Management Science 2013
Management Insights
Abstract
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
- DOI
- 10.1287/mnsc.2013.1750
- Sources
- openalex