Management and Economics (ERIM)
Erasmus Research Institute of Management (ERIM)
The Erasmus Research Institute of Management (ERIM) is the research school in the field of management of the Erasmus University Rotterdam. The founding participants of ERIM are RSM Erasmus University and the Erasmus School of Economics. ERIM is officially accredited by the Royal Netherlands Academy of Arts and Sciences. The mission of ERIM is to conduct scientific research that enables organizations to assess and improve their business processes in order to perform in a profitable and responsible way.
The research undertaken by ERIM is focused on the management of the firm in its environment, its intra- and inter-firm relations, and its business processes in their interdependent connections. The specific research groups that use the EBL for research in management and economics are:
- Consumer Behaviour
- Marketing decision making and Decision Support Systems
- Organizational Behaviour & HRM
- Behavioural Ethics
- Behavioural Finance
- Behavioural Economics
- Health Economics and Health Utility Measurement
- Electronic markets, auctions and networks
- E-learning and knowledge management
1. Consumer Behaviour
Principal investigators: Prof. Dr ir. Ale Smidts
The Consumer Behaviour group investigates consumer decision processes. Over the past 35 years, research on decision making has focused primarily on demonstrating and describing how human decisions deviate from the prescripts of economic theory. Recently, researchers have started to give more attention to the basic psychological processes that generate these deviations and that underlie human decision making in general. Much of the latest research by the consumer behaviour group focuses on the role in decision making of basic psychological processes such as learning, memory, cognition, perception, and emotion. For example, some of our research describes two different learning-and-memory processes that people use when making decisions (Sweldens). In addition, several researchers investigate the effects of the priming of concepts in memory on consumer decisions (Puntoni, Smidts, Tuk, Verlegh). Other research investigates the role in consumer decisions of emotions such as surprise and fear (Vanhamme, Rossiter). Still other research investigates by means of eye movement data the visual attention processes that consumers use to find and select products for purchase from an assortment of products (van der Lans). Recently, pioneering research has started that uses neuro-imaging techniques (EEG, fMRI) to document the nature of consumer decision processes (Klucharev, Smidts, Fernandez, Hytonen).
Research in the consumer behaviour group relies almost exclusively on laboratory experiments. Most of the experiments require individual, sound-insulated cubicles equipped with personal computers. Other experiments use neuro-imaging and eye-tracking equipment.
2. Marketing decision making and Decision Support Systems
The Marketing decision making and decision support group studies the way managerial decision making takes place and how marketing management support systems affect decision processes and can improve decision outcomes. The International Peer Review Report stated that the marketing group is ‘doing world-class research in decision support systems’ (KNAW re-accreditation report, 2003).
Research in marketing science has produced a large variety of potentially powerful tools and systems that are targeted at improving the quality of marketing decision making. However, their impact on real-life decision making remains limited. Our research systematically investigates the factors that affect the successful implementation and use of marketing management support systems. These factors are, for example, individual characteristics of decision makers, characteristics of the task and the task environment, characteristics of the systems at hand, and characteristics of the implementation procedure. Our research contributes to the theory of decision support in marketing and also helps to design concrete marketing management support tools.
Most of our research involves both individual and group decision making while interacting with computer systems. In order to be able to detect the causal effect of the various factors, and the underlying process, experimental designs are used a great deal.
An example of a recent experimental study is the PhD-project by Althuizen. He carried out a large experimental study (n=120) to investigate the role of analogical reasoning in the design process of sales promotion campaigns. Subjects were graduate marketing students who each worked for three hours in the lab with several versions of a Case-Based Reasoning tool to solve a sales promotions case.
3. Organizational Behaviour & HRM
Experimental research in organizational behaviour is concentrated in two areas: leadership effectiveness and group decision making (both including NWO-funded projects). In recognition of the lack of research on the psychological processes translating leader behaviour into follower action, the leadership research focuses on (a) follower self-conception (e.g., social identification, possible selves, self-esteem) as mediator and moderator of leadership effectiveness; (b) the role of affect and emotion in leadership effectiveness. It uses computer-mediated set-ups (i.e., individual cubicles with PC) to put participants in a follower role and manipulate leader behaviour (e.g., by means of video-recorded messages delivered via computer). The computer-mediated set-up also makes it possible to give participants bogus leader feedback about for instance task performance, and provides an efficient and reliable way to measure follower behaviour (e.g., task performance, cooperation). The research on affect and emotion in leadership also uses physiological measures of arousal (heart rate, blood pressure, skin conductance) to complement behavioural and attitudinal data.
The research on group decision making focuses in particular on work group diversity as one of the key issues in research on groups and teams (cf. the I/O psychology group’s research), but also includes interdependent decision making. Research on diversity and decision making focuses on such issues as the interactive effects of social categorization processes and group-level information processing, the role of shared task representations in group-level information processing, and team learning. This research focuses on small interactive groups who are audio-video recorded to enable systematic coding of group interaction. This makes it possible to test models of the group processes through which experimental manipulations affect group decision quality with high internal validity. Research on interdependent decision making (PI: Abele) focuses on problems in establishing coordination between interdependent decision makers. It is computer-mediated and has strong conceptual and paradigmatic links with research in experimental economics.
4. Behavioural Ethics
The last two decades has witnessed an onslaught of media reports on issues of fraud, corporate scandals, and other types of unethical behaviour. Indeed, the numerous scandals in organizations such as Enron and Worldcom, accompanied by the role that associated institutions such as Arthur Anderson played in these scandals, made all of us concerned about the emergence of ethical and moral behaviour in organizations. More recently, this concern has even become stronger due to the world-wide financial crisis in which it became explicitly clear that the irresponsible (and unethical) behaviour of managers and organizations inflicts pain on society and its members. These high-profile scandals and crises have promoted a keen interest in the scientific field of business ethics; illustrated by the tripling over the last decade of articles addressing issues related to ethics and morality in the social sciences (see Tenbrunsel & Smith-Crowe, 2008). Historically, the field of business ethics has adopted a prescriptive approach in addressing issues related to morality and ethics in group, organizational and societal settings. Such an approach uses insights from important philosophical traditions to describe how moral and ethical people should behave. Under such an approach, the central focus has been on addressing, “questions about whether specific business practices are acceptable” (Ferrell, Fraedrich, & Ferrell, 2008).
However, at the Erasmus Centre of Behavioural Ethics (ECBE) we argue that such a view is too narrow in scope. Rather than the source of unethical behaviour being a lack of information or misapplication of ethical principles, we start from the idea that many ethical failures can be explained by a lack of awareness that one is even facing an ethical problem. This view helps to explain why, despite the pervasiveness of contemporary ethical failures and irresponsible actions, many managers still maintain the belief that they are ethical people (De Cremer & van Dijk, 2005, 2008). In line with this perspective, we advocate that in addition to a prescriptive approach in which a moral principle is communicated and evaluated, we also need a behavioural approach which examines how individuals make actual decisions and engage in real actions when being faced with ethical dilemmas (i.e. a descriptive approach). This line of reasoning is the basis of the new field of behavioural ethics, which “refers to individual behaviour that is subject to or judged according to generally accepted moral norms of behavior” (Trevino, Weaver, & Reynolds, 2006; p 952). Because of its focus on the actual behaviour of the individual, the research conducted at ECBE largely draws from work in psychology, which is the scientific study of human behaviour and thought processes.
5. Behavioural Finance
Traditional Finance assumes that investors have access to all relevant investment information and process this information in a rational manner. By contrast, Behavioural Finance (BF) studies how the psychology of individual and collective decision-making influences the market prices of financial assets. BF holds great promise for understanding a series of financial market anomalies, like the equity premium puzzle (Mehra and Prescott, 1995), stock market overreaction (De Bondt and Thaler, 1985), the size-value effect (Fama and French, 1992) and the momentum effect (Jagadeesh and Titman, 1993). A corner stone of BF is the so-called Prospect Theory (PT; Kahneman and Tversky, 1979). PT has been applied successfully to address many of the financial market anomalies, like the equity premium puzzle (e.g. Benartzi and Thaler, 1995).
A common theme of our research program is the analysis of expectations and preferences of investors with respect to financial assets over time. Key ingredients are risk (and its sources) as perceived by investors, their risk attitude and time preference in relation to economic and psychological factors, and the forces that determine the rewards for bearing risk on an individual and market level. When possible, conclusions will be drawn with respect to behavioural aspects of investor behaviour, and aggregate predictability and patterns in asset returns (i.e. anomalies). Basically, there are two lines of approach.
The first avoids the simplifying assumptions underlying the standard portfolio theory. The research thus far has been mostly theoretical and methodological in nature (see e.g. Post, 2003). Specifically, we have developed a Stochastic Dominance framework for analyzing market data (see e.g. Post and Levy, 2005). In the lab we extend our research with experimental data. We use choice experiments in the spirit of Levy and Levy (2002) to analyze individual risk perception and risk preferences. Second, we conduct experimental simulations of financial markets in the spirit of Levy (1997), where we can observe the actual trading behavior of subjects and control the investment conditions.
A second line of approach addresses regularities in investor behaviour, not by examining trading statistics but by using expectations and preferences as stated by investors. Experimentation in the lab is done to understand the economic-psychological aspects of the investment decision making process. Another issue is the time horizon or evaluation period and related to that the determination and updating of the investors frame of reference (cf. Van der Sar and Antonides, 2000).
6. Behavioural Economics
The group Behavioural Economics focuses primarily on individual decision making under risk and uncertainty and on decisions over time. In decision under risk and uncertainty, the traditional theory, expected utility, has been found to be descriptively inaccurate. In reaction, many new theories have been proposed of which prospect theory is currently the most popular. A complication of prospect theory compared to expected utility is that extra parameters must be elicited. Part of the research of the Behavioural Economics group focuses on the design of methods to measure these extra parameters and to apply these methods in laboratory studies.
In intertemporal decision making the traditional model, constant rate discounted utility, also lies under siege. There is, however, no clear alternative for constant rate discounting. The quasi-hyperbolic discounting model is often used in economic analyses but little empirical evidence exists about this model. Besides, most existing empirical studies suffer from confounding assumptions. The research of our group seeks to shed more light on the descriptive validity of the various discounting models using methods that make no confounding assumptions.
In both fields the empirical studies are performed in the laboratory and involve individual choices which are run on a computer. The advantage of using computers is that responses can be chained and consistency tests can easily be included.
7. Health Economics and Health Utility Measurement
Principal investigator: Prof. Dr H. Bleichrodt
The rising costs of medical care due to the ageing of the population and advances in medical technology have led to an increasingly important role of economic evaluations in health policy. Such evaluations amount to comparing the costs and benefits of medical interventions. The common measure for health benefits is in terms of utility. A problem in health utility measurement is that different methods yield different results. To understand why these differences occur laboratory studies are performed. A different question in health resource allocation is how the benefits of different people should be compared: should we give equal weight to every individual (as is typically done in health policy) or should we weight the benefits of different individuals differently (e.g. give more weight to the young or to the severely ill). Experimental evidence suggests that people believe that not each individual should be weighted equally, but it is not clear which weighting scheme should be used instead. By performing laboratory studies the group Health Economics seeks to obtain more insight into these questions.
8. Electronic markets, auctions and networks
Principal investigator: Prof. Dr Eric van Heck
The ‘Marketplace of the Future’ research program analyses and explains how and why markets are transitioning and what the impact will be on the different actors (buyers, sellers, market makers, government). In the past, markets were often bound together in one location – an agora, an auction, or a stock exchange where people typically met face to face. Today they are increasingly physically dispersed, but bound together by information technology that enable remote trading. However, there is a lack of knowledge how the interaction between the technological development and the social development of the actors occurs.
This research programme will provide a much better understanding of the co-evolution of the technological and social development. We focus on auction markets, because these markets become more widely used due to the decreased transaction costs. By using both laboratory and field experiments, we are able to explain in much more detail how innovative market architectures interact with human behavior of actors.
Within the subtheme of the ‘The Role and Impact of the Information Architecture’ we study how in electronic markets, the information architecture of the market should to be designed by the market maker. Should traders be anonymous? How are products described online? Do traders see all the bids that are submitted or only the highest bid? What decision support should be offered to traders? These and other related questions all revolve around the information architecture of the market. First results show that this information architecture can have a strong influence on multiple market performance measures (Koppius 2002). Combining theories from the fields of behavioral decision-making, its applications in economics and finance, and using methods from experimental economics, this project is dedicated to further investigating how the information architecture affects market performance.
Within the subtheme of ‘New Auction and Negotiation Market Concepts’ we investigate how the improved information access and information-processing capabilities enabled by the Internet allow new types of auctions. These include reverse (buyer-driven) auctions, multi-attribute auctions and combinatorial auctions (Koppius & Van Heck 2002, Teich at al. 2004), but also information markets that can be used to predict future events (Kambil & van Heck 2002). Through a combination of prototype development and testing, and experimental research this project compares various features of the auction types to determine which are the most effective in improving performance of the participants.
9. E-learning and knowledge management
Principal investigator: Dr Peter van Baalen
In March 2004, the CELK (Centre of Expertise in the field of e-Learning and Knowledge management) was founded at the RSM Erasmus University. Two research topics require use of the EBL.
- Collaborative e-Learning in an Extended and Distributed Learning Environment.
Recent research points to the relevance of collaborative learning. Collaborative learning is not just about the peer group support that is given to the ‘right’ understanding of new concepts but also helps to assess the relevance of these concepts into particular contexts. Learning is a ubiquitous socio-cognitive process which is not restricted to the instructional context. New learning technologies, wireless IT-infrastructures and mobile devices provide opportunities to extend the traditional learning environment. The distributed nature of the extended learning environment prevents us, however, to study collaborative learning in a proper way. The EBL will be used to simulate distance (geographically and in time) and to control and manipulate the learning environment. Experiments will be carried out in which collaborative learning processes of distributed groups of students will be investigated. The controlled, experimental setting is crucial here as it appears hard to study collaborative learning beyond the traditional learning environment.
- Simulating Relational Models for Knowledge Sharing.
Knowledge sharing has become a major research topic in various management disciplines (knowledge management, information management, marketing management, innovation management, strategic management, human resource management). Most research focuses on factors that facilitate or impede knowledge sharing in organizational settings. In a recent dissertation at our school, four relational models for knowledge sharing have been developed (see N.I. Boer, Knowledge Sharing within Organizations: a situated and relational Perspective. PhD thesis to be defended on June 17th 2005). The four relational models are: Market Pricing, Authority Ranking, Equality Matching, and Communal Sharing. Based on this PhD thesis, new research will be started in which the relational models will be tested in an experimental setting. We assume that people use different relational models for knowledge sharing in different situations. In the experiments these situations will be controlled and manipulated in order to find out what factors elicit what type of knowledge sharing behavior. The findings will be used for developing simulations that will give insights in the motivations for knowledge sharing in different organizational settings.