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Research

Our research focuses on four main themes:

• Cross-cultural interactions
• Third sector and public goods
• Cognition and emotions
• Online communities

 

 

Cross-cultural interactions

Culture can have important effects on economic and business behaviour and interactions. Political scientists have highlighted cultural differences as an emerging source of potential conflict in international relations in the future. Economists have identified the impact of culture on economic variables at the national level such as development, productivity and trade. Business researchers study the effects of national culture and cultural difference in a globalising world where cross-national interaction has become the operating norm.

In CRIBS, we approach culture by assessing how it moderates decision making and behaviour at different levels - the individual, group or institution. Our aim is to investigate the role played by culture in a variety of international business situations, such as negotiating a strategic alliance or a merger, managing business government relations, or dealing with buyers and suppliers.

The third sector and public goods

Public goods benefit everybody, for instance protecting the environment. The provision of these goods is difficult due to the free rider problem. Any member of a community, team or organisation, can benefit from it once it has been provided. The problem is that self-interested individuals would rather let others bear the costs of provision. However, if all reason like this, the collective good will not be provided. This is the infamous 'free-rider problem’.

In practice we see that public goods are often provided by voluntary organisations, for instance the National Trust, a private charity, preserves attractive countryside and historic buildings.

Our research on public goods aims to understand the conditions under which people may either contribute or 'free ride'. At CRIBS, we seek to identify the behavioural determinants of cooperation - the psychological, cognitive, cultural or strategic reasons that cause an individual to cooperate.

Cognition and emotion

Much traditional social science is based on the assumption of rational choice, the notion that decision makers select the course of action that they believe, after correctly processing voluminous and relevant information, to best satisfy their consistent and stable set of preferences.

Recently, this view has been modified with insights about the psychology of human decision-making. People are often unable to collect and process relevant information in an unbiased way, their preferences may be incomplete, changeable and contradictory. In addition, their choices might be guided by their emotions - the physiological states that reflect beliefs about one's environment that are experienced as positive or negative and create a tendency towards some action.

At CRIBS, we seek to understand the role of cognition and emotions in managerial decision-making under risk and uncertainty.

Our projects include:

• participation in one's group (such as experiencing guilt and pride)
• other people (admiration, jealousy)
• counterfactual states (feeling regret or hope) and to one's self (being bored, surprised)
• attitude to imprecise probabilities and conflict between experts
• various forms of rationality

This alternative view of managerial choice provides a potential explanation for cases where firms ostensibly fail to maximize their own interest or look beyond that of their shareholders, such as in the Enron affair, in acts of corporate philanthropy or even in the current financial crisis.

Emotions and behavioural biases can also play a significant role in shaping contract enforcement at both organisational and societal levels, particularly in cases where real-life contracts are incomplete and lack strong legal enforcement mechanisms. This can be exemplified in employment relations, microfinance contracts, and tax compliance.

Unethical behaviour and competition

The research project investigates the relationship between competitive incentives and unethical behaviour using an online experiment. As measuring the true extent of unethical behaviour in a population is challenging, we generate data in an online environment which reduces peer effects and facilitates future replicability In this project we create a controlled environment which enables us to obtain accurate estimates of unethical behaviour. In the online experiment, subjects are set in competitive environments which should lead them to exert different levels of efforts.

We also aim to investigate how the presence of a negative externality imposed on a third party affects a subject's effort provision. We adopt an experimental methodology in order to test theoretical hypotheses and establish causality, as we can observe and vary the circumstances under which a subject resort to unethical behaviour.

Behavioural Law and Economics

One of the first applications of behavioural science was to legal issues.  In Nottingham we are researching liability and contract law. Behavioural biases may lead individuals to behave in ways which have legal implications. Psychologists have shown that overconfidence and risk seeking behaviour are more common than previously thought. These behaviours may lead to liability cases. For instance an overconfident driver is more likely to have an accident and hence become liable to the other party. In a series of recent papers we have studied the implications of new theories of uncertainty for liability law. We have shown that negligence is more robust to behavioural biases than alternative liability rules, such as strict liability. This research will help the design of liability rules.

Behavioural Finance

Behavioural Corporate Finance aims to examine the impact of managerial psychological issues on corporate decision-making. While traditional financial theories assume that managers are rational agents, Behavioural Corporate Finance posits that managers are likely to make decisions based on incomplete information and cognitive biases. In Nottingham, we investigate whether and how overconfident managers play a significant role in influencing corporate behaviour, and most importantly, whether an appropriate corporate governance system can mitigate such psychological biases.

Online communities

CRIBS is examining behaviour in online communities.

Online communities are groups of people who operate and interact at least in part using Internet technologies. Typical technologies used to facilitate this interaction include email, wikis, instant messaging and virtual worlds.