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To understand where to begin, first we must know where we are. Rigorous research is the bedrock of the Institute of Entrepreneurship and Private Capital, underpinning all our practitioner, faculty and outreach activities.
Think at London Business School
Thursday 1 June 2023
Market trends and technological developments in private markets that will shape the future funding and investing of organisations
By Jonathan Braude
Think at London Business School
Tuesday 25 April 2023
We take an in-depth look at the largest financial sector most people have never heard of – and unpick the highlights for this year's event
By Dan Atkinson
Think at London Business School
Thursday 6 April 2023
What leads PE firms to disclose more ESG information and does it reflect their investment activities? We find out
By Jeff Abraham, Marcel Olbert, Florin Vasvari
Marcel Olbert
Assistant Professor of Accounting, London Business School
Jinhwan Kim
Assistant Professor of Accounting, Stanford GSB
John Gallemore
Associate Professor of Accounting, UNC Chapel Hill
Academics, investors, and policymakers worldwide are interested in the drivers and consequences of international capital allocation. A key social issue with great policy interest concerns the allocation of global capital to businesses with a positive environmental, social, and governance (ESG) impact. Our project examines the allocation of global investors’ debt and equity capital to companies owned by oligarchs. Providing systematic empirical evidence on this issue is important, because oligarch companies often operate in the dark (e.g., through tax havens) and they are accused of unsustainable business practices undermining the overarching goals of ESG regulations. Our study proceeds in three steps. First, we create a novel dataset identifying over 300 large companies controlled by oligarchs and linking those companies to their affiliated legal entities across the globe. Second, we link this dataset to private and public capital markets data. This allows us to establish several novel stylized facts on the nature and amount of global capital allocation to oligarch-backed businesses. For example, we will show how and to what extent companies owned by oligarchs have raised equity and debt capital from investors in Western countries through private equity and debt transactions o public equity issuances. Third, we study how the specific sanctioning of oligarchs and internationally coordinated transparency regulations have impacted capital allocation to oligarch companies. Our research has the potential to show whether and how investors in private and public capital markets have contributed to the financing and operations of oligarch-owned companies. Thus, we study direct empirical and so far underexplored outcome of sustainable investing. We will provide novel evidence that is at the center of sustainability and responsibility concerns of private and public capital investment strategies. Further, we will provide policy insights by showing whether and how internationally-coordinated transparency regulations, such as the public Country-by-Country Reporting (CbCR) for EU banks and private mandatory CbCR for multinational companies, affect oligarch companies exposed to these regulations.
Ahmadreza Mostajabi
PhD in Strategy and Entrepreneurship
This research studies how platforms’ adjustment of market segments by creating new and more homogenous ones can influence market demand- and supply-side dynamics. Platforms distribute their products into different segments, classifying them around similar topics. These product classifications can facilitate user search, thus improving matchmaking in platforms as one of their primary functions. I argue that while market segmentation can reduce search costs and empower matchmaking on the demand side, it can have more nuanced effects on the supply side in terms of complementors’ incentive to innovate: it can disincentivize innovation in the existing segments from which the new ones emerge (source segments), while having a promoting effect on innovation in the newly created segments. I will test my arguments in the context of mobile application platforms (Google Play and App Store) by analyzing the effect of introducing new segments in the market on matching efficiency and innovation dynamics in the platform market. This research contributes to the literature on entrepreneurship, platform governance, and market competition.
Jefferson Kaduvinal Abraham
PhD in Accounting, London Business School
Marcel Olbert
Assistant Professor of Accounting at London Business School
Florin P. Vasvari
Professor of Accounting; Chair, Accounting Faculty; Academic Director, Institute of Entrepreneurship and Private Capital, LBS
This paper offers the first systematic evidence on environmental, social and governance (ESG) disclosures provided by a global sample of private equity (PE) firms. Using historical websites from 2000 to 2021, we develop a novel measure of voluntary PE firm ESG disclosures. We find that these disclosures have been increasing over time, irrespective of the firms’ investment strategy, size, listing status or investment location. We investigate disclosure determinants and document that PE firms’ ESG disclosures are associated with mandatory ESG regulations aimed at publicly listed firms in countries of PE firms’ portfolio companies. ESG disclosures also increase when PE firms voluntarily sign up to United Nations’ standards of responsible investing and around fundraising events. Finally, we examine whether PE firms’ ESG disclosures match their investment activities. We find that PE firms with high environmental disclosures target portfolio companies with lower environmental toxic releases. Further, the funds of PE firms with high ESG disclosures achieve better returns. Overall, these findings indicate that PE firms’ take actions consistent with their ESG disclosures. Presented at: Nanyang Technological University Singapore, Singapore National University, University of St. Gallen (all in fall 2022)
Marcel Olbert
Assistant Professor of Accounting, London Business School
Peter Severin,
University of Mannheim; University of Mannhei
We study the economic impact of private equity investments on local governments, which are important corporate stakeholders. Examining over 12,000 deals and private firm data in Europe, we document that target firms' effective tax rates and total tax expenses decrease by 15% and 12% after deals. At the same time, target firms invest more in human and physical capital. Using administrative data from Germany and exploiting the staggered nature of deals at the local level, we document that private equity activity is negatively associated with tax revenues and the spending of local governments and triggers creative destruction within the local economy. Collectively, our findings suggest that corporate tax avoidance serves as a cost-cutting channel in the private equity sector and constrains the finances of local governments.
Aharon Cohen Mohliver
Assistant Professor of Strategy and Entrepreneurship, London Business School
Rebecca Karp
Assistant Professor in the Strategy, Harvard Business School Tiona Zuzul, Assistant Professor of Business Administration, Harvard Business School
We set out to explore the processes that occur inside the organization that allow deception to persist, and more importantly, how it can exacerbate with calamitous consequences. This deception is aimed at investors, but not only at them and is perpetuated by founders and managers, but curiously sometimes by employees who have little to gain form tainting their morality in such extreme ways. In the first part of the project (here), we conducted separate, longitudinal ethnographic studies of two promising start-ups founded to solve intractable problems. While we did not set out to study deception, deception is what we observed: told by founders, managers, and employees, to stakeholders and one another, about core elements of each firm’s value proposition. We unpack how the narratives entrepreneurs wove about their intractable mission quickly evolved into meaningful dominant deceptions produced rapidly and collectively by many members within the organizations. While the literature on misconduct shows that organizational deceit often grows from small, private violations that become normalized and institutionalized, we identify an alternative pathway explaining the tenacity of deceit. We propose that deceit persists through entrenchment, as organizational members are open about and experiment with deception, and amplification, as organizational members justify deception and reinforce their belief in their venture’s mission through moral disengagement and cognitive dissonance. We are looking to find a comparative case of non-dominant deception and follow the path by which deception occurs when it is not core to the organization's value statement. Then we collect additional data on organizations in which dominant deceptions occurred and explore its impact on further founding of firms by prior employees of organizations in which dominant deceptions may have had an imprinting effect (Bianchi and Mohliver 2016). The products of these exploratory activities indirectly support our intention to write a managerial piece (short form, or full-length HBR) from these data, informing investors and managers on processes that happen inside entrepreneurial ventures that can lead to catastrophic failures (e.g. Theranos, Nicola) – and helping to identify them early on.
Abhishek Bhatia
PhD Student in Strategy and Entrepreneurship
How does investor control through board seats impact the operational efficiency of startups? Agency theory suggests that greater monitoring by the principal (investors) reduces the self-serving behavior of the agent (founder). Therefore, monitoring lowers opportunistic spending by the founder CEO (i.e., greater operational efficiency) when investors take board seats. Further, the Resource-dependence theory suggests that investors provide valuable operational expertise to startups, again implying an increase in the operational efficiency of startups. However, the extant research on new venture governance suggests a reverse agency problem in investor–startup relationships, in which the principal and agent issues are flipped, stressing the opportunistic behavior of the principal (investors). This project explores this tension between an increase in efficiency due to mentoring and monitoring by investors vis-à-vis a decrease in efficiency due to the opportunistic behavior of the investors in the context of the efficiency with which a startup uses its resources (i.e., burns cash) for its growth. Our central thesis is that investors can benefit from a high cash burn rate in some situations that are not necessarily related to the startup's efficiency and hence are not entirely aligned with the interests of the startup and its founders. We attribute the misalignment of investors' and startups' interests to their different objective functions. More specifically, while the startups and their founders aim to maximize the profits and survival of the venture, the investors have a diversified portfolio and seek to maximize the valuation (and return on investment) across all their portfolio investments. We examine some situations where the different objective functions may result in conflicting interests.
Abhishek Bhatia
PhD Student in Strategy and Entrepreneurship Niro Sivanthan Professor of Organisational Behaviour
Past research on gender gap in new venture financing has focused mainly on the likelihood and amount of investment in female-founded ventures. This line of research has found that female founders are less likely to receive early-stage investments and, conditional on the deal, are likely to raise lower amounts. The reasons cited include both gender bias and lower aspirations of female founders. However, in comparison, past research has not focused much on a more subtle form of gender bias in the funding process – equity stake (or control) that female founders give up in raising funds from male investors. In order to better understand the negotiation-related nuances of the funding process, this project employs a rich archival dataset on equity investment deal negotiations with the equity stake offered by the founder and the same demanded by the investors for the deal to materialize. We plan to further enrich this dataset by creating pitch and tone-related variables for both founders and investors during the observed pitch interactions. Overall, through this research project, we hope to shed light on several novel research questions at the intersection of gender equality and entrepreneurship through a negotiation lens.
Jefferson Abraham
PhD student in Accounting
Marcel Olbert
Assistant Professor of Accounting
Florin Vasvari
Professor of Accounting
Global investors’ focus on the environmental, social, and governance (ESG) performance of companies is one of the most important developments in the areas of global capital allocation as well as accounting and disclosure regulation. While there is a nascent stream of research on the relevance of ESG in the public equity (mostly mutual fund) market and regulatory bodies start to mandate ESG disclosures for large publicly listed firms, we know little about the impact of ESG investing in the private equity market despite its large economic relevance.
This project aims to explore the relevance, the specific strategies, and the outcomes of ESG investing of private equity firms which are responsible for a substantial fraction of the global capital allocation. To this end, the project will develop a new measure of private equity firms’ ESG focus through the firms’ disclosure on their websites over the last two decades. Empirical analyses will then explore how disclosed ESG strategies are reflected in private equity firms’ investment decisions and their effects on portfolio companies’ financial performance.
Building on the prior literature examining the impact of private equity buyouts on portfolio companies, our analyses will study how different ESG strategies interact with employment outcomes, investment growth, cost cutting, and tax avoidance strategies.
Nina Teng
PhD student in Strategy and Entrepreneurship
Firms are increasingly using corporate entrepreneurship strategies—particularly startup innovation contests like accelerators, incubators, challenges and hackathons—to search widely for innovative, breakthrough ideas to adopt and commercialize. However, do corporate entrepreneurship contests promote the innovativeness of startups by design? I aim to study the following research question in the context of global corporate accelerator contests: do startup ideas that win template-based innovation contests have lower innovativeness? The findings of this research could have policy implications for how innovation contests—particularly the startup selection and training processes—could be designed to address a potential innovativeness paradox that could undermine the contest organizers’ original intent to seek the most innovative ideas. At the same time, startup firms could also re-assess the potential implications of participating in innovation contests on the innovativeness of their ideas.
Marcel Olbert
Assistant Professor in Accounting
Dr. Peter Severin
PhD in Finance from the University of Mannheim and Senior Consultant at Deloitte
We study the economic consequences of private equity buyouts with a focus on local governments as a stakeholder in private equity portfolio firms.
Exploiting over 12,000 deals and private firm data in Europe, we document that portfolio firms' decrease their tax payments and effective tax rates decrease by 10-15%. At the same time, the firms grow in profitability and capital investment.
Building on these firm-level results, we exploit the staggered nature of private equity buyouts at the local geographic levels to examine the net effect of lower tax payments but higher growth for local governments’ public finances.
We document that local governments’ corporate tax revenues significantly decrease after private equity transactions in their constituency. Further, governments seem to decrease their spending and maintain debt levels constant following local private equity transactions.
Collectively, our findings suggest that some private equity investors impose a negative externality on local domestic governments through increased tax avoidance in target firms without creating large enough positive spillovers for other tax bases.
Emre Ozdenoren
Professor of Economics
Mayur Choudhary
PhD student in Finance
We examine the nature of contracts that may arise between entrepreneurs and investor firms in an environment with asymmetric information and search frictions. In our model the entrepreneurs may be productive or unproductive. The productive entrepreneurs occasionally generate high output which can be interpreted as a successful business idea. The unproductive entrepreneurs never produce high output. Entrepreneurs have noisy private information about their productivity, and they have access to an outside option if they decide to quit. If an entrepreneur produces high output, then both the entrepreneur and the market learn that the entrepreneur is productive. We assume that at this point the entrepreneur obtains a large reward. Investors face a trade-off in posting the optimal wage. A lower wage leads to advantageous selection as it attracts only those entrepreneurs who are more likely to be productive. However, restricting search to these more optimistic entrepreneurs leads to a longer search increasing the firm’s recruitment cost. The equilibrium features learning about the productivity of entrepreneurs, endogenous quitting, and poaching by other firms. The equilibrium wage depends on the initial distribution of entrepreneur types, their speed of learning, poaching rate and their bargaining power relative to the entrepreneur. The model has applications beyond entrepreneurship finance as a model of selection with endogenous wage where workers and firms learn about the match productivity on the job.
Keun Woo Jeong
PhD student in Strategy and Entrepreneurship
Keyvan Vakili
Associate Professor of Strategy and Entrepreneurship
While studies document various individual and firm-level outcomes of gender- and family-oriented policies, surprisingly little research has documented how these policies fundamentally alter the type and direction of value produced by the impacted actors. In this proposal, we aim to address this gap by tracking the changes in the innovation activities and output of all inventors in the U.S. following the state-level policy interventions that are gender- and family-oriented. We use the population of granted patents listed in the USPTO from 1980 to 2018 as our sample frame. We focus on two policies: abortion restriction and paid family leave act. Employing a staggered difference-in-differences design, we examine the changes in the types of innovation at the state and inventor levels in response to implementation of these policies across different states over time. Our findings can shed light on how gender- and family-oriented policies can differentially affect inventors’ innovative behavior based on their gender and other characteristics.
Ali Aouad
Assistant Professor, Management Science and Operations
Kamalini Ramdas
Professor of Management Science and Operations; Deloitte Chair in Innovation & Entrepreneurship
Alp Sungu
PhD candidate in Management Science and Operations
This project aims to assess the potential value generated by the adoption of data-driven technologies for micro-entrepreneurs in developing countries. Our first goal is to develop a parsimonious multi-item shopping basket choice model to help small store owners better understand and predict their customers’ purchasing behaviour. We leverage transaction-level shopping data in groceries located in low-income areas in India, to run this model on. Next, using pricing as a lever, we will develop a data-driven optimization model to identify “win-win” opportunities for micro-entrepreneurs and their customer community in terms of economic efficiency and social development. In particular, we will quantify synergies and trade-offs between maximising the stores’ revenue and increasing the customers’ access to nutritious and balanced food baskets. Finally, putting our main emphasis on social development, we plan to implement an experiment to test the efficacy of these data-driven frameworks in the context of real-life outcomes.
Sungyong Chang
Assistant Professor of Strategy and Entrepreneurship, London Business School
Sukhun Kang
PhD candidate in Strategy and Entrepreneurship, London Business School
Joseph S. Ross
Professor of Medicine, Yale School of Medicine
Professor of Public Health, Yale School of Public Health
Jennifer E. Miller
Assistant Professor of Medicine, Yale School of Medicine
Importance: The US Food and Drug Administration (FDA) Expanded Access pathway allows patients with life-threatening or serious conditions to access investigational drugs outside of clinical trials, under certain conditions. The 21st Century Cures Act (“Cures Act”) mandates that certain drug companies have publicly available expanded access policies. We collected data on applicable US-based oncology companies, generally companies with an investigational drug in at least a phase 2 clinical trial development stage or an FDA fast-track or breakthrough designated drug. Despite legal obligations, only about one-third of applicable US-based oncology companies have publicly available expanded access policies as required. This suggests the Cures Act may be having a limited impact on the information available to patients and doctors looking for expanded access to investigational oncology therapies. Results further suggest resource constraints within companies may be limiting their abilities to implement Act requirements. To ensure the goal of closing the information gap between companies and patient / physician communities, future policy efforts could provide better assistance for small companies to develop and disseminate expanded access policies and better enforce act requirements.
Gary Dushnitsky
Associate Professor of Strategy and Entrepreneurship
Sayan Sarkar
PhD student, Strategy and Entrepreneurship
The literature on entrepreneurial resource acquisition shows investment decisions are a function of (1) the characteristics of a focal venture, or (2) the innate traits and biases of each investor. We advance a third explanation: investment in highly uncertain, early-stage, ventures may be susceptible to transient contextual shocks (i.e., sudden changes to the physical environment). It is a distinct explanation that does not require assumptions of heterogeneity in the quality of ventures or the traits of investors. We investigate this issue using proprietary data from 764 ventures graduating from London-based accelerators in the past decade.
Every accelerator holds a Demo Day event where graduating ventures pitch to investors. We find that ventures graduating on a ‘sunnier’ day (i.e., Demo Day receives more sunshine than the preceding day) experience greater likelihood of securing a Demo Day funding round compared to those graduating on ‘non sunnier’ days. The impact of sunshine varies as we approach the summer solstice. Importantly, the ‘sunnier’ Demo Day effect is sensitive to the level of uncertainty: it is stronger for (a) nascent ventures; and (b) those where founders have limited human capital.
Read the latest article about this research: Can investors' decisions be influenced by the weather?
Published paper: Here Comes the Sun: The Impact of Incidental Contextual Factors on Entrepreneurial Resource Acquisition | Academy of Management Journal
Luofu Ye
PhD in Finance
Using novel publication data, I characterise the supply chain of innovation where knowledge generated at universities is converted by firms into patents and products, adding value to firms and leading to externalities and economic growth. The universities are subsidised and have been producing knowledge at a stable rate. However, the rate at which the diffusion eventually reaches the market is slower in firms withdrawing from basic research. I uncover that in the diffusion process, firm scientists are essential to stay abreast of scientific breakthroughs, pick and convert the valuable ones into applied technology. I show firms harvest scientific breakthroughs when they conduct basic research themselves, and enjoy increased patent quantity, patent quality and productivity relative to firms that do not. My findings have policy implications for subsidising firm basic research to increase knowledge spillover and provide empirical evidence for key assumptions in endogenous growth models.
Shikhar Singla
PhD candidate Finance
I apply supervised machine learning and data mining techniques using Python on documents of all US federal rules and regulations to build measures of regulatory burden on firms. I obtain 1) dollar costs, 2) paperwork hours required to comply with regulations, and 3) number of restrictions (measured by words like shall, must, prohibited etc.) for every industry from 1970-2017. I also build these measures for small businesses within an industry. I show that regulatory burden on businesses in US has been substantially increasing and small entities bear higher regulatory costs per employee. Increased regulatory burden, especially on smaller firms, can explain the 50% decline in the startup activity in the US since late 1970s. My results also throw light upon the impact of regulatory burden on many well-documented features and secular trends of US economy - increased concentration, increased markups, stagnation of wages, decreased labour share, wage inequality and jobless growth.
Sayan Sarkar
PhD student, Strategy and Entrepreneurship
Does access to finance unintentionally encourage (sub-optimally) risky strategic behaviour? My proposed study aims to examine this question in the context of pharma ventures that went public in the US in the last decade. In April 2012, the US Congress enacted a legislation that exempted companies with less than $1 billion revenues from disclosing executive stock options information to the public during ipo and post-ipo phase. consistent with regulators’ vision – and media attention – the lowered regulatory burden has factually allowed ventures to access financial markets at a more nascent stage. i argue that this is an incomplete characterisation of this regulation because of the following. (1) nascent ventures have more cash proceeds from equity sales than before, however, their management could still lack the acumen to manage larger, strategic investments. (2) stock options induce high risk-taking by managers, and now the effect is exacerbated as executives can continue to place big bets away from capital-market scrutiny and disciplining forces. these allow executives to take bigger and risker r&d investments without commensurate rise in innovation or financial performance. by drawing concepts in incentives and agency, i can inform literatures entrepreneurship, innovation, and ipos how increased access to finance can be a double-edged sword, which alsoinduces suboptimal risk-taking, and consequently, inferior innovation.
Freek Vermeulen
Associate Professor of Strategy and Entrepreneurship
Joao Cotter Salvado
PhD Candidate, Strategy and Entrepreneurship
Recent years have witnessed a growing interest in understanding the role of language as a way to manage the perception of the stock market about organisational decisions. Accordingly, organisational research has examined how organisations influence investors’ response by framing their actions differently, i.e. selectively conveying certain preferred meanings and interpretations, while hiding others (Fiss & Zajac, 2006; Rhee & Fiss, 2014; Westphal & Zajac, 1998). Furthermore, accounting and behavioral finance research has examined how stock pricing responds to the use of particular language characteristics, such as tone (Henry, 2008; Huang, Teoh, & Zhang, 2014; Price, Doran, Peterson, & Bliss, 2012) or complexity (Hwang & Kim, 2017; Li, 2008; Loughran & McDonald, 2014) in companies’ disclosures. Overall, the precise choice of language has been reported to be able to moderate the stock market’s reaction to particular events or pieces of information.
With this project, we intend to explore CEO’s use of language in the communication of strategic innovation to the financial market. Our basic premise is that the effectiveness of different linguistic features will depend on the degree of innovativeness of the new strategy being presented.
Aldona Kapačinskaitė
PhD student, Strategy and Entrepreneurship
This study explores how an exogenous shock to the price in the product market in one industry engendered employment and founding of new establishments in a younger, substitute industry. The argument is that in industries where assets such as human capital have strong redeployment potential, intra-industry competitive interactions may lead to an improved performance of related industries. In the energy sector, I find that the sharp fall in the price of oil at the end of 2014 engendered a high level of turnover. I study the movement of oil and gas onshore and offshore workers to solar and wind energy firms in Texas and the North Sea, respectively. I find that areas with more oil and gas activity were more likely to see an increase in solar and wind power development in terms of employment, number of establishments and production capacity following the shock.
Why do firms respond differently to the entry and rise of digital innovations and how does this heterogeneity shape firms and their sector?
Michael Jacobides
Sir Donald Gordon Chair of Entrepreneurship and Innovation; Associate Professor of Strategy and Entrepreneurship
Nina Teng
Visiting PhD candidate in Strategy and Entrepreneurship
This project examines the puzzle of why similar firms react in vastly different ways to the impact of digital innovations within a business ecosystem; and how these firms’ strategies in response to innovations affect industry structure and value creation. We aim to contribute an empirical case study to nascent literature on how firms’ strategic responses to digital innovations shape industry architectures, value chains, and ecosystems. Through an inductive, qualitative approach focused on case studies of automotive OEM’s strategic responses to the entry and rise of digital ride-hailing firms in Asia, we plan to examine: (a) how automotive OEMs formulate their strategic responses to the entry and rise of digital ride-hailing innovations (and why these differ); (b) how digital ride-hailing firms view their strategic partnerships with OEMs and other ecosystem stakeholders; and, as a result (c) how firms’ strategies and partnerships change a sector, by providing (potentially competing) templates to organise a new (digital) ecosystem. Our objective is to study how OEM heterogeneity drives their response, and how this sets in motion the dynamics of industry transformation and of the creation of novel business ecosystems.
Jonathan Berman
Associate Professor of Marketing
Nazli Okutur
Doctoral student in Marketing
We investigate how the process of budgeting for charity affects the amount of money people give. While most research in charitable giving focuses on how individual organisations can increase the effectiveness of any single appeal, we know little about how individuals choose to budget for multiple charities, and to what extent the budgeting processes itself effect total giving. We find evidence for a strong order effect when allocating money via a charitable giving platform: individuals donate more money when first deciding which charities to support before allocating a budget as opposed to setting a budget prior to choosing which charities to support.
Charities play a pivotal role in improving lives and supporting communities around the world. Yet, most of the time they struggle to achieve financial sustainability. According to a report published by Charities Aid Foundation, 57% of the charity leaders in the UK say that generating more income is the most pressing challenge they face and over a third of the leaders (34%) are concerned about the reduction in public/government funding (Charities Aid Foundation, Feb 2017). The problem also extends to social entrepreneurs in general who are working to solve society’s most troubling problems, while at the same time trying to attract enough funding to cover their costs (Carpenter & Lauritzen, 2016). This is particularly concerning, given the findings that the public demand for the services of social enterprises is increasing and lacking the financial resources to meet this demand can push these organisations to breaking point.
Joao Cotter Salvado
PhD Candidate, Strategy and Entrepreneurship
This study theorizes and empirically investigates how financial markets perceive CEO presentations of company’s innovation. It examines whether the use of visualizations during these presentations influence the stock market reaction to the innovation announcement, and how this effect is affected both by innovation characteristics and the verbal tactics used by the CEO. We use a novel dataset of 12,000 CEO conference presentations, examining the precise content of those presentations explicitly about innovation. The dependent variable is the short-term market reaction to the conference presentation. We use matching techniques and long-term market reactions to reduce potential endogeneity issues.
Howard Kung
Professor of Finance, LBS
Nuno Clara
PhD student, LBS
Alexandre Corhay,
Rotman School of Management, Toronto
In our project, we ask why most of the creation and destruction of products occur within the boundaries of the firm, and the implications for asset prices. Product creation and destruction has been previously documented at the firm suggesting that creation is cyclical while product destruction is quite countercyclical. Evidently, the process of product innovation is more efficient within the boundaries of the firm. Why? Is this due to synergies within the firm or due to the ‘after the fact’ costs from shutting down a firm (e.g., bankruptcy, loss in human and intangible capital)? The angle we take relates to the latter: the role of financing constraints and default costs (including the loss of intangible and human capital). We estimate an industry equilibrium model with firm entry and exit with firm product innovation to quantify the role of financial frictions for determining the cross-sectional and aggregate patterns in product creation and destruction. On the empirical side of the project we use the bar code – level product data from the Consumer Panel Dataset provided by Nielsen to study what are the determinants of innovation within the firm.
Yun Lee
PhD of Accounting
Narayan Naik
Professor of Finance
Varun Sharma
PhD candidate in Finance
This project aims to provide the first insight about mechanism that robo-advisors use for portfolio recommendation. For all major robo-advisors around the world, we reverse-engineer their asset allocation algorithm and empirically test (i) the extent to which they incorporate important investor parameters into the asset allocation model; (ii) whether they rationally adjust the model over time; (iii) whether their fee charged are reasonable relative to the sophistication of the model; and (iv) the extent to which their projected return provided with portfolio recommendation is credible. We also study key factors that affect potential heterogeneity across platforms in the four dimensions.
Pascal Anders
PhD student, Strategy & Entrepreneurship
In each recession, managers face the same problem: In the wake of falling demand, should employees be kept on board or should they be let go and rehired or replaced by other people when demand bounces back? In other words, should firms hoard labour or not? Labour hoarding as a phenomenon has been carefully studied at the macro-level in the economics literature. The concept was originally introduced to explain the procyclicality of the productivity of labour – somewhat “counterintuitively,” labour productivity falls during recessions and increases during booms. This can be explained under a neoclassical view if the expected cost of rehiring employees after the recession exceeds the expected cost of keeping them on at less-than-full capacity.
It is somewhat surprising that labour hoarding at the firm-level has not created more interest among strategy and innovation scholars, given that research in those domains has linked both firm growth and innovation performance to the tacit knowhow embedded in firms’ employees. With this project, I want to contribute to closing this gap in our understanding of the effect of labour hoarding on firm-level performance outcomes. An extremely rich census dataset covering the German manufacturing sector allows me to break this new ground.
Sayan Sarkar,
PhD student, Strategy & Entrepreneurship, London Business School
Economics and finance literatures show that divergence of investor opinions (also called investor disagreement) has clear short- and long-term impact on organizational performance. I propose to theorize about how the structure of information disclosed during a fundraising round such as an IPO could systematically induce investors to develop diverse opinions about the future potential of a venture, giving rise to divergence between optimists and pessimists. I draw on insights from information processing and cognitive linguistics literatures to uncover conditions under which investors can diverge even absent (a) information flow inefficiencies and (b) investor heterogeneity. My theories aspire to develop a cognitively-grounded understanding of how divergence emerges in first place, and proffer a novel set of linkages between information production and venture performance. In short, my study digs deeper into the question: why do investors disagree?
Aldona Kapačinskaitė
PhD student, Strategy and Entrepreneurship
This project aims at uncovering conditions under which entry into a focal market is beneficial to the incumbent in a multisided market. The paper argues that competition can be beneficial to the extent that market size is not fixed, competition induces firms to innovate and firms are able to observe and learn from one another’s experience. I study this question in the context of platforms that host a set of complements (mobile applications). The predictions are that developers in markets of unfixed size benefit from entry in terms of subscriptions, and innovate more. Learning is moderated by the frequency of competitor’s activity while innovation efforts spill over to other platforms.
Alex Edmans
Professor of Finance
Vivian Fang
Assistant Professor Accounting, University of Minnesota
Allen Huang
Associate Professor Accounting, HKUST Business School
This paper shows that short-term stock price concerns induce CEOs to take value-reducing actions. Vesting equity, our measure of short-term concerns, is positively associated with the probability of a firm repurchasing shares, the amount of shares repurchased, and the probability of the firm announcing a merger and acquisition (M&A). When vesting equity increases, both repurchases and M&A have more positive short-term returns but more negative long-term returns. Overall, by identifying actions that carry clear value implications, this paper documents the long-term negative consequences of short-term incentives.
Amrita Kundu
PhD student, Management Science and Operations
Kamalini Ramdas
Professor of Management Science and Operations; Deloitte Chair in Innovation & Entrepreneurship
Stephen Anderson-Macdonald
Assistant Professor of Marketing, Stanford
Two-thirds of the population in sub-Saharan Africa live without access to modern electricity. A wave of data-driven solar companies are filling this gap by providing off-grid electricity. Fast adoption is key. The question we ask is how can we improve adoption of solar and other technologies in emerging markets? Preliminary analysis suggests that these customers – are sensitive to good service perhaps even more than the barriers affordability and awareness – especially given the close-knit social structures in emerging markets that can make Word-of-Mouth marketing (WOM) an important channel.
WOM remains a concept with little empirical evidence and the role of after-sales service as a marketing channel through WOM is untested. We address two critical questions relating to after sales service and technology adoption in emerging markets; first whether it significantly impacts the decision to adopt technology and second whether it is an effective marketing channel (through WOM).
Elias Papaioannou
Professor of Economics
Giorgio Chiovelli
Research Fellow
Stelios Michalopoulos
Associate Professor of Economic, Brown University
This project assesses the long-run development impact of a major aspect of colonization, concessions to private corporations. First, we use colonial archives to compile an original pan-African dataset with digitized maps covering all concessions and their main features (e.g., crop, mineral, practice of forced labour, revenues. Then we examine the legacy of colonial concessions on contemporary development (income, self-employment, education, and public goods), conflict (major wars, one-sided violence against civilians), and culture (trust and beliefs).
We test causation using two novel identification techniques (i) comparing outcomes just inside and just outside the historical boundaries of colonial concession using spatial regression and ii) using interaction of soil-terrain quality for specific minerals and goods (rubber, cotton, palm oil) with world prices of these goods during African colonization.
Freek Vermeulen
Associate Professor of Strategy and Entrepreneurship
Most firms use some form of visual frameworks to capture and communicate their strategies.
These visualisations are used as sense-making devices, to frame and agree on a strategic course of action and subsequently to communicate a strategy to other stakeholders in the form of a presentation. Such visual frameworks are ubiquitous in the business world but we don’t understand when they are effective and in what form.
We intend to study the use and influence of strategy frameworks in a company’s communication to the financial market, specifically in the context of acquisition announcements to analysts to explain the nature and objectives of the acquisition. Such strategies tend to be unique and innovative and necessitate more sense-making to investors.
We intend to distinguish between calls with and without a visual presentation (in the form of a PowerPoint presentation). We undertake an event-study, examining the precise content of the sense-making presentations, and particularly their visualisation, as independent variables. Our moderator will be the degree of innovativeness of the strategy that the acquisition represents.
Iris Steenkamp
PhD student, Marketing
Rajesh Chandy
Professor of Marketing; Tony and Maureen Wheeler Chair in Entrepreneurship; Academic Director of the Deloitte Institute of Innovation and Entrepreneurship
Om Narasimhan
Professor of Marketing at LSE
This research addresses an important question on the social impact of migration of women: how their status is perceived by (i) themselves and (ii) by others. We use a unique mechanism to explain this impact: consumption.
We study these questions in the context of migration facilitated by an organization which represents a substantial component of the migration flows that occur in the world today. We focus on a quasi-experiment involving organised migration of female textile workers from rural to urban India. The nature of organised migration enables us to compare individual-level data and exploit exogenous variation in order to make causal inferences. To the best of our knowledge, this study is the first to causally assess the social impact of migration at the level of the individual migrant. It is also the first the formally study the potentially transformative impact of organised migration.
Rui Silva
Assistant Professor of Finance
Ramin P. Baghai
Associate Professor of Finance, Stockholm School of Economics
A central question in finance relates to the choices firms make when deciding to finance new investments – particularly whether to go public and raise funds in in public equity markets. Although primarily about financing, the implications of such corporate action may be more far-reached, affecting the firm’s relation with its employees (and thus, their labour force composition) and its brand value.
There are many reasons why IPOs may affect workers. The firm becomes more immune to financial constraints and as such become less risky. This could affect the type of workers that may choose to work for such firms. The relaxation of financial constraints may allow firms to pay more to current employees as well as bid more aggressively for external talent. Publicity may also entice outside employees to join the firm as well as insiders to remain. Finally, incentives change: pre-IPO equity-holding employees had incentives to exert effort in order to cash out in a successful IPO; post-IPO, that incentive is no longer there, which may make the optimal compensation more dependent on performance metrics.
We test these effects using detailed employer-employee matched data from Statistics Sweden.
Rui Silva
Assistant Professor of Finance
Ramin P. Baghai
Associate Professor of Finance, Stockholm School of Economics
Luofu Ye
University Scholar at Shanghai Jiao Tong University
Team production is one of the most important and common ways to organize production in the economy. However, there is little evidence on which environments and corporate actions promote the creation of productive team configurations. In this project we study the impact of Mergers and Acquisitions (M&As) on the composition of teams and their productivity. We focus on inventors in the United States, a group that is of special interest for several reasons: (i) their output—innovation—is of impactds overall economic prosperity; (ii) there exist accurate measures of individual labour productivity (numbers of patents and citations generated, value of patents generated); and (iii) team production can be measured using information on the subset of inventors co-authoring different patents.
Since co-authors of patents span subunits of, rather than the entire firm, we can use this information as proxy for the network of collaborations of different inventors within firms.
Many M&As aim to combine resources from different organizations. Here we shed light on the ability of firms to integrate human resources from the two independent organizations into a single production unit, the timing of that integration, and the extent to which it ultimately leads to increased innovation productivity for the merged firm.
Nuno Clara
PhD Student, Finance
This paper studies the impact of product demand on innovation and asset prices. In particular I ask whether the elasticity of the demand faced by a firm matter for cross-sectional market outcomes and innovation? I make use of high-frequency price and quantity data of retail products sold on Amazon to estimate elasticities of demand. The high-frequency data allows me to reduce the standard endogeneity concerns of prices being jointly determined with quantities sold – in particular, I measure the elasticity encountered by a firm by focusing on how demand reacts within a very narrow window around a price change. This allows me to identify shifts along the demand curve due to the price change. Preliminary findings suggest that firms selling products with high elasticities of demand earn an annual return premium of 6.2% over firms dealing with more inelastic demands. Also, firms with higher demand elasticities do not seem to adjust their prices more frequently even when competitors change their prices or new products are introduced in the market.
Elias Papaioannou
Professor of Economics
This project aims to assess the short, medium and long-run consequences of the massive refugee influx that Greece experienced in the mid-1920s when more than 1 million Greek-speaking people residing in Asia Minor and other part of the Ottoman Empire had to abandon their homes and settled in Greece. We plan digitizing historical archives, past population and business censuses, and yellow pages to provide a detailed autopsy of refugees’ settlement in Greece. Then we will examine the impact of refugees on various aspects of economic efficiency, placing an emphasis on productivity, entrepreneurship, and structural transformation. Almost all refugees arrived in Greece penniless; yet they carried their entrepreneurial talent, open mind-ness, and spirit of commerce as many lived and worked in trade and manufacturing in the main trading hubs of the Mediterranean, Istanbul and Smyrna. For identification, we will exploit the many quasi-random elements of their relocation that took place in chaotic conditions. We will also examine indirect links of refugees with development operating via shaping key for entrepreneurship aspects, such as beliefs, norms, and trust.
Dimas Mateus Fazio
PhD student, Finance
Innovation is the engine of economic growth. This paper examines how changes in production network affects firm innovation. The theoretical prediction is ambiguous. On the one hand, it might be cost efficient for firms to outsource innovation to their suppliers. On the other hand, this makes the firm dependent on these suppliers and its financial health. If there are no alternative providers and innovation is key for the firm’s survival, in-house research and development might be the only solution. In this case, however, the firm bears the entire risk inherent in the development of new ideas, while by outsourcing this risk would be shared among firm and suppliers. Ultimately, the structure of the production network shapes and is shaped by innovation decisions. This paper focuses on understanding how the first affects the second. I do so by providing an exogenous shock to firms’ connections and observing how the development of new ideas changes as a result. Using the universe of firm-to-firm inter-bank payments from Brazil, I create a supplier-customer network and examine how large shocks to the structure of this network affect innovation. I measure innovation using R&D investment and patent data. Large input disruptions can cause firms linkages to be weakened or even severed. Firms might compensate this propagation in at least two ways: (i) create new supplier/customer relationships to replace the ones mostly affected by the shock and/or (ii) move the production of the disrupted input in-house. Innovation might increase or decrease depending on the structure of the production network after the shock. Overall, I present causal evidence on how the production network structure impacts innovation.
Dimas Mateus Fazio
PhD student, Finance
Entrepreneurship is one of the most important drivers of innovation and a major source of economic growth. Understanding what leads individuals to become an entrepreneur is of interest to the development of public policies that foster this activity. On one hand, highly successful examples of entrepreneurs show that the average return on this activity is elevated if compared to a normal wage-paying job. On the other hand, several challenges may curb entrepreneurial activity, such as (i) financial constraints; (ii) lack of ability/skill in running a business, and (iii) the high risk inherent to this activity. While there is empirical evidence on the first two barriers to entrepreneurship, the last one is yet to be answered.
This paper empirically investigates whether risk-aversion is a relevant factor to explain the decision to create a business. Using the universe of labour contracts in Brazil, it is assessed whether employees from firms that suffer large and unexpected production shocks are more likely to leave and subsequently create new business. Large input disruptions may affect employees’ perception of wage and employment risk to such a point that the present value of staying in the firm might become lower than the present value of becoming an entrepreneur. Overall, we present novel evidence on an overlooked channel to explain entry into entrepreneurship.
Gary Dushnitsky
Associate Professor of Strategy and Entrepreneurship
Sayan Sarkar
PhD student, Strategy and Entrepreneurship
The landscape of entrepreneurial finance is shifting rapidly, and increasingly, early-stage start-ups are seeking support of so called seed accelerator programs. Accelerators serve as a launchpad for quickly developing a business models and raising financing. A testament to the growing importance of this phenomenon is that currently London alone has 40-50 entities who call themselves accelerators, and have cumulatively graduated anywhere between 600 and 800 start-ups to date, with many going on to secure VC/ PE/ angel funding. Successful examples include the money transfer venture, TransferWise, who graduated from Seed Camp’s 2011 cohort, and went on to raise about $110M in financing till date, and the credit rating challenger Aire, who raised $7M soon after graduating from Barclays Accelerator’s 2014 cohort, to name a couple.
Accelerator programs are receiving growing attention in academia and practice alike. A rather salient and unique attribute of accelerators is that the culmination of their cohort-based programs is generally marked by a single-day investor roadshow event. Called the “demo day”, this event is marked by all ventures graduating in that cohort making short (typically two to five minutes, and rarely up to 10 minutes) fund-raising pitches to prospective investors. We exploit this unique trait to study the effect on transient exogenous shocks on the likelihood of consummating an investment. Specifically, we ask; does more sunshine on a demo day increase the likelihood of securing funding?
Joao Cotter Salvado
PhD student, Strategy and Entrepreneurship
This study theorizes and empirically investigates the effects of communicating the entrepreneur while trying to persuade potential resource providers. Using a mixed empirical design, with a set of experiments and data from two entrepreneurial crowdfunding platforms, I examine two central questions. First, how visually displaying the entrepreneur affects critical investment outcomes like the probability of being funded, the interest rate paid or the amount of equity acquired by each investor; and, second, how venture distinctiveness and entrepreneurial appearance play role moderating the main effects.
Nitin Bakshi
Assistant Professor of Management Science and Operations
Shyam Mohan
PhD Student, Management Science and Operations
In India, the Midday Meal Scheme (MDMS), introduced in 2001, incentivizes poor families to send their kids to schools by providing them with free and nutritious lunch. The Akshaya Patra is one of the largest NGOs involved in the implementation of this scheme, and serves 1.6 million children daily. Working in collaboration with Akshaya Patra, this project aims at understanding and identifying best practices for implementing the Midday Meal Scheme (MDMS) in schools in India, and intends to set up a data-driven modelling framework that could improve the efficiency and scope of the implementation.
Pascal Anders
PhD student, Strategy & Entrepreneurship
This study expands the extant diversification literature from the business unit level to the product level. Using a novel dataset covering the products produced by the universe of German manufacturing firms1 between 2001 and 2014, I address two central question of the diversification literature that researchers have not been able to robustly answer: (1) Can resource relatedness explain dynamic product market entry and exit? (2) Does diversification in related products cause higher firm and establishment productivity?
Isabel Fernandez-Mateo
Professor of Strategy and Entrepreneurship
Michaël Bikard
Assistant Professor of Strategy & Entrepreneurship
This project re-examines the well-established finding that female scientists produce fewer publications and patents than their male counterparts. We propose to study gender differences in “scientific style” as a potential explanation for this phenomenon. We consider the possibility that women report their findings in a manner that subsequently prompts less scientific recognition and a lower access to commercial opportunities. We will test this argument by analysing the content of 236 “paper twins,” in which male and female academic scientists independently published papers reporting essentially the same discovery. This work will contribute to the sociology of science and innovation, as well as to our understanding of how to best utilize scientific talent in entrepreneurial settings.
Bryan Stroube
Assistant Professor of Strategy and Entrepreneurship
Robert Vesco
University of Maryland & Bloomberg
Innovators seek the counsel of their peers in settings such as academia, R&D labs, and startups. This is because helpful feedback on early-stage ideas can improve innovative outcomes by providing complementary knowledge and lowering search costs. However, providing helpful feedback is costly, so why do peers do it? One explanation is they are motivated by the social status it can provide. This project explores the two dominant explanations for pursuing status: some individuals pursue it for the resources it attracts (pragmatists) while others pursue it because they value the deference of their peers (egoists). We leverage an exogenous change in the visibility of peer recognition in an online community for technology entrepreneurs to infer which of these explanations, if either, dominates. Initial empirical findings indicate that the production of feedback in this community is driven by both of these underlying motives.
Freek Vermeulen
Associate Professor of Strategy and Entrepreneurship
Since the end of the Apartheid regime in South Africa new Safari Parks have been founded. Many of these are purely commercial operations, exploited for commercial use through tourism. Some others have been initiated by the government or by NGOs – such as the NGO Peace Parks – to settle border disputes between neighboring countries and bring welfare to local communities. This environment is a prime example of a setting where firms have to carefully manage the balance between commercial interests on the one hand, and preservation and social interests on the other. The question here is whether Safari Parks founded using a business model specifically aimed at balancing commercial and social interest perform better (both in commercial and social terms) than Parks founded with an emphasis on either one (i.e. specifically to exploit commercial interest or specifically to advance social interests). We will collect longitudinal data to examine this particular issue systematically in a quantitative empirical study.
Freek Vermeulen
Associate Professor of Strategy and Entrepreneurship
Prior research shows that early events in a region can create an institutional legacy that leads to the long-term persistence of certain types of organizational behavior. By contrast, I argue that early events may also imprint an environment in such a way that it fosters a norm of innovation, leading organizations to seek change and adaptation rather than persistence, which manifest long after the events have taken place. I aim to test this perspective using data on firms in the Traditional Chinese Medicine industry in the first half of the 1990s, when firms using this local, indigenous technology were confronted with the onset of a global substitute: “Western-style” chemical drugs. I am already able to show that firms in regions that were under communist rule in the late 1940s, where Mao stimulated experimentation with Western-style drugs treating wounded soldiers, nearly half a century later were more inclined to break industry norms and innovate by introducing “hybrid products” in the market: new products using elements adopted from chemical drugs.
The proposed study’s primary contribution is to show that historical events can create an institutional legacy that fosters innovation, by stimulating firms to deviate from existing industry norms when environmental circumstances are changing.
Keyvan Vakili
Assistant Professor of Strategy & Entrepreneurship
In prior research, we show that the implementation of TRIPS has increased investment in basic science on neglected diseases in low-income countries, potentially through cultivating better institutions of science. The question remains, whether the produced knowledge on neglected diseases in these countries are further adopted by academic and industrial labs, locally and globally. In this project, I explore this question in depth. In particular, I investigate the impact of TRIPS agreement on the diffusion of indigenous knowledge on neglected diseases, produced in low-income countries, within subsequent scientific papers, patents, and clinical trials. I further explore the variance in knowledge diffusion across disease categories and geographical location. The results can shed light on the impact of intellectual property rights on knowledge transfer, the broader institutions required for the global diffusion of scientific knowledge, and the remaining challenges in front of eradicating neglected diseases.
Nicos Savva
Associate Professor of Management Science and Operations
Christopher J Chen
PhD Candidate, Management Science and Operations
This empirical study proposes to identify how the operational policies of hospitals are affected by variability in financial flows and to determine the impact of these changes on patient outcomes. We propose to exploit endowment returns as an exogenous source of variation in hospitals' financial flows and through this, examine how financial health impacts patient length-of-stay, staffing levels, medical inventory position, avoidable errors, readmissions, and mortality rates. Given the connection between operating procedures and patient outcomes, the results will offer managerial insights into designing novel processes that alleviate the impact of financial constraints on quality of care as well as potential policy insights as to the implementation of cutbacks. The funding provided by DIIE will be used to augment the publicly available datasets already in our possession with two proprietary datasets.
Bo Bian
PhD student
This project analyses how the exogenous loss of innovative talent in a firm affects both the firm’s and work-mates’ future performance. I extract information on the death of active inventors from US patent filings and exploit such talent loss as an exogenous shock to help evaluate the value of inventors. I find that a dead inventor’s employer suffers permanently both in subsequent innovation outcomes, measured by aggregate citation weighted number of patents, and future sales growth. Apart from the direct loss of dead inventors’ contribution, there exist negative spillovers. Average quality of the affiliated firm’s future patents drops and the productivity per inventor also goes down. For those who worked closely with the extinct inventor, as identified by past co-inventorship, their output drops even more. Following inventor deaths, there seems to be an exodus of skilled inventors. A deceased inventor’s collaborator is more likely to leave the current employer if he works in the same firm as the dead inventor, but not when he works for a different firm, suggesting potential complementarity between inventors. Firms react to the loss of innovative labour by increasing R&D capital. Taken together, the findings indicate that creative human capital is crucial for both the firm’s and collaborators’ performance and decision-making.
Jean-Marie Meier
PhD student
This paper analyses the impact that cultural norms have on innovation and entrepreneurship. Max Weber postulated that the Protestant ethic motivated Protestants to work hard and be successful in business. Martin Luther announced his Ninety-Five Theses in Wittenberg, Germany. I plan to use the distance to Wittenberg as an instrument for the share of Protestants in a county. With this instrument I can study the effect of Protestantism on innovation and entrepreneurship. I plan to analyse the mechanism underlying the general effect of Protestantism. Understanding the cultural determinants of innovation and entrepreneurship can help us to better understand why innovation and entrepreneurship clusters in particular areas within countries such as in the Silicon Valley in the USA.
Alex Edmans
Professor of Finance
Based on the conventional wisdom, there is widespread belief that short-termism of management (i.e. failure to innovate) is caused by short-termism of investors. Hillary Clinton argued that, by encouraging shareholders to hold their investments for the long-term, this will give companies the freedom to undertake long-term projects, rather than being pressured to pursue short-term profit. However, according to the common wisdom short-term trading by investors need not equate to short-term behaviour by managers. Instead, short-term trading can be based on a firm’s long-term value, and thus encourage managers to think long-term. The goal of this paper is to evaluate these conflicting views, and study whether short-term investor horizons cause short-term behaviour by management. For management behaviour, we intend to study investment, e.g. R&D, advertising, capital expenditure, innovation output (e.g. patent citations). For investor horizons, we intend to measure variables such as the average holding period, or the portfolio turnover rate. The paper will study how capital gains tax affects innovation incentives.
Gah-Yi Vhan
Assistant Professor of Management Science and Operations
The ubiquitous presence of micro-level data is changing business decision-making. E-commerce companies such as Otto (largest European online retailer), Uber, and Rue La La (a flash sale fashion start-up) successfully employ real-time, dynamic pricing as part of their operational strategy and capture value from innovating revenue management models by using (big) data. Revenue management – the practice of managing product assortments, prices and inventories - is one major area that can benefit from the use of Big Data. My earlier research [1, 2] shows that data-driven decisions can generate the best value if used with the correct methodology. In a series of papers, I aim to develop and investigate innovative new methods for incorporating “Big Data” in revenue management problems. One outcome of this research will be universal insights into how, and to what extent, Big Data can bring value in the practice of revenue management.
Kamalini Ramdas
Professor of Management Science and Operations; Deloitte Chair in Innovation & Entrepreneurship
Stephen Anderson-Macdonald
Assistant Professor of Marketing, Stanford
Amrita Kundu
MSE Environmental Systems Engineering, John Hopkins University
Researchers in operations management have been increasingly interested in operational and supply chain disruptions. The research to date on disruptions includes descriptive case-based research, analytical modelling and empirical work. The main focus of OM research on disruptions has been on mature markets supply chains. To our knowledge, little research in operations management has focused on operational or supply chain disruptions in emerging markets, and in particular, on disruptions faced by micro-entrepreneurs – individuals who own and operate very small businesses – in these markets (de Mel et al. 2010). This research intends to: 1) identify and categorize different types of disruptions faced by such micro-entrepreneurs, 2) estimate the effect of different types of disruptions on multiple dimensions of performance including revenues, costs and profits, and 3) estimate the moderating effect of specific operational strategies that micro-entrepreneurs use to improve their resilience to disruptions – i.e., the ability to bounce back post-disruption. This research project is directly focused on understanding micro-entrepreneurs’ businesses and on identifying strategies that can bolster them from disruptions to their business activities.
Nicos Savva
Associate Professor of Management Science and Operations
Tolga Tezcan
Associate Professor of Management Science and Operations BS (Bilkent) MS (Colorado State) MS PhD (Georgia Tech)
The proposed study is motivated by the chronic underinvestment in Emergency Department (ED) capacity, which leads to overcrowding and long wait times. We conjecture that such problems can be alleviated by an innovative payment scheme (dubbed “pay-for-performance”) which links the ED’s reimbursement to patient waiting times. Our research will investigate whether socially optimal outcomes can be achieved though the appropriate application of “yardstick” competition, where the payer creates indirect competition between ED’s by linking their reimbursement to their relative performance against other ED’s. Our work, which is on the interface of economics and operations management, will contribute to the ongoing debate on how to design innovative reimbursement schemes for one important service offered by hospitals – Emergency Care. Our work, which is on the interface of economics and operations management, will contribute to the ongoing debate on how to design innovative reimbursement schemes for one important service offered by hospitals – Emergency Care.
Rajesh Chandy
Professor of Marketing; Tony and Maureen Wheeler Chair in Entrepreneurship; Academic Director of the Deloitte Institute of Innovation and Entrepreneurship
Om Narasimhan
Professor of Marketing at LSE
Thomas Zhang
A long-standing puzzle is why micro-enterprises in developing countries do not adopt productive practices more readily, even when the practices are accessible and their benefits are clearly demonstrated. Farming, in particular, can be much more productive in many emerging markets with the adoption of relatively simple farming innovations. Innovation adoption is not instantaneous, even if the innovation itself is simple. Innovation adoption takes physical and mental time to ponder and assimilate. We argue that poor infrastructure and pressures of daily life in rural villages leave little slack to adopt innovation, even when such innovations are readily accessible and their benefits are clearly shown. We propose that farmers are hindered in innovation adoption by dearth of slack time. The difficult circumstances and lacking amenities in rural villages do not allow for enough slack time to contemplate and evaluate new innovations for adoption, even when such innovations – and their benefits – are clearly presented to the farmers. A survey is planned to directly capture measures of physical and mental slack.
Naufel Vilcassim
Professor of Marketing, London Business School
Stephen Anderson-Macdonald
Assistant Professor of Marketing, Stanford Graduate School of Business
Christy Lazicky
Master’s candidate, Harvard Kennedy School
In this research, we aim to evaluate and further refine the effectiveness of an innovative sampling approach we have developed to identify higher growth-potential entrepreneurs in emerging markets. Building on two on-going studies in Uganda and Rwanda, we will compare, over time, the business performance, practices and psychometrics of entrepreneurs with a high growth potential index (GPI) with that of entrepreneurs with a low GPI to understand how well our approach predicts growth potential. This research aims to assist policy makers better identify target markets for enterprise support programmes designed to stimulate entrepreneurship and economic growth in emerging markets. This research focuses on stimulating entrepreneurship in emerging markets by providing an innovative screening mechanism for policy makers and managers to target entrepreneurship support programmes and partnerships to higher growth-potential entrepreneurs most likely to grow established, employment-generating businesses.
Michaël Bikard
Assistant Professor of Strategy & Entrepreneurship
Why do universities get involved in applied research? And why do firms undertake basic science? The classic view is that academia should focus on basic research and industry should concentrate on applied science. Yet, recent studies have shown that, in some fields, a considerable overlap exists in the “basicness” of university and firm research. This paper proposes that the proximity and complementarity between academic and industrial science is to a large extent driven by the existence of particular lines of research (i.e., belonging to “Pasteur’s Quadrant”) that emerge in some fields and not in others.
Keyvan Vakili
Assistant Professor of Strategy & Entrepreneurship
Scholars and policymakers have sought to identify new mechanisms for cultivating scientific breakthroughs. One such mechanism involves using intellectual-property protections (IPP) such as patents as an incentive, and yet little evidence exists on whether the prospect of obtaining IPP stimulates scientific research that may occur decades prior to an uncertain return on the investment. In this paper, I investigate this mechanism through an examination of the effect of the World Trade Organization’s (WTO’s) 1994 policy of Trade-Related Intellectual Property Rights (TRIPS), which was justified in part by a claim that IPP would improve the availability of drugs for ‘neglected diseases’ that primarily afflict the poor. The analysis further considers how TRIPS may have encouraged new science on neglected diseases by examining the locations of the scientific researchers. The early findings suggest that IPP may create an incentive for new science even when the prospective returns occur decades subsequent to the investment.
Aharon Cohen-Mohliver
Assistant Professor of Strategy & Entrepreneurship
While the majority of work on innovation has focused on value creating activities, not all innovations are designed to create value. Innovative practices such as price fixing schemes, tax evasion and even stock option backdating practices emerge and proliferate among organizational actors, often for years, before they are caught and stopped. These practices have much in common with traditional innovations but they differ on an important dimension- all of them must be conducted in secret to shield the perpetrator from potential liabilities. While we know much on the diffusion of innovation, we know surprisingly little on the diffusion of secrets. In this research I trace the path through which innovative misconduct spreads. I examine the diffusion of stock option backdating between organizations in the United States and find that the practice is closely tied to the identity of the local office of the firms external auditor. Several robustness tests suggests that it is the local office of external auditor that either spreads or stops the practice among its clients. These findings have reaching implications for research on (unethical) innovation and for the governance of organizations.
Alex Edmans
Professor of Finance
Prices can improve innovation efficiency by providing managers with information on their investment opportunities. Traditional thought is that the quality of such guidance depends on the total amount of information in prices. We show that what matters is the amount of information in prices not already known to the manager – i.e. the source of information, not simply the overall amount. We study the staggered enforcement of insider trading laws across 25 countries, as it reduces (increases) managers’ (outsiders’) ability to trade and incorporate information into prices. Enforcement significantly increases the extent to which market prices affect investment.
Michael Jacobides
Sir Donald Gordon Chair of Entrepreneurship and Innovation; Associate Professor of Strategy and Entrepreneurship
This project aspires to provide an innovative, econometric investigation into an area which has remained ill-defined in the literature: The adoption and implementation of new business models, focusing on Financial Services in the USA, over the last 25 years. Drawing on an unusually comprehensive new database, just put together by the New York Federal Reserve Board (NYFRB), I propose to investigate, along with Nicola Cetorelli, a senior NYFRB economist: (a) what drives the adoption of new business models in banking (here, defined as the dependence of Bank Holding Companies on traditional income revenues, vs other sources such as trading and other activities); (b) how this changes with the industry life-cycle; and (c) how this relates to choices firms make in terms of organizational design (e.g., number and type of subsidiaries, scope, etc). We also intend to link the changes in business models with different metrics of success (ROE, ROA, etc), and of risk (NPL, variability of returns), in a way that will shed some light on how changes in business models by those who innovate early on compare with those of laggards. In addition to these results being important for a study of industry change and business model transformation, they should also shed some light on how the innovation from major banks contributed to the financial crisis of 2008, thus complementing ongoing qualitative work.
Naufel Vilcassim
Professor of Marketing
Stephen Anderson-Macdonald
Stanford University Graduate School of Business
Pradeep K. Chintagunta
Professor of Marketing, Booth Business School, University of Chicago
In this study, we examine an innovation in mobile phone technologies designed to stimulate entrepreneurship and firm growth in developing countries. We use a randomised controlled trial to measure the impact on performance of an easy-to-use, SMS-based business information tool that increases an entrepreneur’s ability to track, access and take action on key financial and marketing metrics in his/her business. Through this research, we aim to better understand the role of business information in driving enterprise growth, and how innovation can be used to overcome barriers to growth and unlock the potential of developing-country enterprises in a cost-effective, scalable way.
Jean Marie Meier
PhD student
Alexander Donges
(University of Mannheim, Germany)
Rui Silva
Assistant Professor of Finance
This paper studies the impact of institutions on innovation and entrepreneurship. During the French occupation of parts of Germany after the French Revolution and under Napoleon’s rule, the French imposed major institutional reforms. We use the length of the French occupation in different parts of Germany as a “shock” to institutions. We use this “shock” to study the impact of institutions on innovation and entrepreneurship. We document that better institutions lead to an increase in innovation and entrepreneurship. Thereby we provide evidence of an important channel by which institutions affect long-run economic growth. The results are relevant to policy makers, practitioners and academics given that most of the world’s population is living in countries with weak institutions.
Jean Marie Meier
PhD student
This paper analyses the impact that cultural norms have on innovation and entrepreneurship. Max Weber postulated that the Protestant ethic motivated Protestants to work hard and be successful in business. Martin Luther announced his Ninety-Five Theses in Wittenberg, Germany. I plan to use the distance to Wittenberg as an instrument for the share of Protestants in a county. With this instrument I can study the effect of Protestantism on innovation and entrepreneurship. I plan to analyse the mechanism underlying the general effect of Protestantism. Understanding the cultural determinants of innovation and entrepreneurship can help us to better understand why innovation and entrepreneurship clusters in particular areas within countries such as in the Silicon Valley in the USA.
Jonas Oddur Jonasson
PhD Student
Professional community health workers are currently being introduced as a formal part of the health care delivery system in many southern African countries. This constitutes an operational innovation, both in terms of who does what—CHWs provide primary care instead of qualified nurses or doctors—and in terms of the service location—CHWs visit households, bringing the health care delivery system to the patients. The aim of the project described in this proposal is to jointly model operational and clinical decision making to develop guidelines for how such systems are operationally best implemented, to maximize the positive public health impact.
Raja Patnaik
PhD student
This project aims at exploring the effects of uncertainty on firm investment and innovation. I exploit a prominent weather pattern in the Pacific region that generates uncertainty across different industries in the U.S. to empirically estimate firm-level responses to uncertainty in terms of investment in physical capital and R&D spending. Preliminary results indicate that while firms decrease investment in physical capital, they increase R&D spending in response to higher uncertainty. This suggests that under certain conditions higher uncertainty can stimulate innovation, particularly in industries in which firms have more growth options.
Heikki Peura
PhD student
Disaster investigations often reveal that the accident had been preceded by more frequent near misses precursor events that could have led to a disaster but resulted in limited impact or no damage at all. Yet reports of such precursors either failed to reach management, or were not acted upon, and preventive measures were insu_cient. The purpose of this work is to study why organizations may fail to capture and address such opportunities for safety innovation. To address this question, we analyse how a _rm can incentivize its employees both to learn about disaster risk and simultaneously mitigate it.
Lakshmi Prasad Vana
PhD student
Crowdfunding is an innovative business model that has seen enormous adoption among non-profit organizations. The crowdfunding site Donors Choose has, for example, raised over $250 million for various public school projects in the US since 2002. A major challenge faced by crowdfunding campaigns is to reach their campaign target within the allocated time. My research models how donors evaluate their uncertainty about whether a campaign would reach its target and how that affects the amount they donate. My findings may suggest that displaying the right information may nudge potential donors to better assess the uncertainty, leading to higher donations and completion rates.
For any enquiries about the research proposals please contact us at iepc@london.edu.
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