- 11 Dec 2008
- Working Paper Summaries
Quality Management and Job Quality: How the ISO 9001 Standard for Quality Management Systems Affects Employees and Employers
Nearly 900,000 organizations in 170 countries have adopted the ISO 9001 Quality Management System standard. This is a remarkable figure given the lack of rigorous evidence regarding how the standard actually affects organizational practices and performance. Proponents claim that quality programs such as ISO 9001 improve both management practices and production processes, and that these improvements, in turn, will increase both sales and employment. Documenting and training proper work practices can also reduce potentially dangerous "work arounds," and thus could reduce the risk of workplace accidents and injuries. Some critics, on the other hand, point to the potential for quality programs such as ISO 9001 to be detrimental to employees by documenting work practices, resulting in routinization that may reduce skill requirements and increase repetitive motion injuries. This paper reports the first large-scale evaluation of how ISO 9001 affects workers, focusing in particular on employment, total payroll, average annual earnings, and workplace health and safety. Key concepts include: Companies that adopt ISO 9001 subsequently grow faster in sales, employment, payroll, and average annual earnings than a matched control group. ISO 9001 adopters are also more likely to remain in business. ISO 9000 adopters subsequently become more likely to report zero injuries eligible for workers' compensation. However, there is no evidence that a firm's total or average injury costs improved or worsened subsequent to adoption. Closed for comment; 0 Comments.
- 10 Dec 2008
- Working Paper Summaries
Market Reaction to the Adoption of IFRS in Europe
How do investors in European firms react to a change in financial reporting? Prior to 2005, most European firms applied domestic accounting standards. The adoption of International Financial Reporting Standards (IFRS) would result in the application of a common set of financial reporting standards within Europe, and between Europe and the many other countries that require or permit application of IFRS. However, modification of IFRS by European regulators would result in European standards differing from those used in other countries, thereby eliminating some potential convergence benefits. This study investigates the equity market reaction to 16 events associated with the adoption of IFRS in Europe. Overall, the researchers' findings are consistent with investors expecting the benefits associated with IFRS adoption in Europe to exceed the expected costs. Key concepts include: Overall, investors reacted positively to the increased likelihood of IFRS adoption. Investors expected net benefits associated with increases in information quality, decreases in information asymmetry, more rigorous enforcement of the standards, and convergence. The reaction for firms domiciled in code law countries is less positive, consistent with investors' concerns over enforcement of IFRS in those countries. Closed for comment; 0 Comments.
- 04 Dec 2008
- Working Paper Summaries
Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?
Some places, like Silicon Valley, seem almost magically entrepreneurial with a new start-up on every street corner. Other areas, like declining cities of the Rust Belt, appear equally starved of whatever local attributes make entrepreneurship more likely. Many academics, policymakers, and business leaders stress the importance of local conditions for explaining spatial differences in entrepreneurship and economic development. This paper uses data from the U.S. Census Bureau to characterize these entry relationships more precisely within the manufacturing sector. Key concepts include: Local costs and relevant natural advantages (e.g., coastal access, energy prices) are very important for new manufacturing start-ups. Manufacturing start-ups are particularly drawn to cities with suitable labor forces in terms of occupational distributions. This labor dependency holds across all sizes of start-ups. New start-ups are drawn to areas with smaller, more entrepreneurial suppliers. Local customers are less important for manufacturing startups. Measures of general entrepreneurial culture did not predict manufacturing entry well. Closed for comment; 0 Comments.
- 03 Dec 2008
- Working Paper Summaries
Performance Persistence in Entrepreneurship
All else equal, a venture-capital-backed entrepreneur who starts a company that goes public has a 30 percent chance of succeeding in his or her next venture. First-time entrepreneurs, on the other hand, have only an 18 percent chance of succeeding, and entrepreneurs who previously failed have a 20 percent chance of succeeding. But why do these contrasts exist? Such performance persistence, as in the first example, is usually taken as evidence of skill. However, in the context of entrepreneurship, the belief that successful entrepreneurs are more skilled than unsuccessful ones can induce real performance persistence. In this way, success breeds success even if successful entrepreneurs were just lucky. Success breeds even more success if entrepreneurs have some skill. Key concepts include: There is evidence for the role of skill as well as the perception of skill in inducing performance persistence. Closed for comment; 0 Comments.
- 26 Nov 2008
- Working Paper Summaries
The Sciences of Design: Observations on an Emerging Field
This paper examines the sciences of design as an emerging field of study that cuts across disciplinary boundaries. The paper summarizes and synthesizes the positions, reflections, opportunities, and challenges expressed at the first doctoral consortium to explore the topic, held in 2008. It thus provides a useful agenda for clarifying and articulating important strands of this nascent field. Key concepts include: Design sciences is a movement that affects not only the information systems discipline but also several allied disciplines, which must also contribute to its definition and participation. When a common language exists across disciplines, it enables an ongoing, productive pursuit of scientific knowledge. But common languages only come about through intense, repeated conversations between individuals with disparate views and open minds. Closed for comment; 0 Comments.
- 26 Nov 2008
- Working Paper Summaries
Spanning the Institutional Abyss: The Intergovernmental Network and the Governance of Foreign Direct Investment
Economic globalization presents severe governance challenges. The insufficiency of states as a source of surety for transactions that transcend national borders creates an opportunity for an increased role for organizations in the global institutional framework. The authors of this paper applied a network methodology to show how one type of organization, the intergovernmental organization (IGO), facilitates the cross-border investments of another type, the multinational corporation (MNC). They further document the interdependence between domestic institutions, and international institutions represented by IGOs. The results help to understand and explain which countries attract FDI, and from which senders. Results also point to an emerging rivalry between states and organizations as sources of governance in the global economy. Key concepts include: The connections between states through both economic and social/cultural IGOs are positive and important influences on which states receive FDI from which other states. The network forged by international organizations is massively and increasingly influential in domestic and international governance. The interrelationship between domestic and international governance is more complex than previous accounts have recognized. Closed for comment; 0 Comments.
- 21 Nov 2008
- Working Paper Summaries
Applicant and Examiner Citations in U.S. Patents: An Overview and Analysis
The ready availability of patent citation data has been a tremendous boon to applied research on knowledge and innovation. The role of examiners in the generation of patent citations has been thought to potentially complicate these analyses, but has been difficult to study. Taking advantage of a change in the way patent citation data has been reported starting in 2001, this paper summarizes basic facts on examiner citations, and provides a descriptive analysis of factors associated with citations in a patent. Key concepts include: Patent citations reflect the complicated interaction of applicant and examiner strategies, capabilities, and incentives. Examiner shares are highest in fields where intellectual property tends to be fragmented (computers and communications, for example), and lowest in fields where patents have been shown to be more important in appropriating returns to research and development (such as biomedical and chemical patents). The most prolific patentees tend to have very high shares of examiner citations. Examiner citation shares are especially high for foreign firms. Closed for comment; 0 Comments.
- 20 Nov 2008
- Working Paper Summaries
Was the Wealth of Nations Determined in 1000 B.C.?
To the extent that history is discussed at all in economic development, it is usually either the divergence associated with the Industrial Revolution or the effects of colonial regimes. Is it possible that precolonial, preindustrial history also matters significantly for today's national economic development? The authors find that technology adoption circa 1500 A.D., prior to the era of colonization and extensive European contacts, predicts approximately 50 percent of cross-country differences in both current per capita income and technology in a large cross-section of countries. When exploring the causes of this extreme persistence in technology, they find evidence in favor of the importance of the effect of current adoption on subsequent adoption as the main driver. This leaves a limited role to country-specific factors such as institutions, geography, or genes to explain the persistence of technology. Key concepts include: Precolonial, preindustrial differences have striking predictive power for the pattern of both per capita incomes and technology adoption across nations that can be observed today. Technology is very persistent both within countries and sectors. Adoption dynamics vis-à-vis country-specific factors such as institutions, geography, or genes appear to be the mechanism behind such persistence. Closed for comment; 0 Comments.
- 14 Nov 2008
- Working Paper Summaries
Parallel Search, Incentives and Problem Type: Revisiting the Competition and Innovation Link
The innovation process is fraught with uncertainty. Managers often do not know ahead of time the ideal mix of individuals and skills needed to solve innovation-related problems. One way around this uncertainty is to have multiple paths, approaches, or designs explored at once. The "parallel search" principle can be used inside the firm just as it may be used more generally by pursuing "open innovation". However, having too many searchers attempting to solve the same problem can undercut the benefits if it leads to less effort and investment. The authors study the outcomes of 645 software development contests, conducted by a software outsourcing vendor, involving over 9,000 coders, to understand the relationship between parallel search and increasing competition and innovation. Key concepts include: The key factor favoring parallel search, i.e. increasing the number of independent solvers, is the complexity of the problem at hand. The benefits of increased searchers were curtailed when the problems were simple, indicating that the negative consequences of competition matter most for simpler problems. Closed for comment; 0 Comments.
- 13 Nov 2008
- Working Paper Summaries
The Effect of Labor on Profitability: The Role of Quality
Determining staffing levels is an important decision in retail operations. In 2006, retailers spent $393 billion on employee wages, more than 10 percent of their revenue that year and more than their inventory holding costs. Hence, staffing levels have a major impact on retailers' costs. But at the same time, staffing levels affect conformance quality—how well employees execute prescribed processes—and service quality—the extent to which customers have a positive service experience at the stores. While there is overwhelming evidence that conformance quality and service quality improve sales, both generally and in retail settings, their effect on profitability is not clear. To examine how the amount of labor at a store affects profitability through its impact on conformance quality and service quality, Zeynep Ton analyzed extensive data from stores of a large retailer. Key concepts include: How well employees execute prescribed processes is an important driver of financial performance. It is important to design processes that are simple and easy to follow, especially when there is high employee turnover, as in the retail industry and when offering a self-service environment. Good process design needs to be backed up with an organizational culture that emphasizes conformance to these processes. Too much corporate emphasis on payroll management may motivate managers to operate their stores with insufficient labor capacity that, in turn, degrades financial performance. Emphasis on payroll management can also degrade employee morale. Closed for comment; 0 Comments.
- 06 Nov 2008
- Working Paper Summaries
Extending Producer Responsibility: An Evaluation Framework for Product Take-Back Policies
Managing products at the end of life (EOL) is of growing concern for durable goods manufacturers. While some manufacturers engage in voluntary "take back" of EOL products for a variety of competitive reasons, the past 10 years have seen the rapid proliferation of government regulations and policies requiring manufacturers to collect and recycle their products, or pay others to do so on their behalf. Toffel, Stein, and Lee develop a framework for evaluating the extent to which these product take-back regulations offer the potential to reduce the environmental impacts of these products in an effective and cost-efficient manner, while also providing adequate occupational health and safety protection. The evaluation framework is illustrated with examples drawn from take-back regulations in Europe, Japan, and the United States. Key concepts include: The authors identify key policy levers that promote cost efficiency while reducing risks to the environment, public health, and the workers involved in recovery operations. Key policy decisions include setting the scope of manufacturer responsibilities, the stringency of recovery and recycling targets, design-for-environment requirements and substance bans, restrictions on when customer fees can be imposed, and limitations on the industrial organization of the recycling market. Closed for comment; 0 Comments.
- 05 Nov 2008
- Working Paper Summaries
The Litigation of Financial Innovations
The past 10 years have seen a profound change in the conditions under which financial innovations are pursued. Because patents fundamentally alter the way in which innovations can be used, assessing the impact of patenting is critical to understanding the future of financial innovation. Litigation is crucial to delineating the boundaries of patent awards, and this paper examines the litigation of such financial patents to gain insights into the future of financial innovation. This paper seeks to understand the litigation of financial innovations, an area where patents have only recently been granted. Key concepts include: Financial patents are litigated two to three dozen times more frequently than patents as a whole. The awards being litigated are disproportionately those awarded to individuals and to smaller, private entities. Patents with more claims and more citations are also more frequently litigated. Larger firms are disproportionately targeted in litigation. Closed for comment; 0 Comments.
- 31 Oct 2008
- Working Paper Summaries
Technology, Identity, and Inertia through the Lens of ‘The Digital Photography Company’
Why do established firms find some technological change so challenging? While existing research has identified numerous sources of inertia in established firms exploring new technological domains, identity is a critical piece of the puzzle. As the core essence of an organization, identity directs and constrains action. The routines, procedures, capabilities, knowledge base, and beliefs of an organization all reflect its identity. So when a technology is identity-challenging to an organization—when pursuing it would violate the core beliefs of both insiders and outsides about what the firm represents—organizations face significant obstacles to adopting it. This study by Tripsas highlights the importance of recognizing and evaluating the tradeoffs associated with technological opportunity and organizational identity. Key concepts include: Identity serves as a lens that filters a firm's technical choices. It influences what gets noticed, how it is interpreted, and what action is taken. Opportunities that challenge identity may simply pass by unnoticed. The self-reinforcing dynamics among internal identity, external identity, organizational action, and the industry and technological context create a strong impediment to change. Closed for comment; 0 Comments.
- 30 Oct 2008
- Working Paper Summaries
Do Voters Appreciate Responsive Governments? Evidence from Indian Disaster Relief
In a functioning democracy, politicians' ability to win reelection declines when they perform poorly. This idea fits well with models of political accountability. Recent evidence suggests, however, that voters may punish politicians even for events outside their control. This behavior may violate standard models of democratic accountability, and has been advanced as evidence of voter irrationality. This paper uses detailed weather, electoral, and relief data to identify the relationship between government responsiveness to an emergency and electoral decisions. Specifically, the authors look at the decisions that Indian voters made in provincial elections, using the intensity of the monsoon rains as an exogenous shock to welfare. They find that voters, on average, punish incumbent politicians for being in office during weather events beyond their control. However, the degree of voter punishment is reduced somewhat when the government responds more vigorously to the crisis. Key concepts include: Voters do a better job of holding governments accountable during these emergencies. Voters punish politicians following adverse weather events, but the degree of punishment depends critically on the quality of the ruling party's response: Those distributing greater amounts of relief aid suffer smaller subsequent electoral losses. Closed for comment; 0 Comments.
- 24 Oct 2008
- Working Paper Summaries
Platform Rules: Multi-Sided Platforms as Regulators
Using case studies of Facebook, Tokyo's Roppongi Hills "mini-city," Harvard Business School, and TopCoder, a vendor of outsourced software products, Boudreau and Hagiu explore how multi-sided platforms (MSPs) regulate an industry ecosystem. An MSP is a platform that enables interactions between multiple groups of surrounding consumers and complementors. As the authors demonstrate, the regulatory role played in these cases by MSPs was pervasive and at the core of their business models. That regulatory role goes beyond price-setting and includes imposing rules and constraints, creating inducements, and generally shaping behaviors. These various non-price instruments essentially solve problems that could otherwise lead to market failure. The authors' analytical framework suggests a two-step approach for a platform owner: (1) maximize value created for the entire ecosystem, and (2) maximize the value extracted. "Platform Rules" is a chapter in the forthcoming book Platforms, Markets and Innovation, Gawer, A. (ed) (2009), Cheltenham, UK and Northampton, MA, U.S.: Edward Elgar. Key concepts include: The scope of strategy for multi-sided platforms is significantly wider than for normal firms. It is not limited to pricing, product design, and technology, but also and critically includes control over interactions that do not happen at the firm's boundaries. There is a wide array of strategic instruments available to implement MSP regulation, including contractual, technological, and information design. The need for and consequences of MSP regulation may evolve over time. Closed for comment; 0 Comments.
- 24 Oct 2008
- Working Paper Summaries
Signaling Firm Performance Through Financial Statement Presentation: An Analysis Using Special Items
Do managers' presentation decisions within their financial statements reflect informational motivations (that is, revealing the underlying economics of the firm) or opportunistic motivations (that is, attempts to bias perceptions of firm performance)? The authors examine managers' choices to present special items (such as write-offs and restructuring charges) separately on the income statement rather than aggregated in other line items with disclosure only in the footnotes. Prior research suggests that managers engage in opportunistic reporting in other presentation decisions, and that managers' presentation decisions on the financial statement affects users' judgments. The distinction also matters because current changes in reporting standards are likely to increase the occurrence of "nonrecurring" type charges similar to special items, such as fair value changes. Key concepts include: Managers, in most instances, appear to use the flexibility afforded in the presentation of special items to inform users of the underlying economics of these items. Special items receiving income statement presentation are more transitory than those receiving footnote presentation. These results are consistent with managers using discretion in the financial statement presentation of special items for informational reasons. There is limited evidence that opportunistic motivations underlie this presentation decision. Closed for comment; 0 Comments.
- 23 Oct 2008
- Working Paper Summaries
Economic Impacts of Immigration: A Survey
International migration is a mighty force globally. According to United Nations statistics, over 175 million people, accounting for 3 percent of the world's population, live permanently outside their countries of birth. This paper surveys the economic impacts of immigration for host countries, mostly emphasizing the recent experiences of Northern Europe and Scandinavia. The paper documents how migrant flows to some countries within this region are now of similar magnitude to the United States. The authors discuss the impact of immigration on national labor markets in terms of both immigrant assimilation and possible native displacement. Their survey concludes with the impact of immigration on the public finances of host countries, which is of particular policy importance within Europe today given ageing populations and fiscal imbalances. Key concepts include: The general view on immigration overstates the adverse effects of immigration on natives of the host countries in terms of labor market or wage displacement. Immigrants' use of social benefits varies widely across countries, as does the degree of assimilation into or out of the host country's welfare system. Immigration is generally viewed as a large fiscal burden for European public sectors (or as a possible savior if correctly harnessed). Most empirical studies, however, estimate the fiscal impacts of immigration to be relatively small. Closed for comment; 0 Comments.
- 22 Oct 2008
- Working Paper Summaries
Variation in Experience and Team Familiarity: Addressing the Knowledge Acquisition-Application Problem
Team familiarity helps team members successfully locate knowledge within a group, share the knowledge they possess, and respond to the knowledge of others. While team familiarity may help all teams to better coordinate their actions, it may play a particularly important role for teams with individuals looking to apply knowledge from their varied experience. This possibility leads to the question that provides the foundation for this paper: Does team familiarity moderate the relationship between variation in experience and performance? Prior research attempting to link variation in experience and performance has found effects ranging from positive to neutral to negative. Huckman and Staats explain these differential results by drawing on related work from learning, knowledge management, and social networking. Key concepts include: Managers may benefit from a more detailed understanding of the types of experience that are relevant in their setting (e.g., market, technology). If the most valuable assets of many companies are their employees, then organizations may need to shift from thinking about their project portfolio to their employee-experience portfolio. Conditions that assist in the acquisition of useful knowledge, such as variation in experience, will not guarantee—and may even deter—the eventual application of that knowledge. It is important to separate the processes of knowledge acquisition and knowledge application. Closed for comment; 0 Comments.
- 17 Oct 2008
- Working Paper Summaries
Consequences of Voluntary and Mandatory Fair Value Accounting: Evidence Surrounding IFRS Adoption in the EU Real Estate Industry
The required adoption of International Financial Reporting Standards (IFRS) in the European Union, effective January 1, 2005, resulted in a number of significant changes in how firms report their financial results. Mandatory IFRS adoption has been criticized for both the flexibility afforded under the standards and the encroachment of the fair value paradigm. Specifically, common accounting standards alone may not be sufficient to provide the benefits of common accounting practices. This paper examines the causes and consequences of different forms of fair value disclosures for tangible long-lived assets. Insights may assist standard setters and users in understanding the factors influencing firms' current and future accounting choices, and may also interest U.S. standard setters and managers of the almost 250 publicly traded U.S. real estate firms. Key concepts include: Investors believe that investment property fair values are reliable enough to warrant a significantly lower cost of capital for those firms providing them. The demand for fair value information (reflected in a firm's ownership structure) and the firm's commitment to reporting transparency is associated with the decision to provide fair values. Critically, adoption of this fair value standard under IFRS, in and of itself, is insufficient to fully overcome previous perceived reporting differences across these firms. This is consistent with investors perceiving that property firms across EU countries vary in how they implement this standard. Closed for comment; 0 Comments.
Concentration Levels in the U.S. Advertising and Marketing Services Industry: Myth vs. Reality
How concentrated is the U.S. advertising and marketing services industry? Over the past several decades, the effects of deregulation, globalization, and technological innovation have reshaped the advertising and marketing services industry as they worked their way through the economy. Estimates from the existing literature are typically based on data from trade sources and present a picture that emphasizes rising concentration over time and domination by a handful of holding companies. These estimates are suspect as they suffer from a number of conceptual and measurement limitations. This paper analyzes changes in concentration levels in the U.S. advertising and marketing services industry, using data that have been largely ignored in past discussions of the economic organization of the industry. Key concepts include: Concentration levels vary across the advertising and marketing service industry's nine sectors, but all are within the range generally considered indicative of a competitive industry. From 1977 to 1992, census data show that the number of firms and establishments and the level of agency receipts in real terms increased. After 1992, however, the number of firms and establishments decreased while real agency receipts have continued to grow, and concentration levels have tended to increase. Between 2002 and 2006, the four largest holding companies captured a fifth to a fourth of the total U.S. revenue flowing to suppliers of advertising and marketing services each year. After several waves of mergers and acquisitions, the collective position of the major holding companies in the United States is considerably less than dominant. Closed for comment; 0 Comments.