Business Commons^™

Aligning Performance Metrics With Business Strategy, Ravi Kathuria, Lorenzo Lucianetti

Business Faculty Articles and Research

Purpose

This study examines whether different strategy archetypes deploy specific performance metrics to support their strategic goals and priorities. If so, does alignment of strategy and metrics positively impact organisational performance?

Design/methodology/approach

The conceptual framework and hypotheses are couched in Contingency Theory. The role of business strategy as a moderating variable is tested using MANOVA, followed by post hoc pairwise comparisons. The results are based on cross-sectional survey data from 372 manufacturing and service organisations in Italy.

Findings

The overall contingency effect of business strategy in selecting and deploying performance metrics and their effect on organisational performance is supported. …

Blockholder Mutual Fund Participation In Private In-House Meetings, Robert Bowen, Shantanu Dutta, Songlian Tang, Pengcheng Zhu

Accounting Faculty Articles and Research

The Shenzhen Stock Exchange (SZSE) in China is unique worldwide in requiring disclosure of the timing, participants, and selected content of private in-house meetings between firm managers and outsider investors. We investigate whether these private meetings benefit hosting firms and their major outside institutional investors—blockholder mutual funds (i.e., funds with ownership ≥5%). Using a large data set of SZSE firms, we find that blockholder mutual funds have more access to private in-house meetings, and top management is more likely to be present, especially when a meeting is associated with negative news. Furthermore, when blockholder mutual funds attend negative-news meetings with …

Explainable Ai Helps Bridge The Ai Skills Gap: Evidence From A Large Bank, Selina Carter, Jonathan Hersh

Economics Faculty Articles and Research

Advances in machine learning have created an “AI skills gap” both across and within firms. As AI becomes embedded in firm processes, it is unknown how this will impact the digital divide between workers with and without AI skills. In this paper we ask whether managers trust AI to predict consequential events, what manager characteristics are associated with increasing trust in AI predictions, and whether explainable AI (XAI) affects users’ trust in AI predictions. Partnering with a large bank, we generated AI predictions for whether a loan will be late in its final disbursement. We embedded these predictions into a …

Coming Out Ahead While Losing A Partner: The Thoroughbred Industry Stays On Course, Darcy Fudge Kamal, Cristina Nistor, Charu Sinha

Business Faculty Articles and Research

Purpose

In many industries, firms collaborate as business partners, which helps them achieve superior outcomes and ensure survival in a crisis. Business relationships help companies access limited resources, share information and build trust within the community. This paper aims to highlight the strategies that firms can use to adapt to the loss of a business partner.

Design/methodology/approach

This study considers qualitative examples from what happens when a business partner disappears in the Thoroughbred horse industry. The authors draw attention to several types of partner loss due to firm bankruptcy, owner death and strategic restructuring.

Findings

This paper proposes a framework …

How Apis Create Growth By Inverting The Firm, Seth G. Benzell, Jonathan Hersh, Marshall Van Alstyne

Economics Faculty Articles and Research

Traditional asset management strategy has emphasized building barriers to entry or closely guarding unique assets to maintain a firm’s comparative advantage. A new “Inverted Firm” paradigm, however, has emerged. Under this strategy, firms share data seeking to become platforms by opening digital services to third-parties and capturing part of their external surplus. This contrasts with a “pipeline” strategy where the firm itself creates value. This paper quantitatively estimates the effect of adopting an inverted firm strategy through the lens of Application Programming Interfaces (APIs), a key enabling technology. Using both public data and that of a private API development firm, …

Privacy Considerations For Online Advertising: A Stakeholder’S Perspective To Programmatic Advertising, Dylan A. Cooper, Taylan Yalcin, Cristina Nistor, Matthew Macrini, Ekin Pehlivan

Business Faculty Articles and Research

Purpose

Privacy considerations have become a topic with increasing interest from academics, industry leaders and regulators. In response to consumers’ privacy concerns, Google announced in 2020 that Chrome would stop supporting third-party cookies in the near future. At the same time, advertising technology companies are developing alternative solutions for online targeting and consumer privacy controls. This paper aims to explore privacy considerations related to online tracking and targeting methods used for programmatic advertising (i.e. third-party cookies, Privacy Sandbox, Unified ID 2.0) for a variety of stakeholders: consumers, AdTech platforms, advertisers and publishers.

Design/methodology/approach

This study analyzes the topic of internet …

The Efficiency Of U.S. Public Space Utilization During The Covid-19 Pandemic, Seth G. Benzell, Avinash Collis, Christos Nicolaides

Economics Faculty Articles and Research

The COVID-19 pandemic has called for and generated massive novel government regulations to increase social distancing for the purpose of reducing disease transmission. A number of studies have attempted to guide and measure the effectiveness of these policies, but there has been less focus on the overall efficiency of these policies. Efficient social distancing requires implementing stricter restrictions during periods of high viral prevalence and rationing social contact to disproportionately preserve gatherings that produce a good ratio of benefits to transmission risk. To evaluate whether U.S. social distancing policy actually produced an efficient social distancing regime, we tracked consumer preferences …

The Dark Side Of Executive Compensation Duration: Evidence From Mergers And Acquisitions, Zhi Li, Qiyuan Peng

Business Faculty Articles and Research

We find that contrary to popular belief, CEOs with long compensation duration do not make better long-term investment decisions. Using a comprehensive pay duration measure, we find that acquisitions conducted by CEOs with long compensation duration receive more negative announcement returns, and experience significantly worse post-acquisition abnormal operating and stock performance, compared with deals conducted by CEOs with short compensation duration. The negative correlation between compensation duration and mergers and acquisitions (M&A) performance is driven by long-term time-vesting plans, not by performance-vesting plans. The results suggest that extending CEO pay horizons without implementing performance requirements is insufficient to improve managerial …

How Social Media Communications Can Mitigate Negative Impacts Of Corporate Social Irresponsibility On Corporate Financial Performance?, Saad A. Alhoqail, Hyun Young Cho, Kristopher Floyd

Business Faculty Articles and Research

Previous research on corporate social responsibility (CSR) has focused on corporate reputation (CR) and corporate financial performance (CFP), showing a high correlation between both. While most researchers primarily focus on CSR, our research examines the other side of the coin; corporate social irresponsibility (CSI) and provides findings that counter previous thought. We contribute to the existing literature by showing that CSI has a non-significant impact on corporate financial performance, as measured by market value, while concurrently being negatively correlated to corporate reputation. Further, we show social media, as measured by the Social Media Sustainability Index (SMSI), a measure studied infrequently …

Accounting-Based Compensation And Debt Contracts, Zhi Li, Lingling Wang, Karen Wruck

Business Faculty Articles and Research

We examine how accounting‐based compensation plans influence a firm's contracts with its creditors. After granting long‐term accounting‐based compensation plans (LTAPs) to CEOs, firms pay lower spreads and have fewer restrictive covenants in new bank loans. Mechanisms leading to lower borrowing cost include improvements in debt repayment ability, reduced shareholder‐debtholder conflicts, and reduced risk‐taking incentives. Creditors view LTAPs as a substitute for monitoring, adjust covenant design based on LTAP features, and value plans with concave performance‐payout functions and reasonable performance targets. A firm's credit rating improves and CDS spread declines after LTAP grants, suggesting that LTAPs help reduce firms' credit risk.

Corporate Entrepreneurship In The Digital Era: The Cascading Effect Through Operations, Maheshkumar P. Joshi, Ravi Kathuria, Sidhartha Das

Business Faculty Articles and Research

This study examines a firm’s response to perceived changes in the environment, such as the growth of the digital era, at different levels of a firm—beginning with the adoption of corporate entrepreneurship (CE) down to process renewal (PR). We further explore if the technological intensity of a firm, high-tech or low-tech intensity, influences its choice of mode for organisational renewal (OR)—use of internal competence or outside acquisition—to exploit the opportunities created by the digital era. Using survey data from 170 firms, we test a sequential relationship among environmental changes (growth of the digital era), CE, OR and finally PR that …

Ideological Diversity In Standard Setting, Jivas Chakravarthy

Accounting Faculty Articles and Research

I explore whether the level of ideological diversity among Financial Accounting Standards Board (FASB) members has declined since the emergence of their conceptual framework. I analyze votes made by FASB members on Statements of Financial Accounting Standards and compare them to comment letters submitted by constituent sponsoring organizations. I demonstrate that, relative to the Pre-CF regime (1973–1986), FASB members’ voting positions in the CF regime (1987–2007) are (i) less like their constituent sponsors and (ii) more like one another. The former result is primarily attributable to differences between FASB members with auditor and preparer backgrounds and those groups’ sponsors. Both …

Unrequited: Asymmetry In Interorganizational Trust, Melissa E. Graebner, Fabrice Lumineau, Darcy Fudge Kamal

Business Faculty Articles and Research

Many studies of interorganizational relationships assume that trust between organizations is symmetric. In this essay, we explore the origins of this assumption and examine relevant quantitative and qualitative evidence from the literatures on strategy, marketing, supply chain management, and information systems. We conclude that no systematic evidence currently exists to support the assumption that interorganizational trust is typically symmetric. We explore how the possibility of asymmetry complicates interpretation of previous research on the effects of interorganizational trust. We encourage further research to identify conditions under which symmetry is likely, and offer a variety of strategies that scholars may use to …

Unrequited: Asymmetry In Interorganizational Trust, Melissa E. Graebner, Fabrice Lumineau, Darcy Fudge Kamal

Business Faculty Articles and Research

Many studies of interorganizational relationships assume that trust between organizations is symmetric. In this essay, we explore the origins of this assumption and examine relevant quantitative and qualitative evidence from the literatures on strategy, marketing, supply chain management, and information systems. We conclude that no systematic evidence currently exists to support the assumption that interorganizational trust is typically symmetric. We explore how the possibility of asymmetry complicates interpretation of previous research on the effects of interorganizational trust. We encourage further research to identify conditions under which symmetry is likely, and offer a variety of strategies that scholars may use to …

The Case For Showrooming, Cristina Nistor, Prashanth Nyer

Business Faculty Articles and Research

Showrooming has deeply affected the retail market in the past decade. As consumers became able to easily compare prices on their mobile devices, they started using retail stores to try on and experience products and then they ordered online the lower priced versions they liked best to be delivered directly to their homes. As retailers are trying to adapt to the showrooming challenges and the shift to online purchases, stores are increasingly adopting showrooming as a new selling format. We present examples of successful showrooming and develop a framework for when the new selling format can be expected to be …

Corporate Governance Roles Of Information Quality And Corporate Takeovers, Jing Li, Lin Nan, Ran Zhao

Accounting Faculty Articles and Research

We examine the corporate governance roles of information quality and the takeover market with asymmetric information regarding the value of the target firm. Increasing information quality improves the takeover efficiency however, a highly efficient takeover market also discourages the manager from exerting effort. We find that perfect information quality is not optimal for either current shareholders’ expected payoff maximization or expected firm value maximization. Furthermore, current shareholders prefer a lower level of information quality than the level that maximizes expected firm value, because of a misalignment between current shareholders’ value and total firm value. We also analyze the impact of …

Models Of Intragroup Conflict In Management: A Literature Review, Matthew W. Mccarter, Kimberly A. Wade-Benzoni, Darcy Fudge Kamal, H. Min Bang, Steven J. Hyde, Reshma Maredia

Business Faculty Articles and Research

The study of intragroup dynamics in management studies views conflict as a contingency process that can benefit or harm a group based of characteristics of the group and context. We review five models of intragroup conflict in management studies. These models include diversity-conflict and behavioral negotiation models that focus primarily on conflict within a group of people; social exchange and transaction cost economics models that focus primarily on conflict within a group of firms; and social dilemma models that focus on conflict in collectives of people, organizations, communities, and generations. The review is constituted by summarizing the insights of each …

Finding Meaning At Work: The Role Of Inspiring And Funny Youtube Videos On Work-Related Well-Being, Sophie Janicke-Bowles, Diana Rieger, Winston Connor Iii

Communication Faculty Articles and Research

Watching online videos on social media is a common activity in today’s digital age, but its’ impact on employee well-being at work has not been investigated yet. The current study tried to fill this gap by investigating the role hedonic and eudaimonic online videos play on employee’s stress levels and well-being at work. An online experiment with 200 full time employees in the US was conducted exploring the role of inspiring affect and positive affect on three distinct well-being outcomes: subjective well-being, psychological well-being and social well-being at the workplace. A path model suggests unique effects for inspiring videos on …

Financial Synergies And Systemic Risk In The Organization Of Bank Afþliates, Elisa Luciano, Clas Wihlborg

Business Faculty Articles and Research

We analyze theoretically banks’ choice of organizational structures in branches, subsidiaries or stand-alone banks, in the presence of public bailouts and default costs. These structures are characterized by different arrangements for internal rescue of affiliates against default. The cost of debt and leverage are endogenous. For moderate bailout probabilities, subsidiary structures, wherein the two entities provide mutual internal rescue under limited liability, have the highest group value, but also the highest risk taking as measured by leverage and expected loss. We explore the effect of constraints on leverage and policy implications. The conflict of interests between regulators, who minimize systemic …

Evaluating Patient Preferences For Different Incentive Programs To Optimize Pharmacist-Provided Patient Care Program Enrollment, Daniel M. Tomaszewski, Tim Cernohaus, Rajiv Vaidyanathan

Pharmacy Faculty Articles and Research

BACKGROUND: Employers have increased efforts to engage employees in health and wellness programs. Providing employees with incentives to participate in these programs has been shown to improve overall enrollment and engagement. One program that has had challenges with enrollment and engagement is medication therapy management (MTM).

OBJECTIVES: To (a) determine how individuals evaluate different financial incentives to improve participation in an MTM program and (b) measure the effect of participant characteristics on incentive preference.

METHODS: This study was composed of a paper-based survey administered to participants after focus group sessions. Participants included MTMeligible beneficiaries from 2 employer groups and included …

Watching Online Videos At Work: The Role Of Positive And Meaningful Affect For Recovery Experiences And Well-Being At The Workplace, Sophie Janicke, Diana Rieger, Leonard Reinecke, Winston Connor Iii

Communication Faculty Articles and Research

This study extends research on the relationship between hedonic and eudaimonic entertainment and its potential for recovery experiences and aspects of well-being (e.g., Rieger, Reinecke, Frischlich, & Bente, 2014). With the broad notion of what hedonic and eudaimonic media can entail, this research focused on unique affective experiences—namely, positive affect—and an expanded concept of meaningful affect (including elevation and gratitude). An online experiment with 148 full-time employees in the United States was conducted to investigate the unique role of positive and meaningful affect eliciting YouTube videos (compared to neutral control video) on recovery experiences and vitality and work satisfaction in …

Herding And Anchoring In Macroeconomic Forecasts: The Case Of The Pmi, John B. Broughton, Bento J. Lobo

Business Faculty Articles and Research

We test if analysts display multiple biases in forecasting the Institute for Supply Management’s (ISM) manufacturing Purchasing Manager’s Index (PMI). We adopt a test that does not require knowledge of the forecaster’s prior information set and is robust to rational clustering, correlated forecast errors and outliers. We find that analysts forecast the PMI poorly and display multiple biases when forecasting. In particular, forecasters anti-herd and anti-anchor. Anti-herding supports a reputation-based notion that forecasters are rewarded not only for forecast accuracy but also for being the best forecast at a single point in time. Anti-anchoring is consistent with forecasters overreacting to …

Mutual And Exclusive: Dyadic Sources Of Trust In Interorganizational Exchange, Bill Mcevily, Akbar Zaheer, Darcy Fudge Kamal

Business Faculty Articles and Research

Trust in interfirm exchange has traditionally been treated as mutually held and jointly determined by the two parties in a relationship. Yet, the expectations of exchange partners can, and routinely do, differ with respect to the goals, preferences, and vulnerabilities in their shared relationship. To account for such differences in expectations, we propose a broadened conceptualization of the sources of interorganizational trust as dyadic. Viewing the sources of trust as dyadic expands the conventional focus on mutual elements to further emphasize exclusive features of an exchange relationship. To substantiate our theory, we examine a key source of interorganizational trust, exchange …

Positive Impacts Of Social Media At Work: Job Satisfaction, Job Calling, And Facebook Use Among Co-Workers, Brittany Hanna, Kerk Kee, Brett W. Robertson

Communication Faculty Articles and Research

The number of Facebook users grew rapidly since its conception. Within today’s workplace, employees are increasingly connecting with each other on Facebook for interpersonal reasons. Due to sensational reports by media outlets of inappropriate social media use, many organizations are taking extreme measures about how their employees who utilize Facebook to connect with colleagues. Contrary to the negative assumptions, McAfee [1] states that social media within the workplace can promote positive dynamics. The present study uses McAfee’s argument to examine if a positive connection exists between colleagues who use Facebook to connect with each other. An online survey with questions …

Social Media At Work: The Roles Of Job Satisfaction, Employment Status, And Facebook Use With Co-Workers, Brett W. Robertson, Kerk Kee

Communication Faculty Articles and Research

Limited research has studied workplace satisfaction in a computer-mediated context, particularly with the use of social media. Based on an analysis of an online survey of working adults (N=512) in various companies and organizations in a metropolitan area in Southern California, we tested the relationships among time spent on Facebook interacting with coworkers, employment status, and job satisfaction. Results show that an employee’s satisfaction at work is positively associated with the amount of time they spend on Facebook interacting with co-workers. Contrary to our initial predictions, results to the second and third hypotheses revealed that part time employees reported having …

Executive Compensation Incentives Contingent On Long-Term Accounting Performance, Zhi Li, Lingling Wang

Business Faculty Articles and Research

The percentage of S&P 500 firms using multiyear accounting-based performance (MAP) incentives for CEOs increased from 16.5% in 1996 to 43.3% in 2008. The use and design of MAP incentives depend on the signal quality of accounting versus stock performance, shareholder horizons, strategic imperatives, and board independence. After the technology bubble, option expensing, and the publicity of option backdating, firms increasingly use stock-based MAP plans to replace options, resulting in changes in pay structure, but not in pay level. While firms respond to the evolving contracting environment, they consider firm characteristics and shareholder preferences and do not blindly follow the …

Firing Threats: Incentive Effects And Impression Management, Brice Corgnet, Roberto Hérnan-Gonzalez, Stephen J. Rassenti

Economics Faculty Articles and Research

We study the effect of firing threats in a virtual workplace that reproduces features of existing organizations. We show that organizations in which bosses can fire up to one third of their workforce produce twice as much as organizations for which firing is not possible. Firing threats sharply decrease on-the-job leisure. Nevertheless, organizations endowed with firing threats underperformed those using individual incentives. In the presence of firing threats, employees engage in impression management activities to be seen as hard-working individuals in line with our model. Finally, production levels dropped substantially when the threat of being fired was removed, whereas on-the-job …

A Dynamic Model Of Competitive Entry Response, Matthew Selove

Business Faculty Articles and Research

I develop a dynamic investment game with a “memoryless” research and development process in which an incumbent and an entrant can invest in a new technology, and the entrant can also invest in the old technology. I show that an increase in the probability of successfully implementing a technology can cause the incumbent to reduce its investment. Under certain conditions, if the success probability is high, the incumbent allows the entrant to win the new technology so that firms reach an equilibrium in which they use different technologies, and threats of retaliation prevent attacks; but if the success probability is …

How Do Firms Become Different? A Dynamic Model, Matthew Selove

Business Faculty Articles and Research

This paper presents a dynamic investment game in which firms that are initially identical develop assets that are specialized to different market segments. The model assumes that there are increasing returns to investment in a segment, for example, as a result of word-of-mouth or learning curve effects. I derive three key results: (1) Under certain conditions there is a unique equilibrium in which firms that are only slightly different focus all of their investment in different segments, causing small random differences to expand into large permanent differences. (2) If, on the other hand, sufficiently large random shocks are possible, firms …

Innovators And Imitators In Product-Market Competition And Accounting Reporting, Carlos Corona, Lin Nan, Ran Zhao

Accounting Faculty Articles and Research

In this study, we examine firms’ investments in explorative initiatives and their choices of capitalization method in a product-market competition setting. Since the capitalization of exploration expenditures may contain information on whether a firm’s exploration investment is successful, financial reports may reveal important information to competitors, and thus may have real consequences in product-market competition. In our paper, we identify two driving forces that induce firms to choose different capitalization methods: an information-spillover effect and a preempting effect. We also find that enforcing an accounting method that requires firms to capitalize expenditures of only successful explorations may increase or decrease …