Research in Action - Winter 2022 by UCI Paul Merage School of Business

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IN ACTION Eleventh Edition | Winter 2022

INSIDE THIS ISSUE

Do Blue or Red Stocks Perform Better? How Political Polarization Impacts Your Stock Returns The Not-So-Hidden Emotional Labor of Women in the Advertising Industry Want Employees to Embrace Corporate Environmental Policies? Invest in Them First.

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Research Highlights

Do Blue or Red Stocks Perform Better? How Political Polarization Impacts Your Stock Returns by Keith Giles

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During the COVID-19 pandemic, investors have experienced wild fluctuations in the market, with some companies experiencing significant gains while others suffered. While investors may have their theories for why some organizations weathered the volatile market better than others, there is one significant factor that hasn’t been seriously examined— political alignment. RESEARCH IN ACTION

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Thanks to the diligent research of Jinfei Sheng, Zheng Sun and Wanyi Wang of The UCI Paul Merage School of Business, this previously unconsidered element has been documented and verified. The team published their findings in the article titled “Partisan Return Gap: The Polarized Stock Market in the Time of a Pandemic.” “In early 2020, from March to April, there was a lot of news about stock markets and some discussion about how political beliefs about COVID may impact the market,” says Sheng. “We wanted to understand the impact of political polarization on stock performance and the pandemic provided the perfect environment for us to gather the data we needed.” Over the last few years, as partisanship and political tribalism has grown, the divide across party lines has cut through living rooms and board rooms alike. This widening gap between the red and the blue presumably has been a factor in the rise and fall of stock prices as well, but how, why and in what ways? This was what Sheng, Sun and Wang set out of uncover.

Measuring the politics of a company’s investor base When it comes to determining whether a company is red or blue, the team had to make certain distinctions. “In our paper we rely mainly on the location of the company headquarters,” says Sheng. “Our research shows that the local geographic location is what matters most. Where you are in your industry makes a difference. Local people tend to invest more in local companies,” he says. “We also incorporated new data that allowed us to measure political polarization of a company based on Facebook connections across counties, and other social connections.”

Taking stock of the gap “First, we wanted to find out whether or not the returns of red and blue stocks behaved differently. Was there really a difference? What we found was very striking,” says Sheng. “They really were two different animals. In the face of COVID news, the red stocks had higher returns than those tied to blue stocks. It was a pretty 4

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amazing gap—as much as 20 basis points daily.” Their data also provided insight into the risk attitude of different communities. “If people don’t feel safe, they are less likely to visit public places, and vice versa. With our data we were able to measure local risk attitudes for both red and blue counties and found that people in red counties are less likely to exercise social distancing in response to COVID cases and lockdown orders,” says Sheng. “This was the main driver, we found. About 40% of the gap was driven by political beliefs about COVID.”

Accounting for the StockTwits gap Another surprising result was uncovered when the team began looking at the partisan disagreement measure based on StockTwits data made available by researchers Cookson, Engelberg, and Mullins. . StockTwits is a social network platform on which investors can tweet about their opinions toward different stocks. “On days with high disagreement between red and blue investors, we noticed the most pronounced gaps, and a larger fluctuation in the market that corresponded directly to that,” says Sun. Sun was also surprised at the magnitude of the returns gap and what it said about how students are traditionally taught to valuate companies. “What we teach in our classrooms about how to measure valuation—future cash flows, company risk, and so on— may need to change.” “Our paper demonstrates that these old methods are not sufficient. For example, if you measured future cash

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flows of red and blue companies during the pandemic, it’s clear that partisanship is here to stay. Like it or not, they would be very similar. The same can be said for investors need to seriously consider how this political the risk factors of those firms, and we incorporated polarization might impact their investments and respond those into our study, but those accordingly. traditional methods did not reflect “In the future, new disagreements the results we found,” she says. “In the face of COVID news, the along party lines are inevitably “If we don’t adjust our valuation going to occur,” says Sun. “We methods to include the political red stocks had higher returns need to learn to pay attention to polarization factors, we’ll be how these may affect returns.” that those tied to blue stocks.” Sheng concurs, adding, “With missing a very large part of the data and our valuations will COVID we can see how politics continue to be wrong.” impact stock fluctuations Thanks to this ground-breaking study, we now have a better idea of how investors should evaluate the companies they invest in. “If we could get better data about the political affiliation of the investors,” says Sun, “we might find an even stronger connections to the performance of that company in the market.”

Building politics into our investing future As the political divide in our nation continues to widen,

dramatically, and we need to consider this, or we will suffer as a result.” It’s not an exaggeration to say that politics now seriously impacts stock performance. If so, shouldn’t political affiliation inform our investment decisions? No matter how—or if—you vote, your financial future may depend on whether you invest in red or blue companies from this day forward.

Jinfei Sheng assistant professor of finance at The UCI Paul Merage School of Business. His primary research fields are empirical asset pricing, investments and behavioral finance. His papers use big data, machine learning, and textual analysis to tackle fundamental questions in finance and economics. A central theme of his research is to understand the roles of information in financial markets. He received his PhD in finance from the University of British Columbia.

Zheng Sun is associate professor of finance at The UCI Paul Merage School of Business. Her primary research interests are empirical investments, institutional investors, mutual funds, hedge funds, bonds and loans. She received her PhD from the Stern School of Business at New York University.

Wanyi Wang is a doctoral candidate at The UCI Paul Merage School of Business. Her main research interests are behavioral finance, FinTech and the application of textual analysis in finance. Her working papers explore the asset pricing implication of partisanship during the pandemic and investigate the role of technology in cryptocurrency pricing. She holds a Master of Economics from Peking University.

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The Not-So-Hidden Emotional Labor of Women in the Advertising Industry by Keith Giles

As more women enter the previously maledominated advertising industry, some researchers are noting some curious gender dynamics. Professor Sharon Koppman of The UCI Paul Merage School of Business, together with Professor Beth Bechky of the Leonard N. Stern School of Business at New York University and Andrew Cohen, a culture industry fellow at Yale University and strategist at Decoded Advertising, were interested in understanding how gender influences interactions between the creatives (copywriters, graphic designers, creative directors) and the suits (account managers, executives, project managers).

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Their work will be published in a forthcoming issue of the Academy of Management Journal in an article titled “Overcoming Conflict between Symmetric Occupations: How ‘Creatives’ and ‘Suits’ Use Gender Ordering in Advertising.”

Dangling cookies at the end of sticks Koppman explains that their findings pinpoint a complex relationship of gender roles within the advertising industry. “One of the first things I was surprised by was just how much the division of labor at these agencies was based on gender,” she says. “And this division went against gender stereotypes. Stereotypes typically associate women with creative work, like art, writing, or design, and men with things like strategy, math, and management skillsets. But here, men were performing most of the creative work and women were strategists and managers. As my colleagues and I began to look a little deeper into how these relationships worked, it started to get even stranger,” she says. “For example, we began to notice how often the female account directors would mother the male creatives on the team. In one extreme case, we found a male copywriter receiving chocolate milk from a female account manager as a way of motivating him to do the work he was already paid to do. According to our research, these sorts of favors were fairly common.”

A gender divide hiding in plain sight

The team’s research reveals that gender hierarchy has slowly become part of the advertising industry’s tribal culture, making it very difficult to talk about. “The real problem with these gender dynamics within the advertising “The team’s research reveals that industry,” says Koppman, “is that this is how the work gets gender hierarchy has slowly become done. Creatives turn out great part of the advertising industry’s copy and award-winning ads that make money for their clients, and for the firm. This tribal culture, making it very makes it difficult for anyone difficult to talk about.” inside the agency to see what the problem is.”

Koppman and her research team first discovered the advertising industry’s strange gender dynamic almost by accident. Koppman was working on a project exploring the role social class plays in hiring decisions within creative industries. “I was already doing interviews and field work on this topic,” she says. “I started to notice these gendered relationships between the creatives and the

account managers. I really wasn’t expecting this at all.” When she compared notes with Andrew Cohen, who was working on his own project on the advertising industry and had seen similar patterns, they knew they were seeing a dynamic that needed further exploration.

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“The downside is that there are women doing work that is not only not rewarded, but also far outside their job description. They shouldn’t have to bring candy or cookies to work to coax male creatives

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to cooperate. But the reality is, they do. Women on the account management side were often acting as if they were surrogate mothers, wives, cheerleaders or girlfriends for the male creatives.”

Lopsided labor One way to look at this odd way of doing business is to imagine this sort of behavior taking place if the gender roles were reversed. “Male account managers don’t act the same way female account managers do when asked to motivate male creatives,” she says. “And while it’s true that the work still gets done, the real problem is how this leads women to perform emotionally taxing work that men in the same position aren’t expected to do.”

communicate how this very subtle mechanism is at work in the advertising world. It would be great if advertising agencies worked to address these dynamics,” Koppman says. “It’s not only about employee retention, it’s also about creating a healthy work environment for women and men.”

“Hopefully, once our paper is published, our findings will help to

Sharon Koppman is an assistant professor of organization and management at The UCI Paul Merage School of Business. Her research examines sociological factors underlying hiring, careers and collaboration in creative fields like advertising, music, tech, and science. She examines how people enter these jobs, the factors that shape their careers, and how they collaborate with members of other occupations.

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Want Employees to Embrace Corporate Environmental Policies? Invest in Them First. by Keith Giles

Let’s say you’re the CEO of a large organization and you want to make sure your company scores high on an upcoming environmental impact evaluation. What steps would you take? What policies would you need to create? How many people would you need to join your environmental initiative task force to hit your goals?

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A recent study reveals that although a traditional approach focusing on environmental policies and practices is a necessary step, it is not enough. In fact, what you might need to do is something so counterintuitive and unexpected, that most corporate executives totally miss it. At least that’s what a recent study conducted by Florencio F. Portocarrero, a Ph.D. candidate at UCI’s Paul Merage School of Business, Jone L. Pearce, distinguished professor emerita of organization and management at the Merage School and Anne-Laure Winkler, assistant professor at the Zinklin School of Business, Baruch College, CUNY concludes. Their article—“Broadening our Understanding of Human Resource Management for Improved Environmental Performance”—suggests that a company’s environmental impact success rates are contingent upon the health of that organization’s corporate culture.

Do what I do, not what I say As Portocarrero explains, this question of what makes or breaks a company’s impact on the environment is something he’s wondered about for a very long time. “This was actually one of the first projects I started when I began my Ph.D. journey a little over six years ago,” he says. “I have always been intrigued by the impact organizations have on the environment, and I have always perceived organizations as being key to addressing impact and alleviating barriers and eventually improving environmental conditions in our world.” As a micro-organizational scholar, Portocarrero is interested in how individuals within organizations influence company performance. His graduate work has focused on the role of individuals in shaping their institution’s environmental impacts. Pearce shares Portocarrero’s interest in the practical side of company performance. 12

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“Unlike other academics who might focus on economic conditions, or strategy in the abstract, we are interested in what people actually do,” she says.

Finding the root of environmental success They began their research by looking for empirical methods for answering these sorts of questions. “Thankfully, Anne-Laure and I gained access to a database of aspiring B Corps,” says Portocarrero. B Corporations, or B Corps for short, are businesses that have been independently assessed for their commitment to social and environmental performance, among other things. With access to this data set, they began exploring how organizations can have a meaningful effect on the environment. “The B Corporations angle is one of the things that makes our research so interesting,” says Pearce. “The organizations we looked at have all had to go through a rigorous process of evaluation. We’re sampling companies that want to be designated as environmentally successful corporations. Otherwise, they wouldn’t endure the bureaucratic processes necessary to become certified. What this means for us, as researchers, is that the data we have is all based on facts, not on opinions or posturing.” To discover what people actually do, they focused on human resource management practices. “We wanted to look at how they rewarded the positive behaviors, how they monitored employee actions and how the things they did affected the company’s environmental impact,” says Pearce.

Nurtured employees are enthusiastic employees The team was surprised to discover that programs with no apparent relationship to environmental considerations

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have a strong correlation with a company’s environmental impact. Contributions to employee continuing education programs, healthcare packages, corporate volunteer programs and parental leave policies all make a big difference.

because they have a Chief Sustainability Officer or a team in charge of the company’s environmental initiatives. But the results we’ve found show that this is not enough. You have to make sure managers throughout the organization are held accountable for environmental impact.”

Put another way, although an isolated rewards system focused on environmental goals can be helpful, a If employees sense that the executive team isn’t more holistic employee wellness program is more seriously concerned with the environment, they won’t impactful. As Portocarrero explains, “If I perceive that take it very seriously either. I am valued as an employee, then I am going to feel “Employees tend to take pride in their company when more invested in what they see how well the the organization cares organization treats them,” about as well, and I will “Although an isolated rewards system focused says Portocarrero, “and be more likely to help if that’s their experience the company achieve its on environmental goal can be helpful, a more they are usually more environmental goals.” exuberant when it

Don’t stop at posters in the lunchroom

holistic employee wellness program is more impactful.”

In reflecting on these results, Portocarrero draws on his prior experience as a corporate social responsibility manager. “What I experienced was that environmental initiatives were seldom embraced throughout the entire organization. Companies usually assume that they are doing enough

comes to helping the company reach their environmental impact goals.”

“What works is not a program that puts up posters in the break room twice a year,” says Pearce. “It’s also not a program that squeezes the managers either. It’s really about how the entire organization treats their employees from the ground up.”

Jone Pearce is a distinguished professor emerita of organization and management at The UCI Paul Merage School of Business. She conducts research on how workplace interpersonal processes may be affected by political structures and organizational policies and practices. Her work has appeared in over 100 scholarly publications, she has edited several volumes and written several books. She currently serves on several editorial boards and is a Fellow of the Academy of Management, the International Association of Applied Psychology, the American Psychological Association (Div 14, SIOP), the Association for Psychological Science and the British Academy. Florencio Portocarrero is a doctoral candidate at The UCI Paul Merage School of Business. He conducts research on corporate social responsibility, social and environmental impact and dispositions and emotions in organizations. He applies a broad range of methods to answer questions that help create sustainable organizations where people thrive. He frequently collaborates with for-profit and nongovernmental organizations across the Americas to design, implement and evaluate diverse types of corporate-sponsored social impact initiatives.

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Research Abstracts Latest Published Work by Merage School Faculty Members

Accounting Abstracts Professor Terry Shevlin Title: “Managerial Career Concerns and Corporate Tax Avoidance: Evidence from the Inevitable Disclosure Doctrine” Co-authors: Ningzhong Li and Weining Zhang Accepted at: Contemporary Accounting Research (Journal on Financial Times Top 50 list) While managers’ career concerns have been shown to be influential in shaping their decisions, there is little evidence of the impact such concerns may have on managers’ tax avoidance incentives. This study examines the causal effect of managers’ career concerns on tax avoidance using the staggered recognition by state courts of the Inevitable Disclosure Doctrine (IDD), a trade secret protection doctrine which places greater restrictions on managers from joining or forming a rival company. We argue that the IDD recognition increases the cost of job loss for managers whose current jobs may be in jeopardy, thereby increasing their incentive to avoid taxes in order to positively change their current employer’s evaluation of their ability. The IDD recognition also reduces outside opportunities for high ability managers, and thereby reduces their incentive to avoid taxes in order to positively change external employers’ evaluation of their ability. Using a difference-in-differences design, we provide evidence consistent with these predictions. We further show these effects are stronger for CEOs in their early years of service in the focal firms when the market is more uncertain about their ability. Our findings suggest that managers take into account the impact of tax avoidance on their career outcomes when making tax avoidance decisions.

Professor Terry Shevlin Title: “CEO Sports Hobby and Firms’ Tax Aggressiveness” Co-authors: Shuqing Luo, Lirong Shi and Aimee Shih Accepted at: Journal of the American Taxation Association Recent accounting research suggests that individual executives play a significant role in shaping a firm’s tax planning. Building on psychology research that finds sports interests reflect an individual’s risk-taking preferences, we develop a novel measure of innate and non-pecuniary CEO risk attitudes based on the riskiness of CEOs’ sports hobbies and examine whether the measure is associated with corporate tax aggressiveness. We find that firms managed by CEOs with riskier sports hobbies are more aggressive in their tax planning. This association is more pronounced for CEOs with greater financial incentives and greater power in making decisions. Our results are robust to using alternative measures of CEO sports risks, and after accounting for the self-selection of the disclosure of CEO sports hobbies.

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Finance Abstracts Professor Christopher Schwarz Title: “Attention Induced Trading and Returns: Evidence from Robinhood Users” Co-authors: Brad Barber, Xing Huang and Terrance Odean Accepted at: Review of Finance (Journal on Financial Times Top 50 list) We study the influence of financial innovation by fintech brokerages on individual investors’ trading and stock prices. Using data from Robinhood, we find that Robinhood investors engage in more attention-induced trading than other retail investors. For example, Robinhood outages disproportionately reduce trading in highattention stocks. While this evidence is consistent with Robinhood attracting relatively inexperienced investors, we show that it can also be partially driven by the app’s unique features. Consistent with models of attention-induced trading, intense buying by Robinhood users forecast negative returns. Average 20-day abnormal returns are -4.7% for the top stocks purchased each day.

Professors Christopher Schwarz and Zheng Sun Title: “How Fast Do Investors Learn? Asset Management Investors and Bayesian Learning” Accepted at: Review of Financial Studies (Journal on Financial Times Top 50 list) We study how fast investors learn about manager skills by examining the speed at which their disagreement converges. Using a novel measure of disagreement, we find that hedge fund investors learn as fast as suggested by Bayes’ rule. However, we also find mutual fund investors learn much more slowly than Bayes’ rule. Mutual fund investors’ slow learning is not caused by investors potentially paying attention to different performance measures, institutional frictions such as loads, or lack of sophistication, but is likely due to a low payoff from learning. Our results suggest learning speed depends on the motivation of financial participants.

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Professor Jinfei Sheng Title: “Macro News and Micro News: Complements or Substitutes?” Co-author: David Hirshleifer Accepted at: Journal of Financial Economics (Journal on Financial Times Top 50 list) We study how the arrival of macro-news affects the stock market’s ability to incorporate the information in firm-level earnings announcements. Existing theories suggest that macro and firm-level earnings news are attention substitutes; macro-news announcements crowd out firm-level attention, causing less efficient processing of firm-level earnings announcements. We find the opposite: the sensitivity of announcement returns to earnings news is 17% stronger, and postearnings announcement drift 71% weaker, on macro-news days. This suggests a complementary relationship between macro and micro news that is consistent with either investor attention or information transmission channels.

Information Systems Abstracts Professor Tingting Nian Title: “Platform Policies and Sellers’ Competition in Agency Selling in the Presence of Online Quality Misrepresentation” Co-authors: Jingchuan Pu, Liangfei Qiu and Hsing K. Cheng Accepted at: Journal of Management Information Systems (Journal on Financial Times Top 50 list) On e-commerce platforms, consumers rely heavily on online product reviews, sales volume, number of product page visits, and social media discussions to infer product quality. As a result, the past decade has witnessed an explosive growth of sellerinitiated misrepresentation of quality through fake reviews, fake sales volume, and fake clicks, all used to manipulate consumers’ quality perception of products. In this study, we develop an analytical model to investigate sellers’ quality misrepresentation decisions under the agency pricing regime. The platform can use two strategies to discourage sellers’ quality misrepresentations: increasing the cost of misrepresentation and implementing a more lenient product return policy. We find that while a stricter anti-misrepresentation strategy can deter the misrepresentation level of the high-quality seller, such strategy may unintendedly incentivize the low-quality seller to conduct more quality misrepresentation. Further, increasing return leniency can deter lowquality seller’s quality misrepresentation level in a wider range of market conditions than increasing the misrepresentation cost. Finally, the platform can decide the antimisrepresentation strategies and the strength of these strategies based on its specific objective. The findings demonstrate the necessity of evaluating anti-misrepresentation strategies in a competitive setting. 16

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Professor Behnaz Bojd Title: “Gamified Challenges in Online Weight-loss Communities” Co-authors: Xiaolong Song, Yong Tan and Xiangbin Yan Accepted at: Information Systems Research (Journal on Financial Times Top 50 list) Gamified challenges, one of the most popular features of online weight-loss communities, enable users to set weight-loss goals and compete with other challenge participants via leaderboards. In this paper, using the data from a leading online weight-loss community, we study the effect of gamified challenges on the weightloss outcome. We employ a dynamic model, using a system generalized method of moments estimator combined with an inverse probability weighting approach, to address endogeneity issues. Our findings indicate that participation in gamified challenges has a positive and significant effect on weight loss. We found that, on average, the participants achieved a weight loss of 0.742 kg by participating in at least one challenge a month. We demonstrate that not all gamified challenges are equally effective; effective challenges do not include a numeric weight goal (e.g., lose 5 kg), focus on exercise-only behavioral goals, and have a large active group size. Further, the results show that the absence (presence) of a numeric weight goal benefits users in exercise (diet) challenges. Moreover, a small active group size can help (hurt) users in exercise (diet) challenges. We discuss, as a potential underlying mechanism, the role of leaderboards to induce social comparison and motivate (discourage) users in exercise (diet) challenges. Our findings have implications for designing gamified systems with competition elements in online weight-loss communities.

Marketing Abstracts Professor Imran Currim and PhD student Huwail J. Alantari Title: “An Empirical Comparison of Machine Learning Methods for Text-based Sentiment Analysis of Online Consumer Reviews” Co-authors: Yiting Deng and Sameer Singh Accepted at: International Journal of Research in Marketing The amount of digital text-based consumer review data has increased dramatically and there exist many machine learning approaches for automated text-based sentiment analysis. Marketing researchers have employed various methods for analyzing text reviews but lack a comprehensive comparison of their performance to guide method selection in future applications. We focus on the fundamental relationship between a consumer’s overall empirical evaluation, and the text-based explanation of their evaluation. We study the empirical tradeoff between predictive and diagnostic abilities, in applying various methods to estimate this fundamental relationship. We incorporate methods previously employed in the marketing literature, and methods RESEARCH IN ACTION

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that are so far less common in the marketing literature. For generalizability, we analyze 25,119 products in nine product categories, and 260,489 reviews across five review platforms. We find that neural network-based machine learning methods, in particular pre-trained versions, offer the most accurate predictions, while topic models such as Latent Dirichlet Allocation offer deeper diagnostics. However, neural network models are not suited for diagnostic purposes and topic models are ill equipped for making predictions. Consequently, future selection of methods to process text reviews is likely to be based on analysts’ goals of prediction versus diagnostics.

Professor Rajeev Tyagi Title: “Optimal Bundling of Events” Co-author: Sreya Kolay Accepted at: Marketing Science (Journal on Financial Times Top 50 list) This paper examines a seller’s optimal bundling strategy when the products it sells are events offered over time. For example, these could be events in concert series, music festivals, and sports tournaments. Given the temporal and perishability features of events, a bundle can only be sold at an earlier date, and the earlier event is unavailable for selling at a later date. We consider the following features of such markets: (i) events may differ in their popularity; (ii) the more popular event may be offered earlier or later; (iii) consumers may be uncertain about their valuation of the later event; (iv) seller may be unable to commit to the price of a future event; (v) consumers valuations of events may be independently distributed or positively correlated; and (vi) seller may have capacity constraints. We show how these market features determine the benefit of segmenting consumers with offer of bundle and individual events, the cannibalization between the bundle and the individual events, and the restriction that the unconstrained optimization of the pricing of the later-occurring event imposes on pricing of earlier-offered bundle and earlier-occurring event in the presence of rational forward-looking consumers. We demonstrate how, depending on these market features, the seller’s optimal selling strategy varies from selling only individual events, to selling only the bundle of events, to selling the bundle of events with only the less popular event offered outside the bundle, to selling the bundle of events and both the less and more popular events offered outside the bundle. We also show that the seller prefers to offer the more popular event later in all these market settings.

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Operations and Decision Technologies Abstracts Professor John Turner Title: “Dynamized routing policies for minimizing expected waiting time in a multi-class multi-server system” Co-author: Vahid Nourbakhsh PhD ’18 Accepted at: Computers and Operations Research Minimizing queue waiting time in multi-class multi-server systems, where the service time depends both on the job type and the server type, has wide applications in transportation systems such as emergency networks and taxi networks, service systems such as call centers, and distributed computing platforms. However, the optimal dynamic policy for this problem is not known and remains a hard open problem. In our approach, we develop a math program to model a static variant of this routing problem and use the solution from this math program to construct several novel dynamic policies. In three categories, namely, (i) policies that do not block jobs, (ii) policies that block jobs statically (i.e., blocking jobs using a predetermined blocking probability), and (ii) policies that block jobs dynamically (i.e., blocking jobs when all feasible servers are busy), we compare the performance of our policies with FastestServer-First (FSF), a well-known routing policy for such problems in practice and in the literature. Our experiments show that our proposed overflow dynamic routing policies outperform FSF and its extensions, FSFStaticBlock and FSFDynamicBlock. Moreover, to showcase our methodology, we apply our proposed policies to the problem of assigning fire incidents in Irvine, CA, to fire stations.

Professor Shuya Yin Title: “Retail Distribution Strategy with Outlet Stores” Co-author: Jiaru Bai PhD ’17 Accepted at: Production and Operations Management (Journal on Financial Times Top 50 list) Traditionally, outlet stores were situated away from main stores in order to provide older, less desirable products at discounted prices. More recently, some firms have featured an outlet-within-a-store concept and offer consumers the experience of outlet shopping at the same location. With interest in examining the effect of location differentiation and uncertain outlet store’s product fit on a firm’s distribution strategy, we model a firm with an existing main store and study its motivation on whether to open an outlet store, and where to locate it. The analysis leads to a number of key observations. First, if the firm decides to open an outlet store, it may be co-located with the main store or at a remote location, depending on the combined role of customer dispersion, outlet store’s product fit, customer travel sensitivity and fixed RESEARCH IN ACTION

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costs. Second, there exists a substitution effect between location and quality (and price) differentiation. We show that customer dispersion always encourages the firm to offer outlet stores so as to achieve better market coverage. While a higher probability of product fit at the outlet store makes its more attractive (for example, it makes customers at one location more willing to travel to the outlet store at another location), interestingly, it has a non-monotone effect on its location. Also, in contrast to intuition, higher customer travel sensitivity may even lead to locating the outlet store away from the city center depending on the level of customer dispersion. We also study three extensions. First, the results of our base model are shown to be robust if product quality at the outlet store can positively influence the outlet product’s fit probability. Second, heterogeneous consumer travel sensitivity makes it easier for the firm to segment consumers and hence can increase profits even when travel sensitivity is high. Finally, we consider a continuum of possible outlet store locations, and demonstrate the robustness of the base model results.

Organization and Management Abstracts Professor Patrick Bergman Title: “The Hidden Cost of Worker Turnover: Attributing Product Reliability to the Turnover of Factory Workers” Co-authors: Ken Moon, Prashant Loyalka and Joshua Cohen Accepted at: Management Science (Journal on Financial Times Top 50 list) Product reliability is a key concern for manufacturers. We examine worker turnover as a significant but under-recognized determinant of product reliability. Our study collects and integrates (1) data reporting factory worker staffing and turnover from within a major consumer electronics producer’s supply chain and (2) traceable data reporting the component quality and field failures—i.e., replacements and repairs—of nearly 50M consumer mobile devices over four years of customer usage. Devices are individually traced back to the factory conditions and staffing, down to the assembly line-week, under which they were produced. Despite the manufacturer’s extensive quality-control efforts, each percentage-point increase in the weekly rate of workers quitting from an assembly line (its weekly worker turnover) is found to increase field failures by 0.74-0.79%. In the high-turnover weeks following paydays, eventual field failures are strikingly 10.2% more common than for devices produced during the lowest-turnover weeks immediately before paydays. In other weeks, the assembly lines experiencing higher turnover produce an estimated 2-3% more field failures on average. The associated costs amount to hundreds of millions USD. We demonstrate that staffing and retaining a stable factory workforce critically underlies product reliability and showcase the value of traceability coupled with connected workplace and product data in supply chain operations. 20

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Professor Sharon Koppman Title: “Overcoming Conflict Between Symmetric Occupations: How “Creatives” and “Suits” use Gender Ordering in Advertising” Co-authors: Beth A. Bechky and Andrew C. Cohen Accepted at: Academy of Management Journal (Journal on Financial Times Top 50 list) In knowledge-based organizations, conflict among interdependent occupations can be exacerbated by the absence of a clear hierarchical ordering of these occupations within the organization. Moreover, given women’s inroads into some traditionally maledominated occupations but not others, these workplaces are increasingly horizontally gender segregated. In this paper, we study how members of these symmetric and segregated occupations manage conflict in U.S. advertising agencies through the case of relationships between ‘creatives’ (copywriters, designers, and creative directors) and ‘suits’ or account practitioners (account executives, strategists, and managers). Creatives and suits are at the same organizational level in their agencies. While creatives are primarily men, suits, traditionally also men, are now primarily women. Drawing on participant observation in five different U.S. advertising agencies and over 100 interviews, we show how creatives and account practitioners use gender ordering to overcome jurisdictional conflict. These practices are grounded in enacting essentialist gender differences that transform symmetric occupational relationships into hierarchical ones by embedding the gender hierarchy. We find that while gender ordering helps women and men in cross-occupational pairs get work done, it also reinforces women’s disadvantage because for women it involves low-status and emotionally taxing scut work that it does not involve for men.

Dean Ian O. Williamson Title: “Trust Consensus Within Culturally-Diverse Teams: A Multi-Study Investigation” Co-authors: Bart de Jong, Nicole Gillespie and Carol Gill Accepted at: Journal of Management (Journal on Financial Times Top 50 list) Despite tremendous progress toward understanding trust within teams, research has predominantly conceptualized team trust as a shared group construct, focusing almost exclusively on trust magnitude (i.e., mean level of trust) while ignoring trust dispersion (i.e., within-team differences in trust). As a result, we know little about this critical property of team trust, its determinants, and independent impact on team outcomes. We address this limitation by examining “team trust consensus”—a configural group construct capturing the extent to which team members share their levels of trust in the team—as a variable of theoretical and empirical interest in its own right. Crosssectional data from a work team sample (Study 1, N = 120) provide initial support for our propositions that national culture diversity negatively affects trust consensus and that trust consensus positively affects team performance. Expanding on these findings, we propose a contingency model in which the negative impact of national culture RESEARCH IN ACTION

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diversity is mitigated by team virtuality and collective leadership. Multiwave data from an MBA team sample (Study 2, N = 95) offer support for these propositions and replicate the positive direct effect of trust consensus on team performance. Our findings indicate trust consensus is an important predictor of team performance and provide unique insight into the factors that jointly influence trust consensus within teams.

Dean Ian O. Williamson Title: “The Effect of HRM Practices on Employment Outcomes in Indigenous Social Enterprises” Co-authors: Michelle M. Evans and Jeffrey A. Robinson Accepted at: The Journal of Social Entrepreneurship Indigenous economic development is a critical area of focus for many communities globally. Indigenous social enterprises play an important role in enhancing economic development by providing employment opportunities for Indigenous community members. Thus, understanding the factors that impact employment of Indigenous staff by Indigenous enterprises has important social and economic implications. This study examines the relationship between high commitment human resource management (HC-HRM) practices of Australian Indigenous social enterprises and their employment of Indigenous staff. Specifically, the paper contends with the research question how does the utilisation of HC-HRM by Indigenous enterprises shape the Indigenous employment outcomes of enterprises? Working with research partner Supply Nation, Australia’s Indigenous Minority Supplier Diversity Council, a survey of Indigenous social enterprises was conducted about their HRM practices in relation to leader risk propensity and business strategy pertaining to cultural product/services. A key result of the study is that the use of HC-HRM practices helps increase Indigenous employment outcomes. In addition, the relationship between HC-HRM and Indigenous employment outcomes is moderated by both the enterprise’s business strategy and the leaders’ risk propensity. These findings provide important insight into how Indigenous social enterprises can be best managed to create social and economic benefits in Indigenous communities.

Strategy Abstracts Professor Travis Howell Title: “Going Alone or Together? A Configurational Analysis of Solo Founding vs Co-Founding” Co-authors: Chris Bingham and Brad Hendricks Accepted at: Organization Science (Journal on Financial Times Top 50 list) Research and practice suggest that co-founded ventures outperform solo-founded ventures on average. Yet, little work has explored the conditions under which solo founding might be preferable to co-founding. Combining an inductive case-oriented 22

THE PAUL MERAGE SCHOOL OF BUSINESS

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analysis with a Qualitative Comparative Analysis of 70 new entrepreneurial ventures, we examine why and how solo founders can be as successful as their peers in co-founded ventures. We find that successful solo founders strategically use a set of co-creators rather than co-founders to overcome liabilities, retain control, and mobilize resources in unique and unexpected ways. A primary contribution of this paper is an emergent configurational theory of entrepreneurial organizing. Overall, we reveal the broader significance and theoretical importance of adopting a configurational lens for both practitioners and scholars of entrepreneurship.

Lecturer Leonard Lane Title: “Four Myths About Unauthorized Subcontracting” Co-authors: Felipe Caro and Anna Sáez de Tejada Cuenca Accepted at: MIT Sloan Management Review The authors set out to investigate the factors that can lead suppliers to engage in unauthorized subcontracting, using data (provided by a global supply chain manager) on 32,000 orders, of which 36% were subcontracted without authorization. They identified the key drivers of unauthorized subcontracting and found that it could be predicted correctly for 82% of the orders in out-of-sample tests and for 75% of suppliers.

Professor Libby Weber Title: “The Role of Cognition and Motivation in Understanding Internal Governance and Hierarchical Failure: A Discriminating Alignment Analysis” Co-authors: Nicolai J. Foss and Siegwart Lindenberg Accepted at: Academy of Management Review (Journal on Financial Times Top 50 list) Transaction cost economics (TCE) carefully analyzes market failure while remaining largely silent about hierarchical failure. We argue this omission occurs because TCE’s opportunism assumption does not consider organizational member motivations under different hierarchical forms. Thus, TCE does not fully examine opportunistic behavior under hierarchy, resulting in an incomplete governance analysis. To fill this gap, we build a discriminating alignment theory of hierarchical choice that incorporates explicit motivations under each hierarchical form. We make three contributions to TCE with this theory. First, using the counterproductive work behavior and goal framing literatures, we predict specific motivations (effort, visceral, financial or status opportunism, or collaboration) across hierarchical forms. Second, we predict when “efficient” hierarchical forms (mapped from Williamson’s internal governance analysis) do not effectively mitigate opportunistic behavior, creating hierarchical failure. In these cases, we augment the hierarchical forms with supplemental governance mechanisms necessary to efficiently govern the exchange. Finally, we investigate how different motivations across hierarchical forms lead to excess misalignment costs to enhance our understanding of hierarchical failures. Examining how both transaction hazards and specific motivations drive particular behaviors allows for a more nuanced understanding of specific “costs and competencies” of hierarchy and in turn hierarchical failure in TCE. RESEARCH IN ACTION

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Illustrations by Emily Young ’20