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Sustainability: New Perspectives and Opportunities
Sustainability: New Perspectives and Opportunities
Source: Knowledge@Wharton
After five decades of sustainability debates and policymaking, the world still lacks a comprehensive strategy that recognizes the complexity of the issues. This report, produced by the Joseph H. Lauder Institute of Management & International Studies at the University of Pennsylvania, analyzes the main aspects of sustainability — from the environmental challenges facing cultures around the globe to the quest for a sustainable supply of water and food. Green business practices are seen through the lens of the tradeoffs involved and consumers’ attitudes towards the environment. The report also looks at what kinds of governance structures are needed to encourage sustainability worldwide and to improve collaboration among government officials, companies and nonprofit organizations.
Greening the Supply Chain: Best Practices and Future Trends
Greening the Supply Chain: Best Practices and Future Trends
Source: Knowledge@Wharton (University of Pennsylvania)
The more corporations around the globe focus on sustainability, the more they realize that their greatest challenges and opportunities often lie outside their own offices and manufacturing plants. To make a truly significant lifecycle leap, large companies have to work on greening their supply chains.
Recognizing this, Wharton’s Initiative for Global Environmental Leadership (IGEL) devoted its 2012 annual conference to “Greening the Supply Chain: Best Business Practices and Future Trends.” Attended by noted academics and professionals, the conference covered a broad range of topics.
This special report, a collaboration between IGEL and Knowledge@Wharton, zeroes in on four of the most pressing issues in the field, using information from the conference, as well as additional interviews and research.
Insurer Pricing and Consumer Welfare: Evidence from Medigap
Insurer Pricing and Consumer Welfare: Evidence from Medigap (PDF)
Source: Wharton School, University of Pennsylvania
While adverse selection is often blamed for inefficiently high insurance premiums, imperfect competition is also a pervasive feature of many health insurance markets. In Medicare Supplement Insurance (Medigap), two firms control nearly three-fourths of the market, and premiums exceed claims by 30 percent. I find that, while adverse selection can restrain markups, low price elasticity and consumers’ brand preferences create incentives for firms to engage in substantial marketing and price above cost. I conclude that the strategic behavior of insurers facing relatively inelastic demand is critical in explaining poor market performance and loss of consumer surplus, and find that insurers do not capture all of the rents in this market.
Bayesball: A Bayesian Hierarchical Model for Evaluating Fielding in Major League Baseball
Bayesball: A Bayesian Hierarchical Model for Evaluating Fielding in Major League Baseball (PDF)
Source: Wharton School, University of Pennsylvania
The use of statistical modeling in baseball has received substantial attention recently in both the media and academic community. We focus on a relatively under-explored topic: the use of statistical models for the analysis of fielding based on high-resolution data consisting of on-field location of batted balls. We combine spatial modeling with a hierarchical Bayesian structure in order to evaluate the performance of individual fielders while sharing information between fielders at each position. We present results across four seasons of MLB data (2002–2005) and compare our approach to other fielding evaluation procedures.
See: Sports by the Numbers: Predicting Winners and Losers (Knowledge@Wharton Today)
How Interest Shapes Word-of-Mouth Over Different Channels
Consumers share word-of-mouth face-to-face, online, and through various other channels. But do these channels affect what people talk about, and if so, how? Analysis of over 21,000 conversations, as well as a laboratory experiment, demonstrate that conversation channel continuity norms shape what gets discussed. In discontinuous conversation channels (e.g., online posts or text), pauses between conversational turns are expected, so people have time to select and craft what they say. Consequently, more interesting products should be talked about more than boring ones. In channels where conversations are expected to occur more continuously (e.g., face-to-face or on the phone), however, there is less time to selectively pick what one talks about. Consequently, how interesting products are to talk about should have less of an impact on whether they get discussed. These findings shed light on what drives word-of-mouth and how companies can design effective word-of-mouth campaigns.
Intelligent Management of Intelligence Agencies
The intelligence community (IC) is asked to predict outcomes that may often be inherently unpredictable—and is blamed for the inevitable forecasting failures, be they false positives or false negatives. To move beyond blame games of accountability ping-pong that incentivize bureaucratic symbolism over substantive reform, it is necessary to reach bipartisan agreements on performance indicators that are transparent enough to reassure clashing elites (to whom the IC must answer) that estimates have not been politicized. Establishing such transideological credibility requires (a) developing accuracy metrics for decoupling probability and value judgments; (b) using the resulting metrics as criterion variables in validity tests of the IC’s selection, training, and incentive systems; and (c) institutionalizing adversarial collaborations that conduct level playing-field tests of clashing perspectives.
Severe Weather and Automobile Assembly Productivity
It is expected that climate change could lead to an increased frequency of severe weather. In turn, severe weather intuitively should hamper the productivity of work that occurs outside. But what is the effect of rain, snow, fog, heat and wind on work that occurs indoors, such as the production of automobiles? Using weekly production data from 64 automobile plants in the United States over a ten-year period, we find that adverse weather conditions lead to a significant reduction in production. For example, one additional day of high wind advisory by the National Weather Service (i.e., maximum winds generally in excess of 44 miles per hour) reduces production by 26%, which is comparable in order of magnitude to the estimated productivity drop during the launch of a new vehicle. Furthermore, the location with the best weather (Arlington, Texas) only loses 2% of production per year due to the weather, whereas the location with the most adverse weather (Lordstown, OH) suffers an annual production loss of 11%. Our findings are useful both for assessing the potential aggregate productivity shock associated with inclement weather as well as guiding managers on where to locate a new production facility – in addition to the traditional factors considered in plant location (e.g., labor costs, local regulations, proximity to customers, access to suppliers), we add the prevalence of bad weather.
Transformative Times: New Opportunities for Business in an Era of Upheaval
Transformative Times: New Opportunities for Business in an Era of Upheaval
Source: Knowledge@Wharton
In the 20 articles that make up this special report, students from the Joseph H. Lauder Institute of Management & International Studies explore the many ways that the business community has responded to changes in our global economy. They look at individual companies and industry trends, and analyze how startups as well as established firms are taking advantage of transformative events around the world.
Can Venture Capital Really Influence Environmental Sustainability?
Can Venture Capital Really Influence Environmental Sustainability? (PDF)
Source: Knowledge@Wharton
Startup companies are developing a wide range of new — and sometimes exotic — sustainable-energy technologies to help countries move away from their dependence on dwindling and greenhouse-gas producing fossil fuels. In this special report from the 2011 Wharton Global Alumni Forum in San Francisco, Knowledge@Wharton surveys the role and limitations of venture capital in contributing to this transformation.
Different Worlds: Do Recommender Systems Fragment Consumers’ Interests?
Different Worlds: Do Recommender Systems Fragment Consumers’ Interests?
Source: Knowledge@Wharton
The rise of computer-driven recommendation systems designed to help consumers navigate a growing ocean of choice is prompting concerns that the hyperpersonalization of information sources will lead to harmful divisions throughout society.
New Wharton research into consumer purchasing patterns suggests the opposite. An empirical study of music recommendations indicates that receiving suggestions tailored to individual listeners actually widens exposure to new products and fosters human bonds.
In a paper titled, “Will the Global Village Fracture into Tribes: Recommender Systems and their Effects on the Consumer,”researchers examined iTunes purchases and networks that developed among people who had signed onto a service that uses a recommendation system to suggest songs the listeners might like.
The researchers found that rather than creating entrenched factions, recommender systems expand the reach of individual consumers across wider networks of people, building on common interests among listeners who expose one another to new artists. “What we found in our setting was that commonality increased among users, and people seemed to be using personalization to widen their interests and explore new things — in this case music,” says Wharton professor of operations and information management Kartik Hosanagar, co-author of the paper along with Wharton statistics professor Andreas Buja and Daniel M. Fleder, who earned a PhD at Wharton in 2009.
+ Full Paper (via SSRN)
Gamification: Why Playing Games Could Be the Next Big Thing for Business
Gamification: Why Playing Games Could Be the Next Big Thing for Business
Source: Knowledge@Wharton
Gamification — the application of online game design techniques in non-game settings — has been quickly gaining the attention of leaders in business, education, policy and even terrorist communities. But gamification also has plenty of critics, and the debate over its future could become an epic battle in the same vein of many online game favorites. This special report includes coverage of a recent Wharton conference titled, “For the Win: Serious Gamification,” in addition to interviews with conference participants who discuss the use of gamification in business, government and other arenas.
Decision Quicksand: When Trivial Choices Suck Us In
Decision Quicksand: When Trivial Choices Suck Us In (PDF)
Source: University of Pennsylvania (via Jonah Berger)
Consumers often get unnecessarily mired in trivial decisions. Four studies support a metacognitive account for this painful phenomenon. Our central premise is that people use subjective experiences of difficulty while making a decision as a cue to how much further time and effort to spend. People generally associate important decisions with difficulty. Consequently, if a decision feels unexpectedly difficult, due to even incidental reasons, people may draw the reverse inference that it is also important, and consequently increase the amount of time and effort they expend. Ironically, this process is particularly likely for decisions that initially seemed unimportant because people expect them to be easier (whereas important decisions are expected to be difficult to begin with). Our studies not only demonstrate that unexpected difficulty causes people to get caught-up in unimportant decisions, but also to voluntarily seek more options, which can increase decision difficulty even further.
Unheeded Lessons: What Did We Fail to Learn from the Financial Crisis?
Unheeded Lessons: What Did We Fail to Learn from the Financial Crisis?
Source: Knowledge@Wharton (University of Pennsylvania)
Nearly two years after the financial meltdown of September 2008, is the global economy any less risky? Or do the conditions that led to the crisis still persist? These questions and more were at the heart of a conference titled, “Global Risk: New Perspectives and Opportunities,” organized at Wharton by Penn Lauder CIBER (Center for International Education and Research) and Santander Universities. The consensus: We managed to respond to the immediate threats, but the longer-term drivers of instability are still active.
According to Nouriel Roubini, an economist at New York University’s Stern School of Business, the major risks to the U.S. economy include “deleveraging of the household sector, high unemployment, a housing double dip, state and local government problems, and gridlock in Congress.” Pushing these issues off to the future could cause a bond market revolt. High-growth developing countries are another source of risk. “Emerging markets are growing very fast,” said Roubini, noting that there is a danger of their overheating.
+ Full Conference Report (PDF)
When Engaging with Your Stakeholders Is Worth Its Weight in Gold
When Engaging with Your Stakeholders Is Worth Its Weight in Gold
Source: Knowledge@Wharton (University of Pennsylvania)
Wharton management professor Witold Henisz has been studying political and social risk management for 15 years, focusing mainly on strategies of avoidance — i.e., better identification of risky places to do business, and then helping companies minimize their exposure to them. Recently, he discovered a way to distinguish the payoff in “engag[ing] with these risky environments. What strategies did firms that decided to enter these markets follow? Why did some succeed and others fail?”
The result is a research paper titled “Spinning Gold: The Financial Returns to External Stakeholder Engagement,” by Henisz and Sinziana Dorobantu, a senior research fellow and lecturer at Wharton, and Lite Nartey, an assistant professor at the University of South Carolina.
The authors used data from 26 gold mines owned by 19 publicly traded firms between 1993 and 2008. By coding more than 50,000 “stakeholder events” found in media reports, Henisz and his colleagues developed an index of the degree of stakeholder cooperation or conflict for these mines.
The term “stakeholders” in this context, says Henisz, includes everyone from local and national politicians and community leaders to priests, war lords, paramilitary groups, NGOs and international bodies like the World Bank. The term “stakeholder event” includes reported actions or expressions of sentiment from these groups that indicate cooperation with the mine owners, as well conflict with them. “At one extreme would be militia attacks on mines in the Congo. The other extreme would be groups in the Congo organizing to defend a mine from such an attack,” Henisz notes. Other events are far less extreme, such as peaceful protests by community leaders or demonstrations by environmental NGOs like Greenpeace or the World Wildlife Federation. The mines are so big, Henisz adds, that “whoever the politically relevant stakeholders in an area are, they often take sides because so much money and so many jobs are at stake.”
+ Full Paper (PDF)
2011 Wharton Private Equity Review: Gradually Regaining Ground
2011 Wharton Private Equity Review: Gradually Regaining Ground
Source: Knowledge@Wharton (University of Pennsylvania)
The financial meltdown of 2008-2009 and the resulting global recession dealt a painful blow to private equity investing, and the industry is still recovering. In this special report, based on the 2011 Wharton Private Equity and Venture Capital Conference, Knowledge@Wharton examines the industry’s gradual comeback.
+ Full Report (PDF)
Mission Critical: 15 Principles to Help Leaders Meet Their Toughest Challenges
Mission Critical: 15 Principles to Help Leaders Meet Their Toughest Challenges
Source: Knowledge@Wharton
In his new book, The Leader’s Checklist, Wharton management professor Michael Useem presents a collection of 15 principles that can help leaders navigate successfully through even the most difficult circumstances. Using such milestone events as the rescue of the 33 Chilean miners in 2010, the collapse of AIG in 2008 and the surrender of the Confederate army at Appomattox in 1865, Useem illustrates the difference between good and bad leadership, and how to achieve one’s own personal leadership success. The Leader’s Checklist is the first ebook published by Wharton Digital Press. To mark the occasion, the book will be available as a free download at leading retailers until June 28, 2011.
Useem, who is director of Wharton’s Center for Leadership and Change Management, talked with Knowledge@Wharton about his book. Also included is a video conversation between Useem and Laurence Golborne, Chile’s mining minister, who is a speaker at this year’s Leadership Conference 2011 titled, “Leading in a Reset Economy and Uncertain World.” The conference is co-sponsored by the Leadership Center and Wharton’s Center for Human Resources.
Below is an edited transcript of the conversation.
Healthy Business: Will Medical Tourism Be India’s Next Big Industry?
Healthy Business: Will Medical Tourism Be India’s Next Big Industry?
Source: India Knowlege@Wharton
In the past, U.S. President Barack Obama has singled out India for what he sees as the country usurping American jobs and business. In May 2009, he removed some tax incentives for U.S. companies who allegedly preferred to outsource rather than create domestic jobs. “Buffalo before Bangalore” was his rallying call at the time. Now, India is back in his crosshairs. In April 2011, he told a town hall gathering in Virginia that Americans shouldn’t have to go to India or Mexico for “cheap” health care. “I would like you to get it right here in the U.S.,” he said.
“It’s a 100% political statement,” Gopal Dabade, convener of the All India Drug Action Network, told weekly newsmagazine India Today. Others in India were equally critical and dismissive. But some have taken more serious objection. “Not acceptable,” says federal health minister Ghulam Nabi Azad. Affordable health care does not mean our medicine is inferior to any superpower’s. I would like to say our medicines are indigenous, they are superior, and superiority does not come by escalating costs.”
The bone of contention is the word “cheap.” Obama probably used the term in the sense of less expensive. But Indians have interpreted it as meaning “tawdry and inferior.” Analysts don’t expect Obama’s political posturing to make any difference to the flow of U.S. medical tourists into India. But there is a lurking fear, nevertheless, that a nascent sector could be hamstrung at birth.
Global Philanthropy: Why Western Models May Not Work Everywhere
Global Philanthropy: Why Western Models May Not Work Everywhere
Source: India Knowledge@Wharton
Warren Buffett and William Gates are targeting billionaires: They want the world’s wealthy to contribute at least 50% of their fortunes to charity by joining a global initiative called the Giving Pledge. By the end of April, the 69 donors who had signed up so far included Larry Ellison, David Rockefeller, Ted Turner and Mark Zuckerberg. In India, there are none. When Buffett and Gates were visiting the country in March this year to push their cause, G.M. Rao, infrastructure tycoon and head of the GMR Group, announced that he was donating US$340 million — his personal share in the business — to charity. But he clarified it had nothing to do with the visiting duo. In China, which Buffett and Gates had visited in September 2010, billionaire philanthropist Chen Guangbiao said he would donate not half but all of his personal wealth to charity. According to a Reuters report, he had convinced 100 other Chinese businessmen to do the same. Still, seven months later, none of their names are on the Pledge. “[Buffett and Gates] don’t understand China,” says Feng Gang, professor of sociology at the Zhejiang University in Hangzhou. Adds Harsh Goenka, chairman of the Mumbai-based RPG Enterprises: “[In India,] our charity is not about writing fat checks.”
Following their trips to the two fastest-growing economies in the world — India and China — the two billionaire philanthropists seem to have realized that in charitable giving, one size does not fit all. “A number of people have shown interest in knowing more about what we are doing in the U.S., but it doesn’t mean that it should be done the same way in India,” Buffett told India Knowledge@Wharton in Bangalore. “You have your own culture, your own history. All we are here to do is talk about what we have been doing. When we were in China, we met around 50 to 60 billionaires, and I was astounded, frankly, that one after the other they stood up and talked about the same things that people talk about in the U.S. — their families, their business, their hopes, their fears, everything. When people talk to each other, they learn. We can all learn from each other.” Added Gates, who spoke to the media in New Delhi: “Each country should decide what model of philanthropy makes sense to them.”
Private Equity in the Middle East: Gathering Strength as New Opportunities Unfold
Private Equity in the Middle East: Gathering Strength as New Opportunities Unfold (PDF)
Source: Knowledge@Wharton
Two major upheavals have rocked the Middle East and North Africa (MENA) region in recent years. The global financial crisis of 2009 slowed the rapid economic growth that the region had been enjoying, while the turmoil that has swept from Tunisia to Bahrain — the so-called Arab Spring — has shaken the political landscape. In this four-part special report, experts at Wharton and Amwal AlKhaleej, a leading Middle East-focused private equity firm, and other analysts explore the outlook for private equity across MENA in light of these developments. While the financial crisis slowed the expansion of private equity deals, the improving economy will open up fresh opportunities for investment over the long term, particularly for firms with close ties to the region. In the short run, however, while the political situation remains uncertain, investors will likely favor more liquid assets.
Development and Pilot Testing of a Dynamic Hurricane Simulator for the Laboratory Study of Hurricane Preparedness and Mitigation Decisions
Development and Pilot Testing of a Dynamic Hurricane Simulator for the Laboratory Study of Hurricane Preparedness and Mitigation Decisions (PDF)
Source: Wharton School, University of Pennsylvania
A potential new laboratory approach to understanding the dynamics on individual preparedness responses to hurricane threats is described and illustrated. Termed Dynamic Information Acceleration, the approach immerses participants in a realistic simulation that recreates via the web the information dynamics that precede decisions to invest in protection against both long term (mitigation) and short-term (preparedness) hurricane threats. In addition to providing data describing how information is gathered and utilized over time to make protective decisions in light of changing beliefs about hurricane threats, it provides a tool for experimentally testing alternative policies for enhancing investments in preparedness and mitigation. A prototype system is described that is designed to measure the timing and nature of preparedness actions in response to a hypothetical hurricane threat in South Florida. Incentive compatibility is achieved by imbedding the simulation in a time-management game played for real compensation in which participants trade off time that could be allocated to undertaking utility-generating activities such as work and recreation, with that which could be allocated to undertaking protective actions, such as putting up shutters. The findings of a pilot application of the simulation is reported, which is used to provide evidence on the effect of alternative stormforecast graphics on overall levels of storm preparedness.
