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Firm Expansion, Size Spillovers and Market Dominance in Retail Chain Dynamics

Authors: Jason R. Blevins, Ahmed Khwaja and Nathan Yang

Publication: Management Science, Forthcoming

Abstract:

We develop and estimate a dynamic game of strategic firm expansion and contraction decisions to study the role of firm size on future profitability and market dominance. Modeling firm size is important because retail chain dynamics are more richly driven by expansion and contraction than de novo entry or permanent exit. Additionally, anticipated size spillovers may influence the strategies of forward looking firms making it difficult to analyze the effects of size without explicitly accounting for these in the expectations and, hence, decisions of firms. Expansion may also be profitable for some firms while detrimental for others.

Thus, we explicitly model and allow for heterogeneity in the dynamic link between firm size and profits as well as potential for persistent brand effects through a firm-specific unobservable. As a methodological contribution, we surmount the hurdle of estimating the model by extending the Bajari, Benkard and Levin (2007) two-step procedure that circumvents solving the game. The first stage combines semi-parametric conditional choice probability estimation with a particle filter to integrate out the serially correlated unobservables.

The second stage uses a forward simulation approach to estimate the payoff parameters. Data on Canadian hamburger chains from their inception in 1970 to 2005 provides evidence of firm-specific heterogeneity in brand effects, size spillovers and persistence in profitability. This heterogeneous dynamic linkage shows how McDonald’s becomes dominant and other chains falter as they evolve, thus affecting market structure and industry concentration.

Read full article:  Management Science

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Published: 19 Oct 2017

Market and Regional Segmentation and Risk Premia in the First Era of Financial Globalization

Authors: David Chambers, Sergei Sarkissian and Michael J. Schill

Publication: Review of Financial Studies, Forthcoming

Abstract:

We study market segmentation effects using data on U.S. railroads that list their bonds in New York and London between 1873 and 1913. This sample provides a unique setting for such analysis because of the precision offered by bond yields in cost of capital estimation, the geography-specific nature of railroad assets, and ongoing substantial technological change. We document a significant reduction in market segmentation over time. Whilst New York bond yields exceeded those in London in the 1870s, this premium disappeared by the early 1900s. However, the segmentation premium persisted in the more remote regions of the United States.

Read full article: Review of Financial Studies

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Published: 18 Oct 2017

Two-Sided Reputation in Certification Markets

Authors: Matthieu Bouvard and Raphaël Levy

Publication: Management Science, Forthcoming

Abstract:

In a market where sellers solicit certification to overcome asymmetric information, we show that the profit of a monopolistic certifier can be hump-shaped in its reputation for accuracy: a higher accuracy attracts high-quality sellers but sometimes repels low-quality sellers. As a consequence, reputational concerns may induce the certifier to reduce information quality, thus depressing welfare. The entry of a second certifier impacts reputational incentives: when sellers only solicit one certifier, competition plays a disciplining role and the region where reputation is bad shrinks. Conversely, this region may expand when sellers hold multiple certifications.

Read full article: Management Science

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Published: 18 Oct 2017

To Thine Own Self Be True? Facades of Conformity, Values Incongruence, and the Moderating Impact of Leader Integrity

Authors: Patricia Faison Hewlin, Tracy L. Dumas and Meredith Flowers Burnett

Publication: Academy of Management Journal, Vol. 60, No. 1, February 2017

Abstract:

When employees feel that their values do not match those of the organization, they often respond by pretending to fit in. We examine how leader integrity influences the tendency to create facades of conformity, proposing that employees will actually fake more when leaders are principled. In a laboratory experiment (Study 1), undergraduate students whose values ostensibly differed from those of other discussion group members and the university administration created more facades when they perceived the discussion group leader as having high integrity. A two-wave survey of employed adults (Study 2) replicated the moderation effect and also revealed negative effects of facade creation on work engagement. In both studies, our results indicate that, ironically, when leader integrity is high, the tendency to create facades of conformity in response to low values congruence is magnified. Additionally, our findings reveal that positive attributes in leaders may not always result in positive responses from followers. The results from our study also show that facades of conformity may serve as a partial explanatory mechanism in the relationship between values congruence and employee engagement.

Read full article: Academy of Management Journal

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Published: 18 Oct 2017

Popularity or Proximity: Characterizing the Nature of Social Influence in an Online Music Community

Authors: Sanjeev Dewan, Yi-Jen (Ian) Ho and Jui Ramaprasad

Publication: Information Systems Research, Vol. 28, No. 1, March 2017

Abstract:

We study social influence in an online music community. In this community, users can listen to and “favorite” (or like) songs and follow the favoriting behavior of their social network friends—and the community as a whole. From an individual user’s perspective, two types of information on peer consumption are salient for each song: total number of favorites by the community as a whole and favoriting by their social network friends. Correspondingly, we study two types of social influence: popularity influence, driven by the total number of favorites from the community as a whole, and proximity influence, due to the favoriting behavior of immediate social network friends. Our quasi-experimental research design applies a variety of empirical methods to highly granular data from an online music community. Our analysis finds robust evidence of both popularity and proximity influence. Furthermore, popularity influence is more important for narrow-appeal music compared to broad-appeal music. Finally, the two types of influence are substitutes for one another, and proximity influence, when available, dominates the effect of popularity influence. We discuss implications for design and marketing strategies for online communities, such as the one studied in this paper.

Read full article: Information Systems Research

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Published: 18 Oct 2017

Social Media Affordances or Connective Action: An Examination of Microblogging Use During the Gulf of Mexico Oil Spill

Authors: Emmanuelle Vaast, Hani Safadi, Liette Lapointe, and Bogdan Negoita

Publication: MIS Quarterly, Vol. 41, No. 4, 2017, pp. 1179-1205

Abstract: This research questions how social media use affords new forms of organizing and collective engagement. The concept of connective action has been introduced to characterize such new forms of collective engagement in which actors coproduce and circulate content based upon an issue of mutual interest. Yet, how the use of social media actually affords connective action still needed to be investigated.

Mixed methods analyses of microblogging use during the Gulf of Mexico oil spill bring insights to this question and reveal, in particular, how multiple actors enacted emerging and interdependent roles with their distinct patterns of feature use. The findings allow us to elaborate upon the concept of connective affordances as collective level affordances actualized by actors in team interdependent roles. Connective affordances extend research on affordances as a relational concept by considering not only the relationships between technology and users but also the interdependence type among users and the effects of this interdependence onto what users can do with the technology. This study contributes to research on social media use by paying close attention to how distinct patterns of feature use enact emerging roles.

Adding to IS scholarship on the collective use of technology, it considers how the patterns of feature use for emerging groups of actors are intricately and mutually related to each other.

Read full article: MIS Quarterly

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Published: 17 Oct 2017

A Configural Approach to Coordinating Expertise in Software Development Teams

Authors: Srinivas Kuduravalli, Samer Faraj and Steven L. Johnson

Publication: MIS Quarterly, Vol. 41, No. 1, March 2017

Abstract:

Despite the recognition of how important expertise coordination is to the performance of software development teams, understanding of how expertise is coordinated in practice is limited. We adopt a configural approach to develop a theoretical model of expertise coordination that differentiates between design collaboration and technical collaboration. We propose that neither a strictly centralized, top-down model nor a largely decentralized approach is superior. Our model is tested in a field study of 71 software development teams. We conclude that because design work addresses ill-structured problems with diverse potential solutions, decentralization of design collaboration can lead to greater coordination success and reduced team conflict. Conversely, technical work benefits from centralized collaboration. We find that task knowledge tacitness strengthens these relationships between collaboration configuration and coordination outcomes and that team conflict mediates the relationships. Our findings underline the need to differentiate between technical and design collaboration and point to the importance of certain configurations in reducing team conflict and increasing coordination success in software development teams. This paper opens up new research avenues to explore the collaborative mechanisms underlying knowledge team performance.

Read full article: MIS Quarterly

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Published: 17 Oct 2017

What Users Do Besides Problem-Focused Coping In the IT Security Context: An Emotion-Focused Coping Perspective

Authors: H. Liang, Y. Xue, Alain Pinsonneault and A. Wu

Publication: MIS Quarterly, Forthcoming

Abstract:

This paper investigates how individuals cope with IT security threats by taking into account both problem-focused and emotion-focused coping. While problem-focused coping (PFC) has been extensively studied in the IT security literature, little is known about emotion-focused coping (EFC).

We propose that individuals employ both PFC and EFC to volitionally cope with IT security threats, and conceptually classify EFC into two categories: inward and outward. Our research model is tested by two studies: an experiment with 140 individuals and a survey of 934 respondents.

Our results indicate that both inward EFC and outward EFC are stimulated by perceived threat, but that only inward EFC is reduced by perceived avoidability. Interestingly, inward EFC and outward EFC are found to have opposite effects on PFC. While inward EFC impedes PFC, outward EFC facilitates PFC. By integrating both EFC and PFC in a single model, we provide a more complete understanding of individual behavior under IT security threats.

Moreover, by theorizing two categories of EFC and showing their opposing effects on users’ security behaviors, we further examine the paradoxical relationship between EFC and PFC, thus making an important contribution to IT security research and practice.

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Published: 17 Oct 2017

The Spillover Effects of Health IT Investments on Regional Healthcare Costs

Authors: Hilal Atasoy, Pei-Yu Chen and Kartik K. Ganju

Publication: Management Science, Forthcoming

Abstract:

Electronic health records (EHR) are often presumed to reduce the significant and accelerating healthcare costs in the United States. However, evidence on the relationship between EHR adoption and costs is mixed, leading to skepticism about the effectiveness of EHR in decreasing costs. We argue that simply looking at the hospital-level effects can be misleading because the benefits of EHR can go beyond the adopting hospital by creating regional spillovers via information and patient sharing. When patients move between hospitals, timely and high-quality records received at one hospital can affect the costs of care at another hospital. We provide evidence that although EHR adoption increases the costs of the adopting hospital, it has significant spillover effects by reducing the costs of neighboring hospitals. We further show that these spillovers are linked to information and patient sharing. Specifically, the spillovers are stronger when more hospitals in the region are in health information exchange networks and in the same integrated delivery systems, which can share information more easily. Furthermore, utilizing regional characteristics that can affect the extent of patient sharing such as urban versus rural areas, population density, average distance between hospitals, and hospital density, we find that locations with higher patient and hospital concentration experience stronger regional spillovers. Additionally, spillovers are stronger after the HITECH (Health Information Technology for Economic and Clinical Health) Act that increased EHR adoption and use. Overall, our findings suggest that we need to take into account externalities to understand the benefits of health IT investments and form policy decisions.

Read full article: Management Science

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Published: 17 Oct 2017

E-Mail Interruptions and Individual Performance: Is There a Silver Lining?

Authors:  Shamel Addas and Alain Pinsonneault

Publication: MIS Quarterly, Forthcoming

Abstract: Interruption of work by e-mail and other communication technologies has become widespread and ubiquitous. However, our understanding of how such interruptions influence individual performance is limited. This paper distinguishes between two types of e-mail interruptions (incongruent and congruent) and draws upon action regulation theory and the computer-mediated communication literature to examine their direct and indirect effects on individual performance.

Two empirical studies of sales professionals were conducted spanning different time frames: a survey study with 365 respondents and a diary study with 212 respondents. The results were consistent across the two studies, showing a negative indirect effect of exposure to incongruent interruptions (interruptions containing information that is not relevant to primary activities) through subjective workload, and a positive indirect effect of exposure to congruent interruptions (interruptions containing information that is relevant to primary activities) through mindfulness.

The results differed across the two studies in terms of whether the effects were fully or partially mediated, and we discuss these differences using meta-inferences. Technology capabilities used during interruptions episodes also had significant effects: rehearsing (fine-tuning responses to incoming messages) and reprocessing (reexamining received messages) were positively related to mindfulness, parallel communication (engaging in multiple e-mail conversations simultaneously) and leaving messages in the inbox were positively related to subjective workload, and deleting messages was negatively related to subjective workload.

This study contributes to research by providing insights on the different paths that link e-mail interruptions to individual performance and by examining the effects of using capabilities of the interrupting technology (IT artifact) during interruptions episodes. It also extends the experimental tradition that focuses on isolated interruptions. By shifting the level of analysis from specific interruption events to overall exposure to interruptions over time and from the laboratory to the workplace, our study provides realism and ecological validity.

Read full article: MIS Quarterly

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Published: 17 Oct 2017

Power Distance Belief, Power, and Charitable Giving

Authors:  Dahee Han, Ashok K. Lalwani and Adam Duhachek

Publication: Journal of Consumer Research, Vol. 44, No. 1, June 2017

Abstract:

Three studies examine the relation between power distance belief (PDB), the tendency to accept and expect inequalities in society; power, the control one has over valued resources; and charitable giving. Results suggest that the effect of PDB depends on the power held by the donor. In low-PDB contexts, people high (vs. low) in psychological power tend to be more self-focused (vs. other-focused), and this leads them to be less charitable. In high-PDB contexts, however, people high (vs. low) in psychological power tend to be more other-focused (vs. self-focused), and this leads them to be more charitable. The authors also explore several boundary conditions for these relationships and conclude with the implications of these findings.

Read full article: Journal of Consumer Research

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Published: 17 Oct 2017

Illiquidity Premia in the Equity Options Market

Authors: Peter Christoffersen, Ruslan Goyenko, Kris Jacobs, Mehdi Karoui

Publication: Review of Financial Studies, Forthcoming

Abstract:

Standard option valuation models leave no room for option illiquidity premia. Yet we find the risk-adjusted return spread for illiquid over liquid equity options is 3:4% per day for at-the-money calls and 2:5% for at-the-money puts. These premia are computed using option illiquidity measures constructed from intraday effective spreads for a large panel of U.S. equities, and they are robust to different empirical implementations. Our findings are consistent with evidence that market makers in the equity options market hold large and risky net long positions, and positive illiquidity premia compensate them for the risks and costs of these positions.

Read full article: Review of Financial Studies

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Published: 17 Oct 2017

Mathieu Bouvard wins SFI Outstanding Paper Award 2017

The Swiss Finance Institute (SFI) has attributed its Outstanding Paper Award to "The Blockchain Folk Theorem," a research paper by Bruno Biais, Toulouse School of Economics, Christophe Bisière, Toulouse School of Economics, Matthieu Bouvard, McGill University, and Catherine Casamatta, Toulouse School of Economics, that investigates the stability of the blockchain protocol in a game-theoretic approach.

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Published: 13 Oct 2017

Home Bias Abroad: Domestic Industries and Foreign Portfolio Choice

Authors: David Schumacher

Publication: Review of Financial Studies, Forthcoming

Abstract:

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Published: 11 Oct 2017

Scenario generation for long run interest rate risk assessment

Authors: Robert Engle, Guillaume Roussellet, Emil Siriwardane

Publication: Journal of Econometrics, Vol. 201, No. 2, December 2017

Abstract:

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Published: 3 Oct 2017

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