Tuck Forum

Tuck Forum—a report on new research at the school—is published twice a year by the Office of Creative Services. To read the full articles, download the PDFs below.

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WINTER 2008 VOLUME X, NUMBER 2

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Security Issue Timing: Betting on a Sure Thing
How clear is the corporate crystal ball when it comes to timing security issues? Can managers anticipate changes in their companies’ share value? Do they use this ability to turn a profit for their corporations? Solid evidence from research by Professor Katharina Lewellen and colleagues indicates that managers are effective at identifying mispricing of their own securities and are willing to exploit it by selling or buying securities using the corporate account.

Airline Alliances: Better Ways to Share the Pie
Imagine two kids splitting a piece of pie while both hold the knife. That’s a lot like two airlines splitting revenues in a code-sharing arrangement, except when the airlines are done, they may end up sharing a smaller pie. According to Professor Rob Shumsky, sharing agreements among alliance members may actually be limiting revenue for the alliance as a whole. Research by Shumsky and colleagues points toward new types of algorithms that may improve everyone’s take.

Social Marketing Kick-Starts Savings
Putting money from each paycheck into a retirement fund is common sense to the financially savvy. But that doesn't describe most Americans. To prod voluntary retirement savings, employers use signup bonuses, financial planning seminars, and one-on-one counseling, only to encounter scant interest and a drop in participation when incentives dry up. But Professor Punam Anand Keller has used social marketing research to devise a better, less costly way.

•Work in Progress:
Finding Insight in Unsolvable Problems: Professor Stephen Powell and Bob Batt T'06 love a challenge, and ill-structured business problems give it to them. In their new book, Modeling for Insight, they present an original approach to modeling those kinds of problems, which cannot be solved in the conventional sense but can be explored for useful insights.

•On the Edge:
Buzz in Advertising: Are consumer word-of-mouth and marketers' advertising substitutes or complements? The prevailing view is that favorable consumer buzz renders mass-media advertising superfluous. However, according to a new study of the U.S. DVD market by Tuck Professor Jackie Luan and K. Sudhir of Yale, there is substantial synergy between buzz and ads.

What They See Can Still Hurt: Chinese manufacturers usually price exports in U.S. dollars, regardless of destination. So as the Chinese renminbi (RMB) rises in value, exporters’ net revenues fall—roughly a half percent drop in revenues for a one percent appreciation of the currency. For a forthcoming research paper, Professor Andrew Bernard surveyed Chinese textile manufacturers and found that managers are aware of this relationship and perceive that their operating exchange rate exposure corresponds to the RMB dollar rate.

Laissez-Faire Vs. the Power to Act: Investor expropriation often takes the form of selfdealing transactions. In their current research, Professor Rafael La Porta and his colleagues examine how laws in 72 countries regulate a hypothetical transaction in which a controlling shareholder wants to enrich himself without breaking the law.

winter 2007, Volume X, number 1

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Do You Know Where Your Competition Is?
Tuck Professors Koen Pauwels and Richard D'Aveni have created an innovative method of using "price-value maps" to uncover the nature and structural changes of competition in fast-changing markets and help managers profit from change.

How the World Works. Sort of.
Generations of distinguished scholars have continued to tweak the capital asset pricing model (CAPM) and debate it, among them Tuck Professor Jonathan Lewellen. "The CAPM," explains Lewellen, "is a way to measure risk, and, in some ways, it's the right way."

•Work in Progress:
Filling the Knowledge Gaps in Database Marketing
In their very big book—Database Marketing: Theory and Practice—Professor Scott Neslin and his coauthors summarize,
distill, and synthesize the academic research that has been done across the full spectrum of database marketing.

On the Edge—Snapshots of Research at Tuck:
Women Executives: A Long Way to Go
According to a six-year study led by Professor Constance Helfat, companies headed by women are projected to increase from 2 percent now to 6.2 percent in 2016. "Not very impressive," says Helfat, "considering that by 2016 it will have been 40 years since women entered corporate management in force."

Hidden Costs of Borrowing
New research by Tuck Professor Victor Stango and Dartmouth Professor Jonathan Zinman reveals that people who underestimate borrowing costs most suffer the most adverse consequences, highlighting the crucial role of financial literacy.

Karma and the  Consumer
Tuck Professors Praveen Kopalle and John U. Farley, along with Donald Lehmann of Columbia University, have identified how belief in karma creates a direct positive effect on expectations of Indian consumers.

Fall 2005, Volume IX, number 1

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IPOs: Why Does Bookbuilding Remain Popular?
It's a case of practice not lining up with theory, and Tuck Professor Kent Womack wants to know why. In theory, auctioning initial public offerings (IPOs) directly to investors should net the issuing company the most money at the lowest cost. And thanks to the Internet, technology to conduct large-scale auctions is readily available. But only a handful of companies—most notably Google and Morningstar—have auctioned their IPOs in recent years. Instead, almost every IPO in the U.S. is conducted by bookbuilding, a traditional system in which the investment banks underwriting the offering have discretion to determine who gets shares and to set share price in advance.

Internal Fit Matters: Efficiency in the Airline Industry
Before the U. S. airline industry was deregulated in the early '80s, the government's Civil Aeronautics Board controlled operational variables that were critical to how airlines worked. After deregulation, managers suddenly faced a new world of unrestricted strategic choice as they gained unlimited latitude over operational variables and business practices, and overall efficiency of airline improved. Many studies of airline deregulation suggest that efficiency gains were due to increases in the scale and scope of operations. But a new study by Tuck Professor Margaret A. Peteraf and coauthor Randal Reed—using a large-scale statistical model and data on the airlines industry from 1977 to 1986—is the first to demonstrate empirically that managerial choice enhanced efficiency as well. In particular, it appears that managers have played their role by creating good internal alignment between business practices and operating variables.

•Work in Progress:
Dynamic Capabilities and Strategies for Success: Recent research in strategy suggests that business success depends in large part upon a company's "dynamic capabilities," that is, the ability of managers to lead change by building, integrating, and reconfiguring internal resources. Now three Tuck faculty members—Constance Helfat, Sydney Finkelstein, and Margaret Peteraf—will join other prominent scholars as authors of a state-of-the-art study of dynamic capabilities. Constance Helfat will serve as the organizer of Dynamic Capabilities and Resource-Based Change, which will rely heavily on empirical findings to provide a fact-based analysis of dynamic capabilities.

•On the Edge:
Kick! Miss! Lose. :When a country's soccer team loses a World Cup elimination game, that country's stock market falls by a statistically significant 40 basis points, says Tuck Professor Diego García and colleagues.

Credibility is the Best Policy: Does a reputation for credibility matter for corporations? Tuck Professors Amy Hutton and Phillip Stocken say that it does, at least in the accounting world.

What Price Cybersecurity?: Attempts to invade computer network are rampant. But investment in security hardware and software can nearly eliminate automated attempts at password hijacking and unauthorized entry, according to research done by Tuck's Center for Digital Strategies.

Summer 2004, Volume VIII, number 1

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Step by Step: How Firms Absorb and Use Internal Innovation
Most internally developed technological innovations that challenge a company's core direction fail to come to market. In traditional thinking, these "challenge projects" can benefit the company by leaving behind a familiarity with new technologies. In the future, once those new technologies have become more mainstream, the company is in a better position to use them and adapt. But as Professor Alva Taylor studied the internal dynamics of four Silicon Valley firms to understand the effects of challenge projects, he uncovered a mechanism for change that has been overlooked: rather than being put on a back burner for future use, knowledge from failed and resisted innovative projects is incorporated into existing projects right away. Taylor calls the process catabolic learning.

IPOs and the New-Issues Puzzle: Debunking the Myth
It is widely known that initial public offering (IPO) stocks are underpriced on their offering day. Conventional wisdom also holds that the same IPO stocks quickly become overpriced and deliver substandard performance during the subsequent three to five years. This "new-issues puzzle" has given rise to charges that the market is irrational—and to class-action lawsuits alleging illegal price manipulation by underwriters and others. But is there really an empirical basis for the new issues puzzle? Not according to Tuck Professors Espen Eckbo and Øyvind Norli, who challenge the conventional performance measures that have led others to conclude that IPO stocks underperform.

Innovating for Once and Future Customers
In the 1980s, AT&T flirted with a disruptive innovation: the cellular phone. It funded R&D and engaged a consulting firm to perform market research. Pull out, the consultants advised. Market potential was minor—only 900,000 total subscribers—and consumers overwhelmingly preferred the cheap, reliable landline phone. AT&T took the advice and focused on radical innovations like the cordless phone, which caught on immediately. Meanwhile Nokia made cellular technology work. By 2002, approximately 300,000 subscribers were joining mobile phone services every day, causing enormous disruption to the selling of landline phone service. Professors Vijay Govindarajan and Praveen Kopalle use the cell-phone example to illustrate the strategic problem well-established firms face in introducing disruptive innovations. Should AT&T have ignored its mainstream customer base to court the customer of the future? Are such firms simply destined to die for failing to innovate? In a cross-disciplinary study, Govindarajan and Kopalle show that firms can satisfy both mainstream and emerging customer segments.

At the Frontiers of the Networked Enterprise
Through a series of forward-looking yet practical roundtable discussions, Tuck's Center for Digital Strategies is exploring the frontiers of enterprise management. Co-founded with Cisco Systems, Inc., these Thought Leadership Summits on Digital Strategies focus on the enabling role of information technology in extending sound business practices and creating opportunities for growth.