Publications & Working Papers

[1] Ballesteros, L., M. Useem., T. Wry, (2017). Masters of disasters? An empirical analysis of how societies benefit from corporate disaster aid. Academy of Management Journal

Corporations have become increasingly influential within societies around the world, while the relative capacity of national governments to meet large social needs has waned. Consequentially, firms are being asked to adopt responsibilities that have traditionally fallen to governments, aid agencies, and other types of organizations. There are questions, though, about whether this is beneficial for society. We study this in the context of disaster relief and recovery; an area where companies account for a growing share of aid as compared to traditional providers. Drawing on the dynamic capabilities literature, we argue that firms are better-equipped than other types of organizations to sense areas of need following a disaster, seize response opportunities, and reconfigure resources for fast, effective relief efforts. As such, we predict that—while traditional aid providers are important for disaster recovery—relief will arrive faster, and nations will recover more fully when locally active firms account for a larger share of disaster aid. We test our predictions with a proprietary database comprising information on every natural disaster and reported aid donation worldwide from 2003 to 2013. Our analysis uses a novel, quasi-experimental technique known as the synthetic control method and shows that nations benefit greatly from corporate involvement when disaster strikes.

The Effect of Giving from Locally Active Firms on Post-Disaster Recovery (15 years pre-disaster; 10 years post-disaster)

hdi
The figure shows the difference in HDI growth rate between treatment nations and correspondent synthetic controls. Period (0) is the disaster year. Treated are disaster countries with a substantial share of disaster giving coming from firms with operations in the affected country [(as defined by the 75th  (7.7%), 95th (24.5%), and 99th percentiles (44.4%)]. The total sample of country disasters in the period 2003-2013 is 464.
Media coverage:


[2] Ballesteros, L., A. Gatignon, (Forthcoming). The Relative Value of Firm and Non-Profit Experience: Tackling Large-Scale Social Issues across Institutional Contexts

How can corporations leverage the relative value of their own experience, versus that of non-profit organizations (NPOs), when tackling large-scale social issues? We investigate how firms’ local operations and affected countries’ institutional development impact the value of NPOs as channels for corporate disaster aid, relative to direct implementation by the firm. Findings from a quasi-experiment across the 4,396 natural disasters that occurred worldwide from 2003 to 2015 show that firms could donate greater amounts directly (through NPOs) in countries with high (low) institutional development, especially where they have (lack) operations. Yet, firms tend to do the opposite, raising questions about incentive alignment and communication in cross-sector partnerships. We also discuss the strategic and social implications in terms of closing the funding gap for disaster relief.

  • Best PhD Paper, SMS 2017 (Nominated

[3] Ballesteros, L., (Under Revision). Markets as Clubs: Explaining the Corporate Provision of Public Goods with Economic Reliance

When firms decide to engage in the provision of collective goods that benefit social welfare (i.e., to behave pro-socially), they may consider the economic relevance of such goods for their own market operation. The bigger the stake of the firm in a market is, the greater its reliance on the market’s collective goods, such as communication infrastructure. Therefore, a market’s relative importance for a firm is a major predictor of corporate pro-social behavior. I show that accounting for variation in economic reliance leads to a more accurate prediction of corporate pro-social behavior than widely invoked arguments rooted in the extant literature.

Media coverage:

  • The Washington Post: It’s bad business not to donate to Nepal
  • Early versions:
    • The Wharton School Research Series, 2015 (1), p.56.
    • Academy of Management Best Paper Proceedins 2015:1 19077; doi:10.5465
    • Best PhD Paper, SMS 2015

 [4] Ballesteros, L.,T. Wry & M. Useem.,  (Under Review). Follow the Leader? The Costs of Solving Uncertainty and Ambiguity with the Wrong Cognitive Referent

This paper brings attention to the institutional factors affecting the association between the timing of firm non-market choices and firm performance. In contexts of high uncertainty and urgency, firms and the stakeholders often follow different and inversely correlated signals, or cognitive referents, to form beliefs of a firm’s capacity and willingness to meet stakeholder expectations. Firms overestimate the role of financial performance when deciding to donate first, imitate, or deviate from the first donation and underestimate the importance that firm reputation has for stakeholders. The reputation of the first mover overrides the reputation of the follower, which obtains a spillover benefit or loss. Thus, the imitation of high-performing donors often results in a performance loss because firms with bad reputations tend to move early. The findings illuminate the conditions under which rents may be socially constructed and not strongly associated with the physical characteristics of the firm or its choices, which contradicts research suggesting that moving fast with a large and substantive action is more likely to accrue rents than a late, small, and symbolic choice.

  • Best Conference Paper, SMS 2018 (Nominated

 


[5] Ballesteros, L, &  H. Kunreuther, (Under Revision). Organizational Decision-Making under Uncertainty Shocks 

Uncertainty shocks—exogenous and unpredictable hazards that disrupt significantly the welfare of a geographical area, such as natural disasters, terrorist attacks, technological accidents, pandemics, and episodes of violent crime—are associated with prominent levels of business mortality. The organizational capability to manage uncertainty shocks is thus an important determinant of firm performance and market competition. Studies on psychology suggest that individual biases and simplified decision rules and other cognitive factors guide behavior during rare disruptions. The organizational literature, on the other hand, emphasizes the role of structure and routines as tools for group sensemaking and interlevel communication, which are cardinal for the interpretation of external threats and transforming experience into learning. So far, these literatures remain disconnected, which means that we have a fragmented understanding of why some organizations are more able to manage uncertainty shocks while others fail. We offer a multidimensional framework that combines insights from cognitive psychology, the Neo-Carnegie and the institutional literatures to explain such variance. We discuss current research themes related to our framework components and identify promising research avenues on organizational decision making and learning from systemic risks.