Fall 2020 Seminars

Date Title/Speaker Abstract

From ugly duckling to swan: CVC, open innovation, and the advent of unicorn ventures

Xi Zhang, Ph.D. Candidate, NJIT

Shanthi Gopalakrishnan, NJIT

Raja Roy, NJIT

Unicorn start-ups have captured the fancy of the entrepreneurial community, but little is known about the factors that differentiate the unicorns from the rest of the start-ups. Bridging the entrepreneurship and open innovation literature, we predict the antecedents of the unicorns. Drawing on a sample of 1295 start-up ventures, of which 117 became unicorn ventures, we find that the corporate venture capital (CVC) is a critical factor that, by moderating the appropriability, access to funding, and acquisition, increases the probability of becoming a unicorn. We also uncover that besides appropriating the value of their intellectual property, start-up unicorn ventures utilize their inter-organizational relationships with their corporate investors to gain access to valuable resources. By highlighting the role of CVC in the advent of unicorn firms, we address a lacuna in the existing entrepreneurship literature and open the door for future research on unicorn firms.


Estimation Risk and Implicit Value of Index-Tracking

Majeed SimanStevens Institute of Technology

We study Roll’s (1992) conjecture that there may exist an implicit value in index-tracking (IVIT) relative to forming mean-variance (MV) optimal portfolios under estimation error. While index-tracking portfolios are deemed MV inefficient ex-ante, it is unclear whether this is the case when taking into account estimation error in the parameters of the portfolio selection problem. To investigate this, we derive an analytical definition for the opportunity cost facing the MV investor who does not index-track, building on the expected out-of-sample utility framework of Kan & Zhou (2007). Our findings, both analytical and empirical, indicate that such opportunity cost is positive and statistically significant. The existence of an IVIT (positive opportunity cost) is strongly associated with a reduction in the portfolio’s induced estimation risk under index tracking relative to an MV-efficient portfolio of equal target mean return. Under cases of high estimation error, we show that increased IVIT translates to improved metrics of portfolio performance, such as higher risk-adjusted returns, lower volatility, higher Sharpe-ratio, lower turnover, and larger certainty equivalent returns. Moreover, our paper reconciles the theoretical propositions with the out-of-sample performance empirically. The cross-sectional regression results indicate that a one standard deviation increase in the proposed IVIT translates to an annual increase of 4%-5% in the out-of-sample Sharpe-ratio and a 6%-15% decrease in the monthly portfolio turnover.

Supply chain challenges and blockchain opportunities

Volodymyr BabichProfessor of Operations and Information Management, McDonough School of Business, Georgetown University
While blockchain technology has grown in prominence, its full potential and possible downsides are not fully understood yet, especially in supply chain management applications. After reviewing the essential blockchain technology features, we explore multiple business and policy aspects. We identify five key strengths, the corresponding five weaknesses, and three research themes of applying blockchain technology to supply chain management. The key strengths are in promoting (1) trust in data, (2) supply chain transparency, (3) data aggregation, (4) process automation, and (5) system resiliency. The corresponding weaknesses are (1) “garbage in, garbage out” problem (2) lack of privacy, (3) lack of standardization, (4) “black box” effect, and (5) system inefficiency. The three research and applications themes are (1) information, (2) automation, and (3) tokenization. We illustrate these themes with examples ranging from classical supply chain management problems to the analysis of new business models spawned by the introduction of blockchain technology to supply chains.

How Founder Experience Shapes Entry Strategy: Evidence from Dominant Designs in the Disk Drive Industry

Anu WadhwaImperial College, London

This paper investigates the role of strategic positioning choices and pre-entry endowments in determining the post-entry innovative performance of firms entering new markets. We hypothesize that entrepreneurial entrants that possess greater levels of pre-entry endowments and those that choose to operate in multiple segments and position themselves aggressively in new markets will introduce products with dominant design features earlier. We also hypothesize that pre-entry endowments positively moderate the relationship between post-entry technology strategy choices and early introduction of dominant design features. Our hypotheses are tested using longitudinal data on entrepreneurial startups that operate in the computer hard disk drive industry in the period 1974 to 1995. 

Institutional bond ownership and firms' information environment

Xinyuan (Stacie) Tao, NJIT

Chunchi Wu, State University of New York at Buffalo

Using a unique data set provided by eMAXX, we uncover evidence that institutional bond ownership helps to improve firms’ information environment. This improvement is greater for firms with poorer disclosure and long-term institutional investors with large holdings. The improved information environment reduces investors’ costs of information gathering and trading, thereby enhancing monitoring and liquidity. Important, institutional bond ownership lowers information risk and volatilities through the channels of improved disclosure and monitoring. These effects are stronger at rating downgrades and bond issuance. Results support the prediction of financial contracting theory that bondholders have strong incentives to reduce volatilities and wealth transfers.

Shrinking Against Sentiment: Exploiting Behavioral Biases in Portfolio Optimization

Alberto Martin-Utrera, NJIT

High sentiment predicts low market returns and high arbitrage returns. This empirical evidence has important implications for portfolio optimization. Exploiting the eigenvalue-decomposition of the mean-variance portfolio, I show that its performance is the sum of two components: a market component and an arbitrage component. Using a shrinkage covariance matrix that shrinks the sample covariance toward the identity in the construction of mean-variance portfolios gives more relevance to the market component, and its relevance increases with the degree of shrinkage. Shrinking more when sentiment is low and less when it is high generates substantial economic gains to mean-variance investors.

Critical Theory and Social Construction of Vulnerable 
Populations during COVID-19: The Case of Age

Hindy Schachter, NJIT

This presentation explores how critical theory might understand the role of social construction in public administrators' treatment of older Americans as a vulnerable population during the COVID 19 pandemic. The analysis compares differences in how federal and state communications reacted to information that increased age and male sex correlate with negative COVID 19 outcomes and relates these differences to hegemonic constructions of each group that impact a group member's chance of success in the business world.


Medical Staff Assignment and Patient Scheduling Optimization Model

Jen-Yi (Jay) Chen, Associate Professor, Monte Ahuja College of Business, Cleveland State University

Oya Tukel, Dean, Martin Tuchman School of Management, NJIT

This research proposes a mixed-integer programming model that helps assign staff members who each may concurrently serve multiple patients of different acuity levels.

Coopetitive alliances: Is there a "tipping point" between cooperation and competition? 

Mohammad Saleh Farazi, Universidad Carlos III de Madrid/Sharif University of Technology 


Paul Chiambaretto, Montpellier Business School/Ecole Polytechnique

Anne-Sophie Fernandez, University of Montpellier

Shanthi Gopalakrishnan, NJIT

This research focuses on alliances in high-technology sectors that are aimed at bringing about technological innovations. Past research has highlighted the simultaneity of cooperation and competition in such settings. Using a sample of 179 alliances in the biopharmaceutical industry, we explore the mechanism through which the degree of ex ante competition between two partners relates to the level of cooperation once they ally. We also explore the importance of time to ex post competition in this relationship. We find that the degree of ex-ante competition has an inverted U-shaped relationship with the degree of co-operation and this relationship is partially moderated by the time to ex-post competition. The inverted U-shape is indicative of a tipping point beyond which the risks override the benefits of co-operation.