“Am I Getting It or Not?” The Practices Involved in “Trying to Consume” a New Technology

In recent years, high rates of failure of technology‐based products have spurred interest in understanding the psychological and sociological barriers to consumer learning of technological innovations. The main focus of this research was to examine the learning process and consumers’ coping mechanisms when they encounter technological innovations. A study was designed to understand the learning process in real time as consumers engaged in a set of activities associated with the novel interface. The goal was to investigate how consumers cope with high levels of complexity during their initial interactions with a technology‐based product and how their coping strategies may hinder the learning process. Verbal protocol measures were used in order to understand the consumer's learning process as he or she interacts with a technology‐based product in real time. They were told that they would have to think aloud while performing certain tasks and that their thoughts would be recorded for further analysis. The personal digital assistant (PDA) with handwriting recognition as its interface was chosen for this study. The main task for the participants was to learn how to use Graffiti writing—i.e., the product's handwriting recognition software. We proceeded to a thematic analysis in which interpretations were generated by the researchers going back and forth between the transcribed texts, the developing interpretation, the new interface itself, and also the relevant literature. The results suggest that the new product's interface serves to structure the consumer's learning process even as he or she responds in relatively unstructured ways. The findings identify three basic factors that interfere with the learning process during consumers’ initial interactions with a technological innovation: interface and functionality practices, social influence, and causal attributions. Specifically, the results suggest that in designing technology‐based products there is a gap between the levels of know‐how between the manufacturer and the user. The challenge for manufacturers is to understand the consumer's learning experience and coping strategies and provide mechanisms that would make the transition easy and intuitive. This could be achieved by incorporating into the new interface some degree of flexibility that will allow consumers to modify tasks based on their preferences, or by including indicators that will provide feedback to the user. Furthermore, in the context of communication strategies, in order to minimize the negative impact that prior knowledge and social influence may have on learning, marketers could communicate specific steps describing how to use the new interface.     

Ain't it “suite”? Bundling in the PC office software market

Research Summary: We examine the importance of office suites for the evolution of the personal computer (PC) office software market in the 1990s. An estimated discrete‐choice model reveals a positive correlation of consumer values for spreadsheets and wordprocessors, a bonus value for suites, and advantages for Microsoft products. We employ the estimates to simulate various hypothetical market structures to evaluate the profitability, welfare, and competitive effects of suites under alternative correlation assumptions. We find that firms benefit greatly from bundling components (i.e., a spreadsheet and a word processor) when the correlation of consumer preferences over the components in the bundle is positive. Our work adds another aspect to the recent work in the strategy literature that examines benefits from bundling when there are complementary relationships across the products in the bundle. Managerial Summary: Our research helps managers understand the conditions under which product bundling is likely to be most profitable. We show that one key to enhanced profitability is the correlation in consumer preferences over the individual products. We consider the performance implications of bundling under a variety of alternative market structures and competitive environments. Our analysis reveals that firms benefit greatly from bundling when the correlation of consumer valuations over the products is positive. Consumers benefit as well. Hence, bundling is a win‐win for firms and their customers. Since profits increase by more than consumer surplus, bundling leads to increased value capture by the firms. Consequently, it may be profitable for firms to invest in actively increasing the correlation in consumer preferences over products in the bundle.     

Is there a “Dark Side” to Monitoring? Board and Shareholder Monitoring Effects on M&A Performance Extremeness

Research summary: W e investigate the effects of monitoring by boards of directors and institutional shareholders on merger and acquisition (M&A ) performance extremeness using a sample of M&A deals from 1997 to 2006. Both governance research and legal reforms generally have espoused a “raise all boats” view of monitoring. We instead investigate whether monitoring may serve as a double‐edged sword that limits CEO discretion to undertake both value‐destroying M&A deals and value‐creating ones. Our findings indicate that the relationship between monitoring and M&A performance is more complex than previously believed. Rather than “raising all boats” in a shift towards better M&A outcomes, monitoring instead is associated with lower M&A losses, but also with lower M&A gains . Managerial summary: M ergers and acquisitions (M&A s) are a quintessential corporate activity. There were $3.8 trillion worth of M&A deals in 2015, despite scholars and practitioners reporting that M&A s often perform poorly. We question the widespread belief that more vigilant monitoring by boards of directors and large shareholders will raise M&A performance, overall. Put differently, does monitoring constrain CEO s' discretion to pursue bad deals, while simultaneously encouraging them to pursue good ones? We find that monitoring limits both large M&A losses and large M&A gains. Contrary to widely held beliefs, our results indicate that constraining executives' ability to pursue value‐destroying M&A deals does not simultaneously encourage or enable CEO s to pursue value‐creating deals . Copyright © 2017 John Wiley & Sons, Ltd.     

Is the Information Deficiency in Real Estate Evident in Public Market Trading?

This paper examines the summary informativeness of trading in real estate securities. Prior literature on publicly traded real estate securities suggests that the information deficiency associated with local economies and unique rent dynamics will manifest itself as severe information asymmetry. To date, most studies concerned with these issues have focused on the conventional measures of liquidity (serial correlations, bid—ask spreads, etc.). However, the conventional measures have several shortcomings as pure measures of trading information. To address this issue, we use a vector autoregressive methodology pioneered by Hasbrouck. We examine the empirical proposition that information-gathering activities are related to trade informativeness. The evidence is consistent with a theoretical model in which traders are risk-averse and the number of information gatherers is small.     

When can you trust “trust”? Calculative trust,relational trust,and supplier performance

Our research empirically assesses two distinct bases for trust: calculative trust, based on a structure of rewards and penalties, versus relational trust, a judgment anchored in past behavior and characterized by a shared identity. We find that calculative trust and relational trust positively influence supplier performance, with calculative trust having a stronger association than relational trust. Yet, important boundary conditions exist. If buyers invest in supplier‐specific assets or when supply side market uncertainty is high, relational trust, not calculative trust, is more strongly associated with supplier performance. In contrast, when behavioral uncertainty is high, calculative trust, not relational trust, relates more strongly to supplier performance. These results highlight the value of examining distinct forms of trust. Copyright © 2015 John Wiley & Sons, Ltd.     

Mass or Only “Niche Customization”? Why We Should Interpret Configuration Toolkits as Learning Instruments

In order to configure individual products according to their own preferences, customers are required to know what they want. While most research simply assumes that consumers have sufficient preference insight to do so, a number of psychologically oriented scholars have recently voiced serious concerns about this assumption. They argue that decades of consumer behavior research have shown that most consumers in most product categories lack this knowledge. Not knowing what one wants means being unable to specify what one wants—and therefore, they conclude, the majority of customers are unable to use configuration toolkits in a meaningful way. In essence, this would mean that mass customization should rather be termed “niche customization” as it will be doomed to remain a concept for a very small minority of customers only. This pessimism stands in sharp contrast to the optimism of those who herald the new possibilities enabled by advances in communication and production technologies as the dawn of a new era in new product development and business in general. Which position is right? In order to answer this question, this research investigates the role of the configuration toolkit. Implicitly, the skeptic position assumes that the individual customers' knowledge (or absence of knowledge) of what they want is an exogenous and constant term that does not change during the interaction with the toolkit. However, learning theories suggest that the customers' trial‐and‐error interaction with the configuration toolkit and the feedback information they receive should increase their preference insight. If this was true and the effect size strong, it would mean that low a priori preference insight does not impede customers to derive value from mass customization. Three experiments show that configuration toolkits should be interpreted as learning instruments that allow consumers to understand their preferences more clearly. Even short trial‐and‐error self‐design processes with conventional toolkits bring about substantial and time‐stable enhancements of preference insight. The value of this knowledge is remarkable. In the product category of self‐designed watches, the 10‐minute design process resulted in additional preference insight worth 43.13 euros on average or +66%, measured by incentive‐compatible auctions. A moderator analysis in a representative sample shows that the learning effect is particularly strong among customers who initially exhibit low levels of preference insight. These findings entail three contributions. First, it becomes evident that the interaction with mass customization toolkits not only triggers affective reactions among customers but also has cognitive effects—a response category not investigated before. Second, it suggests that the pessimism regarding the mass appeal of these toolkits is not justified—mass customization has the potential to truly deserve its name. The prerequisite for this, and this normative conclusion is the final contribution, is that the toolkit should not be interpreted as a mere interface for conveying preexisting preferences to the producer. Rather, it should be treated as a learning instrument. Several suggestions are made for how firms employing this innovative business model could design their toolkits towards this end.     

Has the “CEO effect” increased in recent decades? A new explanation for the great rise in America's attention to corporate leaders

We introduce a new explanation for one of the most pronounced phenomena on the American business landscape in recent decades: a dramatic increase in attributions of CEO significance. Specifically, we test the possibility that America's CEOs became seen as increasingly significant because they were, in fact, increasingly significant. Employing variance partitioning methodologies on data spanning 60 years and more than 18,000 firm‐years, we find that the proportion of variance in performance explained by individual CEOs, or “the CEO effect,” increased substantially over the decades of study. We discuss the theoretical and practical implications of this finding. Copyright © 2014 John Wiley & Sons, Ltd.     

“To Own or Not to Own?” A Study on the Determinants and Consequences of Alternative Intellectual Property Rights Arrangements in Crowdsourcing for Innovation Contests

Firms are increasingly engaging in crowdsourcing for innovation to access new knowledge beyond their boundaries; however, scholars are no closer to understanding what guides seeker firms in deciding the level at which to acquire rights from solvers and the effect that this decision has on the performance of crowdsourcing contests. Integrating property rights theory and the problem‐solving perspective while leveraging exploratory interviews and observations, we build a theoretical framework to examine how specific attributes of the technical problem broadcast by firms affect the seekers’ choice between alternative intellectual property rights (IPR) arrangements that call for acquiring or licensing‐in IPR from external solvers (i.e., with high and low degrees of ownership, respectively). Each technical problem differs in the knowledge required to be solved as well as in the stage of development of the innovation process and seeker firms pay great attention to such characteristics when deciding about the IPR arrangement they choose for their contests. In addition, we analyze how this choice between acquiring and licensing‐in IPR, in turn, influences the performance of the contest. We empirically test our hypotheses analyzing a unique dataset of 729 challenges broadcast on the InnoCentive platform from 2010 to 2016. Our results indicate that challenges related to technical problems in later stages of the innovation process are positively related to the seekers’ preference toward IPR arrangements with a high level of ownership, while technical problems involving a higher number of knowledge domains are not. Moreover, we found that IPR arrangements with a high level of ownership negatively affect solvers’ participation and that IPR arrangement play a mediating role between the attributes of the technical problem and the solvers’ self‐selection process. Our paper contributes to the open innovation and crowdsourcing literature and provides practical implications for both managers and contest organizers.     

Do Tax Increment Finance Districts Stimulate Growth in Real Estate Values?

We use data on all Wisconsin municipalities during the period 1990–2003 to study the effect of tax increment finance (TIF) on economic development. We use appropriate statistical techniques to measure the impact of TIF and control variables on aggregate property values. We also examine the possibility communities that use TIF are self‐selected. We find little evidence that TIF has led to significant increases in aggregate property values or that TIF increases the total value of residential and manufacturing property within a community. Surprisingly, we find positive impacts for commercial TIF districts.     

“We do what we must,and call it by the best names”: Can deliberate names offset the consequences of organizational atypicality?

Research summary: This article focuses on organizational naming as a strategic choice organizations make to overcome liabilities of atypicality. We argue that, in markets presenting an “illegitimacy discount,” atypical organizations may use deliberate names—names that communicate the market categories to which organizations claim membership—to offset the consequences of atypicality. Using data from the global hedge fund industry, we show that atypical hedge funds are more likely than typical funds to have deliberate names. Importantly, the selection of a deliberate name is economically significant. First, funds with deliberate names grow faster than funds without deliberate names, especially among atypical funds. Second, while atypicality heightened the likelihood of failure during the recent financial crisis—even after controlling for fund performance—having a deliberate name mitigated this effect. Managerial summary: Differentiation is a core element of many organizations' competitive advantage. Nevertheless, as differentiation implies being atypical among one's competitors, differentiation strategies can also lead to an “illegitimacy discount” whereby differentiators are at risk of being misunderstood, miscategorized, and ignored by consumers. Here we investigate how atypical hedge funds—funds that differentiate themselves from their competitors by investing in notably unique ways—use names to offset the potential consequences associated with the “illegitimacy discount.” Our analysis of more than 12,000 hedge funds over 12 years highlighted a trend whereby atypical hedge funds were more likely to choose names that unambiguously associated them with a known investment strategy—for instance, choosing the name “Apex Global Macro Capital” over simply “Apex Capital.” Importantly, name selection proved to be economically significant. For example, among atypical hedge funds, those with unambiguous names grew faster than those without. Furthermore, while being atypical increased the level of disinvestment during the recent financial crisis, having an unambiguous name reversed this effect. Organizational names play an important communication role with consumers, which, while highly symbolic, may also help resolve the dual organizational need to both conform to consumer expectations and differentiate from market competitors. Copyright © 2015 John Wiley & Sons, Ltd.     

The Gender Gap in Real Estate Sales: Negotiation Skill or Agent Selection?

This study examines differences in net selling price for residential real estate across male and female agents. A sample of 2,020 home sales transactions from Fulton County, Georgia, are analyzed in a two‐stage least squares, geospatial autoregressive corrected, semi‐log hedonic model to test for gender and gender selection effects. Although agent gender seems to play a role in naïve models, its role becomes inconclusive as variables controlling for possible price and time on market expectations of the buyers and sellers are introduced to the models. Clear differences in real estate sales prices, time on market and agent incomes across genders are unlikely due to differences in negotiation performance between genders or the mix of genders in a two‐agent negotiation. The evidence suggests an interesting alternative to agent performance: that buyers and sellers with different reservation price and time on market expectations, such as those selling foreclosure homes, tend to select agents along gender lines.     

Is Selection Bias Inherent in Housing Transactions? An Equilibrium Approach

We develop an equilibrium model for residential housing transactions in an economy with houses that differ in their quality and households that differ in their planned holding horizon. We show that, in equilibrium, a clientele effect persists, with long‐horizon buyers overwhelmingly choosing higher quality properties and short‐horizon buyers settling for lower quality properties. This clientele effect creates a sample selection bias: the properties that are on the market are predominantly of lower quality. Since these are the preferred choice of short‐horizon buyers, they demonstrate a faster turnover. Both the clientele effect and the selection bias are more pronounced with an increase in the variance of house quality and in the variance of the planned holding horizon. Our theoretical model supports empirical evidence on the existence of such bias in home price indices and explains it by the differences in ex ante holding horizons.     

Do Real Estate Prices and Stock Prices Move Together? An International Analysis

The relationship between stock prices and real estate prices has been the subject of substantial debate in both the academic and practitioner literatures. Existing studies have focused on the time series of stock and real estate returns using data from a single country, such as the U.S. By necessity, these studies examine return and price changes over short intervals, creating a bias when property values are smoothed from year to year. Using data from 17 different countries over 14 years, this paper examines the relation between stock returns and changes in property values and rents. Consistent with other country-specific studies, we find that, with the exception of Japan, the contemporaneous relation between yearly real estate price changes and stock returns is not statistically significant. However, when the data are pooled across countries and when we look at longer measurement intervals, a significant relation between stock returns and both rents and value changes becomes apparent. Real estate prices are also found to be significantly influenced by GDP growth rates and provide a good long-term hedge against inflation but a poor year-to-year hedge.     

Is the ‘Linkage Principle’ Valid? Evidence from the Field

We present field evidence concerning experienced bidders that supports the linkage principle—specifically, the prediction that in affiliated‐values auction environments the expected revenues generated at open‐outcry, ascending‐bid auctions are higher than those under auction formats that reveal less information to participants. Using field data from a large seller of automobiles who experimented with different selling formats, we have found that average revenues were significantly higher under an English auction than under a dynamic Internet auction format that revealed less information to bidders.     

Who Is Affected by the Minimum Wage?

Prior surveys of empirical research on the minimum wage have been organized around the question “What does the minimum wage affect?” This survey is organized around the question “Who is affected by the minimum wage?” We review the consequences of the minimum wage for teens and young workers, men and women, African Americans and Hispanics, the less educated, workers in low‐wage industries, and low‐wage/low‐income populations. Although there is almost universal agreement that the minimum wage boosts earnings, evidence for a negative employment effect varies between mixed and nonexistent. An important gap in the literature is the paucity of research on low‐wage/low‐income groups.