Why are Firms Slow to Adopt Profitable Opportunities?
Why are small businesses often slow to adopt new profitable opportunities, even in the absence of informational frictions, fixed costs, or misaligned incentives? The authors explore three potential mechanisms: present bias, memory, and trust in other firms. In partnership with a financial technology (FinTech) company in Mexico, the authors randomly offer businesses that are already users of the payment technology the opportunity to be charged a lower merchant fee for each payment they receive from customers. The median value of the fee reduction is 3% of profits. The authors randomly vary the size of the fee reduction, whether the businesses face a deadline to accept the offer, whether they receive a reminder, and whether the authors tell them in advance that they will receive a reminder. While deadlines do not affect take-up, reminders increase take-up of the lower fee by 18%, and anticipated reminders by an additional 7%. The results point to limited memory in firms, but not present bias. Additional survey data suggests trust as the mechanism behind the significant additional effect of the anticipated reminder. Upon receiving an anticipated reminder from the FinTech company, firms value the offer more and accept it even if they generally distrust advertised offers.
Session Chair: Pulak GHOSH
IIMB Chair of Excellence and Professor of Decision Sciences, Indian Institute of Management Bangalore (IIMB)
Sean HIGGINS, Assistant Professor of Finance, Kellogg School of Management, Northwestern University
Paul J. GERTLER, Li Ka Shing Professor of Economics and Professor, School of Public Health, University of California, Berkeley
Ulrike MALMENDIER, Edward J. and Mollie Arnold Professor of Finance, Berkeley Haas and Professor of Economics, University of California, Berkeley
Waldo OJEDA, Assistant Professor, William Newman Department of Real Estate, Baruch College, Zicklin School of Business, City University of New York
Assistant Professor of Finance, Kellogg School of Management Northwestern University
On the academic side, Sean HIGGINS is an Assistant Professor of Finance at the Kellogg School of Management at Northwestern University. His research studies how technology reduces barriers to financial inclusion, and the effect of reducing these barriers on households and small firms. He received a BS and PhD in Economics from Tulane University. Prior to joining Kellogg, he was a Post-Doctoral Fellow at the Haas School of Business at the University of California, Berkeley.
Assistant Professor of Public Policy, Harvard Kennedy School Harvard University
Jie BAI's research focuses on microeconomic issues of firms in developing countries and emerging markets. Her recent projects have examined firms’ incentive and ability to build a reputation for quality, the relationship between economic growth and corruption, and the impact of internal trade barriers among Chinese provinces on resource misallocation, firm performance and export activities. Other ongoing work includes studying firms’ quality upgrading dynamics and reputational forces in export markets. She received my Ph.D. in Economics from MIT in June 2016 and spent one year at Microsoft Research NE prior to joining Harvard Kennedy School.
Professor, Decision Sciences, Indian Institute of Management, Bangalore
Pulak GHOSH is Professor in the Decision Sciences Area at IIMB. His key specializations are in intersection of Big data, Machine learning, Artificial Intelligence and its use in Economics, Finance, Policy and Social Value Creation. He did serve in the editorial board of Journal of the American statistical Association, Journal of the Royal statistical Society and currently serves in the editorial board of Biometrics.
Based on his outstanding and innovative contribution to research, the International Indian Statistical Association awarded him with the "Young Scientist Award” in 2011. The Government of India awarded him the prestigious CR Rao award in 2015 and Econometric Society awarded him the Mahalanobis Award in 2016.
Prior to joining IIMB, he served as Associate Director, Novartis Pharmaceuticals, USA, Assistant Professor, Georgia State University, and Associate Professor at Emory University, USA. He is a visiting faculty at several institutes of international repute.
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