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Faculty Research Brief: June/July 2011

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Faculty Research Brief is a periodic report designed to inform the Stern community about new faculty research, new publications, awards and grants. Please send your research news to be considered for inclusion to paffairs@stern.nyu.edu.

Featured Research

"Networks, Information and Brokerage: The Diversity-Bandwidth Tradeoff

Sinan Aral, Assistant Professor of Information, Operations and Management Sciences, and his co-author examine the information stream in social networks by studying the information content flowing through email at a medium-sized executive recruiting firm and comparing it with the recruiters’ social network and performance data. Conventional wisdom suggests that diverse social networks, in which a recruiter (or any type of broker) has weak ties to a large and diverse network, can provide the broker with more novel information than smaller, close-knit networks with strong ties. However, the researchers propose that a tradeoff exists between network diversity and communications bandwidth (the amount of information flowing from network contacts).

The researchers found that as people develop more diverse networks, ties to contacts tend to be weaker, and communications bandwidth contracts as both the overall volume of communication and the quality of information from these contacts tends to be low. In certain circumstances, homogenous networks with strong ties can provide a greater amount of novel information because the communications bandwidth is greater: the contacts communicate with the broker more frequently, are aware of the broker’s information needs, are more motivated to share relevant and novel information, and are more likely to divulge sensitive information. The researchers found that particularly in environments where information changes rapidly, bandwidth is a more powerful predictor than diversity of the total volume of novel information received. The research suggests that the information advantages of diverse networks versus greater bandwidth are dependent on the type of information environment in which a broker works. The paper will soon appear in the American Journal of Sociology.

Creating Peer Influence and Social Contagion through Viral Product Design

Sinan Aral, Assistant Professor of Information, Operations and Management Sciences, and his co-author examine how firms can create word-of-mouth peer influence and social contagion by using Viral Product Design (incorporating viral features into their products). The researchers used a randomized field experiment among two million Facebook users during the launch of a new product, testing which Viral Product Design strategies create the most peer influence and social contagion. The researchers found that firms can increase peer-to-peer influence and social contagion in new product diffusion by 400 percent by adding basic viral features to their products, and that Viral Product Design is more effective in encouraging new product adoption than traditional marketing strategies alone. They also found that although active-personalized messaging (which is targeted and tailored toward specific peers and requires active user engagement) is more effective per message and is correlated with more user engagement and product use, it is used less often and therefore generates less total peer adoption than passive-broadcast messaging (which is generally aimed at anyone and generates automated actions on behalf of users). The paper, titled “Creating Social Contagion through Viral Product Design: A Randomized Trial of Peer Influence in Networks,” will be published in Management Science this fall in a special issue on the Intersection of Information Systems and Marketing. It has also been selected as an "Editors’ Choice" article by the editors of Science.

"Labor Unemployment Risk and Corporate Financing Decisions"

Do job security and the overall labor market factor into a firm’s investment and financing decisions? Does concern for its employees stop a company from over-leveraging? Assistant Professor of Finance Ashwini Agrawal and his co-author David Matsa of Northwestern University’s Kellogg School of Management deliver a big “Yes” to these questions in their recent paper, which won the 2010-11 NYU Stern Glucksman Research Prize of $6,000 this spring. By studying changes in state unemployment insurance benefit laws and corporate financing decisions of public firms in the United States, the authors show that firms are willing to take on more debt when their workers are better shielded from unemployment through greater unemployment insurance provided by the government. “Some believe that firms don’t seem to take on enough debt, and therefore don’t reap as much value in tax shields as they could, because interest income which accrues to debt holders is non-taxable,” explains Professor Agrawal. “Our paper argues that firms don’t take on high levels of debt because they are concerned about entering bankruptcy and being forced to fire workers, which in turn has implications for firms’ hiring and investment decisions.” According to Professor Agrawal, most existing research in corporate finance assumes that workers can easily relocate from one firm to another (i.e., that labor markets are frictionless). “In contrast, our research suggests that labor market frictions have a significant impact on corporate financing decisions,” he notes. “On the heels of the financial crisis, we know how quickly the labor market can change, so it’s an important factor to consider when studying a firm’s financing and investment decisions.”

"The Valuation and Reporting of Organizational Capability in Carbon Emissions Management"

Professor Emeritus of Accounting Bala K.R. Balachandran, along with co-authors Janek Ratnatunga of the University of South Australia’s School of Commerce and Stewart Jones of the University of Sydney, demonstrates how the economic decisions and management strategies of organizations operating within a carbon trading market will significantly affect financial reporting and the accounting profession as a whole. Under various carbon emissions trading schemes proposed around the world, organizations will need to implement strategies to meet carbon emissions targets, earn revenue and reduce costs. This paper introduces a new metric, Environmental Capability Value, as the underpinning for the conversion of non-monetary items – CO2 emissions and an organization's measures to control emissions – to monetary values. This model may also have applications for organizations that feel pressure to publicize their climate control efforts. The paper has been accepted for publication in the American Accounting Association’s Accounting Horizons 25 (1), 2011. Professor Balachandran delivered a keynote speech on this topic at the 3rd World Accounting Frontiers Symposium in China in May 2011, and will be speaking again on the topic at the Italian Summer School on Sustainable Business in NYC at the end of July.

A 50-Year Review of Cross-Media Research Shows Synergy Has Yet to Achieve its Full Potential

Professor of Marketing Henry Assael finds that today’s rapidly evolving technology, which has resulted in the proliferation of media (Web, mobile, social, TV, print, etc.), has outpaced the means that researchers have to measure the effectiveness of cross media approaches to marketing (the combination of on- and off-line media). Citing the lack of reliable measures of cross-media effects, Professor Assael says that the promise of cross-media research has yet to be achieved. Looking at 50 years of cross-media research, he stresses the importance of linking cross-media effectiveness to sales and ROI. He also finds that greater cross-media synergies appear to be achieved through the visual/verbal connection provided by TV and the Web than the verbal-only connection provided by print and the Web. Professor Assael’s article entitled, “From Silos to Synergy: A Review of Fifty Years of Cross-Media Research,” was published in the 50th anniversary issue of the Journal of Advertising Research (March 2011).

New Book

Understanding Social Entrepreneurship: The Relentless Pursuit of Mission in an Ever Changing World

In her new book (Routledge Publishing, December 2011), Jill Kickul, Clinical Professor of Management and Organizations and Director of the Stewart Satter Program in Social Entrepreneurship in NYU Stern’s Berkley Center for Entrepreneurship & Innovation, and co-author Thomas Lyons of Baruch College’s Zicklin School of Business, explore the field of social entrepreneurship, which aims to develop innovative solutions to the world’s most vexing problems – hunger, poverty, homelessness, unemployment, illiteracy, disease, environmental issues, etc. With few, if any, comprehensive textbooks in this area of study, Professor Kickul and her co-author offer one of the first “go to” resources for the thousands of business and public administration students and teachers interested in this rapidly growing field. The book discusses and brings the mindset, principles, tools and techniques of entrepreneurship to the social sector. Topics include the importance of social entrepreneurship in society, methods and criteria to assess social opportunities, development of a strategic plan, funding alternatives, the importance of organizational structures and measuring and scaling impact, as well as the future of social entrepreneurship.

Awards, Accolades and Presentations

Viral Acharya, C.V. Starr Professor of Economics in the Department of Finance, was named one of Treasury & Risk’s “100 Most Influential People in Finance,” recognizing his role in creating the NYU Stern Systemic Risk Rankings, developed under Robert Engle, Michael Armellino Professor of Finance, Director, Center For Financial Econometrics and Affiliated Faculty, Statistics Group, along with Lasse Pedersen, John A. Paulson Professor of Finance and Alternative Investments; Thomas Philippon, Associate Professor of Finance and John L. Vogelstein Faculty Fellowship in Finance; and Matthew Richardson, Charles E. Simon Professor of Applied Economics, Sidney Homer Director, Salomon Center for Research in Financial Institutions and Markets, and Professor of Finance.

On May 14, Sinan Aral, Assistant Professor of Information, Operations and Management, spoke at TEDx SiliconValley on “Social Contagions.” TEDx is an independently organized TED event which is designed to bring together leading thinkers and innovators to discuss and help inspire innovation for social change. On June 22, he spoke at the NExTWORK Conference about “Contagion in Networks.” He will be a keynote speaker at the International Conference on Weblogs and Social Media in Barcelona, Spain, in July.

PhD student Tingting Fan's research project, with Professor of Marketing Eitan Muller and Peter Golder of Dartmouth College’s Tuck School of Business, entitled, "The Dynamics of Mobile App Usage,” received $7,500 in funding by the Wharton Customer Analytics Initiative, which identifies research that provides insights about mobile customer behavior while also advancing marketing science and practice. The researchers were also invited to present their work at Wharton in February 2012.

Jill Kickul, Clinical Professor of Management and Organizations and Director of the Stewart Satter Program in Social Entrepreneurship in NYU Stern’s Berkley Center for Entrepreneurship & Innovation
, recently won the inaugural Distinguished Social Entrepreneurship Award from Indiana University’s Johnson Center for Entrepreneurship & Innovation and the Institute for Social Impact. This newly created award honors individuals who have made a significant impact on the landscape of social entrepreneurship. As part of this recognition, Professor Kickul will visit Indiana University’s campus and deliver an address to students and faculty in early fall 2011.

Foster Provost, Professor of Information Systems and NEC Faculty Fellow, received a research award for his study entitled, “Geo-Social Targeting for Privacy-Friendly Mobile Advertising,” from the Wharton Customer Analytics Initiative, which identifies research that provides insights about mobile customer behavior while also advancing marketing science and practice. Professor Provost was also invited to present his work at Wharton in February 2012.

Matthew Richardson, Charles E. Simon Professor of Applied Economics, received the Curriculum Development Grant, sponsored by Deutsche Bank. This award was made in recognition of Professor Richardson’s innovative course content in the spring of 2011, describing the causes leading up to the financial crisis of 2007-2009, the events of the crisis and the resulting financial legislation enacted in the aftermath.

Teaching awards were recently presented to three distinguished clinical faculty. Simon Bowmaker, Clinical Associate Professor of Economics, received the Pedagogical Innovation Award; Jeff Carr, Clinical Associate Professor of Marketing and Entrepreneurship and Executive Director of the Berkley Center for Entrepreneurship & Innovation, received the Teaching Excellence Award; and the late Aaron Hipscher, Clinical Professor of Accounting, received the Ely Kushel Teaching Excellence Award.