Research | Recent Publications
Our driven faculty at McCombs School of Business writes and publishes a large body of work each year that spans all areas of business expertise. Explore what McCombs research has to offer.
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Voice Flows to and around Leaders: Understanding When Units Are Helped or Hurt by Employee Voice
Detert, James R., Burris, Ethan R., Harrison, David A., Martin, Sean R.
Administrative Science Quarterly. Dec2013, Vol. 58 Issue 4, p624-668.
In two studies, we develop and test theory about the relationship between speaking up, one type of organizational citizenship behavior, and unit performance by accounting for where employee voice is flowing. Results from a qualitative study of managers and professionals across a variety of industries suggest that voice to targets at different formal power levels (peers or superiors) and locations in the organization (inside or outside a focal unit) differs systematically in terms of its usefulness in generating actions to a unit’s benefit on the issues raised and in the likely information value of the ideas expressed. We then theorize how distinct voice flows should be differentially related to unit performance based on these core characteristics and test our hypotheses using time-lagged field data from 801 employees and their managers in 93 units across nine North American credit unions. Results demonstrate that voice flows are positively related to a unit’s effectiveness when they are targeted at the focal leader of that unit—who should be able to take action—whether from that leader’s own subordinates or those in other units, and negatively related to a unit’s effectiveness when they are targeted at coworkers who have little power to effect change. Together, these studies provide a structural framework for studying the nature and impact of multiple voice flows, some along formal reporting lines and others that reflect the informal communication structure within organizations. This research demonstrates that understanding the potential performance benefits and costs of voice for leaders and their units requires attention to the structure and complexity of multiple voice flows rather than to an undifferentiated amount of voice.based pay). We argue that while challenging targets and target-based pay can hinder the discovery of production
efficiencies, they can motivate high productive effort whereby individuals work harder and more productively using either the conventional task approach or more efficient task approaches when discovered. Results of a laboratory experiment support our predictions. Individuals assigned an easy productivity target and paid a fixed wage identify a greater number of production efficiencies than those with either challenging targets or target-based pay. However, individuals with challenging targets and/or target-based pay have higher productivity per production efficiency discovered, suggesting these control tools better motivate productive effort. Collectively, our results suggest that the ultimate effectiveness of these control tools will likely hinge on the importance of promoting the discovery of production efficiencies relative to motivating productive effort. In doing so, our results provide a better understanding of conflicting prescriptions from the practitioner literature and business press.
Integration and Cospecialization of Emerging Complementary Technologies by Startups
Anderson, Edward G., Parker, Geoffrey G.
Production & Operations Management. Nov2013, Vol. 22 Issue 6, p1356-1373.
We analyze the market entry problem faced by startups that must integrate their service or product with one or more complementary technologies. The problem is especially challenging when the complementary technologies have uncertain cost reduction potentials. The entrepreneurship literature suggests that startups should pursue focused strategies for various reasons, including bounded rationality and budget constraints, but generally overlooks startups entering markets with complementary technologies. The advice for mature firms investing in complementary technologies is often to diversify investment across multiple complements to manage technological uncertainty. Given competing guidance, we seek to extend the entrepreneurship literature by modeling startups' entry decisions for markets in which complementary technologies exhibit strong learning effects. We find that, consistent with the extant entrepreneurship literature, startups generally achieve higher expected returns by channeling their integration investment to only one complementary technology. However, the mechanisms driving our results differ significantly by hinging on nonlinear feedback effects that occur when firms concentrate integration investment in only one complementary technology. Interestingly, this focused strategy often does not yield the highest market share or the lowest likelihood of bankruptcy. We characterize the situations under which each finding holds and describe the implications of these findings for theory, practice, and policy.
When are Enhanced Relationship Tax Compliance Programs Mutually Beneficial?
De Simone, Lisa, Sansing, Richard C., Seidman, Jeri K.
Accounting Review. Nov2013, Vol. 88 Issue 6, p1971-1991.
This study investigates the circumstances under which ''enhanced relationship'' tax-compliance programs are mutually beneficial to taxpayers and tax authorities, as well as how these benefits are shared. We develop a model of taxpayer and tax authority behavior inside and outside of an enhanced relationship program. Our model suggests that, despite the adversarial nature of the relationship, an enhanced relationship program is mutually beneficial in many settings. The benefits are due to lower combined government audit and taxpayer compliance costs. These costs are lower because taxpayers are less likely to claim positions with weak support and the government is less likely to challenge positions with strong support inside the program. Further, we show that an increase in the ability of the tax authority to identify uncertain tax positions makes an enhanced relationship tax-compliance program more attractive to both the taxpayer and the tax authority.
Financial Market Shocks and the Macroeconomy
Subrahmanyam, Avanidhar, Titman, Sheridan
Review of Financial Studies. Nov2013, Vol. 26 Issue 11, p2687-2717.
Feedback from stock prices to cash flows occurs because information revealed by firms' stock prices influences the actions of competitors. We explore the implications of feedback within a noisy rational expectations setting with incumbent publicly traded firms and privately held new entrants. In this setting the equilibrium relation among stock prices and both future dividends and aggregate output depends on the strategic environment in which these firms operate. In general, under reasonable conditions, the relations between prices, dividends, and economic output in our framework are consistent with empirical evidence in the macroliterature. We also generate new, potentially testable, implications.
The Social Negotiation of Group Prototype Ambiguity in Dynamic Organizational Contexts
Bartel, Caroline A., Wiesenfeld, Batia M.
Academy of Management Review. Oct2013, Vol. 38 Issue 4, p503-524.
This article focuses on how the changing nature of work and working today elicits prototype ambiguity in groups-a shared perception among group members that the attributes, attitudes, and actions that define and describe the typical group member are unclear. We offer a functionalist account of prototype ambiguity identifying social contexts that reliably trigger ambiguity in group prototypes, group-level consequences of prototype ambiguity that motivate corrective action, and social negotiation processes by which group members adaptively resolve prototype ambiguity. We outline how group members' social negotiation efforts unfold in different but predictable ways (in response to specific triggers of prototype ambiguity) to yield emergent prototypes based on either central tendencies (as exemplified by the average group member) or ideals (as exemplified by the extraordinary group member). Concluding the article is a discussion of implications for research on social identity processes, group prototypes, and social hierarchies in organizations.
Conspicuous Consumption and Dynamic Pricing
Raghunath Singh Rao, Schaefer, Richard
Marketing Science. Sep/Oct2013, Vol. 32 Issue 5, p786-804.
How do firms develop marketing strategy when consumers seek to satisfy both quality and status-related considerations? We develop an analytical model to study this issue, examining both pricing and product management decisions in markets for conspicuous durable goods. Our analysis yields many interesting and nontrivial insights. First, we demonstrate that high intrinsic quality indirectly generates exclusivity via pricing effects; in turn, this exclusivity generates considerable social payoffs where consumers value status. This insight reverses the direction of causality in the existing literature, wherein only status considerations matter and mere price increases may enhance consumer utility. Second, our dynamic model indicates that where consumers prioritize status benefits, producers incur substantial price depreciation in equilibrium. Third, we examine the product management strategies used by firms to preserve early adopter exclusivity. Finally, we discuss the boundary conditions of our results as well as our results' implications for managerial and policy issues.
Partial Factor Modeling: Predictor-Dependent Shrinkage for Linear Regression
Hahn, P. Richard, Carvalho, Carlos M., Mukherjee, Sayan
Journal of the American Statistical Association. Sep2013, Vol. 108 Issue 503, p999-1008.
We develop a modified Gaussian factor model for the purpose of inducing predictor-dependent shrinkage for linear regression. The new model predicts well across a wide range of covariance structures, on real and simulated data. Furthermore, the new model facilitates variable selection in the case of correlated predictor variables, which often stymies other methods.
Discussion of 'The Economics of Setting Auditing Standards'
Contemporary Accounting Research. Fall2013, Vol. 30 Issue 3, p1216-1222.
The article details the paper by Ye and Simunic (YS) that analyzes the preferences of investors and auditors for auditing standards. It this paper, YS modeled two dimensions of auditing standards which are toughness and vagueness. Toughness refers to typical level of efforts that would be judged adequate and would project the auditor from liability while vagueness refers to variation around the toughness level due to uncertainty about how the standards of a particular journey might be interpreted.
The influence of online word-of-mouth on long tail formation
Gu, Bin, Tang, Qian, Whinston, Andrew B.
Decision Support Systems. Dec2013, Vol. 56, p474-481.
The long tail phenomenon has been attributed to both supply side and demand side economies. While the cause on the supply side is well-known, research on the demand side has largely focused on the awareness effect of online information that helps consumers discover new and often niche products. This study expands the demand side factors by showing that online information also influences the long tail phenomenon through the informative effect, which affects consumers' evaluation of product quality. We examine the informative effect in the context of online WOM. Two sets of theories suggest opposite directions for the implication of the informative effect. Information search and information cascade literatures indicate that WOM provides additional information to consumers, reduces the occurrence of information cascade, and encourages the formation of long tail. Studies on behavior heuristics, however, suggest that consumers tend to ignore online information inconsistent with their prior beliefs, which leads to a rich-gets-richer effect for popular products and curtail the formation of the long tail. We empirically examine the conflict by analyzing different impacts of online WOM across product popularity and WOM ratings. Using a panel data collected from Amazon.com, we show that positive reviews improve the sales of popular products more than the sales of niche products, while negative reviews hurt niche products more than popular products. The results are consistent with the prediction of the behavior heuristic and suggest that online WOM restrains the formation of long tail.
Driven to Be Good: A Stakeholder Theory Perspective on the Drivers of Corporate Social Performance
Brower, Jacob, Mahajan, Vijay
Journal of Business Ethics. Oct2013, Vol. 117 Issue 2, p313-331.
Despite growing evidence of the benefits to a firm of improving corporate social performance (CSP), many firms vary significantly in terms of their CSP activities. This research investigates how the characteristics of the stakeholder landscape influence a firm's CSP breadth. Using stakeholder theory, we specifically propose that several factors increase the salience and impact of stakeholders' demands on the firm and that, in response to these factors, a firm's CSP will have greater breadth. A firm's CSP breadth is operationalized as the number of different sub-domains of CSR for which a firm has taken positive actions and is captured using a unique dataset from Kinder, Lydenburg, and Domini (KLD). This data set includes positive and negative firm actions across more than 35 different dimensions of socially responsible behavior. Findings based on a longitudinal, multi-industry sample of 447 US firms during the period from 2000 to 2007 demonstrate that firms which: (1) have greater sensitivity to stakeholder needs as a result of the firm's strategic emphasis on marketing and/or value creation, (2) face greater diversity of stakeholder demands, and (3) encounter a greater degree of scrutiny or risk from stakeholder action have a greater breadth of CSP in response to the stakeholder landscape that they face.