Corporations are increasingly influential within societies worldwide, while the relative capacity of national governments to meet large social needs has waned. Consequentially, firms face social pressures 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, in which companies account for a growing share of aid, as compared to traditional providers. Drawing on the dynamic capabilities literature, we argue that firms are more able 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 remain 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 data set comprising information on every natural disaster and reported aid donation worldwide from 2003 to 2013. Using a novel, quasi-experimental technique known as the “synthetic control method,” our analysis shows that nations benefit greatly from corporate involvement when disaster strikes
Luis Ballesteros
- PhD Candidate
Contact Information
- Primary Email:
luisf@wharton.upenn.edu - Office Phone:
(215) 746-7954 - Mobile Phone:
617-599-9046
- office Address:
3112 SH-DH
3620 Locust Walk
Philadelphia, PA 19104
Research Interests: business provision of collective goods, global strategy, non-market strategy, organizational decision-making under uncertainty, organizational responses to systemic risks, social-welfare implications of business strategy
Overview
[Visit my personal website for information on and requests of the Economic Affiliation to National Markets (by Corporation) and Concentration (by Industry and National Market) databases]
The cornerstone of my research interests is the intersection between strategy and organizational theory. I study market and non-market responses to adverse events, such as natural disasters, which includes decision-making under uncertainty and risk and organizational learning. I seek to understand the conditions and mechanisms under which firms react to and learn from exogenous disruptive phenomena and the consequences of such responses on firm efficiency and competitiveness.
JOB MARKET PAPER
Halos or Horns?
The Social Construction of Timing Advantages under High Uncertainty, Ambiguity, and Time Pressure
The prevailing wisdom in the strategy literature is that the rents associated with the timing of organizational choices are endogenous to firm performance. Higher-performing first movers are more likely, on average, to accrue rents than lower-performing first movers. Likewise, followers will be better off imitating the former type of first mover, and differing or deviating from the choices of the latter type. Drawing upon institutional theory, I argue that the literature has overlooked the possibility that the stakeholders (e.g., customers) reacting to firms’ choices focus on features that are not only different from but also inversely correlated with firm performance. Elaborating upon this intuition, I develop a theoretical argumentation that identifies media reputation as a key firm-specific feature that stakeholders use in forming beliefs about the firm’s capacity and willingness to meet their expectations in the face of uncertainty and ambiguity. Analysis of the corporate giving of 5,845 firms from 74 countries in the aftermath of 4,637 natural disasters affecting the world in the period 2003-2015 provides support for my arguments. In the context of my sample, firms underestimate the value of media reputation and overestimate the value of financial standing. This explains the frequent observation of firms with bad reputations moving first and being mimicked by other firms, with both the first mover and the following firms suffering performance losses. Similarly, I find that the reputation of the first mover, on average, overrides the reputation of the follower: a bad-reputation imitator of a reputable first mover is likely to realize performance benefits. Finally, my findings suggest that in settings where uncertainty, ambiguity, and time pressure are pervasive, rents are not strongly associated with the physical characteristics of the firm or its choices, thus contradicting previous research suggesting that moving fast with a large and substantive action is more likely to accrue rents than a late, small and symbolic choice.
DISSERTATION
Drivers and Consequences of Non-Market Decision-Making under Uncertainty, Ambiguity, and Time Pressure:
Evidence from Global Corporate Disaster Giving
In my dissertation, I use a proprietary dataset that I collected and coded during four years and comprises 74,131 responses of 34,258 firms to the population of natural disasters that affected the world in the period 2000-2015. I seek to understand whether, how, and the extent to which corporate engagement in the strategic provision of public goods in the aftermath of disasters explains variance in firm performance across national markets and social welfare. I do this with three lines of research:
- How the strength of a firm’s economic connection with a national market affects its decision to help such market in the context of disasters;
- How first movers’ public image, not associated with disaster giving, in combination with high uncertainty, affects stakeholder preferences of a contextually appropriate donation, creates strategic isomorphism among followers, and explains first-mover and follower advantages;
- How firms’ dynamic capabilities in disaster response help countries recover faster and greater than through aid from foreign national and multilateral agencies. (A study forthcoming in Academy of Management Journal).
My professional endeavors prior to Wharton–at JP Morgan, the United Nations Development Program, and the World Bank–inspired and fueled this interest and my understanding of business responses to systemic risk.
Dissertation Committee:
Mauro Guillen
Witold Henisz (Chair)
Exequiel Hernandez
Uri Simonsohn (OPIM)
Michael Useem
Tyler Wry
Research
- Luis Ballesteros, Michael Useem, Tyler Wry (2017), Masters of disasters: An empirical analysis of how societies benefit from corporate disaster giving, Academy of Management Journal, Forthcoming (). Abstract
- Luis Ballesteros and Michael Useem, “Corporate Activity for Dealing with Societal Risks”. In, edited by, (:, 2016)
- Howard Kunreuther and Luis Ballesteros, “Deciding in the Context of Low-Probability Shocks: Biases, Heuristics, and Uncertainty”. In, edited by, (:, 2016)
- Luis Ballesteros and Howard Kunreuther, “Organizational Learning from Catastrophes”. In Rethinking Catastrophic Risk: How Corporate America Copes with Disruption, edited by Howard Kunreuther, Erwann Michel-Kerjan, Michael Useem, (: Oxford University Press, 2016)
- Luis Ballesteros (Work In Progress), An Adaptation of the Herfindahl-Hirschman index (HHI) to Study Market Concentration at the National and International Levels.
- Luis Ballesteros (Work In Progress), Innovation and Systemic Risk: Can Exposure to Large Shocks Affect Risk Taking?.
- Luis Ballesteros (Work In Progress), Using a Polynomial Expansion of Subsidiaries, Sales, and Employees as a Measure of Firm-Market Economic Linkages.
- Luis Ballesteros (Under Review), Markets as Clubs: A Study of the Role of Firm-Market Economic Reliance in the Corporate Provision of Collective Goods (ACAD MANAGE PROC 2015 2015:1 19077; doi:10.5465/Best PhD Paper, SMS 2015). AbstractRelated
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 given market, the greater its reliance on the market’s collective goods (e.g., communication networks, transportation infrastructure). Therefore, a market’s relative importance for a firm should be a significant predictor of corporate pro-social behavior—an association that is not explained by theories on social preferences or strategic considerations. I test this argument by constructing a measure of corporate economic reliance on market systems based on the literature on club goods and analyzing data on corporations’ philanthropic responses to 3,115 natural disasters between 2003 and 2013, inclusive. I show that accounting for variation in economic reliance leads to a more accurate prediction of the frequency and magnitude of corporate pro-social behavior than widely invoked arguments rooted in the strategic philanthropy and institutional literatures, which neglect such firm-market connection.
- Luis Ballesteros (Working), Lead, Follow, or Abstain? Timing Advantages under High Uncertainty and Time Constraints (Best Paper SMS 2016, Nomination). Abstract
This paper presents a comparative analysis of the economic efficiency of leading versus following or abstaining when a strategic choice that can affect firm performance is made the conditions under high uncertainty and severe time constraints. Analyzing responses of 2,000 corporations from 65 countries in the aftermath of earthquakes that affected the world in the period 2000-2015, I show how leading can result in first-mover advantages when the firm possesses knowledge of the market and experience making similar decisions. The first move generates a mental anchor that some market competitors imitate because they interpret it as capturing stakeholder expectations for similar organizations. Consumers reward the first-mover for being a catalyst of market activity and innovation, increasing the magnitude and duration of market rents. My study contributes to the first-mover advantage and timing strategy literatures by showing the conditions under which different the timing of the decision, including abstaining, in contexts of systemic shocks may derive in a benefit for the firm.
- Luis Ballesteros and Michael Useem (Working), Local versus Global Institutional Pressures: Organizational Imitation and Multinationality. Abstract
The management literature has emphasized the role that imitation plays on corporate strategy. Firms tend to align to the social norms observed by reference peers. A widely invoked argument is that the community where firms are originally headquartered imprints them with a longstanding influence toward similar patterns of behavior. In this paper, I suggest that this argument is not easily generalizable once the organization internationalizes. Using the context of philanthropic responses in the aftermath of natural disasters, I show that the non-market activity of multinational firms that share the metropolitan area as headquarters may be significantly different. I find that firms tend to mimic the characteristics of the response of peers from the same industry despite that such organizations have different countries of origin. Furthermore, organizations that share metropolitan region as headquarters show dissimilar responses in a frequency that is not explained by chance. This study extends the global strategy and community literatures by proposing that the influence of geographic location on organizational behavior is less stable than institutional scholars tend to suggest. The systems of social norms and beliefs that firms join as they internationalize become more salient for organizational decision making than those learned in their communities of origin. The study also provides a more nuanced awareness of the role of the non-market activity of multinational enterprises in the context of geographically located systemic shocks.
Teaching
Information on my teaching experience can be found here.