Faculty Awarded 2006-2007
McCombs Research
Excellence Grants
The McCombs Research Excellence Grant program recognizes and
promotes research excellence in the McCombs School by supporting
influential and high quality faculty research projects.
The grants are awarded based on competitive project proposals, and
can be used to cover substantive research expenses (such as data
gathering costs, graduate assistantships and database purchases).
Criteria for awarding Research Excellence Grants include the novelty
and likely academic impact of the proposed research, potential to
significantly enhance the research reputation of the faculty and the
school, and prospects for facilitating collaboration among faculty
members.
For the 2006-2007 period, Research Excellence Grants were awarded to
the following projects:
- "How costly is financing under asymmetric information? Evidence from private placement of public securities" : Andres Almazan and Aydogan Alti
- "An Empirical Analysis of Financial Returns to Strategic Outsourcing Alliances and Subsequent Performance, 1995 – 2000" : Anitesh Barua and Andrew Whinston
- "Is There an Expected Trade-off Between a Product’s Ethical Value and Its Effectiveness?: Exposing and Attenuating Latent Intuitions about Ethical Products ": Julie Irwin and Raj Raghunathan
- "Measuring and Motivating Creativity": Steve Kachelmeier and Michael Williamson
- "Impact of Telemedicine on Accessibility, Quality, and Cost of Health Care" : Huseyin Tanriverdi
How costly is financing under asymmetric information? Evidence from private placement of public securities
Andres Almazan and Aydogan Alti
Private placement of public securities has been an increasingly common financing method for U.S. corporations over the past ten years. Private placements differ from traditional forms of public security issuance in two respects. First, there is no retail investor participation; the typical placement involves a small group of sophisticated institutional investors. Second, securities sold in these transactions are highly customized, exhibiting various non-standard pricing rules and payoff characteristics. These features closely parallel theoretical prescriptions offered by prior work for alleviating asymmetric information problems between issuers and investors. As such, the fast-growing private placement market constitutes an excellent setting to detect informational costs and constraints firms face when raising capital. In particular, our study attempts to exploit the large variation in issuer characteristics and the richness of securities issued in the private placement market in order to provide a more complete mapping between firm fundamentals and financing behavior than has been possible with standard datasets in the past. .
An Empirical Analysis of Financial Returns to Strategic Outsourcing Alliances and Subsequent Performance, 1995 – 2000
Anitesh Barua and Andrew Whinston
The shifting basis of competitive advantage in modern firms from ownership to control of strategic capabilities is evidenced in the significant growth in the outsourcing market as well as the increasingly strategic, often core, nature of value chain activities outsourced. Yet, evidence from industry and emergent research (for example, Rouse and Corbitt 2006) highlight the inherent complexity and high failure rate of outsourcing initiatives. Our study will offer empirical evidence to assess whether and how outsourcing initiatives create value for the outsourcing firm. Using a sample of the 100 largest outsourcing initiatives announced each year during the period 1995 to 2000, we will assess whether outsourcing firms gain significant improvements in operational performance relative to their industries after the outsourcing announcement, leading to higher post-outsourcing cash flow returns. Further, we will examine whether the post-outsourcing increases in operational performance influence abnormal stock returns at outsourcing announcements and in the long run, thereby, providing evidence of the expectations of performance gains that underlie the equity revaluations of the outsourcing firms. Finally, we examine the role of alignment between the outsourcing governance structure and the adaptive constraints in the outsourcing relationship in moderating the abnormal stock returns and operational performance gains from the initiative. Our study may enhance managerial understanding of the value created through different types of outsourcing initiatives, and yield important insights on the role of effective governance in value creation through outsourcing as well as the need to communicate to investors this important role of governance design in value creation.
Julie Irwin and Raj Raghunathan
Every firm that develops and manufacturers products makes decisions throughout the process about which materials to use, how to treat workers, what impacts to have on the local community, and so on. Each of these choices varies in ethical quality; some choices violate ethical principles more than others do. Aggregated over the marketplace, the choices potentially add up to big gains (or losses) for ethical principles that most people care about, such as fairness, avoiding harm to living things, and the preservation of the environment. Changing the purchasing habits of even a small percentage of consumers towards a greater support of ethical principles could have an enormous impact.
Our primary interest in this project is in better understanding why consumers do not buy products with positive ethical attributes (such as products that do not harm the environment and/or animals, products that are produced using sustainable practices, etc) even though surveys (and everyday experience) suggest that people do care about ethical issues. At the core of our research is a hypothesized intuition that consumers may not choose ethical products in part because they believe (perhaps unconsciously) that products with ethical attributes are less effective than products without these ethical attributes. We explore effectiveness both in terms of the utilitarian and the hedonic (e.g., smell, taste, feel) aspects of products because product effectiveness for certain goods is defined in terms of the goods’ ability to satisfy hedonic needs. For example, people may believe that free-trade coffee is less delicious than in conventional coffee.
As opposed to the view that consumers do not buy ethical products because they do not really care about ethical issues in any sort of meaningful way, we contend that consumers do care but that they expect to be asked to give up too much when they buy ethical products. If we could understand when and how consumers expect to give up product functionality, the intuition might be better attenuated through marketing and/or product manufacturing.
This project has implications for marketers of ethical goods because whatever moderators of the intuition we identify can help these marketers increase market share. More importantly, the research helps explain the mysterious gap between consumer values and consumer purchasing behavior—understanding how to bridge this gap could have enormously positive consequences. If the marketplace reflected ethical values instead of (as it so often does) subverting them, the “right thing” could arise naturally from the economy instead of having to arise from policy making and not-for-profit enterprise.
Measuring and Motivating Creativity
Steve Kachelmeier and Michael Williamson
Several management accounting studies investigate how performance-based incentives influence employee productivity, but these studies generally involve mundane tasks for which the quantity produced is the only meaningful output measure. Our proposal extends this body of literature to investigate the effects of performance-based incentives on creativity and innovation, thereby melding the accounting insights on productivity with insights from the organizational behavior and social psychology literatures on the factors that foster creativity.
The old adage that “you get what you pay for” does not necessarily extend to efforts such as imagination and creativity that require “right-brain” thinking. In fact, studies conducted by several management and psychology researchers suggest that rewards actually hinder creativity. This position is far from universally accepted, however, as others assert that participants in prior studies misinterpreted rewards as encouraging productivity (just get it done) rather than rewarding creativity.
In our initial efforts, we attempted to resolve this uncertainty in an experiment that asked business students to create “rebus puzzles,” a task that lends itself to meaningful measures of both the quantity of puzzles produced and the creativity of those puzzles. We rewarded these students based on either the number of puzzles they produced, the average creativity score of their puzzles (as evaluated by an independent group of raters), the “weighted score” of creativity-weighted total output, or no performance measure (i.e., a fixed wage).
Challenging assertions that financial
incentives impair creative thinking, our preliminary results
indicate that students with creativity incentives generated puzzles
that independent raters judged to be more creative, on average.
However, these higher average creativity scores came at the cost of
a substantial loss of productivity, implying a suboptimal trade-off
between creativity and quantity. We plan to follow up on these
results by investigating incentive plans that can improve creativity
without undermining productivity, insofar as both dimensions are
clearly important to contemporary business success.
Impact of Telemedicine on Accessibility, Quality, and Cost of Health Care
Huseyin Tanriverdi
Telemedicine—the use of Information Technology (IT) to deliver medical services over distances—has been proposed as one of the mechanisms through which problems in accessibility, quality, and costs of medical care can be addressed. Access to care is problematic in rural areas and remote locations where there is shortage of physicians. Telemedicine could increase access to care by enabling distant physicians to consult with patients in underserved areas. Quality of care becomes problematic when the patient cannot see a physician who can appropriately diagnose and treat her condition. Telemedicine could improve quality of care by enabling geographically dispersed physicians to collaborate on complex clinical problems that cannot be diagnosed or treated locally. Telemedicine could also reduce cost of care by enabling remote monitoring and examinations, minimizing the transportation of patients to physicians, the need for on-call expertise and the maintenance of expensive facilities. However, accessibility, quality, and cost reduction objectives can conflict with each other and require tradeoffs. This study aims to better understand the interrelationships among these objectives and how telemedicine impacts them. This study will collect data with a survey of about 1000 telemedicine programs in the US, Canada, Australia, and Europe. It will draw implications for managers from business and public policy perspectives and contribute to the business value of IT research.
For information on specific programs at the McCombs School, consult our contacts page. For media information, contact the Communications Director by phone at 512-471-3314 or by email at CommunicationsDirector@mccombs.utexas.edu.
