It has been a long while since I last updated this blog, largely because I was very busy with my work. So, I have decided not to write too much but to just share some latest research findings (mostly of other peoples) that are interesting and relevant to our daily life. The following are two new results that may be of general interest.
1. The power of labor union: http://pubsonline.informs.org/doi/abs/10.1287/mnsc.2014.2075.
Essentially, the study finds that companies tend to withhold good news and promote bad news when they face a powerful labor union. The motivation is to increase their bargaining power against the workers.
2. Why companies do CSR? http://pubsonline.informs.org/doi/abs/10.1287/mnsc.2014.2038.
Well, the study finds that "close call" CSR proposals increase firms' positive announcement results and accounting performance. The authors did further tests and found that labor productivity and sales growth increased after these CSR proposals. Intriguing, isn't it?
Monday, February 23, 2015
Wednesday, August 13, 2014
Should we set up do not call for person-to-person calls?
After a long journey, our paper on privacy externalities is finally accepted for publication in Management Science! Let me explain what we did in that study here.
Essentially, we analyzed the pattern of do not call (DNC) registrations in the USA, which had opened the registry since June 2003. We found a robust externality between consumer registrations -- as more consumers register in a market, the number of subsequent registrations in the same market increases. We believe (and have found evidence) that this is because the DNC registry sorts consumers into two groups, those who are not interested in telemarketing offers and those who may be interested. So, with the DNC, the remaining consumer pool may have a higher interest in promotions, which had increased marketers' profitability from making the calls. Naturally, marketers responded by more solicitations.
Moral of the story:
Essentially, we analyzed the pattern of do not call (DNC) registrations in the USA, which had opened the registry since June 2003. We found a robust externality between consumer registrations -- as more consumers register in a market, the number of subsequent registrations in the same market increases. We believe (and have found evidence) that this is because the DNC registry sorts consumers into two groups, those who are not interested in telemarketing offers and those who may be interested. So, with the DNC, the remaining consumer pool may have a higher interest in promotions, which had increased marketers' profitability from making the calls. Naturally, marketers responded by more solicitations.
Moral of the story:
- A DNC covering person-to-person calls may help marketers (instead of hurt them as intuition or common wisdom would suggest);
- Marketers should try to avoid excessively soliciting the remaining pool -- these are people who may be interested in the offers provided you don't over-do it. The last thing we want is all consumers register their telephone numbers;
- The government or the industry should find ways to match interested consumers and marketing promotions. My other paper in Management Science in 2008 had suggested and analyzed call filtering (what we call "deflection" in that study) as one possible solution. To facilitate filtering, a registry for telemarketers would be helpful.
I have also written some of these insights in an op-ed which was published in SCMP on Monday. See here.
Monday, July 7, 2014
Marriage and CEOs' risk appetite
Just read another interesting piece of research: http://pubsonline.informs.org/doi/abs/10.1287/mnsc.2014.1926
The authors found that single CEOs tend to be more risk taking and pursue more aggressive investment policies. This marital status effect, however, is weaker among older managers. This is an important identification because if we believe that marriage and risk taking are both driven by a common personality trait, then people who are single should continue to be risk taking when they grow older. This is not the case here.
The authors have also used another clever trick to rule out the alternative hypothesis that the finding was due to innate characteristics of the person. What they have done is to use the divorce laws across states (the study was conducted in the USA) as an instrument. The idea, in layman terms, is that divorce cost should affect a person's inclination to get married, but the establishment of the divorce laws should have little to do with the innate traits of the persons. So, the divorce laws can be used to prune the (what we call "endogenous") variations due to other unknown variations in the data, such as personality traits or intrinsic risk preferences due to race, gender, etc. After this kind of "correction", we should be fairly confident that the difference in risk attitude is really due to marital status itself.
So, why would a married CEO be less aggressive? There are many possible explanations. It could be family commitment, the relatively higher cost of leisure time, aggregation of family preferences (which tends to regress the risk attitude toward the average), or even, biological, as marriage may affect a person's testosterone level.
The only pity I find in this study is that the authors have not attempted to validate some of these explanations. Nevertheless, it is a good illustration of an interesting business study that uses a clever way to address a challenging research problem. Some may say that the finding seems trivial. However, we should all grow the habit to challenge the trivial thoughts. What seems trivial in our every day life are often wrong -- having an independent inquisitive mindset is important.
The authors found that single CEOs tend to be more risk taking and pursue more aggressive investment policies. This marital status effect, however, is weaker among older managers. This is an important identification because if we believe that marriage and risk taking are both driven by a common personality trait, then people who are single should continue to be risk taking when they grow older. This is not the case here.
The authors have also used another clever trick to rule out the alternative hypothesis that the finding was due to innate characteristics of the person. What they have done is to use the divorce laws across states (the study was conducted in the USA) as an instrument. The idea, in layman terms, is that divorce cost should affect a person's inclination to get married, but the establishment of the divorce laws should have little to do with the innate traits of the persons. So, the divorce laws can be used to prune the (what we call "endogenous") variations due to other unknown variations in the data, such as personality traits or intrinsic risk preferences due to race, gender, etc. After this kind of "correction", we should be fairly confident that the difference in risk attitude is really due to marital status itself.
So, why would a married CEO be less aggressive? There are many possible explanations. It could be family commitment, the relatively higher cost of leisure time, aggregation of family preferences (which tends to regress the risk attitude toward the average), or even, biological, as marriage may affect a person's testosterone level.
The only pity I find in this study is that the authors have not attempted to validate some of these explanations. Nevertheless, it is a good illustration of an interesting business study that uses a clever way to address a challenging research problem. Some may say that the finding seems trivial. However, we should all grow the habit to challenge the trivial thoughts. What seems trivial in our every day life are often wrong -- having an independent inquisitive mindset is important.
Monday, June 2, 2014
Beauty and employment
Just read an interesting piece of research: http://pubsonline.informs.org/doi/abs/10.1287/mnsc.2014.1927
Essentially, the researchers created a large set of CVs that are otherwise identical except the inclusion of applicants' photos. The CVs variously contain photos of an attractive male (AM), plain-looking male (PM), attractive female (AF), and plain-looking female (PF), and no photos (NM and NF). They sent the CVs in response to different job advertisements and analyzed the call-back rates from the employers.
Here are the findings in terms of call-back rates:
For male: AM > NM > PM
For female: NF > PF » AF
These ordering are robust to jobs requiring prior experience, and whether the jobs require the applicants to face the public or just stay inside the office. However, on further scrutiny, the researchers find that these differences are largely due to employment agencies. If the companies do the hiring themselves, then the call-back rates are mostly indistinguishable, except for the attractive females, who are still penalized. The researchers conducted a series of follow-up works and tests and concluded that the most likely explanation is female jealousy and envy.
Moral of the story: (1) If you're a good-looking female, maybe you should avoid showing people your photos when looking for jobs; (2) If you're a good-looking male, then attaching your photo may give you an advantage, especially when dealing with head-hunters; (3) It may not be a good idea to use an employment agency because it tends to focus on appearance, which should be irrelevant.
Another interesting side note is that when I asked my good friend to guess the outcome of this research last night, she almost gave me the exact same ordering as those above. Her explanation was that most of the hiring work in companies is done by HR, and HR will likely favor AM and penalize AF. Her reasoning is strikingly consistent with the employment agency finding shown in the research, and largely in line with the jealousy/envy explanation too! I must admit that before I saw this research I thought AF should always command an advantage in job seeking. Turns out I was wrong.
This is also the beauty of research -- people may have different speculation/experience on certain social phenomena, and it is through rigorous research design and data collection and analysis that we can arrive at more informed conclusions. How we can make use of these findings and conclusions is, of course, up to the individual readers.
Essentially, the researchers created a large set of CVs that are otherwise identical except the inclusion of applicants' photos. The CVs variously contain photos of an attractive male (AM), plain-looking male (PM), attractive female (AF), and plain-looking female (PF), and no photos (NM and NF). They sent the CVs in response to different job advertisements and analyzed the call-back rates from the employers.
Here are the findings in terms of call-back rates:
For male: AM > NM > PM
For female: NF > PF » AF
These ordering are robust to jobs requiring prior experience, and whether the jobs require the applicants to face the public or just stay inside the office. However, on further scrutiny, the researchers find that these differences are largely due to employment agencies. If the companies do the hiring themselves, then the call-back rates are mostly indistinguishable, except for the attractive females, who are still penalized. The researchers conducted a series of follow-up works and tests and concluded that the most likely explanation is female jealousy and envy.
Moral of the story: (1) If you're a good-looking female, maybe you should avoid showing people your photos when looking for jobs; (2) If you're a good-looking male, then attaching your photo may give you an advantage, especially when dealing with head-hunters; (3) It may not be a good idea to use an employment agency because it tends to focus on appearance, which should be irrelevant.
Another interesting side note is that when I asked my good friend to guess the outcome of this research last night, she almost gave me the exact same ordering as those above. Her explanation was that most of the hiring work in companies is done by HR, and HR will likely favor AM and penalize AF. Her reasoning is strikingly consistent with the employment agency finding shown in the research, and largely in line with the jealousy/envy explanation too! I must admit that before I saw this research I thought AF should always command an advantage in job seeking. Turns out I was wrong.
This is also the beauty of research -- people may have different speculation/experience on certain social phenomena, and it is through rigorous research design and data collection and analysis that we can arrive at more informed conclusions. How we can make use of these findings and conclusions is, of course, up to the individual readers.
Thursday, May 15, 2014
Inaugural Entry and Classification of Universities
After undertaking some administrative duty at the HKUST Business School, I have noticed that many people are not familiar with how the knowledge we learn in a business school could affect our daily life and the broader community. Some people still think that it is unnecessary to have business education at the undergraduate level because a person will naturally pick up the business knowledge as he/she grows up. I call this a naive view of business education. It is naive because it simplifies business education into some sort of popular wisdom, and undermines the rich foundation that builds the business knowledge that we learn in a university today.
To rectify this naive view, I reckon that one good way is to showcase what we, the business professors, do in our research, and how our research can create a difference to the world. Our school has been actively doing this through our business insights series, but it may be helpful to give this task a lighter treatment here. So, I created this blog mostly to share what I have learned from (and, very occasionally, contribute to) the business literature. I hope readers will find this blog helpful in appreciating how a systematic treatment of business subjects can enrich our life.
For this first entry, I have not selected any business topic. However, the following is an excellent piece shared by a renowned accounting scholar who helped found our school back in the 1990s. The article discusses the differences between the various tiers of universities in the world, what makes a top university, and why an all-rounded research emphasis underscores the road to success of building a top, impactful university. It is a food-for-thought for those who do not understand why many universities are willingly spending huge amount of resources on academic research which seems hardly accessible to the general public.
To rectify this naive view, I reckon that one good way is to showcase what we, the business professors, do in our research, and how our research can create a difference to the world. Our school has been actively doing this through our business insights series, but it may be helpful to give this task a lighter treatment here. So, I created this blog mostly to share what I have learned from (and, very occasionally, contribute to) the business literature. I hope readers will find this blog helpful in appreciating how a systematic treatment of business subjects can enrich our life.
For this first entry, I have not selected any business topic. However, the following is an excellent piece shared by a renowned accounting scholar who helped found our school back in the 1990s. The article discusses the differences between the various tiers of universities in the world, what makes a top university, and why an all-rounded research emphasis underscores the road to success of building a top, impactful university. It is a food-for-thought for those who do not understand why many universities are willingly spending huge amount of resources on academic research which seems hardly accessible to the general public.
漫谈二流大学
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