Research in Action 2019 by UCI Paul Merage School of Business

Research in Action Sixth Edition | Fall 2019

A Note from the Dean

Ditching the French Fries: Rethinking How and Why We Eat

Altruism or Careerism: Why Do Open Source Coders Work for Free?

Not All Ad Exposures Are Equal: A New Approach to Optimizing the Spread of Online Advertising

Falling Flat? Customer Uncertainty Plays a Key Role in Software Subscription Models

Research Abstracts

Appointments, Awards and Honors

Welcome New Faculty Members

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A Note from the Dean

Welcome to the 2019 edition of Research in Action. In these pages you will find discoveries that match the entrepreneurial spirit of our school and address the realities of our digitally driven world. First, we explore our changing relationship with food and its potential impact on the modern food industry with the piece “Ditching the French Fries: Rethinking How and Why We Eat.” Next we delve deep into the motivations of coders that work for free on open-source websites like Stack Overflow. Another study proposes a fresh way to measure the reach of online ads. Finally, we examine the profitability of different software pricing models. I invite you to learn more about the scholastic achievements of the Merage School at merage.uci.edu/abstracts. Best,

Eric R. R Spangenberg Dean and Professor of Marketing

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Research Highlights

Ditching the French Fries

Rethinking How and Why We Eat by Keith Giles

For too long, many Americans have suffered from a toxic relationship with their food, leading to obesity, diabetes, heart disease and numerous other health issues. Oftentimes our consumption of unhealthy food is tied to eating for pleasure as opposed to eating for health. Healthy foods are assumed to be bland, boring or even unappetizing options for those trying to lose weight. However, there is a paradigm shift taking place when it comes to food choices. Many people are starting to approach food as fuel, rather than food as pleasure, and this transformation is driving a revolution that even fast food giants can no longer ignore.

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Tonya Williams Bradford Professor of Marketing

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In their article, “Restricted Pleasure For Healthy Eating And Food Well-Being,” forthcoming from Qualitative Market Research, Tonya Williams Bradford of UCI’s Paul Merage School of Business, and Sonya Grier of the American University, Washington, D.C., examine the relationship of dietary restriction and food well-being (FWB) in the African American community – a largely under-researched segment of the population – to determine how food socialization and food literacy can transform an individual’s relationship with food. By conducting a series of individual interviews of African American women participating in a food detoxification program, Bradford and Grier looked at the effects of reorienting food as fuel rather than approaching food as merely the response to cravings or perceived hunger. “For those who participate in a food detox program like the one we studied it’s not just about losing weight or trying to avoid that second piece of chocolate cake,” says Bradford. “It’s about altering our fundamental relationship with food and eating primarily for the nutritional and healing benefits of food.” Redefining the Connection Between Food and Pleasure Their study, which began in 2008, involved a long season of data collection and analysis. “At the time we began our research the notion of food restriction was fairly new,” she says. “Today the idea has gained a lot of traction among those who are more health conscious. We see evidence of how widespread the idea has become in the fact that there are now raw food and vegan or vegetarian restaurants. The best you could expect ten years

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ago would be a few vegetarian options on the menu. A lot has changed for the better.” One of the surprising details revealed by their research was how detox participants began to redeﬁne pleasure in relation to food consumption. Prior to the detox, most would have said that they were driven to eat decadent foods – like donuts or pizza – because of the pleasure they received from eating them. Ironically, eating those “pleasure foods” tends to make us feel bad later – either physically tired and bloated, or emotionally sad and guilty. “One of our study participants described using food as a means of comfort, and that they recognize food as comfort

“It’s about altering our fundamental relationship with food and eating primarily for the nutritional and healing benefits of food.”

in the behaviors of others. They drew a connection to the practice of putting something in a crying baby’s mouth. From there, food becomes a security blanket, but we can’t eat just anything and expect to be healthy.” After going through the detox, participants began to associate healthier foods – like vegetables, fruits and tofu – with even greater pleasure; both physically and emotionally. What changed? As Bradford explains, it has to do with food association. “People associate food with people and experiences and a time of year. It’s almost more about our emotional connection with food that gives us the real pleasure and comfort we feel from eating it.” Evolving Relationships With Food The study also revealed how African American women were swayed by food marketing.

“Commercials send the message that eating a hamburger is going to improve your relationship with your mom or dad, or that eating ice cream is going to make us feel better after a hard day at work,” she says. “The notion of food as a soother is not unusual, but many African American women are being diagnosed with high blood pressure, diabetes and heart disease. Many of these diseases are associated with food intake commonly employed with self-soothing, and that often gets reinforced by marketing. They have to go through an extreme detox to break that relationship with food.” This realization has helped many to break the hold that certain foods have over them. “We need to rewire our brains and see food as energy rather than as filling an emotional gap, or fulfilling a desire to eat for pleasure,” says Bradford. “Once we do that, we can break some of those emotional and psychological associations we’ve all learned related to food.” More People are Embracing Healthy Eating Once people make the break from food-aspleasure and transition to food-as-fuel, they finally discover the pleasurable aspect of healthy eating. They have more energy, feel better after they eat, and stop eating when they’re full. “Most of us were trained as children to clean our plates. That creates guilt for us now when we leave food on our plates,” says Bradford. “The detox process is similar to a 12-step program. You start by admitting you don’t

really need those foods you once craved. Next you are taught to see food as medicine for your body. With that new perspective, you recognize cravings for certain foods, and portion sizes at intervals throughout the day. You begin to eat only when you’re hungry. By the fifth week when you’re consuming clear broth and green juice you realize that you’re so full you can barely finish it. Foods that once tempted you are no longer appealing. You begin to break those emotional bonds. Detoxing focuses on the emotional and visceral first, and then your mind follows.” As more people begin to rethink their approach to food, the marketplace has started to accommodate those preferences for healthier options. Many quick service restaurants now offer plant-based proteins for burgers and tacos (e.g., “Impossible Burgers”, Beyond Burgers, tofu) for those who have transitioned away from meat. Grocery stores now have entire sections devoted to organic food shoppers. The future looks brighter in terms of breaking our emotional connections with food and moving to food-as-fuel which can lead to healthier, happier and more energetic lifestyles.

Tonya Williams Bradford is an assistant professor of marketing at The Paul Merage School of Business. She studies consumer rituals and shares vital knowledge to advance the theory and practice of marketing with students at the undergraduate and graduate levels. She obtained degrees from Northwestern University including a Bachelor of Arts in anthropology, and an MBA and PhD in marketing from the Kellogg School of Management. Prior to coming to the Merage School, Bradford worked in industry for seventeen years across domestic and international markets.

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Tingting Nian Assistant Professor of Information Systems 8

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Altruism or Careerism Why Do Open-Source Coders Work for Free? by Keith Giles

High quality user-generated content is essential to the success of knowledge-sharing platforms like Wikipedia, GitHub and Yelp. But what motivates users to share their expertise free of charge? Speciﬁcally, why do thousands of programmers and coders voluntarily devote hours of their time to contribute to open-source software development projects, or to online Q&A communities? According to Tinting Nian, assistant professor of information systems at The Paul Merage School of Business, the answers may be more enterprising than altruistic. As she explains, “Over the last decade, much research has been done to answer these questions from the standpoint of sociology or psychology. But what hasn’t been examined until now is how much activity within these online communities is driven by career concerns.”

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To determine the degree to which career advancement might influence the frequency and quality of user participation in online communities, Nian collaborated with Lei Xu of the Toulouse School of Economics and Luís Cabral of the Stern School of Business at New York University to analyze user activity on Stack Overflow, the largest online Q&A community on the internet for programmers. In 2019, Management Science published the results of their work in the study “What Makes Geeks Tick? A Study of Stack Overflow Careers.” Altruism May Not be the Only Motivation Behind Open Source Software “Previous studies have only explored altruistic motivators,” Nian says, “or examined the gratification contributors received from improving the quality of open-source software projects, for example.” But what if previous studies had failed to measure a stronger, more practical motivational factor than altruism? What if users actively contributed answers to difficult coding questions simply to boost their reputation scores within the community as a means of helping them find a better job? “To the best of our knowledge, this is the first paper that empirically identifies and estimates the causal relation between changes in career status and voluntary contributions to online public goods as an indirect measure of career concerns,” the study explains. Their research examined the posting habits of users on Stack Overflow (SO) to determine motivational factors driving contributions. Users of Stack Overflow can earn reputation scores based on the site’s voting mechanic. User reputations can grow by receiving positive votes for posting good answers to another user’s questions, but not for their edits to another user’s posts. In turn, users can use an affiliated service, Stack Overflow Careers, to link their Stack Overflow profile to their

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professional credentials, which potential employers can see. Stack Overﬂow Users Care About Their Reputation The study examined user editing and answering activities to look for clues about their motivations. As Nian explains, “If contributors were not concerned about their careers, then what we would expect to see is that the number of answers generated and the number of edits created would be moving in parallel over the time. Why? Because generating answers on the site increases their reputation scores – which can be leveraged to demonstrate their expertise to prospective hiring managers – while editing does not impact their reputation. Therefore, these two types of activities should have the same mix if career advancement isn’t a motivation.” To get a better picture of how career concerns impacted Q&A and editing activities, the study looked at data of SO users who experienced a job change, analyzing the frequency and quality of activity in the three months before and after the career move. Their goal was to determine whether reputation-building activities decreased more compared to non-reputation-building activities after a user successfully landed a new job. The results showed that reputation-building activities increased signiﬁcantly three months prior to a user’s job change but dropped off sharply three months later. There were a number of possible explanations for this. The study factored in the possibility that the user may simply be too busy with a new job to continue contributing. But as Nian explains, “If the reduction in availability due to the job change was the primary reason for the drop in Q&A activity three months after landing the new job, then we should expect to see an equal impact on the user’s edit activity. But, again, that is not what we found.”

Evidence of Career-Driven Motivation According to their research, users who changed jobs reduced their Q&A contribution levels by 23% but those same users only reduced their reputation-neutral editing activities by 7.4%. “The dip in editing activity should be driven only by a lack of time availability,” she says. “But the explanation for why we see an even larger drop in contributing answers can’t be driven by time constraints alone. Both activities take an equal amount of time. But only one of those activities – answering questions – contributes to their reputation scores which can be leveraged to advance their careers. The difference between changes in these two contribution levels reveals how much of their activities were driven by employment concerns [16%], as opposed to any altruistic concerns.” The researchers were surprised by how much user’s Q&A activities ramped up before their job changes and how dramatically they declined afterward. The data revealed a clear link between planned career changes and an uptick in Q&A activity on Stack Overﬂow. Nian compared it to job seekers in other industries updating their LinkedIn proﬁles or personal websites ahead of a renewed job search. By focusing more on answering questions, users could demonstrate expertise, increase their reputation scores, and rise to the top of the pack.

Sites Can Beneﬁt From Building Incentives for Career-Oriented Users Nian thinks this research may offer insights to open-source software communities as they look for new ways to motivate user engagement. Nian says, “For example, GitHub and other sites could potentially implement reputation-based systems that reward contributors and increase their incentives to improve the quality and frequency of their activity. Even online shopping websites could provide better incentives for those who write product reviews. They could reward those whose reviews receive the most ’helpful’ votes with reputation-based perks like discounts and special offers to incentivize those users and increase participation.” So, is there any hope for quality code to be written by someone who is not being paid? Nian thinks so. “I think that’s a good question, and it’s worth studying in further research,” she says. “In this paper we ﬁnd that having an intrinsic or extrinsic motivator doesn’t really dampen the quality of the posts or the code being shared. The bottom line is that career advancement is a long-term factor that people are concerned about, and so they work to maintain reputation and demonstrate expertise within their community, and this helps users to write higher-quality code, whether it makes them feel good or not.”

Information Systems Professor Tingting Nian is a faculty member at the UCI Paul Merage School of Business. Her research studies of social media, online communities and economics of digital goods have won her numerous awards, including the 2014 INFORMS Conference on Information Systems and Technology Best Conference Paper Award, a WCAI Research Award from Wharton Customer Analytics Initiative, and several research grants including TFI Long-Term Research Grant and Hellman Fellowship. She received her PhD in business administration (specialized in information systems) from the Leonard N. Stern School of Business at NYU in 2015 and earned her bachelor’s degree in business administration from Tsinghua University.

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Not All Ad Exposures are Equal A New Approach to Optimizing the Spread of Online Advertising by Alex D. Bennett

About a third of all online advertising is impression-based, with the principal objective of drawing eyeballs to build brand or product awareness. Unlike conventional advertising, online ad campaigns can be targeted to highly customized population segments. The spread of an ad’s impressions across target audiences is a key metric of an ad’s performance. Gini indices and Lorenz curves offer a novel approach that may help publishers and ad purchasers better evaluate their respective strategies for analyzing past performance and optimizing the distribution of future ad campaigns.

John Turner Professor of Operations & Decision Technologies

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Associate Professor of Operations and Decision Technologies John Turner of UCI’s Paul Merage School of Business, and Miguel Lejeune, professor of decision sciences at George Washington University, explored the potential benefits of applying Gini indices and Lorenz curves to the analysis of how online advertising is spread across target audience segments. Their work is reported in the study, “Planning Online Advertising Using Gini Indices,” published in 2019 by Operations Research. Inequality is a Complex Problem in the Advertising World Studies of wealth inequality typically use a Lorenz curve to illustrate the spread of wealth across a population. Turner and Lejeune suggest using Gini indices and Lorenz curves to measure the spread of an online ad’s impressions as they can provide a useful analytical tool for understanding the ad’s effectiveness and a means of fine-tuning pricing to fit the advertiser’s specific needs.

Figure 1

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Figure 1 illustrates the idea with two hypothetical Lorenz curves, in blue and red. A perfect spread of impressions, represented by the dotted line, is rarely achieved in reality. The blue line might reﬂect a successful matching of the desired spread and the delivered impressions. In contrast, the red curve indicates a missed target, with too few impressions—only 20%—delivered to nearly 60% of the target audience. A Gini index is equal to twice the area between the dotted line of equal proportion and the Lorenz curve. The result is a value between 0 (perfect equality) and 1 (drastic inequality), when all the ads are shown to a single user. A result like the blue line will produce a Gini index much closer to zero than the red line. By calculating the Gini index, advertisers and publishers can see in one value how well-spread an ad campaign’s impressions were. In Online Advertising, the Variables Stack Up Bringing Lorenz curves and Gini indices into the

online advertising world involves grappling with a complex set of variables. Advertising sold by a publisher to an advertiser on a guaranteed impressions basis typically involves a contractual obligation to show the ad a certain number of times within a fixed time period. The advertiser’s target audience, such as women who live in California, restricts the set of users the publisher can use to fulfill the contract. If a campaign targeting women in California concentrated too heavily on women in Los Angeles and did not get many impressions from elsewhere in the state, it may not have the spread the advertiser wanted. Because only one ad can be served to a user at a time, the publisher must continually choose winners from among its many advertising customers. Some customers pay extra to target narrow subgroups. Consequently, the publisher has an incentive to carve out these users and not serve other ads to them. Proposed Changes to the Advertising Industry’s Baseline Model Publishers are aware of the distribution inequality problem. Many ad publishers use a mathematical model to determine how impressions are allocated across multiple advertising campaigns. Existing models produce well-spread advertising plans using a quadratic penalty function, which can have costly results for publishers due to its rigid interpretation of inequality and limited flexibility to accommodate competing requirements. This approach can frustrate efforts to interpret and compare the inequality of how impressions

are spread across ad campaigns and across different dimensions such as time, geography, and demographic. Turner and Lejeune propose replacing the baseline model’s quadratic penalty function with one based on a Gini coefficient. As Turner explains, “A publisher can benefit from this approach by showing customers exactly how the publisher’s discretion can be used to benefit the advertiser.” The approach gives advertisers insight into the opportunities they were not given, allowing them to evaluate whether to pay more for those opportunities. Turner and Lejeune also develop an algorithm which can be used to quickly compute an optimal solution for their Gini-based ad planning model. “These kinds of models can be hard to solve given all the variables,” Professor Turner explains. “A typical publisher manages thousands of ad campaigns, and these all need to be taken into account simultaneously.” Online advertising has undergone significant revenue growth over the last decade. With deepening competition, Turner believes that a pricing model based on Gini indices may offer publishers a novel method for offering precisely tailored impression-based advertising with pricing and penalties fine-tuned to specific performance demands. Although bias in favor of higher paying customers will continue, publishers can offer a concrete illustration of how an ad will be distributed across an audience and charge accordingly.

John Turner is an associate professor of operations and decision technologies at The Paul Merage School of Business. His research is focused on fostering a richer understanding of the planning, pricing, and scheduling of online advertising. His work includes exploration of new advertising models, applied optimization, and the intersections between operations and marketing. Turner holds a PhD in operations research from the Tepper School of Business, Carnegie Mellon University.

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Mingdi Xin Assistant Professor of Information Systems

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Falling Flat? Customer Uncertainty Plays a Key Role in Software Subscription Models by Alex D. Bennett

Because software can be used repeatedly without diminishing its value, standard economic theory treats it like a durable good. A conventional durable-goods vendor can optimize its proﬁts by prioritizing subscription-based pricing. But software behaves differently than standard theory would suggest. Although durable-goods theory holds that software vendors should operate under a subscription model, in practice subscriptions have not shown clear advantages over the perpetual licensing model, even as its popularity continues to rise.

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“There’s a lot of confusion in the field, because the historically prevailing practice differs so much from theory.”

The contrast between practice and theory in software licensing is the focus of UCI Paul Merage School of Business Assistant Professor of Information Systems Mingdi Xin’s recent work. Her study, “The Impact of Customer Valuation Uncertainty on Software Licensing,” is forthcoming in MIS Quarterly. The research explores how a customer’s uncertainty about the value of a software application prior to adoption influences a vendor’s optimal pricing strategy and may explain why perpetual licenses are more profitable than durable-goods theory would suggest. Software Licensing: Theory Versus Practice Over the last few decades, software licensing has undergone a series of evolutions. Until the mid2000s, perpetual licensing was the overwhelming standard. The perpetual licensing norm contrasted with economic theory, which consistently suggested that software vendors could achieve better profitability using a subscription model. Despite the theoretical consensus, subscriptions rarely generated significant revenue for vendors. Technical advances have made subscription models more common. The new Software-as-aService (SaaS) model, which bundles a software subscription with other web-based services, has grown rapidly. Given the excitement around SaaS, one might expect it to drive vendor revenue growth. But the real-world experience has not been so clear. Many vendors switched to the SaaS model but are now pushing for multiyear commitments from customers, transforming a nominal subscription into something resembling a perpetual license. Xin explains, “There’s a lot of confusion in the field, because the historically prevailing practice differs so much from theory. Now the new SaaS model appears ready to disrupt the marketplace, but vendors have shown reservation. What is going on?”

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Valuation Uncertainty Offers a Compelling Explanation The study locates a potential source of the problem in the nature of customer demand: Customers usually cannot fully evaluate a software application before adopting it. To reach a firm valuation, a customer would need to use the software for a long time, integrated into the customer’s wider IT systems and workflows. Reviews or product demonstrations can only tell part of the story. The cost of implementation often complicates the customer’s choice. In a dynamic game theoretic model, the study examines how customers’ value uncertainty may affect a vendor’s optimal licensing strategy. It shows that given value uncertainty, customers and the vendor face a trade-off. From the customer’s perspective, a perpetual license offers the advantage of a one-time cost at the risk of making an irreversible, bad choice. A subscription provides customers with the flexibility to cancel or modify their plan. But subscriptions come with the risk of price increases over time, potentially increasing the software’s overall cost. While customers grapple with how to value prospective new software, vendors must make a pricing choice between perpetual licenses and subscriptions. With subscriptions, the vendor has the flexibility to change prices over time. It may charge a low initial price so customers can use the software and resolve valuation uncertainty with a low upfront financial commitment. After customers learn their true valuation, some are willing to pay more, while others may only be willing to pay less for a renewal. The vendor can raise the renewal price to gain from the improved willingness-to-pay in the high-end market, although it would lose demand from lower-end customers. A perpetual license prevents the vendor from increasing prices later on, but with the benefit of greater up-front revenue. Moreover, customer

value uncertainty leads to a less diverse demand distribution, which helps make perpetual licensing more profitable. Specifically, even though customers may research software prior to initial adoption, they may incorrectly assess their perceived valuation, while the actual benefit of the software only becomes clear through use. When all customers take this risk into consideration, their willingness-to-pay for the software prior to adoption becomes more uniform. The study shows that such a reduction in demand diversity can make perpetual licensing more profitable. Toward a More Profitable Approach The study examines various models. In models that leave out customer value uncertainty, the study’s prediction is consistent with conventional durable-goods theory. Adding customer value uncertainty into models produces results that more closely resemble real-world strategies. The vendor’s optimal licensing strategy depends on the nature of the software. Vendors of software that faces high customer value uncertainty and high implementation costs such as complex enterprise software should prefer perpetual licensing. But when subscription is optimal, the study recommends a low-then-high variable pricing path, with the low initial price aiming to encourage adoption and help customers resolve value uncertainty. This finding differs from conventional economic theories, but is consistent with many software vendors’ practice. Another alternative, which may be more profitable for software with low implementation costs and wide differences

between high- and low-end customers, is to offer subscriptions at different rates depending on the length of a customer’s commitment. The study also examines the social welfare impact of customer valuation uncertainty. On one hand, the customer’s initial value uncertainty may produce a net social benefit by reducing the dispersion of demand distribution in the marketplace and leading to more customers adopting the software. On the other hand, due to value uncertainty, a customer may make a bad choice based on incorrect valuation assumptions, resulting in a net decrease to welfare. The overall social welfare effect depends on the trade-off between these two opposing forces. In some cases, a vendor may have incentives to address customer valuation uncertainty if it hurts social welfare outcomes. Xin hopes her study will help software vendors better understand how features of customer demand may affect the trade-off between different licensing strategies. Her explanation for why software licensing deviates from standard durablegoods theory offers vendors three important insights. First, it explains why perpetual licenses can be optimal in some situations, and why they have historically dominated the software marketplace. Second, the model finds that when subscription is optimal, customer value uncertainty makes low-then-high pricing a more profitable approach than a fixed-price subscription. Third, sometimes a menu of subscription options varying in subscription duration and prices may be optimal.

Mingdi Xin is an assistant professor of information systems at The Paul Merage School of Business. An applied economist with a PhD from the New York University’s Stern School of Business, she explores design and pricing strategies for digital goods and services, IT investment strategies and their competitive implications, and the impact of digital ad exposure on consumer product search behavior in her research. Her research has been published in Management Science, Information Systems Research, MIS Quarterly, and Harvard Business Review.

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Research Abstracts Latest Published Work by Merage School Faculty Members August 2018-2019

Accounting Professor Chuchu Liang Title: “The Effect of Major Customer Concentration on Firm Profitability: Competitive or Collaborative?” Co-authors: Kai Wai Hui and P. Eric Yeung Accepted at: Review of Accounting Studies We test two potential hypotheses regarding the effects of major customer concentration on firm profitability. Under the collaboration hypothesis, customer power facilitates collaboration and both the supplier firm and its major customers obtain benefits. Under the competition hypothesis, customer power results in rent extraction and the major customers benefit at the expense of the supplier firm. We document that major customer concentration is negatively associated with the supplier firm’s profitability but positively associated with the major customers’ profitability. We demonstrate that these effects weaken as the supplier firm’s own power grows over its relationship with major customers, supporting the competition hypothesis. We carefully reconcile our results with prior findings that focus only on the supplier firm’s profitability and identify their research design and interpretation problems. We obtain similar inferences in a setting of major customers’ horizontal mergers and when we use an alternative measure of major customer power.

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Professor Ben Lourie Title: “Key Performance Indicators as Supplements to Earnings: Incremental Informativeness, Demand Factors, Measurement Issues, and Properties of Their Forecasts” Co-authors: Dan Givoly, Yifan Li (UCI PhD alumnus) and Alexander Nekrasov (Former UCI Professor) Accepted at: Review of Accounting Studies The documented decline in the information content of earnings numbers has paralleled the emergence of disclosures, mostly voluntary, of industry-specific key performance indicators (KPIs). We find that the incremental information content conveyed by KPI news is significant for many KPIs, yet it is diminished when details about the computation of the KPI are absent or when the computation of the KPI changes over time. Consistent with analysts responding to investor information demand, we find that analysts are more likely to produce forecasts for a KPI when that KPI has more information content and when earnings are less informative. We also analyze the properties of analysts’ KPI forecasts, and we find that KPI forecasts are more accurate than mechanical forecasts, and their accuracy exceeds that of earnings forecasts. Our study contributes to the literature on the information content of KPIs and increases our understanding of the factors that affect this content. We provide evidence pertinent to the debate on whether and how to regulate KPI disclosures. This study further contributes to research on the properties of analysts’ forecasts.

Professors Devin Shanthikumar and Siew Hong Teoh Title: “Private Firm Investment and Public Peer Misvaluation” Co-author: Brad Baderstcher Accepted at: The Accounting Review We examine whether misvaluation of publicly traded industry peers is associated with capital expenditures by privately-held firms. An economic competition hypothesis predicts a negative relation because misvaluation-induced new investment by public firms crowds out investment by private firms when they share common input or output markets. An alternative shared sentiment hypothesis predicts a positive relation because private firm stakeholders share in the sentiment associated with misvaluation in public markets. Misvaluation is proxied using both the price-tofundamental ratio and an exogenous instrument obtained from mutual fund flows. The evidence is consistent with the shared sentiment hypothesis, and robust to alternative treatments for growth opportunities. We find expected cross-sectional variation in the strength of the positive relation between public-peer misvaluation and private firm investment. Our results indicate that private firms finance misvaluation-induced investment primarily internally or externally with debt, not equity. Finally, misvaluation-induced investment increases future return on investment for private firms in contrast with public firms. Overall, these findings suggest that overvaluation in public markets increases

private firm investments and has beneficial effects on private firm investments by relaxing financing constraints.

Professor Terry Shevlin Title: “U.S. Worldwide Taxation and Domestic Mergers and Acquisitions, a Discussion” Co-author: Novia X. Chen (Merage School PhD ’15) Accepted at: Journal of Accounting and Economics Harris and O’Brien (2018) investigate whether U.S. tax policy distorts U.S. multinationals’ (MNCs) investment. They ﬁnd that MNCs facing higher repatriation tax costs engage in fewer domestic acquisitions. The study re-examines the results in two prior studies that found no effect (Hanlon et al. 2015) and a positive effect (Martin et al. 2015) by introducing a new proxy for repatriation tax costs: A binary variable for whether the MNC uses the Double Irish structure. We critique the theory underlying the prediction as well as the proxy. We conclude that caution should be exercised in taking the results at face value.

Professor Terry Shevlin Title: “Macroeconomic Effects of Corporate Tax Policy” Co-authors: Lakshmanan Shivakumar, London Business School and Oktay Urcan UI-UrbanaChampaign Accepted at: Journal of Accounting and Economics Prior studies on the relation between corporate taxes and future macroeconomic growth present

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contradictory evidence. We argue this mixed evidence is at least partly due to the use of statutory corporate tax rates which ignore the complexity of tax exemptions, tax deductions, tax enforcement and firms’ tax planning. We propose an alternative tax rate measure that aggregates cash effective tax rates of listed firms, which reflect not only statutory tax rates, but also other features of the tax code, enforcement, and firm’s tax planning. We find a strong robust negative relation between country-level effective tax rates and future macroeconomic growth.

households are the least and self-employed households the most likely to be homeowners. Compared to Hindus, Muslims show significantly lower while other minority religions (Sikhs, Buddhists and Jain combined) show significantly higher propensity towards homeownership after controlling for other factors. Castes which have been victims of discrimination show significantly higher propensity towards homeownership. The propensity towards homeownership in discriminated class households significantly increases when endowed with esteem or affluence.

Professor N. Edward Coulson

Economics/Public Policy Professor N. Edward Coulson Title: “Caste, Faith, Gender: Determinants of Homeownership in Urban India” Co-authors: Prashant Das and Alan Ziobrowski Accepted at: Journal of Real Estate Finance and Economics Analyzing a large dataset of urban non-slum households, we find that homeownership tenure choice in India is significantly associated with gender, religion and caste. In particular, large households or those headed by women or with larger number of women are significantly more inclined towards homeownership than households of otherwise similar characteristics. Salaried

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Title: “Estimating Supply Functions for Residential Real Estate Attributes” Co-authors: Zhi Dong and Tien Foo Sing, National University of Singapore Accepted at: Real Estate Economics This paper is the ﬁrst to identify and estimate developers’ supply functions for real estate attributes. It introduces instruments that separate the demand side effects of real estate attributes and capture the nature of developers upon their initial business establishment into a two-stage estimation model. We construct a unique dataset by merging the datasets containing characteristics of projects and developers with the dataset of new private non-landed residential sales in Singapore. The study covers the period from January 1995 to March 2009. The supply functions for unit area and ﬂoor level are concave with developers’ building

experience, and convex with developers’ business age. Developers enjoy marginal cost reductions on the two attributes after they have developed 1,000 or more units; and young developers have steeper “learning curve” than other developers. Old and experienced developers demonstrate less elasticity in their supply functions than young and inexperienced developers. This study provides new empirical evidence on corporate learning curve and knowledge diffusion processes with regard to the supply of real estate attributes.

Professor N. Edward Coulson Title: “Tenure Tipping” Co-author: Gregory Wommer Accepted at: Regional Science and Urban Economics In light of the increased importance of the single family rental market, local policymakers and homeowners associations have expressed concern that neighborhoods might turn over, rapidly or otherwise, from largely owner-occupied homes to rental occupied properties. We construct a theoretical model of tenure tipping and employ the methods of Card, Mas and Rothstein (2009) to understand the nature of this type of neighborhood turnover. The CMR model demonstrates that tenure tipping is observed only in the 1990s and 2000s (and not in earlier decades). However, this is not tipping in the traditional sense, since robustness checks indicate that tipping is only observed in more rapidly growing neighborhoods. In the 2000s in particular, this is congruent with

investors in single family rentals geographically concentrating their investments in neighborhoods with sufﬁciently high initial rental share.

Professor N. Edward Coulson Title: “Competition and Appraisal Inflation” Co-authors: James Conklin, Moussa Diop and Thao Le Accepted at: Journal of Real Estate Finance and Economics In mortgage debt contracts, real property serves as collateral and the terms of mortgage financing are largely conditional on the certification of collateral value by appraisers. However, overstatement of collateral value is common in the appraisal industry, causing troubles in the mortgage market as observed in the recent crisis. In this paper, we examine whether competition in the appraisal industry affects appraisal bias. We model appraiser behavior given a loan officer’s preference for favorable appraisals (i.e. appraisal values at least as high as the transaction prices). As appraisers cater to loan officers to increase their probability of winning future business, our model predicts more inflated appraisals in more competitive markets. We confirm this prediction using a sample of purchase mortgages originated between 2003-2006 by a large subprime mortgage lender. Our results show that a one standard deviation increase in appraiser competition, measured at the MSA/year level, is associated with a 1.6 (3.7 percentage point) increase in the share of at-price

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appraisals. Furthermore, the effect is stronger in areas experiencing high house price growth.

Finance Professors David Hirshleifer, Ben Lourie and Siew Hong Teoh Title: “Decision Fatigue and Heuristic Analyst Forecasts” Co-author: Yaron Levi Accepted at: Journal of Financial Economics Psychological evidence indicates that decision quality declines after an extensive session of decision-making, a phenomenon known as decision fatigue. We study whether decision fatigue affects analysts’ judgments. Analysts cover multiple firms and often issue several forecasts in a single day. We find that forecast accuracy declines over the course of a day as the number of forecasts the analyst has already issued increases. Also consistent with decision fatigue, we find that the more forecasts an analyst issues, the higher the likelihood the analyst resorts to more heuristic decisions by herding more closely with the consensus forecast, by self-herding (i.e., reissuing their own previous outstanding forecasts), and by issuing a rounded forecast. Finally, we find that the stock market understands these effects and discounts for analyst decision fatigue.

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Professors David Hirshleifer and Siew Hong Teoh Title: “There Is Little Evidence that the Industrial Revolution Was Caused by a Preference Shift” Accepted at: Behavioral and Brain Sciences The idea, based on Life History Theory, that the Industrial Revolution was a positive feedback process wherein prosperity induced prosperitypromoting preference shifts, is just an intriguing speculation. The evidence does not distinguish this explanation from simple alternatives. For example, increased prosperity may have freed up time for individuals to engage in innovative activity, and increased the beneﬁts from doing so.

Professor David Hirshleifer Title: “Short and Long Horizon Behavioral Factors” Co-authors: Kent Daniel and Lin Sun (Merage School PhD ’15) Accepted at: Review of Financial Studies We propose a theoretically-motivated factor model based on investor psychology and assess its ability to explain the cross-section of U.S. equity returns. Our factor model augments the market factor with two factors which capture long- and short-horizon mispricing. The long-horizon factor exploits the information in managers’ decisions to issue or repurchase equity in response to persistent mispricing. The short-horizon earnings surprise factor, which is motivated by investor inattention and evidence of short-horizon underreaction,

captures short-horizon anomalies. This three-factor risk-and-behavioral model outperforms other proposed models in explaining a broad range of return anomalies.

Professor David Hirshleifer Title: “The Causal Effect of Limits to Arbitrage on Asset Pricing Anomalies” Co-authors: Yongqiang Chu and Liang Ma Accepted at: Journal of Finance We examine the causal effect of limits to arbitrage on 11 well-known asset pricing anomalies using the pilot program of Regulation SHO, which relaxed short-sale constraints for a quasi-random set of pilot stocks, as a natural experiment. We ﬁnd that the anomalies became weaker on portfolios constructed with pilot stocks during the pilot period. The pilot program reduced the combined anomaly long-short portfolio returns by 72 basis points per month, a difference that survives risk adjustment with standard factor models. The effect comes only from the short legs of the anomaly portfolios.

Professor David Hirshleifer Title: Shared Analyst Coverage: Unifying Momentum Spillover Effects Co-author: Usman Ali Accepted at: Journal of Accounting and Economics Identifying stock connections by shared analyst coverage, we ﬁnd that a connected-stock (CS)

momentum factor generates a monthly alpha of 1.68% (t = 9.67). In spanning regressions, the alphas of industry, geographic, customer, customer/supplier industry, single- to multisegment, and technology momentum factors are insigniﬁcant/negative after controlling for CS momentum. Similar results hold in cross-sectional regressions and in developed international markets. Sell-side analysts incorporate news about linked stocks sluggishly. These effects are stronger for complex and indirect linkages. These results indicate that previously documented momentum spillover effects represent a uniﬁed phenomenon that is captured by shared analyst coverage.

Professor Chong Huang Title: “A Theory of Multi-Period Debt Structure” Co-authors: Martin Oehmke and Hongda Zhong Accepted at: Review of Financial Studies We develop a theory of multi-period debt structure. A simple trade-off between the termination threat required to make repayments incentive compatible and the desire to avoid early liquidation determines the number of repayments, their timing, and repayment amounts. As firms increase their borrowing, they add periodic risky repayments from the back of the maturity structure, with the time between repayments increasing in cash-flow risk. Cash-flow growth or a significant risk-free cash-flow component limit the number of periodic risky repayments. Firms with significant risk-free cash-flow component choose dispersed maturity

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proﬁles with relatively safe repayments every period, rather than riskier, periodic repayments.

Professors Philippe Jorion and Christopher Schwarz

Professor Chong Huang

Title: “The Fix is In: Properly Backing out Backfill Bias” Accepted at: Review of Financial Studies

Title: “Star Ratings and the Incentives of Mutual Funds” Co-authors: Fei Li and Xi Weng Accepted at: Journal of Finance We propose a theory of reputation to explain how mutual funds’ ﬂows rationally respond to their star ratings. A fund’s performance is determined by its information advantage, which can be acquired but decays stochastically. Investors form beliefs about whether the fund is informed based on its past performance. We refer to such beliefs as the fund’s reputation, which determines its ﬂows. In equilibrium, as its performance records change continuously, the fund’s reputation may jump among discrete values. When discrete reputations are labeled by stars, investors rationally respond to star ratings, even though stars do not provide investors with new information.

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With assets now exceeding $3 trillion, the hedge fund market has become an essential segment of the asset management industry. This growth has been predicated upon the belief that hedge fund managers can add substantial value added. Measuring this performance accurately, however, is quite difficult, due to the fact that hedge funds are voluntarily reporting to commercial hedge fund databases, unlike mutual funds where reporting is mandatory. Such voluntary reporting creates the potential for “backfill bias.” This occurs when a hedge fund manager decides to list in a database, presumably after a period of good performance. In contrast, funds with poor performance never show up in databases, creating an upward bias in reported returns during the backfill period. Our paper finds that many empirical results in the literature are affected by this bias. We also show that the best practice for dealing with this issue is to remove returns prior to the listing date. However, since many hedge fund databases do not include listing dates, we propose a novel method to infer listing dates when not available.

Professors Zheng Sun and Lu Zheng Title: “Home Bias and Local Contagion: Evidence from Funds of Hedge Funds” Co-author: Clemens Sialm Accepted at: Review of Financial Studies Our paper analyzes the geographical preferences of hedge fund investors and the implication of these preferences for hedge fund performance. We find that funds of hedge funds overweigh their investments in hedge funds located in the same geographical areas and that funds with a stronger local bias exhibit superior performance. This local bias also gives rise to excess flow comovement and extreme return clustering within geographic areas. Overall, our results suggest that while funds of funds benefit from local advantages, their local bias also creates market segmentation that can destabilize the underlying hedge funds.

Information Systems Professor Vijay Gurbaxani Title: “Gearing Up for Successful Digital Transformation” Co-author: Debora Dunkle Accepted at: MIS Quarterly Executive Digital transformation – the reinvention of a company’s vision and strategy, organizational structure, processes, capabilities, and culture to match the evolving digital business context – is not only changing companies but also redefining markets and industries. Executives require frameworks to guide their transformations and assess their digital journeys over time. Given the scope of digital transformation, a useful framework must encompass strategic, technological, human capital, and organizational cultural considerations. Our research identifies six dimensions of digital transformation at the enterprise level. They are: a company’s strategic vision, alignment of the vision and its investments in digital transformation, the suitability of the culture for innovation, possession of sufficient intellectual property assets and knowhow, the strength of its digital capabilities (talent), and its use of digital technologies. The six-dimension framework facilitates benchmarking one’s company with others – either within a sector or against companies that are in the same state of progress towards digital transformation. In addition, executives can measure their company’s

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progress over time. Perhaps most importantly, the framework helps diagnose gaps in a company’s capabilities by identifying how it performs across each of the six dimensions relative to any comparison group.

Professor Vijay Gurbaxani Title: “Optimal Asset Transfer in IT Outsourcing Contracts” Co-authors: Shivendu Shivendu and David Zeng (Merage School PhD ’11) Accepted at: MIS Quarterly Many IT outsourcing arrangements include the purchase of the client’s IT assets by the vendor. Asset transfer benefits the client who can recapture some of their value through the sale and may even negotiate a lower price because the vendor may be more efficient in using these assets. On the other hand, asset transfer creates lockin for the client and limits her future contractual options. To study these tradeoffs, we develop a game-theoretic framework wherein asset transfer creates a one-sided switching cost to the client, and vendors have private information both on their intrinsic capabilities, either high or low, and on the level of quality-improving effort they exert. The quality of IT services depends on the vendor’s capability and quality-improving effort. In a two-period model, we show that when quality is verifiable, the client uses asset transfer as a device to design efficient screening contracts, so that a high capability vendor is selected. On the other

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hand, when quality is non-verifiable, the client mitigates contractual inefficiency by voluntarily locking herself into a long-term relationship with the vendor and may transfer assets at a lower than efficient level, even to a high-capability vendor. Our results show that asset transfer can play a strategic role in outsourcing relationships, not just an operational one.

Professor Mingdi Xin Title: “Nonlinear Pricing of Software with Local Demand Inelasticity” Co-author: Arun Sundararajan Accepted at: Information Systems Research Nonlinear usage-based pricing is applied extensively to price software products. Different from other products, software customers often cannot vary their required usage volume, a property we label local demand inelasticity. For instance, a client ﬁrm that needs a salesforce automation software either buys one user license for every salesperson in its organization or does not buy at all. It is unlikely to buy licenses for some salespersons, but not the others. This demand feature violates a critical assumption of the standard nonlinear pricing literature that consumers are ﬂexible with their usage volume, and the utility that consumers derive from using the product changes smoothly with their usage volume. Consequently, standard pricing solutions are inapplicable to many software products. This paper studies the optimal nonlinear usage-based pricing

of software when customers demand is locally inelastic. We demonstrate that this unique demand feature necessitates a fundamental reformulation of the traditional nonlinear pricing problem. We provide this reformulation and characterize the solution to a complicated nonlinear pricing problem with discontinuous and inelastic individual demand functions, virtually no restriction on demand distribution, and no single-crossing restriction on utility functions. We show that under a weak ordering condition of customer types, this complex pricing problem can be decomposed into a set of much simpler pricing problems with known solutions. Our pricing solution is applicable to a broad range of demand systems including the very popular normal and exponential distributions in prior literature. Managerially, our solution is based on parameters that are easily measurable in practice: the required consumption volume and value from this consumption for each customer. In contrast, typical nonlinear pricing problems require one to specify a complete utility function for every customer drawn from a continuum of customer types. Therefore, our solution likely makes empirical demand estimation and the realworld use of the analytical solution more viable. We discuss the characteristics of the optimal nonlinear pricing schedule and its welfare implications at the end.

Marketing Professor Kevin Duane Bradford Title: “Harnessing Internal Support to Enhance Customer Relationships: The Role of Networking, Helping, and Allocentrism” Co-authors: Yongmei Liu, Yuying Shi, Barton A. Weitz and Jun Xu Accepted at: Journal of Marketing Theory and Practice This research uses social problem theory to examine how salespeople obtain the internal support to address the needs of customers. We propose effectiveness in coordinating internal resources is related to customer relationship quality and subsequent performance. Salespeople can enhance their internal support by engaging in internal networking and helping behaviors. We also introduce allocentrism, a relatively stable, trait-like predisposition to value relationships with others. Allocentrism of salespeople is related to salespeople’s tendency to engage in internal networking and helping behaviors as well as external customer-oriented selling behaviors. The proposed relationships are supported by data collected from surveys of 326 salespeople.

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Professor Tonya Williams Bradford

Professor Connie Pechmann

Title: “Are We a Perfect Match? Roles for Mmarket Mediators in Defining Perfect Gifts” Accepted at: Routledge Interpretive Marketing Research

Title: “Hyperopia and Frugality: Different Motivational Drivers and Yet Similar Effects on Consumer Spending” Co-authors: Li Pan, Todd Pezzuti and Wei Lu Accepted at: Journal of Business Research

The market permeates much of everyday life, with ﬁrms and consumers alike welcoming the interactions. And, the prevalence of the market makes the engagement of market mediators to manage the most intimate aspects of life commonplace. Where engagement with the market is optional for some transactions, there are others where such engagement is necessary and even mandated, as with living organ donation. While transplantation may be perceived as a medical procedure, the laws governing living organ donation in the United States require that individuals gift an organ to another. This chapter considers how the necessitated presence of market mediators inﬂuences gift-giving processes, roles, and enactments.

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The effects of hyperopia and frugality on spending have not been directly compared. Moreover, previous research on hyperopia has focused on the avoidance of luxury spending, rather than spending on routine consumer goods. We address these gaps in the literature by comparing how hyperopia and frugality affect monthly spending, and spending on ordinary consumer goods. Our survey indicates that both tendencies relate to lower monthly spending. Our shopping experiment extends these ﬁndings by showing that both hyperopic and frugal consumers avoid purchasing higher priced consumer goods when lower priced substitutes are available. Our ﬁndings contribute to the literature, which suggests that hyperopic consumers avoid indulgent luxuries, by showing that they also avoid higher priced routine consumer goods and exhibit lower monthly spending, similar to frugal consumers, but for fundamentally different reasons. Hyperopia inhibits spending by lowering the motivation to spend, while frugality inhibits spending by increasing the motivation to save.

Operations and Decision Technologies Professor Robin Keller Title: “Valuing Sequences of Lives Lost or Saved Over Time: Preference for Uniform Sequences” Co-authors: Jeffery L. Guyse (Merage School PhD ’00) and Candice H. Huynh (Merage School PhD ’14) Accepted at: Decision Analysis Policymakers often make decisions involving human mortality risks and monetary outcomes that span across different time periods and horizons. Many projects or environmental regulation policies involving risks to life, such as toxic exposures, are experienced over time. The preferences of individuals on lives lost or saved over time should be understood to implement effective policies. Using a within-subject survey design, we investigated our participants’ elicited preferences (in the form of ratings) for sequences of lives saved or lost over time at the participant level. The design of our study allowed us to directly observe the possible preference patterns of Negative Time Discounting or a Preference for Spreading from the responses. Additionally, we embedded factors associated with three other prevalent anomalies of intertemporal choice (Gain/ Loss Asymmetry, Short/Long Asymmetry, and the Absolute Magnitude Effect) into our study

for control. We find that our participants exhibit three of the anomalies: Preference for Spreading, Absolute Magnitude Effect and Short/Long Term Asymmetry. Furthermore, fitting the data collected, Loewenstein and Prelec’s model for the valuation of sequences of outcomes allowed for a more thorough understanding of the factors influencing the individual participants’ preferences. Based on the results, the standard discounting model does not accurately reflect the value that some people place on sequences of mortality outcomes. Preferences for uniform sequences should be considered in policymaking, rather than applying the standard discounting model.

Professor L. Robin Keller and Visiting Professor Cristina del Campo Title: “Comparing Markov and non-Markov Alternatives for Cost-effectiveness Analysis: Insights from a Cervical Cancer Case” Co-author: Jiaru Bai (Merage School PhD ’17) Accepted at: Operations Research for Health Care Markov models allow medical prognosis to be modeled with health state transitions over time and are particularly useful for decisions regarding diseases where uncertain events and outcomes may occur. To provide sufﬁcient detail for operations researchers to carry out a Markov analysis, we present a detailed example of a Markov model with ﬁve health states with monthly transitions with stationary transition probabilities between states to model the cost

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and effectiveness of two treatments for advanced cervical cancer A different approach uses survival curves to directly model the fraction of patients in each state at each time period without the Markov property. We use this alternative method to analyze the cervical cancer case and compare the Markov and non-Markov approaches. These models provide useful insights about both the effectiveness of treatments and the associated costs for healthcare decision makers.

Professor Carlton Scott Title: “Models for Drone Delivery of Medications and Other Healthcare Items” Co-author: Judy E. Scott (Merage School MBA and PhD ’95) Accepted at: International Journal of Healthcare Information Systems and Informatics This article describes how a healthcare delivery drone has the potential for developing countries to leapfrog the development of traditional transportation infrastructure. Inaccessible roads no longer will prevent urgent delivery of blood, medications or other healthcare items. This article reviews the current status of innovative drone delivery with a particular emphasis on healthcare. The leading companies in this ﬁeld and their different strategies are studied. Further, this article reviews the latest decision models that facilitate management decision making for operating a drone ﬂeet. The contribution in this article of two new models associated with the design of a drone

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healthcare delivery networks will facilitate a more timely, efﬁcient, and economical drone healthcare delivery service to potentially save lives.

Organization and Management Professors Chris Bauman and Libby Weber Title: “The Cognitive and Behavioral Impact of Promotion and Prevention Contracts on Trust in Repeated Exchanges” Accepted at: Academy of Management Journal Although contracts certainly facilitate exchange, scholars debate whether contracts and trust are complements or substitutes. Recent theoretical work suggests that contract frames inﬂuence the relationship between contracts and trust. We test and extend this theorizing by examining the effects of prevention and promotion contract frames on trust and some potential cognitive and emotional mechanisms responsible for them. We also explore how unexpected negative events affect trust developed under different contract frames. Experiment 1 found that promotion contracts fostered stronger attributions of benevolence than prevention contracts, but emotional experiences of the exchanges did not differ. Additionally, trusting intentions were higher following positive exchange experience under promotion than prevention contracts. Experiment 2 found that people

were more willing to engage in trusting behavior following positive exchange experience under promotion than prevention contracts. However, violations of exchange expectations were more damaging to trust developed under promotion than prevention contracts. Together, the studies indicate that contract frames and whether exchange experiences are positive or negative affect the relationship between contracts and trust, likely because contract frames inﬂuence attributions of benevolence.

Professor Sharon Koppman Title: “Taking a Pass: How Proportional Prejudice and Decisions Not to Hire Reproduce Gender Segregation” Co-author: Ming Leung Accepted at: American Journal of Sociology The authors propose and test a novel theory of how decisions not to hire reproduce gender segregation through what they term proportional prejudice. They hypothesize that employers are less likely to hire anyone from an applicant pool that contains a large proportion of gender-atypical applicants--that is, those whose gender does not match the occupation stereotype--as this leads employers to form negative impressions of all of the pool’s applicants, regardless of gender. Analyses of over 7 million applications for over 700,000 job postings by more than 200,000 freelancers in an online contract labor market support their argument. A supplemental survey

experiment isolates the mechanism: applicant pools with a larger proportion of gender-atypical applicants were evaluated as less likely to contain people who “seemed skilled enough for the job.” The authors conclude by demonstrating how their theory reconciles the conﬂicting ﬁndings as to whether gender-atypical job seekers are disadvantaged in the hiring process.

Professor Sharon Koppman Title: “Who Moves to the Methodological Edge? Factors that Encourage Scientists to Use Unconventional Methods” Co-author: Erin Leahey Accepted at: Research Policy Breaking from tradition is necessary for scientiﬁc advancement, yet we know little about the factors that encourage individual scientists to break from tradition in their research, particularly to do so by using methods that are unconventional in their ﬁelds. To address this gap, we integrate the sociology of science with insights from organization theory, which delineates the evaluative advantages bestowed on those with elite status and a consistent professional identity. We use a mixed methods design. Bibliometric data on articles using three unconventional methods in sociology – Correspondence Analysis, Qualitative Comparative Analysis, and Sequence Analysis – allow us to identify which types of scholars have a greater hazard of using unconventional methods and the conditions under which these associations

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hold. Interviews with published, unpublished, and likely users reveal how scholars manage the career risks associated with unconventional method use. We find that scholars who are male and affiliated with top-tier universities, as well as those already committed to an identity consistent with the use of unconventional methods, have a greater hazard of using them in published work, though these associations depend on the extent to which the method diverges epistemologically from conventional methodology and the visibility of its lineage. In addition, we identify five successful (and two unsuccessful) strategies scholars use to manage their use of unconventional methods. Taken together, results from this mixed methods study advance knowledge on scientific practice, extend theory on valuation risk, and provides guidance to policymakers and administrators who aim to foster risky, path-breaking research.

Professor Sharon Koppman Title: “Will We Ever Meet Again? The Relationship between Inter-Firm Managerial Mobility and the Circulation of Client Ties” Co-authors: Joseph Broschak, Emily Block and Idris Adjerid Accepted at: Journal of Management Studies A large body of research shows that manager mobility weakens provider-client relationships because managers bring relationship-speciﬁc knowledge and expertise – i.e., human and social capital – with them to their new employers. This

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study extends this research by introducing a bi-directional perspective of social capital in which both firms and managers may exploit these relationship-specific resources. We use theory on social capital to build arguments about how employee mobility between two service providers in a single market can both lead and lag the movement of client ties between those providers, and signaling theory to hypothesize the conditions under which this is likely to occur. Analyses using longitudinal data on New York City advertising agencies generally support our arguments. Our findings contribute to theory and research on manager mobility, social capital, and signaling, and raises new questions for how the portability of relationship-specific social capital shapes markets.

Professor Jone L. Pearce Title: “Eyes Wide Open: Perceived Exploitation and Its Consequences” Co-authors: Ephrat Ofer and Jacqueline CoyleShapiro Accepted at: Academy of Management Journal Drawing on the array of literature on exploitation from several social science disciplines, we propose a new way of seeing employer-employee relationships by introducing the concept of perceived exploitative employee-organization relationships, distinguish it from related concepts, and conduct ﬁve studies to develop a scale and test our theoretical model of the effects of such employee perceptions. Contributing

to the Employee-Organization Relationships and workplace emotions literatures, perceived exploitation is defined as employees’ perceptions that they have been purposefully taken advantage of in their relationship with the organization, to the benefit of the organization itself. We propose and find that such perceptions are associated with both outward-focused emotions of anger and hostility toward the organization and inwardfocused ones of shame and guilt at remaining in an exploitative job. In two studies including construction workers and a time-lagged study of medical residents, we find that the emotions of anger and hostility partially mediate the effects of perceived exploitation on employee engagement, revenge against the organization, organizational commitment, and turnover intentions, whereas the emotions of shame and guilt partially mediate the effects of perceived exploitation on employee burnout, silence, and psychological withdrawal.

Professor Maia Young Title: “The Relationship Between Belief in Stable Luck and a Propensity for Superstition: The Influence of Culturally-Conferred Agency Beliefs” Co-author: Ning Chen Accepted at: Journal of Cross-Cultural Psychology Superstition is known to be positively associated with the belief in luck. However, prior research that has demonstrated the link between luck belief and superstition has not distinguished between two different types of luck beliefs – stable luck and

ﬂeeting luck – and their concomitant relationships with agency beliefs and superstition, as those vary by culture. The current research focused on the belief in stable luck and investigated the relationship between this belief and the propensity for superstition among Asians and Americans (Study 1) or Asian-Americans and non-AsianAmericans (Study 2). We found that belief in stable luck is positively associated with the propensity for superstition among Asians (Study 1) and Asian Americans (Study 2) but not among individuals without Asian cultural background. Furthermore, belief in collective agency mediated the effect of stable luck on superstition, but again, only for Asians (Study 3). The implications of these ﬁndings for the study of culture are discussed.

Professor Maia Young Title: “Motivated to Confront: How Experiencing Anger Affects Anchoring Bias” Co-author: Heajung Jung Accepted at: Journal of Behavioral Decision Making Prior research has asserted that emotions affect anchoring bias in decision making through the emotion’s certainty appraisal (Inbar & Gilovich, 2011) or through the emotion’s action tendencies (Jung & Young, 2012) but these prior studies investigate the role of each component – appraisal or action tendency – without accounting for potential effects of the other one. The current research investigates whether anger exerts a signiﬁcant effect on anchoring bias by activating a

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desire to confront a potential anchor. Importantly, the studies compare the effect of anger versus disgust, emotions that differ in their action tendency but are similar in their certainty appraisal. In Study 1, participants completed an emotion induction task and then a negotiation task where the ﬁrst offer from the negotiation partner served as a potential anchor. Anger led to more deviation from the anchor compared to disgust or neutral feelings. Subsequent studies provide evidence that the angry participants are less anchored when the anchor value comes from a more confrontable source (someone else versus themselves in Study 2 and an out-group member versus an in-group member in Study 3).

Strategy Professor Philip Bromiley Title: “Behavioral Strategy and Strategy Prescription” Co-author: Devaki Rau Accepted at: Advances in Strategic Management Research based on theories of how organizations do behave do not obviously connect to prescription (how organizations should behave). This article considers how to apply behavioral results to prescription in strategy and the potential pitfalls inherent in that effort.

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Professor Philip Bromiley Title: “Extending the Behavioral Theory of the Firm to Entrepreneurial Firms” Co-author: Devaki Rau Accepted at: Strategic Management Review While the Behavioral Theory of the Firm (BTOF) is one of the most popular theories of organizational change in the strategic management literature, the empirical work used to develop the theory used established firms; most empirical tests of the theory do likewise. Over the past decade or so, however, a number of studies have attempted to extend the BTOF to entrepreneurial firms. This paper examines the extent to which the BTOF applies to entrepreneurial firms. We propose that while some constructs and mechanisms specified in the BTOF (such as aspirations, routines, search, and learning) have limited relevance for entrepreneurial firms and need modifications to be relevant, other constructs and mechanisms (such as dominant coalitions and biases) have greater visibility and relevance in entrepreneurial firms than in larger firms. We conclude with a discussion of how we can most fruitfully apply the BTOF to explaining decision making by entrepreneurial firms.

Professor John Joseph

Title: “Regulatory Uncertainty, Corporate Structure, and Strategic Agendas: Evidence from the U.S. Renewable Electricity Industry” Co-author: Nilanjana Dutt Accepted at: Academy of Management Journal

Title: “The Limits of Relational Governance: Sales Force Strategies in the Medical Device Industry” Co-authors: Aaron K. Chatterji and Colleen M. Cunningham Accepted at: Strategic Management Journal

Prior research has demonstrated that although organizations generally avoid uncertainties, this behavior is not universally true. To understand better the contingencies around organizations’ responses to regulatory uncertainty, we consider the influence of corporate structure on attentional processing. Our theory and findings suggest that because corporate structure differentiates their problem-solving and learning activities, headquarters and subsidiaries differ in attention allocation on their strategic agendas. Our results show that headquarters display lower levels of uncertainty aversion than subsidiaries, but all organizations generally make greater shifts in attention toward alternative courses of action if they possess complementary experience and access shared experience. We test these ideas using a sample of U.S. electric utility companies attending to renewable technologies from 2000 to 2010: a market greatly affected by regulatory uncertainty. By linking models of decision making under uncertainty and learning with the attentionbased view, we develop a more comprehensive understanding of the ways uncertainty influences organizational attention.

We explore how interorganizational relationships shape firm boundary decisions. Using data on 545 U.S. medical device manufacturers’ product portfolios and sales-governance choices (i.e., internal or external sales forces) from 1983 to 1996, we find relational capital between manufacturers and external sales forces influences future firm boundary decisions. Relational capital lowers the likelihood of integrating the sales function, but only when firms remain focused on the same product market. Further, launching an innovative product has a nuanced effect. For firms lacking relational capital, innovation increases the likelihood of sales integration. This pattern reverses as relational capital accumulates, but only when innovations are in the firm’s existing focal product market. Our findings suggest important limits on the effect of relational governance on firm strategy.

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Professor John Joseph Title: “Reviewing, Revisiting, and Renewing The Foundations of Organization Design” Co-authors: Oliver Baumann, Richard Burton, Kannan Srikanth Accepted at: Advances in Strategic Management In this paper, we brieﬂy review the evolution of organization design research. We then revisit the key themes in organization design and use text analysis to uncover changes in the design-related themes that typify management research over the last half century. Next, we consider what might have driven these changes. We posit that research has shifted because of decreasing decomposability of organizations, rising importance of alternative units of analysis, and a corresponding greater interest in dynamics as embodied by adaptation and learning. Finally, we discuss the papers in this volume and show how they contribute to its theme and the renewal of organization design research.

that the transformation of ideas into a great strategy is shaped by the ﬁrm’s identity and corresponding patterns of organizational attention. Furthermore, great strategies focus attention on creating value for the customer—through the ﬁrm’s value proposition and business model— relative to capturing value for the shareholders. Finally, we propose that great strategies emerge from a focused, strategic agenda communicated and distributed throughout the organization. We illustrate our propositions by comparing Apple and Motorola, which began with similar ideas for developing a strategy for seamless integration and seamless mobility, with smartphones as the digital hub. Apple sustained focused attention on transforming the ideas into the great strategy and business model behind the iPhone, while Motorola did not focus or sustain attention throughout the organization on developing its original ideas, leading to strategic failure.

Professor Luke Rhee

Title: “The Attention-based View of Great Strategies” Co-author: W. Ocasio Accepted at: Strategy Science

Title: “Performance Feedback in Hierarchical Business Groups: The Cross-Level Effects of Cognitive Accessibility on R&D Search Behavior” Co-authors: William Ocasio and Tae-Hyun Kim Accepted at: Organization Science

For the attention-based view, the origins of the ideas behind a great strategy are less important than the ability of the organization to sustain focused attention in developing, implementing, and elaborating good ideas into a distinctive strategic agenda for value creation. We propose

This study examines the cross-level effect of group-level managers on member ﬁrms’ problemistic search in hierarchical business groups. Using multi-level data from Korean business groups, we propose that the effects of failure to

Professor John Joseph

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meet an aspiration level on R&D search intensity increase when member firm performance and R&D investments are more cognitively accessible to group-level managers. Specifically, we find, first, that when underperforming firms are widespread in a business group, a focal member firm intensifies R&D search in response performance below an aspiration level because member firm performance, as a group-level problem, becomes cognitively accessible to group-level managers. Second, as member firms operating in R&D intensive industries are more prevalent in a business group, R&D investments, as a search solution, become more cognitively accessible to group-level managers. Thus, a focal member firm reinforces R&D search in response to the performance shortfall. We discuss the implications of these findings for research on the behavioral theory of the firm and performance feedback.

consensus earnings estimate, managers will utilize corporate downsizing in order to meet this target. Using panel data on S&P 100 companies, we find that pressure felt by management to meet the analyst consensus earnings estimate influences the extent of corporate downsizing. Moreover, our results show that high levels of institutional investor stock ownership and CEO power attenuate managers’ sensitivity to financial market pressures, while high levels of analyst coverage increase their sensitivity. Our study highlights the importance of future focused and externally determined performance targets as aspirational levels of performance.

Professor Margarethe Wiersema Title: “The Impact of Earnings Expectations on Corporate Downsizing” Co-authors: Ann-Christine Schulz Accepted at: Strategic Management Journal We propose that due to financial market pressures, managers are forward-looking in their search and decision processes and focus on meeting performance targets set by the financial community. When the firm’s future performance is likely to fall short of the investment analyst

RESEARCH IN ACTION

FALL 2019

Appointments, Awards and Honors Joanna Ho, accounting,

Connie Pechmann,

has been appointed associate dean of master’s programs effective January 1, 2019.

professor of marketing, has been named the 2019-2020 recipient of the Academic Senate Special Award for Impact on Society. This prestigious award is conferred by the Senate on a faculty member whose professional performance has positively impacted the disadvantaged world community in an extraordinary manner.

Welcome New Faculty Members Behnaz G. Boid

Ming D. Leung

Assistant Professor of Information Systems

Associate Professor of Organization and Management

Behnaz G. Bojd joins the Merage School as an assistant professor of information systems. Bojd’s research focuses on two main areas: online health communities and online matching markets. She empirically studies the effect of such online platforms, their design, and mechanisms on consumer behavior. She pursued her PhD in business administration (information systems) at the University of Washington and earned her master’s degree in industrial engineering (operations research) at the University of Southern California and her bachelor’s degree in industrial engineering (industrial technology) at Iran University of Science and Technology.

THE PAUL MERAGE SCHOOL OF BUSINESS

Leung was previously at UC Riverside and UC Berkeley. His research interests are in careers, hiring, and labor markets. Speciﬁcally, he studies diversity and discrimination issues and the role of technology in reshaping how organizations hire and promote. He focuses on innovative, contemporary platform markets, such as virtual freelancing and mobile gig-economy work. Leung’s research has appeared in top management and sociology journals, including: Organization Science, Management Science, American Journal of Sociology, and American Sociological Review. His work has been featured on NPR Science Friday and the Financial Times. Leung has advised both large and small companies, including UpWork, Google, Wonolo,

Atipica and Intel on issues of hiring and diversity initiatives. He has a PhD from Stanford University’s Graduate School of Business, an MBA from University of Chicago’s Booth School of Business and a BS from Carnegie Mellon University.

Kenneth (Ken) E. Murphy Assistant Professor of Teaching of Operations and Decision Technologies Murphy holds a PhD in operations research from Carnegie Mellon University, MS in statistics from Oregon State University and BA in mathematics from Reed College. He has published work on scheduling, technology implementation and organizational effectiveness in Operations Research, Naval Research Logistics, Communications of the ACM and Information Systems Journal among others. Murphy possesses signiﬁcant senior leadership experience having served as associate provost and assistant dean at his former institution. In this role, he provided guidance and direction for process improvement and business analytics initiatives with the goal of building a data driven decision-making culture in the academic context.

outlets, including The Economist, the Financial Times, The New York Times and The Wall Street Journal. He has won the Jensen Prize for the best corporate ﬁnance paper in the Journal of Financial Economics and has presented his work at more than 40 universities and numerous national and international conferences. Xuan holds an AM and a PhD in business economics from Harvard University.

Chenqui Zhu Assistant Professor of Accounting Zhu’s research interest primarily lies in the intersection of information and innovation, such as knowledge diffusion and information dissemination in the technology and capital markets. She is also interested in using big data and textual analysis techniques to study the decision-making of different market participants. She earned a bachelor’s degree from Renmin University of China, an MPhil in economics from Chinese University of Hong Kong and a PhD from New York University.

Yuhai Xuan Dean’s Professor of Finance Yuhai Xuan joins the Merage School as a dean’s professor of finance. Before coming to UCI, Xuan was a professor of finance at the University of Illinois at Urbana-Champaign. He is an associate editor of the Journal of Financial and Quantitative Analysis, Management Science and the Journal of Empirical Finance. Xuan’s research focuses on corporate finance, corporate governance and behavioral finance. His work has been published in leading academic journals, and has been covered in various media

RESEARCH RESEA RESEAR CH IN ACTION

FALL 2019

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