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Why negotiations fail

For business leaders engaged in negotiations, it’s essential to constantly analyze and revisit their negotiation strategy to avoid many of the errors typically made in the process. In the Handbook of Conflict Management Research, Erika Hall, assistant professor of organization & management, and coauthors Brian Lucas (U of Chicago) and Leigh Thompson (Northwestern U) offer a window into negotiation methods and some of the mistakes negotiators make along the way. The trio discovered and defined three specific errors that occur in negotiations, including what they label as domain myopia, the self-preoccupation effect, and the script hijack effect. Domain myopia is described as the “tendency for negotiators to fail to see meaningful parallels across negotiation situations that might appear different on the surface, but have meaningful underlying similarities.” Hall and her coauthors also describe the self-preoccupation effect, where negotiators let their emotions win the day and subsequently lose perspective. The third scenario that they define is the script hijack effect, which they describe as “the tendency for negotiators to feel compelled to follow a script, often based on stereotypes.” According to the authors, the problems they document apply across a variety of industries. Source:

Repo transactions and bank risk

In a research study from Edward Owens, assistant professor of accounting, and Joanna Shuang Wu (U of Rochester), the authors examine bank reporting of short-term borrowings in the repo market. Repo borrowings, otherwise known as sale and repurchase agreements, are essentially collateralized loans known for their short-term nature. The authors note that repo borrowings are typically associated with risky trading behavior, especially due to their opaque nature and role in the recent financial crisis. Owens and Wu found that current financial reporting requirements for banks might not adequately capture a full accounting of the risks associated with a bank’s repo liabilities. Specifically, end-of-quarter balance sheets may not correctly show the risk levels from repo borrowings exhibited throughout the quarter. The researchers analyzed quarter-end deviations in bank repo borrowings to better study the risk they represent. The primary research sample for the study was pulled from “13,548 bank-quarter observations across 573 unique publicly traded bank holding companies.” The authors attribute some of the deviation to what is termed “window dressing,” a step banks might take “to temporarily reduce the reported level of repo borrowings around quarter-end reporting dates.” Expected fluctuations in bank depositor and borrower activity around the end of the quarter did factor into the deviation as well. Source:

Supply network structure and systemic risk

Demand uncertainty can present a serious challenge for any business, especially when it comes to managerial decisions on inventory. But when an economic downturn happens, the challenge becomes systemic. According to research by Nikolay Osadchiy, assistant professor of information systems & operations management, and coauthors Vishal Gaur (Cornell U) and Sridhar Seshadri (Indian School of Business), systemic risk is more greatly felt depending on where a company sits in the supply chain. The trio discovered that while an economic downturn presented a serious hurdle for retailers, wholesalers, and manufacturers alike, manufacturers were more prone to systemic risk given their placement upstream in the supply chain. Manufacturers had “a more dispersed customer base,” which the authors noted was more closely “associated with higher systematic risk.” Manufacturers also experienced greater systemic risk due to the effect of aggregation of orders over time. They wrote, “A market shock in one period may affect sales over several periods due to lead times and time lags in managerial decision making.” Source:

Understanding self-serving behavior in leaders

In a new research paper, Melissa Williams, assistant professor of organization & management, developed a framework to better understand when and why leaders use their power for personal gain. She discovered that a variety of traits, characteristics, and values, such as feeling less of a sense of guilt, made leaders more likely to exhibit self-interested behaviors. Individuals who were more narcissistic, less humble and honest, and generally less agreeable also had an increased chance of abusing their power. Leaders with an individualistic and competitive streak as well as those with a lower sense of morality were also more likely to act on self-interest. Threats to power especially increased self-serving behavior for those with a propensity for it. Williams added that “because positions of leadership are desirable and hedonically pleasurable, leaders facing threats to their power will prioritize self-interested actions that secure their own power over behaviors that serve shared goals.” Interestingly, for the individuals who did not have self-interested traits and values, power actually decreased the likelihood that they would become self-interested. Source:

Using social media to assess public sentiment

Large corporations, government agencies, and political campaigns increasingly are using social media listening platforms and software to monitor public sentiment online. According to research from David Schweidel, associate professor of marketing, and Wendy Moe (U of Maryland), the information gleaned from social media can provide useful insights for decision making, but only if the “comments are measured appropriately.” Since prior marketing research has focused on one social media venue or failed to acknowledge the differences in multiple social media venues, Schweidel and Moe discovered that these measurements of public sentiment fell short. Instead, they analyzed brand sentiment for an enterprise software company and a telecommunications business across a variety of social media platforms. Accounting for factors that varied across different social media platforms, the authors derived a measure of general brand impression (GBI). They showed that general brand impression was a leading indicator of shifts in brand tracking studies and stock price movements. Taken together, Schweidel and Moe’s “measure of GBI effectively captures movement in the underlying sentiment toward the brand.” Source:

The brain, human behavior, and accounting

Accounting is essential to market economies, setting up what is basically a moral code for financial transactions. Drawing from new and related research, Gregory B. Waymire, Asa Griggs Candler professor of accounting, argues that accounting does have a moral basis because it is designed to encourage and promote ethical behavior. To support the point, he used existing functional MRI research showing how the brain responds to accounting information. Studies show a clear link between earnings news and increased brain activity, as well as accounting information and changes in human behavior. Waymire notes that accounting has the ability to create trust in economic exchange and establishes a way to benefit from it. Additional neuroscience research will play a critical role in furthering our understanding of the relationship between accounting and human behavior. The research is particularly salient for auditors as they work to improve investor trust. Source:

The effect of multitasking on worker performance

Diwas KC, associate professor of information systems & operations management, completed an in-depth investigation of the impact of multitasking in a complex work environment by analyzing patient flow and clinical data of physicians in a large hospital ER. The study provides important findings for understanding multitasking and its “implications for a knowledge economy, where attention and focus are significant drivers of productivity and quality.” The research indicated that multitasking starts out as a positive influence on work, giving physicians the “ability to utilize idle time between tasks.” Additionally, lower levels of multitasking actually improved the quality of care, since “low levels of stress can aid cognitive function.” Once multitasking behavior became excessive, productivity declined dramatically due to a variety of factors, including work interruptions and coordination costs. A higher level of multitasking also led to a drop in detected diagnoses and an increased rate of revisits in a 24-hour period for patients initially treated in the emergency department. Physicians spent less time with patients and their overall focus suffered. Source:

The return on international investment products

Individual investors have access to an ever-increasing number of US-registered equity funds that invest in international assets, as well as institutional investment products focused on global assets. Despite the growing importance of global equity markets for US investors, there is little academic research devoted to their study. Jeffrey Busse, associate professor of finance, Amit Goyal (University of Lausanne), and Sunil Wahal (Arizona State U) advanced the research, tackling the common theory that less developed markets are less efficient and, consequently, “exploitable by active fund managers.” The trio analyzed a large sampling of active retail mutual funds and institutional products investing in global equity markets, concentrating their research on a sample period from 1991 to 2009. The authors used quarterly returns net of trading costs and gross of fees. They also collected information on annual fee schedules, portfolio turnover, and assets under management. On average and in the aggregate, the data showed a lack of “superior performance” for the sampling. The research paper won the Spangler IQAM Best Paper in Investments Prize at the 2014 European Finance Association Annual Meeting in Lugano, Switzerland. Source:

Speculation and its impact on trading volume

Financial researchers have long wondered exactly which economic forces cause variation in asset prices and returns. For instance, traders will often target financial instruments due to their volatile and highly liquid nature, such as US treasury bonds. This speculative behavior takes advantage of the frequent price movements of the product. But the influence of that behavior remains the subject of debate. Francisco Barillas, assistant professor of finance, and Kristoffer Nimark (Cornell U) take a deep dive into the issue by investigating the impact of speculative trading activity on the variation of long maturity US bond yields. For their analysis, Barillas and Nimark use public information to develop a rational model to track “informed traders that take on speculative positions to exploit what they perceive to be inaccurate market expectations about future bond prices.” They argue that their research takes a more “suitable approach for empirical work” by factoring in how traders exploit private information that other traders may not have. The authors note that bond prices alone are not enough information for predicting bond returns. The two write, “If traders have access to different information, this price may differ from what an individual trader would be willing to pay for the bond if he had to hold it until maturity.” Ultimately, they find that this speculation remains a key driver of trading volume, accounting for a “substantial fraction of the variation in historical US bond yields along with the usual analysis of estimating returns based on bond prices.” Source:

Consumer word-of-mouth and social media

Certainly, marketers are well aware of the value of the consumers’ word-of-mouth (WOM) endorsements of a product or service. But the ubiquitous nature of social media demands that advertisers find new ways to tap into how consumers interact and communicate to leverage the power of WOM online. Panagiotis Adamopoulos, assistant professor of information systems & operations management; Vilma Todri, assistant professor of information systems & operations management; and Anindya Ghose (NYU-Stern) take a close look at the role of hidden personality traits of online users and how they play into the effectiveness of product WOM on Twitter. The trio used big data, machine learning methods, and causal inference econometric techniques to study consumer purchases made through Twitter accounts. The research showed an increase in the likelihood of a purchase by 47.58% when there was exposure to WOM tweets from a sender who had similar personality traits to the recipient of the information. The trio found that introvert users were much more accepting of WOM versus extrovert users. They also noted agreeable, conscientious, and open social media users are more effective influencers. The combinations of personality traits of disseminators and recipients of WOM impacted the decision to buy a product, with the researchers noting that a “WOM message from an extrovert user to an introvert peer increases the likelihood of a subsequent purchase by 71.28%.” Source: