Faculty Publications

The MIT Sloan faculty has transformed the literature of management. Many are the authors of textbooks adopted in courses worldwide, but they are also producing works, like Lester Thurow's seminal book Building Wealth, that attract large, enthusiastic audiences from the wider reading public.

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Faculty Publications

Semantic Distances for Technology Landscape Visualization (Working paper)
Wei Lee Woon, Stuart Madnick

This paper presents a novel approach to the visualization of research domains in science and technology. The proposed methodology is based on the use of bibliometrics; i.e., analysis is conducted using information regarding trends and patterns of publication rather than the actual content. In particular, we explore the use of term co-occurrence frequencies as an indicator of semantic closeness between pairs of terms. To demonstrate the utility of this approach, a number of visualizations are generated for a collection of renewable energy related keywords. As these keywords are regarded as manifestations of the associated research topics, we contend that the proposed visualizations can be interpreted as representations of the underlying technology landscape. More >>

Capital Controls and Macroprudential Measures: What Are They Good For? (Working paper)
Kristin J. Forbes, Marcel Fratzscher, Roland Straub

Are capital controls and macroprudential measures successful in achieving their objectives? Assessing their effectiveness is complicated by selection bias and endogeneity; countries which change their capital-flow management measures (CFMs) often share specific characteristics and are responding to changes in variables that the CFMs are intended to influence. This paper addresses these challenges by using a propensity-score matching methodology. We also create a new database with detailed information on weekly changes in controls on capital inflows, capital outflows, and macroprudential measures from 2009 to 2011 for 60 countries. Results show that macroprudential measures can significantly reduce some measures of financial fragility. Most CFMs do not significantly affect other key targets, however, such as exchange rates, capital flows, interest-rate differentials, inflation, equity indices, and different volatilities. One exception is that removing controls on capital outflows may reduce real exchange rate appreciation. Therefore, certain CFMs can be effective in accomplishing specific goals -- but most popular measures are not "good for" accomplishing their stated aims. More >>

The Components of Private Equity Performance: Implications for Portfolio Choice (Working paper)
William B. Kinlaw, Mark Kritzman, Jason Mao

We use a proprietary database of private equity returns to measure the excess return of private equity over public equity and to partition it into two components: an asset class alpha and compensation for illiquidity. Our evidence suggests that private equity managers, as a group, generate alpha by anticipating the relative performance of economic sectors. If we assume that manager-specific alpha is fully diluted across a broad universe of private equity managers, we can interpret the balance of excess return as a premium for illiquidity. This result suggests that investors can capture the asset class alpha of private equity by using liquid assets such as ETFs to match the sector weights of private equity investors. This decomposition of private equity performance has important implications for portfolio choice, which we explore in this paper. More >>

Ideas for the Future of the IS Field (Working paper)
Gordon B. Davis, Paul Gray, Stuart Madnick, Jay F. Nunamaker Jr., Ralph Sprague, Andrew B. Whinston

Information Systems as a field of intellectual inquiry is now approximately 50 years old. It has many achievements and extensive research to its credit and has established a large group of researchers and experts worldwide. The field has changed and changed and changed again over the last half century. The question addressed in this inaugural issue paper is: Where does IS go from here? This paper presents the views of six of the 'fathers of the field' about its directions in the years ahead. Each coauthor presents two ideas about the future. The topics covered includes continuing support of the work of organizations, emerging technologies, new ways of communicating, expanding the ways IS performs research, expanding its vision both of what IS is and of its impact, its role as a resource, its model of the IS professional and its graduates, and its staying on top of new technologies and new areas of inquiry. More >>

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (Book)
Erik Brynjolfsson, Andrew McAfee

The Second Machine Age debuted at number nine on The New York Times hardcover non-fiction bestseller list. But it should surprise no one that people are reading. The book's subject -- how machines and computers are advancing at an exponential rate and what that means for society and the American economy -- is all encompassing. Its findings are relevant not just for business, but also for government, workers, and families. Whether this new future is a good one or a bad one is up to us, the authors argue. More >>

The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits (Book)
Zeynep Ton

In The Good Jobs Strategy, MIT Sloan adjunct associate professor Zeynep Ton delves into data and more than a decade of research about retail and service companies. She argues that even in low-cost businesses, good jobs aren't only good for employees, but for customers and employers as well. While bringing the human pain of bad jobs -- low wages, unpredictable schedules, low self-worth, and a vicious cycle of poverty -- to life, Ton anchors the book with research, case studies, and a framework for implementing the Good Jobs Strategy. That's how a book ostensibly about labor instead takes up business decision-making, such as how offering fewer products or operating with slack in staffing levels can benefit a company. More >>

Disciplined Entrepreneurship: 24 Steps to a Successful Startup (Book)
Bill Aulet

A successful startup is an enigma, at once simple ("I should have thought of that!"), and mysterious ("How did they make that work?"). But the secret may be out. Entrepreneurship is not magic. It is work. It is a process. And a process can be taught. That's the argument in Disciplined Entrepreneurship, a new book by Bill Aulet, the managing director of the Martin Trust Center for MIT Entrepreneurship. Aulet breaks down the entrepreneurial process, presenting it in a 24-step framework, drilling readers on the nuts and bolts from market segmentation through charting a competitive position to developing a product plan. More >>

X-Teams: How to Build Teams That Lead, Innovate and Succeed (Book)
Deborah Ancona, Henrik Bresman

The X-Team is much more than just the latest B-school theory -- it's a well-established, but often hidden, reality that's now being highlighted by this new book. Challenging the traditional notions of what makes a successful team, the authors' years of research support a new way of doing things. This new kind of team, dubbed X-Teams, has team spirit, but the team also projects upwards and outwards. The group establishes cooperative relationships, seeks out key information from other teams and outside sources, evangelizes the team's mission to key stakeholders, and actively pursues support from management. The poorest-performing teams, on the other hand, focused inward. The book explains that X-teams not only are able to adapt in ways that traditional teams aren't, but that they actually improve an organization's ability to produce creative ideas and execute them -- increasing the entrepreneurial and innovative capacity within the firm. More >>

Productivity Effects of Information Diffusion in Networks (Working paper)
Sinan Aral, Erik Brynjolfsson, Marshall Van Alstyne

We examine the drivers of diffusion of information through organizations and the effects on performance. In particular, we ask: What predicts the likelihood of an individual becoming aware of a strategic piece of information, or becoming aware of it sooner? Do different types of information exhibit different diffusion patterns, and do different characteristics of social structure, relationships and individuals in turn affect access to different kinds of information? Does better access to information predict an individual's ability to complete projects or generate revenue? More >>

Coordination of Supply Chain Networks and the Emergence of Mini-Maestros (Working paper)
Pilar Ester Arroyo-Lopez

Companies recognize international sourcing as a business practice useful to reduce product prices, deal with supply shortages and identify new competitive suppliers. Effective international sourcing implies the integration and coordination of materials, processes, information flows and multiple producers at each buying location. Many companies do not have the capabilities or the willingness to develop and manage such sourcing networks; therefore, other entities have assumed these responsibilities. These coordinators are in charge of the integration of many suppliers to develop full-package production, serve as liaisons between suppliers' capabilities and market demands, and provide the technical and financial support to sustain the sourcing network. The review of the industrial clustering and global supply chain literature allowed the identification of such coordinators in Mexico. The emergence and profile of these coordinators is associated with corporate strategies of multinational firms, the efforts of industrial groups, and the governmental policies for the development of dynamic industrial regions. This paper analyzes the characteristics of four coordination models identified in the Mexican context, focusing on their contribution to the participation and upgrading of national suppliers. The profile of the coordinator firm, the type of relations that this firm sustains with producers and the support offered to suppliers is also discussed. A particular emphasis is given to the fourth model where a third party, a knowledge and service company, assumes the coordinator role. The interest on this model is due to its novelty, the flexibility of the sourcing network, and the potential impact on regional development that could result from the intervention of a neutral third party as coordinator of the activities of multiple local and specialized suppliers. More >>

Breaking the Mold (Book)
Lotte Bailyn

In this second edition of Breaking the Mold, MIT Sloan Professor Lotte Bailyn maintains the long-standing separation between work and family life is an outdated concept. She contends that unless American business radically rethinks some of its basic assumptions about work, time, and career paths, both employee and employer will experience setbacks in today's intensely competitive business environment. Bailyn shows how the structure and culture of corporate life could be changed to integrate all of an employee's obligations and interests. And she illustrates the benefits that such change can have for the organization itself. More >>

Information and Transformation at Swiss Re: Maximizing Economic Value (Working paper)
Cynthia Beath and Jeanne W. Ross

In 2007 Swiss Re was striving to maximize economic value, a metric that would allow the company to assess its performance over time despite the volatility of the reinsurance industry. This case describes Swiss Re's journey from a regional to a global firm and highlights the role of information technology in enabling the standardization and sharing of the firm's global processes and data. More >>

Chevron: Outsourcing Commodity Processes in a Commodity Business (Working paper)
Cynthia M. Beath, Jeanne W. Ross

Faced with a large number of impending retirements, Chevron intended to downsize by outsourcing commodity services. In 2004 management recognized that taking advantage of the growing number of services available on the market required new competencies. This case describes how Chevron learned to identify appropriate outsourcing opportunities and how the IT unit--and managers of IT-enabled processes--incrementally built skills around architecture, integration, and vendor management to enable the company to benefit from outsourcing opportunities More >>

Bankruptcy and the Collateral Channel (Published paper)
Nittai Bergman, et al.

Do bankrupt firms impose negative externalities on their non-bankrupt competitors? We propose and analyze a collateral channel in which a firm's bankruptcy reduces collateral values of other industry participants, thereby increasing the cost of external debt finance industry wide. More >>

Credit Traps (Forthcoming)
Nittai Bergman, et al.

This paper studies the limitations of monetary policy in stimulating credit and investment. We show that, under certain circumstances, unconventional monetary policies fail in that liquidity injections by the central bank into the banking sector are hoarded and not lent out. More >>

Vintage Capital and Creditor Protection (Published paper)
Nittai Bergman, et al.

We provide novel evidence linking the level of creditor protection provided by law to the degree of usage of technologically older, vintage capital in the airline industry. Using a panel of aircraft-level data around the world, we find that better creditor rights are associated with both aircraft of a younger vintage and newer technology as well as firms with larger aircraft fleets. More >>

The Longer Tail: The Changing Shape of Amazon's Sales Distribution Curve (Working paper)
Erik Brynjolfsson, et. al.

Internet consumers derive significant surplus from increased product variety, and in particular, the "Long Tail" of niche products that can be found on the Internet at retailers like Amazon.com. The authors' analyses suggest that by 2008, niche books account for 36.7 percent of Amazon's sales and the consumer surplus generated by niche books has increased at least five fold from 2000 to 2008. They argue that this increase is consistent with the presence of "secondary" supply-and-demand-side effects driving the growth of the Long Tail online. More >>

Innovation Incentives for Information Goods (Working paper)
Erik Brynjolfsson, et. al.

Innovations can often be targeted to be more valuable for some consumers than others. This is especially true for digital information goods. We show that the traditional price system not only results in significant deadweight loss, but also provides incorrect incentives to the creators of these innovations. In contrast, we propose and analyze a profit-maximizing mechanism for bundles of digital goods which is more efficient and more accurately provides innovation incentives for information goods. More >>

The Outside-in Corporation (Book)
Barbara E. Bund

This book presents a new approach that enables business people to design and operate their businesses (both strategies and actions) based firmly on a customer perspective -- in other words, from the outside in. The approach works despite the real-world challenge that there is never as much available information about customers as business people want and need. It leads to marketplace strategies with a clear, explicit customer reason for every marketplace action -- strategies with improved probabilities of success, that can be communicated throughout an organization and then understood and implemented by employees at all levels, and that can be adapted effectively as conditions change. More >>

Dueling Stakeholders and Dual-Hatted Systems Engineers: Engineering Challenges, Capabilities and Skills in Government Infrastructure Technology Projects (Working paper)
John Carroll, et al.

Engineering projects that support government enterprises face substantial challenges due to demands from diverse stakeholders and rapidly-changing technologies. In this paper, we present findings from analysis of five case studies of systems engineering projects for large government enterprises. We focus on what can be learned from systems engineers, their essential role, and their engineering practices. More >>

Gender, Race, and Meritocracy in Organizational Careers (Published paper)
Emilio J. Castilla

This study helps to fill a significant gap in the literature on organizations and inequality by investigating the central role of merit-based reward systems in shaping gender and racial disparities in wages and promotions. More >>

Dynamic Analysis in the Social Sciences (Book)
Emilio J. Castilla

The study of social dynamics using quantitative methodology is complex and calls for cutting-edge technical and methodological approaches in social science research. This book presents the existing statistical models and methods available for understanding social change over time. It provides step-by-step instructions for designing and conducting longitudinal research, with special focus on the longitudinal analysis of both quantitative outcomes (for the modeling of change in continuous variables) and qualitative outcomes (for the modeling of events occurring over time). More >>

Generalized Transform Analysis of Affine Processes and Applications in Finance (Published paper)
Hui Chen

Non-linearity is an important consideration in many problems of finance and economics, such as pricing securities and solving equilibrium models. This paper provides analytical treatment of a general class of nonlinear transforms for processes with tractable conditional characteristic functions, which extends existing results on characteristic function based transforms to a substantially wider class of nonlinear functions while maintaining low dimensionality by avoiding the need to compute the density function. More >>

Macroeconomic Conditions and the Puzzles of Credit Spreads and Capital Structure (Published paper)
Hui Chen

I build a dynamic capital structure model that demonstrates how business-cycle variations in expected growth rates, economic uncertainty, and risk premia influence firms' financing and default policies. More >>

Market Timing, Investment, and Risk Management (Published paper)
Hui Chen, et al.

Firms face uncertain financing conditions, which can be quite severe as exemplified by the recent financial crisis. We capture the firm's precautionary cash hoarding and market timing motives in a tractable model of dynamic corporate financial management when external financing conditions are stochastic. Firms value financial slack and build cash reserves to mitigate financial constraints. The finitely-lived favorable financing condition induces them to rationally time the equity market. More >>

Rare Disasters and Risk Sharing with Heterogeneous Beliefs (Forthcoming)
Hui Chen, et al.

Risks of rare economic disasters can have large impact on asset prices. At the same time, difficulty in inference regarding both the likelihood and severity of disasters as well as agency problems can effectively lead to signiffcant disagreements among investors about disaster risk. More >>

A Unified Theory of Tobin's Q, Corporate Investment, Financing, and Risk Management (Published paper)
Hui Chen, et al.

We propose a model of dynamic corporate investment, financing, and risk management for a financially constrained firm. The model highlights the central importance of the endogenous marginal value of liquidity (cash and credit line) for corporate decisions. More >>

Entrepreneurial Finance and Nondiversifiable Risk (Published paper)
Hui Chen, et al.

We develop a dynamic incomplete-markets model of entrepreneurial firms, and demonstrate the implications of non-diversifiable risks for entrepreneurs' interdependent consumption, portfolio allocation, financing, investment, and business exit decisions. More >>

Scenarios of Greenhouse Gas Emissions and Atmospheric Concentrations; and Review of Integrated Scenario Development and Application (Published paper)
L. Clarke, J. Edmonds, H. Jacoby, H. Pitcher, J. Reilly, R. Richels

This and a companion report constitute one of twenty-one Synthesis and Assessment Products called for in the Strategic Planfor the U.S. Climate Change Science Program. These studies are structured to provide high-level, integrated research results on important science issues with a particular focus on questions raised by decision-makers on dimensions of climate change directly relevant to the U.S. More >>

The objective value of subjective value: A multiround negotiation study (Working paper)
Jared R. Curhan, Hillary Anger Elfenbein, Noah Eisenkraft

A 2-round negotiation study provided evidence that positive feelings resulting from one negotiation can be economically rewarding in a second negotiation. More >>

Staying Power: Six Enduring Principles for Managing Strategy and Innovation in an Uncertain World (Book)
Michael A. Cusumano

Cusumano explains the six critical principals that put today's top companies at the front of the line-and kept them there. Drawing on real-life examples, he illustrates how the best companies put these principles into practice, identifying precisely how these ideas have lead to concrete success time after time. More >>

Cooperation Without Coordination: Influence Dynamics and the Emergence of Synchrony in Inter-Organizational Networks (Working paper)
Jason P. Davis

This paper explores the emergence of synchrony in cooperative inter-organizational networks. While some research suggests that synchronizing organizational actions like product releases is a form of collective behavior that generates advantages for organizations, most existing network theory focuses on dyads and not the larger organizational groups where networked cooperation is relevant. More >>

Catalyst Code: The Strategies Behind the World's Most Dynamic Companies (Book)
David S. Evans, Richard Schmalensee

Catalysts are the new business powerbrokers. Fueled by the increasing interdependence of global markets, technology, and consumers, catalysts are reshaping entire industries as they mobilize two or more distinct customer groups around a common platform to create value and drive profits. Some of the world's most important businesses -- from Lloyd's of London and Hearst Newspapers to Microsoft and Google -- have made profits by simultaneously bringing together distinct customer groups who need each other onto the same platform. Their successes demonstrate that, to succeed, catalysts must defy traditional business and economic wisdom when designing business models, pricing schemes, and organizational incentives. Catalyst Code shows executives and entrepreneurs how to innovate and profit by detailing new economic theory and business history, as well as through extensive interviews with established and emerging catalysts. More >>

Missing Links: Referrer Behavior and Job Segregation (Working paper)
Roberto M. Fernandez, et. al.

How does referral recruitment contribute to job segregation, and what can organizations do about it? Current theory on network effects in the labor market emphasizes the job-seeker perspective, focusing on the segregated nature of job-seekers' information and contact networks, and leaves little role for organizational influence. But employee referrals are necessarily initiated from within a firm by referrers. We argue that referrer behavior is the missing link that can help organizations manage the segregating effects of referring. More >>

Tipping Points: Referral Homophily and Job Segregation (Working paper)
Roberto M. Fernandez, et. al.

How does referral recruitment contribute to job segregation? Current theory emphasizes the segregated nature of job-seekers' information and contact networks. The job-seeker perspective characterizing most research on network effects in the labor market leaves little role for organizational influence. But referrals are necessarily initiated within a firm by referrers. More >>

From Metaphors to Mechanisms: Gender Sorting In(to) an Organizational Hierarchy (Working paper)
Roberto M. Fernandez, et. al.

Numerous studies have examined patterns of gender inequality in organizational advancement, with some showing results indicative of "glass ceilings," where gender disparities are strong at the upper reaches of the organization, while others suggest "sticky floors," where the gender differences in advancement occur at the lower levels of the organization. More >>

Creating Connections For the Disadvantaged: Networks and Labor Market Intermediaries at the Hiring Interface (Working paper)
Roberto M. Fernandez

Scholars interested in race inequality have been particularly attracted to network accounts of the stratifying effects of social networks in the labor market. A recurring theme in policy-oriented research on poverty is that institutional connections can be engineered to create connections between job seekers and employers in ways that parallel social network processes. More >>

Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act (Working paper)
Kristin J. Forbes, et al.

This paper analyzes the impact on firm behavior of the Homeland Investment Act of 2004, which provided a one-time tax holiday for the repatriation of foreign earnings by U.S. multinationals. The analysis controls for endogeneity and omitted variable bias by using instruments that identify the firms likely to receive the largest tax benefits from the holiday. More >>

Why Do Foreigners Invest in the United States? (Working paper)
Kristin J. Forbes

Why are foreigners willing to invest almost $2 trillion per year in the United States? The answer affects if the existing pattern of global imbalances can persist and if the United States can continue to finance its current account deficit without a major change in asset prices and returns. More >>

System Dynamics--the next fifty years (Published paper)
Jay W. Forrester

Fifty years after its creation, I review the current status of the field of system dynamics and assess prospects for the next fifty. I focus on the challenges the field must face if it is to realize its potential. The first 50 years of system dynamics have established an introduction to the field. We have shown the importance of achieving a better understanding of complex systems in nature and human affairs. Now, the field is on a plateau ready to launch the next great thrust forward. More >>

System Dynamics--a personal view of the first fifty years (Published paper)
Jay W. Forrester

I present a personal recollection of the history of system dynamics and observations about its present state. The article treats the history in two parts: first, my personal background and how all the threads came together to initiate the field of system dynamics; and second, the historical development of the cornerstone projects that shaped the field. These early works include industrial dynamics, urban dynamics, world dynamics, and the national economic model. The paper continues with an assessment of the present condition of the field. A companion paper (System Dynamics--The Next Fifty Years, also in this issue of System Dynamics Review), highlights challenges for the future. More >>

To Wave Or Not To Wave? Order Release Policies for Warehouses with an Automated Sorter (Working paper)
Jeremie Gallien and Theophane Weber

Wave-based release policies are prevalent in warehouses with an automated sorter, and take different forms depending on how much waves overlap and whether the sorter is split for operating purposes. Waveless release is emerging as an alternative policy adopted by an increasing number of firms. While that new policy presents several advantages relative to waves, it also involves the possibility of gridlock at the sorter. More >>

Implementing Supply Routing Optimization in a Make-to-Order Manufacturing Network (Working paper)
Jeremie Gallien, John Foreman, et al.

Dell's supply chain for desktops involves Asian vendors shipping components by sea to several U.S. plants. While suppliers are responsible for shipping enough inventory, Dell can re-route and expedite their shipments while in transit and also transfer on-hand inventory in order to balance supply across sites. This paper describes the development, implementation and impact of the process and optimization-based control system now used by Dell to address this supply routing challenge for its US-bound monitors. This new methodology is estimated to have reduced Dell's inventory re-positioning costs for monitors by about 60 percent. More >>

Order Release Control for an Online Retailing Warehouse (Working paper)
Jeremie Gallien and Theophane Weber

Working in collaboration with a large online retailer, our goal is to develop an operational solution to the problem of order release control for its highest volume and most automated warehouse pick-to-ship process. This problem consists of dynamically varying the rate at which new picking orders are released into this process in order to achieve a high throughput while mitigating the risk of congestion-induced collapse (gridlock). We describe a queueing model of this complex process with validated predictive accuracy against actual historical data, and develop a numerical approximate solution method for an associated constrained dynamic program, which we implemented to compute our proposed policy. Simulation experiments suggest that an implementation of our computed policy along with an increase in staffed packers by 25 percent could increase process throughput by 10 percent. They also shed light on why our proposed policy outperforms other simple release policies such as constant release rate and CONWIPin this setting, in terms of both steady-state throughput and robustness to transient disruptions. More >>

Enhancing Analogical Reasoning and Performance in Strategic Decision Making (Working paper)
M. Shayne Gary, et al.

Strategy scholars have recently started theorizing about the impact of and the extent to which managers reason by analogies drawn either from their own past experience or from vicarious knowledge about seemingly similar situations. More >>

Inside Organizations: Pricing, Politics, and Path Dependence (Working paper)
Robert Gibbons

When economists have considered organizations, much attention has focused on the boundary of the firm, rather than its internal structures and processes. In contrast, this essay sketches three approaches to the economic theory of internal organization- one substantially developed, another rapidly emerging, and a third on the horizon. More >>

Direct Energy: Evolving a New Role for IT (Working paper)
Cyrus F. Gibson

In 2005 top management of Direct Energy, a rapidly growing energy utility, distribution and trading company, recruited a new CIO to be a member of the executive team. The case describes three years of significant change in the role of IT and provides lessons in mutual IT-business learning and relationship building for businesses in transition to greater dependency on IT as a competitive resource. Of particular relevance is the approach taken by top management in setting priorities and introducing change, including new IT governance mechanisms and assistance to businesses to gain credibility and influence. More >>

Integration and Information: Markets and Hierarchies Revisited (Working paper)
Robert Gibbons, Richard Holden, and Michael Powell

We analyze a rational-expectations model of price formation in an intermediate-good market under uncertainty. There is a continuum of dyads, each consisting of an upstream party and downstream party. Both parties can make specific investments at private cost, and there is a machine that either party can own. As in property rights models, different ownership structures create different incentives for the parties' investments. More >>

Rational-Expectations Equilibrium in Intermediate Good Markets (Working paper)
Robert Gibbons, Richard Holden and Michael Powell

We analyze a rational-expectations model of information acquisition and price formation in an intermediate-good market: prices and net supply are non-negative, there are no noise traders, and the intermediate good has multiple potential uses. Several of our results differ from the classic Grossman-Stiglitz approach. For example, the price mechanism is more informative at high and low prices and potentially uninformative at middle prices. More >>

Firms In Markets Under Uncertainty (Working paper)
Robert Gibbons, Richard T. Holden and Michael Powell

We analyze a rational-expectations model of price formation in an intermediate- good market under uncertainty. There is a continuum of dyads, each consisting of an upstream party and a downstream party. More >>

Snow and Leverage (Published paper)
Xavier Giroud, et al.

Based on a sample of highly leveraged Austrian ski hotels undergoing debt restructurings, we show that reducing a debt overhang leads to a significant improvement in operating performance. More >>

System Dynamics Modeling of Humanitarian Relief Operations (Working paper)
Paulo Goncalves

Humanitarian organizations face increased challenges scaling capacity, improving operational efficiency, reducing staff turnover, improving institutional learning, satisfying increasingly demanding donors, and operating in increasingly challenging environments, with poor or inexistent infrastructure, high demand uncertainty and little time to prepare and respond. To address such challenges, managers in humanitarian organizations must understand the complexity that characterizes humanitarian relief efforts to learn how to design and manage complex relief operations. More >>

Behavior Modes, Pathways and Overall Trajectories: Eigenvector and Eigenvalue Analysis of Dynamic Systems (Published paper)
Paulo Goncalves

One of the most fundamental principles in system dynamics is the premise that the structure of the system will generate its behavior. Such philosophical position has fostered the development of a number of formal methods aimed at understanding the causes of model behavior. More >>

Dealer Hoarding, Sales Push and Seed Returns: Characterizing the Interdependency between Dealer Incentives and Salesforce Management (Working paper)
Paulo Goncalves

Hybrid seed suppliers experience excessive and costly rates of seed returns from dealers, who order in advance of grower demand realization and may return unsold seeds at the end of the season. Sales representatives know they must carefully gather information on grower demand for seed types and quantities to improve their demand forecast and better position their seeds. More >>

Potential Land Use Implications of a Global Biofuels Industry (Published paper)
Angelo Gurgel, John M. Reilly, Sergey Paltsev

In this paper we investigate the potential production and implications of a global biofuels industry. We develop alternative approaches to consistently introduce land as an economic factor input and in physical terms into a computable general equilibrium framework. The approach allows us to parameterize biomass production consistent with agro-engineering information on yields and a "second generation" cellulosic biomass conversion technology. We explicitly model land conversion from natural areas to agricultural use in two different ways: in one approach we introduced a land supply elasticity based on observed land supply responses and in the other approach we considered only the direct cost of conversion. We estimate biofuels production at the end of the century could reach 221 to 267 EJ in a reference scenario and 319 to 368 EJ under a global effort to mitigate greenhouse gas emissions. More >>

Invisible Engines: How Software Platforms Drive Innovation and Transform Industries (Book)
Andrei Hagiu, David S. Evans, Richard Schmalensee

As they wait in long lines to buy the latest game console, few shoppers realize that the most important element of that Xbox (as well as of their cell phones, PDAs, web-based software such as eBay, and far more) is something they can't even see. Invisible Engines tells the important story of how invisible but powerful software platforms are driving not only today's technology, but tomorrow's innovations and economy. The book recounts the growth, development and marketing of software platforms, which have turned devices such as Sony's PlayStation and Apple's iPod into household names and tools for everyday life. Because software platforms can be used by independent companies or developers to offer a wide range of products and services, the authors note, they function as "invisible engines that have created, touched, or transformed nearly every major industry for the past quarter century." More >>

The Delta Model: Reinventing Your Business Strategy (Book)
Arnoldo C. Hax

Strategy is the most central issue in management. It has to do with defining the purpose of an organization, understanding the market in which it operates and the capabilities the firm possesses, and putting together a winning plan. There are many influential frameworks to help managers undertake a systematic reflection on this issue. The most dominant approaches are Michael Porter's "Competitive Strategy" and the "Resource-Based View of the Firm," popularized by Gary Hamel and C.K. Prahalad. Arnoldo Hax argues there are fundamental drawbacks in the underlying hypotheses of these approaches in that they define strategy as a way to achieve sustainable competitive advantage. More >>

A Fire Sale without Fire: An Explanation of Labor-Intensive FDI in China (Working paper)
Yasheng Huang, et al.

Using a large firm-level panel dataset from the Chinese National Bureau of Statistics, we examine the effect of financial distortions on FDI inflows in China's labor-intensive industries. Following Whited and Wu (2006), we estimate the investment Euler equation and construct a financing constraint index for each firm. We find that among domestic firms, the financing constraint index is highest for private firms and lowest for state-owned firms. More >>

Is Entrepreneurship Missing in Shanghai? (Working paper)
Yasheng Huang, Yi Qian

Using a unique census dataset on all industrial firms (with more than 5 million yuan in sales), we document a phenomenon of missing entrepreneurship in Shanghai. Entrepreneurship is defined as private, new entrants in our paper. Specifically, in terms of business density, the size of employment and a host of other measures, the relative ranking of Shanghai was always near the bottom in the country. All these empirical findings took place against a backdrop of the presumably huge locational advantages of Shanghai -- the substantial human capital, rapid GDP growth, and a long and stellar -- but pre-communist -- history of entrepreneurship. We propose a hypothesis that Shanghai adopted a particularly rigorous version of industrial policy model of economic development and this industrial policy proclivity may have led to the atrophy of entrepreneurship in Shanghai. More >>

Does Ethnicity Pay? Evidence from Overseas Chinese FDI in China (Working paper)
Yasheng Huang, Li Jin, Yi Qian

Using a comprehensive sample of all FDI firms in China, we explore the question whether ethnicity enhances operating performance. While there has been a sizable theoretical literature studying ethnicity and foreign investments, the prediction of the impact of ethnicity on firm profitability is far from clear. More >>

Can We Exploit Collective Intelligence for Collaborative Deliberation? The Case of the Climate Change Collaboratorium (Working paper)
Luca Iandoli, Mark Klein, Giuseppe Zollo

Current open-source/peer-production technologies, such as forums, wikis and blogs, have enabled an unprecedented explosion of global knowledge sharing, but appear to be less successful at enabling collaborative deliberation (i.e. the systematic enumeration, analysis, and selection of solution alternatives) around the complex and controversial challenges, such as climate change, now facing humankind. In this paper, we present a new kind of collaboration platform, based on argumentation theory, which is aimed at addressing this weakness. We present the rationale for its design as well as preliminary results obtained from a first field test with a moderate-sized (200 member) user community. More >>

Climate Change Taxes and Energy Efficiency in Japan (Published paper)
Satoru Kasahara, Sergey Paltsev, John Reilly, Henry Jacoby, A. Ellerman

In 2003 Japan proposed a Climate Change Tax to reduce its CO2 emissions to the level required by the Kyoto Protocol. If implemented, the tax would be levied on fossil fuel use and the revenue distributed to encourage the purchase of energy efficient equipment. Analysis using the MIT Emissions Prediction and Policy Analysis (EPPA) model shows that this policy is unlikely to bring Japan into compliance with its Kyoto target unless the subsidy encourages improvement in energy intensity well beyond Japan's recent historical experience. Similar demand-management programs in the US, where there has been extensive experience, have not been nearly as effective as they would need to be to achieve energy efficiency goals of the proposal. The Tax proposal also calls for limits on international emission trading. We find that this limit substantially affects costs of compliance. More >>

Do Short Sellers Front-Run Insider Sales? (Working paper)
Mozaffar Khan, Hai Lu

We find evidence of significant increases in short sales immediately prior to large insider sales, consistent with information leakage and front-running. We examine a number of alternative explanations that the increase in short sales is driven by public information about the firm or about the impending insider sale, but the evidence is inconsistent with these explanations. The result has implications for the enforcement of insider information regulations, and for timely disclosure of short sales information by stock exchanges. More >>

What Can We Conclude From Common Tests of Accrual Mispricing? (Working paper)
Mozaffar Khan

Mispricing and risk have both been suggested as explanations for the cross-sectional relation between stock returns and firm characteristics such as accruals. As emphasized by Ferson and Harvey (1998) and Berk, Green and Naik (1999), it is difficult to evaluate these competing explanations without explicitly modelling the relation between risk and firm characteristics, if risk is not independent of firm characteristics. Drawing on theory and empirical evidence, this paper models systematic risk as a function of accruals, and accruals as mean-reverting. More >>

Handling Resource Oscillations Through Selective Misinformation (Working paper)
Mark Klein, Richard Metzler, Yaneer Bar-Yam

When resource consumers select among competing providers based on delayed information, inefficient oscillations in resource utilization can emerge. This paper describes an approach, based on selective stochastic resource request rejection, for dealing with this emergent dysfunction. More >>

Supporting Collaborative Deliberation Using a Large-Scale Argumentation System: The MIT Collaboratorium (Working paper)
Mark Klein, Luca Iandoli

In this paper, we present a new kind of collaboration platform, based on the large-scale application of argumentation theory, aimed at addressing this weakness. We present its rationale and design, as well as preliminary results obtained from a field test with a moderate-sized (220 member) user community. More >>

The MIT Collaboratorium: Enabling Effective Large-Scale Deliberation for Complex Problems (Working paper)
Mark Klein

While current online discussion tools such as email, chat, wikis, and web forums have been enormously successful at enabling unprecedented global knowledge sharing, they face significant limitations from the perspective of enabling effective large-scale deliberation around complex and controversial issues such as climate change. This paper describes the design and rationale of a system, called the Collaboratorium, which was developed to transcend these limitations by supporting large-scale on-line argumentation. More >>

Displacement Risk and Asset Returns (Forthcoming)
Leonid Kogan, et al.

We study asset-pricing implications of innovation in a general-equilibrium overlapping- generations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. More >>

Mutual Fund Trading Pressure: Firm-Level Stock Price Impact and Timing of SEOs (Forthcoming)
Leonid Kogan, et al.

We use price pressure resulting from purchases by mutual funds with large capital inflows to identify overvalued equity. This is a relatively exogenous overvaluation indicator as it is associated with who is buying -- buyers with excess liquidity -- rather than what is being purchased. More >>

Economic Activity of Firms and Asset Prices (Forthcoming)
Leonid Kogan, et al.

In this paper we survey the recent research on the fundamental determinants of stock returns. These studies explore how firms' systematic risk and their investment and production decisions are jointly determined in equilibrium More >>

Social Learning in Social Networks (Working paper)
PJ Lamberson

This paper analyzes a model of social learning in a social network. Agents decide whether or not to adopt a new technology with unknown payoffs based on their prior beliefs and the experiences of their neighbors in the network. More >>

Linking Network Structure and Diffusion Through Stochastic Dominance (Working paper)
P.J. Lamberson

Recent research identifies stochastic dominance as critical for understanding the relationship between network structure and diffusion. More >>

Secrets of the Academy: The Drivers of University Endowment Success (Working paper)
Josh Lerner, Antoinette Schoar, and Jialan Wang

In this paper, we have sought to understand what has been the performance of university endowments, and what drives the observed pattern of performance. More >>

Provably Near-Optimal LP-Based Policies for Revenue Management in Systems with Reusable Resources (Working paper)
Retsef Levi and Ana Radovanovic

We use an extremely simple linear program (LP) that provides an upper bound on the best achievable expected long-run revenue rate. The optimal solution of the LP is used to devise a conceptually simple control policy that we call the class selection policy (CSP). More >>

Securities Trading of Concepts (Published paper)
Andrew W. Lo, et al.

Market prices are well known to efficiently collect and aggregate diverse information regarding the economic value of goods, services, and firms, particularly when trading financial securities. We propose a novel application of the price discovery mechanism in the context of marketing research: to use pseudo-securities markets to measure consumer preferences for new product concepts. More >>

Measuring Systemic Risk in the Finance and Insurance Sectors (Working paper)
Andrew Lo, et al.

A significant contributing factor to the Financial Crisis of 2007-2009 was the apparent interconnectedness among hedge funds, banks, brokers, and insurance companies, which amplified shocks into systemic events. More >>

Systemic Risk and the Refinancing Ratchet Effect (Working paper)
Andrew Lo, Robert C. Merton, Amir Khandani.

The confluence of three trends in the U.S. residential housing market-rising home prices, declining interest rates, and near-frictionless refinancing opportunities-led to vastly increased systemic risk in the financial system. More >>

What Happened to the Quants in August 2007 (Published paper)
Amir E. Khandani and Andrew W. Lo

During the week of August 6, 2007, a number of quantitative long/short equity hedge funds experienced unprecedented losses. Based on TASS hedge-fund data and simulations of a specific long/short equity strategy, we hypothesize that the losses were initiated by the rapid "unwind" of one or more sizable quantitative equity market-neutral portfolios. Given the speed and price impact with which this occurred, it was likely the result of a forced liquidation by a multi-strategy fund or proprietary-trading desk, possibly due to a margin call or a risk reduction. These initial losses then put pressure on a broader set of long/short and long-only equity portfolios, causing further losses by triggering stop/loss and de-leveraging policies. More >>

The Promise and Perils of Private Voluntary Regulation: Labor Standards and Work Organization in Two Mexican Garment Factories (Working paper)
Richard M. Locke, et al.

What role can private voluntary regulation play in improving labor standards and working conditions in global supply chain factories? How does this system relate to and interact with other systems of labor regulation and work organization? More >>

Using Semantic Web Tools for Context Interchange (Working paper)
Mihai Lupu, Stuart E. Madnick

The COntext INterchange Strategy (COIN) is an approach to solving the problem of interoperability of semantically heterogeneous data sources through context mediation. The existing implementation of COIN uses its own notation and syntax for representing ontologies. More recently, the OWL Web Ontology Language is becoming established as the W3C recommended ontology language. A bridge is needed between these two areas and an explanation on how each of the two approaches can learn from each other. We propose the use of the COIN strategy to solve context disparity and ontology interoperability problems in the emerging Semantic Web both at the ontology level and at the data level. In this work we showcase how the problems that arise from context-dependant representation of facts can be mitigated by Semantic Web techniques, as tools of the conceptual framework developed over 15 years of COIN research. More >>

Preventing Accidents and Building a Culture of Safety: Insights from a Simulation Model (Working paper)
John Lyneis, Stuart Madnick

Research has approached the topic of safety in organizations from a number of different perspectives. On the one hand, psychological research on safety climate gives evidence for a range of organizational factors that predict safety across organizations. On the other hand, organizational learning theorists view safety as a dynamic problem in which organizations must learn from mistakes. Here, we synthesize these two streams of research. More >>

The Alignment of Partnering Strategy, Governance and Management in Research and Development Projects: The Role of Contract Choice (Working paper)
Alan MacCormack, et. al.

Firms increasingly look outside their organizational boundaries to identify partners that can improve the effectiveness of R and D projects. The strategy for using partners, however, varies significantly across projects. In some, partners are used primarily to lower development costs and/or supplement development capacity; in others they are used to improve the quality of the final product. How should these variations in partnering strategy impact the governance and management choices made within projects? More >>

Experiences and Challenges with Using Cert Data to Analyze International Cyber Security (Working paper)
Stuart Madnick, et al.

With the increasing interconnection of computer networks and sophistication of cyber attacks, it is important to understand the dynamics of such situations, especially in regards to cyber international relations. More >>

Comparison of Generality Based Algorithm Variants for Automatic Taxonomy Generation (Working paper)
Stuart Madnick, et al.

We compare a family of algorithms for the automatic generation of taxonomies by adapting the Heymannalgorithm in various ways. More >>

A Framework for Technology Forecasting and Visualization (Working paper)
Stuart Madnick, et al.

This paper presents a novel framework for supporting the development of well-informed research policies and plans. The proposed methodology is based on the use of bibliometrics; i.e., analysis is conducted using information regarding trends and patterns of publication. Information thus obtained is analyzed to predict probable future developments in the technological fields being studied. While using bibliometric techniques to study science and technology is not a new idea, the proposed approach extends previous studies in a number of important ways. More >>

Approach and Preliminary Results for Early Growth Technology Analysis (Working paper)
Stuart Madnick, et al.

Even experts cannot be fully aware of all the promising developments in broad and complex fields of technology, such as renewable energy. Fortunately, there exist many diverse sources of information that report new technological developments, such as journal publications, news stories, and blogs. More >>

Reconciling Semantic Heterogeneity in Web Services Composition (Working paper)
Stuart Madnick, Hongwei Zhu, et al.

Service Oriented Computing (SOC) is a popular computing paradigm for the development of distributed Web applications. Service composition, a key element of SOC, is severely hampered by various types of semantic heterogeneity among the services. More >>

Reconciling Equational Heterogeneity within a Data Federation (Working paper)
Stuart Madnick, Michael Siegel, Benjamin Grosof, et al.

Mappings in most federated databases are conceptualized and implemented as black-box transformations between source schemas and a federated schema. More >>

Measuring Innovation Using Bibliometric Techniques: The Case of Solar Photovoltaic Industry (Working paper)
Stuart Madnick, et al.

In this paper, we use feature extraction and data analysis techniques for the elucidation of patterns and trends in technological innovation. In studying innovation, we focus on the role of public research institutions (research universities and national laboratories) in the development of new industries. More >>

Bibliometric Analysis of Distributed Generation (Working paper)
Stuart Madnick, et al.

This paper describes the application of data mining techniques for eludicating patterns and trends in technological innovation. Specifically, we focus on the use of bibliometric methods, viz techniques which focus on trends in the publication of text documents rather than the content of these documents. More >>

Framework for the Analysis of the Adaptability, Extensibility, and Scalability of Semantic Information Integration and the Context Mediation Approach (Working paper)
Stuart Madnick, et al.

Technological advances such as Service Oriented Architecture (SOA) have increased the feasibility and importance of effectively integrating information from an ever widening number of systems within and across enterprises. A key difficulty of achieving this goal comes from the pervasive heterogeneity in all levels of information systems. More >>

Reconciling Protocol Mismatches of Web Services by Using Mediators (Working paper)
Stuart Madnick, et al.

In the era of Global Services, Service Oriented Architecture (SOA) has been gaining momentum for building Web-based information systems. Service composition is one of the key objectives for adopting SOA. More >>

Comparison of Approaches for Gathering Data from the Web for Technology Trend Analysis (Working paper)
Stuart Madnick, et al.

We are investigating trend extrapolation using historical data from academic publications to forecast future technology directions. More >>

Latent Semantic Analysis Applied to Tech Mining (Working paper)
Stuart Madnick, et al.

This paper presents an approach to bibliometric analysis in the context of technology mining. Bibliometric analysis refers to the use of publication database statistics, e.g., hit counts relevant to a topic of interest. More >>

Real Options Signaling Games with Applications to Corporate Finance (Published paper)
Andrey Malenko, et al.

We study games in which the decision to exercise an option is a signal of private information to outsiders, whose beliefs affect the utility of the decision-maker. More >>

Competition among Sellers in Securities Auctions (Published paper)
Andrey Malenko, et al.

We study simultaneous security-bid second-price auctions with competition among sellers for potential bidders. The sellers compete by designing ordered sets of securities that the bidders can offer as payment for the assets. More >>

A Bayesian Approach to Real Options: The Case of Distinguishing between Temporary and Permanent Shocks (Published paper)
Andrey Malenko, et al.

Traditional real options models demonstrate the importance of the "option to wait" due to uncertainty over future shocks to project cash flows. However, there is often another important source of uncertainty: uncertainty over the permanence of past shocks. More >>

Harnessing Crowds: Mapping the Genome of Collective Intelligence (Working paper)
Thomas W. Malone, et al.

Google. Wikipedia. Threadless. All are well-known examples of large, loosely organized groups of people working together electronically in surprisingly effective ways. More >>

Construction by Replacement: A New Approach to Simulation Modeling (Working paper)
Thomas W. Malone, Paulo Goncalves, et al.

Simulation modeling can be valuable in many areas of management science, but is often costly, time-consuming and difficult to do. This paper describes a new approach to simulation that has the potential to be much cheaper, faster and easier to use in many situations. More >>

The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life (Book)
Thomas W. Malone

Imagine organizations where bosses give employees huge freedom to decide what to do and when to do it. Imagine electing your own bosses and voting directly on important company decisions. Imagine organizations where most workers aren't employees at all, but electronically connected freelancers living wherever they want to. And imagine that all this freedom in business lets people get more of whatever they really want in life--money, interesting work, helping other people, or time with their families. More >>

Enterprise 2.0: New Collaborative Tools for Your Organization's Toughest Challenges (Book)
Andrew McAfee

"Web 2.0" is the portion of the Internet that's interactively produced by many people; it includes Wikipedia, Facebook, Twitter, Delicious, and prediction markets. In just a few years, Web 2.0 communities have demonstrated astonishing levels of innovation, knowledge accumulation, collaboration, and collective intelligence. Now, leading organizations are bringing the Web's novel tools and philosophies inside, creating Enterprise 2.0. In this book, Andrew McAfee shows how they're doing this, and why it's benefiting them. More >>

The Hazards of Debt: Rollover Freezes, Incentives, and Bailouts (Forthcoming)
Konstantin Milbradt, et al.

We investigate the trade-off between incentive provision and inefficient rollover freezes for a firm financed with staggered short-term debt. More >>

Understanding Complexity: Dynamic Analysis of Combat Vehicle Accidents (Working paper)
Maj. Nathan A. Minami, Stuart E. Madnick

Dozens of U.S. soldiers are killed each year as a result of both combat and motor vehicle accidents. The objective of this study is to look beyond the events and symptoms of accidents which normally indicate human error, and instead study the complex and poorly understood upper-level organizational processes and problems that may constitute the actual root causes of accidents - this is particularly challenging because the causes often involve nonlinear dynamic phenomena and have behaviors that are counter-intuitive to normal human thinking, these are often called "wicked" problems. After reviewing the available literature, a System Dynamics model was created to provide an analytical model of this multifaceted system that allows for extensive simulation. The results of these simulations suggest that high-level decisions that balance mission rate and operations tempo with troop availability, careful management of the work-rest cycle for deployed troops, and improvement of the processes for evaluating the lessons learned from accidents, will lead to a reduction in Army combat and motor vehicle accidents. More >>

Extending Construal Level Theory to Distributed Teams: Perception and Evaluation of Distant Others (Working paper)
Mark Mortensen, et al.

Building on prior research on distributed teams that has identified physical and temporal distance as impediments to collaboration and relationship development, this paper explores how and why we treat geographically distant others differently from those who are proximal. More >>

Multiple Team Membership: A Theoretical Model of Its Effects on Productivity and Learning for Individuals, Teams, and Organizations (Working paper)
Mark Mortensen, et al.

While organizations strive to manage the time and attention of workers effectively, the practice of asking workers to contribute to multiple teams simultaneously can result in the opposite. More >>

Firsthand Experience and the Subsequent Role of Reflected Knowledge in Cultivating Trust in Global Collaboration (Working paper)
Mark Mortensen, et al.

While scholars contend that firsthand experience -- time spent onsite observing the people, places, and norms of a distant locale -- is crucial in globally distributed collaboration, how such experience actually affects interpersonal dynamics is poorly understood. More >>

Understanding Virtual Team Performance: A Synthesis of Research on the Effects of Team Design, Processes, and States (Working paper)
Mark Mortensen, et al.

Virtual teams are essential to the functioning of numerous organizations. They have been the subjects of much research, resulting in a growing body of literature on the topic. Nevertheless, our understanding of the performance impacts of different aspects of virtual teams (e.g., the people, task, and technology), and the processes through which these come about, remains relatively limited. More >>

Fuzzy Teams: Why do teams disagree on their membership, and what does it mean? (Working paper)
Mark Mortensen

Organizations increasingly rely on teams as fundamental building blocks -- a focus mirrored by a long legacy of research on teams. Due to the complexity of team dynamics and processes within teams and small groups, to date such research has yielded an ambiguous or equivocal set of results regarding the determinants of team performance. More >>

Contracting Over the Disclosure of Scientific Knowledge: Intellectual Property Protection and Academic Publication (Working paper)
Fiona Murray, et. al.

The authors explore the conflicting incentives facing researchers and their funders: scientists have incentives to disclose discoveries through scientific publication while firms have incentives to protect their ideas through patenting or secrecy. They focus on the strategic interaction between researchers and firms bargaining over whether (and how) knowledge will be disclosed. More >>

Financial Puzzles (Published paper)
Stewart Myers

Financial Puzzles written by Stewart Myers of MIT will be published over the next several issues of JAF. These are offered to stimulate discussion and thought around several topics in finance. The proposed solutions to the puzzles will be published in the following issue of JAF, as well as in the FMA on-line journal. We trust that you will find these puzzles both enjoyable and thought provoking. More >>

Principles of Corporate Finance, 9th ed. (Book)
Stewart Myers, et al.

Principles of Corporate Finance is the worldwide leading text that describes the theory and practice of corporate finance. Throughout the book the authors show how managers use financial theory to solve practical problems and as a way of learning how to respond to change by showing not just how but why companies and management act as they do. More >>

Friends and Enemies Within: The Roles of Subgroups, Imbalance, and Isolates in Geographically Dispersed Teams (Working paper)
Michael Boyer O'Leary, Mark Mortensen

In this study, we explore the impact of GDT configuration (i.e., the relative number of team members at different sites, independent of the characteristics of those members or the spatial and temporal distances among them) on GDT dynamics. More >>

The Truth About Middle Managers (Book)
Paul Osterman

"Middle management" is a term associated with relentless downsizing, corporate drudgery, and career dead-ends. Bashed by management gurus, dismissed by social scientists, and painted as victims by the media, middle managers seem permanently relegated to the sidelines of corporate power. More >>

Directed Technical Change and the Adoption of CO2 Abatement Technology: The Case of CO2 Capture and Storage (Published paper)
Vincent M. Otto and John Reilly

This paper studies the cost effectiveness of combining traditional environmental policy, such as CO2 trading schemes, and technology policy that has aims of reducing the cost and speeding the adoption of CO2 abatement technology. For this purpose, we develop a dynamic general equilibrium model that captures empirical links between CO2 emissions associated with energy use, directed technical change and the economy. More >>

Assessment of U.S. Cap-and-Trade Proposals (Published paper)
S. Paltsev, J. Reilly, H. Jacoby, A. Gurgel, G. Metcalf, A. Sokolov, J. Holak

The MIT Emissions Prediction and Policy Analysis model is applied to an assessment of a set of cap-and-trade proposals being considered by the U.S. Congress in spring 2007. More >>

Energy Scenarios for East Asia: 2005-2025 (Published paper)
Sergey Paltsev and John Reilly

We describe several scenarios for economic development and energy use in East Asia based on the MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the world economy. Historic indicators for Asian economic growth, energy use, and energy intensity are discussed. In the Baseline scenario, energy use in East Asia is projected to increase from around 120 EJ in 2005 to around 220 EJ in 2025. More >>

How Sovereign is Sovereign Credit Risk? (Published paper)
Jun Pan, et al.

We study the nature of sovereign credit risk using an extensive set of sovereign CDS data. We find that the majority of sovereign credit risk can be linked to global factors. More >>

Volatility Information Trading in the Option Market (Published paper)
Jun Pan, et al.

This paper investigates informed trading on stock volatility in the option market. We construct non-market maker net demand for volatility from the trading volume of individual equity options and find that this demand is informative about the future realized volatility of underlying stocks. More >>

The Economic and Policy Consequences of Catastrophes (Working paper)
Robert S. Pindyck and Neng Wang

What is the likelihood that the U.S. will experience a devastating catastrophic event over the next few decades -- something that would substantially reduce the capital stock, GDP and wealth? More >>

Uncertain Outcomes and Climate Change Policy (Working paper)
Robert S. Pindyck

Focusing on tail effects, I incorporate distributions for temperature change and its economic impact in an analysis of climate change policy. More >>

Sunk Costs and Risk-Based Barriers to Entry (Working paper)
Robert Pindyck

In merger analysis and other antitrust settings, risk is often cited as a potential barrier to entry. But there is little consensus as to the kinds of risk that matter -- systematic versus non-systematic and industry-wide versus firm-specific -- and the mechanisms through which they affect entry. More >>

Enabling Global Price Comparison through Semantic Integration of Web Data (Working paper)
Nicolas Prat, Stuart E. Madnick

"Sell Globally" and "Shop Globally" have been seen as a potential benefit of web-enabled electronic business. One important step toward realizing this benefit is to know how things are selling in various parts of the world. A global price comparison service would address this need. But there have not been many such services. In this paper, we use a case study of global price dispersion to illustrate the need and the value of a global price comparison service. Then we identify and discuss several technology challenges, including semantic heterogeneity, in providing a global price comparison service. We propose a mediation architecture to address the semantic heterogeneity problem, and demonstrate the feasibility of the proposed architecture by implementing a prototype that enables global price comparison using data from web sources in several countries. More >>

Evaluating and Aggregating Data Believability across Quality Sub-Dimensions and Data Lineage (Working paper)
Nicolas Prat, Stuart E. Madnick

Data quality is crucial for operational efficiency and sound decision making. This paper focuses on believability, a major aspect of data quality. The issue of believability is particularly relevant in the context of Web 2.0, where mashups facilitate the combination of data from different sources. Our approach for assessing data believability is based on provenance and lineage, i.e. the origin and subsequent processing history of data. We present the main concepts of our model for representing and storing data provenance, and an ontology of the sub-dimensions of data believability. We then use aggregation operators to compute believability across the sub-dimensions of data believability and the provenance of data. We illustrate our approach with a scenario based on Internet data. Our contribution lies in three main design artifacts (1) the provenance model (2) the ontology of believability subdimensions and (3) the method for computing and aggregating data believability. To our knowledge, this is the first work to operationalize provenance-based assessment of data believability. More >>

Effects of Air Pollution Control on Climate (Published paper)
Ronald G. Prinn, John Reilly, Marcus Sarofim, Chien Wang and Benjamin Felzer

Urban air pollution and climate are closely connected due to shared generating processes (e.g., combustion) for emissions of the driving gases and aerosols. Thus policies designed to address air pollution may impact climate and vice versa. We present calculations using a model coupling economics, atmospheric chemistry, climate and ecosystems to illustrate some effects of air pollution policy alone on global warming. More >>

Global Economic Effects of Changes in Crops, Pasture, and Forests due to Changing Climate, Carbon Dioxide, and Ozone (Published paper)
Reilly, J., S. Paltsev, B. Felzer, X. Wang, D. Kicklighter, J. Melillo, R. Prinn, M. Sarofim, A. Sokolov and C. Wang

Multiple environmental changes will have consequences for global vegetation. To the extent that crop yields and pasture and forest productivity are affected there can be important economic consequences. We examine the combined effects of changes in climate, increases in carbon dioxide, and changes in tropospheric ozone on crop, pasture, and forest lands and the consequences for the global and regional economies. We examine scenarios where there is limited or little effort to control these substances, and policy scenarios that limit emissions of CO2 and ozone precursors. We find the effects of climate and CO2 to be generally positive, and the effects of ozone to be very detrimental. Unless ozone is strongly controlled damage could offset CO2 and climate benefits. We find that resource allocation among sectors in the economy, and trade among countries, can strongly affect the estimate of economic effect in a country. More >>

Bringing Entrepreneurial Ideas to Life (Working paper)
Ed Roberts, et al.

Organizational design in the context of new venture development is particularly challenging due to initially severe resource constraints. Deepening our understanding of differential productivity in the startup resource assembly process is therefore important. More >>

Entrepreneurial Impact: The Role of MIT (Working paper)
Edward Roberts and Charles E. Eesley

Research- and technology-intensive universities, especially via their entrepreneurial spinoffs, have a dramatic impact on the economies of the United States and its fifty states. A new report on just one such university, the Massachusetts Institute of Technology, indicates conservatively that, if the active companies founded by MIT graduates formed an independent nation, their revenues would make that nation at least the seventeenth-largest economy in the world. More >>

Business Education (Book)
Jeanne Ross, Peter Weill, David Robertson

Top performing companies like 7-Eleven Japan, ING Direct, MetLife, and UPS are using enterprise architecture to reduce costs while increasing strategic effectiveness and business agility. Based on research at over 200 companies, this book describes how these and other leading companies use architecture to guide the evolution of a core foundation of systems and processes to ultimately create a more competitive business. More >>

Agility and Risk Management at Pacific Life: Optimizing Business Unit Autonomy (Working paper)
Jeanne W. Ross and Cynthia Beath

Pacific Life is a diversified financial services company with a history of autonomous business units. Pacific Life had five independent divisions, including Life Insurance, Annuities and Mutual Funds, and Investments. These divisions served different customers and responded to different regulatory and market requirements. This case describes how the company governs shared IT services and enterprise risk management to limit its risk exposure while reaping the benefits of decentralization. More >>

Building Business Agility at Southwest Airlines (Working paper)
Jeanne W. Ross, Cynthia M. Beath

Southwest Airlines has grown from upstart to the largest U.S. airline in terms of number of passengers flown while recording 34 consecutive years of profitability. Through most of those 34 years, Southwest management emphasized high touch rather than automation as critical to business success. Over time, however, Southwest employees introduced technology-based innovations to support key processes, including the industry's first paperless ticketing system and early entry into web-based applications. By 2002 then-CFO (and subsequently CEO) Gary Kelly recognized that IT would be important to meeting the company's strategic objectives. He initiated a business transformation that relied on building a strong IT foundation. This case describes the IT and business changes Southwest introduced to help the company succeed in its increasingly competitive environment. More >>

The Consequences of Entrepreneurial Finance: A Regression Discontinuity Analysis (Forthcoming)
Antoinette Schoar, et al.

This paper documents the role of angel funding for the growth, survival, and access to follow-on funding of high-growth start-up firms. We use a regression discontinuity approach to control for unobserved heterogeneity between firms that obtain funding and those that do not. More >>

Stressed, Not Frozen: The Federal Funds Market in the Financial Crisis (Forthcoming)
Antoinette Schoar, et al.

We examine the importance of liquidity hoarding and counterparty risk in the U.S. overnight interbank market during the financial crisis of 2008. Our findings suggest that counterparty risk plays a larger role than does liquidity hoarding: in the two days after Lehman Brothers' bankruptcy, loan terms become more sensitive to borrower characteristics. More >>

The Necessary Revolution: How Individuals and Organizations are Working Together to Create a Sustainable World (Book)
Peter Senge

A revolution is underway in today's organizations. As Peter Senge and his co-authors reveal in The Necessary Revolution, companies around the world are boldly leading the change from dead-end "business as usual" tactics to transformative strategies that are essential for creating a flourishing, sustainable world. There is a long way to go, but the era of denial has ended. Today's most innovative leaders are recognizing that for the sake of our companies and our world, we must implement revolutionary--not just incremental--changes in the way we live and work. More >>

Human-Induced Climate Change: An Interdisciplinary Assessment (Book)
M. Schlesinger, H. Kheshgi, J. Smith, F. de la Chesnaye, J. Reilly, T. Wilson, C. Kolstad

Urban air pollution and climate are closely connected due to shared generating processes (e.g., combustion) for emissions of the driving gases and aerosols. Thus policies designed to address air pollution may impact climate and vice versa. We present calculations using a model coupling economics, atmospheric chemistry, climate and ecosystems to illustrate some effects of air pollution policy alone on global warming. More >>

Encouraging Cooperation in Sharing Supermodular Costs (Working paper)
Andreas S. Schulz, Nelson A. Uhan

In this paper, we study the computational complexity and algorithmic aspects of computing the least core value of supermodular cost cooperative games, and uncover some structural properties of the least core of these games. More >>

The Shift from Centralized to Peer-to-Peer Communication in an Online Community: Participants as a Useful Aspect of Genre Analysis (Working paper)
Masamichi Takahashi, JoAnne Yates, George Herman, Atsushi Ito, Keiichi Nemoto

In this paper we analyzed an online community based on a mailing list that was created as an internal marketing tool for launching a new network service. We focused on the change in communication over time among dispersed Sales representatives and the employees in a centralized Service Department. We conducted a genre analysis based on content (what), purpose (why), timing (when), form (how) and participants (who communicates to whom) (Yates and Orlikowski, 2002). Analyzing the participants in a genre and how those participants changed over time highlighted a shift from centralized to dispersed, peer-to-peer communication in this community. We highlight implications both for genre analysis and for organizational practice. More >>

Identifying Formal and Informal Influence in Technology Adoption with Network Externalities (Working paper)
Catherine Tucker

Firms introducing network technologies (whose benefits depend on who installs the technology) need to understand which user characteristics confer the greatest network benefits on other potential adopters. To examine which adopter characteristics matter, I use the introduction of a video-messaging technology in an investment bank. More >>

Design-Inspired Innovation (Book)
James M. Utterback, Eduardo Alvarez, Sten Ekman, Susan Walsh Sanderson, Bruce Tether, Roberto Verganti

Design-Inspired Innovation takes a unique look at the intersection between design and innovation, and explores the novel ways in which designers are contributing to the development of products and services. The book's scope is international, with emphasis on design activities in Boston, England, Sweden, and Milan. Through a rich variety of cases and cultural prisms, the book extends the traditional design viewpoint and stretches the context of industrial design to question -- and answer -- what design is really all about. It gives readers tools for inspiration, and shows how design can change language and even create human possibilities. More >>

How Does Popularity Information Affect Choices? Theory and A Field Experiment (Working paper)
Catherine Tucker, Juanjuan Zhang

Does popularity information (i.e., information on the frequency with which a product has been chosen) benefit niche or mainstream products more? More >>

Interpersonal Authority in a Theory of the Firm (Working paper)
Eric Van den Steen

This paper develops a theory of the firm in which a firm's centralized asset ownership and low-powered incentives give a manager 'interpersonal authority' over employees (in a world with differing priors). The paper derives such interpersonal authority as an equilibrium phenomenon. One key result is that a manager's control overcritical assets-through its effect on the level of outside options allows the manager to order employees what to do. The paper thus provides micro- foundations for the idea that bringing a project inside affirm gives the manager authority over that project, while-in the process-explaining concentrated asset ownership, low-powered incentives, and centralized authority as typical characteristics of firms. It also leads to a new perspective on the firm as a legal entity and, building on the insights of a parallel paper, to a new theory for firm Boundaries based on the idea of break-up. A key feature of the latter theory is that firm boundaries matter even though both ex-ante investments and ex-post actions are perfectly contractible. More >>

Modeling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation (Working paper)
Eric von Hippel, et al.

In this paper we assess the economic viability of innovation by producers relative to two increasingly important alternative models: innovations by single user individuals or firms, and open collaborative innovation projects. More >>

Profiting from voluntary information spillovers: How users benefit by freely revealing their innovations (Working paper)
Eric von Hippel, et al.

Empirical studies of innovation have found that end users frequently develop important product and process innovations. Defying conventional wisdom on the negative effects of uncompensated spillovers, innovative users also often openly reveal their innovations to competing users and to manufacturers. More >>

Users as Service Innovators: The Case of Banking Services (Working paper)
Eric von Hippel, et al.

Many services can be self-provided. An individual user or a user firm can, for example, choose to do its own accounting - choose to self-provide that service - instead of hiring an accounting firm to provide it. More >>

Open Source Software and the "Private-Collective" Innovation Model: Issues for Organization Science (Working paper)
Eric von Hippel, et al.

Currently two models of innovation are prevalent in organization science. The "private investment" model assumes returns to the innovator results from private goods and efficient regimes of intellectual property protection. The "collective action" model assumes that under conditions of market failure, innovators collaborate in order to produce a public good. The phenomenon of open source software development shows that users program to solve their own as well as shared technical problems, and freely reveal their innovations without appropriating private returns from selling the software. More >>

Measuring user innovation in Dutch high tech SMEs: Frequency, nature and transfer to producers (Working paper)
Eric von Hippel, et al.

A detailed survey of 498 "high tech" SMEs in the Netherlands shows process innovation by user firms to be common practice. Fifty four percent of these relatively small firms reported developing entirely novel process equipment or software for their own use and/or modifying these at significant private expense. More >>

The Prevalence of User Innovation and Free Innovation Transfers: Implications for Statistical Indicators and Innovation Policy (Working paper)
Eric Von Hippel, et al.

Statistical indicators have not kept pace with innovation research. Today, it is well understood that many industrial and consumer products are developed by users, and that many innovations developed at private cost are freely shared. New statistical indicators will empower policymakers to take advantage of the latest research findings in their innovation policymaking, and will enable them to benefit from improved measurement of resulting policy impacts. More >>

Why Markets Make Mistakes (Working paper)
Henry Birdseye Weil

Many models of markets are based on assumptions of rationality, transparency, efficiency, and homogeneity in various combinations. They assume, at least implicitly, that decision makers understand the structure of the market and how it produces the dynamics which can be observed or might potentially occur. Are these models acceptable simplifications, or can they be seriously misleading? More >>

Asymmetric Information Distances for Automated Taxonomy Construction (Working paper)
Wei Lee Woon, Stuart E. Madnick

A novel method for automatically constructing taxonomies for specific research domains is presented. The proposed methodology uses term co-occurence frequencies as an indicator of the semantic closeness between terms. More >>

Semantic Distances for Technology Landscape Visualization (Working paper)
Wei Lee Woon, Stuart E. Madnick

This paper presents a novel approach to the visualization and subsequent elucidation of research domains in science and technology. The proposed methodology is based on the use of bibliometrics; i.e., analysis is conducted using information regarding trends and patterns of publication rather than the contents of these publications. More >>

Economic Benefits of Air Pollution Regulation in the USA: An Integrated Approach (Published paper)
Trent Yang, Kira Matus, Sergey Paltsev and John Reilly

Market and non-market effects of air pollution on human health are estimated for the U.S. for the period from 1970 to 2000. The pollutants include tropospheric ozone, nitrogen dioxide, sulfur dioxide, carbon monoxide, and particulate matter. We develop a methodology for integrating the health effects from exposure to air pollution into the MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the economy that has been widely used to study climate change policy. More >>

The Role of an Online Community in Relation to Other Communication Channels in a Business Development Case (Working paper)
JoAnne Yates, et al.

We investigated how sales representatives (Salespeople) and members of a service business development department (the Service Dept.) communicated within an informal online community, particularly in relation to their use of other informal and formal communication channels. More >>

Semantic Integration Approach to Efficient Business Data Supply Chain: Integration Approach to Interoperable XBRL (Working paper)
Hongwei Zhu, Stuart E. Madnick

As an open standard for electronic communication of business and financial data, XBRL has the potential of improving the efficiency of the business data supply chain. A number of jurisdictions have developed different XBRL taxonomies as their data standards. Semantic heterogeneity exists in these taxonomies, the corresponding instances, and the internal systems that store the original data. Consequently, there are still substantial difficulties in creating and using XBRL instances that involve multiple taxonomies. To fully realize the potential benefits of XBRL, we have to develop technologies to reconcile semantic heterogeneity and enable interoperability of various parts of the supply chain. In this paper, we analyze the XBRL standard and use examples of different taxonomies to illustrate the interoperability challenge. We also propose a technical solution that incorporates schema matching and context mediation techniques to improve the efficiency of the production and consumption of XBRL data. More >>

At MIT Sloan, companies are launched in courtyards and corridors. Research shows that start-ups conceived in a technology environment are the most successful.