Abstract

This paper proposes a managerial control tool that integrates risk in efficiency measures. Building on existing efficiency specifications, our proposal reflects the real banking technology and accurately models the relationship between desirable and undesirable outputs. Specifically, the undesirable output is defined as non-performing loans to capture credit risk, and is linked only to the relevant dimension of the output set. We empirically illustrate how our efficiency measure functions for managerial control purposes. The application considers a unique dataset of Costa Rican banks during the period 1998–2012. The results’ implications are mostly discussed at bank-level, and their interpretations are enhanced by using accounting ratios. We also show the usefulness of our tool for corporate governance by examining performance changes related to executive turnover. Our findings confirm that appointing CEOs from outside the bank is associated with significantly higher performance ex post executive turnover, thus suggesting the potential benefits of new organisational practices.

Mircea Epure is Assistant Professor in the Department of Economics and Business at Pompeu Fabra University. He holds a PhD degree from the Department of Business Economics and Administration at Universitat Autonoma de Barcelona. Mircea’s research focuses on management and accounting topics in economic organisations. Prof. Epure teaches Competitive Benchmarking at UPF Barcelona School of Management.

Esteban Lafuente, Universitat Politècnica de Catalunya (Barcelona Tech).

Authors

Mircea Epure

Assistant Professor
Pompeu Fabra University

Esteban Lafuente

Universitat Politècnica de Catalunya

Abstract

New products, services and ideas are often evaluated more favourably than similar but older items. Although several explanations exist, we identify an overlooked asymmetry in information about new and old items that emerges when people seek positive experiences and learn about the qualities of (noisy) alternatives by experiencing them. We analyse a simple learning model and demonstrate that in such settings most people will tend to evaluate a new alternative more positively than an older alternative with the same payoff distribution.  The reason is that, when people seek positive experiences and thus avoid selecting alternatives that led to poor payoffs again, this precludes additional feedback on their qualities. Negative quality estimates, even when caused by noise thus tend to persist. This negative bias takes time to develop, and affects old alternatives more strongly than similar but newer alternatives. An experimental study with 769 participants supports the predictions of our model.

Gaël Le Mens is an Associate Professor of Economics and Business and at Pompeu Fabra University. He holds a PhD from the Stanford Graduate School of Business, Stanford, USA. His research focuses on learning by individuals and organizations, and the dynamics of collective judgments and behavior. His work has been published in top international scientific journals such as Psychological Review, the Proceedings of the National Academy of Science of the USA (PNAS), Cognition, Behavioral and Brain Sciences, and Administrative Science Quarterly. Popular accounts have appeared in the New York Times, the Times (London), WSJ.com, FT.com, USA Today, ABCNews.com, Focus and other in-print and online periodicals. Gael Le Mens teaches Organizational Behavior at the Barcelona School of Management-UPF.

Yaakov Kareev, The Hebrew University of Jerusalem.

Avrahami Judith, The Hebrew University of Jerusalem.

Authors

Gaël Le Mens

Associate Professor of Economics and Business
Pompeu Fabra University

Yaakov Kareev

The Hebrew University of Jerusalem

Avrahami Judith

The Hebrew University of Jerusalem

Abstract

Risk pooling has been studied extensively in the operations management literature as the basic driver behind strategies such as transshipment, manufacturing flexibility, component commonality, and drop-shipping. This paper explores the benefit of risk pooling in the context of inventory management using the canonical model first studied in Eppen (1979). Specifically, we consider a single-period multi-location newsvendor model, where  different locations face independent and identically distributed demands and linear holding and backorder costs. We show that Eppen’s celebrated result, i.e., that the expected cost savings from centralized inventory management scale with the square root of the number of locations, depends critically on the “light-tailed” nature of the demand uncertainty. In particular, we establish that the benefit from α−1 pooling relative to the decentralized case, in terms of both expected cost and safety stock, is equal to n^((α-1)/α) for a class of heavy-tailed demand distributions (stable distributions), whose power-law asymptotic decay rate is determined by the parameter α ∈ (1, 2). Thus, the benefit from pooling under heavy-tailed demand uncertainty can be significantly lower than square root of n, which is predicted for normally distributed demands. We discuss the implications of this result on the performance of periodic-review policies in multi-period inventory management, as well as for the profits associated with drop-shipping fulfilment strategies. Corroborated by an extensive simulation analysis with heavy-tailed distributions that arise frequently in practice, such as power-law and log-normal, our findings highlight the importance of taking into account the shape of the tail of demand uncertainty when considering a risk pooling initiative.

Mihalis G. Markakis is assistant professor in the Department of Economics and Business at Pompeu Fabra University and holds a PhD from the Laboratory for Information and Decision Systems, at MIT. His research interests are in modelling, analysis, and optimization of stochastic systems and their applications to Operations Research and Management Science. His teaching is concentrated on the Master of Science in Management (specialization in Business Analytics) at UPF Barcelona School of Management.

Kostas Bimpikis, Graduate School of Business Stanford University.

Authors

Mihalis G. Markakis

Graduate School of Business Stanford University

Kostas Bimpikis

Graduate School of Business Stanford University

Abstract

This paper proposes a distance-based characterization of age-related structural inertia as an increasing constraint on the speed of change as organizations age. Our framework regards organizations as points in multi-dimensional metric spaces of architectures. Organizational change means movement in this space. The speed of change is the ratio of the distance between positions in a space and the time it took for the organization to make the move. We illustrate how our distance-based approach can be used to formulate theories of age-related organizational inertia by using this representation to develop a model for a possible mechanism: age-related cultural resistance to change based on the dynamics of exposure of organizational members to architectural features. Our proposed mechanism is distinct from prevailing explanations and leads to new predictions. We also illustrate the value of our distance-based approach in a re-analysis of Sørensen and Stuart’s (2000) study of age variations in firms’ patenting behavior. On the basis of patent citations, we construct a space that allows us to characterize the positions of organizations, and the speed at which they change. We find that organizational age has a negative effect on the speed of change.

Gaël Le Mens is an Associate Professor of Economics and Business at Pompeu Fabra University. He holds a PhD from the Stanford Graduate School of Business, Stanford, USA. His research focuses on learning by individuals and organizations, and the dynamics of collective judgments and behavior. His work has been published in top international scientific journals such as Psychological Review, the Proceedings of the National Academy of Science of the USA (PNAS), Cognition, Behavioral and Brain Sciences, and Administrative Science Quarterly. Popular publications have appeared in the New York Times, the Times (London), WSJ.com, FT.com, USA Today, ABCNews.com, Focus and other print and online periodicals. Gaël Le Mens teaches Organizational Behavior at the UPF Barcelona School of Management.

Michael T. Hannan, Graduate School of Stanford Business http://www.gsb.stanford.edu/faculty-research/faculty/michael-hannan

Laszlo Polos, Durham Univesity https://www.dur.ac.uk/research/directory/staff/?mode=staff&id=892

Authors

Gaël Le Mens

Associate Professor of Economics and Business
Pompeu Fabra University

Michael T. Hannan

Graduate School of Stanford Business

Laszlo Polos

Durham Univesity

Abstract

Hadi, Rhonda and Valenzuela, Ana (2014) “A Meaningful Embrace: Contingent Effects of Embodied Cues of Affection”. Journal of Consumer Psychology, forthcoming in the October issue

Can a mere gesture lead to intimate product bonding? In this research, we find that affectionate gestures (e.g. hugging, stroking) can serve as routes to object attachment.  We suggest that the mere execution of an affectionate gesture can generate emotional attachment, which translates into enhanced product attitudes.  However, this effect is contingent on the existence of facilitating conditions via the presence of humanlike characteristics in the target object of the affectionate gesture.

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Ana Valenzuela is the Academic Dean at UPF Barcelona School of Management. She is Associate Professor of Marketing at the Department of Economics and Business. She teaches the course Marketing Analytics at the UPF Barcelona School of Management.

Authors

Rhonda Hadi

Oxford University

Ana Valenzuela

Dean of UPF Barcelona School of Management
Pompeu Fabra University

Abstract

Banal-Estañol, Albert, Ottaviani, Marco and Winton, Andrew (2013) “The Flip Side of Financial Synergies: Coinsurance versus Risk Contamination.” Review of Financial Studies, 26(12), 3142-3181.

This paper characterizes when joint financing of two projects through debt increases expected default costs, contrary to conventional wisdom. Separate financing dominates joint financing when risk-contamination losses—that are associated with the contagious default of a well-performing project that is dragged down by the other project’s poor performance—outweigh standard coinsurance gains. Separate financing becomes more attractive than joint financing when the fraction of returns lost under default increases and when projects have lower mean returns, higher variability, more positive correlation, and more negative skewness. These predictions are broadly consistent with evidence on conglomerate mergers, spinoffs, project finance, and securitization.

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Albert Banal is Associate Professor of Finance at the Department of Economics and Business. He is Academic Director of the Master of Science in Finance and Banking and he teaches the Corporate Finance course at the UPF Barcelona School of Management.

Authors

Albert Banal-Estañol

Department of Economics and Business
Pompeu Fabra University UPF Barcelona School of Management

Marco Ottaviani

Bocconi University

Andrew Winton

University of Minnesota

Abstract

Hoever, Inga J., van Knippenberg, Daan, van Ginkel, Wendy P. and Barkema, Harry G. (2012) “Fostering team creativity: Perspective taking as key to unlocking diversity’s potential.” Journal of Applied Psychology, 97(5), 982-996.

Despite the clear importance of team creativity for organizations, the conditions that foster it are not very well understood. Even though diversity, especially diversity of perspectives and knowledge, is frequently argued to stimulate higher creativity in teams, empirical findings on this relationship remain inconsistent. We have developed a theoretical model in which the effect of a team’s diversity on its creativity is moderated by the degree to which team members engage in perspective taking. We propose that perspective taking helps realize the creative benefits of diversity of perspectives by fostering information elaboration. Results of a laboratory experiment support the hypothesized interaction between diversity and perspective taking on team creativity. Diverse teams performed more creatively than homogeneous teams when they engaged in perspective taking, but not when they were not instructed to take their team members’ perspectives. Team information elaboration was found to mediate this moderated effect and was associated with a stronger indirect effect than mere information sharing or task conflict. Our results point to perspective taking as an important mechanism to unlock diversity’s potential for team creativity.

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Inga Jasmin Hoever is Assistant Professor of Organizational Behavior at the Department of Economics and Business. She teaches the course Managing Teams and Negotiations at the UPF Barcelona School of Management.

Authors

Inga J. Hoever

Department of Economics and Business
Pompeu Fabra University UPF Barcelona School of Management

Daan van Knippenberg

Erasmus University Rotterdam

Wendy P. van Ginkel

Rotterdam School of Management

Harry G. Barkema

Rotterdam School of Management

Abstract

Colla, Paolo, Ippolito, Filippo and Li, Kai (2012) “Specialization.” Journal of Finance, 68(5), 2117-2141.

This paper examines debt structure using a new and comprehensive database on types of debt employed by public U.S. firms. We find that 85% of the sample firms borrow predominantly with one type of debt, and the degree of debt specialization varies widely across different subsamples—large rated firms tend to diversify across multiple debt types, while small unrated firms specialize in fewer types. We suggest several explanations for why debt specialization takes place, and show that firms employing few types of debt have higher bankruptcy costs, are more opaque, and lack access to some segments of the debt markets. Much attention has been devoted to the questions of why firms choose to issue debt over equity, and how optimal capital structure is designed to minimize a firm’s cost of financing (see the survey by Graham and Leary (2011) of the voluminous literature on capital structure). In this paper, we focus on a related, but much less studied topic in corporate finance, namely debt structure. Our goals are to explore the types of debt commonly employed by publicly listed U.S. firms, and to understand why some firms tend to use relatively few debt types, while others display a more diversified debt structure. To our knowledge, our paper is one of the first to provide large sample evidence on the subject.

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Filippo Ippolito is Associate Professor of Finance at the Department of Economics and Business. He teaches the course Financing for Start-ups and he is the coordinator of the corporate finance section at the UPF Barcelona School of Management.

Authors

Paolo Colla

Bocconi University

Filippo Ippolito

Department of Economics and Business
Pompeu Fabra University UPF Barcelona School of Management

Kai Li

University of British Columbia

Abstract

Anik, L., Aknin, L., Norton, M., Dunn, E., & Quoidbach, J. (2013). Prosocial bonuses increase employee satisfaction and team performance. PLoS ONE, 8, e75509. doi:10.1371/journal.pone.0075509

In three field studies, we explore the impact of providing employees and teammates with prosocial bonuses, a novel type of bonus spent on others rather than on oneself. In Experiment 1, we show that prosocial bonuses in the form of donations to charity lead to happier and more satisfied employees at an Australian bank. In Experiments 2a and 2b, we show that prosocial bonuses in the form of expenditures on teammates lead to better performance in both sports teams in Canada and pharmaceutical sales teams in Belgium. These results suggest that a minor adjustment to employee bonuses – shifting the focus from the self to others – can produce measurable benefits for employees and organizations.

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Jordi Quoidbach is Associate Professor at Pompeu Fabra University’s Department of Economics and Business. He has a PhD from the University of Liège, Belgium. His research has been published in journals such as Science, Behavioral and Brain Sciences, Psychological Science, and is often covered in popular media such as CNN, BBC, and The New York Times. Quoidbach has written several popular books on happiness and emotions. Jordi Quoidbach teaches Business Negotiations and Managing Happiness at the Barcelona School of Management-UPF.

Authors

Jordi Quoidbach

Department of Economics and Business
Universitat Pompeu Fabra and Barcelona School of Management

Lalin Anik

Duke University Fuqua School of Business

Lara B. Aknin

University of British Columbia

Michael I. Norton

Harvard Business School

Elizabeth W. Dunn

University of British Columbia

Abstract

Maria Galli and Gerald Gorn (2011). Unconscious transfer of meaning to brands. Journal of Consumer Psychology, vol. 21, 215-225

We examine semantic conditioning in a consumer context. We subliminally paired neutral ideographs with attributes. In experiment 1, the ideographs served as primes during a lexical decision task and slowed down response times to target words with the opposite semantic meaning. In experiment 2, the ideographs served as brand names of beverages, and attitudinal responses to them were less favorable when the associated attributes were incongruent with existing schemas. These results showed that semantic conditioning (1) can occur unconsciously, (2) can have significant and meaningful consequences for brand evaluation, and (3) influences subsequent attitudinal responses via conceptual disfluency processes.

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Maria Galli is an Assistant Professor at Pompeu Fabra University’s Department of Economics and Business. She teaches Integrated Communications at the Barcelona School of Management. Prof. Galli holds a PhD in Management from INSEAD, France. Her research has been published in the Journal of Consumer Psychology.

Authors

Maria Galli

Department of Economics and Business
Universitat Pompeu Fabra and Barcelona School of Management

Gerald Gorn

Hong Kong Polytechnic University

Abstract

Alberto Galasso, Mark Schankerman and Carlos J. Serrano, (2013). Trading and Enforcing Patent Rights. RAND Journal of Economics.

We study how the market for innovation affects enforcement of patent rights. We show that patent transactions arising from comparative advantages in commercialization increase litigation, but trades driven by advantages in patent enforcement reduce it. Using data on trade and litigation of individually-owned patents in the U.S., we exploit variation in capital gains tax rates across states as an instrument to identify the causal effect of trade on litigation. We find that taxes strongly affect patent transactions, and that trade reduces litigation on average, but the impact is heterogeneous. Patents with larger potential gains from trade are more likely to change ownership, and the impact depends critically on transaction characteristics.

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Carlos J. Serrano is an Assistant Professor of Economics and Business at Universitat Pompeu Fabra, where he teaches business economics, business strategy, and economic institutions and markets. He received his doctorate degree from the University of Minnesota in 2006. Professor Serrano’s research has been in the Economics of Innovation and Technological Change, and Entrepreneurship.
Carlos Serrano teaches Competitive Starategy and Technology Markets at the Barcelona School of Management-UPF.

Authors

Carlos J. Serrano

Department of Economics and Business
Universitat Pompeu Fabra and Barcelona School of Management

Alberto Galasso

University of Toronto Mississauga

Mark Schankerman

London School of Economics

Abstract

Jonah Berger y Gaël Le Mens (2009). How Adoption Speed Affects the Abandonment of Cultural Tastes Proceedings of the National Academy of Sciences of the United States (PNAS), 106:8146-8150

Products, styles, and social movements often catch on and become popular, but little is known about why such identityrelevant cultural tastes and practices die out. We demonstrate that the velocity of adoption may affect abandonment: Analysis of over 100 years of data on first-name adoption in both France and the United States illustrates that cultural tastes that have been adopted quickly die faster (i.e., are less likely to persist). Mirroring this aggregate pattern, at the individual level, expecting parents are more hesitant to adopt names that recently experienced sharper increases in adoption. Further analysis indicate that these effects are driven by concerns about symbolic value: Fads are perceived negatively, so people avoid identity relevant items with sharply increasing popularity because they believe that they will be short lived. Ancillary analyses also indicate that, in contrast to conventional wisdom, identity relevant cultural products that are adopted quickly tend to be less successful overall (i.e., reduced cumulative adoption). These results suggest a potential alternate way to explain diffusion patterns that are traditionally seen as driven by saturation of a pool of potential adopters. They also shed light on one factor that may lead cultural tastes to die out.

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Gaël Le Mens is an Associate Professor of Economics and Business and at Pompeu Fabra University. He holds a PhD from the Stanford Graduate School of Business, Stanford, USA. His research focuses on learning by individuals and organizations, and the dynamics of collective judgments and behavior. His work has been published in top international scientific journals such as Psychological Review, the Proceedings of the National Academy of Science of the USA (PNAS), Cognition, Behavioral and Brain Sciences, and Administrative Science Quarterly. Popular accounts have appeared in the New York Times, the Times (London), WSJ.com, FT.com, USA Today, ABCNews.com, Focus and other in-print and online periodicals. Gael Le Mens teaches Organizational Behavior at the Barcelona School of Management-UPF.

Authors

Gaël Le Mens

Department of Economics and Business
Universitat Pompeu Fabra and Barcelona School of Management

Jonah Berger

University of Pennsylvania

Abstract

Serra, D. (2013). Implementing Turf analysis through Binary Linear Programming, Food Quality and Preference, 28(1), 382-386

This paper introduces the approach of using Total Unduplicated Reach and Frequency analysis (TURF) to design a product line through a binary linear programming model. This improves the efficiency of the search for the solution to the problem compared to the algorithms that have been used to date. The results obtained through our exact algorithm are presented, and this method shows to be extremely efficient both in obtaining optimal solutions and in computing time for very large instances of the problem at hand. Furthermore, the proposed technique enables the model to be improved in order to overcome the main drawbacks presented by TURF analysis in practice.

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Daniel Serra is Full Professor at Pompeu Fabra University’s Department of Economics and Business. He graduated in 1984 in Economics from the University Autonoma of Barcelona, and obtained a Master in Systems Analysis and a PhD in the Whiting School of Engineering at Johns Hopkins University in 1989. His fields of specialization are logistics and quantitative methods in management.
Prof. Daniel Serra teaches Quantitative Methods at the Barcelona School of Management

Authors

Daniel Serra

Department of Economics and Business
Universitat Pompeu Fabra and Barcelona School of Management

Abstract

Cornelissen, G., Bashshur, M. R., Rode, J., & Le Menestrel, M. (2013). Rules or Consequences? The Role of Ethical Mind-Sets in Moral Dynamics. Psychological Science, 24(4), 482-488.

Recent research on the dynamics of moral behavior has documented two contrasting phenomena – moral consistency and moral balancing. Moral balancing refers to the phenomenon whereby behaving (un)ethically decreases the likelihood of doing so again at a later time. Moral consistency describes the opposite pattern – engaging in (un)ethical behavior increases the likelihood of doing so later on. Three studies support the hypothesis that individuals’ ethical mindset (i.e., outcome-based versus rule-based) moderates the impact of an initial (un)ethical act on the likelihood of behaving ethically in a subsequent occasion. More specifically, an outcome-based mindset facilitates moral balancing and a rule-based mindset facilitates moral consistency.

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This paper was discussed in:
* The New York Times
* Science Daily
* Psychology Today

Gert Cornelissen is Associate Professor at Pompeu Fabra University’s Department of Economics and Business. He has a PhD from the Catholic University of Leuven, Belgium. His research papers have been published in journals including Psychological Science, Personality and Social Psychology Bulleting, and the International Journal of Research in Marketing.
Prof. Cornelissen teaches Consumer Behavior at the Barcelona School of Management.

Marc Le Menestrel is Associate Professor at the Department of Economics and Business of University Pompeu Fabra (Barcelona, Spain) and Visiting Professor of Ethics at the Social Innovation Center of INSEAD (Fontainebleau, France). He holds a Ph.D. in Decision Sciences from INSEAD.
Prof. Le Menestrel teaches Rationality and Ethical Values at the Barcelona School of Management

Authors

Gert Cornelissen

Department of Economics and Business
Universitat Pompeu Fabra and Barcelona School of Management

Marc Le Menestrel

Department of Economics and Business
Universitat Pompeu Fabra and Barcelona School of Management

Julian Rode

Helmholtz Centre for Environmental Research – UFZ

Michael R. Bashshur

Singapore Management University

Abstract

Epure, M., Prior, D. & Serarols, C. (2013). Assessing Technology- based Spin-offs from University Support Units. Barcelona GSE, Working Paper Series, nº 650.

This paper takes a regional studies approach to assess the efficiency of technology-based spin-offs that benefited from financial and infrastructure aid. It does so by following the objectives of
institutions for regional support and provides evidence on spin-offs created within the special case of a technology transfer network placed at Catalan universities. We contribute to the literature in at least two ways. First, we detect and conceptualise the specific regional objectives and the associated inputs and outputs needed to assess firms created at university-based support units. Second, an application provides empirical insights into regional mechanisms for firm creation. Results indicate that many efficient spin-offs have formal technology transfer agreements and emerge from universities with more technological background. Second stage analyses show that higher levels of innovation and specific academic knowledge or experience related with the university of origin are associated with higher efficiency. Concluding remarks focus on regional policy making and future research directions.

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Mircea Epure is an Assistant Professor at the Department of Economics and Business, Universitat Pompeu Fabra. He holds a PhD degree from the Department of Business Economics and Administration at Universitat Autonoma de Barcelona. Mircea’s research focuses on management and accounting topics in economic organisations.
Prof. Epure teaches Competitive Benchmarking at the Barcelona School of Management

Authors

Mircea Epure

Department of Economics and Business
Universitat Pompeu Fabra and Barcelona School of Management

Diego Prior

Department of Business Economics
Universitat Autònoma de Barcelona

Christian Serarols

Department of Business Economics and Administration
Universitat Autònoma de Barcelona

Abstract

Kunnumkal, S. & Talluri, K. (2012). A New Compact Linear Programming Formulation for Choice Network Revenue Management. Barcelona GSE, Working Paper Series, nº 677.

The choice network revenue management model incorporates customer purchase behavior as a function of the offered products, and is the appropriate model for airline and hotel network revenue management, dynamic sales of bundles, and dynamic assortment optimization. The optimization problem is a stochastic dynamic program and is intractable. A certainty equivalence relaxation of the dynamic program, called the choice deterministic linear program (CDLP) is usually used to generate dynamic controls. Recently, a compact linear programming formulation of this linear program was given for the multi-segment multinomial-logit (MNL) model of customer choice with non-overlapping consideration sets. Our objective is to obtain a tighter bound than this formulation while retaining the appealing properties of a compact linear programming representation. To this end, it is natural to consider the affine relaxation of the dynamic program. We first show that the affine relaxation is NP-complete even for a single-segment MNL model. Nevertheless, by analyzing the affine relaxation we derive a new compact linear program that approximates the dynamic programming value function better than CDLP, provably between the CDLP value and the affine relaxation, and often coming close to the latter in our numerical experiments. When the segment consideration sets overlap, we show that some strong equalities called product cuts developed for the CDLP remain valid for our new formulation. Finally we perform extensive numerical comparisons on the various bounds to evaluate their performance.

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Kalyan Talluri is an ICREA Research Professor and has been teaching at UPF since 1995.
Prof. Talluri teaches Internet Marketing and E-commerce at the Barcelona School of Management

Authors

Kalyan Talluri

Department of Economics and Business
Universitat Pompeu Fabra and Barcelona School of Management

Summit Kunnumkal

Indian School of Business, Hyderabad