Leadership & Organizational Behavior

We present a simple model where a firm will commit to a strictly positive hurdle rate on investment proposals by managers even though the two parties are symmetrically informed about the investments' profitability. Facing a positive hurdle rate, a manager who derives partial benefits from the investment profits will have more incentive to collect information about the projects. The optimal hurdle rate trades off the benefit of more information with the cost of foregoing ex post positive Net Present Value (NPV) projects.

This paper analyzes the role of jumps in continuous-time short rate models. I first develop a test to detect jump-induced misspecification and, using Treasury bill rates, find evidence for the presence of jumps. Second, I specify and estimate a nonparametric jump-diffusion model. Results indicate that jumps play an important statistical role. Estimates of jump times and sizes indicate that unexpected news about the macroeconomy generates the jumps. Finally, I investigate the pricing implications of jumps.

Negotiation scholars and practitioners have long noted the impact of face, or social image, concerns on negotiation outcomes. When face is threatened, negotiators are less likely to reach agreement and to create joint gain. In this paper, we explore individual differences in face threat sensitivity (FTS), and how a negotiator's role moderates the relationship of his or her FTS to negotiation outcomes. Study 1 describes a measure of FTS. Study 2 finds that buyers and sellers are less likely to reach an agreement that is in both parties' interests when the seller has high FTS.

This article focuses on the role of threats in negotiations. Broadly speaking, a threat is a proposition that issues demands and warns of the costs of noncompliance. Even if neither party resorts to them, potential threats shadow most negotiations. Researchers have found that people actually evaluate their counterparts more favorably when they combine promises with threats rather than extend promises alone. Whereas promises encourage exploitation, the threat of punishment motivates cooperation.

In this chapter, the authors argue that having a position of leadership often means having power over other people and that this power may have psychological consequences on the leaders. Specifically, they review research that supports their hypothesis that power tends to make people action prone — leaders tend to act. This tendency may be fine when action is called for, but it may interfere if caution and patience are called for.

Creative destruction presents a tough implementation challenge. It's expensive in terms of physical goods and executive and employee time. Creatively destroying requires stopping all or part of the existing system, destroying it, redesigning the new system, putting it in place, debugging it, and habituating employees to its entirely new features. That means retraining and re-establishing informal networks among longstanding employees, customers, and new employees. Finally, it means creating a new culture and aligning people, processes, networks, and structures with it.

Most management advice today — whether it's from books or articles, prescribed in courses or by consultants — says that change is good and more change is better. Advice on how to change varies quite a bit, but it has three features in common: "Creative destruction" is its motto. "Change or perish" is its justification. And "No pain, no change" is its rationale for overcoming a purportedly innate human resistance to change. The overarching goal is to invent a spanking new future ahead of one's competitors.

Creative destruction tends to be a very disruptive and painful way of bringing about change — often so painful that it becomes virtually unsustainable. In many situations such highly destabilizing and painful changes can hurt more than they help. What is needed is a less disruptive approach to change — one that provides for a sustained series of successful changes, enabling firms to adapt to their ever-changing environments without being torn apart. An alternative to creative destruction called creative recombination is described.