Operations
'The best defence.' or optimal offence/defence spending ratios in the NFL
Kevin McGee, Lee Van Scyoc & Nancy Burnett
Applied Economics Letters, Spring 2012, Pages 717-720
Abstract:
An original data set built from all 32 National Football League (NFL) teams, covering 2000-2009, is used to produce a production function for professional football. We use spending on salaries, divided between offensive and defensive players, as inputs to produce season wins. Our data suggest that the optimal strategy is simply to have a strategy, meaning teams with balanced spending tend to do worse than those with a more strategic allocation towards either offence or defence.
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Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961-1999
David Lee & Alexandre Mas
Quarterly Journal of Economics, February 2012, Pages 333-378
Abstract:
We estimate the effect of new private-sector unionization on publicly traded firms' equity value in the United States over the 1961-1999 period using a newly assembled sample of National Labor Relations Board (NLRB) representation elections matched to stock market data. Event-study estimates show an average union effect on the equity value of the firm equivalent to $40,500 per unionized worker, an effect that takes 15 to 18 months after unionization to fully materialize, and one that could not be detected by a short-run event study. At the same time, point estimates from a regression discontinuity design - comparing the stock market impact of close union election wins to close losses - are considerably smaller and close to zero. We find a negative relationship between the cumulative abnormal returns and the vote share in support of the union, allowing us to reconcile these seemingly contradictory findings.
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Does Linking Worker Pay to Firm Performance Help the Best Firms Do Even Better?
Douglas Kruse, Joseph Blasi & Richard Freeman
NBER Working Paper, January 2012
Abstract:
This paper analyzes the linkages among group incentive methods of compensation, labor practices, worker assessments of workplace culture, turnover, and firm performance in a non-representative sample of companies: firms that applied to the "100 Best Companies to Work For in America" competition from 2005 to 2007. Although employers with good labor practices self- select into the 100 Best Companies firms sample, which should bias the analysis against finding strong associations among modes of compensation, labor policies, and outcomes, we find that in the firms that make more extensive use of group incentive pay employees participate more in decisions, have greater information sharing, trust supervisors more, and report a more positive workplace culture than in other companies. The combination of group incentive pay with policies that empower employees and create a positive workplace culture reduces voluntary turnover and increases employee intent to stay and raises return on equity. Finding these effects in the non-representative "100 Best Companies" sample strengthens the likelihood that the policies have a causal impact on employee well-being and firm performance.
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Willis Jones
Journal of Sports Economics, forthcoming
Abstract:
In recent years, there has been increased research exploring the relationship between college/university intercollegiate athletic expenditures and team on-field success. Scope and methodological limitations of this previous research, however, suggest the need for further empirical research in this area. This study uses regression analyses with time and institutional fixed effects and several control variables to investigate the relationship between college/university athletic department expenditures and overall athletic department on-field success. The findings indicate that institutional athletic expenditures are strongly correlated with team on-field performance among Football Bowl Subdivision (FBS) institutions but not among non-FBS institutions.
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Value Destruction in the New Era of Chapter 11
Barry Adler, Vedran Capkun & Lawrence Weiss
Journal of Law, Economics, and Organization, forthcoming
Abstract:
Over the past two decades, control over the US bankruptcy reorganization process has shifted from a debtor's pre-bankruptcy managers to holders of secured claims. The result has been increased adherence to absolute priority and a harder landing for the debtor's managers and shareholders. Because managers still make or can influence the decision whether or when to file a bankruptcy petition, we hypothesize that anticipation of bankruptcy under these new conditions will result in a delay in filing, increased leverage, increased secured debt, and a reduction of asset value for firms at the time they file. We present empirical evidence consistent with our hypotheses.
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Dedicate Your Life to the Company! A Terror Management Perspective on Organizations
Eva Jonas et al.
Journal of Applied Social Psychology, December 2011, Pages 2858-2882
Abstract:
Terror management research has examined many institutions and beliefs, which provide people with a sense of psychological security against death awareness. However, one important area has yet to receive attention: the workplace. For many employees, corporate culture is not only connected to earning a salary, but also to a sense of security and even personal transcendence. We present evidence that pro-company judgments can serve as psychological defenses under existential threat. In Study 1, following mortality salience, employees gave a more favorable evaluation of the company-praising essay and a more negative evaluation of the critical one. In Study 2, employees and students at a German university were more likely to endorse aspects of organizational culture under mortality salience.
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Wintertime for Deceptive Advertising?
Jonathan Zinman & Eric Zitzewitz
NBER Working Paper, February 2012
Abstract:
Casual empiricism suggests that deceptive advertising about product quality is prevalent, and several classes of theories explore its causes and consequences. We provide some unusually sharp empirical evidence on the extent, mechanics, and dynamics of deceptive advertising. Ski resorts self-report substantially more natural snowfall on weekends. Resorts that plausibly reap greater benefits from exaggerating do it more. Data on website visits suggests that consumers are appropriately skeptical of weekend reports. We find little evidence that competition restrains or encourages exaggeration. Near the end of our sample period, a new iPhone application feature makes it easier for skiers share information on ski conditions in real time. Exaggeration falls sharply, especially at resorts with better iPhone reception.
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Xavier Giroud et al.
Review of Financial Studies, March 2012, Pages 680-710
Abstract:
Based on a sample of highly leveraged Austrian ski hotels undergoing debt restructurings, we show that reducing a debt overhang leads to a significant improvement in operating performance. Changes in leverage in the debt restructurings are instrumented with Unexpected Snow, which captures the extent to which a ski hotel experienced unusually good or bad snow conditions prior to the debt restructuring. Unexpected Snow provides lending banks with the counterfactual of what would have been the ski hotel's operating performance in the absence of strategic default, allowing them to distinguish between ski hotels that are in distress due to negative demand shocks ("liquidity defaulters") and those that are in distress due to debt overhang ("strategic defaulters").
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Daniel Deli
Journal of Sports Economics, forthcoming
Abstract:
Since the publication of Michael Lewis's book, Moneyball, there has been a commonly held belief that getting on-base percentage (OBP) is more important in run production than hitting for power slugging percentage (SLG). Implicit in that conclusion is an assumption that OBP and SLG are drawn from similar distributions. The author finds, however, that they are drawn from meaningfully different distributions. Controlling for those differences, the author finds no evidence that OBP is more important in run production than SLG. In fact, the author finds that from 1980 to 2007 SLG was more important in run production than OBP.
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Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management
Maria Guadalupe, Hongyi Li & Julie Wulf
NBER Working Paper, February 2012
Abstract:
This paper shows that top management structures in large US firms radically changed since the mid-1980s. While the number of managers reporting directly to the CEO doubled, the growth was driven primarily by functional managers rather than general managers. Using panel data on senior management positions, we explore the relationship between changes in executive team composition, firm diversification, and IT investments - which arguably alter returns to exploiting synergies through corporate-wide coordination by functional managers in headquarters. We find that the number of functional managers closer to the product ("product" functions i.e., marketing, R&D) increase as firms focus their businesses, while the number of functional managers farther from the product ("administrative" functions i.e., finance, law, HR) increase with IT investments. Finally, we show that general manager pay decreases as functional managers join the executive team suggesting a shift in activities from general to functional managers - a phenomenon we term "functional centralization."
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Piece rates and workplace injury: Does survey evidence support Adam Smith?
Keith Bender, Colin Green & John Heywood
Journal of Population Economics, January 2012, Pages 569-590
Abstract:
While piece rates are routinely associated with higher productivity and wages, they can also generate unanticipated effects. Using cross-country European data, we provide among the first general survey evidence of a strong link between piece rates and workplace injury. Despite controls for workplace hazards, job characteristics and worker effort, piece rates workers suffer a 5 percentage point greater likelihood of injury. This remains despite attempts to control for endogeneity and heterogeneity. As piece rate wage premium estimates rarely control for injury likelihood, this raises the specter that part of that premium reflects a compensating wage differential for risk of injury.
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The Fundamental Role of Workplace Fun in Applicant Attraction
Michael Tews, John Michel & Albert Bartlett
Journal of Leadership & Organizational Studies, February 2012, Pages 105-114
Abstract:
The present study extended previous research on fun in the workplace by examining the influence of workplace fun in the context of applicant attraction. Specifically, this research examined the impact of workplace fun relative to other key predictors of applicant attraction. Furthermore, this research examined the impact of different sources of workplace fun - fun coworker interactions, fun job responsibilities, and formal fun activities. With a sample of collegiate job seekers, the results demonstrated that workplace fun was a stronger predictor of applicant attraction than compensation and opportunities for advancement. Moreover, the results demonstrated that fun coworker interactions and fun job responsibilities were stronger predictors of applicant attraction than formal fun activities.
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CEO Pay Cuts and Forced Turnover: Their Causes and Consequences
Huasheng Gao, Jarrad Harford & Kai Li
Journal of Corporate Finance, forthcoming
Abstract:
We study large discrete decreases in CEO pay and compare them to CEO forced turnover. The determinants are similar, as are the performance improvements after the action. After the pay cut, the CEO pay-for-performance sensitivity is abnormally high, such that the CEO can restore his pay level by reversing the poor performance. After either a pay cut or forced turnover, CEOs reduce investment and leverage, and improve performance, on average. Together, our results show that the possibility of these large compensation cuts provides ex ante incentives for CEOs to exert effort to avoid poor performance and that CEOs take actions to improve poor performance once pay is cut. The similarity of the causes and outcomes of large pay cuts compared to forced turnover suggests that large pay cuts are used as a substitute for forced turnover, helping to explain why forced turnover is rare.
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Competition Between Organizational Groups: Its Impact on Altruistic and Antisocial Motivations
Lorenz Goette et al.
Management Science, forthcoming
Abstract:
Firms are often organized into groups. Group membership has been shown empirically to have positive effects, in the form of increased prosocial behavior toward in-group members. This includes an enhanced willingness to engage in altruistic punishment of inefficient defection. Our paper provides evidence of a dark side of group membership. In the presence of cues of competition between groups, a taste for harming the out-group emerges: punishment ceases to serve a norm enforcement function, and instead, out-group members are punished harder and regardless of whether they cooperate or defect. Our results point to a mechanism that might help explain previous mixed results on the social value of punishment, and they contribute to understanding the sources of conflict between groups. They also point to an important trade-off for firms: introducing competition enhances within-group efficiency but also generates costly between-group conflict.
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Anastasiya Zavyalova et al.
Academy of Management Journal, forthcoming
Abstract:
We contribute to research on the management of social perceptions by considering the relative effectiveness of a firm's technical and ceremonial actions in managing media coverage after its own or its competitors' wrongdoing. We examine these relationships in the context of product recalls by U.S. toy companies over a ten-year period, 1998-2007. Consistent with our hypotheses, firms with higher levels of wrongdoing experience less positive media coverage; however, this decline is mitigated during periods of higher industry wrongdoing. Additionally, we find support for a negative spillover effect: the tenor of media coverage about a focal firm is less positive if others in the industry recall products. Further, technical actions help firms attenuate the negative effect of their own wrongdoing on the tenor of media coverage, whereas ceremonial actions amplify this effect. In contrast, ceremonial actions are more effective in attenuating the negative effect of industry wrongdoing on the tenor of media coverage about the focal firm.
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Incentive Schemes, Sorting and Behavioral Biases of Employees: Experimental Evidence
Ian Larkin & Stephen Leider
American Economic Journal: Microeconomics, forthcoming
Abstract:
We investigate how the convexity of a firm's incentives interacts with worker overconfidence to affect sorting decisions and performance. We demonstrate experimentally that overconfident employees are more likely to sort into a non-linear incentive scheme over a linear one, even though this reduces pay for many subjects and despite the presence of clear feedback. Additionally, the linear scheme attracts demotivated, underconfident workers who perform below their ability. Our findings suggest that firms may design incentive schemes that adapt to the behavioral biases of employees to "sort in" ("sort away") attractive (unattractive) employees; such schemes may also reduce a firm's wage bill.
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The Effect of Home Advantage, Momentum, and Fighting on Winning in the National Hockey League
Benjamin Leard & Joanne Doyle
Journal of Sports Economics, October 2011, Pages 538-560
Abstract:
Using game-level data, the authors estimate models of team success and test for the effect of three specific factors on game outcomes in professional ice hockey. First, they estimate the home ice advantage and find that much of it can be attributed to rules advantages for the home team. Second, contrary to previous studies on momentum, the authors find some evidence that game-to-game momentum has a positive effect on winning. Finally, the authors test the impact of fighting on the likelihood of winning and find that winning fights does not lead to winning games.
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Measuring the Welfare Gain from Personal Computers
Jeremy Greenwood & Karen Kopecky
Economic Inquiry, forthcoming
Abstract:
The welfare gain to consumers from the introduction of personal computers (PCs) is estimated. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consumption of computers is zero. This implies that the good will not be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated/estimated using standard national income and product account data. The welfare gain from the introduction of PCs is 2%-3% of consumption expenditure.
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Avi Goldfarb & Mo Xiao
American Economic Review, December 2011, Pages 3130-3161
Abstract:
We examine US local telephone markets shortly after the Telecommunications Act of 1996. The data suggest that more experienced, better-educated managers tend to enter markets with fewer competitors. This motivates a structural econometric model based on behavioral game theory that allows heterogeneity in managers' ability to conjecture competitor behavior. We find that manager characteristics are key determinants in managerial ability. This estimate of ability predicts out-of-sample success. Also, the measured level of ability rises following a shakeout, suggesting that our behavioral assumptions may be most relevant early in the industry's life cycle.
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Does Ownership Type Matter for Corporate Social Responsibility?
Lammertjan Dam & Bert Scholtens
Corporate Governance, forthcoming
Research Question/Issue: This study examines how different types of owners relate to corporate social responsibility (CSR).
Research Findings/Insights: We use firm-level data for more than 600 European firms from 16 countries and 35 industries for 2005. We find that ownership by employees, individuals, and firms is associated with relatively poor corporate social policies of the firms they invest in. In contrast, the holdings by banks and institutional investors as well as those by the state appear to be neutral in this respect.
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John Dencker
Industrial Relations, January 2012, Pages 152-169
Abstract:
I develop and test a structural-historical account of corporate reductions in force (RIF) to assess whether this widespread process was redistributive or efficient. I argue that changes in the context of restructuring in recent decades, coupled with substantial changes in organizational compensation systems, lead to temporal variation in the likelihood of "broken-contract" RIF, in which firms terminate highly paid managers, and "trimming the fat" RIF, in which firms terminate low-performing managers. Analyses of personnel records from a Fortune 500 manufacturing firm indicate that low performance leads to increased risk of separation in each of the two RIF undertaken by the firm, with the effect becoming stronger over time in part because of changes in the firm's performance management system. By contrast, high wages were a more important factor explaining departure during the firm's RIF in the 1980s - when competitive pressures to default on bonded contracts were strong - than during its RIF in the 1990s.
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The Signaling Role of Promotions: Further Theory and Empirical Evidence
Jed DeVaro & Michael Waldman
Journal of Labor Economics, January 2012, Pages 91-147
Abstract:
An extensive theoretical literature investigates the role of promotions as a signal of worker ability. We extend the theory by focusing on how the signaling role of promotion varies with education and then investigate the resulting predictions using a longitudinal data set that contains detailed information concerning the internal-labor-market history of a medium-sized firm in the financial services industry. Our results support signaling being important for understanding the differences between promotion practices concerning bachelor's and master's degree holders, while the evidence concerning the importance of signaling for high school graduates and PhDs is mixed.
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More than just the mean: Moving to a dynamic view of performance-based compensation
Christopher Barnes, Jochen Reb & Dionysius Ang
Journal of Applied Psychology, forthcoming
Abstract:
Compensation decisions have important consequences for employees and organizations and affect factors such as retention, motivation, and recruitment. Past research has primarily focused on mean performance as a predictor of compensation, promoting the implicit assumption that alternative aspects of dynamic performance are not relevant. To address this gap in the literature, we examined the influence of dynamic performance characteristics on compensation decisions in the National Basketball Association (NBA). We predicted that, in addition to performance mean, performance trend and variability would also affect compensation decisions. Results revealed that performance mean and trend, but not variability, were significantly and positively related to changes in compensation levels of NBA players. Moreover, trend (but not mean or variability) predicted compensation when controlling for future performance, suggesting that organizations overweighted trend in their compensation decisions. Theoretical and practical implications are discussed.
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Andrew Nutting
Journal of Sports Economics., forthcoming
Abstract:
National Basketball Association home teams produce more defense and more wins the more consecutive games they play at home, suggesting home games serve as on-the-job training for future games during the same homestand. Home teams produce less defense and fewer wins the more days off during a homestand, suggesting training intensity increases productivity. A possible explanation is that teams develop communication skills specific to their home environments and/or adapt to referee bias toward home teams as homestands progress. Homestand training significantly weakens as the season progresses. Visiting teams show similar, but weaker, training effects with respect to roadtrip length and productivity.
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Stanislav Dobrev
Journal of Management Studies, forthcoming
Abstract:
Although it is often acknowledged that organizational structure and career outcomes are related, developed theory on how formal features of the design affect inter-firm job mobility is incomplete. I focus on organizational size and structural differentiation and relate them to ideas about internal labor markets, organizational senescence, bureaucratic complexity, and resource endowments. Analyzing data on the early career histories of professional managers, I find that the negative effect of organizational size on quits weakens with organizational age while a firm's elaborate hierarchy monotonically increases quits in all but very large firms. I interpret these effects as potential mechanisms for linking demographic processes between and within organizations and as a basis for integrating research in corporate demography and career mobility.
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Stephen Burks & Erin Krupka
Management Science, January 2012, Pages 203-217
Abstract:
We use an incentive-compatible economic experiment and surveys in the field at a large financial services firm to identify the norms for on-the-job behavior among financial advisers and their leaders, and the normative expectations each group has of the other. We examine whistle-blowing on a peer, an incentive clash between serving the client and earning commissions, and a dilemma about fiduciary responsibility to a client. We find patterns of agreement among advisers, among leaders, and between the two groups, that are consistent with company guidelines identified ex ante. However, we also find measurable differences between what leaders expect and the actual norms of advisers. When there is such a mismatch we are able to distinguish miscommunication from ethical disagreement between leaders and advisers. Finally, we show that when advisers' personal ethical opinions do not match group norms, this mismatch is correlated with job dissatisfaction and lying for money in a second experiment.
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Sociometric badges: Using sensor technology to capture new forms of collaboration
Taemie Kim et al.
Journal of Organizational Behavior, April 2012, Pages 412-427
Abstract:
This article introduces sociometric badges as a research tool that captures with great accuracy fine-scale speech patterns and body movements among a group of individuals at a scale that heretofore has been impossible in groups and teams studies. Such a tool offers great potential for studying the changing ecology of team structures and new modes of collaboration. Team boundaries are blurring as members disperse across multiple cultures, convene through various media, and operate in new configurations. As the how and why of collaboration evolves, an opportunity emerges to reassess the methods used to capture these interactions and to identify new tools that might help us create synergies across existing approaches to teams research. We offer sociometric badges as a complement to existing data collection methods - one that is well-positioned to capture real-time collaboration in new forms of teams. Used as one component in a multi-method approach, sociometric badges can capture what an observer or cross-sectional survey might miss, contributing to a more accurate understanding of group dynamics in new teams. We also revisit traditional teams research to suggest how we might use these badges to tackle long-standing challenges. We conclude with three case studies demonstrating potential applications of these sociometric badges.