Research Roundup: September 2023
How Do Strategy Courses Affect Student Success?
After students take their first strategy course, they often see improvements in their confidence, business schools, and leadership development, according to a paper published in Organization Science. The paper was co-authored by Mana Heshmati, assistant professor of strategy and entrepreneurship at the University of Washington’s Foster School of Business in Seattle, and Felipe Csaszar, professor of strategy at the University of Michigan’s Ross School of Business in Ann Arbor.
Csaszar and Heshmati focused on 2,269 MBA students who took an introductory strategy course between 2014 and 2019. At the start of the course, the students were asked to evaluate a series of pitch videos from startups on Kickstarter to determine whether or not they would choose to invest in these ventures. Csaszar and Heshmati then observed the strength of students’ performance, mental representations, and self-perceptions throughout the course. These attributes reflect how well and how confidently students predict outcomes, identify challenges, articulate uncertainty, express strategic ideas, and make good decisions.
The researchers found that by the end of the course, students improved across all of these measures. Moreover, the research showed that the course helped bridge the “gender-based confidence gap” that too often negatively impacts women’s learning outcomes and career trajectories. Students who came to the course with less prior business knowledge—specifically, women and engineers—experienced “significant changes in both decision-making accuracy and mental representations,” says Heshmati.
That said, women did not see the same improvements in self-perception as their male counterparts. Women remained “less confident and [found] the course more difficult than men,” Heshmati notes.
The researchers hope this study will inspire more educators to develop pedagogical approaches—such as using more case studies with female protagonists—that empower women and improve their learning outcomes in strategy courses. Csaszar and Heshmati also would like to see more research on teaching methods that improve students’ confidence and decision-making skills and increase the educational value of strategy courses overall.
“We measured what people learned after taking just one course, but we don’t know how that lasts over time,” says Csaszar. “How much do people remember, and how does it affect their decision-making two, five, or 10 years down the road? We don’t know. Continuing research allows us to get a more evidence-based way of teaching strategy.”
A Proposed Solution to Wealth Inequality
By many measures, the income gap between rich and poor is becoming more pronounced in countries worldwide. When companies make investment-related decisions that maximize their profits, such as layoffs, that gap can be widened even further.
But that doesn’t have to be the case. A new paper, “The Macroeconomics of Stakeholder Equilibria,” introduces a strategy that would positively address wealth inequality. The approach was developed by John Donaldson, Mario J. Gabelli Professor of Finance at Columbia Business School in New York City, and Hyung Seok E. Kim, assistant professor of economics at the Korea Advanced Institute of Science and Technology in Daejeon, South Korea.
Donaldson and Kim propose a “Coasian solution” in which companies and workers engage in wage negotiations that consider equally factors that impact shareholder value and risks that impact workers’ employment, financial security, and long-term well-being. For instance, as a result of such “egalitarian wage bargaining,” a company might offer workers “income insurance” through the end of their contracts or “lifetime contracts” that only workers can end.
Egalitarian wage bargaining guarantees that workers’ wages remain stable even when a company’s leaders and stockholders make decisions that could negatively impact salaries and job retention.
This approach presents a win-win situation. It gives workers greater bargaining power and guarantees that their wages remain stable even when a company’s leaders and stockholders make decisions that could negatively impact salaries and job retention. At the same time, this solution allows companies to retain control over investment decisions. As a result, the researchers calculate that the negative impact of these decisions on worker wages would be reduced by 60 percent.
“As we work to reduce the wealth inequality gap created by stockholders and their value-maximizing investment decisions, our model should be considered as a way to break down this gap,” says Donaldson on Columbia Business School’s website. “Our simple idea solves the issue by promising more wage stability to workers while simultaneously benefitting stockholders, all without any government intervention needed.”
The Market Implications of Digital Nomadism
In the past, most people—especially those in the middle classes—could predict their life trajectories with some confidence. Because they felt confident about the future, they would pursue traditional long-term goals such as starting families, owning homes, accumulating possessions, and working in stable office-based jobs. Unfortunately, that level of confidence has disappeared.
That is the conclusion of research conducted by Aleksandrina Atanasova of Bayes Business school at City, University of London; and Katharina C. Husemann of King’s Business School and King’s College London. They argue that, due to trends accelerated by crises such as the pandemic, wars, climate change, and an unpredictable global economy, more people now believe that traditional lifestyles make them more vulnerable to unpredictable global shocks and “anchor” them down in an era that calls for agility and adaptability.
Atanasova and Husemann recently shared the results of their four-year study of these trends in “Liquid Consumer Security,” a paper published in the Journal of Consumer Research. For the study, Atanasova and Husemann conducted 35 in-depth interviews of “digital nomads,” gathered participant and nonparticipant observations at large events for digital nomads, and analyzed social media. They also collected data in three hubs for digital nomads: Bansko, Bulgaria; Valencia, Spain; and Crete, Greece.
Liquid consumer security is defined as the security that people feel from the avoidance of owning assets, consuming material goods, or settling down in one geographic location.
The researchers specifically explored the idea of “liquid consumer security.” They define this term as the security that people feel from the avoidance of owning assets, consuming material goods, or settling down in one geographic location. In so doing, digital nomads also avoid attendant risks and responsibilities and have greater flexibility to navigate turbulent times.
Because digital nomads view home ownership as inherently risky, they design lifestyles that minimize living costs. This might include house-sitting in inexpensive areas of the world or diversifying income streams by working several online jobs at once. Liquidity affords people the flexibility “to pivot and change course when needed and adapt more quickly to an unpredictable environment,” says Atanasova.
The researchers predict that as the pursuit of liquid consumer security becomes more popular, more infrastructure and platforms will arise to support it. They point out that some governments already have amended their tax policies and visa regulations to accommodate digital nomads and remote workers.
While perceived insecurity will not push everyone to nomadism, Atanasova adds, it will likely cause shifts in consumer behavior toward greater flexibility, which could encompass reduced spending on material goods and increased use of subscription services. This research highlights how “the picture of ‘the good life’ is transforming in the face of the collapsing social contract and general global uncertainty.”
■ New dataset available. Financial data and analytics provider OptionMetrics has made available a new implied beta dataset to scholars conducting research on topics such as equities, systemic risk, factor investing, and investment models. IvyDB Beta includes market data collected since January 2007, providing a prospective view of the market’s perception of systemic risk. By using implied betas, says OptionMetrics CEO David Hait, researchers can more accurately price in systematic risk across securities using “forward-looking equities data.”
■ Call for proposals to redesign college admissions. The Lumina Foundation based in Indianapolis has launched a 3 million USD initiative intended to identify new best practices in college admissions. The foundation created The Great Admissions Redesign in response to factors impacting college enrollments, such as decreasing applications, test-optional policies, and rulings by the U.S. Supreme Court that ban race-conscious admissions.
Lumina invites applicants to submit grant proposals that reimagine college admissions. Grant recipients will be selected based on how well proposed projects address three criteria: opportunity (increasing opportunities for students of color, students from low-income families, and first-generation students); simplicity (reducing complexity in admissions and enrollment processes); and innovation (reimagining how students are admitted and enrolled).
Lumina will select projects for funding based on how well they reimagine admissions across three criteria: opportunity, simplicity, and innovation.
Lumina will consider planning proposals (early-stage projects) and implementation proposals (in-progress projects) submitted by state agencies, quasi-public organizations, and state systems or nonprofit groups that include at least one bachelor’s-granting institution. The foundation will select up to five planning proposals (to receive 100,000 USD each) and three implementation proposals (to receive 500,000 USD to 750,000 USD). The foundation has posted an informational webinar on its website. Proposals are due by October 6.
■ X-based index tracks inflation expectations. Researchers at the Frankfurt School of Finance and Management in Germany have created an inflation expectations index based on German tweets on the social media platform X (formerly Twitter). Based on the natural language processing of ChatGPT API, the index makes short-term inflation expectations for Germany available in real time. The creators of the index have shared the results so far for this project in a working paper.
The index downloads all German-language tweets that contain keywords related to prices and inflation, using machine learning to omit bot activity or other interference. The language model then classifies each tweet as “rising,” falling,” or “neutral.” Each day, tweets classified as rising or falling are aggregated into the daily inflation index, both for the entire country and for specific regions. Index developers have found that tweets from private users are especially influential in the current phrase of increased inflation.
The tool, which stems from a project developed at the school’s Center for European Transformation, will be helpful for market actors and policymakers to identify inflation expectations with no time delay, says center director Sascha Steffen. Eventually, he adds, “we plan to expand our index analyzes [to] examine the connection between inflation and private consumption,” as well as to measure inflation expectations in other countries. Center researchers still are refining the index and determining when to make it available to the public.
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