Jones Journal - Spring 2015

SPR ING 2015

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Corner Office Building from scratch with Chris Beckett ’02, EY Entrepreneur of the Year PAGE 30

Research Insights What studies can tell us about the HalliburtonBaker Hughes Merger

Railroad Ties Ed Williams, the father of entrepreneurship at the Jones School, retires

R I C E U N I V E R S I T Y, J O N E S G R A D U A T E S C H O O L o f B U S I N E S S

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The Starter

From the Dean The Jones School is humming with activity. At the time of this writing, Rice Business Plan Competition teams have just been announced; the director of the Johnson Space Center, Ellen Ochoa, spoke at the final Jones Partners Thought Leadership event; and the first annual SCOPE (Strategy and Corporate Performance in the Energy Industry) survey results were revealed at the Customer Management Symposium. Never a dull moment.

feature in every issue of the magazine. In this spring's feature, in light of the Halliburton and Baker Hughes merger, two faculty members weigh in on what their research can tell us about mergers and acquisitions. Gustavo Grullon, professor of finance, and Vikas Mittal, J. Hugh Leidtke Professor of Marketing and head of the Jones School’s Energy Initiative, discuss cost reduction, revenue enhancement and reducing capital expenditures.

I’m pleased to present the spring issue of the Jones Journal, our alumni magazine and pipeline to the stories and accomplishments of the students, faculty, research and alumni of the Jones School.

I’m happy to introduce the first Crownover Scholar, Jasmine Richards ’16. Named in honor of former Rice University Board of Trustees Chair Jim Crownover ’65 (Rice), the Crownover Scholar exemplifies traits that he demonstrated throughout his career and during his engagement with Rice: aspirational leadership, dedicated community service and personal qualities such as respect for others and humility. Jasmine’s story and passion set a high bar.

Congratulations are in order to Chris Beckett ’02, president and CEO of Pacific Drilling Services Inc., the 2014 Ernst & Young Entrepreneur of the Year, U.S. National Award Winner; and Chris Rector ’15 for winning the MIT Sloan International MBA Sales Competition. You may read more about both of them in the following pages.

We’ve reached a milestone with the retirement of our beloved Ed Williams, professor emeritus of entrepreneurship. Ed started the entrepreneurship program in 1978 and was at its helm for years. He estimates that he taught 3,000 students in 100 courses in 36 years, including the first graduating class — all together more than half the MBA alumni. His absence is felt daily, but his legacy is clear with the explosion of entrepreneurship programs, courses and rankings at the Jones School.

Finally, a new campaign is underway. It’s called Build the Class.

We’re reaching out to students, alumni and stakeholders to help us build the next class of students by recommending a friend, colleague or anyone who would make a great candidate for the Rice MBA programs — Professionals, Executives or Full Time. Candidates with verified referrals will have their application fee waived. Thanks to Michael Cordúa ’08 and Fred Espinoza ’06 for being the first to tell their story so well. We hope you’ll join in.

You may read about faculty research in our Faculty Perspectives department and more in depth in a recurring faculty research

Bill Glick, Dean and H. Joe Nelson III Professor of Management

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The Starter

In this Issue 4 The Rundown 9 Faculty Perspectives 14 Corner Office

Dean + H. Joe Nelson III Professor of Management Bill Glick Editor Weezie Mackey

16 Faculty Focus 18 Student Spotlight 34 Resources

Associate Director Intellectual Capital M. Yvonne Taylor Creative Director Kevin Palmer Graphic Designer Shatha Hussein Kasem

Features

Social Media Specialist Liana Lopez

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Marketing Coordinator Dolores Thacker

Railroad Ties Ed Williams, the father of entrepreneurship at the Jones School, retires.

Contributing Writers Bill Arnold Jeff Falk Weezie Mackey M. Yvonne Taylor

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Research Insights What studies can tell us about the HalliburtonBaker Hughes merger.

Contributing Photographers Scott Dalton Jeff Fitlow Printing Chas. P. Young Co.

Jones Journal is published semiannually for alumni and friends by the Jesse H. Jones Graduate School of Business. Current and back issues of the magazine are available online at business.rice.edu/JJ. Change of Address? New job?

Update the online directory with your new contact information at business.rice.edu/alumni.

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Comments or Questions?

We’d love to hear your thoughts about the Jones Journal. Send an e-mail to Weezie Mackey, editor and associate director of communications at wmackey@rice.edu. business.rice.edu

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build the

class In 1990 Fred Espinoza began working as a busboy at Churrascos, one of Michael Cordúa’s restaurants. Within four years, he was elected by his peers to be general manager. Cordúa recognized the leadership potential and offered, after Espinoza had earned a bachelor’s degree at St. Thomas University, to pay for an MBA at Rice. Today, Espinoza ’06 is chief operating officer at Cordúa Restaurants.

“We’re only as good as the people who work with us,” Cordúa said. “I will always believe in growing our talent.” Years before he supported Espinoza, Cordúa had made a personal commitment to further his own education. “But entrepreneurship detracted my studies.” Watching his colleague flourish at Rice inspired him to go back. “I wanted to grow the company and approach the business with a greater understanding.” He graduated two years later.

Help build the Rice MBA class of 2017.

And help build your network. Who do you know who would make the next Rice MBA for Professionals, Executives or Full-Time program even better?

Visit BuildTheClass.com to help create the next class of Rice MBAs. MICHAEL CORDÚA Restaurateur, Founder and Chairman of the Board – Cordúa Restaurants Rice MBA for Executives ’08

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The Rundown CATEGORY WINNERS: Amegy Bank of Texas Winner: Mobile C Arm Main Street Capital Growth Winner: AAA Energy Audits Entrepreneurs Organization of Houston Angel Investor Winner: The Toof-inger Brush Rice Veterans in Business Association (VIBA) Crowd Favorite Winner: Ranch Road Boots Veterans Business Battle Veteran Entrepreneur of the Year: Nick Palmisciano from Ranger Up

A round-up of the most exciting news from the Jones School and beyond.

Veterans Business Battle Over Veterans Day in November, the Jones School’s Veterans in Business Association (VIBA) partnered with the Entrepreneurs' Organization – Houston to launch the Veterans Business Battle, the first-ever national veterans business plan competition. The applicant field of 146 veteran-owned companies was narrowed to 15 for the competition in Shell Auditorium at the end of February.

“The purpose of the event was to get as many of these veteran-owned businesses funded as possible,” said Corban Bates ’15, VIBA president.

Investors in attendance were the Houston Angel Network, ATAN, Apex, Honor Capital, Main Street Capital, Vetted Capital and Mercury Fund. There were also members of Houston EO looking to invest in some of the companies.

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INVESTMENT OFFERS MADE TO: AAA Energy Audits: $60,000 investment offer from Amegy Bank Mobile C Arm: $300,000 from a joint investment offer from Main Street Capital and Amegy Bank INVICTA Challenge: $150,000 investment offer from the Entrepreneurs Investors Forum Trumbull Unmanned: $150,000 investment offer from the Entrepreneurs Investors Forum Ranch Road Boots: $60,000 investment offer from Main Street Capital Steven Walther, inventor of The Toof-inger Brush, presents his product.

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The Rundown

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New classes open for business

For the first time ever the Jones Graduate School of Business is offering courses in entrepreneurship to undergraduate students. Yael Hochberg, associate professor of entrepreneurship, academic director of Rice Alliance and head of the Jones School's entrepreneurship initiative, put together a package of two halfsemester courses for undergraduates who would like to learn the foundations of entrepreneurship. Hochberg, the inaugural Ralph S. O'Connor Associate Professor in Entrepreneurship, taught the first course “Foundations of Entrepreneurship I: Strategy,” focusing on the strategic challenges faced by entrepreneurs when implementing strategy in a dynamic world. Her course emphasizes how entrepreneurs must balance experimentation and learning to successfully transform innovations to commercial success.

Hochberg’s course will be followed by another half-semester course “Foundations of Entrepreneurship II:

Undergraduate students in the inaugural Foundations of Entrepreneurship I: Strategy course.

Financing,” which will be taught by Aziz Gilani, who has a wealth of experience in the venture capital world. Gilani is a partner in Mercury Fund, a well-known seed and early-stage venture capital firm and a major sponsor of the Rice

Business Plan Competition, awarding the $1 million Mercury Fund prize to an Indian start-up firm, Beta Glide, in the 2014 competition. In addition, he is also adjunct professor of entrepreneurship at the Jones School.

3 MBAs test limits, climb Mount Kilamanjaro

Karan Sihota, Ryan Leary, Isabel Maria Gaeta and Ivor Kristiansen hold the Jones School flag at the summit.

Although most students opt for international trips through the Jones School during the winter break, four full-time MBA students from the Class of 2015 set out on the adventure of a lifetime in Tanzania to scale the summit of Mount Kilimanjaro, Africa’s highest freestanding mountain. These students hail from different backgrounds and cultures but share a common interest in international travel, outdoor adventure and hiking.

The highest peak on the continent of Africa, Mount Kilimanjaro stands majestically at 19,341 feet (5,895 m). The six-day trek via the Lemosho route, the longest of the five routes to the summit, tested the mettle and mental tenacity of these students who overcame altitude mountain sickness and bitter cold to reach the summit on December 26.

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The Rundown

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Programs earn top rankings

The MBA program is ranked No. 25 (up from No. 34 in 2012) in Bloomberg Businessweek's new ranking of the best full-time MBA programs in the nation. This is the highest ranking ever received for this program from Businessweek.

program.” Intellectual capital also rose to No. 12 (up from No. 21 in 2012). Businessweek rankings currently are published every other year.

The school continues to climb in the annual Financial Times rankings for MBA for Executives (EMBA) programs. The The rankings include 85 U.S. schools and 27 international 2014 rankings placed the Rice EMBA program at a record schools. To determine which high of No. 5 nationally, up from business schools offer the No. 8 in 2013 and No. 11 in 2012, strongest education and best reflecting the school's strength in prepare MBAs for their careers, helping executives who graduate Businessweek ranked 112 fullfrom the program achieve their time MBA programs on three career and financial goals. In measures: a survey of student fact, the EMBA program ranked satisfaction (45 percent of the No. 1 in “aims achieved” and for ranking); a survey of employers “percent salary increase,” in which who hire those graduates (45 graduates saw a 60 percent salary OVERALL FULL-TIME MBA percent); and the expertise of increase pre-MBA to three years Businessweek, 2014 each school’s faculty, measured post graduation. The program by faculty research in esteemed ranked No. 4 for “salary today,” with journals (10 percent). an average income at $218,340.

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#

The biggest contributor to the Jones School's rise in the overall Businessweek rankings was the positive assessment by employers who hire the school's graduates, with employers and recruiters ranking the program No. 31 this year (up from No. 43 in 2012).

Businessweek shifted their methodology this year, commenting that “We believe these changes make the rankings more accurate and reflective of what prospective students care about when choosing an MBA

The Rice EMBA program continues to be ranked No. 1 in Texas and the Southwest, a distinction it has held for the past five years. The Financial Times rankings are based on surveys of alumni three years after graduation (Class of 2011). Criteria include average salary after graduation and ROI. Their ranking of intellectual capital, measured by faculty research published, also rose to No. 13. Financial Times ranked the Jones School globally with alumni in “entrepreneurship” (No. 4) and “corporate strategy” (No. 7).

5 First female space explorer from Iran speaks at WILC The 15th Annual Women in Leadership Conference, Making Your Mark: In Pursuit of Leadership, focused on exploring challenges women leaders face. Keynote speaker Anousheh Ansari; CEO, chair and co-founder of Prodea Systems, and first woman in the Iranian space program; advised audience members to 'be open, be passionate and learn from your failures.' Her talk touched on the view from space, growing up in Iran and her dedication to inspiring girls to study math and science. Late morning and afternoon panels met to discuss negotiations, entrepreneurship, navigating male6 // JONES JOURNAL SPRING 2015

dominated industries and general challenges faced by women in pursuit of leadership.

Created to provide present and future women business leaders with a unique forum to exchange ideas regarding their professional experiences and issues important in today’s workforce, the Women in Leadership Conference was organized and hosted by Rice University’s student chapter of the National Association of Women MBAs. All proceeds from the conference go directly to supporting scholarships for female Rice MBA students.

The Rundown

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Preview Jones Diversity Chris Rector ’15 receives his winning check for the MIT Sloan International Sales Competition.

MBAP student wins big at MIT Sloan Sales Competition Brigadier General Tammy S. Smith, deputy chief of staff of the Army Reserve and highest-ranking openly gay flag officer, spoke to students about her leadership journey during Preview Jones Diversity, a two-day event that offers prospective students a detailed look at the program.

Along with an earlier meeting with Rice University’s ROTC, lunch with members of Veterans in Business Association (VIBA) and a keynote speech over dinner, Brig. Gen. Smith spoke candidly to current members of the Rice chapter of the National Association of Women MBAs (NAWMBA), Out for Business Club and VIBA. When asked how she responds when facing pushback in her leadership role, she said, “I let my assets speak for themselves.”

Chris Rector ’15 found out about the MIT Sloan International MBA Sales Competition through the Rice Marketing Club, for which he serves as vice president of external relations.

But he never expected to win. Hosted

by MIT and Harvard Business School and sponsored by Microsoft, Hubspot and Goldman Sachs, the two-day event featured 30 finalists representing premier MBA programs (Harvard, Stanford, Wharton, Dartmouth, MIT, Columbia, Duke and others) from across the United States.

After a preliminary round that included a five-minute phone pitch in which Rector had to sell an inbound marketing software platform to a decision maker at a midsize firm, he was invited to Cambridge, Massachusetts, for the final rounds.

“The individual round consisted of a 20-minute presentation, where the student acted as a consultant attempting to pitch employee benefit consulting services to a large company,” said Rector. “The team round consisted of three students — I was paired with students from

Stanford and Dartmouth — pitching the new Microsoft OS and Office Suite to the executive team of a large company.” They had four hours to prepare the team case for their 25-minute presentation. Judges were primarily MIT professors and alumni serving in sales and consulting roles.

Winning prize money was a sweet bonus ($2,500 for first in the individual round and $1,500 for second place in the team round), but it was “the interaction with other students that was outstanding from a networking standpoint,” Rector said. “I really enjoyed learning about the varying focus in industries across the students and programs. Tech startups are huge in Cambridge right now, and it seemed that all of the HBS and MIT students were pursuing opportunities in this realm. Overall, it was a great experience, and I hope to participate in a few more competitions before graduation.”

Rector is a Rice MBA for Professionals weekend student and was sponsored by the Office of Student Services.

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The Rundown

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Zeff publishes historical resource on accounting

Professor Vikas Mittal introduces the SCOPE survey results to attendees of the 8th Annual Rice Customer Management Symposium.

Customer management: perspectives and insights With over 200 attendees, the 8th Annual Rice Customer Management Symposium merged thoughtful perspectives from business-school faculty and senior business executives. Clay Williams, president and CEO of National Oilwell Varco, gave the keynote, and a panel discussion about managing businesses with Rice MBA alumni featured in Houston Business Journal’s most recent 40-Under-40 list followed. The symposium concluded with the results of the Strategy and Corporate Performance in Energy Industry (SCOPE) survey—spearheaded by the energy initiative at Rice and co-authored by Jones School professors Utpal Dholakia and Vikas Mittal. Survey results, contact prime@rice.edu. For details, visit business.rice.edu/insights.

Mittal's research on emotions,

9 decision-making has long reach J. Hugh Liedtke Professor of Marketing Vikas Mittal’s research on how feeling disgusted causes people to lie and cheat garnered news coverage in more than 60 international publications and more than 3,000 social media shares in less than three weeks this past November. This phenomenal visibility, which surpasses any JGSB story generated in the past two years, was driven by high-impact research and a new approach to sharing research stories. The paper, “Protect Thyself: How Affective Self-Protection Increases Self-Interested Behavior” will be published in Organizational Behavior and Human Decision Processing.

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After six years of extensive research, writing and a total of 170 interviews conducted around the world, Aiming for Global Accounting Standards: The International Accounting Standards Board, 2001-2011 by Kees Camfferman and Stephen A. Zeff has been published by Oxford University Press. The book was commissioned by the International Accounting Standards Board (IASB) and offers a historical perspective to help readers understand the background of International Financial Reporting Standards and the issues faced by the IASB. This essential read on accounting standards is "not a text book" but a historical resource, according to Dr. Zeff, professor of accounting and holder of the Keith Anderson Professorship in Business.

Faculty Perspectives

New Research Sheds Light on the CEO–Employee Pay Ratio Study adds data to the conversation

Will knowing how much the CEO makes relative to rank-andfile employees provide information to investors? We may soon find out as a result of a provision in the Dodd Frank Act that requires companies to report the ratio of the CEO’s compensation to that of the median employee. A number of sources have developed industry-based estimates of the ratio using information about CEO pay from corporate disclosures and employee pay from the government’s Bureau of Labor Statistics, and these estimates have been reported widely.

For instance, an article in Bloomberg Businessweek on May 2, 2013, found the ratio of CEO pay to the typical worker rose from about 20-to-1 in the 1950s to 120-to-1 in 2000, with the ratio reaching nearly 500-to-1 for the top 100 companies.

A new working paper by Jones Graduate School of Business Harmon Whittington Professor of Accounting Karen Nelson, Associate Professor of Accounting Brian Rountree and University of Houston Assistant Professor of Accounting Steven Crawford takes advantage of unique reporting rules for the banking sector, which require disclosures concerning compensation to all employees, as well as the CEO. With this data, they calculate the ratio of CEO compensation to that of the average employee.

It turns out that over the years 1995-2012, the ratio remains relatively stable, with an average of 16.58-to-1. In fact, only in the highest decile of CEO pay did the researchers find ratios rising to the levels popularized in the financial press and policy debate. Thus, for the vast majority of corporations in the banking sector, ratios are well within the bounds espoused by management experts such as Peter Drucker.

Are CEO–employee pay ratios associated with investor behavior?

A more important question is whether disclosure of the ratios will influence investor behavior. To provide some evidence on this issue, the team investigates whether the ratios they calculate for the banking sector systematically relate to the way investors vote on Say on Pay (SOP) proposals. The DoddFrank Act also mandates that all corporations administer a non-binding shareholder vote on the compensation of executives reported in the firms’ annual proxy statements.

AVERAGE CEO-EMPLOYEE PAY RATIO BANKING SECTOR

1995-2001

16.58 : 1 From CEO-Employee Pay Ratio, working paper.

This portion of the law is currently in effect, providing the team with three years of data on the preferences of shareholders as revealed through their voting behavior.

They find that voting dissent is greatest at both the lowest and highest levels of the ratio, consistent with information on pay disparity influencing voting behavior. Increased voting dissent at the highest levels of the ratio aligns with arguments that disclosure of the ratio may serve as a catalyst to reign in what investors believe to be excessive CEO compensation. However, it is interesting to note that dissent is also high for banks with the lowest levels of the pay ratio, which could be consistent with the view that some level of pay disparity is necessary to provide appropriate incentives for effort within organizations.

The researchers further examine whether the ratios are predictive of future firm performance and risk to see if investors’ voting behavior is consistent with underlying firm outcomes. Their findings reveal a similar non-linear relationship, where the highest and lowest pay ratios result in the lowest (highest) performance (risk). The economic magnitudes of these effects, however, are relatively small.

Thus in the end, it appears that the pay ratio provides significant information concerning shareholder voting behavior, but only limited information about actual economic outcomes.

Overall, the study’s results help to inform the ongoing policy debate about the magnitude and consequences of pay disparity in public corporations. If the Securities and Exchange Commission issues its final pay ratio disclosure rule in 2015, investors may soon have this information to inform their voting decisions for a broad range of firms.

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Faculty Perspectives

Research makes Zhang a soughtafter expert on hot business topics Professor of Strategic Management Yan “Anthea” Zhang’s extensive research on topics such as emerging markets and IPOs and CEO succession and dismissal have led to numerous interviews with popular media on those topics, giving both the Jones School and her research high-level visibility.

CEO Succession and Dismissal

Alibaba’s IPO

One influential paper by Zhang, “Information asymmetry and the dismissal of newly appointed CEOs: An empirical investigation” published in the Strategic Management Journal, explores why some newly appointed CEOs are dismissed. Zhang’s research shows that boards tend to have less information about a newly appointed CEO if the person is from outside of the firm or the firm dismissed the precedent CEO. The less information the board has the more likely it makes a wrong appointment decision, and thus more likely it is to dismiss the CEO. She found that independent nominating committees could reduce the likelihood of dismissal.

In the months leading up to the public offering of Alibaba, Zhang was queried on topics ranging from what made Alibaba so successful in China to what concerns investors should have and what it means for other Chinese companies if Alibaba’s IPO is successful.

In “CEO Dismissal: The role of investment analysts,” also published in the Strategic Management Journal, Zhang and her coauthor proposed that investment analysts are legitimate 3rd-party evaluators of a firm and its leadership and that they help reduce the board’s ambiguity in making decisions. They found that negative evaluations from investment analysts correlate with higher likelihoods of CEO dismissals.

Just two examples of her extensive studies, they represent the research that made Zhang the ideal expert and commenter for the Microsoft CEO succession story several years back and an expert on a business topic related to leadership, with broad appeal to business and popular media. Her interest in discussing the topics broadly have made her a soughtafter expert.

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Zhang and her coauthors have extensively researched emerging market strategy. In a recent paper, she and her team examined underwriting fees paid by issuing firms in China’s stock market.

They found that the underwriting fees ranged from 1.8 percent to 12.1 percent of the offering size and that a higher fee ratio (than industry peers) was used by institutional investors as a signal of poor quality of the issuers, which led to lower valuation and higher price discount.

One of Zhang’s earlier papers, published in the Strategic Management Journal, in 2010, examined how the country origins of foreign-invested firms in China may affect China’s domestic firms, a phenomenon called “Spillover Effect.”

Zhang and her co-authors argued that domestic firms have the opportunity to learn from foreign firms, and that learning grows exponentially with the diversity of foreign-invested firms’ country origins. The greater the diversity, the greater the exposure to the variety of technologies and management practices brought in by the foreign investors.

The paper, “FDI spillovers in an emerging market: The role of foreign firms’ country origin diversity and domestic firms’ absorptive capacity,” advanced knowledge on the role of foreign direct investment in emerging

markets and is an example of the substantive investigations that make Zhang’s perspective so valuable.

Popular topics in business news such as Microsoft’s new CEO and Alibaba and its IPO make for excellent case studies for the classroom, says Zhang, who was recently named to the board of directors of Strategic Management Society.

A Sampling of Media Coverage CEO succession and dismissal • Bloomberg Business: “So That’s Why They Always Criticize Stock Analysts” (2008) • Wall Street Journal: “ConocoPhillips Names New Heads of Stand Alone Companies” (2011) • Washington Post: “Would an Insider CEO Be the Best Choice?”

(2014)

Alibaba’s IPO • Salon.com: “Why a company you’ve never heard of is about to take over the world" (2014) • Washington Post: “Chinese e-commerce giant Alibaba will play wait-and-watch game with U.S. market” (2014) • New York Times: “Alibaba I.P.O. may unleash global fight over users” (2014) • CNN Money: “What you need to know about Alibaba’s IPO” (2014)

Faculty Perspectives

Don’t Believe the (Local) Hype Research shows positive local media slant toward local businesses and its outcomes According to research by Professor of Finance Alex Butler and Umit Gurun of the University of Texas at Dallas, when local news media report about hometown companies, they use fewer negative words compared to the same media reporting about nonlocal companies. Although this positive slant may be an innocuous case of local media catering to demand from local readership for good news, the evidence suggests a different explanation.

Companies’ advertising expenditures in local media outlets are closely related to the positive local media bias, or hype, about them. This conflict of interest can be strong enough to turn media watchdogs into cheerleaders, which can in turn affect firm values, particularly those of smaller firms.

The researchers find that national news has no such bias and can be a much more reliable source for those interested in the valuation of a business.

Learn more and check out the video at business.rice.edu/hype.

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Faculty Perspectives

Oil industry reforms vital to Brazil Op Ed from JGSB professor on suggestions to regain momentum Reprinted with permission from the Houston Chronicle.

By Bill Arnold Professor in the Practice of Energy Management

Over the past decade, Brazil was poised to rid itself of the moniker, "country of the future." Former President Luiz Inácio "Lula" da Silva found creative ways to encourage parents to keep their kids in school and get their inoculations. He used the military to break up armed gangs in the notorious favelas.

The giant national oil company, Petrobras, used its proprietary technology to unlock the vast "pre-salt" oil reserves in the deep water offshore. (Traditional seismic processes could not identify reservoirs because the salt broke up signals.)

But on a recent weekend, hundreds of thousands of Brazilians took to the streets to protest corruption, a declining economy and high inflation and demand the ouster of President Dilma Rousseff. Earlier this month, Moody's downgraded Petrobras' shares two steps to junk status.

I have followed Petrobras since I was a young banker at Texas Commerce Bank in the late 1970s, when we supported our Texas-based clients operating in Brazil. Twenty years later, as director of international government relations at Royal Dutch Shell, I witnessed a period of openness when international companies were welcomed back to Brazil and could elect to operate independently or with Petrobras as partner.

Times have changed. Rousseff recently replaced the president of Petrobras in response to a corruption scandal. Billions 12 // JONES JOURNAL SPRING 2015

of dollars reportedly were kicked back to politicians in her coalition government through inflated contracts between contractors and Petrobras. Although she has not been accused personally of corruption, Rousseff was chair of the Petrobras board from 2003-2010, when the scheme mushroomed.

Critics question why Petrobras paid nearly $1 billion for the Pasadena refinery it purchased part of in 2006 — even though it had been sold two years earlier for less than $43 million.

Nationalist politicians became increasingly skeptical of Petrobras after it issued a limited percentage of its shares in global capital markets to fund development. They feared that demands of investors would interfere with government goals.

So the government created an unwieldy hybrid. A new bureaucracy, Agência Nacional do Petróleo (ANP), was superimposed to represent the state's interests and make key decisions. Petrobras would be the operator for all pre-salt development. Multinational oil companies like ExxonMobil and Chevron would have to accept Petrobras as operator, even though complex offshore operations are their own key strength.

This structure is dysfunctional. It breeds organizational confusion, enables corruption and places too heavy a burden on Petrobras, while minimizing the contribution that international companies can make.

In October 2013, only one bid was presented at the auction for offshore licenses — it was at the minimum price and minimum local content. There was no licensing round in 2014, and there is talk of deferring a planned auction in the first half of 2015.

Foreign investors must use local companies for the bulk of their equipment and service purchases, so-called local-content requirements. While not unusual in the energy industry, Brazil's are among the steepest in the world. For the 12th licensing round, the average local content commitment was 70 percent for exploration and 85 percent for development phases. Brazilian engineering and construction firms had a lock on the process, with limited competition from outside the country. It probably wasn't difficult for some executives at Petrobras, the construction companies and politicians to find a mechanism to inflate contracts and privately share the excess.

Faculty Perspectives

Brazil, saddled with massive amounts of debt, inflation, deferred oil production and endemic corruption, faces current low oil prices from a position of weakness. Rousseff needs to undertake fundamental reforms. Here are four suggestions: 1.

Adopt the model of a country like Colombia that successfully restructured its energy system and the role of its national oil company. A single agency sets policy, negotiates competitive contracts and monitors operations but doesn't make operational decisions.

Bill Arnold is a professor in the practice of energy management at the Jones School. Previously, as Royal Dutch Shell's Washington Director of International Government Relations and Senior Counsel for the Middle East, Latin America, and North Africa, he engaged at the highest levels of government in the US and abroad to provide geopolitical insights, develop business strategies, build scenarios, and advance multi-billion dollar projects. He was with Shell from 1993 to 2009.

2.

Establish a transparent system in which qualified local and international companies compete with Petrobras for contracts and operatorship on an equal footing.

Arnold held a White House appointment as senior vice president of the Export Import Bank of the United States from 1983 to 1988, when he received the Distinguished Service Medal.

3.

Change the local content laws to get the best products and services through international competitive bidding.

4.

Reconsider a host of other regulatory and legal deterrents, such as labor laws, to see if they really serve to develop human resources in Brazil, or actually prevent workers from becoming internationally competitive. Rousseff's "Workers Party" owes it to them.

Brazil can regain its momentum and fund its serious social and infrastructure challenges. It doesn't always have to be "the country of the future."

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Corner Office

Learning from failure, building from scratch JJ: Why did you leave an established career to start your own company?

CHRIS BECKET T ‘02 President and CEO Pacific Drilling Services Inc. Ernst & Young Entrepreneur of the Year, U.S. National Award Winner Chris Beckett worked for Schlumberger 10 years before coming to Rice for his MBA. He was 32 and admittedly older than his peers in the full-time program.

After a few years as an associate with McKinsey & Company and a few more at Transocean, he began building Pacific Drilling from the comforts of his living room.

The ultra-deepwater oil and gas drilling company, which operates the youngest, high-specification drillship fleet in the industry, was founded in 2008 in Houston, Texas. Since then it has grown to more than 1,600 employees and annualized revenue greater than $1 billion. Pacific Drilling was recently named one of Houston's top companies in the Houston Chronicle 100 special section.

In 2014, Beckett received the Ernst & Young Entrepreneur of the Year Award, a leading business award for entrepreneurs that encourages entrepreneurial activity and recognizes leaders and visionaries who demonstrate innovation, financial success and personal commitment as they create and build world-class businesses. He was recognized for creating and operating one of the most successful startups in the history of the offshore drilling industry.

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CB: There’s often an assumption that when you’re in a safe, established career that’s progressing as careers are supposed to, that this is somehow satisfying. In terms of career, you go through periods of rapid growth and challenge, you’re climbing the hill, and you get to the plateau and tend to stabilize in your role until your company gives you another opportunity or something else comes up.

I think for a lot of people that stable phase is enjoyable. For me it’s kind of boring.

I’d been with Transocean for almost four years. We’d been through the largest M&A in the drilling space — and possibly the oilfield services space, at the time — the acquisition of Global Santa Fe, to create what was by far the largest driller in the industry. In that transaction I headed up their business development, M&A, corporate planning function. That was the biggest deal I was likely to see in the organization.

When I joined Transocean, they didn’t have a core planning team. They brought me in to build one from scratch and to define what it should do and how it should do it. That was the fun part — building a new team and a function and defining its responsibilities. I had a unique opportunity to create my own job, and therefore was able to get involved in all sorts of areas that normally might not have been any of my business.

I’d done that role for long enough and was ready for a move. If I moved into anything else in Transocean, my sphere of influence and scope of responsibility was going to narrow quite significantly.

I liked having a different challenge every

day. I started looking around for other opportunities — maybe at a smaller company — but I definitely wanted an opportunity to maintain the breadth of activities that I was involved in.

One of the things I’d done at Transocean was sign up and run a joint venture with a company that had ordered two drillships to be built in Korea. They needed an operating partner, and we’d formed a joint venture with them so we ran those ships. They’re the ones who asked me to come in and create their own operating capability because they didn’t want to be reliant on a third party to do it.

It was happenstance and luck that I met the right people, and they were looking for the same sort of thing I was, which was to create a new vehicle from scratch. They were visionary about how they wanted to do it. They didn’t want to become a driller like everybody else.

They were focused on one-asset class and being in the leading edge of the industry.

JJ: Why is Pacific Drilling unique?

CB: Our asset base is entirely made up of latest-generation drillships. Our operating, maintenance and HR systems are all focused on bringing around the right resources to maximize our revenue efficiency and up time, which aligns with the client. It allows us to have a different sort of relationship with the client because we have a different focus in what matters most to us as a company.

It influences the way we think about the people we hire, and how we treat them.

We’ve made a clear statement internally that our goal is to be the employer of choice in the industry. To do that, you have to make sure you capture all the revenue that’s available to you. And you want the best people with the best systems trained as well as they can be to do that. That was really the vision and the focus from the beginning.

Our 2014 results delivered higher uptime and revenue efficiency than any other company in the industry. That’s despite running a relatively small

Corner Office fleet (seven, with an eighth under construction). We’ve got an overhead structure that’s sized for more rigs than we’re currently running, and yet it's still producing a better margin than the big guys. It’s a luxury to build something that’s entirely focused on being as efficient as possible and running the assets you have without a bunch of legacy assets to worry about.

JJ: How did your leadership style develop?

CB: Schlumberger is phenomenal for putting you in sink or swim situations, continually challenging you, forcing you to grow quickly. I had a series of great opportunities with them in different places around the world. I was there for more than 10 years and had reached that point where it was now or never.

I had enough real-world experience to put things into perspective if I had the opportunity to learn.

Taking two years off and doing the fulltime MBA program at Rice was a big commitment, but being able to go to school without the daily pressures of work allowed me to get more out of it.

I’m a firm believer that you need enough life and work experience before the things you learn in business school have significant meaning for you. You learn by failure. You don’t learn by success.

The opportunity to look back on some things that haven’t worked out the way I’d planned with a new viewpoint and with more theoretical frameworks to explain them was extremely valuable.

I think my time at the Jones School probably changed my leadership style more than any other experience in my professional career. What I learned at Rice, partly because of the way the team structure was established there, forced me to work with people over whom I had no authority, who were very different in terms of personalities, absolute capabilities, strengths and weaknesses.

To get the best results, all of a sudden you had to be able to influence people without telling them what to do, and you

"I’ve always been a relatively high achiever and I wasn’t happy with myself if I wasn’t on top. The only way that was going to be possible at the Jones School was to work well with others. " had to figure out what they will be good at and not so good at and try to make a team that will gel and bring the best of each individual to the table. It taught me a patience I didn’t have before and a greater appreciation that everybody brings value in their own way. I’ve always been a relatively high achiever, and I wasn’t happy with myself if I wasn’t on top. The only way that was going to be possible at the Jones School was to work well with others.

JJ: How do you make the culture at Pacific Drilling what you want it to be?

CB: Our culture is continually evolving.

The people who can get you from nothing to where we are now are not necessarily the same people or skill sets to get us where we are now to where we want to go. We’re a more mature organization. We’ve been very successful because we’ve put together a team where almost everybody stepped up into the role they took on. Nearly everybody we’ve hired has a very strong learning bias, a desire to experience new things, and is energized by that. We’ve always had a clear vision of where we wanted to go. It’s much easier for a team to gel if everybody knows exactly where they’re going — even if you don’t always have a common vision of how you’re going to get there. It’s that focus on never settling for good enough that has gotten us to where we are. Our culture isn’t static. It changes all the time. It’s the opportunity to grow with us that has empowered people and caused them to want to be part of the team.

JJ: What does the EY Entrepreneur of the Year Award mean to you?

CB: Personally, it’s a validation of what I set out to do six years ago and is great recognition for the company, for the employees to see the world recognizing what we’re doing. It’s nice to show those sorts of wins to the team.

We’ve been nominated three years in a row. The first time was way too early in our development to be meaningful. You get nominated, and then EY approaches you and says, “Can you provide us some basic information, your financial statements?” That first year, I’m not even sure we had any revenue, so it was going to be a little hard to win anything. By the time we came around to the third nomination, we’d had meteoric growth. We’ll do over a billion dollars in revenue in 2014 — a big boost from nothing five years ago.

We had a pretty solid growth story to tell.

We now have three years of operating history running the rigs and have started to prove to our clients we can deliver what we said we could. Those are the game changers. For us as a company, 2014 was the emergence from the cocoon of a fully-fledged organization that’s now got proof of concept.

Being a finalist in the Gulf Coast region was great recognition because a lot of it is against your peers. Winning the national Energy, Cleantech and Natural Resources was if anything moreso. It’s more than who has done well as a driller. It’s now, who has done well as a company.

SPRING 2015 JONES JOURNAL // 15

Faculty Focus

Seed Accelerator Rankings unveiled at South by Southwest Angelpad, MuckerLab and Techstars land in top three Seed accelerators Angelpad, MuckerLab and Techstars landed the top spots in the third Seed Accelerator Rankings announced this spring at South by Southwest (SXSW) by entrepreneurship and management experts from Rice University, Massachusetts Institute of Technology and the University of Richmond.

The Seed Accelerator Rankings Project, brainchild of Yael Hochberg, the Ralph S. O'Connor Associate Professor in Entrepreneurship at Rice's Jones Graduate School of Business and researcher with MIT's Innovation Initiative Lab for Innovation Science and Policy, and Susan Cohen, an assistant professor of management at Richmond's Robins School of Business, are based on a variety of metrics, including the

valuations of participating startups, amount of funding raised by participating startups, startups' survival rates and ratings provided program graduates.

"There are new accelerator programs popping up every month," said Hochberg, who is also academic director of the Rice Alliance for Technology and Entrepreneurship. "Our goal is to generate a larger conversation about what makes some seed accelerators more successful and help entrepreneurs find the right fit for their startup."

"With so many programs available, it's hard for entrepreneurs to know which programs are best," Cohen said. "The Seed Accelerator Rankings Project adds needed transparency to

Professor Yael Hochberg teaching an undergraduate entrepreneurship class. She is one of the founders of the Seed Accelerator Project.

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Faculty Focus help entrepreneurs make a critically important decision for their startups."

Top 10 U.S. Accelerators

The rankings are based on detailed confidential data on accelerator portfolio outcomes, producing the most complete and comprehensive dataset on accelerator performance. To be invited to participate in the rankings, accelerator programs had to meet several criteria. First, they had to meet the definition of accelerator: Programs had to be fixed-term, cohort-based startup "boot-camps" that include educational and mentorship components and culminate in public pitch or demo day. They also had to have graduated at least one cohort, had more than 10 startup graduates and be willing to provide complete data on affiliated startup companies. The researchers — Hochberg, Cohen and MIT Sloan School of Management Ph.D. student Daniel Fehder — also surveyed graduates of the accelerator programs to assess satisfaction. Nearly 1,000 accelerator graduates participated in the survey.

“Our goal is to generate a larger conversation about what makes some seed accelerators more successful and help entrepreneurs find the right fit for their startup.”

Over 150 programs were invited to participate. Notably absent from the rankings this year is Y Combinator, which topped the list last year; Y Combinator has since evolved its model and now characterizes itself as a seed fund rather than an accelerator.

About the Seed Accelerator Rankings Project The Seed Accelerator Rankings Project aims to begin a larger conversation about what makes seed accelerators successful and to provide entrepreneurs with a tool to help them decide which seed accelerators are a good match for their startup. Confidential data provided by accelerator programs and accelerator alumni are incorporated into the evaluation process. The rankings team is led

by Hochberg, Cohen and Fehder. All three are former entrepreneurs turned academics and are considered among the leading research experts on accelerators and their efficacy. The project is an outgrowth of the original accelerator rankings study conducted by Aziz Gilani, Kelly Quann and Hochberg in 2010.

To see the full rankings, go to seedrankings.com.

Infographic courtesy of the Seed Accelrator Rankings Project

SPRING 2015 JONES JOURNAL // 17

Student Spotlight

Robert Frost, Mountain Dew and Mr. Crownover The first Crownover Scholar explores her options Born and raised in Lafayette, Louisiana, Jasmine Richards ’16 found herself on the Dartmouth campus in April of her senior year of high school. “There was a lot of dirty snow on the ground. It was really cold. We got out of the car and my mom looked around and said, ‘Jasmine, this is college. This is what it should look like.’ My mom did not go to college,” Richards said with a grin. But after a tour, a Students for 18 // JONES JOURNAL SPRING 2015

Africa meeting, seeing the Robert Frost statue, getting lost in the woods with one of her hosts and an early class the next morning, she told her mother, “You were right. This is where I need to be.”

And that’s how Dartmouth happened. She loved it, majored in psychology, minored in classical studies, studied in Italy for a term, served on the standards committee, and promptly joined the Teach For America corps upon graduation. She had always thought about teaching and knew she wanted to get closer to home. She picked Houston as her first choice and was placed at Alcott Elementary, part of the Houston Independent School District. Despite 300 corps members placed throughout Houston that year, Richards was the only one at Alcott.

“When I got to my school, most of the other teachers had been there for years. They were like a little family, which was great. But we had a lot of teacher turnover during my first year. It was a tough situation. The kids were a challenge. I taught second grade. My first year was a crisis all the time,

Student Spotlight

but I got through it. By the second year it got better. By the end of my second year I felt I could really be a good teacher.”

Richards stayed four years at Alcott, two more than what is required by Teach For America. She was even nominated for teacher of the year. But she knew by the end of the third year that the fourth would be her last. “I was ready to get out of the classroom. I knew that I needed additional skills. I had friends in different MBA programs and was floating the idea to them about earning my MBA. They said it was perfect. It would set me up to enter any field I wanted to go into. It seemed like the logical next step.”

MBA or bust She was open to going anywhere for her MBA and explored a few places. “I came to some Rice events. I met a lot of second years, and they all had great things to say about the program.

I applied, and by the time Melissa Blakeslee called about the Crownover Scholarship, I had narrowed it down to Rice and Michigan.”

Blakeslee, executive director of admissions, called her to say that the Jones School had a special opportunity for her: a new scholarship named in honor of former Rice University Board of Trustees Chair Jim Crownover ’65 (Rice). The Crownover Scholar exemplifies traits that Crownover demonstrated throughout his career and during his engagement with Rice: aspirational leadership, dedicated community service and personal qualities such as respect for others and humility.

The scholar would receive a full tuition scholarship and an annual $25,000 award to use towards university-mandated fees and living expenses.

Richards submitted all her paperwork, was invited to a dinner with the other candidates and interviewed the next day. “The competition for the inaugural Crownover Scholarship was intense,” Blakeslee said. “But Jasmine rose to the top. Her combination of academic excellence, leadership and service set her apart.”

Driving home from school on 610, Richards got the call. “The committee thought you were great. We would like to offer you the scholarship.’ I couldn’t believe it. I called my mom right away. Once I got the scholarship, there was no question. I was coming to Rice.”

No Coke, Pepsi The first term was hard, she remembers, because she was a psychology major and classical studies minor. “I didn’t have any business background. I knew that finance (Professor Weston) and accounting (Professor Akins) were going to be an issue. I talked to some second years and asked, how did you manage? They said, make sure you participate. Read everything that’s available. Go through the notes. Try to solve

problems on your own. Go prepared. I went to office hours a lot. Going into Weston’s class he’d ask, ‘Does anyone want to solve a problem with me.’ And I’d raise my hand. Plus I always sat in the front, just in case.”

Well into the second semester, Richards has added to her studies: an Action Learning Project with the Houston Zoo on an all-woman team, a non-voting board member at The Women’s Home through Board Fellows, and a juicy summer internship in marketing beverages with Pepsi. “I’m secretly hoping for a project with Mountain Dew.” She landed that internship over the summer. “I went to a Management Leadership for Tomorrow conference in New York. I wasn’t thinking about Pepsi at all, but at one of the company days they gave a presentation, and I was really into it.” Over a series of days she and her team competed in case competitions. The first was marketing; her team didn’t win.

The second was finance; her team didn’t win. The last one was with Pepsi, a marketing case: how to get Pepsi into school breakfast and lunch programs. “I said, ‘Oh, team, I’m a teacher.

I can give you some good ideas.’ We came up with these crazy new products. I was the artist of the team, drawing breakfast milks and go-gurt things. We ended up winning.”

Afterwards, a guy who worked for Pepsi asked her if she was interviewing. She said no. He said, let’s try to get you an interview. “I had an interview the next day and got an offer.”

That’s how Pepsi happened. Before school even started.

Hello, Mr. Crownover The search committee for the Crownover Scholar and Mr. Crownover himself both said that they saw a lot of similarities between Mr. Crownover and Jasmine. “At the dinner before the interview, everyone praised him,” Richards said. “When I finally got to really talk to him he was everything they’d been saying. He’s thoughtful, gives great advice and always asks: What can I do to help you? Where do you need help? How can I be of assistance?”

Mr. Crownover, for his part, said, “I was pleased with the quality of candidates we had for the scholarship and the opportunity to bring them to Rice. All of the candidates were outstanding. Jasmine has passion and presence. She is a very engaging person with high aspirations. I look forward to seeing what she’ll do going forward.”

Despite the fact that her mother doesn’t think she comes home to visit enough, Richards is doing most everything else right. “I’m honored to be the first Crownover Scholar. But really the experience of talking to Mr. Crownover and having him introduce me to all these other people, that’s the power of the scholarship. Being able to use him as a resource is really where the value of the scholarship comes in.”

SPRING 2015 JONES JOURNAL // 19

Student Spotlight

The Fixed-Income Practicum course meets weekly in the Jones School's El Paso Corp. Finance Center and uses Zions Bank's state-of-the-art online bond store and auction platform to buy and sell bonds.

Learning by doing Jones School finance students manage $5 million for Zions Bank The closest that most students come to hands-on experience in high finance is an internship or summer job with investment banks or mutual fund firms. But a group of students at the Jones Graduate School of Business didn’t have to wait for a summer job or internship: They were given $5 million to invest in the bond market as part of their classroom work.

The five MBA finance students in the Fixed-Income Practicum course received the funds temporarily from Salt Lake Citybased Zions Bank, which operates 480 full-service banking offices in 10 Western and Southwestern states, including its affiliated Amegy Bank in Houston, and is one of the 50 largest banking companies in the U.S. The students have six months, Oct. 1 to March 31, to invest the money.

The opportunity was brought to the Jones School by Rice trustee Doyle Arnold ’70, vice chairman and chief financial 20 // JONES JOURNAL SPRING 2015

officer of Zions, said Jill Foote, the course’s instructor and a senior lecturer in finance. Zions currently offers this program to only four other schools in the world: Utah State University, Brigham Young University, Westminster College and University of Oxford. It was conceptualized by Zion’s David Hemingway, executive vice president and chief investment officer.

“Doyle, of course, loves Rice and is a very active alumnus, and he wanted us to be one of the schools,” said Foote, who spent 12 years on Wall Street as an executive with Goldman Sachs.

“This is our inaugural class. It’s very exciting, and I must say, it’s very challenging, in a good way.”

Only top-performing students with prospective careers in a related finance field were allowed to participate and manage a fixed-income investment portfolio in real time.

Student Spotlight

“This class provides a unique opportunity for students to develop the skills necessary to help propel them into these careers.”

Under the guidance of Foote and Zions professionals, the student managers Jeff Bridge, Mitchell Currie, Doug Dawson, Ryan Leary and William Hoy have spent the course’s first months developing and implementing portfolio strategies, analyzing and making investments, and monitoring and managing risk and return in the portfolio. In accordance with Zion’s investment policy, permissible investments include treasuries, certificates of deposit, agency, municipal and corporate bonds as well as mortgages with a maximum maturity of 10 years.

“The majority of investment management career opportunities today are in fixed income,” Foote said. “This class provides a unique opportunity for students to develop the skills necessary to help propel them into these careers.”

Meeting weekly in the Jones School’s El Paso Corp. Finance Center, the students use Zions Direct, Zions’ state-of-theart online bond store and auction platform. There are thousands of offerings for the students to bid on and sell to meet their objectives. By March 31, the portfolio must be liquidated and all funds returned to Zions.

Additionally, if the portfolio value falls by more than 5 percent, Zions will require immediate liquidation.

“While much of news media focus is on equities, nearly all state, county and local governments in the country as well as most companies depend on issuing debt as part of their financing,” Arnold said. ”We are very pleased to

From left, Jones School students Ryan Leary, Jeff Bridge and Mitchell Currie work together closely in managing the course's fixed-income investment portfolio in real time. Photo by Jeff Fitlow.

provide an opportunity for the future treasurers of these entities, as well as investors, now at the Jones School to get hands-on experience with fixed income securities.”

For Hoy, a student in the Professional MBA program, the course provides an opportunity to venture into an unchartered territory. “I think that when a lot of people think of investing, they think of buying stocks and the bigname stocks that they know,” Hoy said.

“Not a lot of people think about buying individual bonds and may have no clue what’s actually involved in doing that, myself included, coming into this. That was a huge driver for me to understand [bonds] at a detailed level.”

While the bond market is a complicated field, it has not held the students back from tackling the intricacies, guided by the proverbial “buy low, sell high” strategy.

“Some of the policies that we have to follow say that our buys have to be investment-grade securities, so we can’t take anything too risky,” said

Currie, a full-time MBA student. “We also have to liquidate the portfolio on March 31, so as part of our decisionmaking process, we looked at bonds to see if they mature before that date and [make sure] that we don’t take on any risk of trying to resell them into the market. Whereas for the longer-term bonds, we have to make sure we have enough liquidity so we don’t lose too much on the [bid-ask] spread when we go to sell. We’re going to see how that plays out ultimately, but that drove a lot of the decision-making process at the beginning of the class.”

While the students don’t get a commission if the investments are profitable, the learning experience is priceless, Foote said. “Completely managing a real-world bond portfolio is an extremely valuable experience for our students, and we are grateful to Zions for this rare opportunity to provide our students with this form of work experience in an academic setting.”

— JEFF FALK SPRING 2015 JONES JOURNAL // 21

d a o r l rai TIES

es ir t e r l o o h c S s e n o J e h t t a ship The father of entrepreneur

22 // JONES JOURNAL SPRING 2015

WORDS BY WEEZIE MACKEY PHOTOS BY SCOTT DALTON

SPRING 2015 JONES JOURNAL // 23

Ed Williams grew up in Houston and discovered early on that he had a knack for selling.

At age seven he started putting old magazines in the back of his wagon and knocking on doors. “Half the people would slam the door in my face. The other half would listen. A few would buy used magazines. I’d make another round in another neighborhood, ‘Do you have any old magazines you’d like to get rid of?’ My cost of goods sold was zero,” he said, revealing the first inklings of an audaciously entrepreneurial childhood.

Mentors made the difference

Williams’ father worked for the Southern Pacific Railroad.

When he was old enough, he took school excursions to Austin or San Antonio once a year. “My dad would lend me $5. I’d buy curios on the trip and then go through the train on the way home selling them to kids or trading. I’d come home with at least $25. One time I had some extra inventory, and I went to see Carl Cohen who owned the little grocery store around the corner from where I lived at 14th and Studewood. He liked me.

I asked Carl, would it be all right if I sold some of these things outside his store? He said yes, so I set up my little stand and sold out the first day. I was 10.”

Somehow, the war stories of entrepreneurship stick. Whether it was born from necessity or desire, his entrepreneurial approach shaped him as a scholar and an educator.

From a little red wagon to crossing the border into Juarez to buy exotic inventory — Mexican bats and bull whips — Williams built a business and an entrepreneurial acumen one sales trip at a time. Today, at 70, always ready with a story, it isn’t hard to imagine the blond-headed kid with the gift of gab who readily admits he had better luck selling to women than men. There would be no holding him back.

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As of July 1, 2014, Ed Williams — formerly the Henry Gardiner Symonds Professor of Management — retired from his career teaching entrepreneurship at the Jones School. He estimated that he taught about 3,000 students in 100 courses in 36 years, including the first graduating class — all together more than half the MBA alumni. It’s no wonder so many of them have stories to share. And that Williams has even more.

“I knew from a fairly early age that I was going to be looking after myself by the time I was 17 if not sooner,” Williams said.

“My dad was a yard master with SP. He was out in the field originally but became a freight re-check clerk, examining mileage and commodity records. He was born in 1897, lived through both World Wars and the Depression. My dad was very conservative. You don’t live through two wars and a depression and come out a risk taker. His own history had a lot to do with mine because the people who worked for the railroad never made a lot of money, at least not at his level. It was sufficient to live on but not to pay for college.”

Through hard work, pluck and several formative relationships during his life, starting with store-owner Cohen, Williams made his way in the world. And then some.

As a student at the newly built Waltrip High School, he became a little less entrepreneurial and a little more studious. After a few summers as an archives clerk at the Magnet Cove Barium Corporation, he landed a plum summer job through his aunt at University State Bank, working as a sight payer and bookkeeper. “The man who owned the bank was a fellow named Goldston.

“He asked me what I was going to do with my life?”

Williams explained that he was saving to go to college.

Goldston invited him, after work and on his own time, to come up to his office and learn to read the Wall Street Journal. “We started on page one. While he was teaching me how to read the Wall Street Journal and the quotations and prices,” Williams said, “he was also teaching me how his bank operates. It was fascinating.”

During his senior year of high school, while president of the student council, Williams was introduced to Bob Waltrip, the owner of Heights Funeral Home. A lifelong friendship began that day as Waltrip shared his plans for Service Corporation International (SCI), where Williams would become vice president years later. First, of course, the budding business man had to go to college. He studied economics and finance at Wharton at the University of Pennsylvania. “I got through Wharton in three years because I ran out of money,” Williams said. After graduation, when Waltrip asked him if he was ready to come work, Williams said, “No. I like academia. He told me he thought I was making a serious mistake.”

The fast train

After looking into and deciding against graduate school at Yale — it was longer and more expensive than what he could afford — Williams got a hold of the head of the finance department at the University of Texas. “The tuition was $50 a semester for all the courses you could take. There were no constraints on time. You had to pass five field exams and write a dissertation. And you had to take so many course hours. I signed on and finished my Ph.D. in two years. I was 22.”

He shrugs and claims it was a matter of necessity. “I had no money. I got the Texas Savings and Loan League fellowship and ultimately wrote my dissertation on the savings and loan industry. I remember one semester I

Above right: A 1950s-era SP diesel locomotive leads a first class passenger train.

Below right: Williams puts the finishing touches on a Santa Fe engine in his shop.

SPRING 2015 JONES JOURNAL // 25

26 // JONES JOURNAL SPRING 2015

was taking seven courses. I was teaching two and writing my dissertation. And living on a $100 a month.”

As he was finishing his doctorate, Williams attended the American Economic Association meeting and ran into a former professor of macroeconomics from Wharton, Paul Davidson, another mentor who remains a good friend to this day. “I was looking for a job. He was a professor at Rutgers by then. He said, ‘You’d be younger than the kids in our graduate school, but why don’t you come up and give a paper, and we’ll see how it goes.’ It went well.” He was hired as an assistant professor of economics in the College of Arts and Sciences at Rutgers. After two years he was hired as an associate professor of finance in the Faculty of Management at McGill University.

Three years later he called Bob Waltrip. SCI had gone public in 1969 and was doing very well. He told Waltrip he was ready to leave academia for a while. “I went down to visit and got a job offer to be a vice president. It was three times what I was making at McGill plus stock options. This was 1973.

My basic job was to oversee our investments, including our endowment care funds. I'm still doing that today as chairman of the investment committee of our board of directors. In those days, we had $9 million. Now we’ve got $9 billion.”

Today, SCI is the world's largest operator of funeral homes and cemeteries in North America, and Williams worked there five years before he got a call from the first dean of the Jones School, Dr. Robert Sterling, asking if he might be interested in returning to academia.

“I said to Sterling, if I come back to academia, I’m not interested in teaching finance and economics. I did that already. I want to do something different.” Which is how Williams arrived at Rice as the founder of a new program in the emerging area of entrepreneurship. It was 1978, and Williams was 33.

Head of the class

Only a handful of business schools were teaching entrepreneurship back then. “The exciting thing about that time was the Jones School was new,” said Williams. “The upshot of that was you could mold it.” Molding it meant finding literature and textbooks, creating a curriculum. “There was a textbook being used, Patrick Lyle’s The New Enterprise.

He was an adjunct at Harvard. It was a case book, but it had snippets of the theory of entrepreneurship. Which is almost an oxymoron. I spent the summer with that book preparing to teach the fall class, The New Enterprise. The spring class would be Buying and Selling Companies.”

Williams loved being back in the classroom. “I like talking to people and explaining things. It’s funny because even when I was in junior high I would pretend to be a teacher. I would stand up with a little black board and teach Texas history or something like that. I pretended that I had students. I even graded fake papers.” He laughed. “I’d write stuff up with mistakes in it and grade it. I always wanted to be a teacher.”

The second year he added a third class. “My agreement with Bob Sterling was I could teach two the first year and three the second. The added class was micro-economics, which I didn’t really want to teach, but I did, and I met my wife Sue in that class. She was a student,” he smiled. “But nothing happened until later.” Susan ‘84 had two children, Laura and David ‘99, and a dog from a previous marriage. The two married in 1983 and now have five grandchildren.

“In entrepreneurship, theory is not enough. In the eyes of a student, there’s nothing better than the war stories of somebody who’s actually seen these problems and solved them.”

Above left: Williams puts together an SP freight train with a steam engine in the lead.

Below left: An unfinished scene in downtown Houston circa 1950.

SPRING 2015 JONES JOURNAL // 27

TIMELINE: THE CAREER OF ED WILLIAMS 1955 Ran first business at age of 10 1957 First stock investment 1959 First job at Magnet Cove Barium Corporation 1966 Graduated from Wharton at the age of 20 1968 Earned Ph.D. from University of Texas at age 22 1968 Became an assistant professor of Economics at Rutgers University 1968 First book was reviewed in the Journal of Finance 1970 Became associate professor of finance at McGill University 1973 Became VP of Service Corps International 1978 Taught first entrepreneurship class at the Jones School 1983 Bought first model train set 2006 Named No. 2 entrepreneurship professor in the U.S. by Businessweek 2009 Published first book with Al Napier 2012 Meritorious Service Award from the Association of Rice Alumni 28 // JONES JOURNAL SPRING 2015

In 1979, Williams attended the first Babson College Entrepreneurship Conference to see what other business schools were doing. Rice was in good company. Harvard, UCLA, USC, Carnegie Mellon, Wharton and Babson were the universities that pioneered the development of this new discipline, and they were all in attendance. Next, Williams began to recruit the first of many adjunct faculty members who were instrumental in the early success of the program.

The first was George Ballas, inventor of the Weed-Eater, who team taught the New Enterprise course with Williams.

The question remained: can you teach someone to be an entrepreneur? “My thinking on that is it’s a practice. You learn to be an entrepreneur by having done it for a while. You can structure an analysis of it, almost like a social scientist looks at a phenomenon. Actually teaching somebody to be an entrepreneur is a different story. But that doesn’t mean it can’t be put in a formal framework and examined.”

Enter Al Napier

When Al Napier began teaching Information Technology at the Jones School in 1984 there were still only 15 full-time faculty members. Williams had known Napier as a doctoral student at the University of Texas at Austin in the ’60s. They struck up their old friendship and began fishing together.

On one of their trips, they talked about Napier joining the entrepreneurship faculty. “He had his computer consulting company, Napier and Judd, but we were getting to the point where the classes were getting larger and larger. I wanted help teaching The New Enterprise. It kind of brightened my day because needing another professor showed the entrepreneurship program was working.”

It brightened Napier’s day as well. “Ed has been a great friend. He mentored thousands of students and alumni with their entrepreneurial pursuits and mentored me in my teaching of entrepreneurship,” Napier said. “His impact has been immeasurable.”

Being bigger gave the Jones School the opportunity to claim some fame in the world. “Businessweek came down here,” Williams said modestly. “They nominated a few people back in ’96 for top entrepreneurship professors, and I was No. 2.”

In the country. Not only that, but he won so many teaching awards within the school, that he eventually declined to be in the running so that others could take home the honors.

The rest is history. After Napier accepted the position, and The New Enterprise course ultimately became his, more adjuncts were hired, including Jerry Finger, a successful banking and real estate entrepreneur, and Dennis Murphree, a serial entrepreneur who was also a savvy venture capitalist.

From one faculty member teaching two courses in 1978, the program now has over 23 faculty members teaching 27 entrepreneurship-related courses. The year 2013 marked the naming of the Ralph S. O’Connor Associate Professor in Entrepreneurship, awarded to Yael Hochberg. She is the academic director of Rice Alliance for Technology and Entrepreneurship, associate professor of finance and currently leads the school-wide entrepreneurship initiative.

Go out and learn a business

Williams walked among a sea of students in the Rice Memorial Center, looking professorial. He came from a course in statistics and investments that he was teaching with John

Dobelman. “It’s through the statistics department. He’s the professor in charge, and I go over and lecture some. Once a week, three hours. Gives me a chance to stay in touch with students. I like the lecturing. I do it for free. I do it for me.”

as an example. “Her father is a physician. He’s also quite an inventor and entrepreneur. Her mother is as well. She grew up in an environment of ‘let’s start a business. Let’s do this.’

And, believe it or not, that helps.”

Though the two just wrote a text book together — Investing for Profit: A Data Based Approach — the teaching of entrepreneurship never seems far from his heart. “I used to try and leave the students at the end of the year with this advice: go out and learn a business. Know that business. Then buy one in that area. Jack Ledford did that. Even though he’s a military veteran, he actually got his feet wet getting work experience before buying a business.

Goodner said, “Ed’s class and his enthusiasm for entrepreneurship was the catalyst for me starting a company after graduation. I had no intention of pursuing entrepreneurship when I entered business school, but after catching his passion for being an independent employer and employee, I decided to start the company I had devised in a business plan during his class.”

And business plans are vital. But it is Williams’ belief that while the skillset of being an entrepreneur is teachable, “Being one is not.”

On the horizon

Rob Royall ’84, a partner at Ernst & Young, said Williams offered this advice in one of his classes: the key to success and building wealth is to find something no one else wants to do and become very good at it.

“When I pursued an expertise in derivatives accounting, there was literally one person in all of Ernst & Young who was deeply experienced in it. I eventually became the lead resource for the firm on the topic— the topic no one else at the time was clamoring to cover. I was made a partner in order to get coverage on the topic and the risk it presented to our practice.”

That kind of advice and the practical foundation he provided has made the Another scene on Williams's 1950s era 1500 square foot layout. This one will eventually reveal the entrepreneurship program what it is neighborhood where he grew up including including Heights Blvd., where SCI's original funeral home was located. today. It is the legacy he leaves in his wake. His free time is jammed packed with golf, the investment committee at SCI Ledford, class of ’02 and CEO of Spearhead Services, added, and his own personal investments, teaching with Dobelman, “Ed’s class really opened my eyes to a whole world I didn’t the model railroad set that takes up 1,500 square feet and know existed. His insight is that building equity is the most hundreds, possibly thousands, of feet of track. efficient way of building wealth. While entrepreneurship isn’t the best way to quickly build a big salary, it is the most The idea of the train set was to give him something to do in effective way to build equity. Once I understood this, Ed’s his 70s and 80s. “When I was a kid, we went everywhere on emphasis on managing the balance sheet as much as the the train because we had a free pass. That was the way we got income statement made a lot of sense. He’s been an investor around. We didn’t even have a car. So I’ve always been interested in two of my companies. A lot of people don’t put their money in trains. Always enjoyed riding them. Even to this day I love to take a train.” The elaborate train is a replica, of sorts, of the where their mouth is, he does.”

Southern Pacific’s main line, which ran from New Orleans Cooper Etheridge, class of ’03 and president of Automation through Houston to El Paso and Los Angeles, Oakland and Technology Inc., agreed. “He was the very first person to invest San Francisco, and then all the way to Oregon. “I started with in my business, proving that he is willing to practice what he Houston and made big passenger stations, including the two in teaches. Ed represented a breaking away from the usual and Houston — Union Station and the SP's Grand Central Station. I mostly theoretical approach of our other classes. He emboldened now have every train the SP railroad had from that era.” his students, and made us feel, while we were in school, that we The historical precision of stations and cities from the 1950s were already in the game and to start acting like it.”

— he’s working on Los Angeles now — requires a strategic Williams scowls at what he sees as his own limitations. “It’s perspective and the constant care and maintenance of a still not sufficient. A student could take my class. They know all master gardener. “I like operating them. I enjoy putting them the tricks of buying and selling but they still don’t necessarily together and planning what will go where.” know how to operate a business. Buying and selling is easier, but it’s still not a substitute for knowing how to run something.” From his first entrepreneurial adventures to the meticulous model railroads, Ed Williams looks much the same in Sometimes he had a student with some kind of experience. retirement as he did in the first blush of his career: there’s no Take Caroline Caskey Goodner ’92, CEO of Caskey Holdings LLC, holding him back.

SPRING 2015 JONES JOURNAL // 29

FAC U LT Y RESEARCH SHAPING BUSINESS W I S D O M

RESEARCH INSIGHTS AND THE

Halliburton-Baker Hughes Merger An In-Depth Q&A with Gustavo Grullon and Vikas Mittal INTERVIEWED BY M. YVONNE TAYLOR

C

onventional business wisdom states that mergers make business sense. Merging firms can cut costs by reducing redundancies and consolidating operations, expanding their scope and market share, and freeing up capital for further growth.

Last November, Halliburton and Baker Hughes, the second and third largest oilfield services firms in the world decided to merge. According to Halliburton, the deal, the biggest takeover of a U.S. energy company in three years, will consolidate operations, provide cost savings and align and expand their customer base. Halliburton’s CEO Dave Lesar has said that the merger could save the merged entity as much as $2 billion a year. And with lower oil prices and mounting pressures on margins, such a merger may make even more sense. But despite the many opportunities for business success, mergers are complicated and risky business.

Among their many offerings, both companies provide drilling and hydraulic fracturing services to a large customer base

30 // JONES JOURNAL SPRING 2015

of oil and natural gas companies. Providing these services requires a combination of capabilities, such as technological innovation, operational support to customers, after-sales service and so forth. On the one hand, Baker Hughes has the innovative products and technological know-how to drill new wells and boost production in older wells. On the other, Halliburton is well-known for its capacity for efficient execution and logistics management.

But integrating these capabilities requires agreement and collaboration at all levels of both merging companies — from the highest levels of company leadership to front-line managers and employees. The sheer size of these two entities may also introduce additional complications because of the global footprint of the customer base of both companies and potential antitrust issues. In fact, the regulatory risks involved are so weighty that Halliburton offered Baker Hughes a $3.5 billion fee if the deal fails to go through due to failure to gain regulatory approval.

Customer Focused Perspective The Pathway to Financial Success

Firm Initiatives and Inputs Employees, Systems.

Infrastructure, Etc.

Cost Reductions

Customer Focus

(Efficiency Perspective)

(Revenue Expansion Perspective)

DUAL EMPHASIS

Results in:

Short-term sales and profitability Long-term value From "Dual emphasis and the long-term impact of satisfaction"

So what can research tell us?

Vikas Mittal, head of the Jones School’s Energy Initiative and J. Hugh Leidtke Professor of Marketing, and Professor of Finance Gustavo Grullon, sat down recently to discuss how their wideranging research on customer focus, efficiency of financial markets and strategic thinking can inform one of the most discussed merger stories in the energy industry.

Who benefits from value creation in a merger: target or acquiring firm?

Grullon: If you look at the empirical evidence, mergers, on average, do create value. The problem is that most of this value is captured by the target firm, not the acquiring firm. In many cases, especially during a large merger, the acquiring firm experiences negative stock returns around the announcement of the merger. Value is created by combining two firms, but most of it goes to the target firm.

[This can be seen in stock prices for both Halliburton and Baker Hughes, immediately following the merger announcement.

On November 17, the day of the announcement, Halliburton’s stock price fell 11 percent to $49.23, their biggest decline since June 2010; Baker Hughes’ rose 31 percent more than its price three days prior. General market reaction to the merger news overall has been mixed.]

Grullon:

Industry concentration is also a relevant issue during M&A transactions. My recent research shows that in industries with fewer rivals, acquiring firms tend to get better value from the deal. You see more value creation for acquirers in those cases where there is less competition in their product market. This evidence is particularly interesting because it suggests that market power considerations are becoming a key source of value during these corporate events. We also know from previous studies that when public firms buy private firms, usually the acquiring firms tend to do better in those transactions. One potential reason for this phenomenon is that public firms have more negotiating power in private transactions than in public ones. In addition to this, there is evidence that expected synergies are more likely to be realized in smaller deals than in bigger deals. Big deals are so complex that they usually end up destroying value.

How can value be created in a merger: efficiency focus or revenue-enhancement focus?

Mittal: Firms tread a delicate balance — you can save cash

through a relentless focus on efficiency or generate cash by enhancing revenues from your customers. We found in our research that, post-merger, only firms that simultaneously create efficiencies and create revenue enhancement (through increased customer satisfaction) were the ones that increase SPRING 2015 JONES JOURNAL // 31

"Today, because of the complexity involved in innovating, it's really hard to innovate at a smaller scale. You can't do innovation in a garage like Apple did decades ago." value in the long run. In other words, achieving a dual focus — creating efficiencies and enhancing revenues through customer satisfaction — is what led to superior long-term value for merging firms.

Can a dual emphasis be achieved? Yes, but only with a relentless eye toward implementation. For example, take the case of the US Airways and American Airlines merger. It’s been almost a year but they are still working to integrate their reservation systems. They had eight hub airports; five from American and three from US Airways. And they’re still in the process of getting an agreement signed with the employees.

So the big things that could have created any value from the customers’ point of view — good customer service because of happy employees or a good reservation system —haven’t materialized due to implementation issues.

What about capital expenditures in mergers?

Carefully reducing them pays off.

Grullon: There is evidence that most of the synergies in M&A transactions come from the elimination of duplicate activities and reduction in capital expenditures. These types of synergies are extremely important in the oil and gas industry. So one way you could see a benefit from the Halliburton-Baker Hughes deal is through reduced capital expenditures, and that could have a huge impact on current cash flows. However, managers need to be careful because these decisions can have a significant impact on the long-run performance of the firm. While reducing capital expenditures can increase cash flows in the short-run, it could hurt the ability of the firm to grow in the future.

Mittal:

That’s a good point. The reduction of capital expenditure must be done very carefully. When it’s reduced in more of a surgical manner, very strategically — not reducing capital expenditure just for the sake of reducing capital expenditure — there’s a lot of potential.

There’s a second piece coming into play for the HalliburtonBaker Hughes merger. With the downward pressure on the price of oil, many E&P companies are reducing their capital expenditures. In anticipation of weak 2015 commodity prices, ConocoPhillips has further reduced its expected 2015 capital expenditures to $11.5 billion from the $13.5 billion previously announced. Shell announced that it would cut spending by $15 billion over the next three years. BP announced a 20 percent cut in spending this year. Chevron intends to spend $35 billion in capital in 2015 versus the $40 billion it spent in 2014, a 20 percent cut. ExxonMobil intends to cut spending by 12 percent this year. And the list goes on.

And that can be a boon for companies like Halliburton. The E&P companies are not going to indiscriminately cut down 32 // JONES JOURNAL SPRING 2015

any project. They are going to rank order the projects and cut down the low-grade projects and keep only the high-grade projects. A lot of these high-grade projects are by default very complicated. Because of the higher cost of executing these complicated projects, larger companies are going to look for more service from the oil field services companies. They are not just looking to buy a piece of equipment — rather, they are looking for a complete, bundled solution from a company. A company like Halliburton which can provide the entire suite of products, services, advice and assurance is more likely to get business.

Moreover, if companies can innovate and provide that complete solution are they also more likely to have pricing power. Only those companies that have pricing power and the scale to provide the entire array of solutions would have an advantage.

If Baker Hughes and Halliburton can combine resources judiciously, they should be able to better capture value from customers, and they’d also have better pricing power now.

Are mergers detrimental to customers? Not necessarily, as they can stimulate innovation.

Grullon: So related to this issue of pricing power — there is another side of M&A transactions, which is antitrust issues.

One obvious consequence of mergers in an industry is fewer firms in that industry. I’m currently working on a paper where we’re finding very strong evidence that competition has been declining over the last 15 years. For instance, today we have fewer public firms than we had in 1973.

Mittal: One way to think about this issue is as follows: a lot of

literature shows smaller firms are more innovative than their larger rivals. If a wave of mergers leaves fewer smaller firms in an industry, you’re likely to see a decline in innovation.

Even if you look at the oil and gas industry, particularly the unconventional industry, a lot of innovation — technological and process — came from smaller companies. With M&As, a strategic challenge confronting the oil-field services companies will be to keep innovating. If they are unable to innovate they will lose pricing power.

Grullon: Another way to look at this issue is as follows: larger

companies have more resources to deploy into innovation.

They can also sustain, over time, the erratic ebbs and flows of innovation success. Clearly, the scale of Google and Apple has enabled them to be more, not less innovative. The resource constraints in smaller firms do not allow them to have the same kind of innovation as big firms do. Today, because of the complexity involved in innovating, it's really hard to innovate at a smaller scale. You can't do innovation in a garage like Apple did decades ago. The complexity of the technology is

changing so much it's really hard to do it with a small group of people. You need not only the resources, but also a team who can create more innovation.

I'm working on a paper that looks at the effect of competition on patents. If you look at the '80s and the early '90s, you'll see that most of the patents were created in competitive markets — now we are seeing the opposite, that most of the patents are created in concentrated markets where you have fewer players. And that may be driven by the fact that now you need more resources to innovate. And not only that, what we're seeing is that if a small firm creates innovation, these firms are likely to be acquired by large firms.

Mittal: Great point. Industries have evolved to address these issues. I look at pharmaceuticals, which is an industry with many parallels with the oil and gas industry. That industry has evolved an eco-system where the smaller companies innovate, and large pharma typically buys out the small companies at the commercialization stage.

Really large companies like Google nurture innovation inside.

So, Professor Grullon’s point about resources is well taken.

Inside large companies with resources, you've got to create processes — whether they are based on incentive alignment or through company culture — to propel innovation.

In this industry, innovation is extremely important. The larger problem facing the industry is falling oil prices. The cost of extracting oil is higher than the price of oil. The only way to lower the cost of extracting oil is through innovation.

Innovation, in the oil-field services industry has a twofold advantage. One is that innovation can allow you to lower your own fixed and variable costs. You make this investment today and innovation can allow you to lower your cost structure.

And it also allows you to increase pricing power. But the fixed cost of innovating is high. The lead time to commercialize innovation is long. And there are enough safety concerns around every innovation, regulatory approvals, etc. that you really need an infrastructure to innovate and commercialize technology, assess their business and financial impact, and understand their strategic significance. You have to have people within the organization with commercial acumen and leadership potential who can take on this task. And that's how you can profit in the long run.

Oil and gas industry: Any predictions?

Grullon: We may actually see more M&A transactions because oil prices will drive a lot of consolidations. Cashstrapped companies are going to look for firms with more resources in order to survive. So now is going to be a good time for the big firms to buy the cash-strapped companies because they are going to have more power on the negotiation table.

Mittal: I agree completely. If you look back to the financial crisis faced by the U.S. in 2007-08, there was a wave of mergers — National City, Wachovia, Merrill Lynch — all marquee firms.

However, they were relatively weak, and merged with rivals.

Despite the shock, the financial services sector has emerged stronger today. In the long run, these types of shocks make any industry stronger. The oil and gas industry is no exception.

Grullon: Yes, because it drives innovation.

GUSTAVO GRULLON Professor of Finance

Grullon currently teaches courses on mergers and acquisitions and on corporate financial policy.

His research covers topics in empirical corporate finance and provides rational explanations to several documented anomalies in the asset-pricing literature, such as the tendency of investors to buy familiar stocks and the effect of managerial flexibility on firm value. His papers have been published in top academic journals and featured in the popular press. He received the Jones School’s Award for Scholarship Excellence in 2006. Grullon received his Ph.D. in finance from Cornell University.

RELEVANT RESEARCH Grullon, Gustavo, Yelena Larkin, and Roni Michaely.

“The Disappearance of Public Firms and the Changing Nature of U.S. Industries” working paper

VIKAS MITTAL

J. Hugh Liedtke Professor of Marketing Head, Energy Initiative Mittal’s varied experience designing integrated, experiential courses along with his superb, multidisciplinary research record provide the foundation for a strong, cross-functional energy initiative.

His unique expertise and approach to teaching core content is embraced by leaders in the energy industry through courses designed for companies such as Shell, BP, National Oilwell Varco, Cameron and CB&I. In 2006, he was awarded the William F. O’Dell Award in recognition of his significant, long-term contributions to the theory, methodology and practice of marketing. He co-authored the new energy-focused SCOPE survey (see more on p. 8).

Mittal received his Ph.D. from Temple University.

RELEVANT RESEARCH Mittal, Vikas, and Wagner A. Kamakura.

"Satisfaction, repurchase intent, and repurchase behavior: Investigating the moderating effect of customer characteristics." Journal of Marketing Research 38.1 (2001): 131-142.

Mittal, Vikas, Eugene W. Anderson, Akin Sayrak, and Pandu Tadikamalla. "Dual emphasis and the long-term financial impact of customer satisfaction." Marketing Science 24, no. 4 (2005): 544-555.

Swaminathan, Vanitha, Christopher Groening, Vikas Mittal, and Felipe Thomaz. "How achieving the dual goal of customer satisfaction and efficiency in mergers affects a firm’s long-term financial performance." Journal of Service Research 17, no. 2 (2014): 182-194.

Mittal: It also clears out the weaker players.

SPRING 2015 JONES JOURNAL // 33

Resources

JGSB Online

business.rice.edu

facebook.com/ricemba twitter.com/ricemba

Check out the detailed bios of all JGSAA 2014-15 officers and board members, including President Jay Hawthorn ’05 and President-Elect Phillip Brown '08. business.rice.edu/jgsaa_board

Did you know? You can see every elective available, register for Executive Education classes, search for alumni and check for upcoming Jones School events online. business.rice.edu

The Jones Corporate Investors Program provides corporations with many ways to become involved with the Jones School, tailoring each contribution to be the most productive and mutually rewarding for both the school and the investor. business.rice.edu/corporate_investors

Jones Partners open doors to partnership among Houston business leaders and Jones School communities. They also present a compelling speaker series, pairing business leaders with JGSB professors. This spring's schedule included Dr. Ellen Ochoa, director of the Johnson Space Center, discussing the launch of the JSC's change initiative 2.0 with Yael Hochberg, Ralph S. O'Connor Associate Professor of Entrepreneurship. business.rice.edu/jonespartners

The Rice MBA admissions blog has program information, admissions tips, Jones School news, as well as student and alumni bloggers sharing their experiences at the Jones School. riceMBAadmissions.com

From seed accelerator rankings announced at SXSW to faculty research and student and alumni stories, the homepage hosts a fresh rotation of articles each month. Click on News and Noteworthy to see what you’ve missed in the archives. business.rice.edu

Looking for Class Notes? We’ve moved them to our Facebook page! Join the alumni group, and check out the Class Notes Album to see up-to-the-minute alumni news, including all the baby photos you can handle. business.rice.edu/alumnifb 34 // JONES JOURNAL SPRING 2015

Last Look

Atelier Bow-Wow + Jesús Vassallo + Students from the Rice School of Architecture, Shotgun, 2015. Commission, Rice University Art Gallery, Houston, Texas.

Photo by: Nash Baker © nashbaker.com

“Everybody ought to take a period of time and do something else.”

– ed williams

P.O. Box 2932 Houston, Texas 77252-2932

Opportunities and Challenges in a Volatile Price Environment friday November 6, 2015 Jones Graduate School of Business, McNair Hall Rice University

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