Luis Ballesteros

Business Strategy under Uncertainty | The School of Business | The George Washington University

Summary of Research Findings

Do uncertainty shocks lead to higher innovation?

In a 2019 working paper, I evaluate the second-moment effects of low- probability, high-magnitude shocks in innovative behavior, proxied by inventor’s patent fillings at the U.S. county level. Using Hurricane Katrina as treatment in preliminary analyses, I observe that counties in the upper two quartiles in the distribution of disaster magnitude, measured by number of victims and economic cost, experience an economically significant rise in patent fillings within five years after Katrina. These results are in line with the argument that large disruptions lead to (temporal) changes in risk taking. They are not explained by several economic, political, social, and demographic factors, including educational attainment, income, race distribution and external aid. The treatment-control matching covers five years before the uncertainty shock. I also account for the potential confounding effects of the 2007-2009 financial crisis and selective migration.

Is there an economic case for countries affected by natural disasters to receive aid from firms instead of public agencies?

Humanitarian aid from firms with local operations helps countries affected by disasters recover faster and greater than aid from foreign governments, multilateral agencies, and individual charity. Here is the paper from Academy of Management Journal:" Masters of Disasters? An empirical analysis of how societies benefit from corporate disaster aid. This is an animation summarizing this collaborative work with Mike Useem and Tyler Wry:

This study won the Responsible Research in Management Award, IACMR-RRBM.

Do societies benefit more when firms allocate resources in response to national shocks using their own structure or when they use NPOs as resource channels?

Firms often supply emergency public goods via non-profit organizations (such as the Red Cross) in countries with high institutional development (such as Japan). Our research suggests that these countries would benefit more if firms implemented their aid with their own resources. Conversely, in countries with low institutional development (such as Haiti) the social benefit is comparatively high when firms channel their aid via NPOs. Yet, Aline Gatignon and I have found that firms tend to do the opposite, which, arguably, reduces the economic spillovers of their pro-social behavior. Here is the paper from Strategic Management Journal: The relative of value of npo-firm experience.

Are firms financially strategic when they engage in non-market behavior?

Over 51% of firms supplying public goods in the aftermath of disasters observe losses that are not explained by market operation. We have found that the financial implications of this company pro-social behavior is a function of firms’ preexisting media reputations more than the underlying characteristics of firms’ donations. Moreover, there are reputational spillovers among firms that donate a similar amount than the first donor. (This is the updated paper 03 14 19).