Archives: News Releases

Study finds Saturday driving restrictions fail to improve air quality

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS—Decades ago Mexico City’s air pollution was so poor, birds would fall out of the sky—dead. Locals said living there was like smoking two packs of cigarettes a day, according to one report.  In response, Mexico City took several steps to try to improve air quality including restricting driving one or two days during the weekdays. The program has had negligible results.

In 2008, the city added driving restrictions on Saturdays in hopes of moving the needle but according to new research by Lucas W. Davis, an associate professor at UC Berkeley’s Haas School of Business, extending the program one more day also isn’t working.

“Saturday driving restrictions are a flawed policy. It’s a big hassle for people and does not improve air quality,” says Davis, who is also the faculty director at the Energy Institute at Haas.

The study, “Saturday Driving Restrictions Fail to Improve Air Quality in Mexico City,” published today in Scientific Reports, is the first to examine the effects of restricted driving on Saturdays. It compares pollution levels of eight major pollutants before and after the program went into effect. Having fewer motorists on the road on Saturdays led to close to zero impact. Proponents of the Saturday program had estimated vehicle emissions would be reduced by 15% or more.

Mexico City has the worst air quality in the Western Hemisphere with particulate levels that are three to four times higher than in New York, Los Angeles, São Paulo, or Buenos Aires, the paper states. Mexico City has tried many different approaches to improving air quality, including the city’s well known driving restrictions, which were first introduced in 1989.

The program works like this: restrictions are based on the last number of a vehicle’s license plate. For example, vehicles with license plates ending in “5” or “6” cannot be used on Mondays.  The ban is in effect from 5:00 a.m. to 10:00 p.m. for both personal and commercial vehicles. 

To determine the impact of Saturday restrictions, Davis analyzed hourly air pollution data from 29 monitoring stations around Mexico City from 2005 to 2012. He studied emission levels for carbon monoxide; nitric oxide; nitrogen dioxide; nitrogen oxide; ozone; large particulates; small particulates; and sulfur dioxide. None of these pollutants decreased as a result of Saturday driving restrictions.

Trying to figure out why pollution did not decrease, Davis next examined ridership data from Mexico City’s public transportation systems. From city buses, to light rail, to electric buses, he found no discernible increase in Saturday riders.

“People have found other ways to get around the driving restrictions,” says Davis. “Some purchase multiple cars, others take taxis or Uber.”

Davis argues that as Uber and other taxi-like services become increasingly available, driving restriction policies will continue to struggle to improve air quality. Instead, he suggests that Mexico City and other cities plagued by dangerous pollution need to require stricter vehicle emission tests.

“Test every car, test every year. If you have a car that’s polluting the air, you can’t drive it. Period,” says Davis.

 

 

How GPS network science is evolving to help mobile marketers prosper

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS—Companies love knowing where potential customers are hanging out at any given moment. By “geo-fencing” or using GPS data, companies can target customers based on their exact location and send promotional messages directly to their phones.

Location data can also help to discover customers’ personal preferences. Research now shows that consumers are more likely to respond similarly to a mobile marketing offer or coupon if they have recently been in the same physical place.

A new study found that location data is a better predictor—up to 19% more accurate—of consumer behavior than information about demographics (age, income, education) and psychographics (values, lifestyle, and personality).

Zsolt Katona, an associate professor of marketing at UC Berkeley’s Haas School of Business, calls this response a “co-location effect” in his study, “Predicting Mobile Advertising Response Using Consumer Co-Location Networks.” The paper is co-authored with Peter Pal Zubcsek of Tel Aviv University, and Miklos Sarvary of the Columbia Business School.

The researchers hypothesize that redemption responses may be similar because people with similar tastes typically visit the same places. “If you have similar tastes, you are more likely to go the same location, even if you do not actually know each other. That may cause you to respond similarly to the same coupon. We saw the biggest effect with people who are closely located, within a roughly 400-foot radius,” says Katona.

The researchers used GPS data obtained by a major Southeast Asian cell phone company and modeled how 217 study participants in a metropolitan area responded to a variety of coupon  offers for coffee, food, and entertainment sent out at random times and random locations.

While like-minded consumers may visit similar locations, the co-location relation between consumers is not necessarily social. That’s good for marketers who don’t have access to people’s social networks.

In order to study how well customers respond to coupons while controlling for similar habits of socially connected individuals, Katona and his colleagues constructed two participant networks: co-location and referral. Co-located participants must have been at the same location during at least one of the GPS observations the day before the offer. Participants in the referral network were deemed connected if one of them had invited the other to the program.

When participants recently visited the same location and received the same mobile coupon, they reacted to the offer at a higher rate and with more similar responses than those who were not near each other. For instance, a participant in the proximity of someone with a 20% coupon redemption rate (in the consumer packaged goods or CPG category) redeemed the same offers at roughly double the rate of participants who had not visited the same location.

The research team also conducted similar tests to determine if consumers are more or less likely to redeem offers in a similar fashion if they had met in so-called “hot spots”—popular and populated locations such as those in urban centers—compared to “cooler” or less-visited locations.

The study found that it is easier to predict customers’ behavior when they have visited the same cool spots rather than the same hot spots. By definition, hot spots attract everyone irrespective of tastes and preferences. In contrast, when people tend to go to the same cool or non-popular places, they are more likely to be similar in their preferences.

“We saw the biggest effect with people who are closely located, within a roughly 400-foot radius,” says Katona.

The researchers used GPS data obtained by a major Southeast Asian cell phone company and modeled how 217 study participants in a metropolitan area responded to a variety of coupon  offers for coffee, food, and entertainment sent out at random times and random locations.

While like-minded consumers may visit similar locations, the co-location relation between consumers is not necessarily social. That’s good for marketers who don’t have access to people’s social networks.

In order to study how well customers respond to coupons while controlling for similar habits of socially connected individuals, Katona and his colleagues constructed two participant networks: co-location and referral. Co-located participants must have been at the same location during at least one of the GPS observations the day before the offer. Participants in the referral network were deemed connected if one of them had invited the other to the program.

When participants recently visited the same location and received the same mobile coupon, they reacted to the offer at a higher rate and with more similar responses than those who were not near each other. For instance, a participant in the proximity of someone with a 20% coupon redemption rate (in the consumer packaged goods or CPG category) redeemed the same offers at roughly double the rate of participants who had not visited the same location.

The research team also conducted similar tests to determine if consumers are more or less likely to redeem offers in a similar fashion if they had met in so-called “hot spots”—popular and populated locations such as those in urban centers—compared to “cooler” or less-visited locations.

The study found that it is easier to predict customers’ behavior when they have visited the same cool spots rather than the same hot spots. By definition, hot spots attract everyone irrespective of tastes and preferences. In contrast, when people tend to go to the same cool or non-popular places, they are more likely to be similar in their preferences.

 

 

The University of California, Berkeley’s Haas School of Business honored US President Barack Obama with the Award for Outstanding Global Leadership in Open Innovation at the World Open Innovation Conference held at ESADE Business School, Ramon Llull University, Barcelona, Spain, today (Dec. 16, 2016).

Marcos C. Mandojana, Consul General of the United States of America in Barcelona, accepted the award on the President’s behalf.

Every year at its World Open Innovation Conference, the Garwood Center for Corporate Innovation at Berkeley-Haas recognizes a global leader who applies the concept of open innovation to create significant change. Pranab Mukherjee, the President of India, received the inaugural award in 2015.

Open innovation asserts that an organization should make greater use of external ideas in its business and allow its own ideas to be used by others outside of the organization in order to accelerate innovation.

The Garwood Center presented the award to President Obama for his achievements in championing open innovation through government initiatives and programs for youth, researchers, academics, and entrepreneurs. These initiatives include, among others:

• The Open Government Initiative, which focuses on transparency, participation, and collaboration, and has brought forth successful crowdsourcing and peer-production initiatives at the local, state, and federal levels.

• The Educate to Innovate Program, launched in 2009 to raise American students’ achievements in science and math over the next decade—with the help of leading companies, foundations, non-profits, and science and engineering societies.
• The Next-generation Hubs Program, which provides online tools to entrepreneurs to start a business in a single day.
• The New Strategy for American Innovation to improve performance and create a better environment for innovation in federal government by offering areas of opportunity from self-driving cars to smart cities.
• The Smart Cities initiative, which invested more than $160 million in federal research and leveraged more than 20 cities participating in new multi-city collaboration, to help local communities tackle key challenges from reducing traffic congestion to fighting crime and fostering economic growth.
• The Nation of Makers initiative to give more students, entrepreneurs, and citizens access to a new class of technologies,such as 3D printers, laser cutters, and desktop machine tools. Federal agencies, companies, non-profits, cities, and schools are collectively making commitments to create more than 1,000 maker-oriented spaces in the United States.
   

About the Garwood Center for Corporate Innovation:
The Garwood Center at the University of California, Berkeley’s Haas School of Business promotes academic research and the practice of open innovation and entrepreneurship across the globe through executive programs, student curricula, academic research, and collaborative international open innovation conferences. The center seeks to promote open innovation as a means to benefit the global economy by improving businesses’ profitability, competitive advantage, stability, and adaptability.

For more information, contact:
Solomon Darwin, Executive Director of Garwood Center for Corporate Innovation, at [email protected] or
Henry Chesbrough, Faculty Director of Garwood Center for Corporate Innovation, at [email protected]

 

 

How messaging can be framed to influence acceptance

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF YEAR—Imagine you are an organ donor in need of an organ yourself. Should you get preferential treatment because you had volunteered to be a donor? A new study shows that most people would support moving you up on the waiting list. At the same time, they would vehemently oppose moving non-donors needing an organ down on the list.

Why do people accept some policies and reject others when the outcomes are the same? Getting the desired results depends on the policy’s messaging and whether people’s behavior is voluntary or obligatory. Study participants favored outcomes that reward positive and voluntary behavior. Likewise, people tend to favor punishing people’s behavior when it runs afoul of an obligation or rule but oppose preferential treatment for those who did not break the rules.

The study, “When Do People Prefer Carrots to Sticks? A Robust ‘Matching Effect’ in Policy Evaluation,” forthcoming in Management Science, suggests that by understanding how people evaluate policies, marketers and policymakers can better frame and improve acceptance rates. The paper is co-authored by Ellen Evers, an assistant professor at UC Berkeley’s Haas School of Business, Yoel Inbar of the University of Toronto, and Irene Blanken and Linda Oosterwijk of Tilburg University, Netherlands.

“For a policy to succeed, it must not only be effective in changing behavior, it must also be accepted by stakeholders,” says Evers. “Therefore it is crucial to understand how different descriptions of the exact same policy can lead to dramatically different rates of acceptance.”

When a policy addresses voluntary behaviors, study participants favored outcomes that help those who participated more than outcomes that punish non-volunteers, as in the organ donor scenario. The same results occurred in 13 similar scenarios. For example, people supported a plan to move community service volunteers up on a waiting list for a desirable apartment, while moving non-volunteers down on the list was seen as completely unacceptable.

The pattern flips when the policy addresses obligations. For example, study participants preferred a policy that cut test scores by 50% for students who cheated on an exam. Those students failed to fulfill their obligation not to cheat. At the same time, the study participants were less favorable toward a policy that doubled test scores for students who had not cheated because the honest students’ behavior is deemed voluntary.

Evers calls these differences in judgment a “matching effect.” Policies that provide a disadvantage—such as being moved down on the organ donor list—are considered punishment. At the same time, policies that create an advantage (moving up on the organ list) are favored because they are seen as rewarding a desired voluntary behavior. By understanding this matching effect when framing a message, policymakers are more likely to increase acceptance of a policy.

Think of the Netherlands’ so-called ‘fat tax’ proposal in 2012. Left-leaning parties wanted to increase taxes on unhealthy, fattening foods and use the proceeds to make healthy foods more affordable. Evers says the proposal failed because of its campaign message— introduce a fat-tax and use the proceeds to make healthy food cheaper—because it was perceived as punishing citizens for eating bad foods.

“If they had framed the campaign positively such as, ‘We should make healthy foods cheaper and fund this by increasing the cost of bad foods,’ it is likely many more people would have seen this as an acceptable intervention,” says Evers. “The same policy can get a lot of support, or be hated by most of the population, purely by the way it is described.”

 

 

MEDIA ADVISORY

Contact:
Dariush Zahedi, director of the BIT-AMENA Center for Building Innovation Economies
[email protected] | 925-286-7267

WHAT

The Berkeley iTechpreneurship in Asia, Middle East, and North Africa (BIT-AMENA) Center for Building Innovation Economies at the University of California, Berkeley’s Haas School of Business welcomes Hooshang Amirahmadi, who will discuss how “Trumpism” conflicts with the values and modus operandi that define Silicon Valley.

“Trumpism is a racial populist rage against the corrupt elite and globalizations,” says Amirahmadi,founder and president of the American Iranian Council and a former Iranian presidential candidate. “It will be at odds with the growingly interdependent world, and with Silicon Valley for its neoliberal, free-trade and immigration orientations—the two vital requirements of the global high tech community.”

BIT-AMENA connects Muslim-majority countries in Asia, Middle East and North Africa with the resources of the center to help build diversified and innovation driven economies.

WHEN

5 p.m., Sunday, December 4        

WHERE

Heizel Boardroom, Faculty Building, Room F299
UC Berkeley’s Haas School of Business, 2220 Piedmont Ave., Berkeley, CA 94720 | Map

WHO

Amirahmadi is a professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. Hei is the author of several books, including The Political Economy of Iran under the Qajars, Revolution, and Economic Transition: The Iranian Experience. He earned his Ph.D. at Cornell University and is a frequent contributor in the national and international press on topics of global economic transition.  Amirahmadi is the founder and president of the American Iranian Council (AIC) (www.american-iranian.org), and was a candidate for President in the ninth presidential elections in Iran in June 2013. More information about him is online.

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Study finds the most successful employees do a bit of both, striking a balance between integration and nonconformity.

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—Is it better to fit in or stand out at work? A new study suggests that the answer depends on your position in your network structure and your degree of cultural alignment.

If you’re the kind of person who stands out culturally — you don’t follow the same norms as the others in the office — in order to succeed you will need to fit into your organization structurally, by being part of a tight-knit group of colleagues. And if you stand out structurally — you aren’t a member of any one clique at work but serve as a bridge across groups that are otherwise disconnected from each other — then you better fit in culturally.

In the paper, “Fitting in or Standing Out? The Tradeoffs of Structural and Cultural Embeddedness,” published in the American Sociological Review, co-authors Sameer Srivastava of UC Berkeley’s Haas School of Business and Amir Goldberg of Stanford University’s Graduate School of Business explore the relationship between fitting in, standing out, and success within an organization. The paper is written in collaboration with Christopher Potts, professor of linguistics at Stanford, and Stanford graduate researchers Govind Manian and Will Monroe.

“Most people recognize that, if they fail to differentiate themselves from their peers, they are very unlikely to get ahead,” says Srivastava. “Yet fitting into a company creates a larger, motivating sense of identity for employees and enables them to collaborate with others in the organization.”

The result is a conflicting pressure on workers to fit into an organization and, at the same time, stand out. Srivastava and his colleagues wanted to learn more about that tension and find ways to resolve it.

Examining the language used in corporate emails provided useful, raw data. The researchers studied a mid-sized technology company’s complete archive of email messages exchanged among 601 full-time employees between 2009 and 2014. For privacy and confidentiality, only emails exchanged among employees were analyzed and identifying information and actual message content were stripped from the data. The team created an algorithm that could analyze the natural language in emails, focusing on the extent to which people expressed themselves using a linguistic style that matched the style used by their colleagues.

”Some of the most informative language categories were ones whose use is governed by cultural norms — for example, using emotional language when communicating with colleagues. People who fit in culturally learned to understand and match the linguistic norms followed by their colleagues,” says Srivastava.

To learn how this relates to an employee’s success, the researchers studied employee age, gender, and tenure, and identified all employees who had left the company and whether their departure was voluntary or involuntary. That data enabled them to correlate professional success with fitting in and standing out. The researchers theorized that employees in the firm can be characterized by their levels of cultural assimilation, as well as their attachment to various network cliques. This led them to identify four organizational archetypes: “doubly embedded actors,” “disembedded actors,” “assimilated brokers” and “integrated nonconformists.”

What the researchers call a “doubly embedded” employee —is someone who is both culturally compliant and part of a dense network. Such a person is unlikely to get exposed to novel information and will struggle to break through the clutter in proposing ideas of his own. The researchers found that such workers were over three times more likely to be involuntarily terminated (i.e. fired) than those identified as integrated nonconformists, people who are part of a tight-knit group but still stand out culturally.  

Those most likely to get ahead are called “assimilated brokers,” meaning people who are high on cultural fit and low on network cliqueness. Their mirror images, the integrated nonconformists, also gained more job success.

“The assimilated broker has connections across parts of the organization that are otherwise disconnected. At the same time, she knows how to blend in seamlessly with each of these groups even if they are quite different culturally,” says Srivastava.

Clearly, both fitting in and standing out are important for career success, but the lesson, says Srivastava, is that if you blend in both structurally and culturally, you risk being seen as bland and unremarkable. At the same time, if you try to serve as a bridge across groups but lack the capacity for cultural conformity, you can wind up being perceived with suspicion and mistrust.

The goal is to find a balance between the two.

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The original version of this article was published by the Stanford Graduate School of Business on Insights by Stanford Business.

 

 

 

The human voice possesses the power to sway non-supporters

 

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—What humanizes Donald Trump or Hillary Clinton more: hearing them speak or reading their opinions? A new study found that people who watch or listen to those with opposing opinions, instead of reading what they say, find them more thoughtful, competent, and rational—and more human.

 

The study, “The Humanizing Voice: Speech Can Reveal, and Text Conceal, The Presence of a Thoughtful Mind in The Midst of Disagreement,” is the work of Juliana Schroeder, an assistant professor at UC Berkeley’s Haas School of Business, who studies how different communication mediums influence people’s beliefs about a communicator. Her co-authors are Michael Kardas and Nicholas Epley, both of the University of Chicago.

 

“Voice and visual cues imbue the speaker with thoughts and feelings and make them seem more mindful,” says Schroeder. “In contrast, when reading someone’s opinion on a piece of paper, the communicator’s thoughtfulness is not as apparent.”

 

In the first experiment, 322 participants watched, listened, or read one of six communicators’ opinions about controversial political and social topics—war, abortion, and music—that they either supported or opposed. Participants dehumanized the communicators with whom they disagreed more than those with whom they agreed; however this tendency diminished when they heard the same opinion via voice rather than via the transcribed speech.

 

A second experiment tested whether the same effect held true for communicators’ own written speech. Eight communicators discussed which candidate they supported in the 2016 presidential election on videotape and in writing. A group of 575 participants observed the opinions in four formats—video, audio, transcript, and written text—and rated each presenter. Once again, observers dehumanized communicators with differing political beliefs, but their responses were more favorable when they saw or heard the speech being presented than when they read the speech.

 

The results were consistent whether listening to male or female voices.

 

“Giving the opposition a voice, literally, enables partisans to recognize a difference in beliefs between two minds and may reduce the negative perceptions that lead to conflict,” says Schroeder.

 

Similarly, in their paper, “Mistaking Minds and Machines: How Speech Affects Dehumanization and Anthropomorphism,” recently published in the Journal of Experimental Psychology, General, Schroeder and Epley found further evidence of the humanizing effect.

 

Three experiments found that text communication makes the communicator seem less likely to be genuinely human, perhaps computer-generated, whether the text is generated from an actual human or a computer.

 

In a fourth experiment, studying the varied nuances or cues of the human voice—tone, pace, pitch, and volume—helps explain why speech is humanizing. Actors delivered speeches (written by others) in varying voices, from a “mindful” voice infused with natural emotion and intonation to a “mindless” voice in which the words were read without feeling. When listening to the messages read without feeling, participants deemed the communicators as mindless, robotic, and not human; the same effect occurred when participants read the message themselves.

 

In today’s text-driven world, Schroeder says her findings may be cause for concern.

 

“Our results suggest that if we communicate with others solely through text without hearing their voices, we may be more likely to dehumanize them and consider them relatively mindless. This is where conflicts such as online bullying may begin,” says Schroeder. “In politics, hearing a politician who possesses a different agenda, rather than reading it, may help voters make more positive judgments about him or her.”

 

 

 

 

Study finds cause for banning public investment advice

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—Are investors “mad” to follow CNBC’s Mad Money show host Jim Cramer’s stock advice? Would they be better off without media’s insights?

When investment information is public—such as being broadcast to thousands of viewers—all that “noise” excites investors and causes them to lend more weight to the information than they should, even when the quality of the information is low. As a result, new research suggests that society may be better off making the public release of such information—illegal.

“People put an enormous amount of weight on information delivered via the media. As a result, we found that investor behavior becomes more random and investors become less likely to use the information in an optimal fashion to price the stock,” says John Morgan, an economist at UC Berkeley’s Haas School of Business. “The cost of our markets functioning based on mispriced stocks is greater than the benefits of having public information.”

In the working paper, “Experiments on the Social Value of Public Information,” Prof. Morgan and co-author Donald J. Dale of Muhlenberg College suggest that policymakers must balance the costs of transparency—meant to maintain accountability—with the effects of distorted information.

“The ‘echo chamber’ effect of public information can ruin the way the market should function,” says Morgan.

Media critics began challenging the “CNBC effect”—the result of noise, confusion, and incomplete information—in business journalism during the beginnings of the subprime crisis a decade ago. The phenomenon revealed that new sources of information, such as Mad Money, could move investor sentiment to depend less on stock fundamentals and become more reliant on the public information provided by the press.

“Without public information, each investor would only have a little private information,” says Morgan, referring to the kinds of insights shared privately by people whom investors consider to be knowledgeable of the industry or product. “If you add a new source such as Mad Money, even if it’s a poor source about fundamentals, you know that everyone else will hear it, and this can trump your private information.” Investors therefore are inclined to follow what’s popular.

Because the researchers wanted to make sure that the results held true among the general population, and not just sophisticated stock traders, the researchers used a subject pool of undergraduate college students.  

The participants were first given two types of private information or signals in a stock trading game: high quality/reliable and low quality/less reliable, correlating with fundamentals information (a stock’s intrinsic or true value, not market value) Later, they were given public information. Participants tended to overweight the low-quality information in all rounds of the experiment.

The signals were indications of the true value of the firm, but always reported with error,” says Morgan. “One of the signals was less error-prone than the other and the subjects paid too much attention to the more error-prone signal.”

When the participants were given a modest amount of public information— enough information that a layperson could use it to his or her benefit—the participants consistently over-weighted the public information, resulting in a lower payoff.

The payoff for each participant was determined in two ways: 1) by the difference between one’s choice and the average of all choices, and 2) by the difference between one’s choice and the true fundamental value of the firm. A firm’s true value, according to finance theory, represents the net present value of its future cash flows.

“It places investors on the horns of a dilemma,” says Morgan. “We would all be better off cooperating but our individual interests are strong. If everyone else is following the news story, then most people think the best thing they can do for their investment strategy is to follow along even if they know they may be wrong.”

 

 

 

 

 

 

 

Berkeley-Haas’ Fisher Program for CIO Leadership: recognizing the world’s best technology management leaders

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS—Go into any Walmart and you can always find a good deal on everything from household supplies to casual clothing. But while Walmart stores in California may offer a wide range of organic vegetables, those in Colorado carry a wider variety of fishing and sporting gear. In order to learn more about its 140 million weekly U.S. shoppers and their expectations, Walmart Chief Information Officer Karenann Terrell embraced the giant retailer’s pervasive use of data to drive inventory systems, ensuring merchandise will be available in the stores demanding it.

Terrell has been named the winner of the 2016 Fisher-Hopper Prize for Lifetime Achievement in CIO Leadership, presented by the Fisher CIO Leadership Program at the University of California, Berkeley’s Haas School of Business. The prestigious award recognizes CIO leadership excellence in information and technology management. This year’s award nominees included Terrell and three other respected CIOs: Kim Hammonds of Deutsche Bank; Matt Carey of Home Depot; and Kim Stevenson of Intel.

Terrell’s ability to scale big data and technology to modernize the 54 year-old retailer’s global backend system is an excellent example of CIO leadership, according to the Fisher-Hopper Prize 14-person selection committee.

"A primary motivator for us is to serve customers seamlessly from app to site to store. Consumers want a frictionless experience," said Terrell.

Terrell will be honored at the Renaissance CIO banquet and award ceremony on September 29, 2016, at the UC Berkeley Faculty Club on the Berkeley campus. The banquet follows a daylong conference, “Landmark CIO Community Event,” to be held at the University Club at Memorial Stadium and sponsored by the Fisher CIO Leadership Program. Featured conference speakers include Merrill-Lynch CIO DuWayne Peterson and Raytheon CIO Rebecca Rhoads, winner of the 2015 Fisher Prize. 

The Fisher CIO Leadership Program provides CIOs, Berkeley-Haas students, and faculty with seminars and research insights about the evolving role of CIOs and the application of information technology to business strategies. The program also provides monthly roundtable discussions for senior IT executives on such topics as intellectual property protection, big data, and IT security.

 

 

 

 

 

Capitalizing on the power of consumer peer pressure to develop sustainable new products 

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—If you purchased a Toyota Prius, you may have been driven by the desire to conserve the environment or to save yourself some money at the gas pump.  But consumers may also choose to buy sustainable products to make themselves appear socially responsible to others. Before making purchases, they evaluate how their decisions will stack up against their peers’, according to a new study.  

The study, “Social Responsibility and Product Innovation,” forthcoming in Marketing Science, examines how understanding this phenomenon, known as “conspicuous conservation,” may help leading companies shape their product innovation strategies, especially in ubiquitous product categories such as cars. 

“The design of the Prius is easily noticed by other people on the road, and consumers care about that. The value that I get from driving a Prius may depend upon how many other people in my social circle are also driving environmentally friendly cars. The value is higher if I’m the only one,” says Ganesh Iyer, a professor in the Marketing Group at UC Berkeley’s Haas School of Business, and one of the study’s authors. “Conversely, if an individual is the only one in his or her social circle who is driving a gas-guzzler, there will be pressure to conform.”

The paper is co-authored by David Soberman of the University of Toronto’s Rotman School of Management.

Refraining from buying a product that damages the environment can generate social value for consumers. This need by consumers to measure up to their peers – a concept called social comparison preference – can provide marketers with valuable insights about how they can enhance the desirability of their products. 

“We are trying to capture this issue of social comparison in markets, which is important for visible products like cars and clothing,” says Iyer. “Making a product better on a social or environmental dimension is not the same as simply improving its quality, it is about leveraging social comparison preferences.”

The researchers developed a model linking the R&D decisions of firms to the interplay of consumers’ social comparison preferences (their need to stack up) and how much they are willing to pay. The analysis shows that social comparison can provide incentive for a company to develop innovations in sustainability when the product category is mature and most consumers are already users of that category. In the case of the Prius, for example, most consumers already drive.

Heightened media attention also helps green products become more socially valuable, according to the research. For instance, as the media focused more and more on the effect of palm oil production on deforestation, many consumer product companies started producing palm-oil free products.  

The paper also cites Levi’s Water<Less™ jeans and Clorox’s Green Works cleaners as examples of innovative products developed to respond to consumers' social preferences. Levi’s spent three years developing a process to create denim that requires less water and fewer chemicals to produce, and Clorox spent over $20M to produce eco-friendly, natural cleaning products.

The research study’s findings, says Iyer, underscore the value for companies to understand their consumers’ preferences with respect to social responsibility and to use that understanding in determining long-term innovation and product strategies.

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—Less can be more when it comes to manufacturers and the number of business-to-business relationships they maintain.

Doing business with a limited number of major customers allows manufacturers to hold fewer inventories for a shorter time, according to new research by Panos N. Patatoukas, an assistant professor at UC Berkeley’s Haas School of Business. Patatoukas says inventories comprise a significant part of a firm’s assets — as much as 25 percent for the average manufacturer — and can be costly and risky to hold as inventories can become obsolete. 

“The matching between suppliers and customers is a bit like dating. When a supplier firm in the manufacturing sector develops a focused, long-term relationship with a major customer, both parties tend to benefit by choosing each other,” says Patatoukas.

The study, “Customer-Base Concentration and Inventory Efficiencies: Evidence from the Manufacturing Sector,” co-authored by Patatoukas and B. Korcan Ak, a Berkeley-Haas PhD candidate, was published in the February issue of Production and Operations Management.

Manufacturing firms typically record three types of inventories: raw materials, work-in-progress, and finished goods. The supplier-customer relationship is centered on the transfer of ownership of finished goods.

In order to examine the link between customer-base concentration and inventory efficiencies, Patatoukas and Ak analyzed more than 15,000 annual reports of U.S. manufacturers over a 30-year period obtained from filings with the U.S. Securities and Exchange Commission. Using text-mining algorithms, the researchers were able to get insights about the drivers of inventory efficiencies.

Suppliers with fewer customers also enjoy better collaboration with their major customers, the study finds. In essence, their co-dependency fosters more information sharing that facilitates better demand forecasting and more efficient production planning.

The findings also build upon Patatoukas’ previous research that found a concentrated customer base benefits the manufacturer’s value to stock market investors.

“Investors appear to consider relationships with a limited number of major customers as a plus for firm valuation and are willing to pay a higher premium for manufacturers with more concentrated customer bases,” says Patatoukas.

The case of Walmart and its relationships with its dependent suppliers exemplifies the study’s findings.

“You may think of Walmart as this big, evil behemoth that is more likely to squeeze its dependent suppliers,” says Patatoukas. “The study, however, illustrates how a dependent supplier doing business with a major customer like Walmart may actually do well in terms of inventory management through enhanced collaboration along the supply chain.”

Patatoukas hopes that by combining accounting and operations management research, the study will provide new managerial insights about inventory management and firm value creation.

See Abstract.

 

 

Muscular men perceived to be better leaders than physically weak ones

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—Forget intelligence or wisdom. A muscular physique might just be a more important attribute when it comes to judging a person’s leadership potential.

Take Arnold Schwarzenegger whose past popularity was a result of his physical prowess as a “Mr. Universe” bodybuilder. In the 2003’s historic recall election, the physically imposing Schwarzenegger easily defeated California Governor Gray Davis who is arguably weaker looking than “The Terminator.”

Coincidence? Maybe. But now there is also real evidence that physical strength matters.

Study participants in a series of experiments conducted by Cameron Anderson, a professor of management at UC Berkeley’s Haas School of Business, and Aaron Lukaszewski, an assistant professor at Oklahoma State University, overwhelmingly equated physical strength with higher status and leadership qualities. The paper, “The role of physical formidability in human social status allocation,” is forthcoming in the Journal of Personality and Social Psychology.

The experiments first measured the strength of various men using a handheld, hydraulic Dynamometer that measures chest and arm strength in kilograms or pounds.  After being rated on strength, each man was photographed from the knees up in a white tank shirt to reveal his shoulder, chest, and arm muscles. This way, researchers were able to control for reactions to height and attire rather than strength.

In one experiment, groups of men and women—about 50-50—were shown photographs of the different men on a computer screen. Before the participants saw the photos, they were told that they would be rating people who had been recently hired by a new consulting firm. The participants were asked to rate each subject on how much they admired him, held him in esteem, and believed he would rise in status. They were also asked questions such as, “Do you think this person would be a good leader?” and “How effective is this person dealing with other in a group?”

“The physically strong men in the pictures were given higher status because they are perceived as leaders,” says Anderson. “Our findings are consistent with a lot of real examples of strong men in positions of power.”

But how did the researchers know that participants weren’t simply equating strength with physical attractiveness, also known as a predictor of high social status? The researchers distinguished between the two by asking participants to also rate the photos on “overall physical attractiveness.”  

In another experiment, to further test their results, the researchers used Photoshop to switch the bodies of the strong and weak subjects. For example, a weak man’s head was depicted on a strong man’s body, and vice versa.  The result: participants rated the weak men with stronger, superimposed bodies higher in status and leadership qualities.

The final experiment focused on the height factor. Using Photoshop again, the researchers photographed the men in three different lineups. From right to left: 1) two tall men and two short men; 2) two short men and two tall men; and 3) four men of equal height. In all, each subject was manipulated so he appeared short, tall, and of equal height to the other men in the lineup. The participants’ responses indicated that men of taller stature were perceived to have more strength; as in the other experiments, stronger subjects were rated higher in leadership and status.

The researchers say their findings also dispel the popular explanation that the strong succeed by aggressively intimidating their rivals into submission. 

"Strong men who were perceived as being likely to behave aggressively toward other group members were actually granted less status than their apparently gentler counterparts,” says Prof. Lukaszewski. “Together, the results suggest that the conferral of status upon formidable men, perhaps counter-intuitively, serves a fundamentally pro-social function — to enhance the effectiveness of cooperation within the group."

This phenomenon apparently applies to men only. There was little effect on participants’ perception of leadership skills when they were shown physically strong vs. weak women.

So, do smaller, shorter, or less formidable men have to work harder to gain status? Not necessarily.

“Perceived strength does give people an advantage but it’s not make or break,” says Prof. Anderson. “If you’re behaving in ways that demonstrate you are a leader or are not a leader, strength doesn’t matter.”

Cameron Anderson is the Lorraine Tyson Mitchell Chair in Leadership and Communication II and a member of the Haas Management of Organizations Group.

 

Study reveals the economic value of “soft power” in international commerce

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—Pop culture assets like Star Wars, Taylor Swift, and the NBA not only contribute to ramping up American appeal, they also increase demand for American goods aboard.

Economists call this “soft power,” the ability to attract and positively influence others. Even though countries tend to wield “hard power” by flexing their economic or military strength, a new study found that countries admired for their soft power tend to sell more exports in the global marketplace.

“Countries are always concerned about their image, but the soft power effect has a very tangible commercial payoff.  Germany is a much-admired country and an export powerhouse; North Korea and Iran are pariah states and both find it difficult to export goods,” says Andrew Rose, the study’s author and a professor at UC Berkeley’s Haas School of Business. Rose holds the Bernard T. Rocca, Jr. Chair in International Business & Trade.

In his working paper, “Like me, buy me: The effect of soft power on exports,” Rose studied the period between 2006 and 2013 and found that a 1% net increase in soft power raises exports by about 0.8%.  Rose says this responsiveness means that the monetary return to soft power can be immense.  

The study tracks trade data for over 200 countries using the International Monetary Fund’s Direction of Trade Statistics (DOTS). The data set includes flows between pairs of countries for both exports and imports. Rose also factored in regional trade agreements from the World Trade Organization.

While soft power can be a driving force in international trade, so are other ubiquitous influences such as population, GDP, and political elections. In order to control for them, Rose incorporated these so-called “fixed effects” in his econometric model.

“Any influence, whether it is economic, social, political or cultural, that affects a country’s ability to export in a given year is swept away by these fixed effects, as are all effects on a country’s desire to import,” Rose explains. 

But how do economists measure soft power?

In 2006, a BBC World Service/GlobeScan poll asked people in 33 countries what they thought about different countries—China, Britain, Russia, the United States, India, Japan, and Iran, France, and other countries in Europe—and whether these countries had a “mainly positive or mainly negative” influence in the world. The survey continues to be conducted annually. Today, the survey covers 17 countries and engages participants from 46 countries. The result: a quantitative measure of soft power.  

Among nations, the United States is typically viewed as possessing the most soft power, though perceptions vary greatly from country to country. In 2013, only 17% of Russians considered American influence mainly positive, compared to 82% of Ghanaians.

The analysis also found that soft power changes vary over time. For example, Mexican positive perception of the U.S. rose from 10% in 2006 to 41% in 2013. Over the same period, French positive perception increased from 25% to 52%, while Brazilians’ increased from 33% to 59%.

Similarly, over the same seven years, positive views of China decreased substantially in Spain and Germany while remaining rather constant in Indonesia and Kenya.  Negative views toward China increased the most in Russia and Brazil.

U.S. and Chinese trade were but two examples in which exports correlated with their respective degrees of soft power.

Furthermore, the most negatively viewed countries—Iran, North Korea, Pakistan, and Israel—also saw fewer exports than they would if they had more positive influence in the world, according to Rose’s analysis.

 

Even when a startup fails, the risk pays off.

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—Tempted to launch a new business? Entrepreneurs statistically fail more often than not, but new research suggests that the financial risk is not as great as previously thought, as failed entrepreneurs can return to the salaried workforce and recover their earnings quickly.

While prior research maintained that entrepreneurs bear more risk than salaried workers, Assoc. Prof. Gustavo Manso of the Haas Finance Group at UC Berkeley’s Haas School of Business found that entrepreneurs receive comparable lifetime earnings when they return to a salaried position and, therefore, are exposed to less risk than previously thought.

And those who remain entrepreneurs earn substantially more than their less adventurous counterparts over time.

“Would-be entrepreneurs may think they have a huge chance of failure and will be sacrificing earnings for the rest of their lives, but it’s not true,” says Manso. “Even if the business fails, entrepreneurs don’t suffer as much since they are able to quickly transition to the salaried workforce.”

The findings can be found in Manso’s working paper, Experimentation and the Returns to Entrepreneurship.

Manso followed the careers of entrepreneurs over three decades, including both founders of innovative startups as well as small business owners such as restaurant owners—successful and unsuccessful.

He used the National Longitudinal Survey of Youth-1979 (NLSY79) to model entrepreneurship’s return on investment, or ROI. He gained access to data on 12,686 young men and women who ranged in age from 14 to 22 years old when they were first surveyed in 1979.

The participants were interviewed annually through 1994—and continue to be interviewed every other year. The Longitudinal Survey also provided Manso with the participants’ demographics, education, careers, and labor market traits.

The survey revealed that 52% of entrepreneurial endeavors last less than two years.  Understandably, entrepreneurs who earned less while self-employed tended to abandon the solo route more often than those who earned more as entrepreneurs.

Over a lifetime, the entrepreneurs not only earn about 10% more but also do so with less risk than previously thought, according to Manso’s research. “The study suggests that becoming an entrepreneur is a rational decision and failing isn’t as bad as one would think,” says Manso. “It doesn’t hurt your lifetime prospects.”

 

 

 

 

 

 

 

Emotional appeals elicit compassion and compromise 

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—Is sympathy considered a sign of weakness or is there a place for sympathy in negotiations?

Research by Laura Kray, a professor in the Haas Management of Organizations Group at UC Berkeley’s Haas School of Business, suggests that when one party conveys information with emotional reasons behind it, the other party is more likely to develop sympathy, be more willing to compromise, and find creative solutions.

“Sympathy is an emotion that corresponds with good will,” says Prof. Kray. “In negotiations, it can translate into a willingness to problem solve in ways that might not otherwise occur.”

Kray’s research, “Is There a Place for Sympathy in Negotiation? Finding Strength in Weakness,” is forthcoming in the journal, Organizational Behavior and Human Decision Processes. The paper is co-authored by Aiwa Shirako, Berkeley-Haas PhD 11, and People Analyst at Google, and Gavin Kilduff, Berkeley-Haas PhD 10, and an assistant professor at New York University’s Stern School of Business.

The researchers also found that being transparent about one’s misfortune is more effective when initiated by a “low power” negotiator or someone in the weaker position. Negotiators in the stronger position who tried to gain sympathy were seen as manipulative.

The study involved 106 MBA students (30% female) and the negotiations took place as part of one of their classes. Participants were randomly assigned to negotiating teams to play out various scenarios.

One scenario involved a dispute between a general building contractor and a real estate developer over payment. The study focused on whether feeling sympathy helped the negotiations.

Before going on a trip, the developer told the contractor that quality counts. In an effort to improve workmanship, the contractor upgraded the type of wood used and the developer’s assistant approved the change. However, the developer decided to sell the property and therefore didn’t feel any upgrades were personally beneficial and didn’t want to pay for the more expensive materials. The contractor also owed the developer money for a previous loan. The contractor explained that he could be forced into bankruptcy if the developer called the loan and he reminded the developer of his good intentions.

While the researchers did not measure the reasons behind the developer's response, the outcome suggests that the contractor's statements may have triggered sympathy. In the end, both parties were more poised to work out an amicable agreement to split the additional cost of the wood than they were prior to those pleas.

In another study, the Haas research team measured the use of sympathy-eliciting appeals and also compared the effectiveness of those appeals to rational arguments and to sharing information that benefits both parties.  When the weaker party appealed to the stronger party, shared vulnerabilities, and proposed a solution that would also benefit the stronger party, the latter felt sympathy and was more motivated to help.

A person tasked with negotiating an outcome may not always want to appear weak but the study shows that sharing one’s vulnerability in a genuine way can be beneficial.

Prof. Kray says the results are encouraging and give negotiators more tools to work out compassionate solutions.

“Our findings reveal an optimistic message. Even when people are in powerful positions, situations in which cold-hearted, rational actors might be expected to behave opportunistically, we are finding instead that their feelings of sympathy motivate them to help the disadvantaged,” says Kray.

Laura Kray is the Warren E. and Carol Spieker Chair in Leadership at Berkeley-Haas.

 

 

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—After the 1996 telecom deregulation, American cable, broadband, and phone companies became highly strategic in their campaign finance strategy, using donations to state legislators to gain advantage with appointed regulators.

And when their competitors started opening their wallets, companies and PACs became even more generous, according to new research.

"The Market for Legislative Influence Over Regulatory Policy," forthcoming in Advances in Strategic Management, illustrates how telecommunications companies—from established providers such as Ma Bell to the newer players who gained entry to local markets—have used campaign donations to create their own channel of influence.

“Firms are clearly trying to manage their regulatory environment, and even if they don’t want to donate, they have to respond when their competitors try to manage their environment,” says Rui J.P. de Figueiredo, an associate professor in the Haas Business and Public Policy Group and the paper’s lead author. De Figueiredo studies the intersection of organizations and public policy.

Incumbents wanted to maintain their advantage by keeping prices for access to telephone networks high, while newer entrants wanted prices low so they could compete. “Firms may not always agree on what they want from regulators, but they are essentially required to try to influence policy in states where regulation is up for grabs," says de Figueiredo.

The paper is co-authored by Geoff Edwards, PhD 04, an economist who currently serves as vice-president at Charles River Associates and is one of the first to test campaign contribution strategies by rival interests at the state level.

The study also found that regulators who are political appointees are generally more responsive to the companies than those who are elected by voters. The firms donate more, and expect their contributions to have a bigger effect, when regulators are beholden to the legislature for their position.

The study’s findings are based on data collected from FollowTheMoney.org, a nationwide, non-partisan archive of political contributions and their sources. The study also factored in the characteristics of the donating firms (size, location, and whether they operate in more than one state); the political environment (who controlled the legislature and whether regulators were elected or appointed); and the state’s demographics (how many jobs the companies provide, how much the other employers in the state rely on and utilize the telecommunications industry). Then the researchers analyzed and calculated how contributions have influenced policy and also how competing firms have responded to each other’s donations.

The results also imply, says de Figueiredo, that engaging in “non-market” strategies with government agencies, interest groups, or the media, in addition to market strategies that focus on customers, suppliers, and direct competitors, is an important way for firms to gain advantage.

While this paper focuses on the behavior of firms, an earlier study by Prof. de Figueiredo found that regulators are indeed influenced by political donations when crafting policies. “In that study, the firms that gave the most gained fairly significant market advantages in terms of the regulated prices which are paid to incumbents for access to their local phone loops by entrants,” says de Figueiredo.