How Does Terrorism Change the Business Landscape for Firms?

This chapter introduces a new framework for understanding firm creation and firm behavior in the face of terrorism and its ensuing risks such as institutional disruption. There is surprisingly scant theoretical or empirical research on how terrorism impacts firms and their ability to be agile in the face of risk. The extant strategic management literature is underdeveloped for making such assessments because it largely ignores the socio-cognitive impact of collective traumas on society. Building on the traditional assumptions of institutional theory from strategic management, the authors incorporate cosmopolitan memory theory from the field of international relations to offer a theoretically grounded set of testable predictions about terrorism's effects on both new and existing firms.

EXPRESS: Learning to Set Prices

The authors empirically examine how firms learn to set prices in a new market. The 2012 privatization of off-premise liquor sales in Washington State created a unique opportunity to observe retailers learn to set prices from the point at which their learning process began. Tracking this market as it evolved through time, the authors find that firms indeed learn to set more profitable prices, that these prices increasingly reflect demand fundamentals, and they ultimately converge to levels consistent with (static) profit maximization. The paper further demonstrates that initial pricing mistakes are largest for products whose demand conditions differ the most from those of previously privatized markets, that retailers with previous experience in the category are initially better-informed, and that learning is faster for products with more precise sales information. These findings indicate that firm behavior converges to rational models of firm conduct, but also reveal that such convergence takes time to unfold and play out differently for different firms. These patterns suggest important roles for both firm learning and heterogeneous firm capabilities.

Industry Networks and the Geography of Firm Behavior

Using a network approach that circumvents well-known challenges in estimating peer effects, we show that interactions with a firm’s geographic neighbors play a significant causal role in corporate investment behavior and a modest role in financial policies and firm performance. Moreover, these geography network effects are almost entirely driven by propagation effects through product market and supply chain networks. We corroborate our findings in a quasi-experimental framework that allows for spillovers in treatment effects. Our findings help rationalize industrial clusters (e.g., Silicon Valley), as they illustrate that agglomeration economies are substantial and operate predominantly within industry boundaries. This paper was accepted by David Simchi-Levi, finance.

Academic Teams and Commercialization in the Life Sciences

We review the literature on entrepreneurial team formation with a focus on data to study academic teams and summarize our empirical work on the life sciences industry. We consider how academics form teams to start new companies and the implications of various configurations on firm behavior with regards to patenting, survival and firm growth. We present several empirical challenges facing research on academic teams and conclude with suggestions for future research.

Consumer Consent and Firm Targeting After GDPR: The Case of a Large Telecom Provider

The general data protection regulation (GDPR) represents a dramatic shift in global privacy regulation. We focus on GDPR’s enhanced consumer consent requirements that aim to provide transparent and active elicitation of data allowances. We evaluate the effect of enhanced consent on consumer opt-in behavior and on firm behavior and outcomes after consent is solicited. Utilizing an experiment at a large telecommunications provider with operations in Europe, we find that opt-in for different data types and uses increased once GDPR-compliant consent was elicited. However, consumers did not uniformly increase data allowances and continued to generally restrict permissions for more sensitive or tangential uses of their personal information. We also find that sales, the efficacy of marketing communications, and contractual lock-in increased after consumers provided new data allowances. Additional analysis suggests that these gains to the firm emerged because new data allowances enabled them to increase their use of targeted marketing for households that were amenable to these marketing efforts. These results have significant implications for firms and policymakers and suggest that enhanced consent provided via GDPR may be effective for increasing consumer privacy protection while also allowing firms reliant on consumers’ personal information to improve outcomes. This paper was accepted by Chris Forman, information systems.

Managerial Style and Attention

Is firm behavior mainly driven by its environment or rather by the characteristics of its managers? We develop a cognitive theory of manager fixed effects, where the allocation of managerial attention determines firm behavior. We show that in complex environments, the endogenous allocation of attention exacerbates manager fixed effects. Small differences in managerial expertise then may result in dramatically different firm behavior, as managers devote scarce attention in a way that amplifies initial differences. In contrast, in less complex environments, the endogenous allocation of attention mitigates manager fixed effects. Firm owners prefer “managers with style” only in complex environments. (JEL D21, D23, G34, M10, M31, M54)

Mandatory CSR and sustainability reporting: economic analysis and literature review

This study collates potential economic effects of mandated disclosure and reporting standards for corporate social responsibility (CSR) and sustainability topics. We first outline key features of CSR reporting. Next, we draw on relevant academic literatures in accounting, finance, economics, and management to discuss and evaluate the potential economic consequences of a requirement for CSR and sustainability reporting for U.S. firms, including effects in capital markets, on stakeholders other than investors, and on firm behavior. We also discuss issues related to the implementation and enforcement of CSR and sustainability reporting standards as well as two approaches to sustainability reporting that differ in their overarching goals and materiality standards. Our analysis yields a number of insights that are relevant for the current debate on mandatory CSR and sustainability reporting. It also points scholars to avenues for future research.