Showing papers by "HEC Paris published in 2011"
TL;DR: In this article, the authors introduce the source method, a tractable method for quantitatively analyzing uncertainty empirically, within which subjective (choice-based) probabilities can still be defined.
Abstract: We often deal with uncertain events for which no probabilities are known. Several normative models have been proposed. Descriptive studies have usually been qualitative, or they estimated ambiguity aversion through one single number. This paper introduces the source method, a tractable method for quantitatively analyzing uncertainty empirically. The theoretical key is the distinction between different sources of uncertainty, within which subjective (choice-based) probabilities can still be defined. Source functions convert those subjective probabilities into willingness to bet. We apply our method in an experiment, where we do not commit to particular ambiguity attitudes but let the data speak.
497 citations
TL;DR: Regularized generalized canonical correlation analysis (RGCCA) as mentioned in this paper combines the power of multi-block data analysis methods (maximization of well identified criteria) and the flexibility of PLS path modeling (the researcher decides which blocks are connected and which are not).
Abstract: Regularized generalized canonical correlation analysis (RGCCA) is a generalization of regularized canonical correlation analysis to three or more sets of variables. It constitutes a general framework for many multi-block data analysis methods. It combines the power of multi-block data analysis methods (maximization of well identified criteria) and the flexibility of PLS path modeling (the researcher decides which blocks are connected and which are not). Searching for a fixed point of the stationary equations related to RGCCA, a new monotonically convergent algorithm, very similar to the PLS algorithm proposed by Herman Wold, is obtained. Finally, a practical example is discussed.
290 citations
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TL;DR: The very nature of luxury goods, the variety of consumption situations and the everlasting philosophical debate over luxury lead to particularly complex and ambivalent consumer attitudes, as evidenced by a first study based on the content analysis of in-depth interviews as mentioned in this paper.
Abstract: The very nature of luxury goods, the variety of consumption situations and the everlasting philosophical debate over luxury lead to particularly complex and ambivalent consumer attitudes, as evidenced by a first study based on the content analysis of in-depth interviews. A second study, based on surveys in twenty countries using finite mixture modeling, identifies three types of consumer rapport to luxury.
279 citations
TL;DR: The authors examined the corporate environmental disclosures of 90 U.S. firms and found that firms derive different reputational rewards depending on whether they conform to the goal or procedure dimension of the environmental transparency norm.
Abstract: Deviance from social norms has been extensively examined in recent strategy research, leaving the strategic implications of conformity largely unexplored. In this article, we argue that firms can elect to conform to a norm along two dimensions: compliance with the goal and level of commitment to the procedures. We then produce a typology of four norm-conforming behaviors, which allows us to isolate differentiated effects of conformity on firm reputation. We examine the corporate environmental disclosures of 90 U.S. firms and find that firms derive different reputational rewards depending on whether they conform to the goal or procedure dimension of the environmental transparency norm. In addition, the relationship between conformity and reputation is moderated by the firm's prior reputation and the stringency of the normative environment. Copyright © 2011 John Wiley & Sons, Ltd.
254 citations
TL;DR: In this paper, a survey of 830 independent inventors and 300 individuals from the general population was used to discriminate between the two theories, and the results showed that inventor-entrepreneurs typically have a more varied labor market experience, and that varied work experience is associated with lower household income.
228 citations
TL;DR: In this article, the authors provide general evidence from the U.S. showing that the gross flow of science and engineering university graduates' start-ups is at least an order of magnitude larger than faculty spin-offs, that a recent graduate is twice as likely as her Professor to start a business within three years of graduation, and that the graduates’ spinoffs are not of low quality.
Abstract: Earlier research on the role of universities in fostering entrepreneurial economic development almost exclusively covers spin-offs by faculty and staff. In contrast, we provide general evidence from the U.S. showing that the gross flow of science and engineering university graduates’ start-ups is at least an order of magnitude larger than faculty spin-offs, that a recent graduate is twice as likely as her Professor to start a business within three years of graduation, and that the graduates’ spin-offs are not of low quality. Three case studies illustrate how universities may stimulate science and engineering students and recent graduates to create new firms of high quality. We conclude that transforming university goals and practices toward increasing start-ups led by faculty might not be the most effective way for universities to stimulate entrepreneurial economic development.
225 citations
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TL;DR: This paper investigated the differences in economic attitudes and financial decisions between religious and non-religious households and found that religious households consider themselves more trusting, and have a stronger bequest motive and a longer planning horizon, while Protestants combine a more external locus of control with a greater sense of financial responsibility.
Abstract: We investigate the differences in economic attitudes and financial decisions between religious and non-religious households. Using Dutch survey data, we find that religious households consider themselves more trusting, and have a stronger bequest motive and a longer planning horizon. Furthermore, Catholics attach more importance to thrift and are more risk averse, while Protestants combine a more external locus of control with a greater sense of financial responsibility. Religious households are more likely to save. Catholic households invest less frequently in the stock market. Economic attitudes are particularly helpful in explaining the financial decisions of Catholic households.
182 citations
TL;DR: It is hypothesized that power and choice are substitutable; that is, the absence of one would increase the desire for the other, which, when acquired, would serve to satisfy the broader need for control.
Abstract: Power and choice represent two fundamental forces that govern human behavior. Scholars have largely treated power as an interpersonal construct involving control over other individuals, whereas choice has largely been treated as an intrapersonal construct that concerns the ability to select a preferred course of action. Although these constructs have historically been studied separately, we propose that they share a common foundation—that both are rooted in an individual’s sense of personal control. Because of this common underlying basis, we hypothesized that power and choice are substitutable; that is, we predicted that the absence of one would increase the desire for the other, which, when acquired, would serve to satisfy the broader need for control. We also predicted that choice and power would exhibit a threshold effect, such that once one source of control had been provided (e.g., power), the addition of the other (e.g., choice) would yield diminishing returns. Six experiments provide evidence supporting these predictions.
174 citations
TL;DR: In this paper, the authors report the results of a longitudinal study based on panel data of 414 companies in the German mechanical engineering industry collected over a five-year period and provide empirical evidence for the causality between service infusion strategies and manufacturers' profit trajectories.
173 citations
TL;DR: Lee et al. as mentioned in this paper used a multitask model of occupational choice in which frictions in the labor market induce mismatches between firms and workers, and misassignment of workers to tasks.
Abstract: Recent evidence has shown that entrants into self-employment are disproportionately drawn from the tails of the earnings and ability distributions. This observation is explained by a multitask model of occupational choice in which frictions in the labor market induce mismatches between firms and workers, and misassignment of workers to tasks. The model also yields distinctive predictions relating prior work histories to earnings and to the probability of entry into self-employment. These predictions are tested with the Korean Labor and Income Panel Study, from which we find considerable support for the model.
This paper was accepted by Lee Fleming, entrepreneurship and innovation.
172 citations
TL;DR: In this paper, the authors examine when established firms participate in corporate venture capital and find that firms in industries with rapid technological change, high competitive intensity and weak appropriability engage in greater CVC activity.
TL;DR: In this article, the authors study the relation between the ownership structure of financial assets and non-fundamental risk, and they define an asset to be fragile if it is susceptible to nonfundamental shifts in demand.
TL;DR: In this article, the authors extend the dynamic capability view and research on organizational path dependence by arguing that path dependence can be a property of capabilities when a contingently-triggered capability path is subject to self-reinforcement (i.e., a set of positive and negative mechanisms that increases the attractiveness of a path relative to others).
Abstract: This paper extends the dynamic capability view and research on organizational path dependence by arguing that path dependence can be a property of capabilities when a contingently-triggered capability path is subject to self-reinforcement (i.e. a set of positive and negative mechanisms that increases the attractiveness of a path relative to others). The paper introduces an evolutionary perspective, which specifies the underlying selection mechanisms of the property of path dependence in internal and external firm environments. This theorization sheds new light on three paradoxes that currently blur the theoretical contribution of path dependence to research at the managerial, organizational, and industry levels: (1) the problematic coexistence of path irreversibility and managerial intentionality; (2) the ambivalent strategic value of lock-in with regard to competitive advantage; and (3) the relative homogeneity in observed dynamic capabilities, despite their (possible) path dependence that should lead to...
TL;DR: This article found that bad mood does lead to greater purchase and consumption of unplanned treats for the self and that those individuals who do indulge can also exercise restraint if the goal of restraint also leads to improved mood.
Abstract: “Retail therapy” is often applied to the notion of trying to cheer oneself up through the purchase of self-treats. The negative moods that lead to retail therapy, however, have also been associated with greater impulsivity and a lack of behavioral control. Does this lead to mindless shopping when consumers are “down” and regret later? The current work documents that a bad mood does lead to greater purchase and consumption of unplanned treats for the self. However, it also provides evidence that the consumption of self-treats can be strategically motivated. Those individuals who do indulge can also exercise restraint if the goal of restraint also leads to improved mood. Finally, retail therapy has lasting positive impacts on mood. Feelings of regret and guilt are not associated with the unplanned purchases made to repair a bad mood. The implications of the research are discussed. © 2011 Wiley Periodicals, Inc.
TL;DR: This article analyzed the predictors of job satisfaction that may arise in an expatriate context, drawing on the cultural distance perspective, they proposed that the national cultural distance, supervisor's nationality, host-country language proficiency, expat type, and company nationality are important determinants of expat job satisfaction.
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TL;DR: In this paper, the authors explore performance measurement practices in the pharmaceutical industry with particular focus on the inscribing (or tracing) of pharmaceutical representatives (drug reps) responsible for the promotion of prescription medications to general practitioners and other healthcare professionals.
Abstract: In this paper we explore performance measurement practices in the pharmaceutical industry with particular focus on the inscribing (or ‘tracing’) of pharmaceutical representatives (‘drug reps’) responsible for the promotion of prescription medications to general practitioners and other healthcare professionals. We draw upon Latour’s sociology of translation to explore performance measures in the organizational field of pharmaceutical companies operating in France. Access to sales data is heavily circumscribed by government regulation of the health sector: doctors’ prescriptions that generate sales remain hidden from pharmaceutical companies. We explore how organizational actors build control and address problems of ‘circulating reference’ (Latour, 1999) in this setting. We show how ambivalence, opacity, bricolage, and practical actions enabled by inscription devices strengthen networks of performance measurement. In so doing, we contribute to the sociology of translation by highlighting how weak references can perform and circulate without reversibility in the chains of transformation between matters and forms. We also seek to add to and to depart from the literature on performance measurement focusing on transparency and certainty as key features for ‘successful’ implementation of performance measures.
TL;DR: This article found that people preferred to hire a more expensive CEO when the alternative candidate requested a frivolous perk as part of his compensation package, an effect mediated by the informativeness of his request.
TL;DR: In this article, Wu et al. report on the results of an experimental elicitation at the individual level of all prospect theory components (i.e., utility, loss aversion, and weighting functions) in two decision contexts: situations where alternatives are described as probability distributions and situations where the decision maker must experience unknown probability distributions through sampling before choice.
Abstract: This paper reports on the results of an experimental elicitation at the individual level of all prospect theory components (i.e., utility, loss aversion, and weighting functions) in two decision contexts: situations where alternatives are described as probability distributions and situations where the decision maker must experience unknown probability distributions through sampling before choice. For description-based decisions, our results are fully consistent with prospect theory's empirical findings under risk. Furthermore, no significant differences are detected across contexts as regards utility and loss aversion. Whereas decision weights exhibit similar qualitative properties across contexts typically found under prospect theory, our data suggest that, for gains at least, the subjective treatment of uncertainty in experience-based and description-based decisions is significantly different. More specifically, we observe a less pronounced overweighting of small probabilities and a more pronounced underweighting of moderate and high probabilities for experience-based decisions. On the contrary, for losses, no significant differences were observed in the evaluation of prospects across contexts.
This paper was accepted by George Wu, decision analysis.
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TL;DR: In this paper, a theoretical interpretation of the "flash-crash" of may 2010 is presented, and the equilibrium level of investment in algorithmic trading is analyzed, showing that for a given level of trading, multiple equilibria can arise, some of which generate market exclusion for slow traders and sharp increases in the price impact of trades.
Abstract: Algorithms enable investors to locate trading opportunities, which raises gains from trade. Algorithmic traders can also process information on stock values before slow traders, which generates adverse selection. We model trading in this context and show that, for a given level of algorithmic trading, multiple equilibria can arise, some of which generate market exclusion for slow traders and sharp increases in the price impact of trades. We offer a theoretical interpretation for the "flash-crash" of may 2010. Next, we analyze the equilibrium level of investment in algorithmic trading. Because when others become fast it increases adverse selection costs for slow investors, algo-trading generates negative externalities. Therefore the equilibrium level of algo-trading exceeds its utilitarian welfare maximizing counterpart. Furthermore, since it involves fixed costs, investment in algorithmic trading is more pro table for large institutions than for small ones. This generates equilibrium informational asymmetries between large fast traders and small slow traders.
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TL;DR: In this article, a unified methodology for product line optimization that coordinates positioning and design models to achieve realizable firm-level optima is presented. But the method is managerially valuable, as it yields product line solutions efficiently, accounting for marketing-based preference heterogeneity as well as engineering-based constraints on which product attributes can be realized.
Abstract: Successful product line design and development often requires balancing technical and market trade-offs. Quantitative methods for optimizing product attribute levels using preference elicitation (e.g., conjoint) data are useful for many product types. However, products with substantial engineering content involve critical trade-offs in the ability to achieve those desired attribute levels. Technical trade-offs in a product’s design must be made with an eye toward market consequences, particularly when heterogeneous market preferences make differentiation and strategic positioning critical to capturing a range of market segments and avoiding cannibalization. We present a unified methodology for product line optimization that coordinates positioning and design models to achieve realizable firm-level optima. The approach overcomes several shortcomings of prior product line optimization models by incorporating a general Bayesian account of consumer preference heterogeneity, managing attributes over a continuous domain to alleviate issues of combinatorial complexity, and avoiding solutions that are impossible to realize. The method is demonstrated for a line of dial-readout scales, using physical models and conjoint-based consumer choice data. Results show that the optimal number of products in the line is not necessarily equal to the number of market segments; that an optimal single product for a heterogeneous market differs from that for a homogeneous one; and that the representational form for consumer heterogeneity has a substantial impact on the design and profitability of the resulting optimal product line – even for the design of a single product. The method is managerially valuable, as it yields product line solutions efficiently, accounting for marketing-based preference heterogeneity as well as engineering-based constraints on which product attributes can be realized.
TL;DR: In this paper, the authors define frictions as incomplete linkages in the industry value chain that keep some parties from meeting and transacting, and show that firms with a competitive advantage prefer industries with lower levels of frictions than their disadvantaged rivals.
Abstract: We use a formal value-based model to study how frictions in the product market affect value creation and value capture. We define frictions as incomplete linkages in the industry value chain that keep some parties from meeting and transacting. Frictions, which arise from search and switching costs, vary across markets and over time as, for example, products commoditize and competition becomes more global. Importantly, frictions moderate the intensity of industry rivalry, as well as the efficiency of the market. We find that firms with a competitive advantage prefer industries with lower levels of frictions than their disadvantaged rivals. We show that the impact of rivalry on industry attractiveness cannot be analyzed independently of other competitive forces such as barriers to entry and buyer bargaining power. We introduce resource development in our model to study the emergence and sustainability of competitive advantage. Firm heterogeneity emerges naturally in our model. We show that the extent of firm heterogeneity falls with the level of frictions, but sustainability increases. Overall, we show that introducing frictions makes value-based models of strategy even more effective at integrating analyses at the industry, firm and resource levels.
TL;DR: In this article, the authors draw on the resource-based view of the firm and the alliance benefits and costs literature to advance a model of value creation in firms that access network resources through multiple simultaneous strategic alliances with different partners.
Abstract: We draw on the resource-based view of the firm and the alliance benefits and costs literature to advance a model of value creation in firms that access network resources through multiple simultaneous strategic alliances with different partners. Our model suggests that value creation on the alliance portfolio level is a function of the benefits created through synergistic combinations of network resources accessed through alliances with different partners and of the costs generated by the substitutability of resource combinations between the focal firm and its alliance partners. We specify the conditions under which firms can leverage their network resources accessed from alliances with different partners to create benefits above and beyond the benefits they create at the level of any individual alliance. We conclude that the value creating potential of network resources should not only be evaluated on the basis of each individual alliance but also from an alliance portfolio perspective.
TL;DR: In this article, the impact of time on risk preferences was investigated in a simple experimental design based on the comparison of two monetary lotteries with the same delay, and the authors found that subjects become more risk-tolerant for delayed lottery games.
Abstract: Intertemporal decision making under risk involves two dimensions: time preferences and risk preferences. This paper focuses on the impact of time on risk preferences, independent of the intertemporal trade-off of outcomes, i.e., time preferences. It reports the results of an experimental study that examines how delayed resolution and payment of risky options influence individual choice. We used a simple experimental design based on the comparison of two-outcome monetary lotteries with the same delay. Raw data clearly reveal that subjects become more risk tolerant for delayed lotteries. Assuming a prospect theory--like model under risk, we analyze the impact of time on utility and decision weights, independent of time preferences. We show that the subjective treatment of outcomes (i.e., utility) is not significantly affected by time. In fact, the impact of time is completely absorbed by the probability weighting function. The effect of time on risk preferences was found to generate probabilistic optimism resulting in a higher risk tolerance for delayed lotteries.
This paper was accepted by Teck Ho, decision analysis.
TL;DR: A study examined whether desire would trump beliefs based on facts when participants were asked if they believe home care is superior to day care and concluded that evaluations of purported scientific evidence were shaped more by what would-be-parents desired to be true than by what they had initially believed to betrue.
Abstract: The article discusses a study which examined whether desire would trump beliefs based on facts when participants were asked if they believe home care is superior to day care. It also examind whether would-be-parents would change their initial beliefs to conform to their plans and desires. The study concluded that evaluations of purported scientific evidence were shaped more by what would-be-parents desired to be true than by what they had initially believed to be true.
TL;DR: The authors showed that the impact of Machina's examples is not restricted to the model initially targeted, but also for the four most popular and widely used models of ambiguity-averse preferences, namely maxmin expected utility (Itzhak Gilboa and Schmeidler 1989), variational preferences (Fabio Maccheroni, Massimo Marinacci, and Aldo Rustichini 2006), a-maxmin, and the smooth model of ambiguity aversion (Peter Klibanoff, Marinacci and Sujoy Mukerji 2005).
Abstract: Daniel Ellsberg (1961) constructed counterexamples to show the limitations of Leonard J. Savage's (1954) subjective expected utility (SEU). Ellsberg's examples involved a comparison between objective uncertainty (risk), in which probabilities are known, and subjective uncertainty, in which they are not. The prevailing prefer ence for objective over subjective uncertainty, known as ambiguity aversion, raised an important paradox for economic theory. Since Ellsberg's classical work, many models have been developed to generalize SEU, in order to accommodate the pref erence for objective over subjective uncertainty. In the same manner as Ellsberg, Mark J. Machina (2009) proposed two examples that falsify one of the SEU generalizations, David Schmeidler's (1989) Choquet expected utility (CEU). This article shows that the impact of Machina's examples is not restricted to the model initially targeted. His examples pose difficulties not only for CEU, but also for the four other most popular and widely used models of ambiguity-averse preferences, namely maxmin expected utility (Itzhak Gilboa and Schmeidler 1989), variational preferences (Fabio Maccheroni, Massimo Marinacci, and Aldo Rustichini 2006), a-maxmin (Paolo Ghirardato, Maccheroni, and Marinacci 2004), and the smooth model of ambiguity aversion (Peter Klibanoff, Marinacci, and Sujoy Mukerji 2005). Consequently, the implications for economics are more pro found than initially thought. We also discuss Marciano Siniscalchi's (2009) vector expected utility (VEU) model, which can account for the typical ambiguity-averse preferences in Machina's examples. Finally, we examine how our results are related to the uncertainty aver sion axiom, which is assumed in virtually all commonly used decision models under ambiguity. In particular, we argue that Machina's examples demonstrate that the uncertainty aversion axiom can be overly restrictive in some circumstances. The article proceeds as follows. Section I presents the four models of ambiguity averse preferences, which are alternatives to CEU, and which are examined in this paper. In Section II and III, the implications of Machina's examples for these models are presented. Section IV discusses alternative models and the uncertainty aversion axiom.
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TL;DR: In this article, the authors present an analysis of the relationships between research objects, research design, and the implications of research findings, based on a sample of papers dealing with the rarity of women at the highest levels of accountancy.
Abstract: This paper proposes a reflexive examination of research into the rarity of women at the highest hierarchical levels of accountancy, with the aim of contributing to the transformation of gendered structures of domination. We practice reflexivity in two ways. First, we provide an analysis of the relationships between research objects, research design, and the implications of research findings, based on a sample of papers dealing with the rarity of women at the highest levels of accountancy.We show that self-proclaimed “neutral” research that rejects any form of prediction is adopting an illusory position which is detrimental to the situation of women. We also point out the risks associated with taking a subjective stance, which can be involuntarily detrimental to the cause it intends to serve.Second, we draw on our various experiences at conferences. We show that our intention to transform the structures of domination has led us to adapt our own discourses, seeking to convince reluctant audiences by adopting a pragmatic style. We also discuss how conferences have shaped our research choices and interests, while making us aware of our own potential tendency towards universalism and a biased standpoint as Western scholars.
TL;DR: The raw legitimacy vector (RLV) as mentioned in this paper is a multidimensional measure of legitimacy, which accounts for the heterogeneity of perceptions across space and time, and has been proposed for the global defense industry.
Abstract: Measures of organizational legitimacy fall in three categories, based, respectively, on the observation of code adoption, firm linkages, and media coverage. Such variety reflects the absence of consensus definitions. Because legitimacy involves perceptions of social congruence, the author argues in favor of a perceptual measure based on media content analysis. The author extends existing media-based indicators by offering a multidimensional measure of legitimacy, the raw legitimacy vector (RLV), which accounts for the heterogeneity of perceptions across space and time. The article details a three-step methodology to compute RLV and illustrates its applicability using data on the global defense industry. The author finds strong support for RLV’s factorial, convergent, discriminant, and criterion-related validity and demonstrates that RLV performs better than alternative measures. The paper contributes to research by identifying four stable dimensions of legitimacy (environment, competition, accountability,...
TL;DR: A model of fit between environmental requirements and integrated solutions capabilities in the IT sector is tested and suggests the existence of four different configurations and indicates that differences in fit betweenEnvironmental variables and strategic choices partially account for performance differences among integrated solution providers.
Abstract: Integrated bundles of products and services are gaining importance in various sectors and are reshaping the competitive landscape of many industries. They also pose new challenges to established firms, who need to reconfigure their capabilities. Drawing upon the resource-based view and contingency theory, we test a model of fit between environmental requirements and integrated solutions capabilities in the IT sector. We used the model to interpret the current industry structure and analyze its dynamics. The analysis suggests the existence of four different configurations and indicates that differences in fit between environmental variables and strategic choices partially account for performance differences among integrated solution providers. The results also suggest that, although the provision of bundled products and services confers some a priori advantages to IS providers over generic IT firms, these advantages are greater for firms that are able to align their capabilities to the characteristics of their operational environment.
TL;DR: In this paper, the authors present an algorithm to compute the set of perfect public equilibrium payoffs as the discount factor tends to 1 for stochastic games with observable states and public (but not necessarily perfect) monitoring when the limiting set of (long run players') equilibrium payoff is independent of the initial state.
Abstract: We present an algorithm to compute the set of perfect public equilibrium payoffs as the discount factor tends to 1 for stochastic games with observable states and public (but not necessarily perfect) monitoring when the limiting set of (long-run players') equilibrium payoffs is independent of the initial state. This is the case, for instance, if the Markov chain induced by any Markov strategy profile is irreducible. We then provide conditions under which a folk theorem obtains: if in each state the joint distribution over the public signal and next period's state satisfies some rank condition, every feasible payoff vector above the minmax payoff is sustained by a perfect public equilibrium with low discounting.
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TL;DR: In this paper, a positive relationship between minority participation and alternative conformity is found, and that relationship is attenuated by organizations' adherence to a dominant logic, the centrality of minority logic holders and a minority logic's institutional credit.
Abstract: To what extent do organizations respond favorably to minority participation-that is, conform to demands from minority resource suppliers that hold an unconventional logic? A favorable response to minority participation (i.e., "alternative conformity") helps decrease the influence of dominant players, alter the resource suppliers' social structure, and promote new logics, which makes alternative conformity a "son control strategy" for organizations. We expect a positive relationship between minority participation and alternative conformity and expect that relationship to be attenuated by organizations' adherence to a dominant logic, the centrality of minority logic holders, and a minority logic's institutional credit. We test and find strong support for our hypotheses using original data on investment funds in the French film industry (1994-2008).