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Abstract

In many settings, firms rely on independent contractors, or freelancers, for the provision of certain services. The benefits of such relationships for both firms and workers are often understood in terms of increased flexibility. Less understood is the impact of freelancing on individual performance. While it is often presumed that the performance of freelancers is largely portable across organizations, it is also possible that a given worker's performance may vary across organizations if he or she develops firm-specific skills and knowledge over time. We examine this issue empirically by considering the performance of cardiac surgeons, many of whom perform operations at multiple hospitals within narrow periods of time. Using patient mortality as an outcome measure, we find that the quality of a surgeon's performance at a given hospital improves significantly with increases in his or her recent procedure volume at that hospital but does not significantly improve with increases in his or her volume at other hospitals. Our findings suggest that surgeon performance is not fully portable across hospitals (i.e., some portion of performance is firm specific). Further, we provide preliminary evidence suggesting that this result may be driven by the familiarity that a surgeon develops with the assets of a given organization.
MANAGEMENT SCIENCE
Vol. 52, No. 4, April 2006, pp. iv–vi
issn 0025-1909 eissn 1526-5501 06 5204 00iv
informs®
doi 10.1287/mnsc.1060.0555
© 2006 INFORMS
Management Insights
The Firm Specificity of Individual Performance:
Evidence from Cardiac Surgery
Robert S. Huckman,Gary P. Pisano
In many settings, firms depend on freelance labor
for provision of critical services. Examples can be
found in entertainment, journalism, consulting, and—
the focus of this paper—medical care. The reliance
of firms on labor they do not employ raises impor-
tant managerial questions. To what extent is the per-
formance of freelancers transferable across organiza-
tions? Alternatively, to what degree do assets that
are specific to a given organization affect the per-
formance of any individual freelancer? Finally, how
should a manager value evidence about a freelancer’s
prior performance in another organization? We con-
sider several of these issues in the market for car-
diac surgery, a setting where freelance surgeons often
work at multiple hospitals. We find that the estab-
lished positive relationship between a surgeon’s vol-
ume of procedures and the quality of his or her surgi-
cal outcomes is, in fact, a firm-specific phenomenon.
That is, the quality of a surgeon’s outcomes at a given
hospital is positively related to his or her volume at
that hospital but is not related to his or her volume
at other hospitals. We find support for the view that
this firm specificity is due to a surgeon’s familiarity
with assets (both physical and human) that may differ
between organizations.
Does Past Success Lead Analysts to Become
Overconfident?
Gilles Hilary,Lior Menzly
The authors use financial analyst behavior to study
how individuals make decisions. The results indicate
that people tend to become overconfident in their
capacities after a series of good performance. In other
words, they attribute too much of their success to
their skill and not enough to plain luck. In the setting
considered in this paper, analysts take more risk and
make more mistakes after a series of accurate earnings
forecasts. This suggests a counterintuitive implication
for practitioners in the financial markets. If two ana-
lysts possess identical skills and experience but only
one was recently successful, investors may want to
rely more on the subsequent forecast of the less accu-
rate analyst. In other words, investors may want to
downplay the predictions of analysts who have expe-
rienced short-term success.
Confidence in Imitation: Niche-Width Strategy
in the UK Automobile Industry
Mooweon Rhee,Young-Choon Kim,Joon Han
Firms often imitate other firms’ strategies for eco-
nomic and social purposes. Our study suggests that
managers’ decisions to imitate others are affected by
their confidence in imitation, which derives from the
distribution of other firms they are considering imi-
tating (i.e., “reference firms”). We find that firms are
more likely to imitate other firms when they observe
more reference firms and when the strategies of those
reference firms are less heterogeneous. However, the
fact that managers can only imitate the strategies
of firms that have survived the competitive process
means that their choices of reference firms are usu-
ally unrepresentative (i.e., “undersampled”). This pro-
vides managers with a misleading picture of the prac-
tices they imitate and leads to misguided confidence
in imitation decisions. In particular, during periods
of disruptive technological and market change where
innovation is considered superior to imitation, the
undersampling of failed firms may lead managers to
make inferior strategic decisions because they under-
estimate the range of behavior of their reference firms.
Given this tendency, managers should be aware of a
potential decision trap because the distribution of ref-
erence firms distorts as well as influences their deci-
sion to imitate. Our study suggests that if managers do
not recognize and correct for this undersampling prob-
lem, then their imitation decisions can be systemati-
cally biased and could damage their firms’ long-term
survival.
A General, Analytic Method for Generating Robust
Strategies and Narrative Scenarios
Robert J. Lempert,David G. Groves,
Steven W. Popper,Steve C. Bankes
When faced with deeply uncertain, hard-to-predict
futures, decision makers often seek robust strate-
gies that perform well over a wide range of plau-
sible scenarios. But most quantitative decision sup-
port methods answer a different question, identify-
ing an optimum strategy contingent on decision mak-
ers’ best estimates of future outcomes and their like-
lihoods. Such optimal strategies may be highly vul-
nerable to unexpected opportunities and dangers. This
paper describes robust decision making (RDM), a new
analytic method that helps decision makers design
the robust strategies they need to more effectively
iv
Management Insights
Management Science 52(4), pp. iv–vi, © 2006 INFORMS v
manage deeply uncertain futures. Using an organi-
zation’s existing models and data in a computer-
supported, iterative process, RDM first discovers
promising strategy options, aggressively searches for
their vulnerabilities by scanning hundreds to millions
of computer-generated scenarios, and then suggests
modifications that address these vulnerabilities. Dur-
ing this process, RDM identifies a small number of
scenarios particularly salient to the decision makers’
choices. RDM thus offers a synthesis between the
communicative power of narrative scenarios and the
rigor of quantitative decision analysis. We illustrate
the approach by identifying robust, adaptive near-
term pollution control strategies for the 21st century.
Affect, Empathy, and Regressive Mispredictions of
Others’ Preferences Under Risk
David Faro,Yuval Rottenstreich
Managers must often predict how others will react
to risk. For example, suppose that a pharmaceuti-
cal firm is selecting a system by which to compen-
sate scientists and doctors employed to develop new
innovations. Management might consider two types
of compensation: a salary-based system providing a
guaranteed, stable income, or a riskier, performance-
based system that provides substantial bonuses for
successful innovations but only modest remuneration
for unsuccessful innovations. Which one is preferred
will depend on the employees’ risk attitudes. In this
paper, we experimentally assess the accuracy of peo-
ple’s predictions of others’ reactions to risk. We find
that predictions get the “direction” correct but are sig-
nificantly too “tempered.” That is, people do indeed
like risks they are predicted to like, but they like these
risks more than predicted. Likewise, people tend to
dislike risks they are predicted to dislike, but they
dislike these risks more than predicted. In the context
of our compensation example, our findings suggest
that if managers predict that employees would pre-
fer the riskier, performance-based system, employees
will actually prefer this compensation plan even more
than managers forecast.
Risk Management with Benchmarking
Suleyman Basak,Alex Shapiro,Lucie Teplá
This paper focuses on a common practice in the
money management industry—relative performance
evaluation—which leads to benchmarking invest-
ment strategies. We approach this issue by investi-
gating the optimal investment behavior of a man-
ager who strives to meet a tracking error constraint
in a standard asset allocation framework. The con-
straint allows a shortfall from a benchmark return,
consistent with growing interest in such practice.
While shortfall-based investment strategies have been
argued to have adverse implications, we demonstrate
that, in conjunction with benchmarking, such prac-
tices offer a variety of attractive features. Our results
show that a money manager optimally under- or
overperforms a target benchmark under different eco-
nomic conditions, depending on his or her attitude
toward risk and the choice of benchmark. This, in
turn, provides guidance for investors on how to select
managers/benchmarks in order to achieve a desired
investment performance profile. Although our formu-
lation includes important risk-management practices,
such as portfolio insurance, value-at-risk, downside
hedging, as special cases, many of our findings fall
outside the predictions of existing work.
Downside Loss Aversion and Portfolio Management
Robert Jarrow,Feng Zhao
When managing either a fixed-income portfolio that
is exposed to credit risk or an equity portfolio involv-
ing derivatives, portfolio management tools based on
the traditional mean-variance analysis may no longer
be relevant. Indeed, traditional mean-variance meth-
ods view risk symmetrically (downside and upside).
Yet, industry practice and behavioral finance support
the notion that risk is not viewed symmetrically, and
that downside loss-averse preferences are the norm.
Given these observations, this paper provides an anal-
ysis of the differences between optimal portfolio hold-
ings for downside loss-averse versus mean-variance
preferences. The authors show that if the return dis-
tributions of the assets underlying the portfolio are
symmetric, then the two different preferences yield
similar optimal portfolios. However, if the return dis-
tributions are asymmetric with larger left tails, then
the portfolio holdings differ significantly. This leads to
simple procedure for determining optimal portfolios
for a class of downside loss-aversion preferences.
An Empirical Examination of the Decision to
Invest in Fulfillment Capabilities: A Study of
Internet Retailers
Taylor Randall,Serguei Netessine,Nils Rudi
The spectacular rise and fall of many prominent Inter-
net retailers is a subject of intensive inquiry in the aca-
demic community. In this paper, we analyze the deci-
sion of some Internet retailers to outsource inventory
and back-end operations to third parties and compare
it with decisions of other retailers to keep fulfillment
capabilities in-house. Using evidence from a sample
of over 50 public Internet retailers, we demonstrate
empirically that older firms selling small, high-margin
products, offering lower levels of product variety, and
facing lower demand uncertainty tend to integrate
inventory and fulfillment capabilities with virtual
storefronts. Furthermore, we find that the decision
to invest (or not invest) in fulfillment capabilities
is associated with the ultimate success of Internet
retailers: companies making this decision in accor-
dance with theoretical predictions are much less likely
to go bankrupt. This suggests that supply chain
Management Insights
vi Management Science 52(4), pp. iv–vi, © 2006 INFORMS
management decisions by Internet retailers have a sig-
nificant effect on their economic performance.
E-sourcing in Procurement: Theory and Behavior in
Reverse Auctions with Noncompetitive Contracts
Richard Engelbrecht-Wiggans,Elena Katok
Auctions effectively establish a market clearing price.
However, there are costs associated with running
and/or participating in an auction. For example, a
buyer may prefer to continue purchasing from sup-
pliers with whom he has previous experience, as long
as he gets a fair price. As a compromise between
noncompetitive procurement and an all-out auction,
we consider hybrid mechanisms in which only some
units get purchased at auction, but this auction estab-
lishes the price for the noncompetitively procured
units as well. We show, both in theory and in the
laboratory, that such hybrid mechanisms can actually
result in even lower prices for the buyer than an all-
out auction.
Machine Learning for Direct Marketing Response
Models: Bayesian Networks with Evolutionary
Programming
Geng Cui,Man Leung Wong,Hon-Kwong Lui
The rapid accumulation of customer and transac-
tion data has resulted in very large databases. The
amount and variety of data provide new opportu-
nities for marketing researchers to use data mining
methods to gain insight into consumer behavior by
exploring unanticipated relationships. This is particu-
larly relevant for direct marketing operations. Using
RFM (recency, frequency, monetary value), lifetime,
and transaction data to model consumer response to
direct marketing, we demonstrate that Bayesian net-
works (BN), which are free from traditional data and
model assumptions, require no a priori model for-
mulation and can take on any structure for a model
by encoding a joint probability distribution among
the variables. In comparison with neural networks,
CART (classification and regression tree) and latent-
class regression, BN provides more accurate and inter-
pretable results, greater transparency, and explanatory
insight. The machine learning algorithm of evolu-
tionary programming (EP) compares numerous alter-
native BN models to arrive at an optimal solution.
Together, BN and EP represent efficient tools that
marketing managers can use to extract and update
knowledge in a timely fashion and thereby facilitate
improved marketing decisions.
Research Note—Sole Entrant, Co-optor, or
Component Supplier: Optimal End-Product
Strategies for Manufacturers of Proprietary
Component Brands
R. Venkatesh,Pradeep Chintagunta,Vijay Mahajan
Component branding is emerging as a prominent
marketing strategy. Our focus is on manufacturers of
powerful component brands who are able to shape
the competitive structure even for downstream prod-
ucts. We see three alternative roles for such manufac-
turers in the end-product market: sole entrant, as with
3Com, which until recently offered its Palm operating
system only as part of its own Palm handheld devices;
co-optor, as with Canon, whose specialty motors go
into its own and HP laser printers; and component
supplier, as with Intel, which has refrained from mak-
ing its own PCs. We analyze a spatial model to pro-
pose which role is the best and what the related pric-
ing practices should be. Our recommendations are as
follows.
1. The co-optor role (i.e., entering the end-product
market and co-opting other end-product manufactur-
ers) is generally more profitable than the sole entrant
and component supplier roles.
2. Under the co-optor role, firms can and should
charge higher prices than under the other two roles.
Doing so moves the players to more profitable
“niche” roles and avoids cut-throat competition.
3. Firms should offer their potent component even
to competitors who are using inferior alternatives. Co-
opting these rivals is likely to lead to “win-win” out-
comes.
We provide an illustrative application of the model
to three high-tech end-product categories—digital
handhelds, color TV sets, and laser printers.
Allocation of Service Time in a Multiserver System
Muhammad El-Taha,Bacel Maddah
This article deals with a novel idea of reducing con-
gestion and related cost without committing addi-
tional resources by reallocating existing resources in a
more efficient manner. In a multiserver queuing sys-
tem with job processing times characterized by high
variability, we divide the servers into two groups,
where all arriving jobs go to the first group and
receive up to Tof their service requirement and, if
necessary, proceed to the second group of servers to
receive their remaining service. In this design, large
jobs with long processing times end up at the second
group of servers. This mechanism allows fast process-
ing of small jobs at the first group of servers with
minimal delay. This article finds the value of Tand
the number of group 1 servers that minimize mean
delay per job in the system. Numerical results show
significant reduction in mean delay over using the
standard multiserver model. Our results may offer a
means for improving responsiveness in manufactur-
ing, repair and maintenance facilities, and computer
applications, where processing times are not known
in advance.
... In many creative contexts, such as film and video game development, scholars argue that employee mobility can be a key obstacle to protecting investments in human capital (e.g., Cadin et al., 2006). And while outside knowledge might help firms tackle problems that were solved elsewhere (Franke et al., 2014), or might be useful for generating new ideas that lead to innovation (Storz et al., 2015), knowledge does not always transfer across project or firm context (Groysberg et al., 2008) and can present hazards if it is uncritically applied (e.g., Huckman et al., 2006). These hazards are particularly salient when a project is focused on either exploitation-a primary focus on leveraging the firm's own prior experience (e.g., Benner & Tushman, 2003;Rosenkopf & Nerkar, 2001)-or imitation-a primary focus on replicating the successes of industry rivals (e.g., Semadeni & Anderson, 2010). ...
... This has since shifted since, over time, scholars have increasingly recognized the role of transient members on workgroup performance (e.g., Brady & Davies, 2004;Prencipe & Tell, 2001). As our knowledge on this topic continues to mature and work structure evolves, an area of growing interest focuses on the contextualized application of knowledge within workgroups (Groysberg et al., 2008;Huckman & Pisano, 2006)-specifically, the potential limits of knowledge transfer between workgroup contexts (e.g., Chatterji et al., 2019;Fahrenkopf et al., 2020)-and uncovering the ideal balance between different types of knowledge in a workgroup (Argote et al., 2021). ...
... In the modern era, firms often form ad hoc, project-focused workgroups that can consist of both internal employees and external contracted workers which disband when that project is completed (Brady & Davies, 2004;Hobday, 2000). There are many potential short-run benefits from such temporary workgroup arrangements, such as the portability of skills, reduced costs, and increased flexibility, among others (Huckman & Pisano, 2006). Initially, these ad hoc groups do not benefit from the gradual honing of routines and increased relational capital enjoyed by workgroups with collaborative histories (Edmondson & Nembhard, 2009). ...
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... First, until replacements accumulate human capital at least equivalent to that of the leavers, the unit suffers from the outcome of less-proficient employees (Laulié & Morgeson, 2020;Siebert & Zubanov, 2009), and remainers have to take on part of their work to compensate for the gap (Hausknecht, Trevor, & Howard, 2009). Furthermore, although the loss of individual explicit knowledge ("know-what") may be counterbalanced through additional investments in human capital (Christian, Pearsall, Christian, & Ellis, 2014;Dess & Shaw, 2001), tacit knowledge development requires team interaction and practice (Grant, 1996), and the idiosyncratic nature of "know-how" makes it difficult to capture the previous functioning of a unit (Huckman & Pisano, 2006;Kacmar, Andrews, Van Rooy, Steilberg, & Cerrone, 2006). ...
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Thesis
Full-text available
PENGURUSAN BAKAT DAN PRESTASI KERJA DALAM INDUSTRI PERBANKAN NIGERIA: PERANAN PENGLIBATAN KERJA, KEPUASAN KERJA DAN PERSEPSI SOKONGAN ABSTRAK Bank Sentral Nigeria bertujuan membentuk semula industri perbankan Negara Nigeria. Pelbagai dasar ekonomi yang bertujuan untuk membentuk semula telah diwujudkan oleh Bank Sentral Nigeria. Namun begitu, kebanyakan bank di Nigeria masih tidak menunjukkan prestasi yang baik berbanding dengan bank di negara lain. Kajian ini bertujuan mengkaji prestasi pekerja dalam industri perbankan di Nigeria. Berdasarkan teori pertukaran sosial dan teori modal insan, kajian ini fokus kepada menyiasat hubungan pengurusan bakat dengan prestasi kerja pekerja dalam industri perbankan Nigeria. Kajian ini menggunakan penglibatan kerja dan kepuasan kerja sebagai angkubah mediasi serta persepsi sokongan organisasi dan persepsi sokongan supervisor sebagai angkubah moderasi. Soal selidik digunakan untuk mengumpul maklumat dari 302 pekerja sepenuh masa di lima buah bank terbaik dalam industri perbankan Nigeria. Data kemudian dianalisis menggunakan PLS-SEM. Dapatan kajian menunjukkan bahawa tarikan bakat dan pengembangan bakat pekerja mempunyai pengaruh positif terhadap prestasi kerja, gelagat kewarganegaraan organisasi dan gelagat kewarganegaraan individu. Pengekalan bakat didapati tidak mempunyai pengaruh signifikan terhadap prestasi kerja, gelagat kewarganegaraan organisasi dan gelagat kewarganegaraan individu. Hasil kajian membuktikan bahawa penglibatan kerja dan kepuasan kerja berpengaruh positif atas tarikan bakat, pengembangan bakat dan prestasi kerja, gelagat kewarganegaraan organisasi dan gelagat kewarganegaraan individu. Sebaliknya, penglibatan kerja dan kepuasan kerja tidak menjadi angkubah mediasi atas perhubungan antara pengekalan bakat dan prestasi kerja, gelagat kewarganegaraan organisasi dan gelagat kewarganegaraan individu. Tambahan lagi, persepsi sokongan supervisor tidak memoderasi perhubungan antara penglibatan kerja dan prestasi kerja, gelagat kewarganegaraan organisasi dan gelagat kewarganegaraan individu. Walau bagaimanapun, dapatan menunjukkan bahawa persepsi sokongan supervisor memoderasi perhubungan antara kepuasan kerja, prestasi kerja dan gelagat kewarganegaraan organisasi, tetapi tidak memoderasi perhubungan antara kepuasan kerja dan gelagat kewarganegaraan individu. Akhirnya, kajian mendapati bahawa persepsi sokongan supervisor tidak memoderasi hubungan antara penglibatan kerja dan prestasi kerja, gelagat kewarganegaraan organisasi dan gelagat kewarganegaraan individu. Dengan cara yang sama, persepsi sokongan supervisor tidak mempengaruhi perhubungan antara kepuasan kerja dengan gelagat kewarganegaraan organisasi dan gelagat kewarganegaraan individua, tetapi memoderasikan perhubungan antara kepuasan kerja dan prestasi kerja. Oleh itu, untuk bank Nigeria memotivasi pekerja supaya berprestasi tinggi dalam ekonomi digital ini, pengurusan bakat perlu dirancang dengan teliti kerana pengurusan bakat dapat mewujudkan keadaan lebih daya saing. Kesimpulannya, kajian ini akan memanfaatkan industri perbankan Nigeria, pihak berkepentingan dan pembuat dasar dalam memahami peramal prestasi kerja industri perbankan agar prestasi pekerja dapat dipertingkatkan. TALENT MANAGEMENT AND JOB PERFORMANCE IN NIGERIAN BANKING INDUSTRY: THE ROLES OF WORK ENGAGEMENT, JOB SATISFACTION, AND PERCEIVED SUPPORT ABSTRACT The Central Bank of Nigeria aimed to reshape Nigeria’s banking industry. However, despite the various economic policies, most banks continue to perform poorly compared to their counterparts in other parts of the world. Therefore, there is a need to study the Nigerian banking industry, in particular, the predictors of employee job performance. Based on the social exchange theory and human capital theory, this study aims to investigate talent management and job performance of Nigerian banks, using work engagement and job satisfaction as mediators, as well as perceived organizational support (POS) and perceived supervisory support (PSS) as moderators. Questionnaire was used to obtain information from 302 full-time employees of the top five banks in Nigeria. PLS-SEM was used to analyze the data. The results indicated that talent attraction and talent development have a significant and positive influence on task performance, organizational citizenship behavior organization (OCBO), and organizational citizenship behavior individual (OCBI). However, talent retention was found to have no significant effect on employee task performance, OCBO, and OCBI. Work engagement and job satisfaction are found to relate positively to talent attraction, talent development, task performance, OCBO, and OCBI. However, work engagement and job satisfaction do not mediate the relationship between talent retention and task performance, OCBO, and OCBI. Furthermore, it is found that POS does not moderate the relationship between work engagement and task performance, OCBO, and OCBI. However, the finding revealed that POS moderates the relationship between job satisfaction and task performance and OCBO, but does not moderate the relationship between job satisfaction and OCBI. Finally, PSS does not moderate the relationship between work engagement and task performance, OCBO and OCBI. Similarly, PSS does not intervene in the relationship between job satisfaction, OCBO and OCBI, but instead it moderates the relationship between job satisfaction and task performance. Therefore, for the Nigerian banks to motivate high-performing employees in this digital economy, talent management will need to be carefully designed to create the most enduring competitive advantage. This study will benefit the Nigerian banking industry, the stakeholders, and the policy makers to apprehend the predictors of job performance so that the prevalence of poor employee job performance will not occur.
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