Research Roundup: April 2023

Startups Benefit From Operating ‘in the Shadows’

Startups often get a boost when founders delay formally registering their businesses with governmental authorities. That's according to a new paper published in the International Journal of Entrepreneurial Behavior & Research. Its co-authors, all from NEOMA Business School in France, include Ana Colovic, professor of strategy and entrepreneurship; Bisrat Misganaw, assistant professor of strategy and entrepreneurship; and Dawit Assefa, research engineer. 

After analyzing the performance of 49,520 companies from 116 countries, the researchers found that up to 50 percent of businesses in developing economies were operating informally, compared to just 15 percent in countries that are part of the Organization for Economic Co-operation and Development. When these startups “operated in the shadows,” they often grew faster than their formal counterparts.

This could be because “informal startups can redirect money usually earmarked for authorities in taxes, registration fees, etc., to expand the company,” says Colovic. “They also rely more on their leaders’ networks than on public services to obtain resources and gain legitimacy.”

But this positive effect only lasts so long. After 7.52 years, on average, informal startups not only must spend more to keep their businesses going, but also miss out on resources available to formally registered businesses. The stronger a country’s institutions, the less time startups benefit from informal operation.

The researchers believe these findings should encourage startup founders to avoid keeping their businesses informal for too long. By registering their businesses within a reasonable time, founders will have access to greater advantages, such as training opportunities and reduced registration costs, and will be able to maximize their contributions to their local economies.

‘Skill Signals’ More Critical to Women’s Careers

Having strong skills and qualifications helps most individuals advance their careers, but two scholars from the University of Mannheim Business School in Germany find that such skill signals are far more important to women than to men. Alexandra Niessen-Ruenzi, Chair of Corporate Governance, and Leah Zimmerer, a doctoral candidate, published their findings as a European Corporate Governance Institute Finance working paper.

Niessen-Ruenzi and Zimmerer analyzed the biographical data of more than 103,000 corporate directors. They looked specifically at skill signals related to levels of higher education and extent of professional experience. The pair found that male directors whose biographies included these signals saw their probability of entering leadership roles increase by 5.9 percent and their pay by 6.8 percent—compared to 12.9 percent greater likelihood of entering leadership roles and 21.2 percent higher pay for female directors.

“Observable skill signals are more important for female directors if the hiring decision is made only by men, and after sudden CEO death, when search committees need to find a new CEO under time pressure.”

The researchers point out that women already receive lower pay, on average, than men, and they are less likely than men to reach leadership positions. Because the women and men in the study’s sample were equally qualified, these findings suggest that women directors are held to higher standards than men.

The analysis also revealed “that observable skill signals are more important for female directors if the hiring decision is made only by men, and after sudden CEO death, when search committees need to find a new CEO under time pressure,” explains Niessen-Ruenzi. In addition, the results held true when companies hired women directors externally or were headquartered in states with conservative gender norms.

The researchers speculate that women might be held to higher standards where observable skill signals are concerned because employers do not have the metrics to evaluate women’s unobservable qualifications for leadership, such as adaptability, creativity, critical thinking, communication skills, and emotional intelligence. Until women and men start from equitable baselines, the researchers add, women will need to collect more observable skill signals than men to achieve similar career advancement.

For Teachers, Is ChatGPT More Friend Than Foe?

When OpenAI released ChatGPT in November 2022, many educators feared that the artificial intelligence platform would encourage widespread cheating among students. But just a few months later, a recent survey shows that teacher attitudes about ChatGPT seem to be shifting in its favor.

The survey of 1,000 educators at the high school, undergraduate, and graduate levels was conducted by Intelligent.com, a resource that helps students make decisions about higher education. Among the findings:

• 98 percent of respondents use ChatGPT themselves, for tasks ranging from preparing lesson plans (97 percent) to writing letters of recommendation (89 percent).
• 79 percent approve of students using ChatGPT in assignments.
• 84 percent of those who approve of the platform have dedicated class time to teaching students how to use ChatGPT, and 35 percent “frequently” give students assignments that require its use.
• The primary reason teachers cite for using ChatGPT is that it saves time (42 percent).
• A minority use it to understand its capabilities (17 percent).
• 60 percent of respondents believe that “most” or “many” of their students have turned in work generated by Chat GPT.
• Only 24 percent indicate that their schools have ChatGPT policies in place.

Diane Gayeski, professor of strategic communications at Ithaca College in New York, asks her students to use ChatGPT to develop strategic ad content for a class client. “I coach them to use various prompts to see which [prompt] creates the more helpful plans and possible messaging,” Gayeski says. Knowing how to use AI tools, she adds, will be “an essential skill” for her students as they write content such as marketing pieces, press releases, training materials, and reports.

Yuvay Ferguson, associate professor of marketing at Howard University’s School of Business in Washington, D.C., also approves of her students’ use of AI. “In the same way that peer study groups can assist with learning, I think AI is a way for students to work with ‘someone else’ on developing solutions to problems,” Ferguson says. “People don’t trust the AI responses to be perfect (yet), so students are reading and rewriting the drafts that they worked on with their ‘study partner.’” That process, she emphasizes, requires “a level of comprehension and learning.”

“Despite concerns, AI tools such as ChatGPT can be useful when used with caution and intentionality,” concludes Intelligent.com’s education advisor Blanca Villagomez. “ChatGPT is already transforming the educational landscape whether we are ready or not.”

Research News

■ GMAC survey highlights current student preferences. The Graduate Management Admission Council has released its 2023 Prospective Students Survey, which outlines the expectations and preferences of incoming student cohorts. For instance, while two-year MBA programs are still popular, most students now prefer one-year programs. In addition, Gen Z students prefer to enroll in full-time in-person programs, while 42 percent of all respondents view sustainability and corporate social responsibility as “must-haves” in business curricula.

■ New lab explores equity compensation. The Rutgers School of Management and Labor Relations at Rutgers University in Piscataway, New Jersey, has opened the Shares Laboratory, which will conduct research and policy analysis in areas relevant to equity compensation. Its activities will include monitoring the growth of equity compensation and its role in the economy and analyzing federal policies related to stock, stock options, and other shares.

The Shares Lab also will propose innovations that will extend shares to more employees, especially to women and people of color, as well as predict how changes in equity access will affect the economy. Early sponsors of the lab include Bank of America, Computershare, Fidelity Investments, and PayPal.

“A huge number of Americans receive equity compensation,” says Bill Castellano, professor and co-leader of the initiative. The lab, he adds, will act as “a place in higher education where policy, practice, and impact will be closely monitored.”

■ Program funds research on agricultural biodiversity. Horizon Europe, a research and funding program of the European Union, has issued a call for proposals for its Transformative Change in Telecoupled Agrofood Systems for Biodiversity and Equity program, or TC4BE. The program, in place through November 2026, supports transdisciplinary research that will generate models for developing agricultural biodiversity and identify methods for assessing areas at risk for biodiversity loss.

In a four-year project, European universities will work to bring large agricultural producers and consumers together to tackle biodiversity loss.

For example, one four-year project has received 200,000 EUR (nearly 220,000 USD) from TC4BE to promote mutually beneficial relationships among farmers and other producers. “We couple producers from, for example, big cattle farms in Brazil and large monocultural farms in Kenya with the consumers in the EU to get the right tools to tackle biodiversity loss,” explains Othmar Lehner, director of the Hanken Centre of Accounting, Finance and Governance at the Hanken School of Economics in Helsinki.

The project includes researchers from disciplines such as geography, biology, and sociology. The Hanken School is contributing its accounting expertise to measure the impact of greater biodiversity and the success of different interventions. In addition, Lehrner and his team will develop biodiversity bonds to help agricultural producers fund their efforts.

■ Hult adopts impact-focused strategy. Hult International Business School—with campuses in Boston, London, San Francisco, and Dubai—has launched Hult Impact Research, an initiative that will prioritize scholarship addressing societal issues. As part of the strategy, the school has launched the Futures Lab, focusing on mitigating global risk and examining how new technologies will impact business and society; the Sustainability Lab, supporting the transition of industry and society toward the United Nations Sustainable Development Goals; and the Coaching Lab, connecting science and practice in the executive coaching field.

In addition, the business school will align its existing doctoral programs and postdoctoral fellowship with these three research areas. The objective, says Hult’s chief academic officer Johan Roos, is to create interdisciplinary “intellectual ecosystems” that generate solutions, create sustainable value, and advance society.

■ Research by Duke professors is signed into law. In December 2022, the United States Congress passed a law adopting the Vector Expedited Review Voucher (VERV), an approach developed by professors at Duke University’s Fuqua School of Business in Durham, North Carolina. VERV was introduced in a 2017 paper co-authored by David Ridley, faculty director for health sector management; Jeffrey Moe, professor at the Duke Global Health Institute; and Nick Hamon, CEO of the Innovative Vector Control Consortium in the United Kingdom.

VERV is a voucher system that incentivizes agrochemical companies to develop new insecticides targeting insects that spread diseases such as Dengue fever, malaria, West Nile virus, and Zika virus. The system is a continuation of a similar program promoting the development of new drugs to combat tropical diseases. That program—which was introduced in 2006 by Ridley, Moe, and Henry Grabowsky of Duke’s department of economics—was signed into law in 2007.

VERV is critical because “no new class of pesticides has been developed in 40 years,” and mosquitoes are becoming increasingly resistant to old classes of products, says Ridley in a Duke publication. With so little return on investment for companies, he adds, government needs to create a financial incentive to develop new options. The researchers hope that, as a result of VERV’s adoption, at least one to two new insecticides targeting vector-borne diseases will reach the market over the next few years.

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