HBS Theses and Dissertations

In this dissertation, I study how consumers influence each other in the adoption and engagement of digital goods. In the first essay, I study peer influence in mobile game adoption. Although peer effects are expected to influence consumer decisions, they are difficult to identify in observational studies due selection bias: Friends share common characteristics and behave in similar ways even without peer effects. I use a novel approach to estimate unobserved characteristics which endogenously drive tie formation and use the estimates to control for selection, without need for instruments. This is the first paper to use latent space to reduce bias in peer influence estimates. I find that peers account for 27% of mobile game adoptions, and that ignoring latent homophily would bias the estimates by 40%, in line with previous studies. In some samples, ignoring latent homophily can result in overestimation of social effects by over 100%. In the second essay, I examine the effect of zero rating on consumer behavior in a social net- work. I use Facebook data on millions of users to quantify direct, peer, and long-term effects of zero rating, a campaign where consumers can access digital media over mobile networks for free, on social network activities. I find that zero rating does not have the same effect on all so- cial network activities. While the direct impact of zero rating is positive on all activities, users with more friends on zero rating create less, consume more, and give more feedback on content. In addition, zero rating does not have a uniform effect across consumers. Some consumers benefit more from zero rating than others, and I show that network characteristics can help identify those consumers whose network benefits the most from zero rating.

By most conventional measures of corporate success (revenue, market capitalization, global brand growth, etc.) businesses operating as multi-sided platforms (MSPs) and their associated ecosystems constitute the majority of the fastest growing organizations in the global economy. In the strategy and economics fields there is a burgeoning literature related to MSP-governed businesses and their ecosystems primarily focused on pricing, growth, governance, and competitive considerations. Yet, in organizational studies and innovation there is a dearth of research analyzing characteristics of these businesses and their complementors and the managerial challenges they present. More specifically, an increasing number of mature incumbent organizations in a variety of industries are starting to operate in environments in which they either need to operate as MSP-based businesses, or join ecosystems governed by them to compete successfully and grow. This dissertation consists of two book chapters and one empirical project aligned with one overarching question: As information constraints approach zero and MSP-governed businesses and their complementors become increasingly more prevalent in the global economy, what are the strategic and organizational issues affecting incumbent organizations that choose to become MSPs or compete as complementors to them? The first chapter, incorporating a forthcoming book chapter (see Altman, Nagle, & Tushman, 2015) is a theoretical study exploring the effects on management research and organizations when the costs of information processing, storage, and communication approach zero and organizations engage with a wide range of communities. As these information constraints are reduced, one effect is that MSP-based businesses and ecosystems thrive and impact large sectors of the economy. Thus, this chapter sets the context for the dissertation as it outlines the environment in which MSP-governed businesses and their complementors operate and introduces theoretical challenges posed by the growth of these networks. The second chapter, an empirical paper, focuses on challenges encountered by incumbent organizations joining MSP-governed ecosystems as complementors. This project is a multi-year qualitative inductive field-based research study analyzing the transition of a well-known consumer technology product provider as it joins a powerful MSP-based ecosystem. The accessory organization enters an asymmetric power relationship encountering, and responding to, multiple types of dependencies. I identify three types of dependencies faced by the organization: technological, information, and values-based, and three response strategies the organization deploys: compliance, influence, and innovation. I suggest that these dependencies and responses are related to, but distinct from, extant work on power and dependencies. I also classify three phases of complementor maturity through which the organization passes. I induce a grounded theory model identifying relationships between the concepts and discuss theoretical implications. The final chapter, also a forthcoming book chapter (see Altman & Tripsas, 2015), addresses organizational identity implications of transitions mature organizations undergo as they shift from product to MSP-based business models in which business considerations include network effects and interdependence. This chapter explains that organizational identity may affect, and may be affected by, product-to-platform transitions. It suggests that an organization must question its identity and modify it to be consistent with its re-defined business model.

In this thesis, I research the management of platforms by participating organizations and study the ensuing performance of both participating organizations and the platform.

In the first essay, titled The Impact of High Performance Outliers on Two-Sided Platforms: Evidence from Crowdfunding,'' I study how one kind of observable on platforms affects both the subsequent entry decision of organizations and the performance of the platform. I focus on the arrival of high performing sellers and study how these outliers'' affect the subsequent growth and liquidity of the platform. In the context of the two largest rewards-based crowdfunding platforms, I find that outliers are followed by a relative increase in entry and transaction volume on the competing platform. Moreover, this average effect is stronger for marginal, or low quality, sellers. Within the platform hosting the outlier, transaction volume increases for sellers in the same product category as the outlier, but this average effect reverses for outliers in certain product categories. The results suggest that the impact of heterogeneous users depends on platform rules, and that in addition to pricing, competing platforms may selectively focus on attracting users with high performance potential to achieve the desired mix of buyers and sellers.

In the second essay, titled ``Social Media, Loyalty, and Organizational Performance'' (written with Shiladitya Ray), we study how the interactions between users and organizations on social media relate to organizational performance outcomes. Specifically, we explore the relationship between expressions of loyalty on social media and performance. We relate the number of followers on Twitter to television show ratings and find that change in the number of individuals following an organization's Twitter account prior to the realization of a repeated performance outcome is positively associated with that outcome. We present evidence of the heterogeneity in the effect, showing that the relationship is stronger for organizations that match the demographics of the social network and niche product categories. We also show that higher levels of a show's initial following mitigates the relationship between followers and performance for shows in niche categories, and tentatively strengthens it for show's in non-niche categories.

In addition to considering the theoretical relationship between social media and organizational performance, we employ a parsimonious prediction model relating the two, showing that a model with social media measures outperforms both a baseline autoregressive model and a model that includes search data.In so doing, we extend recent literature that uses real-time data to predict current economic indicators by using social media data to predict organizational performance outcomes.Our results indicate that technological innovations can diminish the distance between the organization's bounaries and outside stakeholders. This reduction in distance underlines the importance for firms to attend to their non-transaction interactions on social media.

In the final essay, titled ``Organizational Management of Social Media,'' I address how organizations manage activities on social media, beginning with the decision to adopt social media and its rate of diffusion within the organization. In the context of television show adoption of Twitter, I show that larger organizations and organizations started more recently more readily adopted social media. I also provide evidence highlighting the heterogeneity in organizational approaches to social media. By looking at the heterogeneity in the rates of diffusion, I am able to distinguish differences in approaches to social media management along three dimensions: the timing, the speed, and the centrality of management within the organization. Finally, I show the changing nature of diffusion of a technology in an industry over time. By applying theories of strategy and innovation management, I underscore the importance of considering the impact of social media on the organization and processes of the firm.

As a result of globalization, organizations expect more from their employees. While organizations have become leaner, the productivity requirements have not decreased. Further, there is greater importance being placed on the connection between human capital and operational outcomes. This research explores the impact of management decisions on teams of employees. It also examines how organizations use and develop their workforce. In three studies, my dissertation considers how an organization manages their human capital to gain optimal operational results: 1) by leveraging multiple-team membership practices while staying cognizant of the fragility that it induces, 2) by being more thoughtful in the assignment of employees to varying work contexts, and 3) by understanding how employee development has near-term and long-term effects on the human capital pipeline and the organization’s performance.

ABSTRACT 1: This paper examines whether mobile telecom operators with access to different kinds of knowledge pursue different strategies in politically risky markets. Using data from 2000-2010 I find that firms with country-specific knowledge, gained via presence in the local market, and general knowledge, gained through a long history of operations, were more likely to increase or maintain investment and operations even as political risk rose to the highest levels while peer firms drop both investment and operations. Firms with market-risk knowledge, gained through previous experience confronting political risk, drop investment similar to peer firms but increase operations to capitalize on their short-term competitive advantage. Therefore, country-risk knowledge and general knowledge are associated with strategies that are durable to political risk, while market-risk knowledge is associated with the distinct strategy for political risk of increased operations. These results contribute to the literature by documenting distinct market-based strategies for firms with differing knowledge sets that remain in a market as political risk rises. ABSTRACT 2: Scholars of corporate governance have debated the relative importance of country and firm characteristics in understanding corporate governance variation across emerging economies. Using panel data and a number of model specifications, we shed new light on this debate. We find that firm characteristics are as important as and often meaningfully more important than country characteristics. In fact, 16.8% percent of firms in emerging economies have been able to exceed the 75th percentile of ratings in developed economies. Our results suggest that over recent years firms in emerging economies had more capability to rise above weak home-country institutions than previously suggested. ABSTRACT 3: Outsourcing firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories increasingly rely on private social auditors to provide strategic information about the conduct of their suppliers. But little is known about what influences auditors’ ability to identify and report poor supplier conduct. We find that individual supply chain auditors’ monitoring practices are shaped by social factors including their experience, gender, and professional training; their ongoing relationships with suppliers; and the gender diversity of their audit teams. Providing the first comprehensive and systematic findings on supply chain monitoring, our study identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational spillover risks by reducing information asymmetries between themselves and their suppliers.

The contemporary executive career looks different from the “company man” era of post World War II. At that time, executives rose almost exclusively within a single firm, learning the business over many loyal years of service. Since the 1970s, firms have progressively relied more on external markets for filling its leadership ranks. As a result, the value of executives has become increasingly defined by capabilities portable across organizational settings. External markets have less information about executive abilities compared to incumbent employers, which strengthens the influence of externally observable signals of quality on executive career opportunities and compensation. Across three studies, this dissertation empirically explores how external markets value executive human capital attributes. In particular, this work focuses on how external markets differ from incumbent employers and explores implications for executives building their careers across multiple organizations.

In this paper I examine how one construction management company uses contract design and incentive design to respond to aspects of task complexity and relationship complexity present in its construction projects. In terms of contract design, I find that the company is unable to increase its use of cost-plus pricing when faced with technically complex projects. Instead, the company uses increased pre-execution design modification and price markups when technically complex projects are contracted with fixed-pricing. Further, I find that design modification is only margin-improving when used in projects that are both technically complex and fixed-price and that price markups are only margin-improving when projects are fixed-price. In terms of incentive design, I find that the company provides more qualitative feedback to employees and quantitatively rates employees with less centrality bias (i.e. more dispersed ratings) when employees work on fixed-price projects. Further, when employees work on fixed-price projects, they are granted greater average financial rewards, their financial rewards are relatively more based on input-behaviors (i.e. less based on output-results), and their bonuses, raises and promotions appear to be awarded with more managerial discretion (i.e. are less systematic.)

The classic economic concept of the tragedy of the commons occurs when individuals overuse a public good, resulting in the complete depletion of the good. Comparatively, in the digital world public goods are non-rival and essentially infinitely abundant. However, the nearly infinite supply of a public digital good can still be tragic, albeit in a different manner. For example, the rise of the free crowdsourced digital good Wikipedia essentially destroyed billions of dollars of economic value in the encyclopedia industry. Despite this apparent destruction of value, the reduction in prices for many digital goods also represents a great opportunity. Firms are increasingly relying on the crowd to help shape future products, provide value for their customers, and build software crucial to the firm’s production process. This phenomenon is leading to a weakening of firm boundaries and a change in the nature of the firm’s innovative processes. My dissertation is comprised of four studies that explore this phenomenon to better understand the transformative nature of the digital commons.

The first chapter, “Innovating Without Information Constraints: Organizations, Communities, and Innovation When Information Costs Approach Zero” (w/ Elizabeth Altman, and Michael Tushman), explores how technological progress and reductions in information costs are leading firms to increasingly engage with external digital communities. In particular, firms are increasingly engaging with networks of developers, external labor marketplaces, and users, with the latter frequently occurring through the process of crowdsourcing. This engagement leads to a weakening of firm boundaries such that the locus of innovation and value creation moves outside the boundaries of the firm. The increase in this phenomenon motivates a reevaluation of many traditional theories of how firms organize and innovate. Specifically, we consider how shifts in information costs affect the classic organizational concepts of firm boundaries, business models, interdependence, leadership, identity, search, and intellectual property. In turn, these effects on the firm’s organization alter how the firm innovates.

The second chapter, “Digital Dark Matter and the Economic Contribution of Apache” (w/ Shane Greenstein) examines the impact of crowdsourced digital goods at a macro-level. We show that due to its reliance on price to measure value, GDP calculations do not account for “digital dark matter”, digital goods and services that are non-pecuniary and effectively limitless inputs into production. We scan 1% of the 1.5 billion IP addresses in the United States to measure the types of web servers businesses and individuals employ. We estimate the value of the free and open source nature of the predominant web server, Apache, by comparing it to the closest pecuniary alternative, Microsoft’s Internet Information Services (IIS) server. Our analysis shows that the lack of price for the Apache server leads to an underestimation of GDP by upwards of $12 billion. Although this is the value from only one piece of digital dark matter, this miscalculation represents a large proportion of all software sales and significantly alters economic growth projections.

The third chapter, “Crowdsourced Digital Goods and Firm Productivity: Evidence from Open Source Software”, empirically measures the firm-level productivity impact of managers’ decisions to use non-pecuniary digital inputs from the crowd. Existing literature examining the impact of IT on productivity does not account for investments in such goods, as their use cannot properly be captured by traditional measurement methods based on price. Therefore, their contribution to the firm’s production process is currently unexplored, despite mounting evidence that firms are increasingly relying on these types of inputs. Employing data from a survey of technology use at nearly 2,000 firms over 10 years, I find that a 1% increase in the amount of non-pecuniary open source software (OSS) used by a firm leads to a .073% increase in productivity. This translates to a $1.35 million increase in productivity for the average firm in my sample. This is more than double the magnitude of the coefficient on investments in traditional pecuniary IT capital. I find that this effect is greater for larger firms and for firms in the services industry. I use inverse probability weighting, instrumental variables, firm-fixed effects and data on managerial quality from the World Management Survey to add support to a causal interpretation of these results.

The final chapter of my dissertation, “Organizational Learning Through Contributing to Public Goods: Evidence from Open Source Software,” builds on the concepts developed in the other three to explore how firms that engage external communities and contribute to the development of crowdsourced digital goods enhance their ability to extract value from technology-related inputs via increased learning about how these complex goods operate. This study explores this mechanism by using data on firm contributions to Linux, an OSS operating system that is an important public digital good created via crowdsourcing. Using coarsened exact matching and inverse probability weighting to address endogeneity concerns, this study shows that firms who contribute to the development of OSS capture more productive value from the use of OSS than their non-contributing peers through a process similar to absorptive capacity. Further, this learning has a spillover effect that allows contributing firms to capture more productive value from all of their IT investments, not just OSS.

Together, the results of these four studies show that the digital commons can help create a great deal of economic value, but that this value is difficult to measure via standard economic methods that rely on price to reflect value. These results have important strategic implications for managers and policy makers to consider as organizations increasingly engage with external communities and ecosystems to innovate and create value.

My dissertation is composed of three papers on symbolic consumption–how consumers use products, brands, and time to express who they are and signal status. The first paper (Brand Tourists: How Non–Core Users Enhance the Brand Image by Eliciting Pride) demonstrates the positive impact of non-core users of a prestige brand perceived as “brand tourists” into the brand community. The second paper (The Red Sneakers Effect: Inferring Status and Competence from Signals of Nonconformity) investigates the conditions under which nonconforming behaviors, such as wearing red sneakers in a professional setting, can act as a particular form of conspicuous consumption and lead to positive inferences of status and competence in the eyes of others. The third paper (Conspicuous Consumption of Time: When Busyness and Lack of Leisure Time Become a Status Symbol) further extends this line of investigation on alternative signals of status by uncovering the role of long hours of work and lack of leisure time as a status symbol. I conclude with a discussion of current working papers and future research agenda on symbolic consumption and branding.

In this dissertation, I present three essays on the dynamics of intellectual property bargaining and trade, particularly of patents. The first essay presents a game theoretic model examining the sale of intellectual property rights from small inventors with buyers of varying commercialization capacity across intellectual property rights regimes with full and no property rights protection. The essay finds that in Nash equilibrium in both single seller and infinite seller scenarios, sellers generally approach firms with greater commercialization capabilities if property rights are strong, and approach firms with lesser commercialization capabilities if property rights are not protected. The second essay examines the sale of patents from small inventors and entities to firms from 1992 to 2000. I exploit the 1996 Supreme Court case Markman v. Westview Instruments, arguing that patent protection weakened afterwards, to compare patent sales to firms with greater or weaker commercialization capabilities, which I proxy using industrial patent holdings. Using a conditional fixed-effects multivariate choice model, I find that patent sales are more highly concentrated towards firms with weaker patent holdings after Markman. The last essay develops a conceptual model of patent dynamic capabilities for firms, developing several predictions in conjunction with the technology life-cycle model.

A network good is a product or service which becomes inherently more valuable as its adoption increases. The mechanism driving this value varies by context: for example, a software ecosystem produces more software as the “installed base” of its consumers and developers grows; the quality of content improves as a information aggregator collects information from more users; and the liquidity of an exchange-traded product increases as more investors trade the product. I begin my thesis with a puzzle: why are new network goods more likely to succeed in some markets than others? I show, both via a formal model and empirical analyses, that the likelihood of a network good's success depends on structural features of the innovation and its market. Tailoring entry and growth strategies to fit these features present new opportunities for established firms and entrepreneurs.

This dissertation is composed of three essays on innovation, strategy and competition. The first essay studies how entry of patent intermediaries known as "patent assertion entities" (PAEs) impacts behavior of other firms in the patent space. It uses deaths of individual patent owners to exogenously identify PAE patent acquisitions, and estimates its impact on follow-on citations. Finally, it shows that after being acquired by PAEs, patents lose a large portion of their follow-on citations. These effects are driven almost entirely by citing behavior of large entities and are robust to controlling for patent examiner-added citations. This effect disappears once the acquired patents expire, indicating that large entities may be acting strategically to reduce the likelihood of patent assertion. The second essay investigates patent disclosure processes at seven large Standard-Setting Organizations (SSOs) where participating entities have a choice between specific patent disclosures and broad generic disclosures. It finds that large, downstream firms who face large technology search costs prefer to use generic patent disclosures. In addition, it shows that higher quality patents are more likely to be disclosed in specific disclosures, because they are more likely to be monetized through licensing. The third essay estimates the causal impact of research expenditures on scientific output. Unexpected college football outcomes provide exogenous variation to university funds, and in turn, research expenditures in the subsequent year.

Using this variation, this essay estimates the dollar elasticity of scholarly articles, new patent applications, and the citations that accrue to each.

This dissertation is comprised of three studies investigating sources of variation in firm practices. Firm practices may differ both due to differences in the practices firms choose to implement – different types of firms may make different selections – and due to differences in implementation success of similar practices – variation in internal firm conditions may result in differences in otherwise similar practices. The first essay examines a difference in firm practice selection whereas the second and third essays examine differences in firm practice implementation. Essay one considers how ownership impacts the management practices implemented by firms, specifically considering the founder CEO firm’s adoption of management practices as compared to firms with other owner-manager types. Founder CEO firms adopt fewer management practices than firms under other ownership structures, both due to a lack of awareness about the lower quality of their practices and due to greater value placed on the nonpecuniary benefit provided by potentially less efficient but power-preserving practices. Essays two and three use data from a Fortune 100 retail chain that implemented a new restocking practice across a subset of its retail stores. Essay two examines how prior experience with the old restocking practice impacts a team’s ability to perform and learn the new restocking practice. Teams with greater exposure to the old practice perform worse at first – due to experiencing a competency trap – but then improve more rapidly – due to greater efficiency of communication and coordination. Essay three focuses on the impact of pilot use when rolling out the new practice, proposing that a main function of pilot implementations is to allow for vicarious learning opportunities for stores subsequently implementing the practice. The relative performance of the pilot stores as well as the contextual similarity of these stores to the stores learning from them matters a great deal. Nonpilot stores increasingly rely only on their own experiences rather than the pilots’ experiences in instances where the learning opportunities become less obvious.

The internet has revolutionized marketing. Firms use the internet to procure advertising content, reach consumers, and offer a convenient channel of purchase. Given the growing importance of the internet, marketers must learn to take advantage of new marketplaces and channels. This research examines how the economic design of electronic marketplaces and online channels affects consumer and firm behavior. The first chapter examines the effects of prize structure and entry limits on participant behavior and idea quality in a freelance marketplace where popular advertisers such as P&G and Unilever organize contests to procure ideas for advertising content. It presents a structural model and uses counterfactual simulations to show that although the number of prizes does not appear to affect contest outcomes, prize amount and submission limits may have a significant impact that depends on participant heterogeneity and information. The second chapter uses a structural model and counterfactual simulations to explore how different expiration and pricing policies in a marketplace that offers deeply discounted but expiring deals for products affects the purchase and redemption behavior of consumers and the pricing decisions of merchants. This chapter sheds light on recent marketing regulation that befell the daily deals industry. The third and final chapter studies the decisions of retailers who operate both an online and a store channel to match their own prices across channels in a variety of competitive settings. It uses an analytical game theory model to show that different self-matching configurations may emerge in equilibrium, and that self-matching pricing policies may increase retailer profits.

Effective operating models based on carefully selected resources, processes and logic allow organizations to develop the right products and services and deliver them to customers. However, there has been little investigation of how organizations design and manage their operating models when they enter new contexts due to changes in regulation, competition, markets, technology, location and/or a combination of these factors. This dissertation examines the relationship between an organization’s external context and its operating model by carefully examining the choice of operating resources, processes and logic as organizations enter new contexts. The dissertation specifically focuses on one developing country, India, and adopts an inductive approach to study the design of operating models in response to significant changes in location and/or market in three different empirical settings within the healthcare industry.

The first study, conducted jointly with Stefan Thomke, explores the influence of the institutional context on the R&D processes. Inductive field work, focused on medical device development at a newly established R&D center of a US MNC in India, suggests that institutional flexibility in emerging markets (such as India) might allow for high fidelity experimentation and testing during early stages of product development. This, in turn, has implications for R&D search performance and the locus of innovation and entrepreneurship.

The second study, a joint project with Rob Huckman and Tarun Khanna, identifies the development of an operating model based on the practice of shifting less complex surgical tasks from senior surgeons to skilled junior surgeons as fundamental in enabling Narayana Health (NH) to provide high-quality, low-cost cardiac surgery care to the indigent population in India. Our analysis of surgical outcome data suggests that the task shifting based model – while costing significantly less – does not negatively affect clinical outcomes. Further, we highlight the location-specific contextual factors that allow for such a model in India.

The third study, conducted with Tarun Khanna, focuses on NH’s design of a low-cost, high-quality tertiary care hospital in the Cayman Islands. The prior experience of developing different hospital models in response to the heterogeneous market in India allowed NH to develop a deep understanding of the environmental context and a diverse set of knowledge and practices. This understanding of and experience at diverse contexts informed the Cayman project, and NH was able to selectively borrow and recombine elements from their different models in India while setting up the Cayman hospital. Building on these findings, we develop a process model that highlights how recombination of elements developed to address heterogeneity of context in the home country can allow an organization to develop an effective operating model in the host country.

Collectively, the studies illustrate how the external context shapes an organization’s ability to design, implement and transfer operating models. At the same time, they emphasize that organizations can successfully develop an operating model to accommodate any significant context change by approaching the design effort as a fundamentally new design problem. This latter approach is in contrast to the often discussed replication-adaptation balancing approach that emphasizes marginal adaptation of prior established model(s). Further, by uncovering the importance of the local context in selecting and adopting specific operational resources and processes in healthcare settings in an emerging market, the studies contribute rich insights to the new yet growing streams of literature related to healthcare management in resource-constrained settings, innovation and entrepreneurship in emerging markets, and the transfer of innovations from developing to developed markets. In conclusion, by focusing on the relation among (1) the external context of an organization, (2) the design of operating logic, resources and processes and (3) organizational performance, this dissertation contributes to research in operations strategy, organization theory and the management of innovation and entrepreneurship.

In these essays, I explore the relation between shareholder activism and corporate governance, mainly the board of directors and takeover defense measures.

In the first essay, “Takeover defenses in the era of shareholder activism,” I examine whether or not takeover defense measures that were originally developed to protect the management have differential effects on the probability of shareholder activism. I also examine what are the types of demands activists make when there are defense measures in place and look at the outcomes following activist campaigns. I find that firms with a staggered board or dual-class shares are less likely to be targeted while firms with a poison pill in place are more likely to be targeted. Also, staggered board and poison pill are more likely to be removed following activism and target firms are more likely to be taken over following activism despite having defense measures in place.

In the second essay, “Consequences to Directors of Shareholder Activism,” co-authored with Ian D. Gow and Suraj Srinivasan, we examine how shareholder activists can influence accountability of the board of directors. We find that the directors are more likely to leave the board in the two years following activist engagement and their turnover is more sensitive to their performance in the period leading up to shareholder activism. However, we do not find evidence of reputational consequences for the directors as we do not find changes in the number of other board seats.

In the third essay, “Activist directors – determinants and consequences,” also co-authored with Ian D. Gow and Suraj Srinivasan, we examine whom the directors shareholder activists put in when they are granted a board seat or when they win proxy fights and whether having these board seats can help them achieve their goals more effectively. We identify 1,369 activist directors during the period of 2004–2015. Activists remain as shareholders longer when they have board seats and having activist directors is associated with significant strategic and operational actions by firms.

Organizations increasingly empower their employees to conduct local experimentation and generate innovation ideas. The aim of this dissertation is to understand the role of management control mechanisms in motivating and managing employee-driven innovation. Specifically, I provide empirical evidence – both quantitative and qualitative – on the specific channels and mechanisms through which employee-driven innovation is facilitated within real-world settings.

In the first chapter of my dissertation, I conduct a field study in a gaming company to examine how innovation ideas are generated and selected. I provide details on the various channels through which employee-driven innovation occurs, as well as the management control mechanisms used to manage employee-driven innovation. The rich descriptive evidence enabled me to uncover important themes in the management control mechanisms that balance innovation and execution.

The second chapter is based on my job market paper (“Boss, Cut Me Some Slack: Control and Innovation in a Multitasking Environment”) which examines the problem of motivating innovation in the presence of existing execution tasks. Using employee- and project-level data from a software company, I examine the relationship between reduced time pressure on execution tasks and employee-level innovation by exploiting variations in the extent to which predetermined time constraints on execution tasks were loosely enforced by managers in decentralized teams. I find that reduced time pressure on execution tasks is significantly associated with a greater probability of self-initiated innovation. Consistent with theories on employee selection and relational contract, the above effect is more pronounced (1) for employees without significantly negative outcomes on past execution tasks, (2) for employees with a greater preexisting propensity to innovate, or (3) when the supervisor has a history of working with innovating employees. Conditional on submitting innovation prototypes, reduced time pressure on execution tasks is also significantly associated with higher-quality innovation.

Despite the formal permission to innovate, many employees in established organizations seem unable to fully and effectively use the granted discretion to experiment. In the third chapter of my dissertation, I turn my attention to whether certain informal control mechanisms (such as social norms) affect the extent of local experimentation. Using detailed loan- and employee-level data from a financial institution that removed its rule-based formal control system, I analyze changes in decision-making patterns and find that employees who are exposed to two different initial control environments (i.e. before and after removing the rule-based control system) have both increased local experimentation over time after being given the right to make their own decisions. But employees from the initial control environment with zero-experimentation rely much more on managers’ or peers’ degree of experimentation to guide their own experimentation.

Given increased competition with for-profit firms, the issue of the comparative advantage of non-profit organizations is renewed. While non-profits may want to differentiate themselves when faced with additional non-profit competition, it is unclear whether they would want to differentiate themselves or converge towards for-profit competitors. This paper addresses this issue by considering the different financing models, human resource systems, and objectives of non-profit organizations, as compared to for-profits, in the mixed industry of microfinance.

In my first essay, I utilize an analytical model, where firms can choose profit status, sources of financing, and the borrowers they target with a given interest rate and loan size. I find that non-profit and for-profit organizations will segment the market, partly due to differences in profit status and partly due to differences in the sources of financing. I find support for the hypotheses using a large-scale panel dataset of microfinance organizations in Latin America.

The second essay focuses on a particular element of the business model considered in the first essay: deposit-taking. I show that non-profits that begin taking deposits only benefit financially if they also begin making larger loans. This suggests that changes in non-profits' activities may require a change in positioning to improve financial performance. More broadly, it supports the literature on the importance of fit between product market strategy and business model, which suggests extra managerial attention be paid to whether and how to adopt activities that change the business model.

The third essay considers another key distinguishing element between the non-profit and for-profit business model: the incentive and reward systems for employees. I merge the panel dataset with a cross-sectional survey on the dimensions along which the firms incentivize employees, and develop a proxy for the level of bonus pay. The results suggest that more mission-oriented firms reward employees on more dimensions, but with lower average salary and a smaller amount of bonus pay. This suggests that incentive pay may be used as a signal in more mission-oriented firms to clarify the expectations of employee behavior, whereas it is used to directly motivate and incentivize employees in less mission-oriented firms.

The three essays of my dissertation combine to examine the characteristics that distinguish non-profit organizations, even in industries in which they co-exist with for-profits. The results shed light on these increasingly common mixed industries, as well as provide insight into business model competition and the fit between elements that make up a business model.

Social hierarchies can prevent teams from hearing and using all of their members’ contributions. They are also ubiquitous and difficult to change, reinforced by conscious and unconscious factors as well as social-structural systems. Social hierarchies in teams, however, can and do change. This dissertation diverges from recent research focused on the stability of social hierarchies to argue that social hierarchies in teams can become more dynamic over time; it also explores why and how this shift comes about and how it impacts team member relationships and interaction patterns. In chapter 2, “Toward a more dynamic conceptualization of social hierarchy in teams,” I theorize about the antecedents and processes that allow teams to shift their social hierarchy, focusing on the importance of socialized schemas, identity, emotions, and behaviors. Chapters 3 and 4 draw from a 31-month ethnographic investigation into these processes in three multidisciplinary “change teams” in primary health care clinics. These teams were specifically charged with moving their organization toward a more dynamic social hierarchy to remain competitive in their industry. I studied how team members did this within their own team. In chapter 3, “Microwedges: Moving teams from rigid to dynamic social hierarchy,” I identify and theorize about the process through which an extra-role behavior, over time, helps to create cognitive changes in team members, prompting them to change their task strategies, role responsibilities, and communication patterns to promote dynamic social hierarchy in the team. Chapter 4, “The changing nature of social hierarchy and voice” follows a change team on a weekly basis over 22 months to document a shift to dynamic social hierarchy and to theorize about the relationship between social hierarchy and voice and silence via “opening” and “closing” behaviors and the team conversation structure. My dissertation extends and generates theory about social hierarchy and voice. It introduces the concepts of dynamic social hierarchy and the microwedge process to further our understanding of how teams and their members change over time. It also has practical implications for how team members can engage with the social hierarchy in which they are embedded, alter their teams’ processes, and help their organizations rethink entrenched assumptions about the capabilities and preferences of their members.

This research investigates the continuum of choice—unseen, unanticipated causes and consequences of consumer decisions. Three essays investigate hidden factors that influence the choices we make, subtle ways to affect choice at the moment of execution, and the overlooked signals that our choices convey (correctly or incorrectly) about us to others. Essay one investigates the perverse tendency to hope for the worst: when faced with a difficult decision (e.g., whether or not to have surgery), people can paradoxically feel subjectively better with—and even actively prefer—objectively worse but certain news (e.g., “95% chance of a disease”) over objectively better but more uncertain news (e.g., “50% chance of a disease”). This, in turn, has the potential to meaningfully change people’s subsequent choices and preferences in unexpected ways. Essay two examines a subtle intervention to change people’s decisions about engagement levels: arbitrarily grouping discrete tasks or items together as part of an apparent “set” motivates people to reach perceived completion points—or finish a pseudo-set—even in the absence of extrinsic incentives. Essay three explores the judgments people make after observing others’ choices; specifically, upon learning of someone’s choice of one option, people erroneously believe that person must dislike dissimilar options, leading to a pervasive and systematic prediction error.