets during recessions, however, if they can resist the pressures, and strategically continue to make marketing investments during recessions they will achieve higher stock market returns.


Professor Imran Currim Title: “Effect of Analysts’ Earnings Pressure on Marketing Spending and Stock Market Performance” Co-authors: Jooseop Lim (PhD alumnus) and Yu Zhang Accepted at: Journal of the Academy of Marketing Science 'HVSLWH WKH FOHDUO\ YLVLEOH HIIHFWV RI DQDO\VWV· pressures on C-level executives in the popular press, there is limited evidence on their effects on marketing spending decisions. This study asks two TXHVWLRQV )LUVW KRZ GR DQDO\VWV· SUHVVXUHV DIIHFW ÀUPV· VKRUW WHUP PDUNHWLQJ VSHQGLQJ GHFLVLRQV" %DVHG RQ D VDPSOH RI ÀUPV GXULQJ ² 2009 compiled from Institutional Brokers Earning 6\VWHP &203867$7 DQG &563 GDWDEDVHV ZH ÀQG WKDW ÀUPV FXW PDUNHWLQJ VSHQGLQJ 6HFRQG PRUH LPSRUWDQWO\ ZH DVN LI ÀUPV ZKLFK UHPDLQHG more committed in the past to marketing spending XQGHU DQDO\VWV· SUHVVXUHV KDYH KLJKHU ORQJHU WHUP VWRFN PDUNHW SHUIRUPDQFH :H ÀQG WKDW WKH VWRFN PDUNHW SHUIRUPDQFH RI ÀUPV PRUH committed to marketing spending under past SHULRGV RI DQDO\VWV· SUHVVXUHV LV KLJKHU 7KH ÀQGLQJV DUH UHSOLFDWHG IRU 5 ' VSHQGLQJ DQG are robust across measures, controls, and methodologies. Consideration of two industryEDVHG PRGHUDWRUV 5 ' VSHQGLQJ DQG UHYHQXH JURZWK DQG RQH ÀUP EDVHG PRGHUDWRU ZKHWKHU WKH ÀUP LV DPRQJ WKH LQGXVWU\·V WRS IRXU PDUNHW VKDUH RU RWKHU ORZHU VKDUH ÀUPV UHYHDOV WKDW WKH ÀQGLQJV DUH VWURQJHU IRU KLJK 5 ' DQG JURZWK LQGXVWULHV DQG ORZHU PDUNHW VKDUH ÀUPV 2QH


key implication is that top executives respond to DQDO\VWV· SUHVVXUHV E\ FXWWLQJ PDUNHWLQJ VSHQGLQJ LQ WKH VKRUW WHUP KRZHYHU LI WKH\ FDQ UHVLVW WKHVH pressures, longer-term stock market performance is higher.

Professor Mary Gilly Title: “The Role of Marketing in Ritual Evolution” Co-authors: Samantha Cross (PhD Alum) and Robert Harrison Accepted at: Journal of Macromarketing Thanksgiving in the U.S. is a ritual with shared meanings. This research evaluates the meanings of symbolic representations in advertising to understand the role of the media in the construction, maintenance, and evolution of ritual celebration. Thanksgiving advertisements published over a 99-year period are analyzed using a methodological mixture of semiotic analysis, historical analysis and context-driven periodization. The result is a multi-layered understanding of inter-related aspects of advertising history and the role of the media in the evolution of consumption ritual-making. Media are seen as agents for creating and legitimizing cultural norms, adding to our appreciation of normative and cultural-cognitive practices in supporting evolving social institutions. Findings show that marketers create and maintain the norms associated with Thanksgiving celebrations, ZKLOH UHÁHFWLQJ DQG JUDGXDOO\ VKLIWLQJ WKHP

moving us to the next stage in the evolutionary process. This research also highlights how cultural mythmaking strategies are employed and develop into historical brand narratives.

Professor Mary Gilly Title: “Temptation’s itch: Mindlessness, acceptance, and mindfulness in a debt management program” Co-authors: Mary Wolfinbarger Celsi, Russel P. Nelson, and Stephanie Dellande (PhD alumni) Accepted at: Journal of Business Research This study examines the experience of temptation through the accounts of consumers who have entered a debt management plan (DMP). During 12 weeks, participants reported weekly temptations. The results are consistent ZLWK VRFLR FRJQLWLYH WKHRU\ SDUWLFLSDQWV ZLWK KLJKHU VHOI HIÀFDF\ DUH EHWWHU DEOH WR PDQDJH WKHLU HPRWLRQV UHVLVW MXVWLÀFDWLRQV FRQQHFWHG ZLWK HQWLWOHPHQW DQG SHUFHLYH WKHLU GLIÀFXOW circumstances as providing them the opportunity WR GHYHORS QHZ ÀQDQFLDO VNLOOV DQG DQ LPSURYHG ÀQDQFLDO LGHQWLW\ 7KH UHVXOWV VKRZ WKDW '03 consumers engage in three patterns of responses WR WHPSWDWLRQ WKDW YDU\ LQ GHJUHH RI VHOI HIÀFDF\ mindlessness, acceptance, and mindfulness. 7KH KLJKHVW OHYHO RI VHOI HIÀFDF\ DQG VXFFHVV in the DMP is associated with mindfulness, as WKHVH SDUWLFLSDQWV IHHO SULGH ZKHQ WKH\ ´ZRUN WKH SURJUDPµ DQG UHVLVW WHPSWDWLRQ

Professor Eric Spangenberg Title: “A Meta-Analytic Synthesis of the QuestionBehavior Effect” Co-authors: David E. Sprott, Ioannis Kareklas, and Berna Devezer Accepted at: Journal of Consumer Psychology Asking people a question about performing D WDUJHW EHKDYLRU LQÁXHQFHV IXWXUH SHUIRUPDQFH of that behavior. While contextually robust DQG PHWKRGRORJLFDOO\ VLPSOH WKLV ´TXHVWLRQ² EHKDYLRU HIIHFWµ UHYHDOV WKHRUHWLFDO FRPSOH[LW\ as evidenced by the large number of proposed explanations for the effect. Furthermore, considerable heterogeneity exists regarding WKH ´TXHVWLRQµ XVHG WR HOLFLW WKH HIIHFW DQG WKH YDULHW\ RI GLIIHUHQW W\SHV RI WDUJHW ´EHKDYLRUVµ IRU which the effect has manifested. A meta-analytic V\QWKHVLV RI TXHVWLRQ EHKDYLRU VWXGLHV across 51 published and unpublished papers LV SUHVHQWHG *URXSLQJ SURSRVHG WKHRULHV IRU the effect into four overarching categories, we derive and test systematic predictions regarding potential moderators of conceptual and practical VLJQLÀFDQFH 2XU ÀQGLQJV SURYLGH YDU\LQJ degrees of support for four different theoretical PHFKDQLVPV DWWLWXGHV FRQVLVWHQF\ ÁXHQF\ and motivations) proposed to underlie the effect. Insights into these mechanisms are presented and outstanding gaps in our understanding are LGHQWLÀHG DV RSSRUWXQLWLHV IRU IXWXUH UHVHDUFK


Professor Rajeev Tyagi Title: “Outsourcing to Convert Fixed Costs into Variable Costs: A Competitive Analysis” Co-authors: Yunchuan Liu Accepted at: International Journal of Research in Marketing Outsourcing of production, services, and various economic activities is a pervasive phenomenon across industries. One of the key HFRQRPLF EHQHÀWV RI WKLV SRSXODU SUDFWLFH DV mentioned by its sellers and buyers, is that it DOORZV WKH RXWVRXUFLQJ ÀUP WR UHGXFH LWV À[HG costs such as expenditures on equipment, LQIRUPDWLRQ WHFKQRORJ\ À[HG VDODULHV RI employees etc., and convert those into a variable cost in the form of the purchase price that the RXWVRXUFLQJ ÀUP WKHQ SD\V WKH RXWVLGH LQGXVWU\ This paper examines the strategic implications of this role of outsourcing in an oligopolistic setting. We show how these strategic considerations imply that, even absent any cost savings from RXWVRXUFLQJ FRPSHWLQJ ÀUPV FDQ ÀQG LW SURÀWDEOH to outsource. Furthermore, in such a setting, one ÀUP PD\ RXWVRXUFH ZKLOH WKH H[ DQWH VLPLODU FRPSHWLQJ ÀUP PD\ QRW RXWVRXUFH :H DOVR examine how consumer and social welfare are adversely affected when outsourcing plays this À[HG FRVW WR YDULDEOH FRVW FRQYHUVLRQ UROH LQ DQ oligopolistic setting.


Professors Rajeev Tyagi and Sreya Kolay Title: “Product Similarity and Cross-Price Elasticity” Accepted at: Review of Industrial Organization Cross-price elasticity is one of the most commonly used constructs in theoretical and empirical work in the areas of pricing and market structure. A higher cross-price elasticity between two products means that they are more substitutable, and is often suggested as an indication that these products are more similar to each other in their characteristics. This implied positive relationship between cross-price elasticity and similarity between products is used in a large number of academic empirical studies, in LPSOHPHQWDWLRQV RI GHÀQLWLRQV RI PDUNHWV E\ courts in legal cases, and in merger analysis. This paper investigates theoretically the relationship between the similarity between two products and the cross-price elasticities between them. Using a spatial competition model, we show how making two products more similar on product attributes could increase, decrease, or have an inverted-U shaped effect on cross-price elasticity. Thus, we show how the relationship between cross-price elasticity and similarity between products is more nuanced than the positive relationship posited in the literature. We also show how the direction of this relationship is affected E\ WKH GLIIHUHQFH LQ WKH SURGXFWV· EDVH VWUHQJWKV (e.g., product qualities), the nature of the increase LQ WKH ÀUPV· PDUJLQDO FRVWV LI FRVWV YDU\ ZLWK

base strength, and the nature of the disutility that consumers incur by buying a product that is away from their ideal points.

Operations and Decision Technologies

Professor Alladi Venkatesh

Professor Libby Weber

Title: “Regaining control through reclamation: how consumption subcultures preserve meaning and group identity after commodification.” Co-authors: Kristen Schiele Published in: Consumption, Markets & Culture We examine the process of subcultural FRPPRGLÀFDWLRQ ZKHUH JURXS PHDQLQJV RI D -DSDQHVH \RXWK FRQVXPHU VXEFXOWXUH L H Harajuku) are created, fragmented, and then FRPPRGLÀHG E\ WKH PDLQVWUHDP FXOWXUH :H consider the role of authenticity in subcultures and VSHFLÀFDOO\ ZKDW LW PHDQV WR UHFODLP PHDQLQJV DQG JURXS LGHQWLW\ DIWHU FRPPRGLÀFDWLRQ 8VLQJ D multi-method ethnographic approach, we explore how a subculture reacts when faced with cooptation. This analysis promotes understanding of how a non-Western subculture reacts after PDLQVWUHDP FRPPRGLÀFDWLRQ DQG WKH VWUDWHJLHV they employ to regain control of their community by reclaiming authenticity, maintaining collective belonging, and uniting with a common cause.

Title: “A Socio-cognitive View of Repeated Interfirm Exchanges: How the Co-evolution of Trust and Learning Impacts Subsequent Contracts” Accepted at: Organization Science , DXJPHQW WKH VWXG\ RI UHSHDWHG LQWHUÀUP exchanges with social cognition to expand the understanding of trust development and learning, and how these combined forces shape subsequent contracts. Although scholars have extensively examined the independent effects of trust and learning on contracts in repeated exchanges, their co-evolution and combined impact have received much less attention. I argue this omission largely occurs because social cognition is not typically considered in these literatures, even though both trust development and learning are socio-cognitive processes LQÁXHQFHG E\ HDFK RWKHU DV ZHOO DV KHXULVWLFV (contract frames) and cognitive biases (intergroup attribution bias). When these processes are examined in a positive exchange, the contract IUDPH SUHYHQWLRQ RU SURPRWLRQ LQÁXHQFHV LQLWLDO reputation-based trust or prior development of knowledge-based trust (competence or integrity), which biases what is learned. This biased learning further impacts knowledge-based trust development, and together these factors


shape adjustments to subsequent contracts. In a negative exchange, the contract frame, prior reputation-based trust, and partner explanation (internal versus external) impacts what is learned from partner violations (competence or integrity). 7KLV ELDVHG OHDUQLQJ LQÁXHQFHV NQRZOHGJH EDVHG trust development, and together they shape how subsequent contracts are adjusted. I also propose WKDW ELDVHG OHDUQLQJ LQÁXHQFHV ZKHQ FRQWUDFWV DFW as complements or substitutes for different types of trust, addressing existing debates and critiques in these literatures. Finally, I discuss the dark side of integrity trust and trust repair under promotion contracts in repeated exchanges.

Professor L. Robin Keller Title: “Intention-Behavior Discrepancy of Foreign versus Domestic Brands in Emerging Markets: The Relevance of Consumer Prior Knowledge” Co-authors: Luping Sun, Xiaona Zheng, and Meng Su Accepted at: Journal of International Marketing Most research on the performance of foreign versus domestic brands in emerging markets examines measures of product evaluation or purchase intention. However, consumers intending to buy a product may switch to competing brands, displaying an intention-behavior discrepancy (IBD). Drawing upon literature on country associations and dual process theory, we examine the difference in IBD of foreign versus domestic brands in emerging markets and the moderating


role of prior knowledge. We conducted an intention survey followed by a post-purchase survey in the Chinese automobile and smartphone industries. We found that foreign brands have an advantage on IBD relative to domestic brands, indicating that they have the dual advantage of higher evaluations and lower IBDs. Furthermore, IRUHLJQ EUDQGV· DGYDQWDJH RQ ,%' LV VPDOOHU IRU consumers with inaccurate prior knowledge, as they are more likely to systematically reprocess LQIRUPDWLRQ DQG GLVFRXQW IRUHLJQ EUDQGV· IDYRUDEOH country associations. For these consumers, overestimating the product reduces foreign EUDQGV· DGYDQWDJH WR D VPDOOHU GHJUHH WKDQ XQGHUHVWLPDWLQJ LW GXH WR FRQÀUPDWLRQ ELDV 7KHVH ÀQGLQJV SURYLGH LPSOLFDWLRQV IRU EUDQGV LQ emerging markets.

Professor L. Robin Keller Title: “Markov Chain Models in Practice: A Review of Low Cost Software Options” Co-authors: Jiaru Bai (PhD Student) and Cristina del Campo Accepted at: Investigación Operacional Markov processes (or Markov chains) are used for modeling a phenomenon in which changes over time of a random variable comprise a sequence of values in the future, each of which depends only on the immediately preceding state, not on other past states. A Markov process (PM) is completely characterized by specifying the

ÀQLWH VHW 6 RI SRVVLEOH VWDWHV DQG WKH VWDWLRQDU\ probabilities (i.e. time-invariant) of transition between these states. The software most used in medical applications is produced by TreeAge, since it offers many advantages to the user. But, the cost of the TreeAge software is relatively high. Therefore, in this article two software alternatives are presented: Sto Tree and the zero cost add-in SURJUDP ´PDUNRYFKDLQµ LPSOHPHQWHG LQ 5 $Q example of a cost-effectiveness analysis of two possible treatments for advanced cervical cancer, previously conducted with the Treeage software, is re-analyzed with these two low cost software packages. This paper was also written in Spanish to facilitate communication with Spanish-speaking scholars in Cuba and elsewhere, who aim to conduct Markov cost effectiveness analyses and ZRXOG EHQHÀW IURP ORZ FRVW VRIWZDUH DOWHUQDWLYHV

Professor L. Robin Keller Title: “Information Presentation in Decision and Risk Analysis: Answered, Partly Answered, and Unanswered Questions” Co-authors: YiTong Wong, PhD Alumnus Accepted at: Risk Analysis For the last thirty years, researchers in risk analysis, decision analysis, and economics have consistently proven that decision makers employ different processes for evaluating and combining anticipated and actual losses, gains, delays and surprises. While rational models generally

SUHVFULEH D FRQVLVWHQW UHVSRQVH SHRSOH·V heuristic processes will sometimes lead them to be inconsistent in the way they respond to information presented in theoretically equivalent ways. We point out several promising future research directions by listing and detailing a series of answered, partly answered, and unanswered questions.

Professor L. Robin Keller Title: “Preference Functions for Spatial Risk Analysis” Co-authors: Jay Simon (PhD Alumnus) Accepted at: Risk Analysis :KHQ RXWFRPHV DUH GHÀQHG RYHU D geographic region, measures of spatial risk regarding these outcomes can be more complex than traditional measures of risk. One of the main challenges is the need for a cardinal preference function that incorporates the spatial nature of the outcomes. We explore preference conditions that will yield the existence of spatial measurable value and utility functions, and discuss their application to spatial risk analysis. We also present a simple example on household freshwater usage across regions to demonstrate how such functions can be assessed and applied.


Professors Carlton Scott and John Turner Title: “Mixed Planar and Network Single-Facility Location Problems” Co-authors: Zvi Drezner Accepted at: Networks We consider the problem of optimally locating a single facility anywhere in a network to serve both on-network and off-network demands. Off-network demands occur in a Euclidean plane, while on-network demands are restricted to a network embedded in the plane. On-network demand points are serviced using shortest-path distances through links of the network (e.g., on-road travel), whereas demand points located in the plane are serviced using more expensive Euclidean distances. Our base objective minimizes the total weighted distance to all demand points. We develop several extensions to our base model, including: (i) a threshold distance model where if network distance exceeds a given threshold, then service is always provided using Euclidean distance, and (ii) a minimax model that minimizes worst-case distance. We VROYH RXU IRUPXODWLRQV XVLQJ WKH ´%LJ 6HJPHQW 6PDOO 6HJPHQWµ JOREDO RSWLPL]DWLRQ PHWKRG in conjunction with bounds tailored for each problem class. Computational experiments demonstrate the effectiveness of our solution procedures. Solution times are very fast (often under one second), making our approach a


good candidate for embedding within existing heuristics that solve multi-facility problems by solving a sequence of single-facility problems.

Professor John Turner Title: “A Unified Framework for the Scheduling of Guaranteed Targeted Display Advertising under Reach and Frequency Requirements” Co-authors: Ali Hojjat (PhD Alumnus), Suleyman Cetintas, Jian Yang Accepted at: Operations Research Motivated by recent trends in online advertising and advancements made by online pub- lishers, we consider a new form of contract which allows advertisers to specify the number of unique individuals that should see their ad (reach), and the minimum number of times each individual should be exposed (frequency ). We develop an optimization framework that aims for minimal underdelivery and proper spread of each campaign over its targeted demographics. As well, we introduce a pattern-based delivery mechanism which allows us to integrate a variety of interesting features into D ZHEVLWH·V DG DOORFDWLRQ RSWLPL]DWLRQ SUREOHP which have not been possible before. For example, our approach allows publishers to implement any desired pacing of ads over time at the user level or control the number of competing brands seen by each individual. We develop a two-phase algorithm that employs column generation in a hierarchical scheme with three parallelizable components.

1XPHULFDO WHVWV ZLWK UHDO LQGXVWU\ GDWD VKRZ WKDW our algorithm produces high-quality solutions and has promising run-time and scalability. Several extensions of the model are presented, e.g., to account for multiple ad positions on the webpage, RU UDQGRPQHVV LQ WKH ZHEVLWH YLVLWRUV· DUULYDO process.

Organization and Management Professor Christopher Bauman Title: “Intentional sin and accidental virtue? Cultural differences in moral systems influence perceived intentionality” Co-authors: Clark, C. J., Kamble, S. V., and Knowles, E. D. Accepted at: Social and Personality Psychological Science Indians and U.S. Americans view harmful actions as morally wrong, but Indians are more likely than U.S. Americans to perceive helping behaviors as moral imperatives. We utilize this cultural variability in moral belief systems to test ZKHWKHU DQG KRZ PRUDO FRQVLGHUDWLRQV LQÁXHQFH perceptions of intentionality (as suggested by WKHRULHV RI IRON SV\FKRORJ\ H J .QREH Four experiments found that Indians attribute more intentionality than U.S. Americans for helpful but QRW KDUPIXO 6WXGLHV RU QHXWUDO VLGH HIIHFWV

(Studies 2-3). Also, cross-cultural differences in LQWHQWLRQDOLW\ MXGJPHQWV IRU SRVLWLYH DFWLRQV UHÁHFW stronger praise motives (Study 3), and stronger devotion to religious beliefs and practices among +LQGXV 6WXG\ 7KHVH UHVXOWV SURYLGH WKH ÀUVW direct support for the claim that features of moral EHOLHI V\VWHPV LQÁXHQFH IRON SV\FKRORJ\ DQG IXUWKHU VXJJHVW WKDW WKH LQÁXHQFH LV QRW LQKHUHQWO\ DV\PPHWULFDO PRWLYDWLRQ WR HLWKHU EODPH RU SUDLVH FDQ LQÁXHQFH MXGJPHQWV RI LQWHQWLRQDOLW\

Professor Christopher Bauman Title: “Blame the shepherd not the sheep: Imitating high-ranking transgressors mitigates punishment for unethical behavior” Co-authors: Leigh P. Tost and Madeline Ong Accepted at: Organizational Behavior and Human Decision Processes 'R EDG UROH PRGHOV H[RQHUDWH RWKHUV· XQHWKLFDO EHKDYLRU" %DVHG RQ VRFLDO OHDUQLQJ theory and psychological theories of blame, we predicted that unethical behavior by higherranking individuals changes how people respond to lower-ranking individuals who subsequently commit the same transgression. Five studies explored when and why this rank-dependent LPLWDWLRQ HIIHFW RFFXUV $FURVV DOO ÀYH VWXGLHV we found that people were less punitive when low-ranking transgressors imitated high-ranking members of their organization. However, imitation only reduced punishment when the two


transgressors were from the same organization (Study 2), when the transgressions were highly similar (Study 3), and when it was unclear whether the initial transgressor was punished (Study 5HVXOWV DOVR LQGLFDWHG WKDW LPLWDWLRQ DIIHFWV SXQLVKPHQW EHFDXVH LW LQÁXHQFHV ZKRP SHRSOH EODPH IRU WKH WUDQVJUHVVLRQ 7KHVH ÀQGLQJV UHYHDO actor-observer differences in social learning and identify a way that unethical behavior spreads through organizations.

Professor Luyi Gui Title: “Design Incentives under Collective Extended Producer Responsibility: A Network Perspective” Co-authors: Atalay Atasu, Ozlem Ergun, Beril Toktay Accepted at: Management Science A key goal of Extended Producer 5HVSRQVLELOLW\ (35 OHJLVODWLRQ LV WR SURYLGH incentives for producers to design their products IRU UHF\FODELOLW\ (35 LV W\SLFDOO\ LPSOHPHQWHG in a collective system, where a network of UHF\FOLQJ UHVRXUFHV DUH FRRUGLQDWHG WR IXOÀOO WKH (35 REOLJDWLRQV RI D VHW RI SURGXFHUV DQG WKH resulting system cost is allocated among these SURGXFHUV &ROOHFWLYH (35 LV SUHYDOHQW EHFDXVH RI LWV FRVW HIÀFLHQF\ DGYDQWDJHV +RZHYHU LW LV considered to provide inferior design incentives compared to an individual implementation ZKHUH SURGXFHUV IXOÀOO WKHLU (35 REOLJDWLRQV individually). In this paper, we revisit this assertion and investigate its fundamental underpinnings


in a network setting. To this end, we develop a new biform game framework that captures SURGXFHUV· LQGHSHQGHQW GHVLJQ FKRLFHV QRQ cooperative stage) and recognizes the need to maintain the voluntary participation of producers for the collective system to be stable (cooperative stage). This biform game subsumes the networkbased operations of a collective system and FDSWXUHV WKH LQWHUGHSHQGHQFH EHWZHHQ SURGXFHUV· product design and participation decisions. We then characterize the manner in which design improvement may compromise stability and vice YHUVD :H HVWDEOLVK WKDW D VWDEOH FROOHFWLYH (35 implementation can match and even surpass an individual implementation with respect to product design outcomes. In particular, we show that when WKH SURFHVVLQJ WHFKQRORJ\ HIÀFLHQF\ DQG SURGXFW recyclability are substitutes (complements), a recycling network where processor capacity SRROLQJ OHDGV WR VXIÀFLHQWO\ ORZ KLJK FRVW reduction will lead to superior designs in the collective system and maintain its stability, and we propose cost allocation mechanisms to achieve this dual purpose.

Professor Jone Pearce

PhD Candidate Harsh Jha

Title: “Using Organizational Science Research to Address U.S. Federal Agencies’ Management and Labor Needs” Co-authors: Herman Aguinis, Gerald F. Davis, James R. Detert, Mary Ann Glynn, Susan E. Jackson, Tom Kochan, Ellen Ernst Kossek, Carrie Leana, Thomas W. Lee, Elizabeth Morrison, Jeffrey Pfeffer, Denise Rousseau, Kathleen M. Sutcliffe Accepted at: Behavioral Science Policy Journal

Title: “A Patchwork of Identities: Emergence of Charter Schools as a New Organizational Form” Co-authors: Christine Beckman Accepted at: Research in the Sociology of Organizations

We describe important and common management and labor needs across more than IHGHUDO DJHQFLHV DV LGHQWLÀHG E\ WKH DQQXDO Federal Employee Viewpoint Survey (FEVS) and offer evidence-based interventions for addressing them based on organizational science research. Our recommendations have the synergistic goals of improving employee wellbeing, employee productivity, and agency performance and innovation, which will result in increased agency HIÀFLHQF\ DQG HIIHFWLYHQHVV IRU WKH WD[SD\HU 6SHFLÀFDOO\ ZH GHVFULEH HPSLULFDO ÀQGLQJV DQG offer suggestions for interventions to improve (a) employee motivation through engagement, HPSRZHUPHQW DQG HPEHGGHGQHVV E HPSOR\HH YRLFH DQG F ZLWKLQ DQG DFURVV XQLW FRRSHUDWLRQ communication, and collaboration. We offer UHFRPPHQGDWLRQV WKDW DUH VXIÀFLHQWO\ JHQHUDO WR be relevant to many agencies, while also being concrete and actionable. We also offer suggestions for associated research that could be conducted in federal agencies interested in these topics.

We examine the emergence of an organizational form, charter schools, in 2DNODQG &DOLIRUQLD :H OLQN ÀHOG OHYHO ORJLFV to organizational founding identities using topic PRGHOLQJ :H ÀQG FRUSRUDWH DQG FRPPXQLW\ founding actors create distinct and consistent identities, whereas more peripheral founders indulge in more unique identity construction. We see the settlement of the form into a stable ecosystem with multiple identity codes rather than driving toward a single organizational identity. The variety of identities that emerge do not always PDS RQWR ÀHOG OHYHO ORJLFV 7KLV KDV LPSOLFDWLRQV for the conditions under which organizational innovation and experimentation within a new form may develop.


Strategy Professor Philip Bromiley Title: “Timing for Dollars: How option exercisability influences resource allocation” Co-authors: David Souder Accepted at: Journal of Management Stock options have been advocated to encourage managers to make long-run investments like research and development 5 ' DQG FDSLWDO H[SHQGLWXUHV &$3; WKDW entail upfront costs with the potential to generate favorable long-term returns. However, the effect of options on managerial decisions depends on managerial beliefs about how the stock market UHDFWV WR ÀUP EHKDYLRU ,I FRQVLVWHQW ZLWK HPSLULFDO evidence, managers believe that stock prices LQFUHDVH LQ WKH VKRUW WHUP IURP LQFUHDVHG 5 ' but not CAPX, then stock option exercisability – which dictates when managers can receive RSWLRQ SD\RXWV ² VKRXOG LQÁXHQFH UHVRXUFH allocation. We also consider the effect of changes LQ WKH YDOXH RI RSWLRQV RYHU WLPH 5HVXOWV IURP a study of more than 6,500 observations from DERXW PDQXIDFWXULQJ ÀUPV RYHU \HDUV show that unexercisable stock options positively LQÁXHQFH &$3; EXW QRW 5 ' ZKLOH H[HUFLVDEOH VWRFN RSWLRQV SRVLWLYHO\ LQÁXHQFH 5 ' EXW not CAPX. Both patterns are consistent with behavior that increases managerial payoffs but QRW QHFHVVDULO\ ÀUP SHUIRUPDQFH ,Q DGGLWLRQ ZH



Professor Philip Bromiley Title: “A behavioral understanding of investment horizon and firm performance” Co-authors: David Souder, Greg Reilly, and Scott Mitchell, PhD Alumnus Accepted at: Organization Science 2EVHUYHUV KDYH DUJXHG WKDW ÀUPV RYHUO\ emphasize short term results at the expense of long run value. Using a behavioral perspective, we analyze three hypotheses related to this general argument. First, we examine the association of LQYHVWPHQW WLPH KRUL]RQV ZLWK ÀUP SHUIRUPDQFH contributing new theory that argues for a quadratic rather than linear association. Second, because the tendency toward immediate results could UHÁHFW VWRFN PDUNHW SUHVVXUHV ZH FRQVLGHU KRZ WKH LQWHUDFWLRQ RI LQYHVWRU SDWLHQFH DQG ÀUP KRUL]RQ UHODWHV WR ÀUP SHUIRUPDQFH 7KLUG ZH H[DPLQH WKH DUJXPHQW·V LPSOLFDWLRQ WKDW PRVW ÀUPV KDYH investment horizons at a level where marginal LQFUHDVHV LQ KRUL]RQ DVVRFLDWH SRVLWLYHO\ ZLWK ÀUP performance. Measuring horizon as the expected XVHIXO OLYHV RI FDSLWDO H[SHQGLWXUHV ZH ÀQG empirical support for the hypothesized quadratic

relation in a large-scale, multi-year sample of U.S. SXEOLFO\ KHOG PDQXIDFWXULQJ ÀUPV DQG FRQÀUP WKDW D PDMRULW\ RI ÀUPV KDYH KRUL]RQV LQ WKH UHJLRQ where our models predict increases in horizon SRVLWLYHO\ LQÁXHQFH SHUIRUPDQFH :H DOVR ÀQG WKDW the most positive returns occur when long horizon investments are aligned with investor patience.

Professor John Joseph Title: “Organizational Structure and Performance Feedback: Centralization, Aspirations and Termination Decisions” Co-authors: Ronald Klingebiel and Alex Wilson Accepted at: Organization Science This study examines the effects of organizational structure and performance feedback on termination decisions – in particular, product phase out. Using quarterly product-level data on the major mobile handset manufacturers IRU WKH SHULRG ZH DQDO\]H KRZ product-level feedback affects product phaseout, and how these decisions are conditioned by organizational structure – the extent to which decision making is centralized. We argue that such structure affects termination in two ways: directly through coordination and indirectly by shaping the interpretation of performance feedback. Our baseline models indicate that as performance increases above aspirations, the rate of phaseRXW GHFUHDVHV :H ÀQG WKDW DV SHUIRUPDQFH declines below aspirations, the rate of phase out

decreases, but then increases when the product IDOOV EHORZ D FHUWDLQ VDOHV WKUHVKROG :H DOVR ÀQG HYLGHQFH WKDW FHQWUDOL]DWLRQ DPSOLÀHV WKH IHHGEDFN effect above aspirations but attenuates it below aspirations. This study links two pillars of the Carnegie school, aspiration levels and hierarchy, to explain the complexity of phase-out following perceived success or failure. We thereby augment the growing scholarship on performance feedback by considering some important conditional effects imposed by a centralized structure. Our focus on centralization expands the scope of theory concerning organization design by linking structure DQG FRJQLWLRQ WR H[SODLQ ÀUP EHKDYLRU HVSHFLDOO\ termination decisions.

Professors Margarethe Wiersema and Libby Weber Title: “Dismissing a Tarnished CEO? Psychological Mechanisms and Unconscious Biases in the Board’s Evaluation” Accepted at: California Management Review ,Q WRGD\·V ZRUOG &(2V DUH IUHTXHQWO\ dismissed following corporate misconduct or poor SHUIRUPDQFH <HW LW LV RIWHQ GLIÀFXOW WR SUHGLFW when boards will dismiss the CEOs, as the same behavior often results in different decisions across ÀUPV 7DNLQJ D VRFLR FRJQLWLYH SHUVSHFWLYH WKLV article explores the factors that lead a CEO to become tarnished. It then uses expectancy


violation theory combined with attribution theory as well as stakeholder theory, concepts of legitimacy, and motivational theory to understand how the board evaluates the tarnished CEO. *LYHQ WKH LQFUHDVLQJ LQFLGHQFH RI &(2 GLVPLVVDO this paper provides an important contribution to both academic research and to corporate boards who face the responsibility of deciding how to UHVSRQG WR LQVWDQFHV RI SRRU ÀUP SHUIRUPDQFH DQG corporate misconduct.

Awards and Honors Professor Philip Bromiley was elected a Fellow of the Strategic Management Society.



Professor David Hirshleifer was elected vice president of the American Finance $VVRFLDWLRQ DSSRLQWHG WR WKH 1DWLRQDO %XUHDX RI (FRQRPLF 5HVHDUFK DQG DSSRLQWHG DV VHQLRU fellow of the Asian Bureau of Finance and (FRQRPLF 5HVHDUFK $%)(5


Professor L. Robin Keller was appointed to the Committee for a Study of Performance%DVHG 6DIHW\ 5HJXODWLRQ E\ WKH 7UDQVSRUWDWLRQ 5HVHDUFK %RDUG 1DWLRQDO 5HVHDUFK &RXQFLO RI WKH 1DWLRQDO $FDGHPLHV


New Faculty Professor Maia Young joined the Organization and Management area of the UCI Paul Merage School of Business effective -XO\ <RXQJ KROGV D %6$ LQ 3V\FKRORJ\ DQG a PhD in Organization Behavior from Stanford University. For the last thirteen years, she served on the faculty at the University of California, Los $QJHOHV $QGHUVRQ 6FKRRO RI %XVLQHVV <RXQJ·V research has focused on the effect of emotions on organizational decision biases to understand how emotions shape cognition and behavior.

3HUHLUD 'ULYH Irvine, CA 92697-3125

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