The Diffusion of Wal‐Mart and Economies of Density

The rollout of Wal‐Mart store openings followed a pattern that radiated from the center outward, with Wal‐Mart maintaining high store density and a contiguous store network all along the way. This paper estimates the benefits of such a strategy to Wal‐Mart, focusing on the savings in distribution costs afforded by a dense network of stores. The paper takes a revealed preference approach, inferring the magnitude of density economies from how much sales cannibalization of closely packed stores Wal‐Mart is willing to suffer to achieve density economies. The model is dynamic with rich geographic detail on the locations of stores and distribution centers. Given the enormous number of possible combinations of store‐opening sequences, it is difficult to directly solve Wal‐Mart's problem, making conventional approaches infeasible. The moment inequality approach is used instead and works well. The estimates show the benefits to Wal‐Mart of high store density are substantial and likely extend significantly beyond savings in trucking costs.     

What Happens When Wal‐Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry

In the past few decades multistore retailers, especially those with 100 or more stores, have experienced substantial growth. At the same time, there is widely reported public outcry over the impact of these chain stores on other retailers and local communities. This paper develops an empirical model to assess the impact of chain stores on other discount retailers and to quantify the size of the scale economies within a chain. The model has two key features. First, it allows for flexible competition patterns among all players. Second, for chains, it incorporates the scale economies that arise from operating multiple stores in nearby regions. In doing so, the model relaxes the commonly used assumption that entry in different markets is independent. The lattice theory is exploited to solve this complicated entry game among chains and other discount retailers in a large number of markets. It is found that the negative impact of Kmart's presence on Wal‐Mart's profit was much stronger in 1988 than in 1997, while the opposite is true for the effect of Wal‐Mart's presence on Kmart's profit. Having a chain store in a market makes roughly 50% of the discount stores unprofitable. Wal‐Mart's expansion from the late 1980s to the late 1990s explains about 40–50% of the net change in the number of small discount stores and 30–40% for all other discount stores. Scale economies were important for Wal‐Mart, but less so for Kmart, and the magnitude did not grow proportionately with the chains' sizes.     

David v. Goliath: A Brief Assessment of the U.S. Supreme Court's 2011 Ruling Denying Class Certification in Dukes v. Wal‐Mart

In 2001, Betty Dukes, then a 54‐year‐old African American, filed suit against her employer, Wal‐Mart, alleging that she had been the victim of gender discrimination. Ms. Dukes alleged that Wal‐Mart, the nation's largest private employer, routinely paid women less than men for comparable work and arbitrarily favored men over women in promotion decisions. In 2004, a U.S. District Court entered an order granting class certification, potentially extending the retailer's financial liability to thousands of current and past Wal‐Mart employees. At that time, the Wal‐Mart suit was the largest class action lawsuit ever approved in the United States. In 2011, the U.S. Supreme Court reversed the lower court's ruling. Writing for the majority, Justice Scalia cited Wal‐Mart's long‐standing explicit gender‐neutral employment policy and the decentralized manner in which local managers have discretion to adjust salaries and recommend applicants for promotion—factors that led the majority to question “the glue” binding the class together. Proponents of the Court's decision hailed the ruling as a victory for business and a step in the direction of needed legal reform. Critics viewed the decision as another in a series of defeats for minority interests by a pro‐business, ideologically divided Court. Did the Court get it right, or is this yet another example of might defeating right?     

Intellectual Property Abuses: How Should Multinationals Respond?

This article illustrates the causes of piracy and pinpoints piracy associated with registrations and with production and distribution. Based on interviews with British and American multinational managers working in China, the authors elaborate 10 corporate actions to counter the spread of the ‘inevitable curse’. In order to implement these 10 strategies, the authors recommend that firms treat piracy as a challenge, be corporately proactive, be aware of the repertoire of possible strategies, investigate co-operative action with other companies, agencies and government and be continuously alert to the dynamic nature of piracy. The problems reflected here are common to multinationals operating businesses around the world, and the destructive nature of piracy is likely to encourage more academic study to yield further insights for practice.     

人民币升值对出口质量的提升效应:来自中国的微观证据

人民币升值如何影响出口企业决策?本文从出口质量的角度研究汇率变动与企业决策的关系。我们利用2000~2006年制造业企业和海关进出口贸易数据库,修正了以往的出口质量测算方法,更准确地测算出口质量。在此基础上,我们的实证证据表明,人民币升值带来的竞争压力促进了出口质量提升:10%的人民币升值使企业出口质量平均上升0.19%。我们进一步发现在质量差异化程度大的行业中,人民币升值对出口质量的提升效应为0.4%,而在质量差异化程度小的行业中该效应不明显。此外,人民币升值减少了出口企业数目,且升值对出口质量的提升效应在非核心产品及低生产率企业中更明显。本文发现了汇率变动影响企业决策的新渠道,同时也表明竞争强度是质量升级的重要决定因素。     

How Organizational Cognitive Neuroscience Can Deepen Understanding of Managerial Decision‐making: A Review of the Recent Literature and Future Directions

There is growing interest in exploring the potential links between human biology and management and organization studies, which is bringing greater attention to bear on the place of mental processes in explaining human behaviour and effectiveness. The authors define this new field as organizational cognitive neuroscience (OCN), which is in the exploratory phase of its emergence and diffusion. It is clear that there are methodological debates and issues associated with OCN research, and the aim of this paper is to illuminate these concerns, and provide a roadmap for rigorous and relevant future work in the area. To this end, the current reach of OCN is investigated by the systematic review methodology, revealing three clusters of activity, covering the fields of economics, marketing and organizational behaviour. Among these clusters, organizational behaviour seems to be an outlier, owing to its far greater variety of empirical work, which the authors argue is largely a result of the plurality of research methods that have taken root within this field. Nevertheless, all three clusters contribute to a greater understanding of the biological mechanisms that mediate choice and decision‐making. The paper concludes that OCN research has already provided important insights regarding the boundaries surrounding human freedom to act in various domains and, in turn, self‐determination to influence the workplace. However, there is much to be done, and emerging research of significant interest is highlighted.     

Operational Entrepreneurship: How Operations Management Research Can Advance Entrepreneurship

In this article, we introduce the notion of operational entrepreneurship—the selection and management of transformation processes for recognizing, evaluating, and exploiting opportunities for potential value creation—to offer examples of research opportunities at the interface of entrepreneurship and operations management. Specifically, we believe that operations management has been under‐utilized for gaining a deeper understanding of (i) the knowledge and motivation required for opportunity recognition, (ii) evaluations of a recognized opportunity to determine if it represents an opportunity for the specific entrepreneur, and (iii) the role that feedback from an exploitation of a current opportunity plays in the recognition and evaluation of subsequent opportunities. We also introduce (but not develop) the notion of entrepreneurial operations.     

The Dynamics of Risk Perception: How Does Perceived Risk Respond to Risk Events?

This paper examines the relationship between perceived risk and experience. This research addresses the processes by which people learn about risk and choose among real life prospects with associated uncertainties, risks and benefits. By comparing the impact of acute risk events with that of chronic risk events on public perception of risk during and after the events, this research focuses on the learning processes that characterize what kinds of risk events alter the perception of risk. Comparing materialized hazards at existing facilities with the risks associated with potential facilities, this research addresses risk choices among real life prospects. This study uses a classic pre-post quasi-experimental design. Surveys conducted in the Spring of 1992 on perceived and acceptable risk in Odessa and La Porte, Texas were conducted prior to risk events. Respondents from that survey were re-interviewed in the Spring of 1993 after the risk events to form a panel design. This paper analyzes the affect of risk events on perceived risk and the implications of these experiences for public policy concerning technological risk. The empirical results suggest that the social processes that construct and maintain risk in the public eye are at least as important as, if not more important than, the physical and psychological dimensions of risk.     

管理学如何才能“致用”——管理学技术化及其方法论

求真与致用的矛盾本质上是科学认识论与技术认识论之间的矛盾,求真与致用在目的、推理方式和知识体系3个方面存在显著的区别。管理学要"致用",就必须实现认识论层面的改变,由"求真"的逻辑转为"致用"的逻辑,这可以称之为管理学的技术化转向。管理学技术化有助于把握管理学的学科属性和本质特点;有助于理解循证思想的精髓,避免将其实证化和教条化;此外,管理学技术化是直面中国管理实践的直接路径,有助于厘清管理研究中"科学严谨性"和"实践相关性"之间的主次关系,是理解"理论与实践脱节问题"的指南。     

POM Forum: Transfer of Changing Production Know‐How

Even with the rich literature on knowledge management, we still don't know enough about how the rate of change in production‐know‐how affects the choice of mechanisms for its transfer. Codifying tacit know‐how helps, but codification becomes more challenging as the know‐how changes more frequently. Transfer of tacit know‐how becomes much more complicated when it changes often. We need more research in this area, particularly to help production and operations managers who must ultimately use the new know‐how and change their companies' production processes. The paper suggests a framework as a step in that direction. The framework focuses on the interplay between the level of codification and the rate of change of production know‐how, and identifies four zones for classifying production know‐how: “slow and codified,” “slow and tacit,” “fast and codified,” and “fast and tacit.” Examples from McDonald̂s, Club Med, Intel, and AOL are used to illustrate primary transfer mechanisms for each zone (manuals and systems, people, joint‐development, and projects, respectively). Appropriate absorptive capacities in the production units for each zone are also identified. Since the ultimate responsibility of operations managers is to improve (i.e., change) their production know‐how as fast as possible, they would be wise to adopt policies that are closer to those suited for the “fast and codified” zone. Intel and Toyota show good models.     

Interest‐Talk as Access‐Talk: How Interests are Displayed,Made and Down‐played in Management Research

This paper addresses the methodological issue of how researchers gain access and build trust in order to conduct research in organizations. It focuses, in particular, on the role of interests (what actors want or what they stand to gain or lose) in the research relationship. The analysis shows how notions of interests, stake and motive were managed during an action research study in a UK subsidiary of a multinational corporation. The study uses an approach to discourse analysis inspired by the field of discursive psychology to identify four discursive devices: stake inoculation; stake confession; stake attribution; and stake construction. The paper contributes to the understanding of research methodology by identifying the importance of interest‐talk in the process of doing management research.     

Estimating Willingness‐to‐pay with Choice‐based Conjoint Analysis – Can Consumer Characteristics Explain Variations in Accuracy?

Knowing consumers' willingness to pay (WTP) is crucial for making effective pricing decisions. We assess the accuracy of choice‐based conjoint analysis (CBCA), a method strongly supported by behavioural theory, in the context of WTP measurement at the individual level. Furthermore, we analyse whether variations in the accuracy of WTP estimates derived by CBCA can be explained by consumers' involvement, brand awareness and the strength of consumer preferences. The results show that CBCA does not provide accurate WTP estimates and, on average, grossly overestimates the true WTP of consumers. No empirical evidence can be found that consideration of the above‐mentioned consumer characteristics results in more accurate WTP values.     

Agent‐Based Recovery Model for Seismic Resilience Evaluation of Electrified Communities

In this article, an agent‐based framework to quantify the seismic resilience of an electric power supply system (EPSS) and the community it serves is presented. Within the framework, the loss and restoration of the EPSS power generation and delivery capacity and of the power demand from the served community are used to assess the electric power deficit during the damage absorption and recovery processes. Damage to the components of the EPSS and of the community‐built environment is evaluated using the seismic fragility functions. The restoration of the community electric power demand is evaluated using the seismic recovery functions. However, the postearthquake EPSS recovery process is modeled using an agent‐based model with two agents, the EPSS Operator and the Community Administrator. The resilience of the EPSS–community system is quantified using direct, EPSS‐related, societal, and community‐related indicators. Parametric studies are carried out to quantify the influence of different seismic hazard scenarios, agent characteristics, and power dispatch strategies on the EPSS–community seismic resilience. The use of the agent‐based modeling framework enabled a rational formulation of the postearthquake recovery phase and highlighted the interaction between the EPSS and the community in the recovery process not quantified in resilience models developed to date. Furthermore, it shows that the resilience of different community sectors can be enhanced by different power dispatch strategies. The proposed agent‐based EPSS–community system resilience quantification framework can be used to develop better community and infrastructure system risk governance policies.     

Why Near‐Miss Events Can Decrease an Individual's Protective Response to Hurricanes

Prior research shows that when people perceive the risk of some hazardous event to be low, they are unlikely to engage in mitigation activities for the potential hazard. We believe one factor that can lower inappropriately (from a normative perspective) people's perception of the risk of a hazard is information about prior near‐miss events. A near‐miss occurs when an event (such as a hurricane), which had some nontrivial probability of ending in disaster (loss of life, property damage), does not because good fortune intervenes. People appear to mistake such good fortune as an indicator of resiliency. In our first study, people with near‐miss information were less likely to purchase flood insurance, and this was shown for both participants from the general population and individuals with specific interests in risk and natural disasters. In our second study, we consider a different mitigation decision, that is, to evacuate from a hurricane, and vary the level of statistical probability of hurricane damage. We still found a strong effect for near‐miss information. Our research thus shows how people who have experienced a similar situation but escape damage because of chance will make decisions consistent with a perception that the situation is less risky than those without the past experience. We end by discussing the implications for risk communication.     

Security Assurance: How Online Service Providers Can Influence Security Control Perceptions and Gain Trust

Security researchers agree that security control is a difficult to observe credence quality of online services that Internet users cannot easily assess through research or experience. Yet there is evidence that users form perceptions of security control that strongly determine how much trust they put in online services. This study investigates whether users’ security control perceptions arise solely from their predispositions or whether online service providers can influence them. The study also examines whether these seemingly undependable perceptions of security control lead to trust or whether more traditional factors might offer a better explanation of trust under security risks. To address these issues, this study proposes a new theory of security assurance that integrates the frameworks of trust and quality signals. The results show that rather than being guided by predispositions, users appear to mainly assess security control based on indirect cues controlled by service providers. Importantly, Internet users do not treat the credence quality of security the same way they treat qualities that can be understood through search and experience. Although returning users develop security control perceptions and trust from the usual heuristics of ongoing relationships, they also continue to evaluate market information about service providers like they do in new relationships. The proposed model offers a new perspective of how users respond to the uncertain and technically challenging qualities prevalent in online services.     

Risk Assessment Can Be a Game‐Changing Information Technology—But Too Often It Isn't

The printing press was a game‐changing information technology. Risk assessment could be also. At present, risk assessments are commonly used as one‐time decision aids: they provide justification for a particular decision, and afterwards usually sit on a shelf. However, when viewed as information technologies, their potential uses are much broader. Risk assessments: (1) are repositories of structured information and a medium for communication; (2) embody evaluative structures for setting priorities; (3) can preserve information over time and permit asynchronous communication, thus encouraging learning and adaptation; and (4) explicitly address uncertain futures. Moreover, because of their “what‐if” capabilities, risk assessments can serve as a platform for constructive discussion among parties that hold different values. The evolution of risk assessment in the nuclear industry shows how such attributes have been used to lower core‐melt risks substantially through improved templates for maintenance and more effective coordination with regulators (although risk assessment has been less commonly used in improving emergency‐response capabilities). The end result of this evolution in the nuclear industry has been the development of “living” risk assessments that are updated more or less in real time to answer even routine operational questions. Similar but untapped opportunities abound for the use of living risk assessments to reduce risks in small operational decisions as well as large policy decisions in other areas of hazard management. They can also help improve understanding of and communication about risks, and future risk assessment and management. Realization of these opportunities will require significant changes in incentives and active promotion by the risk analytic community.     

Older and Wiser: How CEOs’ Time Perspective Influences Long‐Term Investments in Environmentally Responsible Technologies

Most theories of corporate governance argue that chief executive officers (CEOs) take less risk as they near the end of their career, and therefore are less likely to make major investments. This prediction is based on decisions related to firm‐specific benefits; however, it may not be generalizable to decisions that involve broad societal goals. In terms of societal investments, CEOs with a longer time perspective may be more likely, rather than less likely, to invest. In this paper, we argue that a CEO's future time perspective is fostered by shorter career horizons, longer tenures, higher organizational ownership and less short‐term compensation. We test these hypotheses on 150 observations from the US investor‐owned electric power generation sector over a three‐year unbalanced sample (64.3% of the population). We applied random‐effects generalized least squares (GLS) estimations to test our hypotheses, and found support for three out of four hypothesized relationships.     

Stepping Out of Your Own Shadow: A Didactic Example of How Facing Uncertainty Can Improve Decision-Making

Advocates of quantitative uncertainty analysis (QUA) have invested substantial effort in explaining why uncertainty is a crucial aspect of risk and yet have devoted much less effort to explaining how QUA can improve the risk manager's performance. This paper develops a teaching example, using a personal decision problem with subtle parallels to societal risk management, to show how choices made with increasing appreciation of uncertainty are superior ones. In the hypothetical, five analysts explain the same uncertain prospect (whether to invest in a volatile stock issue), with increasing attention to the nuances of uncertainty. The path through these different perspectives on the decision demonstrates four general points applicable to environmental risk management: (1) Various point estimates with equal claim to being "best estimates" can differ markedly from each other and lead to diametrically different choices; (2) "conservatism" has both relative and absolute meanings, with different implications for decision-making; (3) both inattention to and fixation on "outliers" in the uncertainty distribution can lead the manager astray; and (4) the best QUA is one that helps discriminate among real options, that points to optimum pathways toward new information, and that spurs on the iterative search for new decision options that may outperform any of the initial ones offered.     

The Failure of Practical Intuition: How Forward‐Coverage Inventory Targets Cause the Landslide Effect

Seasonal demand for products is common at many companies including Kraft Foods, Case New Holland, and Elmer's Products. This study documents how these, and many other companies, experience bloated inventories as they transition from a low season to a high season and a severe drop in service levels as they transition from a high season to a low season. Kraft has termed this latter phenomenon the “landslide effect.” In this study, we present real examples of the landslide effect and attribute its root cause to a common industry practice employing forward days of coverage when setting inventory targets. While inventory textbooks and academic articles prescribe correct ways to set inventory targets, forward coverage is the dominant method employed in practice. We investigate the magnitude and drivers of the landslide effect through both an analytical model and a case study. We find that the effect increases with seasonality, lead time, and demand uncertainty and can lower service by an average of ten points at a representative company. While the logic is initially counterintuitive to many practitioners, companies can avoid the landslide effect by using demand forecasts over the preceding lead time to calculate safety stock targets.