Explore the faculty research, thought leadership, and groundbreaking philosophies that established Michigan Ross as one of the world’s top business schools.
The article "Social Distancing as a Control Mechanism" by Professor James Westphal, is part of a larger stream of research that developed a more sociological perspective on corporate leadership and governance, an area of scholarship that had been largely dominated by economic perspectives into the 1990s. In a series of studies, Westphal and colleagues revealed a collection of social and psychological mechanisms by which governance policies, structures, and practices that were assumed to promote the economic interests of shareholders and other stakeholders were frequently subverted in ways that served the interests of powerful corporate elites. One such mechanism was "social distancing," a social sanction in which corporate directors who participated in governance reforms that threatened to increase board control over top management at one firm were socially isolated and even ostracized at other firms where they served on the board. They were less likely to be invited to informal meetings, and other directors were less likely to build on their comments and suggestions or solicit their opinions on strategic issues in formal board meetings. Directors who experienced social distancing, witnessed it firsthand, or were socially connected to a director who experienced it, were less likely to participate subsequently in elite-threatening actions. In that sense, the social distancing that Westphal identified parallels and anticipates the social distancing that we all learned about and practiced during the COVID-19 pandemic. But unlike social distancing during a pandemic, social distancing in corporate leadership, like the other social and psychological mechanisms that the authors uncovered, helped maintain a system that serves the interests of a powerful few rather than the many who depend on it for employment, goods and services, and wealth creation.
In 1993, former Michigan Ross finance faculty member Victor Ng, co-authored a paper that is among the top 50 most cited papers in finance. Ng's paper defines the news impact curve, which measures how new information is incorporated into volatility estimates. His paper compares and estimates various new and existing autoregressive conditional heteroskedasticity models, including a partially nonparametric one, with daily Japanese stock return data. New diagnostic tests are presented which emphasize the asymmetry of the volatility response to news. Ng's results suggest that the Glosten, Jagannathan, and Runkle Model is the best parametric model. This path-breaking paper demonstrates the use of a new methodology to show the impact of news on stock prices, probably the most important function of financial markets.
Currently organized by the Sanger Leadership Center, the Leadership Crisis Challenge partly came about based on Sue Ashford’s vision as the then head of the Ross Leadership Initiative and the enthusiasm of students wanting to create more venues to discuss complex and problematic business issues, such as the role of business in addressing society's most difficult problems and how businesses and other leaders might think about tensions between financial and environmental goals. Additionally, there was an interest in understanding how students, as future leaders, might best think about issues of corporate social responsibility. The LCC was intended to address those student interests by putting students in groups of four and asking them to exercise their courage, judgment, and integrity in response to a complex crisis situation and under strict time pressure. In the crisis challenge, students are confronted with a complex case for which there is no right answer or winning position – there are just tradeoffs. Built into the case are some of the most vexing questions of the day, including: What does a company “owe” the community in which it does business? Should the natural environment be sacrificed for shareholder wealth? Can companies admit wrongs in today’s aggressive legal climate? With the input of previous participants, the Net Impact club, and members of the faculty, a new case is prepared every year and overseen and judged by Michigan Ross community members, business leaders, and alums.
Since the COVID-19 pandemic, the public K-12 education system has faced significantly high teacher turnover and poor retention rates. Teachers have faced increasing pressure to achieve academic success while challenged with growing class sizes, reduced funding, and learning loss from the pandemic. This problem has been incredibly difficult to correct, and public school districts across the country have not been able to address it cost effectively.
In their paper, “Stopping the Revolving Door: An Empirical and Textual Study of Crowdfunding and Teacher Turnover,” Professors Samantha Keppler, Jun Li, and Andrew Wu conducted a study of data from the largest teacher crowdfunding site, DonorsChoose, to study the effect of crowdfunded projects on teacher retention. The team found that teachers are less likely to leave their schools and the state public school system when their projects are funded. Assessing teachers’ project request essays, they identified that teachers who received funding for unique projects or requested resources to improve their classroom environment had higher retention rates.
Their paper is the first to identify the effect of crowdfunding on teacher retention. It provides initial, strong evidence that the effect is positive, showing that teachers funded on DonorsChoose are 1.6 percentage points (pp) less likely to leave their schools and 1.9 pp less likely to leave the teaching profession — a 14% and 41% reduction versus baseline turnover and attrition rates, respectively.
Due to the demonstrated impact of teacher-driven crowdfunded projects, DonorsChoose has partnered with eight states to spend COVID-19 education relief funding on teacher crowdfunding projects. To date, these partnerships have funded over $100 million of teacher projects from over 100,000 teachers, impacting over 10 million students.
In 1998, Professor David Hirshleifer of the Michigan Business School, and two co-authors, published a paper titled "Investor Psychology and Security Market Under- and Overreactions." This paper has been widely recognized as the first explanation of the seemingly contradictory behavior in asset prices (under- and overreactions to different news) based on two well documented behavioral biases. The biases outlined in the paper are overconfidence (regarding the precision of one's private information) and biased self-attribution. The former leads to well documented evidence of long-term overreaction (price reversals), while the latter causes underreaction (momentum) in the medium term. This paper was the first widely recognized paper in finance based on departures from rational behavior and provided a compelling explanation for seemingly anomalous behavior in asset prices.
In 1991, Professor Priscilla Rodgers designed an assessment to help the Michigan Business School evaluate MBA students' written communication skills, which was used for course placement. When the GMAT added an Analytical Writing Assessment in 1994, Rodgers conducted research that showed the AWA did not accurately assess management communication and that the assessment criteria and methodology used at the business school were far more meaningful. Rodgers and her team developed five six-point scales that quantified the competencies that MBA students need to be effective writers. In 2017, the business communication area at Michigan Ross moved to an assessment of MBA students' management communication, which included speaking as well as writing, and allowed students to choose a non-credit path toward satisfying the communication requirement. Andrea Morrow, lecturer and director of writing programs, developed a framework based on Rodgers' work called the Ross Management Communication Competencies Framework. As part of the new assessment process, full-time, global, and online MBA students learn about management communication and are assessed using Morrow's framework. If their results show they are low in any of the five competency areas, they can opt to complete targeted work on Canvas, or they can opt to take a business communication class. No other business school has a program like this.
The Affordable Care Act represented arguably the largest change in federal health policy since the creation of the Medicare and Medicaid programs in the 1960s, expanding coverage to approximately 40 million people who were previously uninsured. In a series of papers published in the Quarterly Journal of Economics, New England Journal of Medicine, AEJ: Applied Economics, Journal of Public Economics, and other outlets, Associate Professor Sarah Miller and her co-author Dr. Lara R. Wherry quantify the impact of this policy on the predominantly low-income population who gained coverage as a result of the reform's resultant changes in Medicaid eligibility. Their work has shown that 1) low-income adults who gained coverage through the ACA Medicaid expansions experienced reduced mortality rates and that the failure of some states to adopt these expansions cost approximately 4,800 deaths per year in those states; 2) low-income adults who gained coverage through these expansions experienced improved access to medical care and improved financial outcomes; 3) the expansion of coverage to these individuals did not crowd out care provided to population who were unaffected, such as those in Medicare. This work has garnered over 1,800 citations and has been discussed in numerous high-profile media outlets and policy documents.
In their paper, “Crowdfunding the Front Lines: An Empirical Study of Teacher-Driven School Improvement,” Professors Samantha Keppler, Jun Li, and Andrew Wu conducted the first large-scale empirical test of the frontline improvement theory in K-12 schools. The theory, originating in automotive manufacturing, states that empowering front-line employees to identify organizational and process problems and implement solutions improves organizational performance and customer satisfaction. In this case, the team of Michigan Ross professors was interested in how teacher-identified problems in the classroom and crowd-funded solutions improved learning outcomes for K-12 students.
The team analyzed data on thousands of K-12 teacher projects on the largest teacher crowdfunding site, DonorsChoose. They found that one funded project (about $400 in value), on average, achieves a significant increase in the percentage of students scoring basic and above on all tested subjects in high school, as well as science and language arts in primary and middle schools. This effect translates to two-nine additional students moving up to at least a basic level of proficiency in the correlating subject. The effect of these projects is greatest in low-income schools, where funded projects, on average, move four-10 additional students to at least a basic level of proficiency in tested subjects.
From the textual analyses of the teacher's written statements about the impact of the projects in their schools, Keppler, Li, and Wu additionally learned that student academic performance is significantly better when teachers use crowd-funded money to improve knowledge retention, as a repeated learning tool, and to differentiate or personalize learning.
Due to the demonstrated impact of teacher-driven crowdfunded projects, DonorsChoose has partnered with eight states to spend COVID-19 education relief funding on teacher crowdfunding projects. To date, these partnerships have funded over $100 million of teacher projects from over 100,000 teachers, impacting over 10 million students.
As the worlds of trade and culture were globalized in the 1980s, consumers worldwide saw standardized global brands enter and grow in their local markets, displacing local brands that had been dominant for decades. But what were consumers seeing in these global brands, and why were consumers switching to them? How could local brands fight back? These timely and important questions were addressed in a series of research papers by Michigan Ross Professor Rajeev Batra and his co-authors from 1999 through 2019. They showed that if consumers perceived brands as being global, they assumed these brands were of higher quality, capable of bestowing more prestige and status to their buyers, and would bring these buyers closer to the imagined lifestyles of consumers in the home countries of these brands. These papers have been cited over 6,000 times, have been nominated for and won multiple best-paper awards in journals and societies of international marketing, and have been included in lists of the 10 papers in the last 30 years that have made the most contribution to the international marketing literature. Today, as the lure of globalization seems to be receding and local brands seem to be winning again, this work highlights the tensions and trade-offs at play.
Professor Emerita Valerie Suslow and Adjunct Professor Margaret Levenstein have pursued a collaborative research agenda on the economics of cooperative behavior among firms, with a specific focus on cartels. Agreements between competing firms to reduce the intensity of competition can include actions such as price fixing, allocating geographic markets, allocating customers, and bid-rigging at auctions. Historically, such cooperative behavior was legal throughout the world but illegal in the United States under the Sherman Act of 1890.
The U.S. National Industrial Recovery Act of the early 1930s suspended price-fixing antitrust laws in certain circumstances. In the mid-1990s, after many decades of inattention, it became clear to competition policy enforcers that cartel activity was rampant and was likely causing substantial consumer harm. This spurred new leniency and amnesty policy tools to become available to firms. In their highly cited article "What Determines Cartel Success?" Levenstein and Suslow make the case that while cartels may break up due to cheating on the agreement, the more insurmountable problems are entry and adjustments in the face of changing economic conditions. "Breaking Up Is Hard to Do: Determinants of Cartel Duration" shows that cartels that turn to price wars to punish cheaters are not stable. Highly stable cartels draw upon a vast toolkit of mechanisms to enhance their stability and, therefore, their duration and economic harm.
Levenstein and Suslow's work has been cited in policy reports by organizations around the world, such as the Organization for Economic Cooperation and Development, the United Nations, and the World Trade Organization. They continue to explore hidden or overlooked sources of harm to consumers that may result from cartel activity, most recently turning their attention to the role played by vertical relationships between firms engaged in horizontal collusion, as well as how collusion may be facilitated by the use of a price index in long-term contracts.
The inception of the Journal of Public Policy and Marketing dates back to 1982 when it was founded by Tom Kinnear, a prominent faculty member from the Michigan Business School. Its initial name was Journal of Marketing and Public Policy. However, due to concerns raised by the American Marketing Association about potential confusion with the Journal of Marketing, it officially adopted its current name in 1983. The primary motivation behind the journal's creation was the growing interest among marketing academics in public policy during that era. During the 1970s and early 1980s, there was a growing interest in issues concerning the intersection of public policy and marketing. This interest encompassed various aspects, including advocacy for children's rights, as well as concerns related to other vulnerable groups such as the elderly, ethnic communities, and those with low income; the environmental impact of consumption and the emergence of what is now termed the "green consumer"; the adoption of energy-efficient practices by consumers following significant increases in gasoline, electric, and natural gas prices; evolving product liability doctrines that were becoming more lenient in terms of protective measures; food labeling and nutritional aspects; new consumer protection laws and measures. It is noteworthy that many of these trends are still relevant today, albeit with some shifts in emphasis, such as the increased focus on climate change.
Building on his experience as an attorney at the Federal Reserve, the 2020-22 research of Assistant Professor Jeremy Kress has identified critical weaknesses in bank merger oversight and proposed strategies to reinvigorate bank merger enforcement. Kress' work has shown that lax bank merger oversight has harmed consumers, businesses, and the broader financial system. His research has demonstrated that the prevailing approach to bank merger regulation has increased the cost and reduced the availability of consumer credit, inflated the fees that banks charge for basic financial services, limited small business credit availability, and threatened financial stability. Kress' research has pushed bank merger reform onto the policy agenda in Washington, D.C. by serving as a blueprint for legislation introduced by Senator Elizabeth Warren and inspiring an executive order on bank mergers by President Joe Biden. The Department of Justice also invited Kress to lead a joint initiative with the federal banking agencies to rewrite their bank merger policies.
Professor Gautam Kaul and two former PhD students, in their seminal 1994 study titled, "Transactions, Volume, and Volatility" convincingly argued and verified empirically that it is the occurrence of a trade in a certain direction rather than its dollar value (or volume) that has the greatest effect on prices, hence the greatest relevance when assessing the liquidity of the market where that trade took place. A trade sign is determined by the buyer or seller's information, while market conditions determine trade amount and price. This is a simple yet extremely powerful notion that was originally predicated in theory but had no empirical support before their 1994 study. The publication of this study opened the door to the accurate measurement and needed assessment of market liquidity. These days, the approach they recommended is widespread in its use.
The fields of social movements and organizations had very little overlap until Professors Jerry Davis and Mayer Zald convened a pair of conferences at Michigan Ross in 2001 and 2002 that brought together top scholars from both domains and forged research collaborations that yielded a 2005 Cambridge University Press volume and a 2008 special issue of Administrative Science Quarterly. Zald had previously published a piece on the topic in 1977, as had Davis in 1994. Today, this is a widely recognized and fruitful research domain that arose just in time to explain the increasingly prevalent interplay between corporations and social movements, including boycotts, corporate political activism, and employee social movements.
Following the decision of Dobbs v. Jackson Women's Health Organization by the U.S. Supreme Court, abortion restrictions within the United States have proliferated, and it is reasonable to expect that access to abortion services will be even further reduced in the future. The work of Associate Professor Sarah Miller investigates the impact of abortion denial using new linkages between data from the Turnaway Study and administrative records in credit reports. The Turnaway Study was a path-breaking study from the University of California San Francisco that recruited women seeking abortions, some of whom had pregnancies that just exceeded the gestational age limit of the clinic they attended and were denied abortions, others who fell just below this limit and were able to receive the abortion they sought. Miller and her co-authors found that women denied an abortion and those who received an abortion were on similar trajectories before the denial, but those denied an abortion experienced a large spike in financial problems such as unpaid bills and public records (such as bankruptcies and liens). This spike in financial problems persisted for the full six-year follow-up period that the authors had access to. The results provide evidence counter to the narrative that abortion is exclusively harmful to women who receive one (because of, for example, the regret they may feel after receiving an abortion). Instead, it suggests that giving women control over the timing of their reproduction allows them greater financial stability and self-sufficiency.
In 2007, Professor Maxim Sytch published a paper titled "Joint Dependence and Embeddedness: Reshaping Interorganizational Relationships and Exchange Dynamics." In this work, Sytch and his coauthor identify how joint dependence can shape relational embeddedness in inter-organizational relationships. Joint dependence stimulates relational closeness, collaborative action, and fine-grained information exchange between partners. These dynamics improve the performance of inter-organizational exchanges and reduce uncertainty within the relationship. Additionally, they reshape the exchange logic associated with interdependence, moving from an emphasis on power and leverage to a focus on relational embeddedness and mutual collaboration. This work has served as a potent counter to previous organizational and economic theories that associated interdependence with power, leverage, and mutual holdup. However, Sytch demonstrated that joint dependence can foster stronger bonds between exchange partners, leading to more effective exchanges without the looming threat of retaliation. Furthermore, the concept of joint dependence underscores that reducing relational uncertainty does not necessarily require less dependence on that partner. On the contrary, a mutual increase in dependence can foster relational closeness within the exchange, reducing opportunism, enhancing collaboration, and improving the performance of exchange relationships.