Fourteenth Edition | Spring 2023
INSIDE THIS ISSUE
Insights on the Role of Culture in International Negotiations
Public-Sector Pension Policy: How Changes to Accounting Standards Affect Us All
How Recognition Impacts Group Creativity
Not many research reports can claim the expansiveness of recently published work from John Graham and his colleagues. Why? Well, this body of research includes nearly 40 years of studies involving 20 cultural groups from countries such as China, Brazil, Russia, Japan, Iran, Spain, Canada, and more.
Applying the lens of marketing science, behavioral economics, anthropology, and sociolinguistics, among others, the research examines the way culture impacts behaviors, processes, and outcomes within international business negotiations.
“We hope to help international negotiators understand the cross-cultural differences that can impact business relationships,” Graham explained. “We knew from other research that the success of international commerce largely revolves around the cultural diversity of its participants, but we wanted to better understand under what conditions this was true.”
To gather data from outside the U.S., Graham partnered with local researchers in target countries who were interested in replicating the studies within their cultures. In addition to the work of his co-authors, Mehdi Mahdavi and Navid Fatehi-Rad of the Islamic Azad
University in Kerman, Iran, Graham’s research required the ongoing commitment of research partners in every other country studied. This resulted in a database of results gathered from 1,198 experienced business people with an average age of 35 years and at least two years of work experience. Participants engaged in a three-product, two-party, mixed-motive, intracultural, buyer-seller negotiation simulation. Identical methods were used in each of the collection locations around the world and were compiled for over 36 years. Detailed reports on the body of work are available in the Summer 2020 and Fall 2020 publications of the Negotiation Journal
To distill and contextualize this data for an audience outside of academia, Graham has co-authored four books on international negotiations.
“I want business people, business students, curious people of all kinds to have access to what we’ve learned through this compilation of research,” Graham said. “Of particular interest for me were the lessons for Americans. Our research suggests that we still have a lot to learn when it comes to global negotiations, and I think this body of work synthesizes those lessons into some revolutionary ideas for Americans that can help them in any other country where they do business.”
Graham’s interest in international negotiations began in the 1970s when he worked for Caterpillar selling oilfield equipment around the world. In observing his peers, he quickly learned what contributed the most to a successful sale—the salesperson’s negotiation style.
“It didn’t take long to see where Americans fell short in negotiating,” Graham said. “For example, Americans are generally uncomfortable with periods of silence in a conversation. But those silences are fairly common in other cultures. In coaching Ford executives in the 1980s, I had to advise them to pause a bit longer between statements when negotiating with their Japanese counterparts. Otherwise, the Americans from Ford would end up doing all the talking to the detriment of the whole business relationship.”
Since then, international commerce has only gotten more complicated. It involves complex supply chains connected by dozens of collaborations that are regularly in a state of flux driven by technological change, accelerating globalization, consumer demand, and many other factors. According to Graham’s research, what holds everything together amid this chaos are not efficient processes, slick bargaining tactics, or even creative problem-solving.
“What ends up mattering are long-term interpersonal and commercial relationships that promote cooperation and reciprocity,” Graham explained. “We’ve named it ‘inventive negotiation’ because the main goal is discovering common opportunities. Inventive negotiation is an innovation process, not a competitive game.”
In inventive negotiation, a person’s culture is a fundamental component that impacts the behaviors within and the outcomes of the negotiation and, perhaps more importantly, the relationships between those behaviors and outcomes. Graham explained that the first step in harnessing the power of inventive negotiation is simply paying attention to the variety of cultural differences across the U.S. and around the world. Being observant of, curious about, and respectful of the culture of the person across the table is a powerful behavioral tool.
“For instance, in Brazil, it’s common for people to interrupt or talk over each other, but in some cultures like our own, interruptions are considered impolite,”
Graham said. “Without a mutual understanding, what is simply a cultural difference can end up causing tension and frustration or even permanently damage the partnership.”
Graham’s contributions to international business, both the negotiations and marketing fields, show no signs of slowing anytime soon. In particular, he is interested in communicating his learnings in other ways, namely, through several upcoming books. His novel, Charlotte’s War, is due out in June 2023, and later that year, two children’s books focused on multigenerational families. The 19th edition of his international marketing textbook is the most popular book in the world on the topic, having been translated into seven languages, and will also be published in 2023.
According to Graham, the main goal of all his publications is to promote peace within families, businesses, nations, and the world. In his experience, international commerce is one of the best ways to do so.
“I am convinced that the key to world peace is international trade. Trade relationships are the most common global relationships, and they have been for centuries. When you’re on an international flight, chances are over half the people flying with you are businessmen and women,” Graham explained.
“I believe that if the U.S. intends to rebuild and strengthen relationships with China, Russia, Iran, and Cuba, trade has to lead that process. We need to talk about mutual opportunities so we can mutually benefit each other. Otherwise, we’ll find nations becoming more and more inwardly focused and unable to interact with and care about one another.”
John Graham, is an author and professor emeritus of international business at the UCI Paul Merage School of Business. For four decades, he has provided expert advice and training on international negotiations to executive groups at Fortune 500 companies and government organizations including the U.S. Institute of Peace. Graham has published more than 60 articles in journals such as the Harvard Business Review, the Harvard Law School’s Negotiation Journal, the Journal of Marketing, and Management Science. His seven books with partners have all been best sellers on their respective topics. Graham is a founding director and has been an advisory board member of the UCI Center for Citizen Peacebuilding during the last two decades.
For those who do not work in the public sector, you may not pay attention to governmental accounting standards that impact pension funding. However, recent research from Elizabeth Chuk, Associate Professor at the UCI Paul Merage School of Business, may change that.
Along with research partner Divya Anantharaman of Rutgers Business School, Chuk discovered that within a sample of 100 large state-administered pension plans, recent changes to financial reporting requirements have impacted pension funding and pension policy as a whole.
“These changes impact all of us whether we are state employees or not,” Chuk explained. “Any reporting standards that change how governments fund pensions are relevant to everyone because the cost of these pensions is eventually borne by taxpayers.”
For example, most states have laws that require their government to create balanced budgets each year, so for every dollar it spends on pension funding, that’s one less dollar in the budget for something else. Since the mid-2000s, governments in states like New Jersey and Illinois and in cities like Detroit have struggled with pension funding shortages. This has raised concerns that to compensate, governments were shifting money allocated for roads, schools, fire departments, and other public services into pension plans.
“The financial crisis in 2008 revealed how severely underfunded pensions had become,” Chuk said. “In some cases, plans had only 40 cents to the dollar to cover liabilities. When the media caught wind of such large deficits, the problem became impossible to ignore.”
But the financial crisis was only the proverbial straw for an already precarious system. According to a report from The Pew Charitable Trusts and the Laura and John Arnold Foundation, public pension funding has been increasingly tied to risky assets since the early 1980s. When these assets failed during the crisis, large sums of money allocated for pensions quickly disappeared. On the corporate side, some companies had to declare
bankruptcy due to these massive pension deficits. On the government side, officials scrambled to compensate for similar deficits within public-sector pensions. Meanwhile, employees were left wondering whether they would receive the benefits promised to them, and citizens were left with the possibility of higher taxes.
“Most people don’t realize the government actually provides pension insurance for private companies like Toyota, American Airlines, and others,” Chuk said. “This means that during the financial crisis, the government had to step in to fund failing plans. But just like car insurance or medical insurance, pension insurance doesn’t cover all the costs. In fact, in some cases, it only covered about 16 cents for every dollar owed. To make matters worse, even that 16 cents is eventually passed onto the taxpayer. So, even the corporate funding shortfall ended up impacting us as citizens, and the magnitude was in the trillions of dollars.”
“Because so many plans were and still are underfunded, they didn’t and still don’t have most of that money set aside,” Chuk said.
“This means that the reporting changes required by GASB 67/68 made the liabilities of the pensions look less favorable than they had before. Our study revealed that as a result, plan administrators often contributed more money to close those funding gaps so they could use the higher discount rate. As researchers, we found this interesting because the changes from GASB 67/68 did not in any way ask administrators to put more money into pensions; they just required stricter measurement and reporting of obligations and discount rates. In other words, the requirements were just about disclosure, but they ended up changing pension funding overall because of what administrators decided to do.”
Chuk explained that GASB 67/68 did meet their intended outcome. Investors, credit-rating entities, government officials, and taxpayers all have more clarity on how much pension liabilities actually are. The unintended outcomes, however, are important for researchers like Chuk to discover and share with both academia and the general public.
Her study’s hypothesis accurately predicted the unintended consequence of funding increases in general, but Chuk and her research partner were surprised by some of the variations from state to state.
For instance, in states with upcoming elections, pension plan administrators were more likely to increase funding than in states without upcoming elections. Chuk speculates this could be a result of pressure from incumbent politicians who want to avoid the mention of deficits. The study also found states with higher union membership had greater pension funding perhaps because those employees had stronger negotiating power via their unions.
But ultimately, are increases in pension funding actually a problem? After all, doesn’t a bump in funding now mean fewer deficits for the government down the road? According to Chuk, the answer is not straightforward. For one thing, some governments didn’t have the assets needed to increase funding, so they had no choice but to cut plan benefits.
“A cut to benefits is particularly hard on employees who have already retired,” Chuk said. “Instead of receiving the equivalent of a dollar for every year worked, retirees may only receive 70 cents worth of benefits. Another common cut was to COLAs [cost-of-living adjustments]. Employees who had expected to get a 5 percent COLA
annually were now getting COLAs of only 3 percent.” While benefit cuts most directly affect employees and retirees, Chuk pointed out that in states where funding could and did increase, taxpayers ultimately bear the burden of those costs. Returning full circle to the reason all these matter to the general public in the first place, any increase in money allocated for pensions means that money is not available for other services.
“If the plan administrators couldn’t increase funding, they had to cut pension benefits for current and past employees. If they could increase funding, they had to shift that money from elsewhere in order for the government to present a balanced budget. It had to be one or the other,” Chuk explained.
“It’s really important to us as researchers to make people aware of how these financial decisions their governments are making affect them in very real and lasting ways. Hopefully, this information helps citizens, lawmakers, and elected officials make more informed choices when it comes time to vote, pass laws, and enact policy.”
While most of Chuk’s research on pensions has previously focused on the corporate sector, this current study, her first foray into the field of government-funded pensions, has captured her interest. Going forward, she hopes to continue exploring the space of public pensions and, in particular, how politics and policy are influencing these pensions.
Elizabeth Chuk is an Associate Professor at the UCI Paul Merage School of business. Prior to her time at UCI, she worked as an Assistant Professor at the University of Southern California for six years. Before entering academia, Chuk worked for Deloitte & Touche as a staff auditor and for Levi Strauss & Company as an accountant. In addition to her current faculty role, Chuk serves as an ad hoc reviewer for the Journal of Accounting Research, The Accounting Review, Contemporary Accounting Research, and others. Her primary research interests include financial reporting, consequences of accounting standards, defined benefit pensions, and earnings management.
Does receiving recognition for creative work actually end up stifling the creative process down the road? It may seem counterintuitive, but research from Noah Askin, Assistant Professor of Teaching Organizations and Management at the UCI Paul Merage School of Business, and his colleagues suggest this could be the case. In a study soon to appear in Administrative Science Quarterly, Askin and his team explored how group responses to professional acknowledgment impacted their creative endeavors going forward.
“Most research in this area focuses on creativity in the moment,” Askin explained. “It tends to examine the creative process on a short-term basis. We wanted to look at what happens to groups over time as they repeatedly work together creatively.”
To do this, Askin and his team chose to filter their research through the lens of the music industry, namely bands nominated for a Best New Artist Grammy from 1980 to 1990. This lens allowed them to develop a theory of group reactions to accolades and how those reactions influenced the future creative work of bands and musicians.
The idea for this research blossomed during the eight years Askin spent at INSEAD, Institut Européen d’Administration des Affaires in France, where colleagues Spencer Harrison and Lydia Hagtvedt had already begun collecting qualitative data. Because of Askin’s mastery of quantitative data collection, particularly regarding how music performs and how songs sell, the team knew he would add an invaluable quantitative element to the research, further elevating the reliability and applicability of the results.
“Spencer and Lydia had already done great work collecting publicly available interviews for the music groups in the sample and creating from those a history of each band’s career,” Askin said. “I came into the study to triangulate with quantitative support the themes that emerged from those histories.”
For example, when bands expressed they experimented with the acoustic features of their music after the Grammy nomination, Askin looked at the measurable acoustic features of subsequent albums and compared that to the acoustic features of the Grammy-nominated album. The desire was to see if there was evidence those bands did indeed experiment.
“For me, this was an opportunity to build on previous
research where I analyzed how song novelty or creativity influenced chart performance,” Askin said. “Historically, I’ve been looking at the creativity at the product level in that I’m examining how music performs commercially. This study adds longevity to the mix; it takes that single instance of creative output—the Grammy-nominated album—and sees how that creativity progresses over time as the group keeps making music together.”
The study found groups tend to react in one of three ways upon receiving an early-career accolade like a Grammy nomination. Askin’s team refers to these as “recognition orientations.” The “absorbing” orientation describes a group that internalized the surge of input and higher expectations it receives and opened its relationships and creative process to outsiders. The “insulating” orientation applies to groups that kept expectations and feedback at arm’s length and protected the groups’ relationships. The “mixed” orientation refers to a group that initially internalized the outside voices but eventually learned to compartmentalize the feedback.
For all three orientations, acknowledgment and attention can disrupt or even damage the group’s creative process, but according to this research, absorbing groups tended to struggle the most with sustaining their creative output over time.
“Counterintuitively, a group that internalizes and absorbs the recognition is less likely to earn similar recognition in the future because their creative process takes a hard hit,” Askin explained. “Studies do tend to show that more voices, especially diverse voices, increase creativity in groups and teams, but we found that if you have to deal with a lot of opinions about your creative endeavors, you might have a hard time focusing on what you actually need to do to continue your success.”
That’s not to say creative activities cannot or do not
benefit from outsider input. Still, the key seems to be striking a balance between getting recognition (and its ensuing glut of voices) and staying true to the actual process that led to the recognition in the first place. But Askin’s team’s research indicates striking such a balance is quite difficult to do. Because the Best New Artist Grammy nomination is likely to happen early in a band’s career, it can be destabilizing. It may be the first time the group has encountered so many external opinions from fans, record labels, and peers.
“So, in the midst of getting all kinds of attention, a band now must not only figure out how to reproduce the results on their next album, they must also juggle the expectations of their fans, appease their record label, and decide which advice to follow, all while trying to maintain enough creative energy to actually do the work,” Askin said. “It really is difficult to manage everything. Absorbing groups in particular tend to start rushing their work or trying to match their former sound, and this often leads to less creativity and possibly less success.”
Askin also noted that, interestingly, bands in earlier eras did not face this challenge as much. The Best New Artist Grammy was first awarded in 1959, well before MTV, digital recording, streaming services, and social media. At that time, the input of others had fewer ways of making its way to the nominated bands.
“That media spotlight started adding more pressure to bands that were nominated,” Askin explained. “It became much more difficult to downplay or contextualize the recognition and stay true to who you want to be as a band and what kind of music you want to make.”
For instance, rather than opening the creative
process too much and possibly damaging the band’s interpersonal dynamics, the musicians can elect to take short-term hiatuses. In other words, if the creative energy or flow doesn’t feel right, this research suggests it’s best to take a break and return later with a fresh mindset.
Such an approach could ultimately help preserve the longevity of a creative group. While the absorbing orientation tends to lead groups toward permanent separation, the insulating orientation can inspire healthy, amicable sabbaticals after which groups can come back together with renewed creative energy and interpersonal trust.
Building upon this and other studies, Askin is now examining how to demonstrate the way creativity is shared. This research will map out which attributes lead to the most creative and most novel songs.
“Am I more creative because I work with certain people? Is my music more creative when I record in L.A. instead of Nashville? These are the types of questions I want to answer,” Askin said. “Using the categories of genre, people/network, geography, and organizational affiliation (record label), I want to explore which of those variables, or combination of variables, most directly influences what I—as a musician—can and can’t do creatively.”
Noah Askin is an assistant professor of teaching organizations and management at the UCI Paul Merage School of Business. His research interests include the production and consumption of culture, creativity and how it is fostered and received, as well as interpersonal networks and their influence on the creative process. He is one of the founding members of the Creative Industries Conference and maintains ties to the business and not-for-profit sectors as a coach and consultant.
Professor
Joanna HoTitle: “The Effects of In-Group Identity and Clarity of the Bonus Determination Criteria on Supervisors’ Discretionary Bonus Adjustments: Field Evidence from China”
Co-author: Cody Lu and Anne Wu
Accepted at: Journal of International Accounting Research
This study examines the influence of in-group identity between supervisors and subordinates and the clarity of the bonus determination criteria on supervisors’ discretionary adjustments of subordinates’ bonus compensation through the lens of social identity theory. Using field data from a multinational manufacturing company’s subsidiary in China, we find that in-group sales agents receive higher bonus awards and that this effect is more pronounced when there is high clarity of the bonus determination criteria. Additional analysis shows that these effects hold for higher-tenured sales agents and in regions characterized by lower sales agent turnover. Finally, we find that higher bonus awards are positively (negatively) associated with in-group sales agents’ future performance when there is low (high) clarity of the bonus determination criteria. Our findings hold potential implications for management practices in corporations operating in countries that have strong relationship-based cultures.
Title: “Are Key Audit Matter Disclosures Useful in Assessing the Financial Distress Level of a Client Firm?”
Co-authors: María-del-Mar Camacho-Miñano and Nora Muñoz-Izquierdo
Accepted at: The British Accounting Review
This study examines the usefulness of new expanded audit report key audit matters (KAM) disclosures in assessing the level of financial distress present at a client firm. Using six years of KAM disclosures for U.K. Premium-listed firms beginning in 2013, we investigate the relation between firm financial distress and the number, risk level, financial statement impact, and individual nature of auditor-disclosed KAMs. We expand on literatures examining audit report disclosures in gauging financial distress assessments as well as the utility of expanded audit reporting. We find the greater the number of KAMs disclosed, the higher a firm’s financial distress level. Additionally, results show entity-level KAMs, account-level KAMs with a primary impact on profitability and solvency, and certain types of individual KAMs are more likely to be disclosed when client firms face higher levels of financial distress. The results are robust to alternative measures of financial distress and to endogeneity tests. Our
findings also indicate KAMs have predictive ability in assessing subsequent periods’ financial distress levels. In all, evidence from this study suggests a way financial statement users can use independent auditor disclosures to assess one of the main risks associated with a firm - the risk of failure.
Professor Chenqi Zhu
Title: “All losses are not alike: Real versus accounting-driven reported losses”
Co-authors: Feng Gu and Baruch Lev
Accepted at: Review of Accounting Studies (Journal on Financial Times Top 50 list)
We examine the value relevance of accounting-driven losses that result from the immediate expensing of firms’ internally-generated intangible investments vs. losses occurring irrespective of intangible investments. Contrary to the long-held view that losses are less relevant than profits for valuation, we find that once the accounting bias of intangibles-expensing is undone, earnings of firms reporting intangibles-driven losses are as informative as earnings of profitable firms. Furthermore, contrary to the view that persistent losses decrease earnings relevance, our evidence shows no decrease in the relevance of earnings for firms reporting persistent intangiblesdriven losses. We also find that firms reporting intangibles-driven losses subsequently outperform other loss firms and even profitable firms in value creation from investments in technological innovation and human capital. Our evidence further shows that firms reporting intangibles-driven losses have stronger future performance than other firms. Taken together, the results of this study demonstrate the fundamental differences between losses driven by the immediate expensing of internally-generated intangible investments and losses reflecting genuine business performance shortfalls. Standard accounting performance measures, however, do not properly reflect these operational differences and their implications.
Professor Ed Coulson
Title: “An Alternative Approach to Estimating Foreclosure and Short Sale Discounts”
Co-authors: James Conklin, Moussa Diop, and Nuno Mota
Accepted at: Journal of Urban Economics
Current research documents astonishingly large price discounts for foreclosures and short sales. However, such outsized estimates may largely be due to omitted variables bias. We propose an innovative methodology relying on appraisers’ ability to match properties along both observable and unobservable attributes when performing appraisals. Our empirical
approach, which relies on the use of appraisal fixed effects, produces foreclosure and short sale discounts of approximately 5% after controlling for a rich set of characteristics, including quality and condition, attributable mostly to the stigma associated with distress itself. We show that these lower estimates are not due to appraisers selecting high-price distressed properties as comps and are robust across a wide variety of subsamples and under alternative estimation methods.
Professor Jinfei Sheng
Title: “Do Investors Affect Financial Analysts’ Behavior? Evidence from Short Sellers”
Co-authors: Kin Lo, Yun Ke, and Jenny Zhang
We examine how short sellers affect financial analysts’ forecast behavior using a natural experiment that relaxes short-sale constraints. We find that increased ease of short selling improves analyst earnings forecast quality by reducing forecast bias and increasing forecast accuracy. The improvements can be explained by both the disciplining pressure from short sellers and increased price efficiency from incorporating information in a timely manner. Although it is well documented that financial analysts can affect investors, our paper provides novel evidence on how sophisticated investors, short sellers, can affect analysts.
Title: “Partisan Return Gap: The Polarized Stock Market in the Time of a Pandemic”
Accepted at: Management Science (Journal on Financial Times Top 50 list)
Using two proxies for investors’ political affiliation, we document sharp differences in stock returns between firms likely dominated by Democratic investors (blue stocks) and those dominated by Republican investors (red stocks) during the COVID pandemic. Red stocks have 20 basis points higher risk-adjusted returns than blue stocks on COVID news days (Partisan Return Gap). Lockdown policies, COVID cases, industry and firm fundamentals only explain at most 40% of the return gap. Polarized political beliefs about COVID, revealed through people’s social distancing behaviors, contribute to about 40% of the return gap beyond the fundamental channel. Our paper provides partisanship as a novel aspect in understanding abnormal stock returns during the pandemic.
Title: “Lending Next to the Courthouse: Exposure to Adverse Events and Mortgage Lending Decisions”
Co-author: Da Huo, Bo Sun, and Mingzhu Tai
Accepted at: Journal of Financial and Quantitative Analysis (Journal on Financial Times Top 50 list)
Adverse market events can affect credit supply not only by hurting financial fundamentals but also by changing the risk-taking behaviors of individual decision makers. We provide micro-level evidence of this individual decision-making channel in the U.S. mortgage market. We find that mortgage application rejection rates are more sensitive to foreclosure intensity when loan officers are more exposed to foreclosure news, despite the same housing market and bank fundamentals. Loans originated from the affected branches have lower ex-post default rates, consistent with higher lending standards being applied. In the aggregate, this effect results in tighter credit supply during housing market downturns.
Professor Tonya Bradford
Title: “The Influence of Ritual Efficacy on Ritual Vitality: Temporal Plaiting in the Vestaval”
Co-author: John F. Sherry Jr.
Accepted at: Journal of Marketing Management
Ritual, which connects participants within brand communities, is a vehicle for creating and understanding time. Consumer and marketplace rituals have been theorised with respect to staging, enactment, outcomes, and place-making, but little consideration has been devoted to the timescapes that shape them. The study of time in marketing research is broadening beyond the chronos of chronology to the kairos of apperception or momentous liminality. We analyse distinct and interwoven chronos and kairos temporal strands experienced through the course of the vestaval ritual embedded within a brand community, in a plaiting process that ensures that contrasting temporalities co-exist, leaving the participant unmoored in time and resonant with deep personal significance of the moment. We theorise a temporal plaiting process and interpret its significance for ritual efficacy. We conclude with a discussion of research and managerial implications.
Professor Tonya Bradford
Title: “How Marketers and Consumers Synchronize Temporal Modes to Cocreate Ritual Vitality”
Co-author: John F. Sherry Jr.
Accepted at: Journal of the Academy of Marketing Science (Journal on Financial Times
Top 50 list)
Marketers recognize the contributions that consumer rituals make to their organizations. They endeavor to have such contributions persist as they support consumers in enacting those rituals. This ethnographic study examines the temporal aspects of ritual, termed ‘ritual vitality.’ We explain how marketers can influence ritual vitality through engagement in the chronos and kairos temporal dimensions of ritual; theorize the relationship between those dimensions; identify the ways in which marketers and consumers interact through a ritual’s chronos and kairos temporal dimensions; and theorize how marketers and consumers co-create these experiences as each party guides, aligns with, or detours from one another. This co-creation is central to ritual vitality. Finally, we contribute an understanding of how chronos and kairos temporal dimensions shape, structure, and perpetuate ritual performance, and identify opportunities for marketers and consumers to participate
in the synchronization of chronos and kairos temporality and the support of ritual performances that together may result in ritual vitality.
Professor Imran Currim
Title: “National Customer Orientation: An Empirical Test Across 112 Countries”
Co-authors: Ofer Mintz (PhD alumnus) and Rohit Deshpande
Accepted at: Marketing Letters
Customer orientation is a central tenet of marketing. However, less is known about how customer orientation varies across countries and time. Mintz, Currim, and Deshpandé (2022) propose a country-level construct, national customer orientation, and develop theoretical propositions on how a country’s wealth and average customer price sensitivity affect national customer orientation during and after global economic shocks without providing an empirical test. This paper tests drivers of national customer orientation by employing World Economic Forum and World Bank annual panel data from 112 countries between 2007-2017. The results show customer orientation is a greater luxury of richer nations and price sensitivity is a partial mediator of that relationship, however, both relationships only transpire in non-recessionary times. The empirical test furthers scholarly research on national customer orientation and provides managers with country-level customer orientation benchmarks across countries and time.
Professor Connie Pechmann
Title: “When Students Patronize Fast-food Restaurants Near School: The Effects of Identification with the Student Community, Social Activity Spaces and Social Liability Interventions”
Co-author: Brennan Davis (PhD alumnus)
Accepted at: International Journal of Environmental Research and Public Health
U.S. schools have fast-food restaurants nearby, encouraging student patronage, unhealthy consumption and weight gain. Geographers have developed an activity space framework which suggests this nearby location effect will be moderated by whether people perceive the location as their activity space. Therefore, we study whether students perceive a fast-food restaurant nearby school as their activity space, and whether social marketing messages can change that perception. We conduct six studies: a secondary data analysis, a field experiment and four lab experiments. We find that students who strongly identify with their student community patronize a fast-food restaurant nearby school (vs. farther away) because they view it as their activity space, while students who weakly identify do not. We also find that to deter
the strong identifiers, messages should convey that patronage is a social liability, e.g., portray student activism against fast food. We show that standard health messages do not change perceptions of the restaurants as social activity spaces. Thus, to combat the problem of fast-food restaurants nearby school causing unhealthy consumption, policy and educational interventions should focus on students who strongly identify with their student community and find ways to weaken their perceptions that fast-food restaurants nearby schools are their activity spaces.
Professor Patrick Bergemann
Title: “The Activation of Internal Versus External Social Control Agents: Reporting the Taliban in Afghanistan”
Co-author: Austin Wright
Accepted at: Sociological Science
In many settings, witnesses can report wrongdoing to internal authorities such as officials within an organization, or to external authorities such as the police. We theorize this decision of where to report as rooted in the policing of group boundaries, as the use of different reporting channels symbolically affirms or disaffirms affiliation with different social categories. As such, both witnesses and other social actors have an interest in where witnesses report. We evaluate this theory using villagers’ reporting of illegal Taliban activity in Afghanistan in 2017 and 2018, where witnesses could report externally (e.g., to the National Police) or internally (e.g., to village elders). We show how responses to wrongdoing arose from the interaction between self and others’ attitudes toward the Taliban, and reveal how reporting can be simultaneously punitive for the wrongdoer and affiliative for the category to which the wrongdoer belongs.
Professor Libby Weber
Title: “Managers’ Perceptions and Microfoundations of Contract Design”
Co-author: Russell Coff
Accepted at: Academy of Management Review (Journal on Financial Times Top 50 list)
In interfirm exchanges such as contracts, transaction cost economics theory (TCE) argues asset specificity, critical for value creation, poses hazards requiring contractual safeguards. TCE assumes actors have foresight to mitigate these hazards even though specificity is
typically hard to observe, suggesting managers’ impressions may be biased. Taking a microfoundational approach, we explore how individual negotiators form perceptions of optimal asset specificity and aggregate them to a firm-level assessment that may be influenced through negotiation. We then explore how managers may actively manipulate their counterpart’s perceptions to maximize their firm’s value capture. We theorize about when this may occur and the implications for contractual governance, value creation/ capture, and repeated exchanges – each of which may vary from extant predictions. By applying both an expanded bounded rationality assumption (including cognitive distortions) and net value capture motivation symmetrically, we augment contract design research allowing it to predict when and how managers’ strategic behavior may impact exchange outcomes. As a result, this analysis provides a more nuanced understanding of when contract design may intentionally deviate from efficient governance predictions.
Title: Reality Is Tricky: Contrarian Takes on Contested Economic
In Reality Is Tricky, Richard McKenzie uses basic economics to explain how the logic behind many controversial public policies is seriously flawed (if not totally wrongheaded). His subtitle to the book—Contrarian Takes on Contested Economic Issues—is on the mark because he offers policy viewpoints that often emerge as surprises (even epiphanies) and that challenge much conventional, long-held economic wisdom.
McKenzie explains why the “rich” pay lower tax rates on added income than the “poor”; how walking a mile to work is more polluting than driving the mile; why monopoly markets can be more efficient than highly competitive markets; how free-market kidney sales can save lives and lower transplant costs; and why many decision “irrationalities” and “biases” (as documented by behavioral economists) improve human welfare. He also explains how the downfall of communism in China and the former Soviet Union undermined faith in American capitalism and why the planet is doomed (with no climate policy escapes) if climate scientists are right on their science.
If you take strong issue with these policy positions, this could be a book for you, especially if you have strong opposing views, which many readers will likely have.
Richard McKenzie is the Gerken Professor of Economics (emeritus) in the UCI Paul Merage School of Business. He has written more than three dozen books and numerous articles for academic and general audiences. He has also received many teaching awards.
