Knowledge that Transforms

The unique characteristics of the health care industry have given rise to an intriguing and pervasive form of joint venture between hospitals and physicians known as physician–hospital organization (PHO). With transaction cost analysis as the overarching theory, the authors draw on practitioner insights and literature to reveal the advantages and disadvantages of PHOs and identify the boundary conditions under which PHOs are more likely to enhance patient satisfaction. They test the proposed model using multiyear panel data from 19,134 observations in the U.S. health care industry. The results underscore PHOs’ capability to enhance patient satisfaction with hospital services. The significant main effect grows stronger when the market is characterized by intense competition among hospitals, high mortality rates, urban settings, and high unemployment rates. The post hoc analysis reveals that PHOs can additionally improve patient recommendation of a hospital indirectly through patient satisfaction. This study contributes to research on governance structure and customer satisfaction by establishing a connection between PHO and patient satisfaction and identifying its boundary conditions. The findings highlight several fertile avenues for research.

Consumers’ spending decisions are shaped not only by their objective financial resources but also by their subjective perceptions of wealth. This research investigates the interplay between subjective poverty (e.g., feeling financially constrained) and income in driving spending. Across five studies including real-world spending data from a U.K. financial management app, longitudinal surveys from Kenya and the United States, and controlled experiments, the authors reveal that subjective poverty increases spending among higher-income consumers but decreases spending among lower-income consumers. That is, wealthy consumers who feel financially poor tend to spend more, whereas poorer consumers who feel financially constrained tend to reduce their spending. Drawing on compensatory control theory, the authors demonstrate that subjective poverty threatens individuals’ sense of personal control over life, but people cope with this diminished sense of control differently based on their available resources. Higher-income individuals engage in compensatory consumption to restore control, while lower-income individuals adopt different strategies, including reduced spending. This research advances the understanding of how psychological and material dimensions of wealth interact to shape consumer behavior.

Time intervals can be framed either by a calendar year (e.g., “2015”) or by length (e.g., “ten years”), yet these ostensibly equivalent formats lead to systematically different judgments. Combining data from whiskey auctions with seven controlled experiments, the authors demonstrate that length framing elongates time perception compared with year framing, which they refer to as the year–length effect. As a result of changes in time perception, length framing increases the importance of time-related attributes in choice, leading to more favorable product evaluations in contexts where age enhances product value (e.g., whiskey evaluation) and to more negative evaluations in contexts where age reduces it (e.g., used goods). Process evidence implicates the logarithmic mental number line: Years with large nominal values occupy a compressed region of the line, relative to small length numerals. These findings offer practical guidance on how time framing can be used to shape time perception and customer value.

Goal failure is an important problem that is costly for both companies and consumers. Consumers often purchase products, subscribe to services, and download apps in support of valued goals, yet fail to use these tools as much as intended. But might the language consumers use to describe such goal failures affect how they subsequently pursue those goals? Nine experiments demonstrate that, compared with saying “didn’t have time,” saying “didn’t make time” increases subsequent motivation. This is driven by perceived control over time. Specifically, saying “didn’t make” (vs. “didn’t have”) time makes consumers feel more in control of their time, which increases their subsequent motivation to reengage with the goal. Notably, such make-time framing has downstream implications for consumer evaluations of goal-related products and services. Further, it can be manipulated directly as well as through firms’ promotional activities (i.e., featuring make-time language on social media). Importantly, make-time (vs. have-time) framing may be particularly beneficial in the context of goal failure, when consumers are less inclined to adopt this perspective naturally. Together, the findings shed light on how language shapes motivation, deepen understanding of time's role in goal pursuit, and have important implications for how companies manage consumer goal failure.

Mergers and acquisitions (M&As) may trigger adjustments to firms’ marketing decisions and their outcomes. Yet, prior literature provides little empirical insight regarding the nature of these adjustments. The authors address this gap in the context of the biopharma industry, analyzing data on sales, prices, and detailing spending for 375 branded drugs acquired in 73 M&A deals between 2007 and 2020. They find that, on average, acquiring firms (1) reduce detailing spending on target drugs, (2) increase target drug prices, and (3) achieve increases in detailing elasticity for target drugs after the M&A, compared with before. The younger the target drugs and the more experience the acquirer has in marketing drugs in the drugs’ therapeutic category, (1) the greater the likelihood that detailing will be reduced and prices raised, and (2) the greater the likelihood that acquirers will experience larger increases in detailing elasticity and reductions in price elasticity. For the investigated 375 target drugs, acquirers generated over $23 billion more in revenue in the two years postdeal while spending over $1 billion less on detailing compared with the two years predeal. The article provides a framework for firms regarding commercial returns on M&As and informs the debate on regulatory responses to M&As.

Discriminant validation examines to what extent constructs measured with multi-item scales, which are hypothesized to be conceptually distinct, are empirically distinct. A literature review of published scale development studies shows that a variety of criteria and approaches to assess discriminant validity are in use. However, the requirements for an appropriate criterion have not been spelled out, which has led to the use of problematic criteria. The present research introduces three requirements that an appropriate discriminant validation criterion should satisfy, concerning the correlation, comparison standard, and comparison method. It shows that the common Fornell–Larcker criterion is based on an inappropriate comparison standard and method and that alternative criteria have weaknesses as well. The authors therefore propose an improved comparison standard, congeneric reliability, and develop a systematic discriminant validation procedure based on congeneric reliability and the existing phi criterion, both of which satisfy the three requirements. The procedure provides continuous measures of support for discriminant validity and accounts for measurement and sampling error. A detailed case study and reanalyses of seven published scale development articles demonstrate the application and strengths of the procedure. Example code and an online application facilitate its implementation.

Given the importance of frontline employees (FLEs) for organizations and consumers, it is important to motivate them to achieve optimal performance. One way to motivate FLEs is through employer-provided wellness benefits, which might increase FLEs’ responsiveness to customer needs. Building on social exchange theory, this research simultaneously examines five wellness benefits to identify factors that can enhance FLEs’ feelings of being valued and an induce a sense of indebtedness, which in turn can have downstream effects on customer responsiveness. The results of five studies, including a pilot study, preliminary sales study, field studies, and an internal meta-analysis, demonstrate how food and social benefits exert the strongest effects, with food yielding stronger direct effects on customer responsiveness and both food and social benefits showing indirect effects through value and indebtedness feelings. The next-strongest effects are from mindfulness benefits. Physical and health wellness benefits exert the weakest downstream consequences. Importantly, if FLEs are in a supportive work environment, the effects of food and social benefits are enhanced. Conversely, job stressors and motivational constructs do not significantly impact the effects of employer-provided wellness benefits. By adopting the provided recommendations, retailers and service providers can institute effective and optimal wellness programs to enhance their FLEs’ customer-facing behaviors.

The over-the-top (OTT) subscription video streaming industry has witnessed significant growth and heightened competition in recent years, marked by the influx of new players. At the same time, competing services are forming new alliances that facilitate consumer multihoming. For instance, Amazon Prime Video has partnered with services such as HBO Max and Paramount+ to enhance the combined viewing experience for consumers through seamless integration. The authors build a game-theoretic model with horizontally differentiated services to examine how an alliance facilitating multihoming between two competing services affects price competition in the market. They find that the alliance's impact on price competition depends on the level of content differentiation in the market: Competition intensifies when differentiation is high but relaxes when differentiation is low. The alliance benefits the partnering services as long as the differentiation is not too high, and interestingly, it may increase the profitability of a third nonpartnering service when differentiation is sufficiently low. The authors show that consumer surplus increases under the alliance, even if price competition is relaxed. They also investigate a focal service's decision to partner with one of two competing services and find that it prefers to partner with a service that has high-quality content but a smaller loyal base. This research offers insights into the current landscape of the OTT video streaming market and provides implications for both managers and policymakers.

People routinely make decisions based on predictions made by others (e.g., political pundits, market analysts), so it is in their best interest to identify high-quality forecasts. Experts characterize good forecasting as minimization of continuous error (i.e., predictions close to the eventual outcome). By contrast, the present work reveals that laypeople typically see good forecasts as those that correctly predict an event's categorical outcome (e.g., the winning team). Using within-subjects, between-subjects, and incentive-compatible designs, 15 studies demonstrate this “pick-the-winner-picker heuristic” as well as its psychological mechanism: People evaluate forecasts by assigning separate weights to (1) categorical correctness and (2) continuous error minimization, depending on the overall importance of the categorical and continuous dimensions for that situation. Thus, in the common case when the categorical dimension matters most (e.g., sports contests), people prize forecasts that accurately predicted the categorical outcome (e.g., the winner, not the margin of victory). However, when the categorical dimension's stakes are experimentally reduced, an attenuation is observed. Although this describes how people typically evaluate forecasts, crucially, a dimension's importance is not necessarily related to its diagnosticity of forecaster skill or reliability. Accordingly, the pick-the-winner-picker heuristic may constitute a normative mistake, while framing manipulations help debias judgments.

As AI-powered negotiations spread, their psychological and relational impact remains unclear. The authors propose a novel generative adversarial network framework that trains a bot to aim for superior economic outcomes while appearing “human” (“algorithmic anthropomorphization”). In a bargaining game experiment, they compare this “superhuman” bot with two simpler alternatives: a bot that mimics human behavior and a purely efficient bot. The results show that (1) superficial anthropomorphization can make a bot seem human but does not improve subjective evaluations, (2) the efficient bot is so rational that it is easily exploited, undercutting its performance, and (3) the superhuman bot achieves superior economic results while appearing more human than actual humans. Yet even when bots act indistinguishably from humans, they may trigger an “uncanny valley” effect, lowering subjective evaluations regardless of performance. Because subjective evaluations predict future negotiation outcomes, these findings highlight the potential negative impact that AI bargaining algorithms can have on long-term customer relationships. The authors urge firms to measure more than objective outcomes when assessing AI negotiators.