articles by Rodrigo Canales
Journal of Marketing Research, 2019
At many firms, incentivized salespeople with private information about customers are responsible... more At many firms, incentivized salespeople with private information about customers are responsible for customer relationship management. Although incentives motivate sales performance, private information can induce moral hazard by salespeople to gain compensation at the expense of the firm. The authors investigate the sales performance--moral hazard trade-off in response to multidimensional performance (acquisition and maintenance) incentives in the presence of private information. Using unique panel data on customer loan acquisition and repayments linked to salespeople from a microfinance bank, the authors detect evidence of salesperson private information. Acquisition incentives induce salesperson moral hazard, leading to adverse customer selection, but maintenance incentives moderate it as salespeople recognize the negative effects of acquiring low-quality customers on future payoffs. Critically, without the moderating effect of maintenance incentives, the adverse selection effect of acquisition incentives overwhelms the sales-enhancing effects, clarifying the importance of multidimensional incentives for customer relationship management. Reducing private information (through job transfers) hurts customer maintenance but has greater impact on productivity by moderating adverse selection at acquisition. This article also contributes to the recent literature on detecting and disentangling customer adverse selection and customer moral hazard (defaults) with a new identification strategy that exploits the time-varying effects of salesperson incentives.
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Organization Science, 2021
Evaluating the attractiveness of startup employment requires an understanding of both what start... more Evaluating the attractiveness of startup employment requires an understanding of both what startups pay and the implications of these jobs for earnings trajectories. Analyzing Danish registry data, we find that employees hired by startups earn roughly 17\% less over the next 10 years than those hired by large, established firms. About half of this earnings differential stems from sorting---from the fact that startup employees have less human capital. Long-term earnings also vary depending on when individuals are hired. Although the earliest employees of startups suffer an earnings penalty, those hired by already-successful startups earn a small premium. Two factors appear to account for the earnings penalties for the early employees: Startups fail at high rates, creating costly spells of unemployment for their (former) employees. Job-mobility patterns also diverge: After being employed by a small startup, individuals rarely return to the large employers that pay more.
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Organization Science, 2016
This in-depth, comparative case study of the creation of the small and medium enterprise credit ... more This in-depth, comparative case study of the creation of the small and medium enterprise credit market in Mexico explores the work of actors to craft new organizational practices, as well as the symbols that sustain institutionalization efforts. The study demonstrates that, to craft new institutional practices, individual actors engage in two distinct layers of institutional work. One entails purposefully visible, staged, scripted, and carefully documented work to suspend existing institutions and allow for experimentation as well as to legitimize new practices. The second entails invisible, undocumented work to recruit allies, find resources, experiment with new practices, coordinate strategies of action, and build political toolkits. While visible work---which is the focus of most research on institutional change---was determinant at every stage of the change process because of its symbolic effects, actors spent most of their time and energy on invisible work, which they referred to as ``the real work.'' The paper shows that every act of visible institutional work was crafted through considerable amounts of invisible institutional work. Since new practices and new symbols were crafted through gradual and iterative processes of experimentation, invisible work includes many failures that remain undocumented. It also includes the work of midlevel, invisible actors who, often, are the real and unreported agents of institutional change. The findings have implications for our understanding of the mechanisms of institutional maintenance and change.
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Management Science, 2016
Social scientists have long considered what mechanisms underlie repeated exchange. Three mechani... more Social scientists have long considered what mechanisms underlie repeated exchange. Three mechanisms have garnered the majority of this attention: formal contracts, relational contracts, and relationally embedded social ties. Although each mechanism has its virtues, all three exhibit a common limitation: an inability to fully explain the continuation and stability of intertemporal exchange between individuals and organizations in the face of change. Drawing on extensive quantitative data on approximately 450,000 microfinance loans made by a microfinance institution in Mexico from 2004 to 2008 that include random assignment of loan officers, this research proposes the concept of ''relational styles'' to help explain how repeated exchange is possible in the face of personnel change. We define relational styles as systematically reoccurring patterns of interaction employed by social actors within and across exchange relationships---in this paper, between microfinance clients and loan officers. We show that relational styles that are consistent facilitate a clear understanding of expectations and thus exchange. We also demonstrate that consistency in the relational styles followed by successive loan officers mitigates the negative impact of a broken loan officer--client tie. This paper thus proposes and empirically tests a social mechanism based on relational styles that often accompanies relational embeddedness, but which may also serve as a partial substitute for it. This paper was accepted by Jesper S{\o}rensen, organizations.
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Organization Science, 2014
This article explores how organizations balance the pressures to pursue efficiency through stand... more This article explores how organizations balance the pressures to pursue efficiency through standardization with the need to remain responsive to local needs. The study combines rich ethnography with detailed loan data to show that both standardization and flexibility through relational ties provide substantial organizational benefits but also carry significant costs; thus, no strategy is inherently superior, and their coexistence generates the best results. Such coexistence, however, creates contradictions that must be managed. Here, I use microfinance as a strategic setting and gain analytic leverage from the random assignment across branches of loan officers who exhibit significant heterogeneity in rule enforcement styles: some enforce rules strictly, whereas others frequently bend them to respond to client needs. I find that loan officers with relational styles exercise discretion productively to enhance organizational performance. Yet their effectiveness is contingent on the presence of rule-enforcing peers, as evidenced by the significant underperformance of branches with a high concentration of officers of either type. In contrast, branches that contain discretionary diversity, or a balance between enforcement styles, perform best. This is not due to diversity per se, but because loan officers process decisions in local credit committees. Committees that contain discretionary diversity generate a productive tension that induces participants to justify decisions along broader organizational goals, thus maintaining a productive balance between standardization and flexibility. Implications for organizational theory and practice are discussed.
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Journal of Financial Economics, 2012
We use loan-level data to study how the organizational structure of banks impacts small business ... more We use loan-level data to study how the organizational structure of banks impacts small business lending. We find that decentralized banks---where branch managers have greater autonomy over lending decisions---give larger loans to small firms and those with ``soft information.'' However, decentralized banks are also more responsive to their own competitive environment. They are more likely to expand credit when faced with competition but also cherry pick customers and restrict credit when they have market power. This ``darker side'' to decentralized banks in concentrated markets highlights that the level of local banking competition is key to determining which organizational structure provides better lending terms for small businesses.
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Regulation and Governance, 2011
Abstract This article explores how loan officers enact and adapt organizational policies within m... more Abstract This article explores how loan officers enact and adapt organizational policies within microfinance institutions. Some loan officers frequently bend or choose not to enforce written rules in an effort to better address client needs, while others enforce the rules strictly. These differences in enforcement styles are analyzed to explore the structural characteristics that generate and sustain rule-bending behavior. In microfinance, the pressures to standardize and automate lending decisions challenge loan officers' ability to manage clients because context uncertainty cannot be fully captured by centralized policies. The article shows that officers exercise discretion productively, as measured by the organization's own criteria to (i) better serve client needs when policies can lead to bad outcomes; (ii) purposefully improve the rules themselves; and (iii) defend loan officer status within the organization. The article unveils two inherent tensions in microfinance. First, increased efforts to centralize and enforce policies in fact only increase the motivation for loan officers to work outside the organization's regulations. Second and ironically, the value of the productive rule bending displayed by some loan officers is best captured when other officers are strict enforcers.
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Development practitioners must build a culture of learning, negotiation, and collaboration, so th... more Development practitioners must build a culture of learning, negotiation, and collaboration, so that the generation and use of evidence are integrated into program design and implementation.
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inbooks by Rodrigo Canales
Using a Positive Lens to Explore Social Change and Organizations, 2012
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Papers by Rodrigo Canales
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Development practitioners must build a culture of learning, negotiation, and collaboration, so th... more Development practitioners must build a culture of learning, negotiation, and collaboration, so that the generation and use of evidence are integrated into program design and implementation.
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Academy of Management Proceedings, 2021
The symposium includes four empirical papers that explore how police officers think and feel abou... more The symposium includes four empirical papers that explore how police officers think and feel about their work and their identities. These studies address the implications of traumatic incidents at ...
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Academy of Management Proceedings, 2013
A key question for studying capitalism is its expansion to emerging economies, and increasing eff... more A key question for studying capitalism is its expansion to emerging economies, and increasing efforts have been made to understand the differences between the emerging markets and the developed mar...
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Administrative Science Quarterly, 2010
To most readers, it will come as no surprise that scandal as a social phenomenon is ubiquitous an... more To most readers, it will come as no surprise that scandal as a social phenomenon is ubiquitous and has deep transformative power. Hardly a day goes by without a major national or international scandal playing itself out in the media. Most of these scandals fade away as new ...
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Administrative Science Quarterly, 2012
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Administrative Science Quarterly, 2021
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We examine entrepreneurship and creative destruction following US banking deregulations using Cen... more We examine entrepreneurship and creative destruction following US banking deregulations using Census Bureau data. US banking reforms brought about exceptional growth in both entrepreneurship and business closures. The vast majority of closures, however, were the new ventures themselves. Although we do …nd evidence for the standard story of creative destruction, the most pronounced impact was a massive increase in churning among new entrants. We argue that creative destruction requires many businesses failures along with the few great successes. The successes are very di ¢ cult to identify ex ante, which is why democratizing entry is an important trait of well-functioning capital markets.
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