On staff
Martin Kilduff et al.
Academy of Management Journal, forthcoming
Abstract:
What are the long-term consequences of initially beneficial high-reputation workplace ties? Under uncertainty, acolytes (i.e., subordinates with work connections to high-reputation industry leaders) are likely to benefit in terms of signaling fitness for promotion in the external job market. Analysis of promotion outcomes of coaches in the NFL over 31 years showed that the acolyte effect was reduced for individuals for whom uncertainty was the least (acolytes with considerable industry experience or high centrality in the co-worker industry network). There was no support for either a knowledge-transfer or an intrinsic quality explanation for why acolytes initially gained advantage. Rather, the evidence supported the idea that ties to high-reputation leaders were somewhat randomly distributed so that acolytes faced ex post settling up consequences after their promotions: fewer further promotions or lateral moves, more demotions. Thus, acolytes initially benefited from a loose-linkage between their unobservable quality and signals offered by their industry-leader ties, but they also suffered as the unreliability of social network signals became evident. The results suggest that a competitive job market may exhibit self-correction over time. We offer countervailing theory and evidence to the prevailing view that high-reputation third-party endorsements perpetuate a rich-get-richer social structure resistant to performance outcomes.
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Privileging Naturals Over Strivers: The Costs of the Naturalness Bias
Chia-Jung Tsay
Personality and Social Psychology Bulletin, forthcoming
Abstract:
A preference for “naturals” over “strivers” in performance judgments was investigated to test whether the effect is generalizable across domains, as well as to ascertain any costs imposed on decision quality by favoring naturals. Despite being presented with entrepreneurs equal in achievement, participants judged the natural and his business proposal to be superior to the striver and his proposal on multiple dimensions of performance and success (Study 1a and Study 1b). These findings were extended in Study 2, which quantified the costs of the naturalness bias using conjoint analysis to measure specific decision tradeoffs. Together, these three studies show that people tend to pass over better-qualified individuals in favor of apparent naturals.
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Moneyball After 10 Years: How Have Major League Baseball Salaries Adjusted?
Daniel Brown, Charles Link & Seth Rubin
Journal of Sports Economics, forthcoming
Abstract:
Michael Lewis’ Moneyball describes how the Oakland Athletics exploited an imperfection in the way player productivity was being evaluated pre-2003. On-base percentage appeared to be more important in determining team success compared to more popular statistics. We test the hypothesis that in a competitive market, other teams will increase the weight given on-base percentage in the reward structure for their players. Our results show that in the post-Moneyball (MB) era, the return to on-base percentage has indeed increased for free agents, the group whose salaries we expect to be most affected by the MB philosophy.
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Michael Housman & Dylan Minor
Harvard Working Paper, October 2015
Abstract:
While there has been a lot of research on finding and developing top performers in the workplace, less attention has been paid to the question of how to manage those workers who are harmful to organizational performance. In extreme cases, in addition to hurting performance, such workers can generate enormous regulatory and legal liabilities for the firm. We explore a large novel dataset of over 50,000 workers across 11 different firms to document a variety of aspects of workers’ characteristics and circumstances that lead them to engage in "toxic" behavior. We also find that avoiding a toxic worker (or converting him to an average worker) enhances performance to a much greater extent than replacing an average worker with a superstar worker.
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Hierarchical Organization and Performance Inequality: Evidence from Professional Cycling
Bertrand Candelon & Arnaud Dupuy
International Economic Review, November 2015, Pages 1207–1236
Abstract:
This article proposes an equilibrium theory of the organization of work in an economy with an implicit market for productive time. In this market, agents buy or sell productive time. This implicit market gives rise to the formation of teams, organized in hierarchies with one leader (buyer) at the top and helpers (sellers) below. Relative to autarky, hierarchical organization leads to higher within and between team payoffs/productivity inequality. This prediction is tested empirically in the context of professional road cycling. We show that 46% of performance inequality in the Tour de France is due to hierarchical organization within team whereas team composition only accounts for 6%.
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Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior
Arindrajit Dube, Laura Giuliano & Jonathan Leonard
University of California Working Paper, June 2015
Abstract:
We analyze how quits responded to arbitrary differences in own and peer wages using an unusual feature of a pay raise at a large U.S. retailer. The firm's use of discrete pay steps created discontinuities in raises, where workers earning within 1 cent of each other received new wages that differed by 10 cents. First, we estimate a regression discontinuity (RD) model based on own wages; we find large causal effects of wages on quits, with quit elasticities less than -10. Next, we address whether the overall quit response reflects the impact of comparisons to market wages or to the wages of in-store peers. Here we use a multi-dimensional RD design that includes both a sharp RD in the own wage and a fuzzy RD in the average peer wage.We find that the large quit response mostly reflects relative-pay concerns and not market comparisons. After accounting for peer effects, quits do not appear to be very sensitive to wages – consistent with the presence of significant search frictions. Finally, we find that the relative-pay effect is nonlinear and driven mainly by workers who are paid less than their peers – suggesting concerns about fairness or disadvantageous inequity.
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Shaped by Their Daughters: Executives, Female Socialization, and Corporate Social Responsibility
Henrik Cronqvist & Frank Yu
University of Miami Working Paper, June 2015
Abstract:
We show that large U.S. companies' policies regarding society at large and stakeholders other than their shareholders are systematically impacted by the firm's top decision-maker parenting a daughter. A CEO who has a female child increases a firm's corporate social responsibility (CSR) rating by about 11.9% compared to a median firm, the effect being about one third of the effect of an executive herself being female. The impact is strongest for diversity ratings, but also significant for broader pro-social policies related to the environment and employee relations. The evidence is consistent with a social preferences model in which male executives partially internalize their daughters' experiences and values. The results are robust to considering several sources of endogeneity, e.g., examining only first-born CEO daughters, Trivers-Willard effects, and child gender preferences. The study contributes to several research areas, including female socialization studies, the origins of firms' CSR policies, and exogenous determinants of executives' styles.
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Are there too few trades during the NFL draft?
Philip Hersch & Jodi Pelkowski
Applied Economics Letters, forthcoming
Abstract:
College football players are initially assigned to teams in the National Football League (NFL) through the league’s draft selection process. At each team’s turn to pick, the team has the option of exercising the pick itself or trading it to another team. If gains from trade are exhausted, draft picks should be exercised by the team with the highest expected value. That is, the expected player contribution garnered from a given pick should not be dependent on whether the pick was traded or retained. Regression results, however, indicate that controlling for a player’s draft position, when a team trades up to acquire a player, that player is more likely to have greater on-field success. This suggests that there are too few draft day trades. Plausible reasons are high transaction costs or the fear of media scrutiny that draft trades can engender.
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Corporate Social Initiatives and Employee Retention
Christiane Bode, Jasjit Singh & Michelle Rogan
Organization Science, forthcoming
Abstract:
Firms are increasingly launching initiatives with explicit social mandates. The business case for these often relies on one critical aspect of human capital management: employee retention. Although prior empirical studies have demonstrated a link between corporate social initiatives and intermediate employee-related outcomes such as motivation and identification with the firm, their relationship with final retention outcomes has not been investigated. Our study fills this gap. Using individual-level data for approximately 10,000 employees in a global management consulting firm, we present empirical evidence of a positive retention effect associated with employee participation in a corporate initiative with explicit social impact goals. In addition, we offer arguments for moderating conditions that weaken this relationship and present evidence consistent with our arguments. Further econometric analysis based on a stringent matching approach as well as additional analyses based on survey and interview data suggest that the retention effect can at least partly be attributed to treatment and is not all just a manifestation of sorting of certain types of employees into the social initiative. Overall, by demonstrating a positive association between social initiative participation and employee retention, this study highlights the need for further research into how corporate social engagement can serve as a tool for strategic human capital management.
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Timo Vuori & Quy Huy
Administrative Science Quarterly, forthcoming
Abstract:
We conducted a qualitative study of Nokia to understand its rapid downfall over the 2005–2010 period from its position as a world-dominant and innovative technology organization. We found that top and middle managers’ shared emotions during the smartphone innovation process caused cycles of behaviors that harmed both the process and its outcome. Together, organizational attention structures and historical factors generated various types of shared fear among top and middle managers. Top managers were afraid of external competitors and shareholders, while middle managers were mainly afraid of internal groups, including superiors and peers. Top managers’ externally focused fear led them to exert pressure on middle managers without fully revealing the severity of the external threats and to interpret middle managers’ communications in biased ways. Middle managers’ internally focused fear reduced their tendency to share negative information with top managers, leading top managers to develop an overly optimistic perception of their organization’s technological capabilities and neglect long-term investments in developing innovation. Our study contributes to the attention-based view of the firm by describing how distributed attention structures influence shared emotions and how such shared emotions can hinder the subsequent integration of attention, influencing innovation processes and outcomes and resulting in temporal myopia — a focus on short-term product innovation at the expense of long-term innovation development.
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The Advocacy Trap: When Leaders’ Legitimacy Building Inhibits Organizational Learning
Tiona Zuzul & Amy Edmondson
Harvard Working Paper, September 2015
Abstract:
This paper theorizes a relationship between legitimacy building and learning for new firms in nascent industries. We conducted a longitudinal study of a new firm in the nascent smart cities industry, and discovered that the firm’s legitimacy-building activities provided benefits (leading diverse stakeholders to value the new firm and the new industry), but also created risks. Specifically, legitimacy building relied on and reinforced individual-level behaviors (an external focus and an advocacy orientation) that inhibited the firm’s ability to learn. We propose that legitimacy building can comprise an advocacy trap that blocks meaningful learning vital to the success of a new firm. By suggesting a downside to legitimacy building and identifying a new barrier to learning, rooted in cognition and especially salient in new firms and nascent industries, our discovery opens new avenues for research on entrepreneurship and organizational learning.
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Do Agents Game Their Agents’ Behavior? Evidence from Sales Managers
Alan Benson
Journal of Labor Economics, October 2015, Pages 863-890
Abstract:
This paper examines how sales managers, acting as agents of the firm, game the staffing and incentives of their subordinates. Sales managers on a quota’s cusp have a unique personal incentive to retain and lower quotas for poor-performing subordinates, allowing one to isolate a manager’s interest from the firm’s. Using microdata from 244 firms that subscribe to a cloud-based service for processing sales compensation, I estimate that 13%–15% of both quota adjustments and retentions among poor performers are explained by managers’ incentives around quotas. Although a minority of poor performers are subsequently terminated or transferred, most are retained indefinitely.
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Eddy Cardinaels & Huaxiang Yin
Journal of Accounting Research, forthcoming
Abstract:
Principals make decisions on various issues, ranging from contract design to control system implementation. Few studies examine the principal's active role in these decisions. We experimentally investigate this role by studying how a principal's choice for a truth-telling incentive contract, compared to a fixed-salary contract without truth-telling incentives, affects the honesty of their agents’ cost reporting. Results show that besides an incentive effect and a principal trust effect (Christ et al. [2012]), the active choice for incentives produces a negative “information leakage” effect. When principals use incentives, their choices not only incentivize truthful reporting and signal distrust, but they also leak important information about the social norm; namely, that other agents are likely to report dishonestly. Agents conform to this social norm by misrepresenting cost information more. Our results have important practical implications. Managers must recognize that their decisions can leak information to their agents, which may produce unanticipated consequences for the social norms of the organization.
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Venkat Kuppuswamy & Belén Villalonga
Management Science, forthcoming
Abstract:
We show that the value of corporate diversification increased during the 2007–2009 financial crisis. Diversification gave firms both financing and investment advantages. First, conglomerates became significantly more leveraged relative to comparable focused firms. Second, conglomerates’ access to internal capital markets became more valuable, not just because external capital markets became more costly but also because the efficiency of internal capital allocation increased significantly during the crisis. Our analysis provides new evidence on how and why the value of diversification varies with financial constraints and economic conditions, and it suggests that corporate diversification can serve an important insurance function for investors.