Six new faculty have joined the Haas School for the 2002-2003 academic year. CalBusiness is featuring three of the six professors in this issue; three will be featured in the spring 2003 issue.
Pino G. Audia
After six years at the London Business School, Audia joins the Haas School as an assistant professor in the Organizational Behavior and Industrial Relations group. The southern Italian is teaching the organizational behavior core course in the full-time MBA program this fall. “The first term is a great time to teach MBA students as they start their studies and have so much energy and enthusiasm,” he said.
One of Audia’s main research interests is to explain what he calls the “paradox of success”, a frequent pattern in which successful firms fail to adapt their strategies to obvious environmental changes. It is these companies’ persistence with outdated strategies that lay the foundation for their future decline. A recent example he gives is Intel. When PCs were the dominant piece of consumer technology, Intel was on top. But when handheld devices and mobile phones started to make significant strides, Intel did not realize that it was time to produce microprocessors suitable for those devices. Intel allowed other companies like Broadcom and Texas Instruments to become dominant in those areas.
“You would expect that when the environment changes, successful companies would have all of the resources – the smartest people in the industry – and that they would see the change and adapt,” he notes.
Audia has found that top executives are often the cause of company failures. “Success affects the way executives make decisions,” he says. “It makes them overconfident, rigid in their beliefs, and reluctant to listen to people with differing views.”
The question arises as to what companies need to do to avoid these failures and remain successful when the environment changes. Audia’s research so far shows that the suggestion most often offered by academics – changing the CEO – is not a real solution because new chief executives do not have sufficient power to introduce change in successful organizations. A better alternative, he suggests, is to implement a strong board and train executives to make better use of the talent available inside the organization. He notes that more studies are needed and anticipates more insights from his current research in progress.
Audia received his Ph.D. at the University of Maryland after getting his MBA at Bocconi University in Milan, Italy. His work has been published in a variety of journals, including the Academy of Management Journal, Advances in Strategic Management, the American Journal of Sociology, and the Journal of Applied Psychology.
Audia is looking forward to exploring the Bay Area. “Cycling is my primary thing,” he said, “but I also like skiing, so I’m looking forward to the first snowfall, and Lake Tahoe.”
Thomas Davidoff recently moved from Cambridge, Massachussetts, to Berkeley to join the Haas School’s Real Estate group. The newly minted assistant professor researches the timely issue of how individual investors manage risk in their real estate and financial investments.
“Recently the popular press has been full of examples of investors putting all of their eggs in one basket,” says Davidoff, citing the example of Enron employees whose future incomes were entirely dependent on the firm’s performance. “For most households, however, the amount of wealth held in stocks is very small compared to that held in the form of housing.”
He found that individuals whose incomes tend to move more closely with local housing prices should find housing to be a less attractive investment than people whose incomes tend not to remain stable. “If income moves with housing prices,” explains Davidoff, “then housing is negative insurance.”
For example, a New York investment banker typically is rich in the same times when New York housing prices are high (booms), and a little less rich when housing prices are lower (busts). So, buying housing creates an asset that has relatively big pay-offs (capital gains) when wealth is the least useful and relatively small payoffs when wealth is the most needed.
Using data on workers in a wide range of industries in different metropolitan areas, Davidoff found that households are buying roughly the equivalent of one more, or one less, bedroom depending on whether their income correlates more or less strongly with local housing prices than the average household. “Evidently,” Davidoff concludes, “some households do recognize that it is not a good idea to put all of their eggs in one basket.”
Looking into alternative investments, Davidoff has found that “annuities are a good way of making sure you will have enough to live on, even if you live to a very old age.” Annuities are assets that pay out more because they convert back to the issuer if the investor dies. Davidoff hopes that his work on annuities will lead to the development of new types of annuity products. His research also suggests that new ways of marketing annuities could broaden their appeal.
Davidoff spent his undergraduate years at Harvard University, and went on to get his Masters in Public Affairs in Urban and Regional Planning at Princeton University. He recently completed his Ph.D. in Economics and Urban Studies and Planning at the Massachusetts Institute of Technology. He worked for three years at Forest City Ratner Companies, a real estate development company, as a project manager in his hometown of Brooklyn, New York.
Davidoff says there were many reasons for coming to Berkeley, “The faculty here have so much depth. There’s also a serious real estate center, and the great UC Berkeley economics department and Business School were a real draw.”
This fall, Davidoff is teaching two MBA microeconomics courses and will organize the Ph.D. real estate seminar. He says teaching the microeconomics courses will be fascinating because, “I think it will be likely that the MBA students, having real world experience, will come to me with ideas, some which will be half-baked, and some will be really interesting.”
Outside of work, he plans to start exploring California’s abundant campgrounds. “My wife and I love to hang out outdoors,” he says, “so we’ll do a lot of running and hiking.” He also like to play some internet speed chess from time to time.
Laura J. Kray
Assistant Professor Laura J. Kray came to the Haas School’s Organizational Behavior and Industrial Relations group by way of the University of Arizona’s Eller School, where she taught for three years, and the Kellogg Graduate School of Management at Northwestern University prior to that. Trained in psychology, Kray studies how people’s cognitive orientations, or mindsets, affect their performance and decision-making ability.
In a series of experiments, Kray found that a stereotype can negatively affect the performance of people who profess not to believe the validity of that stereotype. For example, in a negotiation study women performed more poorly than men after they were told that the exercise was highly indicative of their inherent negotiating ability. In contrast, Kray observed no gender differences when the negotiators believed the exercise merely served as a learning tool and was not indicative of ability. More surprisingly, when Kray told women that negotiating requires skills that stereotypes ascribed to men and that explicitly linked gender to performance, women tended to set higher goals for themselves and ended up outperforming the men.
“In this world of political correctness, stereotypes are often brushed under the table, but they do affect people’s performance, even if they don’t subscribe to them. As soon as we make the stereotypes explicit, however, people tend to rise above them,” says Kray. “It shows how important it is to talk about the stereotypes that exist.”
Kray and her co-author, Adam Galinsky, assistant professor at the Kellogg School, recently received a National Science Foundation grant to investigate ways to improve decision accuracy.
Kray and Galinsky based one experiment on the space shuttle Challenger accident, which was caused by the failure of o-rings due to the cold weather. In their scenario, students had to decide whether or not to go ahead with a car race during cold weather. They found that subjects who were primed prior to making their decision to think in terms of counterfactuals – imagining various possible outcomes and asking “what if” – were three times as likely to decide correctly not to proceed with the race than those who were not primed.
“When people are exposed to counterfactual thoughts that remind them that there are multiple possible worlds, it carries over and allows them to process information more systematically and to ask more critical questions in a subsequent task,” says Kray.
Working on her research in the fall, Kray begins her teaching in January with a section of the bargaining and negotiations class for the MBA program. She’ll also start a new class in the spring about groups and teamwork, a class she said she is “importing from Arizona.”
She earned her BA in Organizational Studies from the University of Michigan, Ann Arbor, and her Ph.D. in Social Psychology from the University of Washington, Seattle.
The self-described “foodie” loves restaurants, hiking, photography, and seeing live music in her spare time. “Mostly,” she says, “I love just hanging out with my two cats and my husband in our backyard.”
Laura Kray, also joining the OBIR group, attributes her decision to come to Berkeley to a better fit career-wise, and the fact that “Berkeley has an excellent reputation for scholarship, in addition to being a really fun place.”
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