The current problems and obvious contradictions in Latvia's education require flexib ility in pedagogical work: one the one hand, the system of Latvian education needs changes, and on the other hand, we also need people who will advance and stimu late these processes. This poses a question: what are the most essential teacher's co mpetences which can ensure the introduction of innovations into education? The purpose of this research is to investigate those teacher's competences which would ensure effective management of innovative processes in education, and to study opinions of Latvian teacher-mentors about factors contributing to or impeding the introduction of innovations into Latvian education. In this research, teacher's competences which can ensure the introduction of innovations into education were formu lated. By applying a questionnaire survey method, teacher-mentors' (N= 173) opinions were studied: a) about those most essential teacher competences that can ensure the introduction of innovations into education; b) about factors that contribute to or impede the introduction of innovations into the Latvian education system.
Modern company needs as the foundation of its successful operation clearly defined vision, employees values and high, but still reachable business goals, which are based on high level involvement of employees in the company and on the basis of their participation. Knowledge, skills and experience, that employees possess, are strong arguments of successful company, but it is not all the same, with what kind of emotions arguments are expressed in their own practice. Research shows that emotional intelligence respondents attach great influence in the success of the company. Emotional intelligence should help both to better work performance, as well as to improve the physical well-being and emotional stability.
This article explores the relationship between the components of the services provided by complementary voluntary health insurance (CVHI), to which users ascribe different levels of importance. Research model that consists of four constructs (importance of quality service, additional coverage, price discounts of CVHI and insurance company reputation) and an indicator of the importance of insurance premium of CVHI was tested with structural equation modelling (SEM) on the sample of 300 Slovenian users of CVHI. Our findings show that - according to the users - the importance of the component of CVHI service (insurance premium) is reflected in the perceived importance of other components of CVHI (additional coverage, quality, price discounts and insurance company reputation).
Savannah Wei Shi, Michel Wedel, F. G. M. (Rik) Pieters What you see is what you get: How does eye movement during browsing affect consumer buying? The authors examine eye-tracking data to investigate how consumers gather product and attribute information from moment to moment. They seek to understand information acquisition patterns on product attributes such as can be found on comparison websites. The authors follow eye movement, infer information acquisition, and finally observe and predict shopper switching strategy. The authors show that consumers switch frequently between acquisition strategies, and they obtain information on only two or three attributes or products in a particular acquisition strategy before switching. The insight for management: The eyes have it! Website design and online retailing strategies should consider the ocular tendencies of its customers to be more effective. Barış Ata, Bradley L. Killaly, Tava Lennon Olsen, Rodney P. Parker How does the U.S. Medicare hospice reimbursement policy affect patient care and hospice finances? The existing policy consists of a daily payment for each patient under care with a global cap of revenues accrued during the Medicare year, which increases with each newly admitted patient. The authors provide reasons for a recent spate of provider bankruptcies related to the reimbursement policy and give recommendations to alleviate these problems. They find several unintended consequences of the Medicare reimbursement policy on a hospice's incentives for patient management. For example, a hospice may seek short-lived patients (such as cancer patients) over patients with longer expected lengths of stay. The policy also affects the effort with which hospices seek out, or recruit, such patients at different points in the year. Finally, the effort they apply to actively discharge a patient whose condition has stabilized may also depend on the time of year. The insight for management: Unintended and undesirable behaviors are a direct consequence of the current U.S. Medicare reimbursement policy. Henri Servaes, Ane Tamayo Be aware! Customer awareness could promote corporate social responsibility (CSR). The authors find that high customer awareness, as approximated by advertising expenditures, contributes to CSR, as well as to increased corporate valuations. For firms with low customer awareness, the relation is either negative or insignificant. The authors also find that the effect of awareness on the CSR–value relation is reversed for firms with a poor prior reputation as corporate citizens. The insight for management: If you've got it, flaunt it; advertising can improve CSR and firm valuation. Boris Groysberg, Paul Healy, George Serafeim, Devin Shanthikumar Buy! Sell! Does it make a difference? Most research on equity analysts focuses on those employed by sell-side investment banks and brokerage houses. Yet investment firms undertake their own buy-side research, and their analysts face different stock selection and recommendation incentives than their sell-side peers. The authors examine the selection and performance of stocks recommended by analysts at a large investment firm relative to those of sell-side analysts from mid-1997 to 2004. They find that the buy-side firm's analysts issue less optimistic recommendations for stocks with larger market capitalizations and lower return volatility than their sell-side peers, consistent with their facing fewer conflicts of interest and having a preference for liquid stocks. The authors find that annualized buy-side strong buy/buy recommendations underperform those for sell-side peers from 3.8% to 5.9%. They note, however, that these findings are driven by differences in the stocks recommended and their market capitalization. The insight for management: Despite what might be expected, there is little difference in the performance of the buy- and sell-side analysts' strong buy/buy recommendations. Ling Cen, Hai Lu, Liyan Yang What can we learn about the future returns of a stock when we observe many investors buying in and out of it? It has been hypothesized that a stock's ownership breadth (i.e., the percentage of investors with long positions) both positively and negatively predicts its future returns. On one hand, a higher percentage of investors with long positions implies weaker short-sales constraints and a lower degree of stock overvaluation; therefore, greater ownership breadth predicts higher future returns. On the other hand, just the opposite may be true. When investor sentiment plays a major role in the financial market, such as in the Internet bubble, overly optimistic investors rush into a stock in a mania that leads to a high breadth of ownership. Or, in the subprime crisis, overly pessimistic investors sell a stock in a panic that leads to a low breadth of ownership. In these cases, a high level of ownership breadth is likely to be overvalued. These observations seem to suggest that ownership breadth negatively predicts future returns. The authors examine two offsetting forces—disagreement and sentiment—to resolve this contradiction. They find that the breadth–return relationship is positive when the sentiment effect is small. However, the relationship becomes negative when the variation of market-wide sentiment is high and cross-sectional dispersion of firm-specific exposure to market-wide sentiment variation is large. The insight for management: Buying volumes can be good or bad indicators of future returns; there is high potential when disagreement among investors is high, and one should be wary when everyone seems to think it's a sure thing. Ashish Arora, Andrea Fosfuri, Thomas Rønde Should licensing of IT be centralized? Many firms, such as IBM, Texas Instruments, Hitachi, Dow, Kodak, Eli Lilly, and Procter & Gamble, have embraced a policy of actively licensing their intellectual property (IP) to others, earning millions of dollars in licensing revenues. In these companies, IP managers have pressures to increase direct income from IP, but individual business units in such companies might be reluctant to sell their IP for fear of losing a competitive advantage. As a result, lucrative deals are not consummated. Certainly, the business unit has superior information about licensing opportunities but may not have the appropriate incentives because its rewards depend on product market performance. The authors find that, although centralization results in less information, centralized licensing deals are larger. The insight for management: Understanding and managing complex incentive and information structures in technology organizations is critical to managing IP successfully. Lode Li, Martin Shubik, Matthew J. Sobel How closely should finance departments and operations departments work together? Manufacturers manage interrelated flows of material and cash. Material needs capital, and sales contribute cash. Therefore, it may be beneficial to coordinate operational and financial decisions. The authors study a firm making inventory and financial decisions in the presence of demand uncertainty, financial constraints, and a risk of default. The firm strives to maximize the expected present value of dividends of capital subscriptions. It turns out that the optimal policy is myopic and can be characterized with simple formulas in most cases. The insight for management: The methods of inventory theory are useful in analyzing models of operational and financial coordination. Gregory Dobson, Tolga Tezcan, Vera Tilson Who's next? In emergency rooms, law offices, insurance companies, and banks, we see a common service model. An “investigator” (nurse, lawyer, insurance agent) acts as the customer interface for information collection and dissemination, and a second “back office” resource (such as lab technician, paralegal, or analyst) provides the investigator with analysis and data collection. The investigator must decide in what order work will be done by the back office and must prioritize either seeing a new customer or completing the work with a customer already in the system. While serving one customer, the investigator may be interrupted by requests from the other customers in the system. The authors characterize the impact of the investigator's choices on system throughput, occupancy, and service time. They show that, when interruptions are not an issue, the investigator should prioritize new customers to maximize throughput, keeping the system as full as possible. If customers who have been in the system for a long time generate interruptions and thus additional work for the investigator, it is optimal for the investigator to keep the system occupancy low and prioritize discharging customers. The insight for management: In common service processes, maximize work in process if interruptions are low, and reduce work in process through focusing on discharging customers. Ishtiaq Mahmood, Chi-Nien Chung, Will Mitchell Do high density and exposure enhance or curtail innovation? Business groups are key sources of innovation in emerging market economies, but we understand little about why innovativeness differs across groups and over time. Variation in the density of intragroup buyer–supplier ties, which are common structural linkages among group affiliates, can help explain both cross-sectional and temporal heterogeneity of group innovativeness. The authors argue that greater buyer–supplier density within a group initially creates opportunities that contribute to g
Francesca Gino, Erin L. Krupka, Roberto A. Weber Does the option for regulatory oversight change behavior? Although monitoring and regulation can be used to combat socially costly unethical conduct, their intended targets can often avoid regulation or hide their behavior. This surrenders at least part of the effectiveness of regulatory policies to firms' and individuals' decisions to voluntarily submit to regulation. The authors study individuals' decisions to avoid monitoring or regulation and thus enhance their ability to engage in unethical conduct. They conduct a laboratory experiment in which participants engage in a competitive task and can decide between having the opportunity to misreport their performance and having their performance verified by an external monitor. To study the effect of social factors on the willingness to be subject to monitoring, the authors vary whether participants make this decision simultaneously with others or sequentially, as well as whether the decision is private or public. The insight for management: The opportunity to avoid being submitted to regulation produces more unethical conduct than situations in which regulation is either exogenously imposed or entirely absent. Elena Obukhova, George Lan Do job seekers benefit from contacts? Although it is intuitively plausible that a job seeker benefits by using contacts in her job search, researchers have been plagued by theoretical disagreements and inconclusive empirical evidence. Single-firm studies consistently find that job seekers applying through referrals achieve better labor-market outcomes than job seekers applying without referrals, but the evidence from job-seeker studies is mixed. To solve this puzzle, the authors clarify the distinction between having social capital and using contacts as a search method. They examine the school-to-work transition of 291 university graduates who engaged in 3,112 contemporaneous job searches in their study. The insight for management: Although a job seeker's social capital may not affect whether or not she uses contacts to search for a job, using contacts as a job-search method does improve her job-search outcomes. Anandasivam Gopal, Manu Goyal, Serguei Netessine, Matthew Reindorp How does a new product launch affect plan productivity? Product launch—an event when a new product debuts for production in a plant—is an important phase in product development. But launches disrupt manufacturing operations, resulting in productivity losses. Using data from North American automotive plants from years 1999–2007, the authors estimate that a product launch entails an average productivity loss of 12%–15% at the plant level, which translates to a monetary loss of 42–53 million per launch in lost productivity. The authors identify several ways to mitigate the decrease in productivity. They suggest that product (or mix) flexibility in the body shop is critical for reducing the productivity loss. Also, a plant's past experiences with product launches as well as with manufacturing similar products (specifically, on the same platform as the launch product) temper the productivity losses even further. Nevertheless, there are subtle differences in the accrued learning with these two types of experiences: Whereas the positive impact of platform experience persists over time, the learning accrued with launching other products in the same plant decays more quickly. The insight for management: Launching products at a flexible plant with appropriate platform experience could recover approximately $31 million per launch in lost productivity. Linda V. Green, Sergei Savin, Nicos Savva How many nurses should be scheduled on a given day? The problem of determining nurse staffing levels in a hospital environment is a complex task because of variable patient census levels and uncertain service capacity caused by nurse absenteeism. The authors combine an empirical investigation of the factors affecting nurse absenteeism rates with an analytical treatment of nurse staffing decisions. Using data from the emergency department of a large urban hospital, they find that absenteeism rates are consistent with nurses exhibiting an aversion to higher levels of anticipated workload. The authors provide characterizations of the optimal staffing levels in both situations and show that the failure to incorporate absenteeism as an endogenous effect results in understaffing. The insight for management: Understaffing creates absenteeism and worsens service levels; the optimal staffing levels should consider the reaction of staff who may not report to work when anticipated workloads are high. Felipe A. Csaszar, J. P. Eggers How does the method of decision making affect outcomes? The authors study four information aggregation structures commonly used by organizations to evaluate opportunities: individual decision making, delegation to experts, majority voting, and averaging of opinions. They investigate how the performance of each of these structures is contingent upon the breadth of knowledge within the firm and changes in the environment. They explore when delegation is preferable to other structures, such as voting and averaging. They show that that delegation is the most effective structure when there is diversity of expertise, when accurate delegation is possible, and when there is a good fit between the firm's knowledge and the knowledge required by the environment. Otherwise, depending on the knowledge breadth of the firm, voting or averaging may be the most effective structure. Finally, they use their model to shed light on which structures are more robust to radical environmental change and when crowd-based decision making may outperform delegation. The insight for management: How a decision should be made depends on critical attributes of the organization and problem type. Haitao Li, Tao Li, Cindy Yu Is the Federal Reserve pro-growth or anti-inflation? The authors study the time-varying nature of U.S. monetary policies They find that the Fed is proactive in controlling inflation in one regime and accommodative for growth in another. Moreover, proactive monetary policies are associated with more stable inflation and output gap and therefore could have contributed to the Great Moderation. The authors also highlight the importance of switching regimes for term structure modeling. Without the regimes, inflation and output can explain less than 50% of the variations of bond yields. With the regimes, the two variables can explain more than 80% of the variations of bond yields. The insight for management: The Fed can be either pro-growth or anti-inflation; in order to understand Fed behavior, it is critical to account for regime changes. Nan Jia, Jing Shi, Yongxiang Wang How do trading partners coinsure to improve performance? Using novel transaction-level data on Chinese business groups, the authors provide direct evidence of the coinsurance theory of business groups by investigating when different types of internal resources are transferred within a business group. The authors find that in Chinese business groups, a credit crunch experienced by the controlling shareholding firm (the “controller”) of a publicly listed firm increases the loan-based related party transactions (RPTs) including loan guarantees and intercorporate loans provided by the listed firm to the controller. In turn, when the listed firm's performance dips, the controller and its supporting firms provide more support to the listed firm in the form of non-loan-based RPTs. The insight for management: Business groups support each other in order to ensure the successful continuation of the group. Monic Sun, Feng Zhu How is ad content affected by contract terms? When incentivized by ad revenue, content providers are more likely to tailor their content to attract “eyeballs,” and as a result, popular content may be excessively supplied. The authors empirically test this prediction by taking advantage of the launch of an ad-revenue-sharing program initiated by a major Chinese portal site in September 2007. Participating bloggers allowed the site to run ads on their blogs and received 50% of the revenue generated by these ads. After analyzing 4.4 million blog posts, the authors find that, relative to nonparticipants, popular content increased by approximately 13% on participants' blogs after the program took effect. Approximately 50% of this increase can be attributed to topics shifting toward three domains: the stock market, salacious content, and celebrities. Meanwhile, relative to nonparticipants, participants' content quality increased after the program took effect. The authors also find that the program effects are more pronounced for participants with moderately popular blogs and seem to persist after participants enroll in the program. The insight for management: The content and quality of ads depend directly on the contract terms of the content provider; revenue incentives increase the intensity of ads for the most popular items and improve ad quality. Izak Duenyas, Bin Hu, Damian R. Beil How do auction purchases affect supply contracts? The authors study an optimal procurement mechanism for a newsvendor-like problem where the buyer's (newsvendor's) purchase price of the supplies is not fixed but is determined through interaction with candidate suppliers. The buyer has some idea of supplier costs but does not know their costs exactly. Recent literature has shown how the buyer can implement the optimal procurem
Feng Li, Venky Nagar Are benefits for same-sex partners an expense, or an investment in higher returns? The authors study the performance of U.S. firms initiating same-sex domestic partnership benefit (SSDPB) policies. The results show that holding these firms upon their SSDPB initiation in a calendar portfolio earns a four-factor annualized excess return (alpha) of approximately 10% over the 1995–2008 sample period, beating 95% of all professional mutual funds in the United States. The insight for management: SSDPB adopters also show significant improvement in operating performance relative to nonadopters. Katherine Burson, David Faro, Yuval Rottenstreich In terms of the psychology of wealth, is one piece of chocolate different from a box of chocolates? The “endowment effect” is a bias toward keeping rather than parting with one's possessions. Previous research on endowment focuses on a single unit of a good (e.g., one chocolate). The authors contrast single-unit treatments with multiple-unit treatments in which participants encounter several units of a good (e.g., five chocolates). They find that people treat a box of chocolates much like a single chocolate; in either case, there is a single-unit endowment, regardless of the definition of a unit. Participants holding one piece of chocolate show an endowment effect of standard size, but so do participants holding one box of chocolates. Yet the box contains about 20 individual pieces of chocolate, and participants given that many separate pieces show a substantially attenuated endowment effect. The insight for management: When it comes to endowments, people are subject to “unit dependence”; the definition of a unit can be a chocolate or a box, but a pronounced endowment effect may emerge for singletons but not multiples. Guangwen Kong, Sampath Rajagopalan, Hao Zhang How can supply chain partners share more information to realize improved efficiency with less fear of information leakage? Advances in information technology have had a dramatic impact on the ability of firms in a supply chain to share information, and numerous firms have taken advantage of these advances. Greater collaboration between firms in a supply chain has resulted in initiatives such as Collaborative Planning, Forecasting, and Replenishment (CPFR), in which well-known manufacturers such as Procter & Gamble and Black & Decker as well as major retailers such as Home Depot and Walmart have participated. But a major challenge has been the reluctance of some firms to share information vertically with suppliers because of the fear of leakage of this information to their competitors. The authors show that traditional wholesale pricing contracts are less effective than revenue-sharing contracts to facilitate information sharing in a supply chain and mitigate the negative effects of information leakage. The insight for management: The ideal of information sharing is more easily achieved if revenue-sharing contracts provide the appropriate incentives for cooperation. Daniel C. Feiler, Jordan D. Tong, Richard P. Larrick If a business sells out of inventory, can it know potential demand? If an employee completes a task, could they have done more? If a piece of equipment is replaced, how much longer could it have lasted? Each of these cases is a censored environment where a constraint, the censorship point, systematically distorts the observed sample because the environment constrains the information that managers can observe. The authors demonstrate a censorship bias—individuals tend to rely too heavily on the observed censored sample, biasing their belief about the underlying population. The authors find that the censorship bias is exacerbated for higher degrees of censorship, higher variance in the population, and higher variability in the censorship points. The insight for management: Censorship bias causes individuals to make costly decisions and behave in an overly risk-averse manner. Daniel Adelman, Adam J. Mersereau How should a business ration among its customers in times of shortage? Whenever a firm doing business with a handful of customers (or customer segments) faces more demand than it can supply, it faces a tough choice. On one hand, there is a short-term opportunity for profit taking, by supplying only the most profitable customers today. On the other hand, this is potentially damaging to the firm's relationships with less profitable customers, who receive poor service today. When market conditions change in the future, these neglected customers could be essential to maintaining profitability, but their goodwill toward the firm may be so diminished that their business will not materialize when it is needed most. Customers remember when they were shorted; a customer's order quantity is positively correlated with past fill rates. The insight for management: Optimal rationing among customers depends on their unique contribution margins, their sensitivities to the past, and their demand volatilities. Olivier Toubia, Eric Johnson, Theodoros Evgeniou, Philippe Delquié When trying to understand an individual's choices it would be helpful to know the decision maker's underlying preferences. How can those preferences be determined? The authors present a method that dynamically designs elicitation questions for estimating risk and time preference parameters. They use an online experiment to compare their approach to a standard one used in the literature that requires comparable task completion time. The authors assess predictive accuracy in an out-of-sample task and completion time for both methods. For risk preferences, their results indicate that the proposed method predicts subjects' willingness to pay for a set of out-of-sample gambles significantly more accurately, while taking respondents about the same time to complete. The insight for management: New methodologies enable better estimation of underlying preferences. Ravi Bapna, Nishtha Langer, Amit Mehra, Ram Gopal, Alok Gupta Does training pay in quickly changing industries? The rapid pace of technological innovation necessitates that information technology (IT) services firms continually invest in replenishing the skills of their key asset base, human capital. The authors examine whether human capital investments directed toward employee training are effective in improving employee performance. The authors identify a significant positive impact of training on employee performance: A unit increase in training is linked to a 2.14% increase in an employee's performance. Interestingly, they find that, in the IT sector, skills atrophy and consequently high-experience employees reap higher returns from training, which highlights the uniquely dynamic nature of IT knowledge and skills. The authors find that this holds true for general training that an employee can utilize outside the focal firm but that specific training pertinent to the focal firm is not positively linked to performance. The insight for management: The value of training depends on the content; firm-specific training is less likely to improve performance than general training. Sanjiv Erat, Stylianos Kavadias, Cheryl Gaimon How much integration is too much? In various industries end-product manufacturers acquire core subsystems from upstream technology provider firms and focus primarily on efficient end-product integration. The authors examine the strategic interactions between a technology firm that introduces a new subsystem and the respective end-product manufacturers (“integrators”). They analyze how the fraction of end-product functionalities prepackaged into the subsystem impacts the optimal introduction strategy and the relative value appropriation power across the industries. Offering a subsystem that performs many end-product functions has a dual effect on the provider's profits. On the positive side, the provider extracts a higher ease-of-use rent from the integrators because of the easier/cheaper integration. On the negative side, such subsystems may curtail the adopters' ability for competitive differentiation and render adoption less valuable. The insight for management: Overly integrated supply chains may hinder competitive differentiation and thus product adoption and market potential. Susan F. Lu, Gerard J. Wedig What are the benefits and costs of retail chains? Chains possess scalable advantages that explain their existence, including branding, superior business models, and learning strategies. However, if managers cannot be incented contractually, private ownership is thought to be the primary organizational substitute. The authors explore geographic clustering as an alternative strategy for controlling managerial agency costs within the chain form of organization. Clustering nursing homes may facilitate scale efficiencies in both monitoring and supervision, resulting in reduced agency costs and improved application of the chain's business model. The insight for management: Clustered nursing homes achieve higher quality. Kasing Man, Junbo Wang, Chunchi Wu How has automation affected market efficiency in trading markets? To understand this phenomenon, the authors examine the contribution to price discovery by electronic and voice-based trading systems in the U.S. Treasury market. Evidence shows that the electronic trading system has more price discovery and that trading automation increases the speed of incorporating information into prices. However, huma
Eunkyu Lee, Richard Staelin, Weon Sang Yoo, Rex Du How do a firm's choice distribution intensity (number of outlets), channel exclusivity (whether or not the outlets carry only one brand or multiple competing brands), vertical integration (ownership of upstream suppliers and downstream distribution), and multichannel coordination (e.g., setting different prices across different channels for joint profit maximization) affect its profitability under varying levels of brand and outlet differentiation? Major channel structure decisions, although made infrequently, represent important strategic moves. For example, Gateway, a major U.S. personal computer (PC) maker, closed all 188 of its retail stores in 2004 while keeping its Internet channel open. Subsequently, Gateway PCs were made available at third-party retail stores such as Best Buy and Costco, which also carried competing PC brands. In 2006, Apple made a major expansion of its retail efforts by selling its MacBook computers through Best Buy stores throughout the United States, going beyond its own retail and online stores. In 2009, both General Motors and Chrysler closed more than one-third of their dealerships in the United States. In doing so they greatly reduced their distribution coverage, but they also reduced the inter- and intrabrand competition among the dealers. The insight for management: Complex but important strategic supply chain issues can be addressed with mathematical modeling. Kriti Jain, Kanchan Mukherjee, J. Neil Bearden, Anil Gaba How well can managers gauge the likelihood of future events? For example, experts are often called upon to forecast the price of oil or the level of the Dow Jones Industrial Average (DJIA) at a future point in time, and they use their subjective judgment. However, predictions in such situations tend to be systematically overconfident. The authors of this paper propose a simple process that systematically leads to wider confidence intervals, thus reducing overconfidence. With a series of experiments, including with professionals, they show that “unpacking” the distant future into numerous intermediate more near-term futures systematically improves calibration. In other words, in subjective predictions, a three-month (packed) forecast for the DJIA has a significantly wider confidence interval than one based on one-, two-, and three-month forecasts (unpacked). The insight for management: Take one step at a time; subjective forecasts are more accurate if broken down into successive short-term forecasts. John Shon, Stanley Veliotis How do insider stock sales affect a firm's ability to meet analyst expectations? The authors find that firms with insider sales executed under Rule 10b5-1 plans exhibit a higher likelihood of meeting or beating analysts' earnings expectations (MBE). Interestingly, this relation between MBE and plan sales is more pronounced for the plan sales of CEOs and CFOs and is nonexistent for other key insiders. The market reactions to firms that successfully meet or beat expectations are relatively positive compared with their peers that fail to do so. One interpretation of the results is that CEOs and CFOs who sell under these plans may be more likely to engage in strategic behavior to meet or beat expectations in an effort to maximize their proceeds from plan sales. However, readers should exercise caution in making inferences, because the potential presence of limit order transactions makes it difficult to unambiguously determine the direction of causality of the relation that we document. The insight for management: Watch the insiders; CEO and CFO stock sales activity is an indicator of future firm performance. Victor Manuel Bennett How does the sales process during a car purchase affect the transacted price? Negotiated prices are one factor determining whether a vendor or customer captures the value from a transaction. Auto dealerships that systematically negotiate more effectively capture more value. The author examines one dimension of the sales process: whether salespeople handle the entire sale in parallel or customers begin with less experienced salespeople who can escalate difficult assignments. The author uses data from transaction-level data on new car purchases in the United States and a unique survey of dealership management practices to find that a serial process has implications consistent with improving firms' bargaining power and reducing customers' outside options. The insight for management: Designing a serial negotiation process can increase transaction price and close more deals. Itai Ater Vardit Landsman Do customers learn from experience? The authors study customers' adoption and subsequent switching decisions with regard to a menu of three-part tariff plans offered by a commercial bank. Using a data set of more than 70,000 fee-based checking accounts over 30 months, before and after the introduction of the plans, the authors find that most customers adopt non-cost-minimizing plans, preferring plans with large monthly allowances and high fixed payments. Furthermore, after adoption, customers who exceed their allowances and consequently pay overage fees are more likely to switch to plans with larger allowances than customers who do not experience such fees. Notably, after switching, these overage-paying customers pay higher monthly payments than before. In contrast, switching customers who did not pay overage payments before switching pay less after switching. The authors propose that “overage aversion,” or the fear of conducting more transactions than are covered and thus paying a per-transaction fee, is the most plausible explanation for their findings. The insight for management: Banking customers may have a preference for fixed-fee plans that generate more revenue per customer. Yan Li, Liyan Yang How does dividend volatility affect asset pricing? The authors establish dividend volatility as a fundamental risk metric that prices assets. They show that dividend volatility positively predicts future asset returns, with the predictive power increasing with the forecasting horizon. They provide supporting empirical evidence that dividend volatility is indeed priced in the data. The insight for management: Dividend volatility affects asset pricing. Jasjit Singh, Matt Marx Is geographic proximity a contributor to knowledge diffusion? Pockets of expertise such as Silicon Valley in California would suggest that pockets of knowledge and expertise tend to collocate geographically. But why not eastern Arizona or southern Oregon? Most prior work has typically examined this phenomenon considering only one geographic unit—country, state, or metropolitan area—at a time and has rarely accounted for spatial distance. These authors find that both country and state borders have independent effects on knowledge diffusion beyond what just geographic proximity in the form of metropolitan collocation or shorter within-region distances can explain. The puzzling state border effect remains robust on average across analyses, though it is found to have waned with time. The country effect has, in contrast, not only remained robust but even strengthened over time. The insight for management: Political borders matter. Distance alone does not capture geographical colocation; national borders and—to a lesser degree—state borders act as knowledge spillover inhibitors. Gregory A. DeCroix What is the optimal on-hand inventory to carry if a company's suppliers are subject to disruption? In an assembly system with a single end product and a general assembly structure, the system can be reduced to an equivalent system with some subsystems replaced by a series structure. This reduction simplifies the computation of optimal ordering policies to allow for a heuristic policy for solving the ordering problem. The author finds, surprisingly, that choosing a supplier with a longer lead time can sometimes yield lower system costs. The author also finds that backup supply is more valuable for a supplier with a shorter lead time than for one with a longer lead time. Finally, the author finds that choosing suppliers whose disruptions are perfectly correlated yields lower system costs than choosing suppliers whose disruptions are independent, in contrast to the strategy that is typically preferred when choosing backup suppliers for a single product. The insight for management: Inventory ordering policies for assembly system supply chains with disruptions can lead to revised supply chain management strategies. Bin Hu, Damian R. Beil, Izak Duenyas How should a supplier price its quotes? The authors study an upstream supplier who quotes prices for a key component to multiple sellers that compete for an end-buyer's indivisible contract. In the case where at most one of the supplier's quotes may result in downstream contracting and hence produce supplier revenue, the authors show that the supplier will use one of two possible types of strategies, with the choice depending on the sellers' profit potentials relative to their uncertainties: secure, whereby the supplier will always have business; or risky, whereby the supplier may not have business. Addressing potential fairness concerns, the authors also study price-quoting strategies in which all sellers receive equal quotes. They show that the supplier's optimal mechanism resembles auctioning a single quote among the sellers. The insight for management: Careful analysis can assist upstream suppliers in their pricing decisions and
Muriel Niederle, Carmit Segal, Lise Vesterlund Do two wrongs make a right? Since the Civil Rights Act of 1964, affirmative action has been used to compensate for the distortion that discrimination imposes on the selection of candidates. However, affirmative action has been often criticized for causing reverse discrimination and lowering the qualifications of those hired under the policy. But affirmative action could have a similar corrective impact when qualified individuals fail to apply for a job. The authors evaluate the effect of introducing a female gender quota in an environment where high-performing women fail to enter competitions they can win because they are discouraged. The authors show that guaranteeing women equal representation among winners increases their entry. The response exceeds that predicted by the change in probability of winning and is in part driven by women being more willing to compete against other women. The insight for management: Affirmative action helps more than it hurts; if employers choose the best candidate from a pool, affirmative action can boost the talent in the pool by encouraging broader participation. Mingfeng Lin, Nagpurnanand R. Prabhala, Siva Viswanathan Do popular people get all the breaks? The authors study the online market for peer-to-peer (P2P) lending, in which individuals bid on unsecured microloans sought by other individual borrowers. The authors examine a large sample of consummated and failed listings from the largest online P2P lending marketplace, Prosper.com, and find that the online friendships of borrowers act as signals of credit quality. Friendships increase the probability of successful funding, lower interest rates on funded loans, and are associated with lower ex post default rates. The insight for management: Friendships in P2P markets are a good indicator of credit quality; more friends means lower probability of default. Luc Renneboog, Christophe Spaenjers Is beauty in the eye of the money holder? The Wall Street Journal estimated that approximately 6% of total wealth is held in “passion investments” such as art. But what determines the value of art? For example, Claude Monet's Dans la Prairie sold for 11.2 million British pounds in 2009 after being sold for 14.3 million in 1988 and 15.4 million in 1999. The authors examine the price determinants and investment performance of art by statistical examination of more than one million auction transactions of paintings and works on paper. The authors conclude that art has appreciated in value by a moderate 3.97% per year, in real U.S. dollar terms, between 1957 and 2007—a performance similar to that of corporate bonds—at much higher risk. The authors find larger average price appreciations, but higher volatilities, in higher price brackets. The authors find that measures of high-income consumer confidence and art market sentiment predict art price trends. The insight for management: Buy art to hang on your wall, not to pay for your retirement. Johannes Berger, Christine Harbring, Dirk Sliwka Working hard, or hardly working? That is the question! As one might imagine, an employee's true efforts are at best imprecisely captured by objective figures. The authors conduct a real-effort experiment in which supervisors have to rate the performance of individual workers who in turn receive a bonus payment based on these ratings. They compare a baseline treatment in which supervisors are not restricted in their rating behavior to a forced distribution system in which they have to assign differentiated grades. They find that productivity is significantly higher under a forced distribution by approximately 6% to 12%. However, the productivity effects are less clear-cut when participants have prior experience with the system, and, worse, a forced distribution becomes detrimental when workers have access to a simple option to sabotage each other. The insight for management: Forced distribution evaluation improves effort but may also increase destructive competition between employees. Simon P. Anderson, Régis Renault Want to know more? Call now! Advertising performs many functions, such as informing consumers, signaling quality, and confirming prices. But one key role of advertising is to excite potential consumers into learning more about the product. Advertising content might contain quality information, price information, and attributes to appeal to a certain subset of customers. But which of these does an advertiser stress to generate consumer interest in seeking more information? The authors find that first quality information is disclosed, then price information is revealed, and then “horizontal product information” (attributes that appeal to some consumer segments) is added to the advertising mix. The insight for management: A dynamic advertising strategy with changing emphases must be employed to garner maximal consumer interest in learning more about your product. Qian Liu, Dan Zhang What to buy, and when to buy it? Consumers might choose to purchase not only between products, but also between points in time. What is the appropriate pricing strategy given these dynamics? The authors show that more thoughtful consumers can reduce the profit of firms, but lower-valuation customers are particularly adversely affected. Interestingly, if either firm can hold the line on prices, both firms are generally more profitable. This is particularly true if higher-quality firms can hold prices constant. The insight for management: Pricing games over time are less successful in the face of intelligent consumers; firms can be more profitable through simpler and less costly static pricing strategies. Peng Huang, Marco Ceccagnoli, Chris Forman, D. J. Wu How do intellectual property rights affect entry into the market for complementary applications from independent software providers? The authors examine whether ownership of intellectual property rights (IPR) or downstream capabilities is effective in encouraging entry into markets complementary to a proprietary platform by preventing the platform owner from expropriating rents from start-ups. They study this question in the context of the software industry, an environment where evidence of the efficacy of IPR as a mechanism to appropriate the returns from innovation has been mixed. Entry is measured by an independent software vendor's (ISV's) decision to become certified by a platform owner and produce applications compatible with the platform. They find that ISVs with a greater stock of formal IPR (such as patents and copyrights), and those with stronger downstream capabilities (as measured by trademarks and consulting services) are more likely to join the platform, suggesting that these mechanisms are effective in protecting ISVs from the threat of expropriation. The insight for management: Careful use and distribution of intellectual property rights can encourage varying levels of participation in complementary product development. Paulo Maio What factors might explain dispersion in excess returns? The author introduces a scaled cash-flow factor that results from the interaction between cash-flow news and lagged values of market dividend yield or consumer price index inflation. The author finds that the scaled ICAPM performs well in general, and prices particularly well the momentum portfolios. It compares favorably with alternative asset pricing models in pricing both sets of equity portfolios. Furthermore, the scaled factor is decisive to account for the dispersion in average excess returns between past winner and past loser stocks. The insight for management: A time-varying cash-flow beta/price of risk provides a rational explanation for momentum. Fabio D'Andreagiovanni, Carlo Mannino, Antonio Sassano High-tech wireless networks such as the Internet, television, radio, and mobile communications depend on efficient network design. The authors provide a new approach to the problem of configuring a set of transmitters to provide service coverage to a set of receivers that is quicker to solve and better matches the situation in practice. The insight for management: New modeling techniques make configuring wireless networks faster and more accurate. Saed Alizamir, Francis de Véricourt, Peng Sun Conduct a quick assessment or an accurate one? This is a tough choice faced by triage nurses, first-level technical support agents, and employees making maintenance decisions. In diagnostic services, agents typically need to weigh the benefit of running an additional test and improving the accuracy of diagnosis against the cost of delaying the provision of services to others. The authors analyze how to dynamically manage this accuracy/congestion trade-off. The diagnostic process consists of a search problem in which the service provider conducts a sequence of imperfect tests to determine the customer's type. They find that the agent should continue to perform the diagnosis as long as his current belief that the customer is of a given type falls into an interval that depends on the congestion level as well as the number of performed tests thus far. This search interval should shrink as congestion intensifies and as the number of performed tests increases if additional conditions hold. The authors find that the optimal search interval shrinks when customer types are more ambiguous a priori, i.e., as the base rate approaches the value at which the agent is indifferent between type