Explaining the Variability of Audiences’ Valuations: An Approach Based on Market Categories and Natural Language Processing
This dissertation examines whether the different categorization processes shaping audiences’ valuations in markets bring stability or variability to audiences’ valuations. While seminal research on categorization emphasized the stabilizing role of market categories, recent research suggests that audiences’ valuations can vary substantially even in markets which are wellstructured by pre-existing categories. This variability notably results from audiences’ heterogeneous preferences for typical offerings, from shifts in categories’ meanings or from audiences’ reliance on multiple models of valuation. Taking stock of these new results, this dissertation asks why audiences’ valuations are so variable and explores in more details the role that market categories play in this phenomenon. This dissertation proposes that i) ambiguous categories, ii) the influence of temporary attractions among audiences alongside more stable categories and iii) the co-existence of different types of evaluators all contribute to produce variability in audiences’ valuations. The first two empirical essays use data from publicly listed firms in the U.S. In these essays, firms’ similarity to existing category prototypes or audiences’ temporary attractions toward certain features are measured using semantics extracted from large corpora of annual reports and IPO prospectuses. The third essay is a theoretical model. This dissertation contributes to the literature on market categories, to the burgeoning research on optimal distinctiveness and to computational approaches to the study of organizations.
Three essays in accounting
This dissertation consists of three chapters in the field of audit research. The first chapter, joint with Francois Larmande, analyzes a model in which audit quality - above a given threshold - decreases accounting quality because of the substitution between accounting and real earnings management. The second chapter presents the joint work with Cedric Lesage, exploring the earnings management behavior of managers facing higher auditor’s expertise. The third chapter investigates how audit regulation affects managers’ disclosing and earnings management behaviors.
Market categories, expertise, and evaluation of organizations
This dissertation examines how categories — groupings that are built upon social and cognitive similarities — affect the evaluation of organizations in markets. Research shows that market audiences are likely to penalize organizations that combine multiple categories. Questioning the past studies' underlying assumptions, my work contextualizes this demand of categorical purity by studying the role of (i) category nesting, that is the hierarchical disposition of categories, (ii) audience members’ heterogeneity in expertise and modes of categorization (the way individuals group entities together), and (iii) the differences of valence among categories themselves. Using experimental tests (Chapter 1), longitudinal data on venture capital deals worldwide from 1994 to 2017 (Chapter 2) as well as theoretical developments (Chapter 3), this dissertation provides evidence of conditions under which categorically atypical organizations are better appraised than categorically pure organizations in markets. This work offers contribution to organization theory and economic sociology by speaking to research on market categories, experts’ evaluations and optimal distinctiveness.
Firms' strategic responses to evaluations
The rise of digital media technology over the last decades has transformed the way in which organizations are evaluated. Judgments by experts and critics, recognized for their knowledge of evaluation criteria, appropriate weightings, and appropriate preferences, are losing their appeal to customers in many industries. Every day, on a plurality of platforms and websites, individuals disclose information about their interactions with organizations and their products or services. Compared to traditional media or professional critics, digital users and customers tend to share subjective and partial experiences, have lower concerns for accuracy and balance, and often put emphasis on the emotional content. As more customers rely on this information for their purchasing choices, firms in many industries find themselves in a position where it is hard to ignore the opinions expressed online by customers as inconsequential. In this thesis, I study how the strategies and behaviors of organizations are affected by this “democratization” of evaluation process. The empirical setting for my analyses is the restaurant industry. In the first chapter, I study online reviews as a source of information for restaurants, which may learn about problems, errors, or improvement opportunities. I examine what features of customer feedback make it more likely to be considered by target restaurants. With an online experiment in the French restaurant industry, I find that decision makers allocate attention to feedback that is expected to have a stronger impact on the reputation and performance of the restaurant. However, I also find evidence of a “disturbance” effect of the emotions evoked by certain feedback features. With this chapter I emphasize the importance of incorporating affective mechanisms in the study of attention, and shed light on how individual-level emotions impact organizational-level outcomes. In the second chapter, I analyze the effects of the interaction between amateur and expert evaluations. In particular, I study the entry of an expert evaluator (i.e., Michelin guide) in a market, and how it pushes some organizations to make strategic choices that signal their aspirations. Drawing on literature on organizational status, I find that restaurants better rated by Michelin make changes to their offer with the aim to self-identify with the élite group. These changes consist in the adoption or removal of certain features displayed in their menus. In addition, by using topic modeling techniques applied to Yelp reviews, I observe that customers’ reactions to the entry of Michelin make restaurants more or less sensitive to the expert’s evaluations. In the third chapter, I focus on how organizations use public responses to customers to address criticism in online settings. Recent studies are not conclusive on the reputational benefits of public responses to reviews. These responses may reduce the likelihood of future negative reviews while, at the same time, draw attention to problems. Building on existing literature on reputation and impression management, I propose that organizations may resolve this trade-off by making a strategic use of different types of verbal accounts (e.g., apology). Although public responses to customers may be counterproductive, adapting the style of public responses to the features of customer reviews might be an optimal strategy for organizations. For this study I analyze restaurant reviews in France and the United States using standard econometric models supported by supervised learning techniques.
Essays in Finance
This thesis consists of three articles. The two first articles study information flows in the financial markets, and the third one studies how mutual fund families may use relatively discretionary income sources to channel profits to specific funds within the family. The first article, joint with Daniel Schmidt, studies price and liquidity spillovers in financial markets. Using a quasi-natural experiment, we show that investors look at stock prices to extract signals, and use these to trade. In the second article, I show that mutual fund acquire information through the securities lending market. I show that active mutual funds start selling the stocks that are borrowed from them by short sellers, whereas index funds — that are prohibited from trading — do not. One the other hand, index funds are able to charge higher stock lending fees from the borrowers. I attribute this to them being better lenders in the sense that they can not use the information they gain to trade, and thereby extract profits from the short sellers’ information. The third article, also with Daniel Schmidt, studies fund family level policies in allocating securities loans and lending revenues between member funds. We show that fund families deviate from the claimed fair allocation, directing more securities loans and lending profits to index funds. The finding is in line with with funds substituting a lower expense ratio with higher securities lending income.
Three Essays on Marketing Interventions to Influence Consumer Judgments, Choices, and Behaviors.
This dissertation consists of three essays that develop marketing interventions to influence consumers judgment, choice, and behaviors. Essay 1 studies whether, how, and when crossmodal correspondences affect downstream judgments. Essay 2 develops a behavioral intervention aimed at reducing consumers’ choices of food portion sizes, which can be easily used in the settings of online food ordering such as food delivery apps. Essay 3 studies whether prosocial incentive scheme can effectively motivate consumers to participate in online referral programs.
Essays on Game Theory, Mechanism Design, and Financial Economics'.
This thesis develops and utilizes tools in game theory and mechanism design to study multiple applications in economics and finance. The first chapter studies the problem of implementing communication equilibria of strategic games when players communicate with an impartial mediator through a network. I characterize necessary and sufficient conditions on the network structure such that any communication equilibrium of any game can be implemented on that network. The next chapter studies a model of supply chain congestion whereby capacity constraints lead to very inefficient Nash equilibria and I show how the use of correlated equilibria can substantially resolve those inefficiencies. The final two chapters study related issues in the design of bank capital requirements. In Chapter 3, I characterize optimal bank capital requirements when banks have private information about the value of their existing assets. I show how the implementation of capital requirements can eliminate the bank's cost of raising capital by revealing their information to the market and conditions under which doing so is optimal. In Chapter 4, I show how when the bank's private information is about the riskiness of its assets instead, then any risk sensitive capital requirement will lead banks to optimally misreport their risk whenever investors are sufficiently risk averse, highlighting important robustness concerns.
Process innovation in pharmaceutical industry
Process innovation is commonly claimed to be a major source of competitive advantage for firms. Despite this perceived influence, it has received substantially less attention than product innovation and much uncertainty re-mains about its true association with firm performance. The main focus of this study is on the relationship between a pharmaceutical manufacturing firm’s process-innovation portfolio and its economic performance. Through a collaboration with expert patent attorneys, a unique longitudinal dataset was developed, that combines secondary data and evaluations of a firm’s portfolio of process patents along three key dimensions: novelty, scope, and locus. I find positive association between overall process innovation and firm performance. Econometric analyses of the large-scale longitudinal dataset suggest that ownership of a portfolio of patented process innovations for the production of a given drug is associated with a market share (for that drug) that is on average 5.4% higher relative to non-process-innovative competitors. When differentiating between dimensions of process innovation, results further suggest that high novelty is beneficial, and complemented by a broad scope, but only for patents applying to the later phase of the pharmaceutical manufacturing process. The results of this study reconcile differences in the organizational learning, strategy, and operations management literatures. The study identifies both advantages and disadvantages of the three types of technological experiences: focal, related, and unrelated. I find that technological experience with the focal product is positively associated with the ability of a firm to process innovate, resulting in the inventions of medium Novelty and broad Scope. By contrast, I find that technological experience with related products is negatively associated with the ability of a firm to process innovate, resulting in the inventions of low Novelty and broad Scope. Likewise, technological experience with unrelated products is also negatively associated with an ability of a firm to process innovate, though it results in the inventions of high Novelty and narrow Scope.
Essays on Value Creation in the Open Source Phenomenon: Understanding theInfluence of Work Structures, Team Composition, and Community Ideologies
This dissertation comprising three essays explores the value creation mechanisms associated with the work structures, team composition, and community ideologies of open source software projects. The first essay examines the unique nature of open source work which is dominated by the sequential layering of individual tasks. This essay theorizes the motivational mechanisms associated with the work structures of open source projects and examines their influence on project success. While the first essay establishes the importance of task-work organization in open source projects, the second essay expands the inquiry into the role of team composition in the project’s success. Building on the theories of coordination and network governance, this essay studies the influence of source code access restrictions imposed on team members in mitigating coordination challenges. The third essay pursues an overarching view of the open source community by examining the ideological foundations of the community and studies its influence on project success. The essay scrutinizes two ideological shifts seen in the open source community that have altered the beliefs of ‘openness’ and ‘prevention of commercial appropriation’, on which the open source phenomenon was founded.
The Effect of Consumer Identity on Marketing Strategy
In this dissertation, I examine the influence of consumer identity (e.g., materialism, self-construal) on marketing strategies of firms. The first essay explores how materialistic consumers can be nudged to behave prosocially by leveraging their status-seeking motivations in the context of luxury consumption. Firms are under increasing pressure to engage in cause-related marketing (CRM) campaigns that link the brand to a charitable cause. However, such campaigns may pose problems for luxury brands because the target market—materialistic consumers—are more extrinsically motivated, less generous, and less concerned with prosocial causes, than non-materialistic consumers. The first essay proposes that certain types of CRM campaigns will be more successful than others by leveraging the motivations of materialistic consumers for buying luxury products. I show that materialists’ willingness to engage in CRM depends on the type of campaign: product-linked (brand linked to a cause through limited-edition products) or donation-linked (direct donations to a charitable cause). Materialists are more willing to engage in product-linked than donation-linked campaigns, whereas non-materialists show the opposite pattern, and these effects are driven by the status-signaling qualities that luxury products convey for materialists: the effects are eliminated for value brands and when materialists’ need for status is momentarily satiated. The second essay investigates how and why individualistic consumers (vs. collectivistic consumers), prefer digitally mediated social interaction such as posting on social network platforms (e.g., Facebook), playing social network games (e.g., FarmVille), or watching live streaming video platforms (e.g., Twitch). Social interaction is a fundamental social behavior based on evolutionary underpinnings that fulfills one’s need to belong. However, desire for social interaction can differ based on individual characteristics. Individualists, who see themselves as independent, autonomous, and distinct from the group, are known to perceive higher costs for social interaction necessary for maintaining their relationships than are collectivists. In Essay 2, I show that individualistic consumers have a greater preference for digitally mediated social interaction than collectivistic consumers, but that this effect is moderated by social interaction costs. I further show that perceived face-to-face social interaction costs explain the underlying process of this effect. The two essays contribute to the literature on self-identity. Essay 1 and 3 focus on materialism and Essay 2 focuses on self-construal. The research findings inform marketing practice in the fields of luxury goods, social media, and gaming industries. This dissertation provides insights into how firms in these industries should consider consumers’ self-identity in adopting new marketing strategies.