Management & Organization Theses and Dissertations
Permanent URI for this collectionhttp://hdl.handle.net/1903/2789
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Item The Impact of Earnings Manipulation on the Science and Practice of Strategic Management(2021) Gibbs, Ralph Anthony; Waguespack, David; Agarwal, Rajshree; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Strategic management research frequently seeks to explain variation in organizational performance using metrics such as accounting profits scaled by firm assets (ROA). Essay 1 addresses a concern with such accrual-based accounting methods—perhaps best illustrated by a large discontinuity in the distribution of ROA around zero for U.S. public firms—that operational and accounting practices will artificially inflate/deflate accounting profit. The essay establishes that such earnings management is common, introduces non-classical noise, and distorts our understanding of broad drivers of firm performance. It concludes with an analysis showing that an alternative performance measure, Cash Flows from Operations on Assets (OCFOA), offers a robust vehicle for checking results using accounting profits. Essay 2 addresses a core prediction of the behavioral theory of the firm—that a firm is more likely to engage in strategic change when its performance falls short of its aspirations. If a firm manipulates income to report above aspirations when otherwise it would have fallen short, this creates a theoretical tension—does the firm engage in strategic change or not? This study utilizes two instrumental variables for a firm’s capability to smooth earnings to analyze the linkage between earnings smoothing and strategic change. The results suggest that public firms actively smoothing earnings have a lower propensity to subsequently change the firm’s major resource allocations, and that avoiding reporting performance below aspirations is a mechanism through which this may occur.Item Essays on the Consequences of Market Democratization for Organizations(2019) Shi, Yuan; Waguespack, David M; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)My dissertation investigates how organizations’ boundary spanning decisions are impacted by the democratization of market mediation, which is defined as a shift in the balance of power from professional intermediaries to laypeople in the market and is often induced by crowd-based technologies and institutional changes. The first study examines how democratization affects boundary spanning in creative production through a quasi-experiment in the Billboard charts that shifted the power of influence from specialized intermediaries to lay consumers. I find that after genre radio stations’ power to define market hits is diluted by average consumers, producers are more likely to introduce offerings that traverse market boundaries to appeal to a broader audience, as is captured by a measure of crossover appeal based on the objective features of song recordings. Meanwhile, the democratization effect varies by organization and is weaker for specialists and those with moderate experience. These findings suggest that intermediaries who are specialized in a market may be more protective of the market’s boundaries than lay consumers due to their greater knowledge and larger stakes in the clarified boundaries. As such, the major impediment to boundary spanning may be intermediaries, not consumers. The second study investigates how professional intermediaries, such as venture capital (VC) firms, change their boundary decisions following democratization events, such as the legalization of equity crowdfunding. VCs may be attracted to the novel opportunities identified by crowdfunding investors, and thus diversify their investments. VCs may also seek to differentiate from the crowd by positioning as dedicated experts, and thus become more specialized in their investments. I test these ideas by leveraging the legalization of equity-based crowdfunding in more than twenty states in the US during 2009-2017. I find that VCs make more specialized investments after the crowdfunding policy shocks in their home states, but the effect is attenuated when VCs and crowdfunding investors share similar investment focus. Mechanism tests indicate that specialization is driven by a crowd-out effect, whereas diversification is explained by a lead-in effect. Taken together, my dissertation documents the causal effects of the increasing influence of the crowd on organizations’ strategic decisions.Item ESSAYS ON A DEMAND-SIDE DRIVER OF MARKET ENTRY(2018) Byun, Heejung; Agarwal, Rajshree; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In this three-essay dissertation, I explore the role of demand-pull in new market entry given repeated transactions with embedded prior transaction partners. I investigate a demand-side driver of entrepreneurial spin-outs and diversifying entrants into a new market through recurring transactions between buyers (clients) and suppliers (firms). In the first chapter, I examine the performance of diversification driven by embedded client ties, "client-led diversifiers." I focus on diversifications intended to cater to an existing client's needs and its adverse effect on firm performance. In doing so, I explore the potential tension embedded client ties create vis-à-vis firm capabilities. I find support for the negative impact of client-led diversifications on firm performance. In the second chapter, I further explore the new market performance of client-led entrants. I focus on the role of clients’ selection in entering a new market and argue that such selection predicts firm and individual performance variations in the new market. The third essay explores how individuals become entrepreneurial entrepreneurs when they experience an increase in the value of relational capital. I examine how a discontinuous increase in the value of an employee’s relational capital influences her mobility and entrepreneurship decisions. Empirically, I exploit the reporting requirements mandated by the Lobbying Disclosure Act of 1995 to construct a unique transaction-level database between lobbyists and clients for lobbying service on lobbying issues in the United States federal lobbying industry between 1999 and 2008. In the first two chapters, I exploit the exogenous creation of the "Homeland Security" issue market after the 9/11 terrorist attack to identify the effect of client-led diversification on firm performance. In chapter three, I use a sample of revolving door lobbyists who are lobbyists-turned-ex-staffers of a politician in the U.S. federal lobbying industry between 1999 and 2008. I leverage plausibly exogenous and large shocks to the value of an employee’s relational capital in testing the hypotheses.