Trading regularity and fund performance

Do funds make more when they trade more regularly? Yes, says research by Jeffrey A. Busse, associate professor of finance, but it depends on the size of the fund. Busse and co-authors Lin Tong (Gabelli, Fordham), Qung Tong (Renmin, China) and Zhe Zhang (Singapore Management University) analyzed institutional trade data across an 11-year sample period to 2009. They found that on average, institutions that trade regularly positively outperform others, generating returns positive enough to offset transaction costs. For these funds, the researchers found that regular trading yields positive returns from contrarian trades — e.g., purchasing recent losing stocks — and when trading immediately prior to a company’s earnings announcements. It’s all not good news, however, as larger funds can see their performance dampened by higher costs. That said, Busse and his co-authors suggest that the strategies of funds that trade regularly can outperform low-cost passive strategies. Review of Financial Studies (2016)

Learning from inventory availability information: evidence from field experiments on Amazon

Many online retailers share on-screen, real-time information about stock availability as a mechanism to encourage customers through the sales funnel. But do these cues to “buy now or risk disappointment” actually achieve their goals? New research by Ruomeng Cui, assistant professor of information systems & operations management, Dennis Zhang (Olin) and Achal Bassambo (Kellogg) would suggest they do. The researchers tracked data across more than 23,500 transactions on where “inventory messages” are routinely highlighted to customers viewing products. They also ran two randomized field experiments, tweaking inventory information across a subset of Amazon’s so-called lightning deals to assess its impact on consumer behavior. Their analysis shows that where stock decreases are flagged to the buyer, there is a concomitant uptick in sales — and it happens fast. When customers see real-time purchases increase by 10%, Cui et al. found, there is a 2.08% increase in cart add-ins. And they happen within the next hour. Cui, Zhang and Bassambo also found a causal link between product characteristics — things like discounts and peer ratings — and customer perceptions. While deep or excessive discounts created negative feelings about a product, strong user ratings build feelings of affinity and may boost sales. Management Science (2018)

An empirical analysis of intellectual property rights sharing in software development outsourcing

Companies outsourcing their software development frequently run into serious issues with vendor organizations. It’s common for client companies to share highly sensitive data, such as pricing analytics and business practices, with these vendors. However, while intellectual assets are nominally protected by intellectual property rights, in reality these rights are often shared with the vendor companies, opening a door to ex post opportunism on the part of the vendors. New research by Anandhi Bharadwaj, Roberto C. Goizueta Chair in Electronic Commerce, and coauthors Yuanyuan Chen (Singapore) and Khim-Yong Goh (Singapore) suggests that companies can mitigate this risk by modularizing software development. By analyzing 171 of these contracts, Bharadwaj et al.were able to establish how specific attributes and each party’s bargaining power impacted the allocation of intellectual property rights. Among their principle findings, it seems that vendors are more likely to win rights over intellectual assets when they use their own proprietary software, when the tasks themselves are more complex and when they are contracted to develop new software. Conversely, client companies exert greater control when they want to customize existing software and when the projects themselves are conducted across blocks or modules of work. For senior managers in client firms, the key implications are that sharing intellectual property (IP) rights with vendors can be used as an incentive to protect non-contractible investments and to safeguard their firm’s assets from ex-post opportunism. When and how to use IP rights sharing will depend, however, on the relative bargaining position of vendors, the complexity of the projects and the specificity of the underlying investments. MIS Quarterly (2017)

From creativity to innovation: the social network drivers of the four phases of the idea journey

There is growing interest among researchers in the way that social networks influence creativity and innovation. Do game-changing ideas emerge from solitude, or is creative output driven by the cut and thrust of social interaction with others? For many academics working in this complex space, the jury is still out. In new research, Jill Perry-Smith, professor of organization & management, and co-author Pier Vittorio Mannucci (LBS) seek to shed light on how successful creative ideas are formed. Drawing on existing literature, Perry-Smith and Mannucci conceptualize “four phases of the journey of an idea”: generation, elaboration, championing and implementation. Collaboration with a heterogeneous network, they argue, is key to keeping this journey moving forward, although this does depend on the kind of interaction individual creators have at different stages. Affirmation and support are important in the face of rejection, but criticism or disagreement might help refine thinking and concepts at later phases of the journey. Future research, say Perry-Smith and Mannucci, will help determine precisely how and when different models of collaboration can spur the innovation process. Academy of Management Review (2017)

Opportunities for innovation in social media analytics

Firms have traditionally viewed social media as a channel to reach their customers. David A. Schweidel, professor of marketing, and co-author Wendy Moe (Smith) argue that while this promotional use of social media is important, user-generated data is a vastly underexploited resource that has still-unlocked potential for proactive marketers. In a new paper, Schweidel and Moe acknowledge the challenges organizations continue to face in converting social media data into structured, actionable insights that map to marketing problems. However, they argue that the rewards of doing so can apply to a range of marketing activities, from brand tracking and management to building social profiles for customer targeting. Schweidel and Moe conclude that the potential for social media analytics as a tool for marketing, together with the general availability and volume of consumer-generated social media activity, make this a fertile space for further research in consumer insight.
Journal of Product Innovation Management (2017)

The moderating role of performance measurement system sophistication on the relationships between value drivers and performance

Despite high adoption rates, employee performance measurement systems like the “balanced scorecard” have divided the academic community. Responding to calls for more work in this field, research by Karl Schuhmacher, assistant professor of accounting, and co-authors Tony Dávila (IESE), Raúl Barroso (IESEG), Michael Burkert (Friborg) and Daniel Oyon (Lausanne) used survey data from more than 300 manufacturing firms to examine how performance measurement systems affect the relationships between value drivers like efficiency and employee commitment on performance outcomes, such as customer satisfaction and financial performance. The researchers argue that it all comes down to how complex the performance measurement system itself is. While sophisticated systems positively affect relatively complex relationships (e.g., between employee commitment and market performance), they negatively impact “simpler” relationships (e.g., between organizational efficiency and financial performance). This is likely because more sophisticated performance measurement systems draw managers’ attention from simple to more complex relationships between value drivers and performance outcomes. Schuhmacher and his co-authors argue that their findings have direct relevance for decision makers, helping them unpack the pros and cons of sophisticated performance measurement systems. Future research is needed, however, to build a detailed understanding of the kinds of processes that sophisticated performance measurement systems entail for organizations.
Comptabilité – Contrôle – Audit (2016)

Sexual aggression when power is new: effects of acute high power on chronically low-power individuals

Building on existing research that links sexual aggression to “expressions of power,” a study by Melissa Williams, associate professor of organization & management, tests the hypothesis that it is the sudden accession to positions of power that drives certain men to harass women. Williams and co-authors Deborah H. Gruenfeld (Stanford) and Lucia Guillory (Head of People at Patreon) conducted a set of five surveys and lab experiments with volunteers to determine whether behaviors change when men with “chronic low power” — the level of power they feel they exert every day — are given “acute high power.” They find that low-power men given a highpower role display increased sexually harassing behavior. They are also the group that exhibits the most aggression when “rejected” by an attractive woman. Williams et al. conclude that when people see themselves as being denied power, for whatever reason, they have a greater desire to feel powerful — and are more likely to use sexual aggression as a means of feeling powerful. Journal of Personality and Social Psychology (2017)

Competing on social purpose

Brands today are better poised to win customers if they can transcend purely functional benefits and embed a social purpose into their product offering. This is the idea at the center of a Harvard Business Review article by Omar Rodriguez-Vila 12PhD, associate professor in the practice of marketing, and coauthor Sundar Bharadwaj (Terry, Georgia). But while taking a visible social stand can boost business outcomes and positively impact society, unless they are scrupulously managed, these initiatives also have the potential to harm reputation and alienate investors. Rodriguez-Vila and Bharadwaj analyzed a range of social-purpose brand program models. They also collaborated directly with a dozen well-known companies to design specific social initiatives. Drawing on this research and experience, they have put together a framework called “competing on social purpose.” The framework sets out a number of key dimensions and insights for firms to help them decide if and how they should successfully integrate a social purpose to their brand. Importantly, it tethers social aspirations to strategic business objectives — an approach that simultaneously mitigates the risks of negative public associations and stakeholder intolerance. The growing goal for firms today, conclude Rodriguez-Vila and Bharadwaj, is to design ways by which they can create value for customers, for shareholders and for society at large. Their article offers some clues on how to do it well. Harvard Business Review (2017)