MIT Sloan School of Management News Briefs

News Briefs offers you timely leads about research and other work by MIT Sloan faculty that can help you with stories you are developing now — or might be developing in the future. Please contact us if you'd like further information about either a topic or its author.

April 2009

Jeffrey Ng on bank bailouts and investor confidence
Money needed to restore both liquidity and investor faith

The federal government has to pump capital into struggling banks not only to prop up the institutions themselves, but to help rebuild the confidence of investors who have lost faith in what banks say about their own conditions, says Ng. He describes a vicious cycle in which investors doubt reports even from institutions that are doing relatively well, which means those banks remain in financial trouble, continuing the need for additional assistance. More >>

Shayne Gary on “Boom and Bust” Dynamics
Economy Not to Blame for all Business Failures

The recent economic crisis has led to the downfall of many businesses, but it can't be blamed for all of the failures. Gary found that the “boom and bust” dynamics experienced by many businesses are caused by decision errors and biases that can be avoided. By following the suggestions in his paper to avoid this cycle, firms are likely to find “remarkable performance improvements.” He said, “What is surprising is that they are not part of the standard ‘tool box’ of managers and management training. As a result, problems such as boom and bust persist and are repeated, many times over.” More >>

Fiona Murray on increase and benefits of faculty collaboration at MIT
MIT is significantly more collaborative than it was in the past

New research by Prof. Murray and her student, PhD candidate Michaël Bikard shows that in-demand technologies created in MIT labs across campus makes entrepreneurship more possible at MIT than at other institutions. The two chose to study MIT because it seemed to be in advance of other scientific institutions in terms of collaboration as well as technology transfer, i.e. reaching across the university boundary to industry. More >>

Zvi Bodie on retirement strategies
Sell your stocks, MIT Sloan professor urges small investors saving for retirement

As they survey the wreckage of their retirement accounts, shell-shocked investors are wondering what to do now. While many advisors suggest holding tight until the stock market recovers, MIT Sloan School of Management visiting professor Zvi Bodie says investors need to face some painful facts. More >>

Jared Curhan on Retaining Employees
Money Not the Most Important Factor in Job Offer Negotiations

A lot of decisions are affected by money, but when it comes to job offer negotiations, money plays a lesser role. Curhan found that how someone is made to feel during the job offer negotiation process is more important than even the dollar value of the deal in terms of predicting future job attitudes and whether the employee will remain at the company. Employers seeking to retain workers would be wise to pay close attention to job offer negotiations because what transpires may have lasting implications for the future employee-employer relationship. More >>

P.J. Lamberson on Market Share
“Consistently Mediocre” Firms in Better Position than “Inconsistently Amazing” Firms to Boost Sales

As stores attempt to boost sales in a down economy, firms that demonstrate consistency in product quality are more likely to see higher sales compared to firms that are hit or miss when it comes to quality. Lamberson found that “being consistently mediocre is better than being inconsistently amazing” because consistent customer reviews and recommendations lead to higher market share. In a related study, he concluded that when it comes to market share, online retailers aren't likely to see a winner-takes-all outcome, but instead markets that are shared by multiple firms. More >>

John Carrier on Fixing Workplace Defects
Cost-Saving Measures Readily Available but Rarely Used

Many manufacturing companies turn to outsourcing to save labor costs, however cost-saving measures are available right on their factory floors. Carrier found that using readily available — but seldom applied effectively — methods could save hundreds of thousands of dollars in a few weeks and prevent the need to outsource jobs. “I always look for oscillations in the process performance,” he said. “As humans, we tend to look to assign blame to the workers, but invariably the true cause is a system problem as opposed to a people problem. By learning to see the entire process and all of its faults … we can eliminate these fluctuations resulting in a significant and immediate reduction in costs.” More >>

Damon Centola on Complex Contagions
Social Affirmation from Multiple People Required to Change Riskier Behaviors

While a friend might convince you to try a new restaurant, it's unlikely that the same friend alone can convince you to adopt a different health behavior. Centola found that when it comes to the spreading of “complex contagions” where there is a barrier to adopting the behavior like cost, risk or social awkwardness, distant social connections aren't enough to trigger behavior changes. Instead, these types of behaviors require social affirmation from multiple people in the same social circles. For example, AIDS can be spread among people with casual connections. While it might seem logical to spread information through those same connections about the use of condoms, it would actually be more effective to target clustered groups of people who can reinforce each other's adoption of condom use. “That will work better than using the faster, more distant networks that allowed the disease to spread,” he said. More >>

Damon Centola on Social Network Dynamics
Tendency to Form Online Cliques Could Help Preserve Global Diversity

With the growth of communication technologies on the Internet, the world has become more connected. However, this trend toward globalization raises questions about the future of cultural diversity. As people interact more, cultural exchange will make them more similar. Does this mean that eventually all of our differences will disappear? Centola found that people's tendencies to form tightly clustered cultural cliques online actually help preserve global diversity. “Some people think that the social cliques that we've observed for hundreds of years will vanish due to the massive connectivity of the Internet, but if you trace who interacts with whom on a regular basis on social networking Websites, those networks and communities tend to reproduce the same clusters that we see in face-to-face communities,” he said, concluding that “social diversity can be maintained even in highly connected environments.” More >>

Alan MacCormack on Identifying Innovation
Companies Can Build “Radars” to Detect Breakthrough Ideas

An ongoing challenge for established companies is identifying breakthrough innovations before they get blindsided by competitors. This may be even more difficult today in this time of shrinking budgets and employee layoffs. However, MacCormack found that companies can quickly generate a diversity of ideas at low cost by designing a “radar.” The key elements of a firm's radar will vary at each company, but “all firms have good ideas floating around inside them, and in the broader ecosystem in which they operate,” he said. “The good firms are the ones who seek to collect those ideas, organize them, synthesize them and make decisions based upon them.” More >>

Elena Obukhova on China's IC Design Industry
Study Finds No Current Threat to U.S. Superconductor Design Firms

While competition with Chinese companies is increasing for many industries in the U.S., semiconductor design firms don't need to worry about losing market share or jobs to China yet. A recent study by Obukhova found that the semiconductor design industry in China has experienced only limited growth since it emerged in 2000. She said, “There was a lot of talk about how this industry in China is developing and whether or not it will affect the U.S. and become a threat with jobs going to China, but when you look at the numbers, the IC design industry in China is much less impressive than many people thought.” More >>

Pierre Azoulay on Superstar Extinction
Deaths of Prominent Scientists Lead to Significant and Permanent Productivity Loss among Collaborators

When “superstar” academic scientists die, their collaborators experience a significant and permanent decline in productivity. Studying the role of collaboration in spurring the creation of new scientific knowledge, Azoulay found that the more the collaborators' areas of study overlapped with the superstar, the sharper the decline in output. This finding supports the concept of the “invisible college” in which superstars infuse their scientific field with fresh ideas and when they die, the entire field contracts. However, he concluded that “for every invisible college that contracts following superstar extinction, another might expand to slowly take its place.” More >>