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Marketing Faculty Research

Would you rather buy from a cuddly chatbot, or the “Lipstick King”?

Jennifer Anzaldi — Tue, 04 Mar 2025 18:03:48 +0000

Would you rather buy from a cuddly chatbot, or the “Lipstick King”? Jennifer Anzaldi Tue, 03/04/2025 - 13:03

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Si Xie

Historically, entertainment and advertising have worked as a tag team, taking turns soliciting attention from audiences. But our social-media age is blending the two into new, hybrid forms.

Witness livestream shopping, a seamless amalgam of e-commerce and entertainment. In place of one-way messaging delivered by polished pitchpeople, this model employs relatable influencers presenting products for online sale—and chatting with consumers—in real-time sessions that often last several hours.

Famously popular in China, livestream shopping is picking up steam in the United States. In June 2024, as an example, U.S. TikTok netted its first million-dollar livestream, courtesy of Texas-based brand Canvas Beauty. By 2026, live shopping may be responsible for as much as five percent of all e-commerce sales in the U.S., according to industry projections.

For global brands, this means a possible revenue explosion. But for information-systems scholars like Si Xie, assistant professor at Costello College of Business, the global rise of livestream shopping represents an unprecedented research opportunity.

Si Xie

“One of the most important elements of livestream shopping is the interaction,” Xie says. “Livestreams bring all potential buyers into the same virtual room, together with the influencer. People can see which products have been put in the online shopping cart, and which have been purchased.”

Her recently published paper in Production & Operations Management finds that the longer an individual product is showcased in a livestream featuring several different brands, the more revenue it will generate. Yet as product showcase duration goes up, overall revenue from the livestream goes down.

To reach their conclusions, the research team—including co-authors Siddhartha Sharma of Indiana University and Amit Mehra of University of Texas at Dallas—analyzed data from nearly 75,000 livestreams conducted in China during 2021.

For Xie, the findings point to a fundamental conflict between the incentives of livestreamers and the brands they promote. It is in the best interest of third-party influencers to move fairly rapidly between different types of products, but brands will want more airtime devoted to each one.

“People like variety,” Xie explains. “If I watch a livestream and all I see are shirts in different fabrics, I might feel there are not too many choices I can make. However, if you show me a shirt and then a pair of pants, I can make an outfit. There’s a higher probability of my making more purchases, and that’s in line with the third-party livestreamers’ incentives.”

One way to correct these misaligned incentives would be for brands to use the power of the purse to influence the influencers. In China, even the suggestion of such corrupting relationships has caused public scandal. In 2023, for example, top livestreamer Li Jiaqi (nicknamed “The Lipstick King” for his ability to sell beauty products) lost one million followers on social media after lashing out at an online commenter who complained about the high price of an eyebrow pencil made by Chinese cosmetics company Florasis. Li, Florasis’s most prominent brand ambassador, was excoriated for ostensibly putting his relationship with the brand above empathy for financially struggling consumers.

“People were saying, ‘you are trying to be defensive of the product because you get so much interest from selling that pencil’”, Xie says. “Therefore, Li’s credibility was really impaired.”

If Xie’s paper describes how human imperfections can jeopardize livestream shopping, could AI be the answer? Indeed, AI-powered animated chatbots — both paired with human influencers, and serving customers solo during off-peak sales hours — have become commonplace on China’s livestreams. For her PhD dissertation, Xie probed data from more than 70,000 livestreams in China and found that introducing an AI assistant boosted livestream sales by about 18%. But the effect steadily declined over time — and not because the novelty wore off. The rapidly improving algorithmic responses had the unintended consequence of shorter watch durations, which may have reduced impulse buying. Xie’s suggested remedy? “The owner of the gen-AI tools could modify the interaction between the virtual livestreamer and the audience to encourage more engagement, perhaps by adjusting the learning speed to ensure that the audience remains engaged for a longer period."

Xie also suggests that brands and channels replace humanoid avatars with cute, cuddly “mascots” that users just can’t bring themselves to click away from.

Xie says she’s working on future papers that tease insights out of livestream data. “One good thing about this new technology is that it promotes the user to buy using methods we can observe. Livestreamers sell general items like grocery items and clothing, as well as expensive stuff like cars and houses, and you can really see how people behave.”

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ISOM Faculty Research

How this summer’s heat waves may impact the economy

Greg Johnson — Tue, 06 Aug 2024 13:39:44 +0000

How this summer’s heat waves may impact the economy Greg Johnson Tue, 08/06/2024 - 09:39

This sweltering summer has brought record-breaking high temperatures to 63 countries, all but cementing 2024’s status as the world’s hottest year on record (even though we’re barely past the halfway point). Such extreme weather trends are bound to have serious implications for the environment, public health, and the economy.

Joseph (Han) Stice

Why, then, aren’t economic indicators flashing bright red? Joseph (Han) Stice, assistant professor of accounting at the Donald G. Costello College of Business at �鶹��Ƶ, has run the numbers on business and climate change. His recent working paper, co-authored by Marcus Kirk of University of Florida and Derrald Stice of University of Hong Kong, paints a picture of profound climate-related disruption underneath the placid-seeming surface of the economy.

For the years 1990 to 2020, the researchers compared quarterly sales performance from a large sample of U.S. firms to the temperature data at their base of operations. In this way, they constructed a measure of weather sensitivity, which they termed “weather beta,” for each company in the initial sample. Specifically, they were looking at whether sales either benefited or suffered when local temperatures were higher or lower than the “ideal” of 65 degrees Fahrenheit.

“What they—they being the people who examine temperature—say is that if it’s above 65, you turn on your air conditioning. If it’s below 65, you turn on your heater,” says Stice.

After restricting the sample to only those firms with discernible weather beta, they ended up with a data-set comprising 66,795 firm-quarters.

Across the sample as a whole, the results were a misleading nonstarter. Weather fluctuations did not seem to have an impact on economy-wide sales, one way or the other.

This was no surprise to Stice. Citing past research, he points out that “the overall economic effect is that colder weather is, on average, better. But that’s not true in every single instance. Some industries (i.e., agriculture) benefit from hot weather. And it also depends on what region you’re in, what time of year it is, etc.”

“We need to have a national discussion and a global discussion,” Stice says. “But the people who really matter are the local leaders, as far as climate is concerned. The people you elect on the local level are going to have a much greater impact on how you respond and how your companies can adjust, than whether or not your candidate is in the White House.”

To gauge actual impact, the researchers split the sample by size and geographic concentration, presuming that larger firms with a wider geographic footprint would be less affected by temperature changes at home base. These differences between firms proved to be critical. For the smallest, most localized firms, a swing from the 75th to the 25th percentile in terms of nonideal temperature meant 8.8-15.9% lower sales. The biggest and most sprawling firms saw sales declines of just 4.3-5.6% from an equivalent shift.

Stice clarifies that “we are talking about very small deviations, like percentages of degrees on average per day over an entire quarter. If it were one degree hotter than 65 degrees every day, that would come up in our measure as a 90. The biggest number we have is like a 25 or a 30.”

Also, sales impact tells only part of the story. The sheer size of the data-set allowed Stice and his co-authors to predict quarterly sales performance for individual firms, based on the weather and firm characteristics. On average, actual sales declines were about half as severe as predicted. The researchers speculate that firms were able to soften the blow of immoderate temperatures by adjusting their business practices. The time and resources spent on these adaptations are part of the hidden economic costs of climate volatility.

If firm managers can anticipate how the weather can impact business outcomes, you would expect financial analysts to be at least as attentive to climate effects. However, the researchers found that sales forecasts made shortly before earnings announcements were thrown off by abnormal temperatures in the previous quarter, with 7.4% inaccuracy in the mean. Similarly, the researchers found that weather impact was positively correlated with announcement-period stock market returns. Apparently, even professional investors are being caught off guard by the subtle but costly interactions between climate and economic activity.

For more accurate appraisals, Stice suggests we should turn to the local level. He notes that his measures of firm-specific weather sensitivity happen to line up fairly neatly with municipal self-assessments made by local governments as part of the Carbon Disclosure Project.

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Joseph (Han) Stice

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Accounting - Costello

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Accounting Faculty Research

George �鶹��Ƶ’s government contracting center is helping the Pentagon enter the 21st century

Jennifer Anzaldi — Thu, 30 May 2024 16:17:30 +0000

George �鶹��Ƶ’s government contracting center is helping the Pentagon enter the 21st century Jennifer Anzaldi Thu, 05/30/2024 - 12:17

When the Pentagon attempts to field innovative technology, its contracting decisions are largely dictated by a process that predates personal computing. Known as the Planning, Programming, Budgeting and Execution (PPBE) resourcing system, it betrays its mid-20th-century origins in its extreme emphasis on long-range management and sequential planning over more agile and rapid program execution.

Jerry McGinn

Calls for PPBE reform are nothing new in the halls of the Pentagon, but recent geopolitical threats have contributed to a general recognition within the federal government that change is badly needed to speed the development and acquisition of new military capabilities.

Hence Congress’s formation in 2022 of an independent commission tasked with closely assessing the current process and making specific recommendations for reform.

The Commission on PPBE Reform promptly engaged the Greg and Camille Baroni Center for Government Contracting at the Donald G. Costello College of Business at �鶹��Ƶ as a key research partner. The center was awarded a $645,000 Department of Defense (DoD) research contract consisting of two projects.

First, the research team, headed by the center’s executive director Jerry McGinn, prepared six case studies documenting PPBE’s effect on DoD’s work with both research and development centers and industry to develop and adopt new technologies.

“We set up hypotheses and did background research on the programs,” McGinn says. “Our conclusions were based on a number of interviews with government and industry officials.”

For example, one of the case studies dealt with the Air Force’s Collaborative Combat Aircraft (CCA) program, for the development of AI-piloted combat drones. Five Air Force officials involved in CCA told the Baroni research team that PPBE complicated necessary collaborations with the Navy and other agencies, due to siloed budgeting protocols making it difficult to align priorities and make resource decisions in a timely manner.

Next, the Baroni research team turned their attention to three inter-related subtasks delving into specific rules governing PPBE’s application.

“For this project, we used a mixture of non-public DoD unclassified databases as well as information available to the general public,” says McGinn.

The researchers investigated whether PPBE should vary based on DoD’s acquisition categories or remain the same for all categories, concluding that the categories were similar enough to warrant a unified process. They were also asked to evaluate how military departments and agencies use PPBE’s various acquisition pathways, resulting in a determination that “budget justification documents, particularly for RDT&E (research, development, testing and evaluation), are overly complex, unnecessarily intricate, and lack standardization”. Finally, the researchers performed an extensive analysis of PPBE’s legal underpinnings and the wider governmental implications of reforming the process.

The team’s final report, submitted to the commission early in 2024, contained a consolidated list of dozens of findings and recommendations. In its own report issued in March 2024, the PPBE Reform Commission cited the Baroni team’s research numerous times.

“Our work played a large role in informing the Commission’s findings and reinforcing their policy recommendations,” McGinn noted. “These inputs are today being considered as Congress debates 2025 appropriations and DoD concurrently develops and vets the budget for 2026 and 2027.

Shortly after the release of the Commission’s report, the Greg and Camille Baroni Center for Government Contracting hosted a rollout event at �鶹��Ƶ Square featuring the Commission’s chair, vice-chair and executive director. A series of additional events around PPBE reform are being planned for the summer.

“Our report reflects the strategic vision with which George �鶹��Ƶ established this research center. Our research and analysis inform the federal government as well as the large government contracting industry here in the national capital region. Our relationships and location make the center uniquely situated to benefit policy-makers and entrepreneurs, alike,” McGinn says.

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