Breaking the Cycle: How the News and Markets Created a Negative Feedback Loop in COVID-19
New research from CBS Professor Harry Mamaysky reveals how negativity in the news and markets can escalate a financial crisis.
New research from CBS Professor Harry Mamaysky reveals how negativity in the news and markets can escalate a financial crisis.
Adapted from “Global Value Chains in Developing Countries: A Relational Perspective from Coffee and Garments,” by Laura Boudreau of Columbia Business School, Julia Cajal Grossi of the Geneva Graduate Institute, and Rocco Macchiavello of the London School of Economics.
Adapted from “Online Advertising as Passive Search,” by Raluca M. Ursu of New York University Stern School of Business, Andrey Simonov of Columbia Business School, and Eunkyung An of New York University Stern School of Business.
This paper from Columbia Business School, “Meaning of Manual Labor Impedes Consumer Adoption of Autonomous Products,” explores marketing solutions to some consumers’ resistance towards autonomous products. The study was co-authored by Emanuel de Bellis of the University of St. Gallen, Gita Johar of Columbia Business School, and Nicola Poletti of Cada.
Co-authored by John B. Donaldson of Columbia Business School, “The Macroeconomics of Stakeholder Equilibria,” proposes a model for a purely private, mutually beneficial financial agreement between worker and firm that keeps decision-making in the hands of stockholders while improving the employment contract for employees.
At Columbia Business School, our faculty members are at the forefront of research in their respective fields, offering innovative ideas that directly impact the practice of business today. A quick glance at our publication on faculty research, CBS Insights, will give you a sense of the breadth and immediacy of the insight our professors provide.
As a student at the School, this will greatly enrich your education. In Columbia classrooms, you are at the cutting-edge of industry, studying the practices that others will later adopt and teach. As any business leader will tell you, in a competitive environment, being first puts you at a distinct advantage over your peers. Learn economic development from Ray Fisman, the Lambert Family Professor of Social Enterprise and a rising star in the field, or real estate from Chris Mayer, the Paul Milstein Professor of Real Estate, a renowned expert and frequent commentator on complex housing issues. This way, when you complete your degree, you'll be set up to succeed.
Columbia Business School in conjunction with the Office of the Dean provides its faculty, PhD students, and other research staff with resources and cutting edge tools and technology to help push the boundaries of business research.
Specifically, our goal is to seamlessly help faculty set up and execute their research programs. This includes, but is not limited to:
All these activities help to facilitate and streamline faculty research, and that of the doctoral students working with them.
Five studies investigated the hypotheses that the sense of power increases optimism in perceiving risks and leads to more risky behavior. In Studies 1 and 2, individuals with a higher generalized sense of power and those primed with a high-power mind-set were more optimistic in their perceptions of risk. Study 3 primed the concept of power nonconsciously and found that both power and gain/loss frame had independent effects on risk preferences. In Study 4, those primed with a high-power mind-set were more likely to act in a risk-seeking fashion (i.e., engage in unprotected sex).
The better able you are to "get inside the head" of your opponent, the better your negotiated outcomes are likely to be. But very few of us are born with the ability to take on the perspective of others effectively. Fortunately, this skill can be learned. The authors of this article show you how to use perspective taking — the active consideration and appreciation of another person's viewpoint, role, and underlying motivations — to understand your counterpart better and improve the quality of your deals.
This paper develops a theory of control as a signal of congruence of objectives, and applies it to financial contracting between an investor and a privately informed entrepreneur. We show that formal investor control is (i) increasing in the information asymmetries ex ante, (ii) increasing in the uncertainty surrounding the venture ex post, (iii) decreasing in the entrepreneur's resources, and (iv) increasing in the entrepreneur's incentive conflict. In contrast, real investor control—that is, actual investor interference—is decreasing in information asymmetries.
The authors demonstrate that in dyadic negotiations, negotiators with a promotion regulatory focus achieve superior outcomes than negotiators with prevention regulatory focus in two ways. First, a promotion focus leads negotiators to claim more resources at the bargaining table. In the first two studies, promotion-focused negotiators paid more attention to their target prices (i.e., their ideal outcomes) and achieved more advantageous distributive outcomes than did prevention-focused negotiators.
The present article offers a conceptual model for how the cognitive processes associated with perspective-taking facilitate social coordination and foster social bonds. We suggest that the benefits of perspective-taking accrue through an increased self-other overlap in cognitive representations and discuss the implications of this perspective-taking induced self-other overlap for stereotyping and prejudice.
Interest in the role of entrepreneurial entry in innovation raises the question of the extent to which tax policy encourages or discourages entry. We find that, while the level of the marginal tax rate has a negative effect in entrepreneurial entry, the progressivity of the tax also discourages entrepreneurship, and significantly so for some groups of households. These effects are principally traceable to the upside' or success' convexity of the household tax schedule.
Suppose you open talks with an important customer by making an aggressive first offer. He becomes offended. You back off a bit; he responds by trying to take advantage. This back-and-forth negotiation process, which many liken to a dance, can leave you shuffling endlessly around the issues, while resentment builds on both sides. Fortunately, a versatile strategy exists that allows you to take the lead in the dance: multiple equivalent simultaneous offers, or MESOs.
While recent research has emphasized the desirability of studying effects of changes in marginal tax rates on taxable income, broadly defined, there has been comparatively little analysis of effects of marginal tax rate changes on entrepreneurial entry. This margin is likely to be important both because of the likely greater elasticity of entrepreneurial decisions with respect to tax changes (relative to decisions about hours worked) and because of recent research linking entrepreneurship, mobility, and household wealth accumulation.
The current experiment explored the effect of activating a counterfactual mind-set on the discussion of unique information and group judgment accuracy. Evidence suggests that a counterfactual mind-set is characterized by a focused, analytic mental state and, when activated at the group level, improves group judgment accuracy in the murder mystery paradigm (a hidden profile task).
We hypothesized that the activation of a counterfactual mind-set minimizes group decision errors caused by the failure of groups to discuss unshared, uniquely held information. In two experiments, we manipulated the salience of counterfactual thoughts in a pre-task scenario and then had groups of three individuals discuss a murder mystery case. In both experiments, counterfactual mind-sets increased the discussion of unshared information and helped groups to identify the correct murder suspect.
We analyze the Pareto optimal contracts between lenders and borrowers in a model with asymmetric information. The model generalizes the Rothschild-Stiglitz pure adverse selection problem by including moral hazard. Entrepreneurs with unequal "abilities" borrow to finance alternative investment projects which differ in degree of risk and productivity. We determine the endogenous distribution of projects as functions of the amount of loanable funds, when lenders have no information about borrowers' ability and technological choices.
Perspective-taking, by means of creating an overlap between self and other cognitive representations, has been found to effectively decrease stereotyping and ingroup favoritism. In the present investigation, the authors examined the potential moderating role of self-esteem on the effects of perspective-taking on prejudice. In two experiments, it was found that perspective-takers, but not control participants, with temporarily or chronically high self-esteem evaluated an outgroup more positively than perspective-takers with low self-esteem.
Two experiments explored the hypothesis that the impact of activating gender stereotypes on negotiated agreements in mixed-gender negotiations depends on the manner in which the stereotype is activated (explicitly vs. implicitly) and the content of the stereotype (linking negotiation performance to stereotypically male vs. stereotypically female traits). Specifically, two experiments investigated the generality and limits of stereotype reactance.
Negotiation scholars and practitioners have long noted the impact of face, or social image, concerns on negotiation outcomes. When face is threatened, negotiators are less likely to reach agreement and to create joint gain. In this paper, we explore individual differences in face threat sensitivity (FTS), and how a negotiator's role moderates the relationship of his or her FTS to negotiation outcomes. Study 1 describes a measure of FTS. Study 2 finds that buyers and sellers are less likely to reach an agreement that is in both parties' interests when the seller has high FTS.
This article focuses on the role of threats in negotiations. Broadly speaking, a threat is a proposition that issues demands and warns of the costs of noncompliance. Even if neither party resorts to them, potential threats shadow most negotiations. Researchers have found that people actually evaluate their counterparts more favorably when they combine promises with threats rather than extend promises alone. Whereas promises encourage exploitation, the threat of punishment motivates cooperation.
Three experiments investigated the hypothesis that power increases an action orientation in the power holder, even in contexts where power is not directly experienced. In Experiment 1, participants who possessed structural power in a group task were more likely to take a card in a simulated game of blackjack than those who lacked power. In Experiment 2, participants primed with high power were more likely to act against an annoying stimulus (a fan) in the environment, suggesting that the experience of power leads to the performance of goal-directed behavior.
We hypothesized that the activation of a counterfactual mind-set minimizes decision errors resulting from the failure of groups to seek disconfirming information to test an initial hypothesis. To test this hypothesis, we conducted two experiments examining the decision making processes of groups. The task for both experiments was modeled after the Space Shuttle Challenger disaster, and groups had to actively seek disconfirmatory information to make a correct decision.
Four studies explored behavioral forecasting and the effect of competitive expectations in the context of negotiations. Study 1 examined negotiators' forecasts of how they would behave when faced with a very competitive versus a less competitive opponent and found that negotiators believed they would become more competitive.
Three experiments explored the effect of outcome delays — longer time horizons for the realization of outcomes — on the efficiency of negotiated agreements. We hypothesized that there would be a positive relationship between a longer temporal distance to the consequences of negotiated agreements and the efficiency of those agreements. Outcome delays did increase the efficiency of the negotiated agreements. In addition, type of resource, burden or benefit, moderated this relationship.
We examine how gender stereotypes affect performance in mixed-gender negotiations. We extend recent work demonstrating that stereotype activation leads to a male advantage and a complementary female disadvantage at the bargaining table (Kray, Thompson, & Galinsky, 2001). In the present investigation, we regenerate the stereotype of effective negotiators by associating stereotypically feminine skills with negotiation success.
Three experiments explored the role of negotiator focus in disconnecting negotiated outcomes and evaluations. Negotiators who focused on their target prices, the ideal outcome they could obtain, achieved objectively superior outcomes compared with negotiators who focused on their lower bound (e.g., reservation price). Those negotiators who focused on their targets, however, were less satisfied with their objectively superior outcomes.
Verhandlungen spielen eine entscheidende Rolle in all jenen Lebensbereichen, die durch Interessenskonflikte gegenzeichnet sind. In Verhandlungssituationen sind relevante Informationen typischer Weise in unzureichendem Maße vorhanden, so dass Verhandlungen meist unter Unsicherheit geführt werden. Folglich sollten Prozesse der Verhandlungsführung von denjenigen psychologischen Mechanismen bestimmt sein, die gemeinhin menschliches Urteilen und Entscheiden unter Unsicherheit charakterisieren.
In this article, the authors explore the role of individuals' counterfactual thoughts in determining their satisfaction with negotiated outcomes. When negotiators' first offers are immediately accepted, negotiators are more likely to generate counterfactual thoughts about how they could have done better and therefore are less likely to be satisfied with the agreement than are negotiators whose offers are not accepted immediately.
The authors examined how gender stereotypes affect negotiation performance. Men outperformed women when the negotiation was perceived as diagnostic of ability (Experiment 1) or the negotiation was linked to gender-specific traits (Experiment 2), suggesting the threat of negative stereotype confirmation hurt women's performance relative to men.
In this paper we review the literature on first offers in negotiations. We explore the determinants of who will make the first offer, how extreme that first offer will be, what effect the first offer has on the value of the final outcome, and how first offers influence post-negotiation evaluations. The PDF attached here may not exactly replicate the final version published in the APA journal. It is not the copy of record. Copyright © 2001 by the American Psychological Association. Reproduced with permission.
We demonstrate that counterfactuals prime a mental simulation mind-set in which relevant but potentially converse alternatives are considered and that this mind-set activation has behavioral consequences. This mind-set is closely related to the simulation heuristic (Kahneman & Tversky, 1982). Participants primed with a counterfactual were more likely to solve the Duncker candle problem (Experiment 1), suggesting that they noticed an alternative function for one of the objects, an awareness that is critical to solving the problem.
In this article, the authors focus on impacts of tax rates and, in particular, tax progressivity on the decision to become an 'entrepreneur.' While a proportional tax with a full loss offset will not affect the entry decision for a risk-neutral individual, a progressive schedule with imperfect loss offsets can discourage entry. The authors find substantial evidence for this effect on entrepreneurship using variation in tax schedules faced by households in the Panel Study on Income Dynamics (PSID) over the period from 1979 to 1992.
Previous theories of financial market rationing focussed on a single market, either the credit or the equity market. An interesting question is whether credit and equity rationing are mutually compatible, and how they interact. We consider a model with two-dimensional asymmetric information, where entrepreneurs have private information about both the expected returns and the risk of their projects. We show that credit and equity rationing may occur individually or simultaneously.
Using 3 experiments, the authors explored the role of perspective-taking in debiasing social thought. In the 1st 2 experiments, perspective-taking was contrasted with stereotype suppression as a possible strategy for achieving stereotype control. In Experiment 1, perspective-taking decreased stereotypic biases on both a conscious and a nonconscious task.
Three experiments tested whether counterfactual events can serve as primes. The evidence supports the hypothesis that counterfactuals prime a mental simulation mind-set that leads people to consider alternatives. Exposure to counterfactual scenarios affected person perception judgments in a later, unrelated task and this effect was distinct from semantic construct priming. Moreover, these effects were dependent on the availability of salient possible outcomes in the person perception task.
In this study, 4 experiments demonstrated that priming effects depend on the context-appropriate meaning of the prime words. Most studies of semantic construct activation have presented prime words in contexts where the meaning of each word was invariant. The authors used words in contexts that supported either literal or figurative meanings, and found that only the context-appropriate meanings had subsequent priming effects on person-perception judgments.
The research in this article examined the consequences of a failed attempt to reduce dissonance through a self-affirmation strategy. It was hypothesized that disconfirming participants' affirmations would reinstate psychological discomfort and dissonance motivation. In Experiment 1, high-dissonance participants who affirmed on a self-relevant value scale and received disconforming feedback about their affirmations expressed greater psychological discomfort (Elliot & Devine, 1994) than either affirmation-only participants or low-dissonance/affirmation disconformed participants.
Beneath the pounding of the percussion and sonority of the strings, beyond the reach of the conductor's gesticulations and exhortations, behind the serenity of the crowd's spirit looms the daunting, incessant, and necessary process of funding a symphony orchestra, of creating and maintaining a public for its music.
Faced with turbulent national and international environments, entire U.S. industries-most notably steel and automobiles-have revealed a distinct propensity to overlook radically new types of competitors, cling to traditional technologies, and remain mired in similar, yet outdated, strategic postures. In this article, we ascribe the adaptive failures of entire industries not only to the micro-cultures of single organizations, but also to what we term inter-organizational "macro-cultures"-relatively idiosyncratic beliefs that are shared by managers across organizations.
Why do some new ventures succeed while others fail? What is the essence of entrepreneurship? Who is most likely to become a successful entrepreneur and why? How do entrepreneurs make decisions? What market, regulatory, and organizational environments foster the most successful entrepreneurial activities? Entrepreneurship research is plagued by these and other fundamental unanswered questions, for which there does not exist a cohesive explanatory, predictive, or normative theory.
We analyze incomplete long-term financial contracts between an entrepreneur with no initial wealth and a wealthy investor. Both agents have potentially conflicting objectives since the entrepreneur cares about both pecuniary and non-pecuniary returns from the project while the investor is only concerned about monetary returns.
Four groups are identified among 113 Fortune 500 manufacturers that approach innovation quite differently. The groups are based on 27 measured elements of formal and informal organization, corporate strategy, and corporate environment. Both financial performance and product innovation differ significantly among the groups. A group of 42 firms that invest heavily in innovation perform the best financially, with a smaller group of firms that are not innovative but which follow a strategy of acquisition performing nearly as well financially.
Four groups are identified among 113 Fortune 500 manufacturers that approach innovation quite differently. The groups are based on 27 measured elements of formal and informal organization, corporate strategy, and corporate environment. Both financial performance and product innovation differ significantly among the groups. A group of 42 firms that invest heavily in innovation perform the best financially, with a smaller group of firms that are not innovative but which follow a strategy of acquisition performing nearly as well financially.
Four groups are identified among 113 Fortune 500 manufacturers that approach innovation quite differently. The groups are based on 27 measured elements of formal and informal organization, corporate strategy, and corporate environment. Both financial performance and product innovation differ significantly among the groups. A group of 42 firms that invest heavily in innovation perform the best financially, with a smaller group of firms that are not innovative but which follow a strategy of acquisition performing nearly as well financially.
A number of issues that relate to the desirability and implications of new venture financing are examined within a principal-agent framework that captures the essence of the relationship between entrepreneurs and venture capitalists. The model suggests: (1) As long as the skill levels of entrepreneurs are common knowledge, all will choose to involve venture capital investors, since the risk sharing provided by outside participation dominates the agency relationship that is created.
An analysis of the environments of leading manufacturing firms operating in the United States and in Australia produced a series of hypothesized differences in the strategies, organization structures, and market environments of firms in the two countries. Parallel hypotheses about differences between domestic Australian firms and subsidiaries of foreign multinationals operating in Australia were also developed. The hypotheses were by and large supported when tested on data obtained from leading corporations in the two countries.
An analysis of the environments of leading manufacturing firms operating in the United States and in Australia produced a series of hypothesized differences in the strategies, organization structures, and market environments of firms in the two countries. Parallel hypotheses about differences between domestic Australian firms and subsidiaries of foreign multinationals operating in Australia were also developed. The hypotheses were by and large supported when tested on data obtained from leading corporations in the two countries.
We show theoretically that a critical determinant of the attractiveness of VC-backed entrepreneurship for high-earning potential founders is the expected time to develop a startup’s initial product. This is because founder-CEOs’ cash compensation increases substantially after product development, alleviating the non-diversifiable risk that founders face at startup birth.
Economic frictions pervade the founding, financing, growing, and exiting of high-growth entrepreneurial firms. This chapter considers one friction that currently affects a small, but important, set of entrepreneurs: racial and gender discrimination. I first collect facts from a large empirical literature that show clear gender and race gaps in participation and financing of startups. Female founders manage 16-25% of all startups, while Black entrepreneurs rarely exceed 3% of the startup population.