Goizueta faculty are world-renowned for their experience and business expertise. They focus on researching important problems that affect business and their insights shape the future of business. The following is a sample of recent faculty research.
Minority Board Directors Held Back by Glass Ceiling and “Myopic” Biases
Diversity remains a troubling issue in the upper echelons of U.S. business today. A stunning 81 percent of board members in top firms are white and male, according to the Standard & Poor 500 Index. So what prevents women and minority directors making it to the top? Goizueta’s Grace Pownall, professor and area coordinator of accounting,and Justin Short, assistant professor of accounting, together with Zawadi Lemayian of Washington University parsed 12 years of data on gender, ethnicity, and compensation to get insight into who holds power in U.S. board rooms. In Behavioral and Experimental Finance, research results point to two critical roadblocks that continue to stymie the career trajectory of aspiring Black, female, and minority directors: the glass ceiling effect that reduces the talent pool; and what Short et. al. call “myopic” bias entrenched in corporate America.
“The glass ceiling is a bottleneck for diverse talent,” says Short. “But we also see minority directors fail to secure promotions once they’re on the board. We conjecture that this is down to biased or myopic thinking on the part of chairs and peers.” Leaders need to be cognizant of the cut-off points that tie to ethnicity and gender in the U.S. and elsewhere, say the researchers; not least of all because of risk to innovation. “Without diversity, any organization risks deferring to group think, and sourcing creativity and ideas from the same, small pool of shared experience,” says Short. “There’s still work to be done because diversity at top levels of American business should be commonplace.”
B2B Firms Need to Smarten Up before Using AI in Procurement
Procurement, the process of buying in goods, products or services from external suppliers, is critical in the B2B market. But it’s costly, labor-intensive, and time-consuming. To speed and drive efficiencies in supply chain management, procurement managers are turning to artificial intelligence (AI). On the one hand, AI can automate the process of obtaining pricing quotes using tools like AI Assist and chat boxes. Then there’s the “smart control” that AI can leverage to identify the best potential suppliers via algorithms that collect and analyze market information. Cut-and-dried benefits then for decision-makers? Not quite, says Goizueta’s Ruomeng Cui, assistant professor of Information Systems and Operations Management of research to appear in Manufacturing & Service Operations Management. Because unless your AI system is fitted with the smart control, you run the risk of getting higher price quotes from suppliers than you would if you used human procurement purchasers. And it’s down to how suppliers interact with automated chatbots. Together with colleagues from Rutgers University and Tianjin University, Cui ran a large-scale field experiment using China’s Alibaba trading platform and integrated chat program, Aliwangwang. What they found is that suppliers essentially “discriminate” against chatbot buyers when it comes to quoting prices. “Suppliers see chatbots as lacking expertise around their products,” says Cui. “The fact they don’t have to lower prices to build professional relationships with chatbot buyers means they tend to quote higher than they would otherwise.” This effect is mitigated, however, when buyers signal to suppliers that they also use the smart control: an AI-powered recommendation system. Caveat emptor, say Cui and her co-authors: by all means use AI in your procurement processes, just be smart about it.
Do Multinationals Enjoy an IT Advantage in Emerging Markets?
We know that digital technology helps firms compete globally. But does IT give foreign firms the edge over local businesses for exploiting opportunities in emerging markets? Yes and no, says Goizueta George S. Craft Professor in Information Systems & Operations Management Benn Konsynski, and his co-authors. Their latest paper in Journal of Management Information Systems looks at data from a large sample of local and international businesses operating in India and reveals two key insights. First, they find that foreign players using IT to boost organizational capabilities do tend to have the advantage over incumbents when it comes to partnering with other companies – a key factor in their ability to scale operations in emerging markets. However, in areas like marketing and customer services, technology gives local firms the edge over foreign competitors, likely because of superior knowledge and understanding of local markets. Konsynski and colleagues shed authoritative new light on two critical areas: how both context and contingency shape outcomes for firms leveraging digital technologies to compete; and the perhaps unforeseen challenges that await newcomers looking to expand operations in emerging markets, which remain an attractive opportunity for international companies.
If PPP Relief is so Attractive, why are so few Small Firms Taking it up?
The Paycheck Protection Program (PPP), part of the U.S. Government’s CARES Act, is a relief package that offers highly subsidized financing to small businesses. With anescalating value, PPP reaches deep into the pockets of Federal Reserve with the aim of helping corporate America weather the economic contraction and job losses due to the pandemic. Yet, despite the “positive shock” it represents to struggling firms, PPP uptake has been far from universal. Not only that, but a significant proportion of firms applying for PPP actually return them to the government without using them. So what’s going on? It has to do with the indirect costs imposed on borrowers, says Goizueta’s Tetyana Balyuk, assistant professor of finance, in the National Bureau of Economic Research: Working Paper. She and colleagues from Johns Hopkins Carey and Fuqua School of Business looked at publicly listed firms that applied for PPP funds using databases maintained by the Securities and Exchange Commission. “These firms are worried about ex-post audits and investigations into recipients of these PPP funds, which are conducted by the government. Specifically they’re worried about subjectivity of these types of audits, and the broad powers the government has to pursue litigation.” The solution to this, she says, is to focus on the objective standards for PPP eligibility, and similarly objective standards for the conduct of ex-post audits. “Among other measures, policy-makers might want to look at delineating safe harbors to circumscribe litigation, which has been a standard practice in securities law since the 1930s.”
What are the Costs – and Opportunities – to Retailers in Returned Merchandise?
In 2018, a staggering 10% of all retail sales –around $369 billion – were returned to the original seller. For retailers, this is vastly challenging. First there’s figuring out how to respond; then there’s the huge financial loss from returned stock. And then there’s simply trying to work out what to do with unwanted merchandise and how to absorb it back into the inventory. But is there an opportunity here for retailers, too? Goizueta’s Ryan Hamilton, associate professor of marketing, and Sandy D. Jap, Sarah Beth Brown professor of marketing,believe so. Together with Wharton Professor and former dean of Goizueta Business School, Thomas S. Robertson, they’ve published their research in Journal of Retailing.
The researchers dive into literature surrounding the returns market – a market so valuable it is “ripe for more research” – and found that returns policies can build reputation, drive customer loyalty, and secure competitive advantage. “Consumers today increasingly expect to be able to return goods easily,” says Jap, “and it’s a burden for retailers. But also an opportunity to deliver a customer experience that drives brand loyalty.” For those retailers, returns provide the chance to exchange goods, or even cross or upsell to customers who return to stores or sites to bring back original purchases. The trick, says Jap, is to “get it right.”An easy returns policy may build erputation for great customer service; too lax a policy and you might end up “training” customers to make returns, she says. There’s the risk to reputation, too, in how retailers absorb or dispose of returned goods: are their policies sustainable and environmentally friendly? More to explore in the potential trade-offs here, says Jap, and she and her co-authors call for more research into this evolving stage in the purchase journey.
Achievement? It’s All in the Eye of the Beholder
There is a well-documented gap in achievement between U.S. social classes that hurts the perception of, standing, and prospects for people from lower-class, high-school educated backgrounds, vis a vis their higher-class counterparts with college degrees. One way of attenuating this gap might be to rethink the way society measures achievement, says Goizueta Assistant Professor of Organization and Management, Andrea Dittmann. Instead of assessing people’s skills and aptitudes through the lens of individual achievement, might it not be just as helpful to measure ability based on how well people work together, as a part of a team? Together with Nicole Stephens of Kellogg and USC Marshall’s Sarah Townsend, Dittman ran four studies of outcomes for students working alone or in groups. The work published in Journal of Personality and Social Psychology portrayed consistent results: when working individually, higher-class students are better able to showcase their strengths. But in groups, this advantage disappears. In fact, when people from lower-class contexts work in teams, they demonstrate unique strengths that can set them apart from more privileged counterparts. Dittman and co-authors call for gateway institutions – institutes of higher education and workplaces – to integrate these findings into practices and procedures that reflect that one style of achievement is not superior to the other, but simply different.
Is There a Case for Sharing Less Information in Financial Statements?
There’s broad consensus in the world of finance. Disaggregation – the practice of breaking down different components or sources of earnings in a financial statement – is good. After all, for investors looking to predict a company’s earnings from one year to the next, all information is good information, right? Not necessarily, says Goizueta Professor of Finance, Teri Yohn; it all depends on what type of information is being shared. Together with colleagues from Colorado, Indiana, and OSU, Yohn hypothesized that not all disaggregated components in earnings statements are heterogeneous. Not all information might be specific to one year, and that’s problematic. “Investors assume that disaggregation highlights one-off specificities that impact earnings – things like restructuring costs– but won’t have a de facto impact on the future earnings of a company,” says Yohn. However, her research, published in The Journal of Accounting Studies, shows that disaggregation also trawls up homogeneous things – the same components that impact earnings year over year. This can lead to confusion on the part of investors, and actual mistakes in forecasting future earnings. “Our paper has two clear takeaways,” Yohn says “For investors: don’t assume that disaggregation only highlights the one-offs in earnings specific to a given timeframe.” For regulators and standard-setters who have pushed for more disaggregation in recent years, Yohn and her co-authors urge deeper reflection about what type of disaggregation should be included in financial statements, or not.
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