Decision Making & Negotiations

The banking legislation of the 1930s took very little time to pass, was unusually comprehensive, and unusually responsive to public opinion. Ironically, the primary motivations for the main bank regulatory reforms in the 1930s (Regulation Q, the separation of investment banking from commercial banking, and the creation of federal deposit insurance) were to preserve and enhance two of the most disastrous policies that contributed to the severity and depth of the Great Depression — unit banking and the real bills doctrine.

The paper provides empirical evidence that strategic complementarities among investors generate fragility in financial markets. Analyzing mutual fund data, we find that, consistent with a theoretical model, funds with illiquid assets (where complementarities are stronger) exhibit stronger sensitivity of outflows to bad past performance than funds with liquid assets. We also find that this pattern disappears in funds where the shareholder base is composed mostly of large investors.

Identity movements rely on a shared "we-feeling" amongst a community of participants. In turn, such shared identities are possible when movement participants can self-categorize themselves as belonging to one group. We address a debate as to whether community diversity enhances or impedes such protests, and investigate the role of racial diversity since it is a simple, accessible, and visible basis of community diversity and social categorization.

It is now widely accepted that the institutional interventions of states are a foundational influence on the dynamics of organizational forms. But why do states act? In this paper, we apply the behavioral theory of the firm to develop an explanation of state actions based on the fact that they are boundedly rational rivals. The instrument of state competition we examine is the founding of business incubators, a primary tool in the entrepreneurial strategy of economic development.

We consider a general infinite horizon inventory control model which combines demand and supply risks and the firm's ability to mitigate the supply risks by diversifying its procurement orders among a set of N potential suppliers. Supply risks arise because only a random percentage of any given replenishment order is delivered as useable units. The suppliers are characterized by the price they charge and the distribution of their yield factor.

We develop a dynamic incomplete-markets model of entrepreneurial firms, and demonstrate the implications of nondiversifiable risks for entrepreneurs' interdependent consumption, portfolio allocation, financing, investment, and business exit decisions. We characterize the optimal capital structure via a generalized tradeoff model where risky debt provides significant diversification benefits.

This article examines how managers' tendency to discuss new ideas with others in their professional networks depends on the density of shared ties surrounding a given relationship. Consistent with prior research which found that embeddedness enhances information flow, an egocentric network survey of mid-level executives shows that managers tend to discuss new ideas with those who are densely embedded in their professional networks. More specifically, embeddedness increases the likelihood to discuss new ideas by engendering affect-based trust, as opposed to cognition-based trust.

Lawrence Glaubinger, a Columbia Business School alumnus, became increasingly involved in running his 100-acre Christmas tree farm after he retired in 1992. Between 1993 and 2008, Glaubinger sold Ponderosa pines through an arrangement with Green Acres, a large retailer that bought Glaubinger's trees to sell at its nurseries. While Glaubinger Tree Farm sold the trees to Green Acre at a wholesale price based on its marginal cost, the retailer independently set retail pricing. Glaubinger suspected his tree farm could have shown higher profits if it had sold directly to consumers.