Robert H. Smith School of Business
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Item Essays on investor preferences and corporate strategies(2024) Nguyen, Huu Loc; Sampson, Rachelle; Business and Management: Logistics, Business & Public Policy; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Time horizon, an investment’s expected payback period, is a consequential investor preference and a crucial determinant of corporate strategy as it can constrain firms’ investment options. However, a gap exists between research focusing on investor temporal preferences and on corporate intertemporal strategy. Therefore, my dissertation offers a multi-level analysis to examine the dynamic relationship between investor temporal preferences and firm strategy. In the first essay, I construct a real-options signaling game model in which time horizon serves as a key determinant of firm strategic responses to shifts in investor temporal preferences. I test my predictions using the emergence of low-carbon energy innovation in the U.S. Oil and Gas industry during 1980-2018. I find that firms adjust their strategies in response to changes in investor time horizons. When faced with a lengthened investor time horizon, firms are more inclined to prioritize long-term inventive innovation, whereas a shortened investor time horizon prompts a greater focus on short-term adoptive innovation. Furthermore, I find suggestive evidence that such commitments when firms align their strategies to investor temporal preferences enhance firms' innovation performance. The second essay extends my investigation in the first chapter to explore the impacts of the inherent information asymmetry between firms and investors on investor-induced firm strategies. I find that, in high information asymmetry contexts, firms overshoot their investor-induced responses to effectively signal their alignment to shifts in investor temporal preferences. In the third (co-authored) essay, we explore the interplay between investor temporal preferences and firm strategies via top management teams. We study how the career experience of top management influences firm strategies and investor temporal preferences. We construct a novel metric to capture, standardize, and compare executives’ career paths across different functional roles, firms, and industries. Our findings indicate that executives with heightened diversity of experience across various functional roles tend to support longer-term strategies, such as income smoothing over time, aligning with the interests of long-term investors. In contrast, executives with more transitions between firms and industries often exhibit more short-term actions, namely cuts in R&D investments, rendering their firms more appealing to short-term investors.Item The Spillover Effect of Environmental Disclosures: Evidence from Customers' Net-zero Pledges(2024) Castillo, Juan; Hann, Rebecca; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This paper investigates the real impact of customers’ voluntary environmental disclosures, specifically, Net-Zero Pledges (NZPs), on the direct greenhouse gas emissions of their suppliers. NZPs represent a growing trend in corporate disclosure, where companies commit to reducing carbon emissions to a minimum level by a specified date, with any remaining emissions being offset by carbon removal actions. Using firms’ connections along the supply chain and a staggered difference-in-differences design, this study provides evidence that suppliers significantly reduce their direct emissions following customers’ NZPs. This effect is more pronounced for NZPs made by customers with greater bargaining power, while suppliers’ reactions are stronger when they have higher carbon intensity and better environmental performance. Furthermore, NZPs of higher quality elicit a stronger response, especially when they limit the use of carbon offsets, set interim targets, and establish public reporting mechanisms. The evidence suggests that this reduction in emissions is achieved by suppliers’ investments in green technologies and innovation, as well as improvements in environmental policies in the years following customers’ NZPs. While these modifications do not seem to change firms’ profitability, they are associated with increased business output and capital investments, though at the expense of additional debt. These findings suggest that customers’ voluntary environmental disclosures can trigger positive spillover effects in upstream suppliers’ real operations, even in the absence of mandatory regulations.Item THE ROLE OF SCIENTISTS AND ENGINEERS IN INVENTIONS AND THEIR ALLOCATION: EVIDENCE FROM JAPAN’S INDUSTRIALIZATION(2024) Yamaguchi, Shotaro; Braguinsky, Serguey; Agarwal, Rajshree; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)My dissertation seeks to address the role of university-educated scientists and engineers (S&Es) during industrialization, with a particular focus on the sorting of S&Es into invention activities and their allocation process both within and across firms. To achieve this, I delve deeply into the historical context of Japan's industrialization from the late 19th to the early 20th century, a period marked by the simultaneous emergence of multiple heavy manufacturing industries, a higher education system in science and engineering, and the rise of extensively diversified conglomerates known as zaibatsu. Using a manually constructed individual career database encompassing nearly all Japanese university graduates in science and engineering from the cohorts of 1877 to 1920 as an empirical basis, I conduct three independent yet interconnected studies in this dissertation. In Chapter 1, I investigate the factors influencing the sorting of university-educated scientists and engineers (S&Es) into inventors by matching them with archival patent records. I find a strong positive correlation between academic excellence and the likelihood of becoming an inventor as well as invention productivity. These highly skilled individuals significantly contributed to inventions in fields associated with emerging heavy manufacturing industries. I also underscore a strong complementarity between their academic skills and post-graduation job experience, which synergistically facilitated the generation of inventions. In Chapter 2, I delve deeply into the (re-)allocation process of educated plant managers and engineers across establishments within a leading cotton-spinning firm, in conjunction with investment in physical capital. Through detailed analysis of plant-level data on human capital appointments, transfers, and capital investments, I illuminate the endogenous process of internal human capital (re-)allocations in alignment with evolving strategic priorities. Notably, the shift from cost leadership to product differentiation, driven by high-end spinning machines, engendered a three-way complementarity between managerial human capital, engineering human capital, and advanced technologies. In Chapter 3, I examine how S&E university graduates are allocated both externally (moves across different independent firms) and internally (moves across affiliated firms within diversified firms or conglomerates) and their implication for innovation. I demonstrate that internal mobility enhances individual invention performance, whereas external mobility diminishes it. However, these performance differences are primarily attributed to the selection of different quality of human capital. Additional analysis suggests that high-quality human capital tends to enter growing industries through internal mobility and be often placed in managerial positions that grant them to access complementary resources. Overall, my dissertation studies contribute to the literature on strategic human capital, corporate strategy, and economic emergence. I assert that the insights derived from the unique historical context of Japan’s industrialization can not only be applied to current emerging economies but also to new industries in developed countries wherein the supply of specialized talent is scarce and mega firms play a pivotal role in driving innovation.Item TWO ESSAYS ON THE ROLE OF INFORMATION TRANSPARENCY IN MARKETPLACE OPERATIONS(2024) Jiang, Jane Yi; Elmaghraby, Wedad J.; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation encompasses two studies on the crucial role of information within marketplace operations. Collaborating with two platforms, we deliver empirical evidence and offer prescriptive insights into how information is conveyed to and perceived by customers, and the consequent impacts on sellers and the marketplace at large.The first study analyzes the introduction of the novel blockchain tracing technology into an online grocery marketplace. Our findings indicate that credible supply chain transparency encourages consumers to more readily buy traced products, especially those that are handling-sensitive or offered in less-trusted markets. Consequently, adopting third-party sellers experienced an average monthly revenue increase of up to 23.4\%. By utilizing structural estimation to understand how consumers assess product attributes and quality, we highlight that consumer responses (and welfare effects) vary in sophistication and size based on their prior experience with the product category. Additionally, we establish that consumers deem blockchain-based. The second study analyzes the unintended transparency issue associated with the pricing structure of bundle discounts and its consequences on product purchases and returns. Our findings reveal that customers tend to overlook complex pricing structures, leading to impulsive buying and increased returns. Enhancing customer attentiveness of pricing can decrease the Retailer's return rates by 20.9\%. Moreover, improving customer attentiveness to pricing benefits retailers by enabling them to create more versatile bundle offers, further optimizing their sales strategy.Item A Prosocial Contributor or Status Grabber? How and Why Newcomer Proactive Knowledge Sharing with Coworkers Impacts Inclusion Perceptions via Ambivalent Coworker Attributions(2023) Guan, Zhishuang; Liao, Hui HL; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Newcomers are often referred to as the “new blood” because they represent a source of fresh, unique, task-relevant knowledge that potentially adds value to organizations. In this research, I focus on newcomer proactive knowledge sharing with coworkers and investigate how it impacts the transition of newcomers from outsiders to insiders. Integrating attribution theory and the status characteristics theory, I propose that newcomer proactive knowledge sharing with coworkers triggers coworkers’ ambivalent attributions (i.e., perceiving it to be driven simultaneously by newcomers’ prosocial and status-striving motives). Furthermore, the ambivalent attributions affect the extent to which coworkers provide socialization support and utilize the newcomer’s knowledge, eventually exerting different influences on the newcomer’s inclusion perceptions. The results of a multi-wave (i.e., four waves) and multi-source (i.e., survey data from newcomers and coworkers) longitudinal study based on 336 newcomers in a large technology company support the proposed serial mediating relationships between newcomer proactive knowledge sharing with coworkers and their inclusion perceptions via coworkers’ ambivalent attributions and behavioral reactions. The data also demonstrates that leader encouragement of learning is a viable leader strategy that makes coworkers more likely to interpret newcomer proactive knowledge sharing is driven by prosocial motives. This research has significant implications both theoretically and practically. From a theoretical perspective, it advances our understanding of newcomer socialization, knowledge sharing, and workplace inclusion. From a practical perspective, it helps newcomers better navigate the process of knowledge sharing by illuminating potential social consequences. Practitioners can leverage these insights to create more inclusive onboarding experiences for new employees.Item Essays on Entrepreneurship: The Role of Complexity of Innovation and Efficient Hierarchies(2023) Ding, Yuheng; Braguinsky, Serguey; Agarwal, Rajshree; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Entrepreneurial activities have been on the decline across a broad range of sectors in the U.S. during the past few decades. This decline (sometimes also called “declining business dynamism”) is reflected in the decreasing rate of new firm entry, the share of young firms (usually defined as those five years of age or less) in the total number of firms and/or the share of employment at young firms in total employment, and so on (e.g., Decker et al. 2014; Akcigit and Ates, 2021). All of the above have exhibited a secular decline, not just in the U.S. but in other advanced economies as well. The underlying causes of these trends, however, are not yet clear with a broad array of explanations suggested in the literature (Akcigit and Ates, 2019; 2021; Decker et al., 2016; Hopenhayn et al., 2018; Karahan et al., 2019; Andrews et al., 2016). There also appears to be a lot of heterogeneity in how strongly the decline in entrepreneurial activities (business dynamism) is pronounced in various industries and sectors of the economy. In particular, the evidence in Haltiwanger et al. (2014) suggests that high-tech industries could be affected more than other sectors of the economy. High-tech sectors have been the driving force of growth in recent decades, so uncovering the reasons for declining business dynamism in those sectors is a task of first-order importance. In the first chapter, I employ the restricted-use data on the science and engineering workforce in the U.S. to investigate whether the increasing burden of knowledge is a growing concern for science-based entrepreneurship. Results show that since 1997, the rate of startup formation has precipitously declined for firms operated by U.S. Ph.D. recipients in science and engineering. The decline in startup formation is accompanied by an earnings decline, increasing work complexity in R&D, and more administrative work for science-based founders. With limited access to efficient knowledge hierarchies, founders of science-based startups must shoulder the burden of knowledge by doing more tasks by themselves. Workers at established firms, on the other hand, could better mitigate the burden of knowledge by narrowing the span of control and increasing the depth of hierarchy. Moreover, less experienced founders were hit harder than more experienced founders as the increasing burden of knowledge led to increasing returns to labor experience. While in the first chapter I use individual-level work data, in the second chapter I utilize firm-level data from the U.S. Census Bureau to develop the analysis further. I adopt the abductive approach and leverage matched employee-employer Census data between 2000-2014 to investigate how a growing burden of knowledge (measured as knowledge interdependence) in the most innovative firms affects potential entrepreneurs’ decisions to start their own business ventures. I show that higher knowledge interdependence in incumbent firms is negatively associated with employee entrepreneurship, and the negative effect is pronounced even stronger among the highest-performing employees. Moreover, higher knowledge interdependence has a positive selection effect on the quality of “spinouts”, and this effect is significantly stronger if the startup is formed by individuals ranked highest in the human capital distribution. These results suggest that knowledge interdependence does not merely raise the barrier for entry into entrepreneurship by imposing higher costs of knowledge transfer. It also changes the functioning of the internal labor market inside the firms. In the third chapter, I further investigate the mechanism underlying the relationship between knowledge interdependence and employee entrepreneurship. I propose a formal theoretical framework that reconciles all empirical findings. The theory suggests firms that rely on higher knowledge interdependence should share “rent” with their employees by paying wage premia if the profit from higher knowledge interdependence is high enough. As a result, within-firm earning dispersion would always be larger in firms relying on higher knowledge interdependence. I find supporting evidence in the data for this alternative explanation. Overall, these findings have important implications for declining entrepreneurial activity, rising income inequality, and technological change in the U.S. economy. While the conventional wisdom might view the declining entrepreneurial activity in the U.S. as the demise of economic growth, it is possible that as innovation becomes more complex, large established firms start to substitute the role of start-ups in pushing forward the technological frontier and driving economic growth as the efficient knowledge hierarchy could better deal with complex knowledge needed in the production process (Garicano, 2000; Garicano and Rossi-Hansberg, 2004). If this is the case, the declining business dynamism might just be a reflection of technological change and efficient (re)allocation of resources but not necessarily detrimental to technological advancement and economic growth. Whether this is true remains an avenue for future research.Item ESSAYS ON MARKET TRANSFORMATION AND ENTREPRENEURIAL STRATEGIES: EVIDENCE FROM THE LITHIUM-ION BATTERY INDUSTRY(2023) ALGHAREEB, ALI; Kirsch, David; Goldfarb, Brent; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation uses an Inference to the Best Explanation approach for two essays on the evolution of the Lithium-ion battery industry (1991—2023). In the first essay, I consider an industry-level perspective and use quantitative and qualitative data to document the emergence and evolution of the Li-ion battery industry. The observations of multiple waves of new firm entry and more than one instance of sales takeoff highlight an empirical puzzle. Thus, I propose a conceptual framework of Market transformation (MT) that is qualitatively related to but distinct from the traditional frameworks of Industry Emergence and Disruption. By comparing the predictions of the Industry Emergence and Disruption approaches with those of the proposed MT framework, I argue that the proposed framework provides a better explanation for the observed evolutionary trajectory of the Li-ion battery industry. In the second essay, I consider the strategic choices of application markets and entrepreneurial strategies from a firm-level perspective to examine how did start-ups choose their entrepreneurial entry strategy when application markets are characterized by different sizes and levels of uncertainty. Assembling a dataset of 151 US-based battery start-ups founded in the Li-ion battery industry, I report on the start-ups’ choices of application markets and entrepreneurial strategies at entry across three distinct periods in the evolution of the Li-ion battery industry. The observation of only 16% of start-ups choosing a specialization-in-generality strategy while 84% of start-ups choosing alternative strategies during a period of increasing uncertainty (2006—2012) highlights an empirical puzzle. Thus, looking across the multi-decade history of the Li-ion battery industry, the uncertainty triggered by the successful commercialization of consumer electric vehicles (i.e., industry demand shock of the Tesla Roadster) spurred start-ups to enter with different strategic bets; it also triggered investors to support those bets. By elaborating and evaluating the list of possible explanations, I infer that the increasing levels of uncertainty associated with each application market generated uncertainty profiles that start-ups selected based on the preferences and beliefs of their entrepreneurs or their investors about the nature of uncertainty, resulting in different strategic bets, as the best explanation.Item An Operations Management Framework to Improve Geographic Equity in Liver Transplantation(2022) Akshat, Shubham; Raghavan, S.; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In the United States (U.S.), on average three people die every day awaiting a liver transplant for a total of 1,133 lives lost in 2021. While 13,439 patients were added to the waiting list in 2021, only 9,236 patients received liver transplantation. To make matters worse, there is significant geographic disparity across the U.S. in transplant candidate access to deceased donor organs. The U.S. Department of Health and Human Services (HHS) is keen to improve transplant policy to mitigate these disparities. The deceased donor liver allocation policy has been through three major implementations in the last nine years, but yet the issue persists. This dissertation seeks to apply operations management models to (i) understand transplant candidate behavior, and (ii) suggest improvements to transplant policy that mitigate geographic disparity. In the first essay, we focus on reducing disparities in the organ supply to candidate demand (s/d) ratios across transplant centers. We develop a nonlinear integer programming model that allocates organ supply to maximize the minimum s/d ratios across all transplant centers. We focus on circular donation regions that address legal issues raised with earlier organ distribution frameworks. This enables reformulating our model as a set-partitioning problem and our proposal can be viewed as a heterogeneous donor circle policy. Compared to the current Acuity Circles policy that has fixed radius circles around donation locations, the heterogeneous donor circle policy greatly improves both the worst s/d ratio, and the range of s/d ratios. With the fixed radius policy of 500 nautical miles (NM) the s/d ratio ranges from 0.37 to 0.84 at transplant centers, while with the heterogeneous circle policy capped at a maximum radius of 500NM the s/d ratio ranges from 0.55 to 0.60, closely matching the national s/d ratio of 0.5983. Broader sharing of organs is believed to mitigate geographic disparity. Recent policies are moving towards broader sharing in principle. In the second essay, we develop a patient's dynamic choice model to analyze her strategic response to a policy change. First, we study the impact of the Share 35 policy, a variant of broader sharing introduced in 2013, on the behavioral change of patients at the transplant centers (i.e., change in their organ acceptance probability), geographic equity, and efficiency (transplant quality, offer refusals, survival benefit from a transplant, and organ travel distance). We find that sicker patients became more selective in accepting organs (acceptance probability decreased) under the Share 35 policy. Second, we study the current Acuity Circles policy and conclude that it would result in lower efficiency (more offer refusals and a lower transplant benefit) than the previous Share 35 policy. Finally, we show that broader sharing in its current form may not be the best strategy to balance geographic equity and efficiency. The intuition is that by indiscriminately enlarging the pool of supply locations from where patients can receive offers, they tend to become more selective, resulting in more offer rejections and less efficiency. We illustrate that the heterogeneous donor circles policy that equalizes the s/d ratios across geographies is better than Acuity Circles in achieving geographic equity at the lowest trade-off on efficiency metrics. The previous two essays demonstrate the benefit of equalizing the s/d ratios across geographies. In December 2018 the Organ Procurement and Transplantation Network (OPTN) Board of Directors approved the continuous distribution framework as the desired policy goal for all the organ allocation systems. In this framework, the waiting list candidates will be prioritized based on several factors, each contributing some points towards the total score of a candidate. The factors in consideration are medical severity, expected post-transplant outcome, the efficient management of organ placement, and equity. However, the respective weights for each of these potential factors are not yet decided. In the third essay, we consider two factors, medical severity and the efficient management of organ placement (captured using the distance between the donor hospital and transplant center), and we design an allocation policy that maximizes the geographic equity. We develop a mathematical model to calculate the s/d ratio of deceased-donor organs at a transplant center in a continuous scoring framework of organ allocation policy. We then formulate a set-partitioning optimization problem and test our proposals using simulation. Our experiments suggest that reducing inherent differences in s/d ratios at the transplant centers result in saving lives and reduced geographic disparity.Item COLLABORATIVE PROBLEM-SOLVING IN THE INNOVATION ECOSYSTEM(2022) Chen, Mo; Waguespack, David M; Zenger, Todd R; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In this dissertation, I use archival data and a formal model to investigate how actors (firms) organize their innovation and coordinate in an innovation ecosystem and what the evolutionary outcome of the ecosystem is. Empirically I study Linux Kernel, the most commercially important open-source project. As of 2017, Linux has more than 99% of the market share in supercomputing, more than 90% market share of public clouds, and around 82% market share of smartphone operating systems. With over 1700 subsystems and over 50000 files, the Linux kernel is one of the most complex systems in innovation history. Moreover, unpaid work only contributes 8.2% to Linux kernel development. Ten big corporations contribute around 40% of development efforts (The Linux Foundation, 2017). Characterized by diverse commercial interests and high-level knowledge heterogeneity and complexity, Linux Kernel provides an ideal setting to understand open collaboration and coordination in an ecosystem. The first chapter investigates how individual innovations evolve in a complex ecosystem. While innovation outcomes have been extensively studied in strategy and related literature, prior studies often abstract away from the interdependent nature of innovation within broader assemblies or systems of technologies. Adopting the problem-solving perspective, I study how three types of complexity — technological, cognitive, and incentive — impact the coordination process of a proposed innovation becoming integrated into the shared infrastructure of the ecosystem. By focusing on Linux Kernel development, a rare setting where the technological and actor interdependence are both observable, I provide evidence of how technological interdependence, a critical concept in organization design, is associated with difficulty in reaching satisfactory solutions. The research context provides a setting to study how heterogeneous interests and potential conflicts between system participants impact innovation outcomes. The results also show that cognitive complexity, measured by the uniqueness of innovation, has a U-shaped relationship with innovation integration. In the second chapter of my dissertation, I investigate the tradeoff between discovery and divergence in the open form of collaboration in the innovation ecosystem. Building on the insight from problem-solving literature, I argue that strategic knowledge accumulation, i.e., actors shape knowledge creation based on self-interest, can create potential conflicts between the system and individual actors and thus impact the open innovation outcomes significantly. I then use a simulation approach to investigate the appropriateness of various coordination mechanisms for innovation systems with varying degrees of complexity and different patterns of the same level of interaction. Results show that both the level of complexity and the way the attributions interact impact the effectiveness of coordination mechanisms. Without system-level incentives, granting veto power to the individual actor would increase strategic knowledge accumulation hazard and thus decrease performance when complexity exists. With the system-level incentive, the composite solution and veto power could improve the overall system performance for systems of a wide range of complexity and interaction pattern. Yet modularized or "core-peripheral" systems see the best performance when no coordination mechanism exists. In the third chapter, I explore the evolutionary pattern of an innovation ecosystem and its components. While research has investigated how interdependence at the system-level impacts innovation in the ecosystem extensively, little is known about how micro-structure interdependence and local social environment impact individual components' evolution within an ecosystem. Utilizing Design Structure Matrices (DSMs), I explore the development of the Linux Kernel technological system and the ecosystems it is embedded in. The results, while exploratory, suggest that component level interdependence and the alignment between technological structure and designed communication channel are associated with an increased chance of component survival. The results also show that local environments' social composition, such as commercial participation percentage and concentration of power, have implications for the component survival.Item Lifted Up or Feet on the Ground? How Leader Emotional Balancing Moderates the Effect of Developmental Feedback on Employee Learning(2022) Guo, Siyan; Seo, Myeong-Gu; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Leaders expect their developmental feedback to help employees develop skills and improve performance, yet the effect of developmental feedback on learning remains unclear. In this dissertation, the concept of developmental feedback (DFB) is extended to include two dimensions, gap identification and gap elimination. I focus on the affective mechanisms underlying the DFB – learning relationship and identify trade-offs in each of the DFB dimensions. I argue that while gap elimination elicits employee positive affect (PA) that facilitates learning via increased learning self-efficacy, it undermines learning via PA and decreased learning need recognition. In addition, gap identification induces employee negative affect (NA) that works in the opposite way. Emotional balancing, or leaders’ dynamic engagement in both affect improving and affect worsening behaviors, is proposed to attenuate the negative mechanisms. I conducted a pilot study in the field to develop measures for the two DFB dimensions, followed by a three-wave, multisource field study to test my theoretical model at the between-person level, and a daily dairy field study to test the model at the within-person level. The findings largely support my proposed model. The results indicate that gap identification positively predicts employee NA, while gap elimination predicts PA. Gap identification is positively associated with learning via employee learning need recognition, but negatively predicts learning via employee NA and learning self-efficacy. I also find that gap elimination positively predicts learning through PA and improved employee self-efficacy in learning. Importantly, the results demonstrate the beneficial effects of emotional balancing, which significantly moderates the effects of PA and NA. Taken together, these findings indicate that receiving DFB is a highly emotional experience that creates a tension between feeling uplifted and keeping feet on the ground, and leaders can use emotional balancing to manage employee affect to achieve better learning outcomes.