Category: Academic Departments
“It’s a mandate! It’s a tax! How word choice effects Obamacare enrollment.”
The Washington Post‘s Wonkblog, in their Health Reform Watch column, recently spotlighted a study co-authored by Boston University’s Keith Marzilli Ericson on the impact of terminology on enrollment in mandated health insurance. Ericson, an assistant professor of markets, public policy, and law at the School of Management, is also co-author of a related National Bureau of Economic Research paper titled “Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange.”
As The Washington Post reports,
It was this week, one year ago, that the Affordable Care Act had its day in court—the Supreme Court, that is.
The health care law had the longest oral arguments of any case the high court has heard; supporters lined up for a seat in the courthouse four days in advance.
Obamacare’s mandated purchase of health coverage survived the challenge. It may not, however, have gotten off scot free: New research suggests the controversy over the mandate may been a blow to its credibility—and Americans’ willingness to comply.
That’s the takeaway from a new paper, authored by Boston University’s Keith Marzilli Ericson and University of Pennsylvania’s Judd Kessler that looks at the difference between describing the health law’s penalty for not carrying insurance as a “mandate” or a “tax.”
The two are, as Ericson describes it, “logically identical.” Beginning in 2014, a person who fails to purchase health insurance will pay a $95 fine, regardless of whether they consider that a tax penalty or a fee for non-compliance with the mandate.
Ericson, whose research focuses on the intersection of health insurance and behavioral economics, had an inkling that the description would matter. He has researched the Massachusetts health reform effort, where a mandate helped the state achieve the highest rate of insurance in the country.
“We expected that the mandate would encourage insurance purchase more than a tax,” he says. “We thought that it establishes a social norm, and a sense of obligation.”
Banner photo courtesy of flickr user DigiDreamGrafix.com
Controversy surrounds Best Buy’s and Yahoo’s decisions to abolish working at home
Excerpts from BU Today:
Last week, Best Buy became the second Fortune 500 Company to announce recently that employees would no longer be allowed to work from home.
Best Buy’s decision came on the heels of an announcement by Yahoo CEO Marissa Mayer that employees of the struggling internet company could no longer work remotely.
Yahoo—and now Best Buy—are bucking the corporate trend toward more workplace flexibility. A recent Census Bureau report found that 13 million people, or 9.4 percent of U.S. employees, worked at home at least one day per week in 2010, compared with 9.2 million people, or 7 percent of workers, in 1997.
BU Today spoke with Kathy Kram, Richard C. Shipley Professor in Management and a School of Management professor of organizational behavior, about the potential benefits and negative consequences of a work-from-home ban for a company like Yahoo and its employees.
BU Today: First Yahoo and now Best Buy have generated enormous controversy over their decision to no longer allow employees to work from home. Do you think other CEOs will follow?
Kram: It sounded like an unusual move, and the reactions to it, although it’s early, have been mixed. I think other CEOs will wait to see what the impact and unintended consequences are of such a policy.
What are some of the negative effects Yahoo might face by requiring all employees to work on site?
My prediction is it could have a negative effect on retention, hiring, and morale. I don’t know if the new policy would have enough benefits in terms of fostering innovation to outweigh those costs.
Younger people are much more inclined to want an integrated life, where being at the workplace doesn’t dominate their existence, and so the option to work at home is highly valued. The most negative effects would be in the early stages of people’s careers, when they are having families. Potential hires might see Yahoo as a less desirable employer.
Faculty promoted this year are from College of Arts & Sciences, the College of Engineering, and the School of Management
Excerpts from BU Today:
From mapping marketing strategies to mapping the brain, the 17 BU faculty members who have just been promoted to full professor cover a wide and compelling range of research interests.
Shuba Srinivasan, a newly minted SMG professor of marketing, views her promotion as an acknowledgment of years of hard work.
“This promotion represents a major milestone recognizing years of sustained effort on several fronts,” says Srinivasan. In addition to designing effective courses in her area of expertise—marketing analytics—Srinivasan has bridged the gap between marketing theory and practice in her research. “This promotion affirms all of this,” she says.
Faculty are selected for promotion based on the quality of the research and scholarship conducted in their classrooms and laboratories.
“Outstanding faculty are at the heart of what defines a successful research institution,” says Jean Morrison, University provost and chief academic officer. “The 17 exceptional scholars we recognize are as talented as they are diverse, each demonstrating the passion for teaching and willingness to reach across disciplines that enable Boston University each day to create new knowledge, generate new ideas, and make important new practical discoveries. From the humanities and sciences to engineering and business, all have emerged as leaders committed to excellence in their individual fields. We are excited to announce their promotion to full professor and for the great work each has in store.”
Read the full story on BU Today.
Palazzo, B. (2012). Cash holdings, risk, and expected returns. Journal of Financial Economics, 104(1), 162–185.
A recent paper by Boston University School of Management’s Berardino Palazzo, an assistant professor of finance, approaches the relationship between an organization’s savings and its vulnerability from a unique angle. His article, “Cash Holdings, Risk, and Expected Returns,” explores the link between a firm’s cash holdings and the broader, systematic risks it faces, rather than focusing narrowly on the relationship between cash holdings and the firm’s specific cash flow volatility, as previous finance studies have done. This study was recently published in the Journal of Financial Economics.
Palazzo follows a recent strand of financial accounting literature to derive a proxy for a firm’s exposure to systematic risk. His findings illustrate how such systematic risk affects firms’ optimal cash holding policies.
The Riskier the Firm, The Higher Its Savings
Palazzo points out that previous studies ignore the overwhelming likelihood that investors are risk-averse. Instead, his paper rests on the assumption that investors are not risk-neutral. “[R]iskier firms,” he writes, “have the highest hedging needs because they are more likely to experience a cash flow shortfall in those states in which they need external financing the most.” Thus, the riskier the firm, the higher its optimal savings are.
Using a data-set of US public companies, Palazzo finds:
- Changes in cash holdings from one period to the next are positively related to beginning–of–period expected equity returns; firms with a higher expected equity return will experience a larger increase in their cash balance.
- Using market size and current profitability as measures, or proxies, firms with higher expected profitability have a larger sensitivity of cash holdings to expected equity returns.
- When using a book-to-market ratio, this correlation is weaker—not a surprise, Palazzo notes, given that the book-to-market ratio is a catch-all proxy for many variables besides future profitability.
- The higher the correlation between cash flows and an aggregate shock—in other words, the riskier the firm—the more the firm hoards cash as a hedge against the risk of a future cash flow shortfall, meaning the higher the savings.
- High cash firms have more growth opportunities but lower current profitability and, as a consequence, they are less exposed to a variety of risks. However, such firms earn a larger and significant risk–adjusted return compared to firms with a low cash–to–asset ratio.
On January 29, Forbes.com featured the research of Boston University’s Kathy Kram, in the article “3 Ways to Develop Your People Without Overwhelming Yourself.” Kram is the Richard C. Shipley Professor in Management and an expert in the field of mentoring.
The article, by Michael Campbell of the Center for Creative Leadership, explores a different approach senior leaders lacking adequate time can take to mentoring and developing others. John Ryan, president of the Center for Creative Leadership, is speaking at the School on February 28.
3 Ways to Develop Your People Without Overwhelming Yourself
Senior leaders consistently report that they don’t have enough time for mentoring and developing others.
Up-and-coming leaders consistently report wanting more guidance, mentoring and face time to learn from senior leaders.
One way to address this dilemma? Developmental networks.
Instead of taking on the formal role of sole coach or mentor to those you are responsible for developing (or to meet that performance metric of “develops others”), you can help your talent build a network of relationships that will – as a whole – provide the support they need for the next role or level.
Research conducted by Kathy Kram (Boston University) and Monica Higgins (Harvard University) indicates that people who develop faster have a strong network of developmental relationships. This parallels findings from Rob Cross of the University of Virginia that shows a clear correlation between high performance and robust networks.
As someone responsible for developing others, you can help your talent learn and grow in a more strategic way. Here’s how it works.
Start by looking at current developmental relationships. Help your direct report or mentee assess what their developmental network looks like today. Explain that a developmental network is made up of individuals who have a genuine interest in your development and who are qualified to assist you in your learning. Keep in mind, developmental relationships are deliberately and clearly about learning and growth.
You can quickly get a picture of the network by asking, during the past 12 months who are the people who have taken an interest and concerted action to help you advance your career? See if they can list 5-10 and then note the type of relationship (boss, peer, direct report, family, etc.)
Students, faculty, staff, alumni, and friends interested in the topic are invited to attend a Dean’s Speaker Series event with John Ryan, president of the Center for Creative Leadership, at the School on February 28.
In the February edition of American Banker magazine, Boston University’s Mark Williams authored the commentary piece “Reduce Taxpayer Risk: Roll Back FDIC Limits.” Williams is an executive-in-residence and master lecturer at the School of Management, an expert on risk management, former Federal Reserve examiner, and author of the book Uncontrolled Risk: The Lessons of Lehman Brothers.
Reduce Taxpayer Risk: Roll Back FDIC Limits
FDIC insurance is more than just a sticker affixed to a bank door, it is a gold-plated guarantee that the government will step in and make depositors whole. Bank customers accept that they will earn a quarter of a percent or less on their deposits because they understand that their money is protected. And banks large and small benefit from this access to a cheap and dependable source of funding.
When it began, FDIC insurance provided depositors with only modest protection. The initial coverage limit in 1934 was $2,500, or less than $45,000 in today’s dollars. Six months later, the limit was raised to $5,000 (still less than $86,000 adjusted for inflation) and the risk-sharing arrangement between banks, depositors and the government was forever changed. As long as depositors stayed within set limits, they assumed zero risk. But if the dollar size of bank failures exceeded the fees collected from the banks, then the government, and taxpayers, would become the ultimate financial backstop.
In recent years, FDIC insurance has experienced mission creep. Having grown at over twice the rate of inflation, it now provides more than modest protection.
Few Americans have the means to keep deposits of $250,000 and benefit from this protection. Instead, the larger limits have tilted the risk-sharing in favor of wealthier depositors and banks themselves.
Read Williams’ full piece on American Banker.
Carroll, A.B., Lipartito, K.J., Post, J.E., Werhane, P. H., & Goodpaster, K.E. (2012). Corporate Responsibility: The American Experience, Cambridge University Press.
Since the dawn of capitalism, nations have struggled to solve “the corporate dilemma.” On one hand, corporations–capitalism’s dominant organizational form–have proven effective mechanisms for producing wealth, meeting consumer needs, and building industries that employ millions. On the other hand, they often impose costly negative externalities on workers, communities, and the natural environment. Corporate responsibility is the “third way” between self-interest and government regulation to address this dilemma.
But to whom do corporations owe a responsibility? For what? And how are those responsibilities, once defined, to be met?
These questions have haunted capitalism throughout the twentieth and twenty-first centuries, both in the US and abroad. Although today constructive corporate citizenship is a hallmark of many leading companies, no single-volume history exists of the concept and practice of corporate responsibility. In his new book, Boston University School of Management’s James E. Post, the John F. Smith Professor in Management, aims to fill this gap. Along with a team of four senior scholars and nearly a dozen research aides, Post and his co-authors have published Corporate Responsibility: The American Experience, from Cambridge University Press.
The story behind the rise of corporate citizenship
This book tells the story of how corporate responsibility emerged as both an idea and practice in the modern firm. Says Bill George, former chairman and CEO of Medtronics and current faculty member at Harvard Business School, the work is “brilliantly researched and beautifully written.” It also a offers gallery of nearly 100 pictures, most in color, featuring seminal moments in the history of corporate citizenship.
“Brilliantly researched and beautifully written“ – Bill George, Former Chairman & CEO, Medtronics; Professor, Management Practice, Harvard Business School
“Our vision, and our hope,” says Post, “was to create a compelling historical narrative of how corporate responsibility emerged as a concept and became part of the American business psyche. It is an idea that has had a significant and enduring influence on both corporate rhetoric and behavior. Now, we offer the story of how business practice has changed as our nation (and the world) evolved, social pressures built, and companies were challenged to respond and then anticipate where these transformations would lead.”
This is no whitewash of business practice, Post explains. The book candidly covers examples of labor violence, such as the slaughter of dozens of miners, women, and children in Ludlow, Colorado in the infamous Shirtwaist Triangle factory fire; sweatshop conditions in modern factories; and the recent Occupy Wall Street movement. But it also offers inspiring stories as well, such as J. Irwin Miller’s leadership in civil rights as CEO of Cummins Engine Company; Bill Norris’ commitment to radical social innovation in Minneapolis as CEO of Control Data; General Mills’ 150 years of corporate volunteerism and community philanthropy; and the role of women as crusaders, activists, and critical contributors to industrial development and family-friendly and fair workplace policies.
Boston University’s heritage in creating corporate, and social, value
New England companies have often been in the vanguard of corporate citizenship. Post explains that “locally, many Boston University alumni will remember the role of Boston businesses in school desegregation; Polaroid’s withdrawal from the South Africa of apartheid days; and Aaron Feuerstein’s bold commitment to continue paying workers who were unemployed as a result of the great Malden Mills fire in Lawrence, Massachusetts in December 1995.” Progressive human relations practices remain a hallmark of many local companies, Post points out: Ben and Jerry’s, Seventh Generation, Tom’s of Maine, and other New England-bred models of social entrepreneurship.
While belief in corporate responsibility is part of America’s cultural fabric, it is also part of Boston University’s heritage. The founding dean of the School of Management, which in 2013 celebrates its 100th year of classes, was Everett W. Lord: an activist for child labor protection, a believer in professional education, and author of The Fundamentals of Business Ethics. The book, published in 1926, challenges students and business leaders alike to view ethics and integrity as the keys to personal success. To Dean Lord and his successors, the purpose of business has always been “service to society.”
About James E. Post
James E. Post teaches in the Markets, Public Policy & Law department in the School of Management, and has been involved in conceptual and practical debates over these issues in many forums since joining the Boston University School of Management faculty in 1974. He criticized companies that engaged in questionable marketing of baby formula in the 1980s, then consulted with the World Health Organization on a pioneering international code of marketing practices. He has worked to professionalize corporate public affairs in the U.S., Europe, and Australia, has written extensively about the concept and practice of business and society, and is frequently cited in the media for his expertise. In 2010, Post received a lifetime achievement award from the Aspen Institute.
Read more about the book Corporate Responsibility: The American Experience.
From “A Hidden Markov Model for Collaborative Filtering,” MIS Quarterly, 36(4), 1329-1356.
Commercial websites are constantly suggesting new products and content to us—a mechanized, cyber-age form of the old urging, “if you liked that, you’ll love this!” In tech terms, the systems that generate these suggestions are called personalized recommender systems. But how can these computer systems account for the age-old human tendency to change our desires as time goes on?
A new study by Boston University’s Nachiketa Sahoo and co-authors Param Vir Singh and Tridas Mukhopadhyay is one of the first to address this problem.
Sahoo is an assistant professor in information systems at Boston University School of Management; Singh and Mukhopadhyay are faculty members at the David A. Tepper School of Business at Carnegie Mellon University. Their paper, “A Hidden Markov Model for Collaborative Filtering,” appearing in MIS Quarterly‘s special issue on business intelligence research, suggests using a stochastic algorithm called a hidden Markov model (HMM) to process data about user activity and preferences, rather than the common algorithms used now by most personalized recommender systems. The authors show that the HMM, a more dynamic model, allows online personalized recommender systems to account for changing user preferences.
A New Model to Address Changing User Preferences
The authors point out that dynamic, not static, user tastes and desires are integral to the consumer experience, particularly with the repeat consumption of so-called “experience goods,” such as movies, music, and news. “This causes problems for a recommender system that has been trained to identify customers’ preferences from their past ratings of products,” the authors write.
Sahoo et al. propose a customized HMM algorithm to estimate user preferences and make recommendations. They evaluate their approaches using three real-world datasets: one containing employees’ blog reading activity in a Fortune 500 IT services firm, one documenting users’ movie watching behavior in the Netflix Prize dataset, and one tracking users’ music listening behavior on last.fm. Comparing the performance of their algorithm with that of several other popular algorithms in recommender systems, the authors show that the HMM-based algorithm performs as well or better than the other algorithms, particularly as user preferences change.
Their approach is based on the intuition that older data, rather than being discounted—as they are in some current personalized recommender systems—could instead be used to learn about that user’s preference and then applied to another user. “Data from a user’s past may not be useful for making recommendation for the user now,” they argue, since “her preference has changed, but it might be useful for making a recommendation for someone who currently has that preference.”
Read more about ”A Hidden Markov Model for Collaborative Filtering.”
Banner photo is a visualization of related movies found by a computer algorithm created for Netflix Prize. Each movie is represented by a dot, and colored lines signify a similarity between pairs. Photo courtesy of flickr user chef_ele.
On January 10, Jacqueline J. and Arthur S. Bahr Professor of Management Michael Salinger‘s piece “Why the FTC Was Right Not to Sue Google” was featured in the Forbes Leadership Forum on Forbes.com. Salinger, a professor in the Markets, Public Policy & Law department, is a former Director of the Bureau of Economics at the United States Federal Trade Commission.
January 3 should go down as one of the most important and proudest moments in the history of United States antitrust enforcement. After a 19-month inquiry, the Federal Trade Commission announced that it had voted unanimously to close its investigation into the design of Google’s search results. The FTC’s decision is a victory for Google, a defeat for those who tried to persuade the FTC to use the antitrust laws to hinder rather than promote competition, and a victory for Google users. It is not easy for a law enforcement agency to devote substantial resources to an investigation and then not bring a case, but sound antitrust enforcement dictates that it must do so when, as happened here, the investigation failed to uncover evidence of a violation.
To understand what was at stake in the case, go to Google and enter a query for “New York weather.” The top result will say “Weather for New York, NY,” with a minimal four-day forecast that may be sufficient for some users. Just below that will be links to sites that provide more detailed weather information. To the extent that users find the information provided directly by Google to be sufficient, weather sites might get less traffic. But Google users are better off, and that is the key point. As FTC Chairman Jon Leibowitz explained about the FTC’s decision, the antitrust laws are supposed to protect competition, not individual competitors. And, far from being an antitrust violation, improving search results to get users the information they need is precisely the sort of competition the antitrust laws are supposed to encourage.
Read Salinger’s full piece on Forbes.com.
Banner image courtesy of flickr user Robert Scoble.
Karim, Samina (2012). “Exploring structural embeddedness of product market activities and resources within business units.“ Strategic Organization 10(4): 333-365.
The lead article in the November 2012 issue of Strategic Organization is Samina Karim‘s study “Exploring structural embeddedness of product market activities and resources within business units.”
Karim is an assistant professor in strategy and innovation at Boston University School of Management.
This paper defines “embeddedness” as the dependence on routines and coordination mechanisms within one’s own business unit, and explores the degree to which embeddedness impacts the success of product market activities (PMA). Karim focuses on which alternative better supports the longevity of a product market within the firm: 1) moving a PMA out of one unit and into another, or 2) moving the entire unit with its PMA into another unit (so that the PMA is still managed in its original organizational context, even though it is now “housed” in another, bigger unit).
Among Karim’s findings:
- If activities and resources are highly embedded in their business units, then “reconfiguring” a unit (by adding to it, trimming it down, or recombining it with another unit) may have consequences on how successful the firm is at its product market activities.
- Moving an entire unit with its PMA into another unit leads to a greater likelihood of retaining the PMA (i.e. the PMA will not be not divested or shut down).
For managers within PMA units, the practical insights of Karim’s study include:
- If managers are going to move a PMA from one unit to another, they are better off recombining the entire unit into the other than simply moving the PMA from one to the other.
- If managers are going to move a PMA from one unit to another, they should be less worried about whether the PMA was acquired or not, and more focused on whether, during the move, they can keep intact the PMA’s former unit’s routines and processes.