Talk About Creativity Hurts Investor Confidence

ilseu — Wed, 08 Jun 2022 05:03:11 +0000

Talk About Creativity Hurts Investor Confidence ilseu Tue, 06/07/2022 - 22:03 More News Holly Ober | UCR News June 07, 2022

Creativity is often touted as a positive activity for organizations, but it is inherently risky. Research led by management professors at UC Riverside has found that when company leaders discuss creativity and innovation, investors react negatively to the perception of risk, displaying a creativity bias. However, the research also shows that this reaction may not be warranted because creativity-speak is linked with higher firm financial performance. Moreover, investor confidence is affected by the tone company leaders adopt when talking about creativity and innovation. Leaders who talk about creativity in a confident, positive manner reassure investors, while creativity-speak that takes a more negative tone turns them away.

Michael Haselhuhn, associate professor of management

“Companies love to play up innovation and creativity and most research on creativity says it’s a good thing,” said Michael Haselhuhn, a UC Riverside associate professor of management. “But there is some research that suggests the opposite. Creative ideas are inherently risky and people don’t like novelty or uncertainty in leaders. We wanted to see if the creativity bias holds in the real world where it matters so we looked to see how investors respond to executives’ discussions of creativity.”

Haselhuhn and Elaine Wong, also an associate professor of management at UC Riverside, and Margaret Ormiston at George Washington University, obtained transcripts of conference earnings calls made to investors. They used a computer program to analyze the transcripts for words related to creativity and innovation, tracking how many times these words were mentioned during the conference calls. From other sources, they found stock return data and financial performance data. Then, the researchers ran regressions and robustness checks on the combined datasets and found correlations between creativity-speak, investor confidence, and earnings.

Elaine Wong, associate professor of management

They found that firms whose top executives discussed creativity and innovation to a greater degree had relatively lower stock returns, indicating lower investor confidence. But the same did not hold true for company earnings.

“Surprisingly, and in contrast to the creativity bias expressed by investors, firms with leaders that engaged in creativity-speak actually had higher earnings,” said Wong. “The perception of risk, however, was still enough to deter investors, but only in certain circumstances.”

When executives talked about creativity with a positive tone and emotions, and communicated confidence and optimism, such as crediting creativity for recent positive performance, the researchers found no negative effect on investor confidence. But when executives talked about creativity in a more negative tone, for example, suggesting that creativity and innovation were solutions to lagging company performance, investors turned away.

“The tone of conversation was more important than the industry or situation. If you mention negative things alongside creativity you’ll hurt investor confidence,” said Ormiston. “Investors are wary of creativity and innovation as evidenced by lowered stock returns in response to creative expression. Top executives need to understand this concern and make efforts to minimize it.”

The paper, “Investors respond negatively to executives’ discussion of creativity,” is published in Organizational Behavior and Human Decision Processes.

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Header image: Jacques Gaimard / Pixabay

Organizational Behavior Is Useful for MBA Grads

ilseu — Wed, 18 May 2022 19:00:09 +0000

Organizational Behavior Is Useful for MBA Grads ilseu Wed, 05/18/2022 - 12:00 More Blog Posts Elias Almarez-Herrera ’23 May 18, 2022

Elaine Wong, associate professor of management

Erick Campos ’18 says his ability to understand and evaluate varying personality types has played a crucial role in the development of his career, a skill he credits to coursework he completed when he took Associate Professor of Management Elaine Wong’s popular class on organizational behavior.

“The Management 200 course introduced me to the six leadership styles,” said Campos, who began his career with the Walt Disney Co. as an intern and is now a strategic sourcing analyst for the company. “It’s important to know your own leadership style and how that varies for others. If you’re butting heads with a member on your project team, you’ll need to adjust your leadership style right then and for future projects with them.”

Campos refers to psychologist Daniel Goleman’s theory on six leadership styles: Emotional intelligence establishes a set of varying approaches to social interactions and business settings. In some situations, business leaders might emphasize delegating tasks in what he calls a coaching style. However, some business settings may require a commanding style in which directions and orders demand immediate compliance with little room for input from team members.

To better express phenomena like this to her students enrolled in the fall quarter, Professor Wong introduced a panel of current PMBA and former MBA students ready to share what they have each learned about emotional intelligence in the workplace since embarking on their respective careers.

MBA Alumnus, Jordan Cullen ’17, a U.S. military veteran and project marketing lead for Esri

Among the panelists was Jordan Cullen ’17, a U.S. military veteran and project marketing lead for Esri, an international supplier of geographic information software; his team brainstorms ideas for desktop and mobile innovations. “I’ve reflected back on my time in this course over and over again post-graduation [and realize] it’s helped me a lot,” he said. “More than half of the meetings I’ve done are walking meetings, like the ones I remember doing in this course.”

“I really liked this class because I learned how to give and take feedback,” says first-year PMBA marketing student Chiree Rice-Coplin ’23, who attended the discussion. “Volunteering for the Women’s Journey Foundation is where I learned how important it is to take feedback positively. It’s necessary to grow.”

Organizational behavior and business work hand-in-hand according to the MBA alumni panelists, which also included Dominic Palencia ’18, an internal auditor with San Bernardino County; Xiao Lu ’22, who will graduate with her UCR MBA in June and is currently chief operating officer for Aukey in the financial services industry; and Danielle Wright ’21, a client and financial analyst for Goldman Sachs.

When asked how the Organizational Behavior course set him up for success in his career, panelist Arnold Ramirez ’20, president of consulting management company CU Intellect, said: “I’m able to step back from personal beliefs in business situations and focus on organizational business tactics. It’s important to understand personalities. People are more dynamic than they may seem on the surface.

MBA students in Professor Elaine Wong's Organizational Behavior class