First Look

Working Papers

Competition and Illicit Quality

Abstract

Competition among firms can have many positive outcomes, including decreased prices and improved quality. Yet competition can have a darker side when firms can gain competitive advantage through illicit and corrupt activities. In this paper, we argue that competition can lead organizations to provide illicit quality that satisfies customer demand but violates laws and regulations and that this outcome is particularly likely when price competition is restricted. Using 28 million vehicle emissions tests from more than 11,000 facilities, we show that increased competition is associated with greater inspection leniency, a form of illicit quality that customers value but is illegal and socially costly. Firms with greater numbers of local competitors pass customers at considerably higher rates and are more likely to lose customers they fail to pass, suggesting that the alternatives that competition provides to customers intensify pressure to illegally provide leniency. We also show that, at least in contexts when pricing is restricted, firms use illicit quality as an entry strategy.

Download the paper: http://www.hbs.edu/research/pdf/12-071.pdf

Short-Termism, Investor Clientele, and Firm Risk

Abstract

Using conference call transcripts, we measure the time horizon that senior executives emphasize when they communicate with investors. We show that firms focusing more on the short-term have a more short-term oriented investor base. Moreover, we find that short-term oriented firms have higher stock price volatility, and that this effect is mitigated for firms with more long-term investors. We also find that short-term oriented firms have higher equity betas and as a result higher cost of capital. However, this result is not mitigated by the presence of long-term investors, consistent with these investors requiring a risk premium for holding the stock of short-term oriented firms. Overall, our evidence suggests that corporate short-termism is associated with greater risk and thus affects resource allocation.

Download the paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1999484

Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China

Abstract

Our paper provides a comparative perspective on the development of public primary education in four of the largest developing economies circa 1910: Brazil, Russia, India and China (BRIC). These four countries encompassed more than 50% of the world's population in 1910, but remarkably few of their citizens attended any school by the early 20th century. We present new, comparable data on school inputs and outputs for BRIC drawn from contemporary surveys and government documents. Recent studies emphasize the importance of political decentralization and relatively broad political voice for the early spread of public primary education in developed economies. We identify the former and the lack of the latter to be important in the context of BRIC, but we also outline how other factors such as factor endowments, colonialism, serfdom, and, especially, the characteristics of the political and economic elite help explain the low achievement levels of these four countries and the incredible amount of heterogeneity within each of them.

Download the paper: http://www.nber.org/papers/w17852

Expertise Dissensus: A Multi-level Model of Teams' Differing Perceptions about Member Expertise

Abstract

Why do some teams fail to convert members' knowledge into valued outcomes? We propose that members' differing perceptions of each other's levels of expertise is a critical factor. To capture this phenomenon, we introduce the concept of expertise dissensus, a team property that reflects the variance in team members' perceptions of one another's levels of expertise. We argue that it matters how team members perceive all others' expertise-not just how they view the most expert team member-and develop and test a multi-level model to explain how expertise dissensus affects team processes and outcomes. We further advance theory by investigating the effects of expertise dissensus on all dimensions of team effectiveness: team performance, team viability, and individual member development (Hackman, 1987).

Download the paper: http://www.hbs.edu/research/pdf/12-070.pdf

Private and Public Decisions in Social Dilemmas: Evidence from Children's Behavior

Abstract

Substantial research with adult populations has found that selfish impulses are less likely to be pursued when decisions are publicly observable. To the best of our knowledge, however, this behavioral regularity has not been systematically explored as a potential solution to social dilemmas. This paper takes a step in that direction. We report data on the self-control decisions of children aged 6 to 11 who participated in games that require one to resist a selfish impulse for several minutes in order to benefit others. In one condition children make decisions in public view of the group of other participants, while in another they can make decisions either publicly or privately. In both conditions, we allow the group size to vary. We find that children aged 9 and higher are better able to resist selfish impulses in public environments. Younger children, however, display no such effect. Further, we find self-control substantially impacted by group size. When decisions are public, larger groups lead to better self-control, while in the private condition the opposite holds. Our findings suggest that announcing decisions publicly and to large groups may be part of a solution to some social dilemmas. In addition, the fact that public decision-making promotes pro-social behavior only in older children suggests this positive effect may stem from a desire to avoid shame.

Download the paper: http://www.hbs.edu/research/pdf/12-073.pdf

Author-Level Eigenfactor Metrics: Evaluating the Influence of Authors, Institutions and Countries within the SSRN community

Abstract

In this paper, we show how the Eigenfactor® score, originally designed for ranking scholarly journals, can be adapted to rank the scholarly output of authors, institutions, and countries based on author-level citation data. Using the methods described herein, we provide Eigenfactor rankings for 84,808 disambiguated authors of 240,804 papers in the Social Science Research Network (SSRN), a pre- and post-print archive devoted to the rapid dissemination of scholarly research in the social sciences and humanities. As an additive metric, the Eigenfactor scores are readily computed for collectives such as departments or institutions. We show that a collective's Eigenfactor score can be computed either by summing the Eigenfactor scores of its members or by working directly with a collective-level cross-citation matrix. To illustrate, we provide Eigenfactor rankings for institutions and countries in the SSRN repository. With a network-wide comparison of Eigenfactor scores and download tallies, we demonstrate that Eigenfactor scores provide information that is both different from and complementary to that provided by download counts. We see author-level ranking as one filter for navigating the scholarly literature and note that such rankings generate incentives for more open scholarship, as authors are rewarded for making their work available to the community as early as possible and prior to formal publication.

Download the paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1636719