Publications

ESMT Berlin publishes in international academic journals, which are first-class in their respective fields. Research also provides cutting-edge and profound insights for the business community as well as the classroom through managerial publications and case studies. This rare integration of research and practice makes ESMT Berlin an outstanding location for generating relevant and ground-breaking knowledge.

Journal Article
Forthcoming

Consumer choice under limited attention when alternatives have different information costs

Operations Research
Frank Huettner, Tamer Boyaci, Yalçın Akçay
Abstract:
Subject(s): Product and operations management
Keyword(s): Discrete choice, rational inattention, information acquisition, non-uniform information costs, market inference
JEL Code(s): D40, D80

Consumers often do not have complete information about the choices they face and therefore have to spend time and effort in acquiring information. Since information acquisition is costly, consumers trade-off the value of better information against its cost, and make their final product choices based on imperfect information. We model this decision using the rational inattention approach and describe the rationally inattentive consumer’s choice behavior when she faces alternatives with different information costs. To this end, we introduce an information cost function that distinguishes between direct and implied information. We then analytically characterize the optimal choice probabilities. We find that non-uniform information costs can have a strong impact on product choice, which gets particularly conspicuous when the product alternatives are otherwise very similar. There are significant implications on how a seller should provide information about its products and how changes to the product set impacts consumer choice. For example, non-uniform information costs can lead to situations where it is disadvantageous for the seller to provide easier access to information for a particular product, and to situations where the addition of an inferior (never chosen) product increases the market share of another existing product (i.e., failure of regularity). We also provide an algorithm to compute the optimal choice probabilities and discuss how our framework can be empirically estimated from suitable choice data.

© 2018, INFORMS


Journal Article
Forthcoming

Contracting in medical equipment maintenance services: An empirical investigation

Management Science
Tian Chan, Francis de VĂ©ricourt, Omar Besbes
Abstract:
Subject(s): Product and operations management
Keyword(s): Health care, contracting, fine balance matching, service value chain

Maintenance service plans (MSPs) are contracts for the provision of maintenance by a service provider to an equipment operator. These plans can have different payment structures and risk allocations, which induce various types of incentives for agents in the service chain. How do such structures affect service performance and service chain value? We provide an empirical answer to this question by using a unique panel data covering the sales and service records of more than 700 diagnostic body scanners. We exploit the presence of a standard warranty period and employ a matching approach to isolate the incentive effects of MSPs from the confounding effects of endogenous contract selection. We find that moving the equipment operator from a basic, pay-per-service plan to a fixed-fee, full-protection plan not only reduces reliability but also increases equipment service costs. Furthermore, that increase is driven by both the operator and the service provider. Our results indicate that incentive effects arising from MSPs leads to losses in service chain value, and we provide the first evidence that a basic pay-per-service plan—under which risk of equipment failure is borne by the operator—can improve performance and reduce costs.

Copyright © 2018, INFORMS


Journal Article
Forthcoming

Defaults and donations: Evidence from a field experiment

Review of Economics and Statistics
Accepted at Review of Economics and Statistics
Steffen Altmann, Armin Falk, Paul Heidhues, Rajshri Jayaraman, Marrit Teirlinck
Abstract:
Subject(s): Economics, politics and business environment
Keyword(s): Default options, online platforms, charitable giving, field experiment
JEL Code(s): D03, D01, D64, C93

Journal Article
Forthcoming

Did Europe move in the right direction on e-waste legislation?

Production and Operations Management
Shumail Mazahir, Vedat Verter, Tamer Boyaci, Luk N. Van Wassenhove
Abstract:
Subject(s): Product and operations management
Keyword(s): Legislation, product recovery, remanufacturing, recycling, end-of-life products

This paper presents an analytical framework of the product take back legislation in the context of product reuse. We characterize existing and proposed forms of E-waste legislation and compare their environmental and economic performance. Using stylized models, we analyze an OEM’s decision about new and remanufactured product quantity in response to the legislative mechanism. We focus on the 2012 waste electrical and electronic equipment directive in Europe, where the policy-makers intended to create additional incentives for the product reuse. Through a comparison to the original 2002 version of the directive, we find that these incentives translate into improved environmental outcomes only for a limited set of products. We also study a proposed policy that advocates a separate target for the product reuse. Our analysis reveals that from an environmental standpoint, the recast version is always dominated either by the original policy or by the one that advocates a separate target for the product reuse. We show that the benefits of a separate reuse target scheme can be fully replicated with the aid of fiscal levers. Our main message is that there can not be a single best environmental policy that is suitable for all products. Therefore, the consideration of product attributes is essential in identification of the most appropriate policy tool. This can be done either by the implementation of different policies on each product category or by implementation of product based target levels.

This article is protected by copyright. All rights reserved.


Journal Article
Forthcoming

Financing capacity with stealing and shirking

Management Science
Abstract:
Subject(s): Management sciences, decision sciences and quantitative methods
Keyword(s): Capacity investment, optimal contracts, capital diversion, financial constraints, newsvendor model, moral hazard

We study a firm's capacity choice under demand uncertainty given it must finance this investment externally.
Sharing profits with investors causes governance problems affecting both capacity and demand: the firm may “steal" capital, which reduces effective capacity, and \shirk" on market-development, which reduces demand. We adopt an optimal contracting approach whereby the firm optimizes among feasible financial claims derived endogenously. We characterize its optimal financing and capacity choices. First, debt financing is optimal: it minimizes the incentives to both divert and shirk. Second, the firm underinvests (overinvests) if the effort problem is mild (severe) enough relative to the diversion problem. Thus, a worsening of the same governance problem can lead to over- or underinvestment depending on circumstances. Third, we find that the diversion and shirking problems interact in their impact on capacity investment. In particular, if the shirking problem is mild enough, the more severe the diversion problem, the less the firm invests. However, if the shirking problem is severe enough, the effect of diversion is reversed: the more severe the diversion problem, the more the firm invests.

Copyright © 2018, INFORMS


Journal Article
Forthcoming

Fire in the belly? Employee motives and innovative performance in startups versus established firms

Strategic Entrepreneurship Journal
Abstract:
Subject(s): Entrepreneurship
Keyword(s): Entrepreneurial firms, human capital, innovative performance, motives, start-up joiners

We examine whether start-ups attract employees with different pecuniary and non-pecuniary motives than small or large established firms. We then explore whether such differences in employee motives may lead to differences in innovative performance across firm types. Using data on more than 10,000 U.S. R&D employees, we find that start-up employees (“joiners”) place lower importance on job security and salary but greater importance on independence and responsibility. Start-up employees have higher patent output than employees in small and large established firms, and this difference is partly mediated by employee motives - especially joiners’ greater willingness to bear risk. We discuss implications for research as well as for managers and policy makers concerned with the supply of human capital to entrepreneurship and innovation.

Copyright © 2017 Strategic Management Society


Journal Article
Forthcoming

How do prior ties affect learning by hiring?

Journal of Management
Vivek Tandon, Gokhan Ertug, Gianluca Carnabuci
Abstract:
Subject(s): Strategy and general management, Technology, R&D management
Keyword(s): Learning-by-hiring, inter-firm mobility, innovation, patents

Research has shown that hiring R&D scientists from competitors fosters organizational learning. We examine whether hiring scientists who have many collaborative ties with the hiring firm prior to the mobility event produces different learning outcomes than hiring scientists who have few or no such ties. We theorize that prior ties reduce explorative learning and increase exploitative learning. From our arguments we also derive other testable implications. Namely, we posit that prior ties lead the hiring firm to focus on that part of a new hire’s knowledge with which they are already familiar and that they help appropriate the new hire’s newly generated knowledge. At the same time, prior ties induce new hires to search locally within the hiring firm’s knowledge base and also to produce more incremental, lower-impact innovations. Using data on R&D scientists’ mobility in the Electronics and Electrical Goods industry, we find broad support for our hypotheses. Our results extend our theoretical understanding of learning-by-hiring processes and bear practical managerial implications.

With permission of SAGE Publishing


Journal Article
Forthcoming

Idea rejected, tie formed: Organizations' feedback on crowdsourced ideas

Academy of Management Journal
Henning Piezunka, Linus Dahlander
Abstract:
Subject(s): Strategy and general management, Technology, R&D management

When organizations crowdsource ideas, they ultimately select only a small share of the submitted ideas for implementation. Organizations generally provide no feedback on ideas they do not select. Contributors whose ideas are not selected for implementation tend to forego submitting ideas in the future. We suggest that organizations can increase contributors’ willingness to submit ideas in the future by giving a thus far understudied form of feedback: rejections. Drawing on social network theory, we develop the overarching argument that rejections lead contributors to bond with the organization, increasing their willingness to continue to interact with the organization. While it may be counterintuitive to associate rejections with bonding, we hypothesize that rejections indicate to contributors that the organization is interested both in receiving their ideas and in developing a relationship with them. This effect, we argue, is particularly pronounced when rejections provide newcomers with explanations that suggest to them that they and the organization are a good match. To test our theory, we examine the crowdsourcing efforts of 70, 159 organizations that receive ideas from 1,336,154 contributors. Using large-scale content analysis, we examine differences in how rejections are written in order to disentangle the mechanisms through which rejections affect contributors’ willingness to continue to interact with an organization. We find that getting a rejection has a positive effect on a newcomer’s willingness to submit idea in the future. The effect is stronger if the rejection includes an explanation, and is particularly pronounced if the explanation accompanying the rejection matches the original idea in terms of linguistic style.

With permission of the Academy of Management


Journal Article
Forthcoming

Knowing me, knowing you: Inventor mobility and the formation of technology-oriented alliances

Academy of Management Journal
2018 VHB JĂŒrgen Hauschildt Award 2018 For the best empirical research publication in Innovation Management
Stefan Wagner, Martin Goossen
Abstract:
Subject(s): Strategy and general management, Technology, R&D management
Keyword(s): Inventor mobility, alliance formation, interfirm collaboration, technological capabilities, pharmaceuticals

We link the hiring of R&D scientists from industry competitors to the subsequent formation of collaborative agreements, namely technology-oriented alliances. By transferring technological knowledge as well as cognitive elements to the hiring firm, mobile inventors foster the alignment of decision frames applied by potential alliance partners in the process of alliance formation thereby making collaboration more likely. Using data on inventor mobility and alliance formation amongst 42 global pharmaceutical firms over 16 years, we show that inventor mobility is positively associated with the likelihood of alliance formation in periods following inventor movements. This relationship becomes more pronounced if these employees bring additional knowledge about their prior firm’s technological capabilities and for alliances aimed at technology development rather than for agreements related to technology transfer. It is weakened, however, if the focal firm is already familiar with the competitor’s technological capabilities. By revealing these relationships, our study contributes to research on alliance formation, employee mobility, and organizational frames.

With permission of the Academy of Management


Journal Article
Forthcoming

Pathways to intercultural accuracy: Social projection processes and core cultural values

European Journal of Social Psychology
Shira Mor, Claudia Toma, Martin Schweinsberg, Daniel Ames
Abstract:
Subject(s): Human resources management/organizational behavior
Keyword(s): Accuracy, social projection, cultural values, collectivistic vs. individualistic value
ISSN 1099-0992 (Online)

Journal Article
Forthcoming

Risk preferences and development revisited

Theory and Decision: 1–21
Ferdinand M. Vieider, Peter Martinsson, Pham Khanh Nam, Nghi Truong
Abstract:
Subject(s): Economics, politics and business environment, Management sciences, decision sciences and quantitative methods
Keyword(s): Risk preferences, development, prospect theory
Pages 1–21

Journal Article
Forthcoming

Speeding up the Internet: Regulation and investment in the European fiber optic infrastructure

International Journal of Industrial Organization
Wolfgang Briglauer, Carlo Cambini, MichaƂ Grajek
Abstract:
Subject(s): Economics, politics and business environment, Information technology and systems, Technology, R&D management
Keyword(s): Internet access market, access regulation, investment, infrastructure, Next Generation Networks, broadband, telecom, cable operators and EU regulatory framework
JEL Code(s): L96, L51

In this paper, we study how the coexistence of access regulations for legacy (copper) and fiber networks shapes the incentives to invest in fiber-based network infrastructures. To this end, we first develop a theoretical model that extends the existing literature by, among other things, considering alternative firms with proprietary legacy network (e.g., cable operators) and the presence of asymmetric mandated access to networks. In the empirical part, we test the theoretical predictions using a novel panel data from 27 EU member states pertaining to the last decade. Our main finding is that, in line with the theoretical results, stricter access regulations (i.e., a decrease in access price to legacy network and the adoption of fiber regulation) decrease the incumbent operators’ fiber investments. The estimated magnitude of these effects is economically significant. On the other hand, cable operators, who are responsible for the largest share of investments in fiber, are not affected by access regulation. Our paper thus provides policy insights for the on-going revision of the EU regulation framework for the electronic communications industry.

With permission of Elsevier


Journal Article
Forthcoming

Static or dynamic efficiency: Horizontal merger effects in the wireless telecommunications industry

Review of Industrial Organization
MichaƂ Grajek, Klaus Gugler, Tobias Kretschmer, Ion MiƟciƟin
Abstract:
Subject(s): Economics, politics and business environment, Information technology and systems, Technology, R&D management
Keyword(s): Telecom mergers, static and dynamic efficiency, difference-in-difference
JEL Code(s): L22, O33, G34, L96

Journal Article
Forthcoming

The dynamics of relational quality in co-development alliances

International Journal of Technology Management
Francis Bidault, Alessio Castello
Abstract:
Subject(s): Strategy and general management, Technology, R&D management
Keyword(s): Co-development, R&D partnerships, cooperative R&D, joint R&D, technology alliances, joint innovation, co-innovation, relational quality, confidence in partners, trust and control

Journal Article
Forthcoming

The risky side of inspirational appeals in personal selling: When do customers infer ulterior salesperson motives?

Journal of Personal Selling & Sales Management (JPSSM)
Sascha Alavi, Johannes Habel, Christian Schmitz, Bianca Richter, Jan Wieseke
Abstract:
Subject(s): Marketing
Keyword(s): inspirational appeals, personal selling, customer emotions, influence tactics
JEL Code(s): M310

In personal selling, the inspirational appeal (IA) is a widely promoted tactic that aims at stimulating customers’ values and ideals, thereby evoking emotions and arousing their enthusiasm for a product. However, whether IAs in fact improve or undermine salespeople’s success in sales talks remains controversial. Therefore, the present study examines consequences and key contingencies of IAs in customer–salesperson interactions in a retailing context, using multi-source data from several retailing industries for three quantitative studies, comprising a total sample of 590 customer and 174 salesperson responses. Drawing on the Multiple Inferences Model (MIM), the authors show that an IA is likely to drive the customer’s inference that the salesperson holds ulterior motives. IAs seem to be particularly detrimental for salespeople with a lack of customer orientation. Beyond expanding research on influence tactics and the ambivalent role of IAs in retailing interactions, these findings can guide practitioners about when to refrain from using an IA.

ISSN 1557–7813 (Online) 0885–3134 (Print)

Pages