Moral Stress: Considering the Nature and Effects of Managerial Moral Uncertainty

To better illuminate aspects of stress that are relevant to the moral domain, we present a definition and theoretical model of “moral stress.” Our definition posits that moral stress is a psychological state born of an individual’s uncertainty about his or her ability to fulfill relevant moral obligations. This definition assumes a self-and-others relational basis for moral stress. Accordingly, our model draws from a theory of the self (identity theory) and a theory of others (stakeholder theory) to suggest that this uncertainty arises as a manager faces competing claims for limited resources from multiple stakeholders and/or across multiple role identities. We further propose that the extent to which the manager is attentive to the moral aspects of the claims (i.e., moral attentiveness) moderates these effects. We identify several consequences of managerial moral stress and discuss theoretical, empirical, and practical implications of our approach. Most importantly, we argue that this work paves an important path for considering stress through the lens of morality.     

Panel studies of new venture creation: a methods-focused review and suggestions for future research

Longitudinal panel studies of large, random samples of business start-ups captured at the pre-operational stage allow researchers to address core issues for entrepreneurship research, namely, the processes of creation of new business ventures as well as their antecedents and outcomes. Here, we perform a methods-orientated review of all 83 journal articles that have used this type of data set, our purpose being to assist users of current data sets as well as designers of new projects in making the best use of this innovative research approach. Our review reveals a number of methods issues that are largely particular to this type of research. We conclude that amidst exemplary contributions, much of the reviewed research has not adequately managed these methods challenges, nor has it made use of the full potential of this new research approach. Specifically, we identify and suggest remedies for context-specific and interrelated methods challenges relating to sample definition, choice of level of analysis, operationalization and conceptualization, use of longitudinal data and dealing with various types of problematic heterogeneity. In addition, we note that future research can make further strides towards full utilization of the advantages of the research approach through better matching (from either direction) between theories and the phenomena captured in the data, and by addressing some under-explored research questions for which the approach may be particularly fruitful.     

Validity of climate change forecasting for public policy decision making

Policymakers need to know whether prediction is possible and, if so, whether any proposed forecasting method will provide forecasts that are substantially more accurate than those from the relevant benchmark method. An inspection of global temperature data suggests that temperature is subject to irregular variations on all relevant time scales, and that variations during the late 1900s were not unusual. In such a situation, a “no change” extrapolation is an appropriate benchmark forecasting method. We used the UK Met Office Hadley Centre’s annual average thermometer data from 1850 through 2007 to examine the performance of the benchmark method. The accuracy of forecasts from the benchmark is such that even perfect forecasts would be unlikely to help policymakers. For example, mean absolute errors for the 20- and 50-year horizons were 0.18  C and 0.24  C respectively. We nevertheless demonstrate the use of benchmarking with the example of the Intergovernmental Panel on Climate Change’s 1992 linear projection of long-term warming at a rate of 0.03  C per year. The small sample of errors from ex ante projections at 0.03  C per year for 1992 through 2008 was practically indistinguishable from the benchmark errors. Validation for long-term forecasting, however, requires a much longer horizon. Again using the IPCC warming rate for our demonstration, we projected the rate successively over a period analogous to that envisaged in their scenario of exponential CO₂ growth—the years 1851 to 1975. The errors from the projections were more than seven times greater than the errors from the benchmark method. Relative errors were larger for longer forecast horizons. Our validation exercise illustrates the importance of determining whether it is possible to obtain forecasts that are more useful than those from a simple benchmark before making expensive policy decisions.     

Anger Strays,Fear Refrains: The Differential Effect of Negative Emotions on Consumers’ Ethical Judgments

Although various factors have been studied for their influence on consumers’ ethical judgments, the role of incidental emotions has received relatively less attention. Recent research in consumer behavior has focused on studying the effect of specific incidental emotions on various aspects of consumer decision making. This paper investigates the effect of two negative, incidental emotional states of anger and fear on ethical judgment in a consumer context using a passive unethical behavior scenario (i.e., too much change received). The paper presents two experimental studies. Study 1 focuses on the interaction of moral intensity (amount of change) and incidental emotion state in predicting the ethical judgment while study 2 investigates the underlying causal mechanism behind the process, using a mediation analysis. The results reveal a significant interaction between moral intensity and incidental emotion. Specifically, individuals in the state of incidental fear exhibit higher levels of ethical judgment as the moral intensity increases as compared to individuals in the state of incidental anger. Further, perceived control is found to mediate the relationship between emotional state and ethical judgment under higher moral intensity condition.     

Key account relationship management: the moderating effects of relationship duration and transaction volume

This study investigates the impact of three relational benefits (i.e. financial benefits, human interaction benefits, preferential treatment benefits) on switching barriers, customer satisfaction, and behavioral loyalty for key accounts in the context of the air express delivery industry in Taiwan. Empirical results indicate that relational benefits impact switching barriers, switching barriers influence customer satisfaction and loyalty, and customer satisfaction effects loyalty. Findings also confirm most of the hypothesized moderating effects for relationship duration and transactional volume on the relationship between relational benefits and switching barriers. Specifically, long-term key accounts place greater emphasis on the human interaction and preferential treatment benefits. Key accounts that have less established relationships based on the length of business relationship place more importance on financial benefits. Financial benefits were found to have a positive influence on switching barriers only for low annual transactional volume clients, while both human interaction benefits and preferential treatment benefits have positive effects for both low and high transactional volume key accounts.     

Abatement,Care, and Compliance by Firms in Financial Distress

We examine precautionary behavior, specifically compliance with environmental regulations, pollution abatement, and care spending, by firms facing two sources of insolvency risk. If poor profit or a liability triggers insolvency, then the firm forgoes a profitable future. The behavioral implications of this survival motive vary across firms. Firms for whom the principal insolvency risk is liability-related now choose precaution above the level chosen by the solvent firm. For firms whose primary insolvency risk is profit-related, the survival motive reinforces incentives for care below the solvent benchmark arising from the familiar judgment-proof effect. We also characterize how insolvency risks affect incentives to conceal adverse events linked to these choices, such as an accident or a regulatory violation. An understanding of these incentives is particularly important during recessionary periods when firms struggle to survive the downturn.     

Evidence of Manager Intervention to Avoid Working Capital Deficits

We study managers’ interventions in financial reporting by examining working capital deficits, measured as current ratios less than 1.0. Current ratios represent important balance sheet liquidity indicators to lenders and creditors, and have an identifiable and naturally occurring reference point at 1.0, analogous to the profit/loss income statement reference point. We find that distributions of reported current ratios of both U.S. and non‐U.S. firms exhibit a discontinuity at 1.0. For U.S. firms, we find that the discontinuity increases with exogenous increases in the cost of credit in the economy, and that determinants of the likelihood to achieve a given current ratio are diagnostic precisely at the 1.0 discontinuity location but not at other nearby locations in the current ratio distribution. U.S. firms that avoid working capital deficits report lower proportions of inventory and higher proportions of accounts receivable in current assets and, when credit is tight, higher proportions of cash, consistent with managers increasing sales volume so as to capitalize profit margins and thereby increase current assets. For non‐U.S. firms, the discontinuity is more pronounced for observations from common law countries, a proxy for jurisdictions where financial reports are more intended to provide decision‐useful information. The evidence suggests that managers intervene to achieve a balance sheet reporting objective that stems from stakeholder use of reference points.     

Changes in trade and domestic distortions affecting China’s agriculture

This paper assesses the implications of China’s trade and domestic policies for incentives to producers in China. It uses a price comparison methodology (nominal rates of assistance—at the border and the farmgate), with adjustments for exchange rate distortions in the first part of the sample period (1981–1994). On average, distortions to agricultural incentives have been reduced. In the early 1980s, on average, China’s domestic prices were far below international prices. There were substantial variations, however, between imported (which were being protected) and exported goods. During the 1980s and 1990s the gap between domestic and international prices for both imports and exports narrowed initially mainly due to the elimination of domestic policy distortions. Between the mid-1990s and 2004, trade liberalization policy furthered narrowed the gap between world and China farmgate prices. By the mid-2000s, China’s agriculture was operating with only small price distortions.