Berkeley-Haas Joins Global Network for Advanced Management as 2nd US Member School

The University of California Berkeley’s Haas School of Business has become the 28th member of the Global Network for Advanced Management, a network of top business schools committed to educating global leaders.

Berkeley-Haas is the second top U.S.-based business school to join the Global Network, and brings unique depth in innovation, entrepreneurship, and technology as well as a close connection with Silicon Valley. Since its launch in 2012, the Global Network has added seven member schools.

As the newest member school, Berkeley-Haas will gain full access to the Global Network’s innovative pedagogical initiatives that connect students and faculty with peers across a range of global economies, including both developed nations and fast-growing economies, such as Indonesia, Turkey, and Chile.  

Read an article in the Financial Times about the addition of the Haas School of Business to the Global Network for Advanced Management.

Some of the most popular Global Network programs include Global Network Weeks, through which students travel to other member schools for mini-courses in areas of special expertise on those campuses, and Global Network Courses, online for-credit courses offered by member schools in which students learn about pressing global questions and work in dispersed, culturally diverse teams.

“Participation in the Global Network for Advanced Management will add a rich global opportunity to the education we offer,” said Berkeley-Haas Dean Rich Lyons. “Global business is a top interest of our students, and the network model enables us to connect with more regions, cultures, and economies at once than would be possible through partnerships or other conventional programs.”

Berkeley-Haas’s application to join the Global Network was approved by a unanimous vote of the existing members schools. Bernard Yeung, the Dean of NUS Business School and chair of the Governance Committee of the Global Network for Advanced Management, said, “We’re very excited to begin working with Berkeley-Haas. Each of our programs becomes richer with the participation of students with diverse perspectives and experiences; adding Haas students to the mix will be a great advantage. Furthermore, this addition connects the Global Network to one of the greatest centers of innovation in the world.”

Enase Okonedo, Dean of Lagos Business School, said, “Global Network programs not only expose our students to thought leaders in other countries, they also help our students build relationships and professional networks that will aid them throughout their careers. I feel confident that students at Berkeley-Haas will both gain and contribute a lot of value as part of the Network.”

Ongoing and developing Global Network programs build on both formal and informal connections. For example, a recently launched investment competition invited participation from students at all member schools and will produce a global index of the resulting stock picks. Member schools are also collaborating to offer an executive education certificate. In addition, the Global Network has developed strong partnerships with the World Business Council on Sustainable Development to work on issues related to sustainability and with the Rockefeller Foundation for an initiative on resilient cities.

Yale SOM Dean Edward A. Snyder said that Berkeley-Haas will increase the power of the Global Network to impact the full range of programs at top business schools, including the full-time MBA as well as non-degree executive education. “Every top school must prepare students for the intensely globalized business world,” said Snyder. “Working in teams with peers across institutional boundaries and from diverse backgrounds is now an imperative.  Those who have greater experience will be more effective in addressing the major challenges of our age.”

Deans and directors of Global Network schools will meet in Bangalore, India, at the campus of the Indian Institute of Management Bangalore, November 15-17. In addition to discussions of ongoing Global Network programs and strategy, the meeting will provide an opportunity for the official induction of Berkeley-Haas as a full member.

Learn more about the Global Network for Advanced Management. [http://advancedmanagement.net/]

Flagging a Stock Price Crash

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—When Barracuda Network’s stock price tumbled almost 35 percent in one day last September, a new system developed by Berkeley-Haas researchers had already flagged the signs that led to the fall.

The new crash-risk system, based on a study of 14 years of stock data, aims to help investors actively avoid price crashes. The system is based on flags which researchers developed from variables associated with stock price declines. When a company receives three or more flags, it is significantly more likely that its stock price will crash.

“We have found these crash flags to be an effective tool for investors,” says Professor Richard Sloan, Haas Accounting Group. “Barracuda had been consistently raising between four and five flags over the previous month, so this is a good example of the price crash flag system in action. Despite reporting a healthy 14% revenue growth rate, Barracuda disappointed investors who had been expecting even more.”

The study, “Navigating Stock Price Crashes,” is co-authored by Prof. Sloan; B Korcan Ak, Berkeley-Haas PhD Candidate; and RS Investment’s Steve Rossi, an analyst, and Scott Tracy, a portfolio manager.

About 70% of stock market crashes occur when earnings announcements are made, says Prof. Sloan.

“We wanted to understand the types of signals that can help to predict such price crashes,” he says.

The researchers studied 14 years worth of stock return data between 2001 and 2014. The sample included nearly 60,000 observations consisting of companies trading on a major US stock exchange with a market capitalization of at least $100 million at the beginning of the period. They rated each stock on a number of variables to determine which companies should be assigned crash flags.

They identified five variables that were particularly helpful in predicting stock price crashes. These variables include unusual trading volume, high short interest, large accounting accruals, extreme valuations and high growth expectations. Stocks ranking in the top quintile on at least three of these variables were significantly more likely to experience a price crash over the next six months.

“We’re not necessarily advocating that investors should trade stocks based on crash risk flags alone,” says Prof. Sloan. “But we strongly suggest that stocks with three or more flags be carefully examined before continuing to hold them through earnings season. Our research should help investors to construct equity portfolios with fewer stock price crashes, higher returns, and lower volatility.”

 

Workplace mentors benefit female employees more than men

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS—The success of online networking sites such as LinkedIn illustrates the popularity of building a wide-ranging contact list. Yet when it comes to raising one’s profile within the workplace, female employees stand much to gain from formal, face-to-face mentoring programs, according to a new study.

In the paper, “Network Intervention: A Field Experiment to Assess the Effects of Formal Mentoring on Workplace Networks,” (Social Forces, Volume 94, Issue 1, September 2015), Assistant Professor Sameer Srivastava of UC Berkeley’s Haas School of Business documents the results of a field experiment involving 139 “high potential” employees at a software development lab for a U.S.-based company in China.

The paper reports that women gained more social capital from affiliation with a high-status mentor than their male counterparts.

Srivastava says that formal mentoring can expand professional networks in a variety of ways—for example, by building social skills and providing access to the elite members of an organization. Notably, simply being publicly affiliated with a high-status mentor appeared to benefit women more than it did the men in the program. Qualitative interviews pointed to one main reason: women experienced a greater increase in visibility and legitimacy as a result of their mentor affiliations than did male participants. As a result, women became more attractive network partners for their colleagues.

“It is well understood that networks form organically. In contrast, I am interested in understanding how managers can actively shape workplace networks,” says Srivastava. “In this company, as in many other comparable companies, technical employees tended to build relatively small networks, mostly within their own groups. Senior leadership believed that the people who did well in the organization were those who had not only depth but also breadth of social capital.”

The company had been experimenting with different ways to help employees develop this breadth of social capital and tried, among other things, a formal mentoring program. The program assigned employees to shadow a more senior person in another part of the organization for about a dozen days over a two-to-three-month period.

During this time, the protégés attended meetings with their mentors and worked on short project assignments. The senior employees’ objective: transfer some of their organizational social capital to their protégés.

“Most mentoring research is based on cross-sectional surveys that are ill-suited to assessing whether formal mentoring programs actually work. The goal of this study was to provide more credible evidence about whether these programs can work, and if so, for which kinds of employees,” says Srivastava.

The study provided this evidence by comparing the size of participants’ reported networks before and after their mentoring assignments. Srivastava then assessed this change relative to a control group of employees with similar past performance and perceived potential who did not participate in the program. He also compared network changes across two groups of employees who participated in the program at different times.

Because the study was based on one particular organization and set of employees, Srivastava says that care must be taken in generalizing the findings to other contexts. Nevertheless, he believes the findings support the idea of formal mentoring programs as a means of addressing differences in the kinds of organizational networks that women and men tend to form, which, in turn, contribute to gender inequality in the workplace.

 

 

 

 

Frequently Discounting Maximizes Retailer Revenues

JC Penney implemented a “best price” strategy in 2012, assuming consumers prefer fair, everyday prices as opposed to sale prices that are discounted from original, inflated prices. It was wrong. Longtime customers—loyal fans of sales and coupons—rejected the new pricing policy, and JC Penney reinstated its old pricing model that included frequent discounts.

In contrast, retailers like Zara, which sells women’s and men’s clothing, relies on a low rate of discounting and low stock replenishment or high product turnover. If customers don’t buy a new product right away, it may disappear before they commit to buy.

But there is a third pricing strategy that incorporates the benefits of both approaches and allows the retailer to better match supply with demand. The “discount-frequently” pricing strategy allows retailers to charge high prices when demand is high and is flexible unlike an “every day low price” strategy or “static pricing.”

“A firm that cares about attracting customers to the store as well as maintaining the flexibility to match supply with demand would benefit from the discounting frequently policy,” says Pnina Feldman, assistant professor at UC Berkeley’s Haas School of Business, Haas Operations and Technology Management Group.

In the paper, “Price Commitments with Strategic Consumers: Why it can be Optimal to Discount More Frequently … Than Optimal” (Manufacturing and Service Operations Management, July 2015), Feldman and co-author Gérard P. Cachon, The Wharton School, University of Pennsylvania, found the discount-frequently strategy proved to be the most optimal.

The findings are based on game theoretic models that compared expected revenue and profits within different pricing strategies. All of the models assumed that customers incur a purchase “cost”—time and effort—to physically shop at a store and will only go shopping when they think it will be worth their while.

Typically a retailer may increase prices when demand is high, or lower prices when demand is low. This is called “dynamic pricing.”

When a retailer discounts prices frequently—even in cases where they would rather charge a high price—Feldman says customers are more likely to visit the store because they value the discounts. At the same time, by not committing to an “every day low price,” it can still raise prices if demand turns out to be very high, and their customers will not abandon them. In this scenario, customers understand that demand may be high so they may not get a big discount; but given the store’s history, they believe they are not being taken advantage of so it’s worth it to continue to shop that store more.

The researchers also contend that customers are equally as strategic as merchants. The discount-frequently strategy is good, says Feldman, if the merchant wants to get more customers to visit the store. Customers may also delay their shopping in anticipation of future discounts. If the latter behavior is more important to the retailer, discounting frequently may not the optimal strategy.

“Committing to discount frequently maximizes revenues by balancing the trade off between dynamic and static pricing,” says Feldman.

 “The discount-frequently strategy is about making commitments without sacrificing flexibility. Retailers think of dynamic pricing as charging the best prices to match supply and demand, “ says Feldman. “But by implementing a dynamic pricing strategy that makes no price commitments, retailers do not take into account today’s smart and savvy customers who will visit the store less frequently if they can’t depend on good prices and product availability.”

 

 

The California Energy Commission Appoints Energy Institute at Haas’s Severin Borenstein as Chair of the Petroleum Market Advisory Committee

News Release
September 10, 2015
Contact: Andrew Campbell, 415-515-4655
 

PMAC To Discuss Why California Gasoline Prices are Unusually High
 
BERKELEY – The Chair of the California Energy Commission, Robert B. Weisenmiller, has appointed Severin Borenstein, E.T. Grether Professor of Business Administration and Public Policy at the Haas School of Business and Research Associate of the Energy Institute at Haas, UC Berkeley, as Chair of the Petroleum Market Advisory Committee (PMAC). The PMAC was established by the California Energy Commission to provide expert advice on market trends and to recommend policy solutions for market instability. As Chair, Borenstein will serve as the primary spokesperson for the Committee before the Energy Commission.
 
I'm honored and excited to be leading the PMAC," said Borenstein. "California's gasoline prices have been way out of line with the rest of the nation since mid-February, much longer than in previous price spikes. This is costing California consumers millions of dollars every day. Taxes and the cost of our cleaner burning gasoline do not explain the differential. I hope to bring together all stakeholders to have a serious discussion about why our gasoline prices are unusually high."

The Committee is made up of five leading petroleum fuels market experts who will provide the Energy Commission and state regulators with independent advice and insights on issues, from local policies to global events, affecting the market. In addition to Borenstein, committee members are James Sweeney, Director of the Stanford University Precourt Energy Efficiency Center; Amy Jaffe, Executive Director of Energy and Sustainability at University of California, Davis; Kathleen Foote, Senior Assistant Attorney General and Antitrust Chief at the California Attorney General's Office; and Dave Hackett, President, Stillwater Associates.

Berkeley-Haas Launches New Tusher Center to Study Management of Intellectual Capital

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS — UC Berkeley’s Haas School of Business has inaugurated a new center to promote the school’s thought leadership in the vibrant, complex field of intellectual capital management.

The new Tusher Center for Management of Intellectual Capital was announced at Innovation and Competition: The Role of Patents and Copyrights, a conference held July 14 at UC Berkeley. The event was organized by Prof. David J. Teece, the Thomas T. Tusher Professor of Global Business, who will also serve as the faculty director of the Tusher Center.

Thomas Tusher, BA 63, former Levi Strauss & Co. President and COO, and the Haas School’s Business Leader of the Year in 1996, established the center.

The center will address research, funding, and outreach related to intangible assets and long-run enterprise-level competitiveness. It will be housed at the Haas’s School’s Institute for Business Innovation.

In his opening conference remarks, Teece said that in today’s global economy, intellectual property, know-how, relational capital, brands, and corporate culture are often more important than tangible assets and financial capital.

“Tangible assets matter, but even in resource-rich places like Australia and North Dakota, the path to riches involves building and leveraging intangible assets,” he said. “These assets can anchor the long-run competitive advantage of nations.”

A primary concern of the Tusher Center is to transcend the complex fields of intellectual capital, including antitrust legislation, international trade, business strategy and organization, science and technology policy, and communications policy, Teece said.

The conference drew high-level experts from around the world. David Kappos, former under secretary of commerce for intellectual property and director of the United States Patent and Trademark Office, highlighted the conflicts between patents and antitrust laws in his keynote. Haas Adjunct Professor Henry Chesbrough, PhD 97, faculty director of the Garwood Center for Corporate Innovation, addressed the opportunities granted by open innovation. Chief policy officer and director for international affairs at the United States Patent and Trademark Office (USPTO) Shira Perlmutter also spoke.

For more information on the Tusher Center for the Management of Intellectual Capital, visit http://businessinnovation.berkeley.edu/intellectual-capital/tusher-center.

How Stock Market’s “Spare Tire” Keeps Economy Churning During Banking Crises

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—Stories about corrupt CEOs raiding the corporate piggy bank would appear to be the best argument for shareholder protection laws known as “anti-self-dealing laws.” But there’s another bonus. A new study finds in countries with strong legislation to prevent fraudulent corporate behavior, banking crises have a less severe impact on firms and the economy in general.

The study, “How the stock market can play this critical role is the subject of “Spare Tire? Stock Markets, Banking Crises, and Economic Recoveries,” forthcoming in the Journal of Financial Economics, is the first assessment of the role of shareholder protection laws in shaping firms’ response to a banking crisis.

Co-authored by Prof. Ross Levine, the Willis H. Booth Chair in Banking and Finance at UC Berkeley’s Haas School of Business; Chen Lin, the Stelux Professor of Finance at the University of Hong Kong; and Wensi Xie, Assistant Professor at the Chinese University of Hong Kong; the paper is forthcoming in the Journal of Financial Economics.  

During a similarly sized banking crisis, firms in countries with strong shareholder protection laws raised more money through stock sales, performed better in terms of profits and investment efficiency, and terminated fewer employees than similar firms in countries with weaker shareholder protection laws.

Banking crises make it harder for firms to obtain loans, threatening their profitability and survival. That’s when the stock market can act like a “spare tire” —by allowing firms to issue equity to keep capital moving so firms can remain solvent and avert further damage to the economy. But strong shareholder protection laws must already be in place, according to Prof. Levine who studies the effects of regulation on the finance industry and how they impact ordinary people.

“This isn’t just about trading and profits,” says Levine. “Much of the population may not know anything about the stock market, but an economic crisis could cause people to lose their homes or jobs.”

The study builds upon a conjecture by Alan Greenspan, former chairman of the Federal Reserve. In 1999, Greenspan argued that the banking crisis in Japan and East Asia would have been less severe had those countries built a legal infrastructure to allow stock markets to provide corporate financing when the banks could not.

“A spare tire is an alternative source of external financing during a crisis. If everything is ok, we wouldn’t put the spare tire on. But if you get a flat, you’re glad that you have a spare,” says Levine.

The researchers compiled data on over 3,600 firms across 36 countries that experienced at least one systemic banking crisis from1990 through 2011. They also factored in shareholder protections in the sample countries, firm profitability, and the duration of the banking crises. By examining what happened to many firms over two decades, the researchers were able to rule out many other potential explanations for why firms in different countries respond differently to crises, such as differences in the size of the crisis; the level of economic development; the sophistication of financial markets; the potential role of other laws; and accounting protocols.

No matter how they cut the data, the evidence indicated that the ability to access stock markets when the banks go flat has a big effect on businesses and, more important, on the lives of ordinary workers.

“The mechanisms are clear,” says Levine. “When a country has stronger shareholder protection laws, people are more enthusiastic about buying shares in firms because corporate insiders are less able to take advantage of small investors and this enthusiasm translates into more money for firms, allowing them to weather banking crises more effectively.”

See full study.

 

How to Trust What Your Customers Say About Your Brand

Berkeley-Haas researchers dive into the brain to validate consumer insights

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS—Marketers would love to get inside the consumer’s brain. And now they can. Researchers at UC Berkeley’s Haas School of Business are using functional magnetic resonance imaging (fMRI) to see if what people say about brands matches what they are actually thinking.

In their paper, “From ‘Where’ to ‘What’: Distributed Representations of Brand Associations in the Human Brain (Journal of Marketing Research: August 2015, Vol. 52, No. 4), co-authors Ming Hsu and Leif Nelson, Berkeley-Haas marketing professors, and Yu-Ping Chen, Berkeley-Haas Ph.D., used fMRI to test a classic marketing proposition that consumers associate human-like characteristics to brands. The authors say the results provide marketers with a rigorous method that they can potentially use to verify core customer insights.

“Surveys and focus groups are the work-horses for generating customer insights. They are fast, inexpensive, and offer tremendous value for marketers,” explains Hsu, who served as senior author of the study, “However, the inherent subjectivity of these measures can sometimes generate skepticism and confusion within companies, often leading to difficult conversations between managers within marketing and those outside.”

The researchers scanned the study’s participants in an fMRI machine while they viewed logos of well-known brands such as Apple, Disney, Ikea, BMW, and Nestle. After they finished the scan, the participants then took a survey that asked about the characteristics that they associated with each brand. Next, using a set of data mining algorithms, the researchers used the participants’ brain activity to predict the survey responses.

“We were able to predict participants’ survey responses solely from their brain activity,” says Chen. “That is, rather than taking participants’ word at face value, we can look to their neural signatures for validation.”

Although conducting fMRI studies on a routine basis is still likely to be cost prohibitive for most companies, the current findings point to a future where marketers can directly validate customer insights in ways that were not possible before.

“In the past, neuroscience has been providing answers to questions that marketers weren’t quite asking, and marketers were asking questions that neuroscientists didn’t have answers for,” says Prof. Nelson.

“Our research aims to close some of that gap,” adds Hsu.

See Abstract.

See full study.

 

Raytheon CIO Honored with Fisher-Hopper Prize for CIO Leadership

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS—The Fisher CIO Leadership Program, Institute for Business Innovation, has awarded Rebecca Rhoads, Raytheon Company president of Global Business Services and chief information officer, with the fourth annual 2015 Fisher-Hopper Prize for Lifetime Achievement in CIO Leadership.

Ms. Rhoads was selected for her extraordinary career fostering technology excellence, providing strong advocacy for Science Technology Engineering and Math (STEM) education, and demonstrating consistent support for more women, diversity, and inclusion in technology careers. She has served as Raytheon’s CIO for over 14 years and has also served as the president of its Global Business Services organization since it was formed in 2013.

“It is such an honor to be recognized by my peers for doing what I love to do. It’s hard but rewarding work,” said Rebecca. “Don Fisher and Max Hopper were pioneers in their industries and I hope my own legacy makes it easier for all to embrace STEM education and career paths.”

Recipients of this highly coveted information technology management award are selected through a peer review process.  Participants in the selection of Ms. Rhoads include current or past CIOs of Cardinal Health, Charles Schwab, Chemical Bank, Cisco, FedEx, Fannie Mae, Frito-Lay, Kroger, Marriott, Merrill-Lynch, Procter & Gamble, the U.S. Department of Defense, and WalMart. Previous winners of this award include Filippo Passerini of Procter & Gamble (2012), Chris Hjelm of Kroger (2013), and Patty Morrison of Cardinal Health (2014).

About the Award – The Fisher-Hopper Lifetime Achievement award is given in honor of the late

Don Fisher (1928-2009), co-founder of The Gap, and Max Hopper (1934-2010), author of American Airlines’ SABRE system, used today by airlines, railways, hotels, travel agents, and other travel companies worldwide. Awardees must demonstrate an enduring, positive, and far-reaching impact on their company and industry, as well as leadership excellence during a variety of business cycles. 

Ms. Rhoads will receive the award from last year’s winner, Patty Morrison, during the annual Renaissance CIO Banquet on September 17, 2015 at UC Berkeley’s Faculty Club, Berkeley. CA. The award ceremony follows the “Becoming a Digital CIO” conference, a full day of lectures and panel discussions by global IT management luminaries.

###

Contact:

Jim Spitze, Executive Director
Fisher CIO Leadership Program, Haas School of Business, UC Berkeley
[email protected]  | (510) 409-2888

Study Finds Costs of Residential Energy Efficiency Investments are Double the Benefits

Contact: Pamela Tom | Media Relations | [email protected]

New evidence supports the need for additional policy solutions to confront climate change while more field evidence is gathered to identify the most beneficial energy efficiency investments.

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS—Energy efficiency investments are widely popular because they are believed to deliver a double win: saving consumers money by reducing the amount of energy they use, while cutting climate-forcing greenhouse gas emissions and other pollutants harmful to human health. But a new study by a team of economists finds residential energy efficiency investments may not deliver on all that they promise. Through a randomized controlled trial of more than 30,000 households in Michigan – where one-quarter of the households were encouraged to make residential energy efficiency investments and received assistance – the economists find that the costs to deploy the efficiency upgrades were about double the energy savings.

“Energy efficiency investments hold great potential as a means to fight climate change.  However, we found that, at least in the case of residential energy efficiency investments, the projected savings overestimate the reality on the ground,” says Michael Greenstone, the Milton Friedman professor of economics and director of the Energy Policy Institute at the University of Chicago (EPIC). “A problem as urgent as climate change must be addressed using policies that deliver the greatest bang for their buck. As policymakers design climate policies, these findings suggest that a market-based approach that puts a price on carbon would likely be more effective. In the meantime, it is critical that we field test energy efficiency programs to determine which investments offer the greatest potential.”

The study – a part of The E2e Project and led by Greenstone, as well as Meredith Fowlie and Catherine Wolfram of UC Berkeley – assessed the nation’s largest residential energy efficiency program, the Federal Weatherization Assistance Program (WAP). Participating low-income households were provided with about $5,000 worth of weatherization upgrades (e.g. furnace replacement, attic and wall insulation, and weather stripping) per home at zero out-of-pocket costs. While the researchers found that the upgrades did reduce the households’ energy consumption by about 10 to 20 percent each month that only translated into $2,400 in savings over the lifetime of the upgrades – half of what was originally spent to make the upgrades, and less than half of projected energy savings.

“Energy efficiency programs are generally viewed as cost effective. This view is often based on engineering calculations and associated savings projections,” says Fowlie, an associate professor of agriculture and resource economics and Class of 1935 Endowed Chair in Energy at UC Berkeley. “Our data-driven analysis that measures the actual returns on energy efficiency investments shows how these projections can be quite flawed. In actuality, the energy efficiency investments we evaluated delivered significantly lower savings than the models predict.”

Past studies have claimed that energy efficiency investments don’t deliver the expected energy savings because of a ‘rebound effect’: households adjust their behaviors and consume more energy services than they had before the investments were made. However, the economists could find no evidence of this ‘rebound effect’ in the households they studied.

Further, some say that the broader societal benefits – savings as a result of reductions in pollution from energy production– justify the investments. Again, the findings did not support this. The cost per ton of CO2 avoided in the sample amounted to $329, significantly larger than the $38 per ton that the federal government estimates as the social cost of carbon.

Another claim is that energy efficiency programs have a low take-up rate because consumers don’t know about the programs or how to participate, driving down the expected benefits. To investigate this, the authors studied whether extensive outreach and assistance would boost the take-up rate of the program. Using a firm with extensive experience in managing outreach campaigns, the research team made almost 7,000 home visits, more than 32,000 phone calls, and 2,700 follow-up appointments. Yet, despite this aggressive outreach and personal assistance, only 6 percent of households in the treatment group participated in the program, compared to 1 percent in the control group. In the end, it cost more than $1,000 for each additional household encouraged to undertake these free energy efficiency investments.

“At the end of the day, the models don’t capture some of the hard-to-quantify costs involved in making energy efficient choices, which could help explain why people aren’t taking advantage of the opportunities as much as the models predict,” says Wolfram, the Cora Jane Flood professor of business administration at UC Berkeley’s Haas School of Business and faculty director at the Energy Institute at Haas. “This is another reason why potential energy efficiency investments need to be rigorously tested in real-world conditions before relying too heavily on them to solve climate change.”

This research was made possible thanks to generous support from the Alfred P. Sloan Foundation, the MacArthur Foundation, the Rockefeller Foundation, and the UC Berkeley Energy and Climate Institute.

About the Energy Institute at Haas (EI@Haas)
The Energy Institute at Haas brings together research and curricular programs on energy business, policy, and technology commercialization. The goal of EI@Haas is to bridge the gap between the frontiers of economic and scientific energy research and the marketplace.  Through an economic lens, faculty at the Energy Institute at Haas probe the intricacies of energy markets and generate ideas to make them work better.

Working Paper: “Do Energy Efficiency Investments Deliver? Evidence from the Weatherization Assistance Program”
###

If You Demonstrate that “Black Lives Matter,” Others Will Too

People who observe positive nonverbal acts toward black Americans become less likely to perpetuate racial discrimination

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS—The “Black Lives Matter” hashtag evolved as a call for social change aimed at increasing the conversation about racial inequality. But what if social change was less dependent on talking and more dependent on nonverbal communication?

New research finds observing a white American engage in small nonverbal acts such as smiling more often, making eye contact for longer periods of time, and standing in closer proximity to a black American makes the observer less prone to racial biases. Specifically, small acts of positivity by white Americans towards African Americans and other black Americans causes observers to hold fewer stereotypes about black Americans and to have more positive attitudes towards black Americans in general.

The findings are described in “Some Evidence for the Nonverbal Contagion of Racial Bias,” (Organizational Behavior and Human Decision Processes, June 2015), co-authored by Dana R. Carney, associate professor and Barbara and Gerson Bakar Faculty Fellow, University of California, Berkeley’s Haas School of Business; Greg Willard, research associate, Harvard University; and Kyonne-Joy Isaac, graduate student, Princeton University.

“Prejudice is often less overt. It manifests often as micro acts of aggression,” says Carney. “What is hopeful is that our study also indicates that positive behavior toward different social groups can be contagious.”

Four related experiments to test the contagious effects of racial bias produced these results:

  •     Observers of micro-positive behavior toward a black American subject formed more positive impressions.
  •     Observers of micro-positive behavior toward a black American subject adopted fewer racial stereotypes.
  •     Observers of micro-positive behavior toward a black American subject were found to have less racial bias towards black Americans in general.
  •     Observers must also be aware that negative social behavior is being directed toward a black person in order to produce a pro-black bias outcome.
     

The experiments consisted of participants who were randomly assigned to watch one of two types of videos.  In one type of video, highly biased white Americans exhibited small, negative, and nonverbal behaviors of bias, such as less smiling, less leaning in, and less gazing, toward a black American. The second type of video showed whites who held black Americans in high regard and naturally expressed their positive biases through more smiling, more leaning in, and more gazing.

In Experiment 1, for example, participants rated the black American in the video on how much they liked or disliked the person or whether or not they would want to be friends with this person. They also rated the black American on six adjectives: kind, considerate, thoughtful, hostile, unfriendly, dislikable. The results: participants liked and wanted to be friends with the black American who was on the receiving end of positive micro nonverbal behaviors significantly more than they liked and wanted to be friends with black Americans who received negative nonverbal micro aggressions.

See full study.

Female Managers Do Not Reduce the Gender Wage Gap, Study Finds

Contact:
Pamela Tom | Media Relations | [email protected]

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS—Working women are “leaning in” and supporting more females in leadership roles, but a new study finds that having a female manager doesn’t necessarily equate to higher salaries for female employees. In fact, women can sometimes take an earnings hit relative to their male colleagues when they go to work for a female manager.

“Agents of Change or Cogs in the Machine? Re-examining the Influence of Female Managers on the Gender Wage Gap”(American Journal of Sociology, forthcoming) is co-authored by Sameer B. Srivastava, assistant professor, and Eliot L. Sherman, doctoral student—both at UC Berkeley’s Haas School of Business. The study examined how the salaries of both male and female employees changed when they switched from reporting to a male manager to reporting to a female manager (and vice versa).

Whereas most previous research has suggested that female managers are “agents of change” who act in ways that reduce the gender wage gap, this study found no support for this assertion. In fact, a subset of switchers—low-performing women who switched to working for a high-performing female supervisor—fared worse financially, not better, than their male colleagues making a comparable switch. 

According to Srivastava, this effect can occur when people see themselves as part of a valuable group but worry that others won’t see them that way. “A high-performing woman might, for example, worry about being devalued because of her association with a low-performing female subordinate,” he explains. “This might lead her to undervalue the subordinate’s contributions.”

Srivastava and Sherman analyzed 1,701 full-time employees in the U.S. who worked for a leading firm in the information services industry between 2005 and 2009. The researchers had access to complete employment data: salary, reporting structure, annual performance evaluations, and demographic information.  For example, the average age of employees was 43; average length of employment was 8.85 years; and merit increases ranged from 3% to 5%.

The authors conclude that it may be wishful thinking to assume that the gender wage gap will automatically close as more and more women take management positions. Instead, they argue that, for fundamental change to occur, the increasing number of women managers must be matched by an organizational culture that is keen on gender equality, fostering initiatives to reduce tokenism, and encouraging women to positively identify with their gender in the workplace.

See Abstract.

The E2e Project Awarded $5 Million Grant to Evaluate New Advanced Energy Monitoring System Designed to Save Industry Energy and Money

Contact:
Andrew Campbell, Executive Director, Energy Institute at Haas
[email protected]
(510) 642-7316
 

Data-driven Analytics to Better Understand the Industrial Energy Efficiency Gap

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS—The E2e Project (E2e), a joint initiative of the University of California, Berkeley, Massachusetts Institute of Technology, and University of Chicago, has partnered with Lightapp Technologies to receive a $5 million research grant from the California Energy Commission (CEC) to conduct the largest demonstration and evaluation of an innovative energy monitoring system for industrial facilities. The project will provide industrial customers and policymakers data-based evidence on whether advanced energy monitoring is a cost-effective approach to save energy and reduce greenhouse gas emissions.

The grant was awarded as part of the CEC’s Electric Program Investment Charge (EPIC) program, an ambitious effort to develop and demonstrate the next generation of energy technologies to address California’s clean energy goals.

“We are honored to receive this highly competitive grant from the Energy Commission,” said Catherine Wolfram, faculty director of E2e and the Cora Jane Flood Professor of Business Administration at the Haas School of Business, University of California, Berkeley. “Policymakers are looking to energy efficiency to reduce the world’s dependency on fossil fuels. Yet our understanding of how individual behavior influences energy use is still poor. This project aims to narrow that knowledge gap.”

E2e’s partner, Lightapp Technologies, has developed a software-based, optimized energy management system for industrial facilities. This innovative approach to energy management relates electricity consumption within specific plant systems to the production outputs of those systems. Lightapp’s software collects data from shop-floor sensors, manufacturing software systems and external data such as weather, and creates reports that will enable users to discover, analyze, and share data about how they consume energy—and, more importantly, how they might use it more efficiently. The reports also identify specific ways to lower consumption through operational changes, repairs, and capital investments.

“Lightapp’s mission is to enable decision makers at all levels in the industrial sector to make financially driven decisions about their energy and operations” said Elhay Farkash, Lightapp CEO. “We are excited to partner with E2e to roll out our new technology to industrial facilities in California and show that by simplifying energy management through software, manufacturers can improve bottom line results and enhance throughput performance.”

For this project, E2e and Lightapp will test Lightapp’s energy-monitoring system in one hundred California industrial facilities. The project will focus on the facilities’ compressed air systems. Compressed air systems do everything from running bottling lines at breweries to powering tools in automotive factories. Air compressors and the equipment they drive account for around 10 percent of the electricity used by manufacturers. In some plants, compressors use more electricity than any other kind of gear. With a leaky compressor valve, money is literally disappearing into thin air.  If successful, the technology can be used throughout a facility and measure energy consumption in every part of the manufacturing process.

E2e will structure the evaluation as a randomized controlled trial, where randomly chosen facilities will be recruited to participate and receive Lightapp’s analytical software. This arrangement will enable the faculty researchers – Catherine Wolfram (Berkeley-Haas), Michael Greenstone (University of Chicago), and Christopher Knittel (MIT) – to precisely measure the impact of the new technology and analytics on industrial facilities’ electricity consumption.  By including a sampling of facilities from different industrial sectors, the researchers also hope to identify which types of facilities are more likely to adopt the new technology and gather information on potential barriers to adoption.

This project aims to generate rigorous and reliable evidence on the effectiveness of an industrial energy-management system. If successful, the findings can be used to encourage thousands of California manufacturers—and even more worldwide—to deploy energy management systems to save energy, lower costs, and reduce carbon emissions.

 

About The E2e Project

E2e is a joint initiative of the University of California, Berkeley’s Energy Institute at Haas, Massachusetts Institute of Technology, and University of Chicago, three recognized leaders in energy research. E2e is a group of economists, engineers, and behavioral scientists focused on understanding the energy efficiency gap. E2e relies on randomized experiments and other state-of-the-art evaluation strategies to measure and enhance the impact of energy efficiency initiatives. E2e seeks to understand the difference between what is technically possible and what is practically achievable for energy efficiency in a wide variety of settings. Uniting the goal of creation of knowledge with a commitment to non-partisan outreach, E2e aims to create a cheaper and greener future.  For more information, please visit http://e2e.haas.berkeley.edu

About Lightapp Technologies

Lightapp revolutionizes the way customers consume energy by exposing and enabling appropriate timely response on key performance indicators that were previously considered unattainable. Industrial energy usage is rarely optimal and about a third is wasted in the process. Though part of this waste is inevitable, the majority could be reduced significantly through managerial attention, operational agility, and real-time analysis and monitoring. Lightapp is an intelligent energy management solution for industrial manufacturing companies that helps reduce energy costs by 5%-27%. Lightapp serves customers in more than 10 industrial verticals in the US and Israel. www.lightapp.com

About CDA Systems

CDA Systems is one of California’s most respected compressed air system contractors, with more than twenty years’ experience in designing, installing, and servicing compressed air equipment. CDA technicians work closely with facility managers to design systems that cost less to maintain and operate, often using PLC automation and integration with plant control systems.

About Ecos Research, LLC

Ecos Research provides energy research and consulting, including emerging technology validation, and lab and field testing of energy-related innovations. The company’s principals have deep experience in utility and government efforts to achieve greater energy efficiency in the residential, commercial, and industrial sectors.

About EcoVox

EcoVox takes building energy information and makes it visible and useful.  Their engineers leverage data analytics tools to drive continuous commissioning processes at their customers’ facilities, spanning the commercial and industrial market segments such as health care, commercial offices, K-12/higher education, food processing, and supermarkets.

 

We All Want High Social Status

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS—Not everyone may care about having an impressive job title or a big, fancy house but all human beings desire a high level of social status, according to a newly published study.

For decades, researchers have argued both sides of the question: is it human nature to want high standing in one’s social circle, profession, or society in general?

Prof. Cameron Anderson sought to settle the debate. In “Is the desire for status a fundamental human motive? A review of the empirical literature” (Psychological Bulletin, May 4, 2015), Anderson and Berkeley-Haas Ph.D. candidates John Angus D. Hildreth and Laura Howland conducted an extensive review of hundreds of studies using a common set of criteria. They found that, yes, status is something that all people crave and covet – even if they don’t realize it. 

“I usually study the sexy angle of power and confidence but with this one, it’s about everyone. Everyone cares about status whether they’re aware of it or not,” says Anderson.

Anderson is a professor of management and the Lorraine Tyson Mitchell Chair in Leadership & Communications II at UC Berkeley’s Haas School of Business. He says status is considered universally important because it influences how people think and behave.

“Establishing that desire for status is a fundamental human motive matters because status differences can be demoralizing,” says Anderson. “Whenever you don’t feel valued by others it hurts, and the lack of status hurts more people than we think.”

Some theorists have argued that wanting status is an innate desire for reputation or prestige. On the other end of the spectrum, scholars cast doubt on the notion that status plays an important role in one’s psychological well-being or self-esteem. Anderson and his team researched a wide range of studies dating back more than 70 years. First, they defined and conceptualized status to “distinguish it from related constructs such as power and financial success.” They defined status as comprising three components: respect or admiration; voluntary deference by others; and social value. Social value (also known as prestige) is bestowed upon individuals whose advice is sought by others. Prestige can also be measured by how much others defer to an individual.

Next, the researchers studied the previous literature that defines what it takes for a motive to be fundamental and innate to people. Four areas of criteria determined whether the desire for status is fundamental.

1. Well-Being and Health – the attainment of status must contribute to long-term psychological and physical health.
2. Activities – if the desire for status is fundamental, it must drive goal-oriented behavior aimed at attaining and maintaining status, drive a preference for select social environments, and drive people to react strongly when others perceive them as lacking status.
3. Status for Status’ Sake – the desire for status is only that; the motivation for status is not dependent on other motives
4. Universality – the desire for status must operate and extend over many types of cultures, genders, ages, and personalities.

The strongest test of the hypothesis is whether the possession of low status negatively impacts health. The studies reviewed showed that people who had low status in their communities, peer groups, or in their workplaces suffer more from depression, chronic anxiety, and even cardiovascular disease. Individuals who fall lower on the status hierarchy, or what the authors call the “community ladder,” feel less respected and valued and more ignored by others.

Anderson hopes the study’s results influence future research including but not limited to management literature. “The desire for status can drive all kinds of actions, ranging from aggression and violence, to altruism and generosity, to conservation behavior that benefits the environment. The more we understand this basic driver, the more we can harness it to guide people’s decisions and actions to more productive paths.”

 

The Cost of Staying Cool When Incomes Heat Up

More air conditioning in middle-and low-income countries will increase energy consumption and strain energy infrastructures

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS –The continual increase in global incomes means people are living more comfortably, including having the ability to afford air conditioning. Staying cool is good but there’s a wealth of fallout. The demand for more “AC” will also cause consumers to use more electricity causing stress on energy prices, infrastructure, and environmental policy, according to a new study.

The study introduces a new energy model developed by Lucas Davis and Paul Gertler, professors at UC Berkeley’s Haas School of Business, which examines the relationship between climate, income growth, and air conditioning adoption. The study, “Contribution of Air Conditioning Adoption to Future Energy Use under Global Warming” (PNAS, April 27, 2015), points to significant potential global impacts from air conditioning usage and the authors call for action now.

“In the near future, over a billion people in Africa, Brazil, India, Indonesia, Mexico and other low and middle income countries will be able to purchase their first air conditioner resulting in a massive increase in energy demand,” says Prof. Gertler. “Now is the time for the public and private sectors to collaborate and develop infrastructures capable of accommodating rising demand, as well build air conditioners that are more energy efficient and more affordable for poorer populations.

“In China alone, sales of air conditioners have nearly doubled over the last five years,” says Davis. “Meeting the increased demand for electricity in the future will be an enormous challenge requiring trillions of dollars of infrastructure investments and potentially resulting in billions of tons of increased carbon dioxide emissions.”

Davis and Gertler analyzed data on 27,000 households in Mexico, a country with varied climates ranging from those that are hot, humid, and tropical to dry deserts and high-altitude plateaus. At all income levels in the cool areas of the country, the data showed little air conditioning usage present, 10 percent or less. In the warm areas, air conditioning increases steadily with income – 2.7 percent per $1,000 of annual household income – to reach almost 80 percent. Assuming conservative increases in income and temperature increases, the model predicts near universal saturation of air conditioning in all warm areas within just a few decades –primarily correlated to income growth.

In Mexico, this combination of a massive increase in air conditioning adoption and increased usage due to rising temperatures means that energy expenditures are forecast to increase by 81 percent. However, Gertler and Davis contend that future technological changes and higher electricity prices will likely lower this estimate.

The global impact of increased air conditioning heats up even further when population is factored in. The study compared population, annual gross domestic product per capita (GDP in thousands), and the annual “cooling degree days” or CDDs in 12 countries with mostly warmer climates. (CDDs are units used to measure energy demand. A cooling degree day is the number of degrees that a day’s average temperature is above 65o Fahrenheit and people start to use air conditioning to cool their buildings. In other words, cooling degree days are calculated by subtracting 65 from a day's average temperature.)

In India, for example, with a population of 1.2 billion, the potential demand for cooling is 12 times that of the United States’ with a population of 316 million. Why?  Because India’s population is four times the U.S. population and its annual CDDs per person (3,120) is three times more than that of the U.S. annual CDDs (882).  Already historically, India’s infrastructure has been unable to accommodate surges in energy consumption resulting in brownouts and blackouts. 

The researchers contend that while more energy-efficient air conditioners and low-carbon electricity generation could help mitigate environmental concerns, the future of electricity prices will also depend on the progress of other factors.

“A substantial increase in electricity prices resulting, for example, from carbon legislation, would slow both adoption and use,” writes Prof. Davis in the Energy at Haas blog.

About the Authors

Professor Paul Gertler is the Li Ka Shing Foundation Chair of Health Management; scientific director, UC Berkeley Center for Effective Global Action (CEGA); and an affiliate of the Energy Institute at Haas.

Associate Professor Lucas Davis is a member of the Haas Economic Analysis and Policy Group; faculty director, Energy Institute at Haas; and an affiliate of CEGA.

CEGA is a UC Berkeley-based research network designing anti-poverty programs for low- and middle-income countries.

See Abstract.

See full paper.

 

UC Berkeley Takes Lead in Understanding Crowdfunding Revolution

UC Berkeley announces CrowdBerkeley, a partnership focused on teaching and learning about the power of crowdfunding

Crowdfunding is changing the future of finance by fostering the exchange of capital through new technology channels and by providing a more equal playing field for funding investors and recipients. A new partnership at the University of California, Berkeley, now provides a premier hub of education, research, and learning engagement on all topics related to crowdfunding.

Researchers at UC Berkeley’s Haas School of Business and the Fung Institute for Engineering Leadership established CrowdBerkeley for the purpose of better understanding crowdfunding.

Fung Institute engineers have been aggregating databases from global crowdfunding platforms to provide researchers, policy experts, and government agencies with the tools to advance knowledge on technology models and to facilitate innovation and networks in crowdfunding. For example, CrowdBerkeley’s public research will provide evidence of crowdfunding trends such as participant demographics.

Berkeley-Haas faculty and researchers in finance and social enterprise will use the data to study how crowdfunding is impacting traditional financial models and paving the way for innovation and new ventures.

CrowdBerkeley is led by Prof. Lee Fleming, faculty director of the College of Engineering’s Fung Institute for Engineering Leadership; Adair Morse, assistant professor, Berkeley-Haas Finance Group; and Prof. Laura D’Andrea Tyson, director of the Haas School’s Institute for Business and Social Impact (IBSI) as well as Dr. Richard Swart, an internationally recognized thought leader in crowdfunding who has joined IBSI as Scholar in Residence, and Ben Mangan, executive director of the Berkeley-Haas Center for Social Sector Leadership (formerly known as the Center for Nonprofit and Public Leadership).  

“The goal of CrowdBerkeley is simple: we aim to leverage the excellence of UC Berkeley to learn, educate, and inform entrepreneurs, policymakers, and researchers on how crowdfunding can shape the economy and society,” says Tyson. “We will pursue this work in a way that reflects the long-standing tradition of the University of California at Berkeley as a university of innovation.”

Crowdfunding got its name from the process of crowds of people investing relatively small amounts of money online to fund new ventures and individuals—bypassing traditional investors and lenders. The growth of crowdfunding continues at a rapid pace, and the practice is expanding to new markets and to new places around the globe each day.

"Berkeley Master of Engineering students have already crowdfunded a startup in the 3D printing space.  Capstone projects have included writing and characterizing classifiers for risk analysis, sponsored by Prosper, a peer-to-peer lending firm in San Francisco,” says Fleming.

CrowdBerkeley enhances an already active study of crowdfunding on campus. Berkeley-Haas has held more than a dozen campus teach-ins where Berkeley academics and students network and collaborate with alumni and industry partners working in crowdfunding. The business school is also redefining finance education by including crowdfunding models, both current and evolving, in the MBA curriculum.

“We care about training our students so they will be best positioned to understand the future of finance from the standpoint of policy, regulation, and tech,” says Morse who teaches the “New Venture Finance” MBA course.

In the course, students learn how to raise equity without traditional investors, create credit and loan models without brick-and-mortar lenders, and understand the implications of new currencies such as Bitcoin, an open source payment network that utilizes technology to conduct peer-to-peer transactions instead of banks to do business.  Berkeley-Haas students have launched several crowdfunding companies, including Indiegogo and WeFinance.

The third annual CrowdBerkeley academic symposium is currently accepting paper submissions on crowdfunding research and will gather academics, practitioners, and policy makers to discuss crowdfunding and crowdfund investing on Sept. 18 to 19, 2015, at UC Berkeley.

The Ewing Marion Kauffman Foundation is the primary sponsor of CrowdBerkeley.

 

(CrowdBerkeley is not affiliated with Berkeley Crowdfunding, the campus’ crowdfunding platform for Berkeley students, faculty, and staff to launch their own crowdfunding campaigns.)

How Limiting CEO Pay Can Be More Effective, Less Costly

Research finds benefits of government regulation on CEO stock-based compensation

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS –CEOs make a lot of money from incentive pay tied to stock performance. Although such schemes help align executives’ interests with shareholders, they are not necessarily the best schemes as compared to schemes that rely on trust between board and executives.

“Ironically, the necessary trust is easier to establish when the alternative of using stock-based pay is less powerful. Our research found that government-imposed limits on contingent compensation make stock-based pay a worse alternative, facilitating superior trust-based incentives,” says Ben Hermalin, an economist in the Haas Economic Analysis and Policy Group, UC Berkeley’s Haas School of Business,

The paper, "When Less is More: The Benefits of Limits on Executive Pay," forthcoming in the Review of Financial Studies, is co-authored by Prof. Hermalin and Peter Cebon, senior research fellow, Melbourne Business School, University of Melbourne.

 

Abstract
We derive conditions under which limits on executive compensation can enhance efficiency and benefit shareholders (but not executives). Having their hands tied in the future allows a board of directors to credibly enter into relational contracts with executives that are more efficient than performance-contingent contracts. This has implications for the ideal composition of the board. The analysis also offers insights into the political economy of executive-compensation reform.

The full study is published online.

Saving Lives by Making Malaria Drugs More Affordable

Study determines offering drug retailers a per-unit purchase subsidy benefits patients

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS –Forty percent of all malaria-caused deaths in sub-Saharan Africa occur in the Democratic Republic of Congo and Nigeria, according to the World Health Organization. The private sector “supply chain” manages 74% of the drug volume in Congo and 98% in Nigeria where malaria-stricken patients rely on “drug shops” and other for-profit retail outlets to get life-saving medicine.

New research forthcoming in Management Science determines that the “shelf life” of malaria-fighting drugs plays a significant role in how donors should subsidize the medicine in order to ensure better affordability for patients.

New concerns over the emergence of drug resistant parasites are yet one more reason that private donors who fund malaria drug programs remain intent on making medicine available and affordable to patients. Artemisinin-based combination therapies, known as ACTs, are considered the best anti-malarial drugs but the lack of affordable ACT supplies for the poor motivates private donors to intervene and improve access. 

In “Subsidizing the Distribution Channel: Donor Funding to Improve the Availability of Malaria Drugs,” Terry Taylor, associate professor, UC Berkeley’s Haas School of Business, and co-author Wenqiang Xiao, New York University’s Stern School of Business, analyzed purchase subsidies vs. sales subsidies.

Donors structure their purchase and sales subsidies per each product unit. A purchase subsidy is a discount or rebate offered to the retailer at the point of sale or when he places his order.  In contrast, the retailer only benefits from a sales subsidy when he sells the product to the consumer.

By analyzing the product characteristics (short vs. long life), customer population (degree of heterogeneity or diverse makeup), and the size of the donor’s budget, Taylor and Xiao found that for long shelf life products, such as ACTs (with a 24 to 36-month life from the factory to expiration), donors should only offer a purchase subsidy. In contrast, if a product has a short shelf life, a sufficiently large donor budget and a diverse customer population, it is optimal to offer a sales subsidy in addition to a purchase subsidy. Why?

“The sales subsidy becomes more attractive for perishable products because you don’t have to subsidize a purchased product that doesn’t sell,” says Taylor.

Unlike previous research, the study’s micro-level approach focuses on distribution channel details such as demand uncertainty, supply-demand mismatch, and the impact of subsidies on stocking and pricing decisions.

“In principle, it would seem that you would want to use both levers to influence stocking and pricing decisions,” says Taylor. “However when we took both into account, our model shows that the purchase subsidy is more effective in increasing consumption of the medicine and ultimately, saving lives.”

Taylor hopes these findings will help guide donors in improving the private-sector distribution channel for malaria drugs. He hopes that in the future, the study’s results could also help inform subsidy decisions for other global health products such as oral rehydration salts, the first-line of treatment for childhood acute diarrhea in developing countries.

See study.

 

 

 

 

 

 

 

 

 

 

Marketing Prof. Clayton Critcher Honored with SAGE Young Scholars Award

UNIVERSITY OF CALIFORNIA, BERKELEY'S HAAS SCHOOL OF BUSINESS –At Berkeley-Haas since 2010, Marketing Prof. Clayton Critcher continues to build his career by studying how people navigate life as economic, political, and moral beings and by shedding light on consumer behavior.

In recognition of his body of research, Prof. Critcher has received a 2015 SAGE Young Scholars Award from the Foundation for Personality and Social Psychology (FPSP).

Critcher, an assistant professor at UC Berkeley’s Haas School of Business, is one of five winners who will be recognized at the FPSP annual conference on Feb. 26 in Long Beach, Calif. His research has focused on judgment and decision-making, moral psychology, and consumer behavior. Contemporary issues such as racial or sexual discrimination often inspire his research work.

“I use experimental methods to test how people come to understand themselves and form impressions of others,” says Prof. Critcher. “I attempt to make major contributions to basic theoretical development by studying questions of clear applied import to both business and public policy.”

In his paper, “If He Can Do It, So Can They: Exposure to Counterstereotypically Successful Exemplars Prompts Automatic Inferences” (Journal of Personality and Social Psychology, March 2014), Prof. Critcher found that positive examples of African-American success stories prompt white Americans to think less successful African-Americans simply need to apply more effort to achieve their own success. A feature story about Critcher’s research paper in The Huffington Post (June 2014) received 27,000 page likes and nearly four thousand page shares.

Critcher also co-authored the study, “The Cost of Keeping it Hidden: Decomposing Concealment Reveals What Makes it Depleting” (Journal of Experimental Psychology: General) that reveals the stress and negative impact of keeping a secret, such as one’s sexual orientation or something as simple as concealing a forbidden word. This paper was cited in The Atlantic (February 2014).

“Clayton has primarily aimed for a more general understanding of how humans think, thereby enabling him to make predictions about the behavior of different people, considering different features, of different products,” says Leif Nelson, chair of the Haas Marketing Group. “His success is reflected in the prestigious SAGE award – by discovering new things about the behavior of humans, he brings insights into consumers across many marketing situations.”

The SAGE Young Scholar Award is sponsored by the FPSP in collaboration with SAGE Publications, the publisher of hundreds of academic journals and textbooks. 

"The SAGE Young Scholars Awards recognize outstanding achievements by young scholars who are early in their research careers,” says Harry Reis, President of FPSP. “The awards are intended to provide these scholars with funds that can be flexibly applied in extending their work in new and exciting directions. Previous winners of this award have gone on to positions of intellectual leadership in the field. Because these awards are highly sought after, winning a Sage Young Scholar Award is recognition of both accomplishment and potential."

The four other SAGE Young Scholar Award recipients are Emily Impett of the University of Toronto Mississauga; Nicholas Rule of the University of Toronto; Jenessa Shapiro of UCLA and Jay Van Bavel of New York University.

 

Keep Your Enemies Close? Study Finds Greater Proximity to Opponents Leads to More Polarization

UNIVERSITY OF CALIFORNIA, BERKELEY’S HAAS SCHOOL OF BUSINESS — Encouraging adversaries to have more interpersonal contact to find common ground may work on occasion, but not necessarily in the U.S. Senate, according to new research.

In their study, “Pulling Closer and Moving Apart: Interaction, Identity, and Influence in the U.S. Senate, 1973 to 2009,” which appears in the February issue of the American Sociological Review<>, Sameer B. Srivastava, assistant professor, Haas Management of Organizations Group at UC Berkeley’s Haas School of Business, and Christopher C. Liu, assistant professor of strategy at University of Toronto’s Rotman School of Management, studied the interactions among U.S. senators from the 1970s to the 2000s.

A pattern emerged. Senators either moved closer together or further apart in their voting behavior as a function of their political identities and how much contact they had with each other. This pattern was especially pronounced when contact occurred in Senate committees that were more divided.

“Conventional wisdom says interpersonal contact between people will foster collaboration and consensus,” says Srivastava. “We found that increasing physical contact between people who have opposing and public political identities can instead promote divergence of attitudes or behavior. This tendency is further amplified in environments involving high conflict, which makes political identities more salient.”

Srivastava and Liu used two measures of political identity: senators’ party affiliation and the religious climate in the senators’ home states. They also measured senators’ interactions in two ways: seating arrangements in the Senate chamber and committee assignments. Senators from the same party who had more contact — as indicated by the proximity of their seats on the Senate chamber floor and by co-memberships on Senate committees — subsequently moved closer together in their voting behavior, while senators from different parties who had more contact in later sessions of Congress moved further apart in their voting behavior.

“Co-location can induce both positive and negative outcomes. Sometimes keeping some distance is the better option,” says Liu.

The authors say the U.S. Senate is an “apt setting for the study of interaction, identity, and influence” because senators have highly visible political identities and are continually seeking to influence each other through interaction. Srivastava and Liu contend that their findings also have implications in corporate organizations with oppositional political identities that are seeking to bridge differences between polarized groups.

For example, Liu and Srivastava explain, “Post-merger integration, particularly following a contested takeover, can produce oppositional identities in a very public setting. In such cases, it may help to move interactions into more private settings and find common ground on less divisive issues before tackling the more controversial ones.”