Robert H. Smith School of Business
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Item Arbitrage Free Approximations to Candidate Volatility Surface Quotations(MDPI, 2019-04-21) Madan, Dilip B.; Schoutens, WimIt is argued that the growth in the breadth of option strikes traded after the financial crisis of 2008 poses difficulties for the use of Fourier inversion methodologies in volatility surface calibration. Continuous time Markov chain approximations are proposed as an alternative. They are shown to be adequate, competitive, and stable though slow for the moment. Further research can be devoted to speed enhancements. The Markov chain approximation is general and not constrained to processes with independent increments. Calibrations are illustrated for data on 2695 options across 28 maturities for 𝑆𝑃𝑌 as at 8 February 2018.Item PAY SYSTEM EFFECTIVENESS IN ORGANIZATIONAL CHANGE: UNDERSTANDING HOW AND WHEN PERCEIVED PAY EQUITY AND PAY EQUALITY AFFECT ADAPTIVE TEAM PERFORMANCE(2017) Li, Ning; Liao, Hui; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In today’s fast-paced economy, organizations undergo changes almost constantly in order to survive or maintain competitive. Under such backdrop, it is important to understand how pay system can help teams adapt and perform well when organizational change disrupts existing ways of collective functioning. However, little theoretical effort has been given to this important topic. The main purpose of this dissertation is to develop theory that explains how pay system can be leveraged to facilitate adaptive team performance. I extend the management literature by clarifying 1) what pay system characteristics are important for promoting adaptive team performance, 2) how such pay system characteristics take effects to shape adaptive team performance and, 3) when such pay system characteristics are more or less instrumental for benefiting adaptive team performance. Specifically, I first propose that adaptive team performance is a function of two pay system characteristics: pay equity and pay equality. Next, I argue that pay equity and pay equality contribute to adaptive team performance through distinct mechanisms. That is, the pay equity operates through facilitating planned coordination; while pay equality operates through facilitating emergent coordination. Last, I predict that interdependence uncertainty serves as a boundary condition to weaken the effects of pay equity on team coordination and adaptive team performance, but strengthen the effects of pay equality on team coordination and adaptive team performance. I tested these hypotheses in a manufacturing firm during a period it went through a major organizational change. Using a sample of 207 production teams, I found evidence that largely supported my theoretical model. This dissertation not only offers a more sophisticated understanding of pay system effectiveness in organizational change, but also provides improved prescriptions for organizations and managers.Item HISTORICAL EXPLANATION IN STRATEGY RESEARCH: LEARNING BY SCALING IN THE EARLY AMERICAN AUTOMOBILE INDUSTRY(2019) Devanatha Pillai, Sandeep; Goldfarb, Brent; Kirsch, David; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation uses the historical explanation to engage in an abductive study of the early American automobile industry (1895-1918). The dissertation suggests that historical explanation is a valuable complement to abductive research. Historical explanation increases the number of hypotheses considered through the temporal perspective it offers and through contextualization. Historical explanation also adjudicates between likely hypotheses to determine the loveliest explanation by evaluating explanatory coherence and consilience. Further, the practical use of the historical explanation is demonstrated by analyzing the challenges that firms faced while attempting to scale manufacturing during the early American automobile industry (1895-1918). The analysis identifies metalworking knowledge as a specific pre-entry capability that mattered and demonstrates that process innovation is critical from a very early industry stage. Thus, this dissertation enhances strategy literature's understanding of why and how scholars should engage with historical explanation.Item Antecedents and Effects of Retail Shelf Availability(2019) Celebi, Heidi; Evers, Philip T; Business and Management: Logistics, Business & Public Policy; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Retail shelf availability research has been limited by the inability to measure stockouts. Not being able to fully capture stockout occurrences has led to studying either the effects of stockouts or their antecedents. It has also led to using various fundamentally different stockout attributes as measures across studies. The relationship between stockout attributes is not clear, making it difficult to have a consensus on either the drivers or the impact of stockouts. This thesis considers both antecedents and effects of stockouts by incorporating actual stockout events under two different risk pooling methods. The first set of models simulate stockout-based customer switching (the inventory effect) to study pooling by substitution for a retailer setting service level goals for two products. The second set of models study pooling by postponement, termed “instore logistics postponement,” using archival data from a new shelf sensor technology that captures actual stockout events. An extension to the second part of this study examines the nonlinear relationship between stockout attributes. Both parts of the dissertation contribute to the stockout literature in different ways. The simulation work contributes towards reconciling opposing views on the performance effect of risk pooling through substitution, also showing how different performance measures may accentuate or mask the impact of stockouts. The shelf technology work contributes to logistics postponement by studying how a two-tier inventory within the store may affect stockouts along more than one stockout attribute, and whether less frequent but longer stockouts are linked to better performance than shorter but more frequent stockouts.Item DATA-DRIVEN OPTIMIZATION AND STATISTICAL MODELING TO IMPROVE DECISION MAKING IN LOGISTICS(2019) Sinha Roy, Debdatta; Golden, Bruce; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In this dissertation, we develop data-driven optimization and statistical modeling techniques to produce practically applicable and implementable solutions to real-world logistics problems. First, we address a significant and practical problem encountered by utility companies. These companies collect usage data from meters on a regular basis. Each meter has a signal transmitter that is automatically read by a receiver within a specified distance using radio-frequency identification (RFID) technology. The RFID signals are discontinuous, and each meter differs with respect to the specified distance. These factors could lead to missed reads. We use data analytics, optimization, and Bayesian statistics to address the uncertainty. Second, we focus on an important problem experienced by delivery and service companies. These companies send out vehicles to deliver customer products and provide services. For the capacitated vehicle routing problem, we show that reducing route-length variability while generating the routes is an important consideration to minimize the total operating and delivery costs for a company when met with random traffic. Third, we address a real-time decision-making problem experienced in practice. In one application, routing companies participating in competitive bidding might need to respond to a large number of requests regarding route costs in a very short amount of time. In another application, during post-disaster aerial surveillance planning or using drones to deliver emergency medical supplies, route-length estimation would quickly need to assess whether the duration to cover a region of interest would exceed the drone battery life. For the close enough traveling salesman problem, we estimate the route length using information about the instances. Fourth, we address a practical problem encountered by local governments. These organizations carry out road inspections to decide which street segments to repair by recording videos using a camera mounted on a vehicle. The vehicle taking the videos needs to proceed straight or take a left turn to cover an intersection fully. Right turns and U-turns do not capture an intersection fully. We introduce the intersection inspection rural postman problem, a new variant of the rural postman problem involving turns. We develop two integer programming formulations and three heuristics to generate least-cost vehicle routes.Item DERIVING HAPPINESS FROM CONSUMPTION: TOWARDS AN UNDERSTANDING OF ENJOYMENT IN CONSUMER CONSUMPTION(2019) Wu, Yuechen; Ratner, Rebecca K; Business and Management: Marketing; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation includes three essays that investigate factors that influence how much enjoyment consumers derive from their various daily consumption. The first essay examines whether and when shared experiences are more or less enjoyable than solo experiences. Whereas prior research has primarily focused on the social benefits of having an activity partner in leisure activities, we propose that sharing experiences requires coordination with others, which can take the consumer’s attention away from the consumption activity, potentially reducing their enjoyment of the activity compared to those who engage in the experience solo. We demonstrate that lack of clarity about a partner’s level of interests in the activity can make it difficult for consumers to coordinate and focus on a shared activity, and ultimately enjoy the experience, relative to solo experiences or shared experiences for which clarity is high. The second essay speaks to consumers’ inhibition that prevents them from deriving happiness from rewarding solitary leisure experiences. Prior research shows that consumers are inhibited from engaging in public leisure activities alone because of negative evaluations on social connectedness they anticipate from others. This essay examines how people actually evaluate consumers who engage in these activities solo versus accompanied. We demonstrate that though observers indeed perceive solo (vs. accompanied) consumers to be less socially connected, observers also make more positive inferences for solo consumers on the trait of openness, and overall view solo consumers as favorably as accompanied consumers. The third essay examines the effect of ownership status (i.e., whether a consumer owns the product or not) on consumers’ adaptation to a product. We demonstrate that consuming a product for which consumers do not have ownership (vs. have ownership) prolongs happiness derived from the product. We propose that when consumers do not have ownership of a product, they experience an elevated arousal, which could help to slow down the otherwise natural process of hedonic adaptation.Item Essays on Business Analytics(2019) Gu, Liyi; Ryzhov, Ilya O; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)With the rapidly increasing availability of business-related big data in recent years as well as the advancements in statistical and machine learning techniques, business analytics (BA) is becoming an essential practice to explain past events, predict future trends and optimize decision making. Using BA, the two essays in this dissertation aim to address some important questions in two emerging topics: humanitarian fleet management and social behaviors in online gaming industry. In the first essay, we analyse how vehicle management is carried out in a humanitarian setting. In humanitarian fleet management, the performance of purchase, assignment, and sales decisions is determined by dynamic interactions between the fleet composition, the time-varying and uncertain demands on the fleet, and the depreciation of the vehicles as they are exploited. We propose to evaluate purchase, assignment, and sales policies in a realistic simulation environment that directly models heterogeneous vehicle attributes and tracks their evolution over time. Using data from a large international humanitarian organization (LIHO), the simulator can identify the rationale behind seemingly ad-hoc decisions by field managers at LIHO. For instance, by selling vehicles later than LIHO recommends, managers are actually reducing their costs; similarly, managers decline to switch vehicles between mission types because the benefits to the operational cost turn out to be marginal at best. In the second essay, we conduct an empirical study of the relationship between social interaction and user engagement, retention, and purchase behavior, based on a high-resolution player-level dataset from a major international video game company for one of its premier titles. We engineer a set of features that characterize social behavior within the game, and link these behaviors to several measures of user engagement using statistical and econometric models. Our results show that user engagement is highly correlated with certain social dynamics; meanwhile, social interaction does not always translate to better retention rates or more purchases. In some cases, high dependence on a small set of friends is positively correlated with churn, indicating a tradeoff between engagement in one title and adoption of others. Early adopters are generally more responsive to the social experience than late adopters.Item A Configurational Approach to Examining the Influence of Information Technology Management and Governance on Organization Performance(2019) Aljazzaf, Salman; Mithas, Sunil; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Information technology (IT) is becoming an increasingly crucial part of modern organizations. This dissertation includes two essays that examine how effective IT management and decision-making structure are associated with better organizational performance. The first essay examines the complementarity between IT management and human resource (HR) management capabilities and discusses the mechanisms through which these two capabilities jointly lead to better organizational performance. The unique contribution of this study is the use of direct measures of IT management and HR management capabilities to estimate their joint impact on organizational performance. Furthermore, I disaggregate HR capability into two specific dimensions: (1) work systems such as employee performance management systems and hiring and promotion systems, and (2) employee learning and development. The main results confirm the complementarity between IT management and both HR management dimensions, and show that work systems more positively moderates the impact of IT management on organizational performance based on financial and market measures. The study is supplemented with a configurational analysis that examines the complex relationships between the organizational capabilities and explain how the complementarity between IT management, work systems, and employee learning varies across sectors and relies also on the presence and absence of other capabilities such as leadership and strategic planning. The study compares the results of the conventional and configurational methods and highlights the unique insights derived from each approach. The second essay discusses the optimal IT reporting structure in a firm, that is, whether the IT head should report to the chief executive officer or some other executive. This study proposes that there are several factors that determine the optimal IT reporting structure such as firm size, industry, IT investment intensity, and whether IT is viewed as strategic to the firm. The study argues that the relationship between these factors and the optimal IT reporting structure is too complex to be represented by linear models that rely on the correlation-based approach. Instead, there is a need to study configurations that lead to better performance based on different combinations of firm-level and industry-level conditions. The study uses a novel configurational approach and a corresponding method, the fuzzy-set qualitative comparative analysis, to determine the optimal IT reporting structure of different configurations. The study results shed light on the complex relationship between IT reporting structure and the conditions defining various firm configurations. Together the two essays provide new insights on how successful IT management and governance structure lead to organizational success.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 DESIGNING INFORMATION STRATEGIES FOR DIGITAL PLATFORMS: FINDINGS FROM LARGE-SCALE RANDOMIZED FIELD EXPERIMENTS(2019) Shi, Lanfei; Viswanathan, Siva; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)The rise of digital platforms has transformed our economy and reshaped consumer behaviors and experiences. While practitioners and researchers have a growing interest in understanding digital platforms, there is still a dearth of research on how platforms can design effective information strategies to mitigate fundamental issues such as information asymmetry and search frictions by leveraging granular data. My dissertation seeks to fill this gap. Specifically, by focusing on significant real-world problems on digital platforms, I aim to examine IT-enabled and analytics-driven information strategies and study the impact of these strategies on the users as well as on the platforms themselves. In collaboration with two different online platforms, I design and conduct three randomized field experiments to investigate the impact of informational interventions and provide actionable suggestions. In Essay 1, I examine incentive strategies for motivating effective mobile app adoptions, by comparing monetary incentives against informational incentives. I find that the usage after app adoption depends on how customers are motivated, and only information induced adoption leads to long-term increase in purchases. In Essay 2, I investigate the role of “verification” when it is made optional, and find that it serves as a very effective signaling device, especially in markets that lack other mechanisms such as reputation systems. I also find that users on the two sides of online platform use the same signal very differently, and that this is attributable to the difference in the credibility of their primary signaling-attribute of each side, viz. income in males and beauty in females. In Essay 3, I examine the effectiveness of three different recommendation systems in two-sided matching platforms with a focus on how the provisioning of potential candidates’ preference information impacts focal user’s decision-making and matching outcomes. I find that compared to “people you might prefer”, users act strategically towards “people who might prefer you” and “people who you might prefer and who might prefer you” by actively reaching out to less desirable candidates, which leads to improved outcomes. In short, the three studies present new empirical evidence of how platforms can leverage information as a tool to design effective incentives, signaling mechanisms and recommender systems to facilitate users’ decision-making, transactions and matching.