As the pandemic forced shutdowns across the globe, U.S. government entities at the federal, state and local levels worked swiftly to secure known drivers of economic growth and job creation – including entrepreneurial ecosystems and small businesses. And while the programs implemented were widely lauded as successful, the story of who benefitted – and who did not – is more complex. This week’s Kenan Insight explores our experts’ key findings around the roles of policy and implementation in supporting equal access to opportunity.
Dr. Gerald Cohen brings nearly 30 years of high-profile private and public sector experience to the institute, where he is taking a leading role in forwarding Kenan Institute’s mission and translational research efforts.
In this week’s commentary, we’ll discuss the robustness of the improved health statistics, what the president’s executive orders mean for the economy and the first estimates from our undetected cases model. We do this with an eye toward what could be impending deterioration on both the pandemic and economic front.
UNC Kenan-Flagler Business School Professor Camelia Kuhnen is an expert in corporate finance, behavioral finance and neuroeconomics, the application of neuroscience tools and methods to economic research. As many question whether a recession is on the way, she answers some questions about how the most notable consumer confidence surveys differ and whether Americans are prone to economic gloominess.
In addition to academic presentations, the Conference on Market-Based Solutions for Reducing Wealth Inequality took participants out of the classroom and into the community for a walking tour and on-site discussions in nearby Durham, N.C.
New business formation plays a crucial role in predicting economic activity in North Carolina. Research shows that business starts positively impact county GDP growth and job creation, with larger effects in highly populated counties. The impact is smaller but still significant in less populated counties. Employment growth also varies by sector—new businesses in goods-producing industries create jobs after a delay, while service-sector businesses contribute to job growth more quickly. This research was done in collaboration with the North Carolina Secretary of State’s Office and the North Carolina Collaboratory.
As firms mature, their founders are often replaced with seasoned executives. When founders are retained, the surrounding top management team (TMT) members are viewed as critical resources in helping compensate for the founder's managerial deficiencies. Surprisingly, however, little is known about how TMT members affect a founder‐led firm's performance later in a firm's life.
This paper investigates whether greater competition increases or decreases individual bank and banking system risk. Using a new text-based measure of competition, and an instrumental variables analysis that exploits exogenous variation in bank deregulation, we provide robust evidence that greater competition increases both individual bank risk and a bank's contribution to system-wide risk.
Examining the strategy formation process is central to understanding why some firms in entrepreneurial settings create competitive advantage and succeed while others do not. While existing work shows the value of learning from experience or having a holistic understanding of how the pieces fit together, there is limited empirical research that fuses the two streams. We first review the extant literature on strategy formation in entrepreneurial settings by organizing around this fundamental tension between strategizing by “doing” versus “thinking.” We then describe recent work that blends the two and conclude with a future research agenda.
We characterize how wishful thinking affects the interpretation of information in economies with strategic and external effects. While players always choose to exhibit overconfidence in private information, their interpretation of public information depends on how non-fundamental volatility affects payoffs. When volatility increases payoffs, players may endogenously disagree: some under-react to public news, while others overreact.
Using unique data on employee ownership plans sponsored by U.S. public companies, we find that large negative market shocks lead to active changes in portfolio choices among inexperienced and previously inattentive investors. We use employee ownership plans to identify a set of inexperienced investors who did not actively select to participate in the market and who are confronted with a difficult financial decision.
Voting outcomes can differ from underlying preferences due to strategic selection into voting. One explanation for such selection effects is lower participation of shareholders with popular preferences (free-rider effect) relative to those with unpopular preferences (underdog effect). We illustrate these effects in a rational choice model in which the voting participation decision depends on the probability of being pivotal and the costs and benefits of voting.
Using unique data on employee ownership plans sponsored by U.S. public companies, we find that large negative market shocks lead to active changes in portfolio choices among inexperienced and previously inattentive investors. We use employee ownership plans to identify a set of inexperienced investors who did not actively select to participate in the market and who are confronted with a difficult financial decision.
We argue that behavioral strategy can learn a great deal from the Theory of Computational Complexity and Artificial Intelligence. Also, a concept of “organizational intractability” may be useful in determining what analytical decision technologies are actually intractable in real organizations with constraints on time and managerial attention.
The ways in which media news is slanted can shape beliefs about the economy, thereby affecting the decision to start a new business. Using exogenous variation in the introduction of Fox News Channel across US counties, I find that increased exposure to a pro-Republican slant during a Republican administration is positively associated with new firm creation.
We contend that the decision between public and private ownership can be understood in a cost-benefit framework where firms trade-off the governance benefits of private ownership with the potentially lower capital costs of public ownership. Consequently, ownership structure can be understood by examining the governance model that maximizes firm value. We discuss the conditions under which firms maximally benefit from private ownership, and argue that the “governance engineering” by private equity sponsors can ultimately explain the continued rise of private markets to the detriment of public markets.
We propose and test a framework of private information acquisition and decision timing for asset allocators hiring outside investment managers. Using unique data on due diligence interactions between an institutional allocator and 860 hedge fund managers, we find that the production of private information complements public information. The allocator strategically chooses how much proprietary information to collect, reducing due diligence time by 18 months and improving outcomes. Selected funds outperform unselected funds by 9% over 20 months. The outperformance relates to the allocator learning about fund return-to-scale constraints and manager skill before other investors.
This study builds on the knowledge spillover theory of entrepreneurship to examine the factors that influence the decision of latent entrepreneurs to move from opportunity recognition to opportunity exploitation and emergent entrepreneurship.
We formulate quantum computing solutions to a large class of dynamic nonlinear asset pricing models using algorithms, in theory exponentially more efficient than classical ones, which leverage the quantum properties of superposition and entanglement. The equilibrium asset pricing solution is a quantum state. We introduce quantum decision-theoretic foundations of ambiguity and model/parameter uncertainty to deal with model selection.
In recent months, mechanisms that have allowed for high-skilled foreign nationals to study and work in the U.S. have been put on the policy chopping block. In this Kenan Insight, we discuss why high-skilled foreign workers are critical to America's economic health, and why policies must continue to support their entry into the U.S.