Management & Organization

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MONEY MATTERS: PIONEERING OF PLATFORMS UNDER INSTITUTIONAL UNCERTAINTY IN THE GLOBAL MOBILE MONEY INDUSTRY
(2022) Wormald, Audra; Agarwal, Rajshree; Braguinsky, Serguey; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation seeks to better understand the phenomenon of industry emergence in settings characterized by high uncertainty. To examine mechanisms underlying industry emergence and growth, I compiled a unique, hand-collected, comprehensive quantitative and qualitative dataset of the global mobile money industry. The first study examines variation in pioneering firm characteristics on choices to integrate capabilities within or across firm boundaries and to create network externalities through open or closed end user access to the mobile money platform. An analysis of the census of mobile money pioneering firms extends theories developed in traditional industrial settings by showing that pioneers were equally likely to engage in external and internal integration, with diversifying entrants less likely to internally integrate than startups. A deep data dive reveals how capabilities and motivations can be brought together to understand heterogeneity in firm choices for platform ecosystem development and underscores the importance of experimentation to resolve demand and ecosystem uncertainty to generate direct and indirect network effects. This study unpacks the relationship between institutional uncertainty and industry emergence by examining two sources of institutional uncertainty: pre-existing market institutions (e.g., impersonal rule of law) and industry-specific institutions (e.g., regulations). As more industries of today are emerging globally, additional research is needed to understand how industry emergence may be affected by institutional uncertainty that differs from one country context to the next. This study examines the emergence of the mobile money industry across the African continent to understand 1) how variation in market institutions across countries influences firm entry and 2) the ways in which market institutions influence the regulatory approach for developing industry-specific institutions. My findings reveal that pre-existing market institutions related to colonial history are associated with variations in both entry patterns and approaches to developing industry-specific institutions. This study sheds light on the path dependencies at play across these two types of institutions, industry emergence, and innovation diffusion, enhancing our theoretical understanding of industry emergence across countries that vary in market-supporting institutions. Together, this body of research underscores the importance of uncertainty reduction and experimentation for innovative solutions that provide a sustained solution to thorny societal problems. This is particularly critical in the poorest nations in the world, where underlying market institutions may be missing or inadequate, but can emerge and grow with industries.
Innovation Strategies for Digital Assets & Wealth Management
(2021-12) Shorter, Charles; Taylor, James; Jones, Jessica; Sanford, Kevin; Kobloth, Nicholas; Dastidar, Protiti
The University of Maryland ALP team serves as an independent research body to the Wealth ecosystem to explore Innovation Strategies for Digital Assets & Wealth Management. During the consult the team conducted a comprehensive case study to identify key data points for solution development which would support the incorporation of Cryptocurrencies into ‘traditional' financial advisory segments. The research is built in conjunction with industry leader Envestnet which specializes in the B2B FinTech, Wealth & Financial Advisory segments for independent advisors and high net worth individuals. The authors presents the essentials of the Wealth Management industry from the perspective of Registered Independent Advisor (RIA) firms that provide financial advice and planning for clients.
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.
ESSAYS ON TECHNOLOGY CHANGE AND FIRM CAPABILITIES IN NASCENT MARKETS: EVIDENCE FROM THE BIONIC PROSTHETIC INDUSTRY
(2021) Kim, Seojin; Agarwal, Rajshree; Goldfarb, Brent; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
My first essay examines how radical technological systems are created by economic actors that are heterogeneous in both their prior history and their experimentation efforts, and the implications for their value capture strategies. Defining radical technologies based on their effect on existing technological regimes, scholars have studied incumbent-entrant dynamics based on whether incumbents can offset the obsolescence of their technological capabilities by utilizing complementary capabilities or by adapting to technological change. I identify important limitations stemming from such a definition of radical technologies and utilize the alternative definition of radical technology as a technological system that utilizes new base principles at either component or system level. We utilize historical methodology to analyze rich quantitative and qualitative data on the incubation and commercialization of bionic prosthetics. We show that the component knowledge for the new technological system was created by diverse firms—startups, conventional prosthetic incumbents, and established firms in other industries. However, incumbents who invested in the new technology system were key to creating an integrated system for bionic prosthetics and dominated in commercialization efforts in the nascent industry. Startups captured value through licensing or being acquired by incumbents, and established firms in other industries were knowledge spillover conduits, given their focus on alternative nascent downstream markets to capitalize on their existing capabilities. The second essay examines how and why the sources of entrepreneurial knowledge, namely prior experience that founders gained in academic, user, and employee settings, may affect market strategies of new ventures. While prior studies did not examine the heterogeneity of pre-entry knowledge in predicting strategy and performance of startups, I argue that each firm type possesses a distinct comparative knowledge advantage regarding key elements of the industry’s technological system, thereby leading to firm differences in technological and value chain positioning. I assembled the quantitative and qualitative data of 106 prosthetic startups created between 1991-2017. My results indicate that academic startups were likely to choose component-level products based on nascent technology, while employee startups were likely to choose finished products based on established technology. Also, user startups were likely to choose niche, component-level products leveraging established technology. Through qualitative data, I interpret my findings to suggest that entrepreneurs’ strategic choices are constrained by their initial strengths and the cost of acquiring additional resources. Together, I suggest that entrepreneurial strategy can be better understood by considering the interaction of the types of entrepreneurial knowledge and the industry’s technological system.
Essays on Motives and Market Outcomes
(2015) Stroube, Bryan Kaiser; Waguespack, David M.; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation examines the existence of heterogeneous motives in markets, particularly how a tension between profit motives and other utility can shape outcomes for organizations and individuals. I explore this tension in the context of biases, organizational identity, and investment behavior. Each of the three empirical chapters employs decision-level data from a different online crowdfunding platform. Academic researchers and the general public are increasingly interested in the phenomenon of "crowdfunding." The term, however, encompasses an incredibly diverse set of activities---ranging from the facilitation of for-profit start-up investments to the charitable funding of medical procedures. This diversity can make it difficult to generalize research insights from studies of any particular instance of the phenomenon. In the introductory chapter I develop a general framework for understanding the source of observed behavior on crowdfunding platforms given some simple assumptions about platform policies.The goal is to provide context for the subsequent chapters of the dissertation. The first empirical chapter examines biases against demographic groups, which are typically explained by one of two mechanisms: either decision makers have a taste for one demographic group over another, or demographics are employed as informational proxies for other unobserved but economically important traits. These mechanisms are difficult to empirically untangle despite the theoretical and practical importance of separating them. I attempt to do so in a Chinese peer-to-peer lending market by leveraging a loan guarantee policy that reduces the economic rationale for lenders to discriminate on borrower demographics such as gender and geography. Comparison of pre- and post-policy periods therefore provides a fruitful tool for measuring the degree of taste versus informational bias. I find that female borrowers appear to receive a preferential informational bias but a negative taste bias, while lenders' geographic bias toward borrowers located in the same province appears to be driven predominately by informational processes and not taste. These findings have implications for multiple sets of decision makers and underscore the theoretical importance of accounting for motives. Chapter two examines the potentially conflicting investment motives found on a non-profit hybrid identity crowdfunding platform, where simultaneous market-like and charity-like motives may lead lenders to respond differently to funding requests from entrepreneurs who appear to have high economic ability and high personal need. I survey actual lenders on the platform to measure their stated preferences for borrowers who fit each of these categories. I find that 1) lenders vary in their preference for these categories and this preference is correlated with their demographics, and 2) past loans made by lenders with an above-average preference for both need and ability were funded faster than loans in other categories. These results highlight how actors' preferences are largely endogenous to the market in which they are observed. In the final chapter I present the results of a simple online experiment conducted in conjunction with a peer-to-peer lending website. Potential lenders were presented randomized versions of the platform's lender registration web page. The content of the page varied in whether it promoted the potential social benefit of lending versus only the financial benefit. No difference was found between the treatment and control groups. The experiment provides some insight into how lenders self-select into crowdfunding activity and may serve as a model for similar experiments on other platforms.
THE STRATEGIC NETWORKS AND PERFORMANCE OF ENTREPRENEURIAL FIRMS: IMPACT OF PRE-FOUNDING TIES.
(2014) Gaonkar, Shweta; Agarwal, Rajshree; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation examines the effect of founders’ background in shaping alliance ties and firm performance of new ventures. In the first chapter, I examine how founders’ prior affiliations contribute to the formation of network ties for new ventures founded by employee entrepreneurs. Prior research on employee entrepreneurship attributes the success of new ventures founded by employees (called spinouts ) to knowledge inheritance from founders’ previous employers (parents). However, studies on new venture alliances suggest that the success of new firms stems from establishing strategic alliances with other firms. I bridge the gap between these two literatures by examining how the knowledge accumulated by the spinout’s founder influences the new venture’s alliance partner choice, using a panel data of pharmaceutical and medical device firms from 1986 to 2012. The findings suggest that a spinout that is similar to its parent in terms of technology and product markets is likely to form marketing, manufacturing, or funding ties with firms that have no parent ties. Conversely, a spinout that is not similar to its parent more likely to form commercialization ties with firms that have indirect ties to the parent, as a way to deal with the risk of collaborating with its parent and its partners. Finally, a spinout that has different technology but operates in a similar market, as its parent is likely to forge commercialization ties with the parent’s partners. In the second chapter, I examine how heterogeneity in the founders’ backgrounds affects the start–up ’s performance. I examine two types of founder backgrounds: employee and academic entrepreneurs. Employee entrepreneurs have relevant industry experience due to their founders ’ prior affiliation, whereas academically founded firms are endowed with research–related resources through their founders’ experience. I use the panel data of academic and employee start–ups in the pharmaceutical and medical device industry, 1986–2013. I find that academic start–ups have higher research output and smaller alliance networks than do employee start–ups. Further, the founders’ background has no impact on the start–up’s performance outcome; instead, it shapes the patents and alliance ties formed by them.
Employee Departure from Organizations: Three Empirical Essays
(2013) Carnahan, Seth; Agarwal, Rajshree; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
My dissertation includes three essays which focus on employee departure from organizations. In the first two essays, I study how employee departure allows individuals to capture more value from their firms. The third essay examines the effect of employee departure on firm performance. Each essay identifies an important theoretical puzzle or tension related to employee departures and sheds light on its resolution through careful research design. In total, this dissertation aims to challenge the way that researchers typically think about employee departures, both theoretically and empirically. The theoretical puzzle in the first essay relates to the connection between the failure of one firm and the birth of other firms. Does the failure of a rival firm cause the employees of existing firms to create entrepreneurial startups? On the one hand, theory suggests that the answer is yes - rival failures may release resources that potential entrepreneurs can use to start new firms. On the other hand, theory suggests that the answer is no - rival failures indicate to potential entrepreneurs that the environment is not munificent enough to support new entry. Using US Census data on the legal services industry, I disentangle these two arguments by examining law firm failures that are preceded by the unexpected deaths of highly paid attorneys. I find strong evidence that these quasi-random failures (which are likely to be weakly related to the broader economic environment) cause attorneys in rival firms to create startups, while other types of rival failures depress entry rates, probably because they proxy for weakness in the local industry. This essay thus provides a theoretical rationale for when the failure of one firm will lead to the creation of another while demonstrating an often-discussed but rarely demonstrated positive side effect of firm failure - a failed firm provides the component parts for new organizations. The puzzle in my second essay relates to the effect that one employee's departure has on the bargaining power and monetary earnings of his or her colleagues. This issue is likely particularly salient for members of underrepresented groups within an organization, such as women in American law firms, which, like the first essay, is the context of this study. Theory might dictate that the departure of a highly paid woman would hurt her female colleagues' earnings by reducing their bargaining power through the elimination of a mentor and advocate. However, an alternative mechanism suggests that the departure of a highly paid woman might provide her colleagues with increased bargaining power due to a relative scarcity of women in the organization. Using unexpected death as a stand-in for departure, I find that women experience an 8% average increase in earnings after a female colleague passes away suddenly. This increase is significantly larger than what women experience when the deceased colleague is male, and it outpaces gains that male attorneys experience when a colleague of either gender passes away. Additional analyses suggest that the departure of a woman from a law firm may imbue her female colleagues with increased bargaining power related to client acquisition or the firm's interest in maintaining gender diversity. The primary contribution of this essay is to point out a paradox related to the bargaining power of underrepresented groups. While much of the organizations' literature suggests that a group's overall bargaining power will increase as a function of the group's size, I find that an individual's bargaining power increases as the size of her overall group shrinks. The third essay extends the literature connecting employee departures and organizational performance by inserting the firm's manager in the causal process linking employee departure to organizational performance. The theoretical puzzle I address in this essay is whether managerial tenure weakens or exacerbates employee level turnover's negative effect on organizational performance. Managers with longer tenure may have superior knowledge of their firm's routines and remaining stock of human resources, allowing them to respond effectively to key employee departure. However, theories related to organizational inertia suggest an opposite effect: managerial stability may reduce an organization's ability to respond to change. I analyze data from the National Football League to test this argument. Using injuries to quarterbacks as a quasi-random source of employee departure and casting the head coach as the team's top manager, I find support for the second argument. Analyses indicate that NFL teams whose coaches have longer tenure perform worse following quarterback injury. The contribution of this essay is to show that stability at one level of the organization can exacerbate turmoil at another level, perhaps due to the ossification of the organization's ability to alter its routines.

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