Based on research by Haiyang Li, Xiwei Y and Geng Cui

• Emerging markets such as China are increasing their outbound foreign direct investment.
• Inbound foreign investment can help firms by boosting knowledge.
• Firms looking to expand globally need to ensure that their organizational resources are adaptable to new markets. 

When foreigners invest in emerging markets, the prospect for those markets’ local businesses looks bright. The payoffs for a country’s companies can range from injections of foreign capital to better managerial talent, technological sophistication and international know-how. But does foreign investment ever push local firms to venture into international projects of their own?

Rice Business professor Haiyang Li looked closely at the ripple effects of foreign investments, and concluded it all depends on the local businesses’ adaptability. That — and their appetite for risk. 

Together with Xiwei Yi of Peking University and Geng Cui of Lingan University, Hong Kong, Li launched a large-scale study of Chinese manufacturers to better understand how multinational investment in domestic companies influences the global market. 

The subject was ripe for analysis. Over the past decade, more and more companies in China and other emerging markets have been testing the waters of direct investment in other countries in sectors as varied as food and beverages, apparel, electronics and transportation equipment. 

Li’s team hypothesized that these emerging market companies were leveraging benefits that foreign investment had ferried into their home markets. This investment, the researchers theorized, had brought in useful resources and skills, which helped ease the local companies into international business markets. 

To confirm this, the team needed to test whether the converse was true: Might information gained from foreign investors actually dull a local firm’s interest in branching out overseas? Maybe the risks of that type of venture — which are higher for firms in emerging markets — would seem too stark. 

To find out, the researchers first vetted the literature on inward and outward investment activities. How, they wanted to know, did domestic firms interact with foreign players in the technology or product importing process? In equipment manufacturing? In franchising and licensing, mergers and acquisitions and activities such as setting up subsidiaries? 

Working with a global research company, Li and his colleagues next surveyed 1,500 Chinese businesses in the food, clothing, electronics and vehicle industries. (Firms in finance, banking, natural resources and business services were ruled out because of their government ties, and also because such organizations usually use fewer resources, which made them harder to evaluate.)

Each company that took part in the survey rated how much they engaged with foreign investors in activities such as importing products and services or forming joint ventures. They also indicated if dealing with foreign direct investment had brought them foreign capital, advanced manufacturing know-how, managerial experience or competitive insight into overseas business. 

The researchers also measured the “fungibility” of these firms’ resources — in other words, how easily could their organizational, cultural and technological resources be adapted to various geographical settings? 

Finally, managers rated how risk-prone they thought their firms were. 

After Li and his coauthors processed the answers, they found several links between foreign investment in domestic firms and local companies’ internationalization efforts.

First, there was a positive relationship between the local gains from foreign investment and a firm’s interest in internationalization projects. While this effect was indirect, it was amplified when foreign investment gave a firm new capabilities that made it more adaptable. In other words, the Chinese companies whose contact with foreign multinationals made them more adaptable in general were better positioned to prosper in ventures abroad.

This stands to reason, the researchers note. That’s because by its very nature foreign investment sparks awareness of new opportunities: Every business trip, plant visit or negotiation with foreign partners is a hands-on lesson in international trade.

But the researchers also uncovered a significant downside to foreign investment for local Chinese firms. When a project was considered high-risk, such as a merger or establishment of a wholly owned subsidiary, the local firms were less prone to venture abroad. This adverse effect was worse for firms that labeled themselves risk-averse, probably because exposure to foreign investors only made the risks of internationalizing clearer.

These findings add important detail to the way foreign investment can affect their local partners’ own international plans — for good and ill.  Already, businesses in emerging markets are used to optimizing resources, wrangling diverse idioms and artisans and adapting logistically to get their products to market. That nimbleness, Li and his colleagues propose, should also be seen as a globalization tool. For businesses in emerging markets, the researchers conclude, day-to-day technical ability is actually less important than cultural and organizational flexibility — and applying lessons learned from foreign investors to their own projects abroad. 

In other words, for firms in emerging markets, globalization is not just a path to new markets. It’s a way to study interactions with foreign firms while on their home turf — and learn how to apply those lessons abroad. 

Haiyang Li is a professor of Strategic Management and Innovation at Jones Graduate School of Business at Rice University.

To learn more, please see: Li, H., Yi, X. & Cui, G. (2017). Emerging market firms’ internationalization: How do firms’ inward activities affect their outward activities? Strategic Management Journal, 38, 2704–2725.

The Rice Alliance for Technology and Entrepreneurship, one of the country’s premier initiatives devoted to the support of technology commercialization, entrepreneurship education and the launch of technology companies, will host a special event Dec. 5 to unveil its new offices, the 3,000-square-foot Bill and Stephanie Sick Suite.

Located in McNair Hall, the home of Rice University’s Jones Graduate School of Business, the space was made possible through a $1 million gift by Rice engineering alumnus William “Bill” Sick and his wife, Stephanie. Bill Sick was one of the first supporters and mentors to the Rice Alliance during the organization’s formation in 2000. The Sicks will attend the event.

What: Unveiling and ribbon-cutting for the new home of the Rice Alliance, the Bill and Stephanie Sick Suite.

Who: Speakers will be Rice President David Leebron, Rice Business Dean Peter Rodriguez and Rice Alliance Managing Director Brad Burke.

Also in attendance will be Reginald DesRoches, Rice’s William and Stephanie Sick Dean of Engineering, and Rice Vice Provost for Research Yousif Shamoo.

When: 1:30-2 p.m. Thursday, Dec. 5. The Rice Alliance open house and holiday party will follow the remarks and ribbon-cutting ceremony.

Where: Rice University, McNair Hall, Suite 103 (first floor), 6100 Main St. Parking is available in the Central Campus Garage. For directions, see http://business.rice.edu/directions-and-parking.

Members of the news media who want to attend should RSVP to Jeff Falk, director of national media relations at Rice, at jfalk@rice.edu or 713-348-6775.

About the Bill and Stephanie Sick Suite
A triptych by local Houston artist DUAL, commissioned by Rice Alliance for the 2019 Rice Business Plan Competition, greets visitors to the new suite and honors Rice Alliance with images from campus and pictures of its supporters. DUAL has been featured in a number of exhibitions by some of the top names in the Houston art scene, including Gallery M Squared, Cardoza Fine Art, Colton and Farb Gallery and Station Museum of Contemporary Art. Most recently, DUAL created a 4-by-184-foot mural at the Lee and Joe Jamail Skatepark in Buffalo Bayou Park.

The new, modern suite is accented by soothing greens and inviting spaces for entrepreneurial-minded students to collaborate. A neon sign from Houston artist Tim Walker of The Neon Gallery adorns the entrance wall. Gensler is the architect and b. bell builders served as the general contractor.

As a nod to Houston’s history as a city supportive of entrepreneurship, mosaic tile flooring from the Blue Tile Project is also inlaid in the space. These custom tiles in the style of Houston’s historic blue street tiles connect Rice Alliance to its mission of promoting local business initiatives.

About the Rice Alliance
Since its founding, the Rice Alliance’s activities have benefited more than 2,400 startups that have raised more than $8 billion in funding. Over 52,000 investors and corporate and industry leaders have participated in Rice Alliance in Technology Venture Forums in energy and clean tech, digital technology and life sciences, and other programs.

The Rice Business Plan Competition is the world’s richest and largest student startup competition. Forty-two startups from across the globe compete in front of over 300 investor and industry judges. The competition awarded more than $2.9 million in prizes in 2019 and is supported by more than 140 corporate, government and investor sponsors. Over the life of the competition, participating teams have successfully launched 229 companies and raised more than $2.3 billion in funding.

Burke, who has served as managing director of the Rice Alliance since 2001, is also executive director of the Rice-based Global Consortium of Entrepreneurship Centers, which represents 250 university entrepreneurship programs around the globe.

Rice’s startup accelerator, OwlSpark, which is managed by the Rice Alliance, was founded in 2013 and offers an intensive summer experience that provides teams of students, faculty and recent alumni with the education, mentorship, space and networking opportunities required to launch their companies. OwlSpark is led by the Rice Alliance’s Kerri Smith and Jessica Fleenor.

Rice Business has the No. 1 graduate entrepreneurship program in the U.S., according to the 2020 rankings announced Nov. 12 by the Princeton Review and Entrepreneur magazine.

Related materials:

Follow the Rice Alliance via Twitter @RiceAlliance.

Follow Rice Business via Twitter @Rice_Biz.

Follow Rice News and Media Relations via Twitter @RiceUNews.

Eleven universities with leading-edge entrepreneurship programs, along with 19 finalists, were recognized for their outstanding programs at the 2019 Global Consortium of Entrepreneurship Centers (GCEC) conference in Stockholm. Now in its 23rd year, the GCEC conference in September was attended by more than 400 individuals from 240 top universities representing 29 countries and six continents.

The Rice Alliance for Technology and Entrepreneurship and Rice’s Jones Graduate School of Business serve as the central office for the GCEC organization.

Universities specializing in venture creation and specialty programs, such as women’s entrepreneurship, were among those acknowledged. The award winners were selected through a rigorous nomination and evaluation process, undergoing review by a panel of 95 academic peers. More than 100 university programs were nominated this year from the 240 GCEC member schools.

Awards were presented in eight categories including the top award, the Nasdaq Center of Entrepreneurial Excellence award. Since 2000, Nasdaq has honored university centers that have made and will continue to make enormous contributions in advancing entrepreneurship as the force in economic growth throughout the world.

In addition, two individuals were honored for their lifetime contribution to university entrepreneurship.

“Entrepreneurship has become a central and vibrant educational component at most top universities around the world,” said Brad Burke, executive director of the GCEC and managing director of the Rice Alliance. “Universities play a critical role in global innovation and economic development. The GCEC has been a driver of vigorous and innovative academic and experiential entrepreneurial programs. More and more institutes of higher education are recognizing that teaching entrepreneurial skills are key to the success of our students and the world’s future economy.”

A complete list of award winners and finalists follows.

Outstanding Contributions to Venture Creation

Winner:

University of Illinois at Urbana-Champaign — Illinois Entrepreneurship

Finalists:

Rady School of Management at the University of California, San Diego — California Institute for Innovation and Development

Clarkson University — Shipley Center for Innovation

Grand Valley State University — Richard M. and Helen DeVos Center for Entrepreneurship & Innovation

University College Cork — IGNITE

Excellence in Specialty Entrepreneurship Education      

Winner:

Rutgers University — Center for Urban Entrepreneurship & Economic Development

Finalists:

Institute for Veterans and Military Families at Syracuse University — Arsenal

University of Delaware — Horn Entrepreneurship

Utah State University — Center for Entrepreneurship

University of Texas at Dallas — Institute for Innovation and Entrepreneurship

Excellence in Entrepreneurship Teaching and Pedagogical Innovation

Winners:

University of California, Berkeley — Sutardja Center for Entrepreneurship & Teaching

University of Colorado Boulder — Deming Center for Entrepreneurship

Texas Christian University — Neely Institute for Entrepreneurship and Innovation

Finalists:

Munich University of Applied Sciences — Strascheg Center for Entrepreneurship

Wisconsin School of Business — Weinert Center for Entrepreneurship

Outstanding Student Engagement & Leadership

Winner:

Michigan State University — MSU Entrepreneurship

Finalists:

West Virginia University — IDEA Hub Ecosystem and LaunchLab Network

University of Houston — Wolff Center for Entrepreneurship

Outstanding Emerging Entrepreneurship Center

Winners:

Dartmouth College — Magnuson Center for Entrepreneurship

Brown University — Nelson Center for Entrepreneurship

Finalists:

Rice University — Liu Idea Lab for Innovation and Entrepreneurship

The Hebrew University Jerusalem — HUJI Innovate

Memorial University — Memorial Centre for Entrepreneurship

Exceptional Activities in Entrepreneurship Across Disciplines

Winner:

Florida State University — Jim Moran College of Entrepreneurship

Finalists:

Texas A&M University — McFerrin Center for Entrepreneurship

Pennsylvania State University — The Center for Penn State Student Entrepreneurship

Florida Polytechnic University — Entrepreneurship Center

Harvard University — Harvard Innovation Labs

GCEC Center for Entrepreneurial Leadership

Winner: Stockholm School of Entrepreneurship

GCEC Legacy Award

Winners:

Saras Sarasvathy, Paul M. Hammaker Professor in Business Administration, University of Virginia Darden School of Business

Ted Zoller, T.W. Lewis Clinical Professor of Strategy and Entrepreneurship and Director of the Center for Entrepreneurial Studies, University of North Carolina Kenan-Flagler Business School

Nasdaq Center of Entrepreneurial Excellence

Winner: University of Chicago — Polsky Center for Entrepreneurship and Innovation

The GCEC is the premier academic organization addressing the emerging topics of importance to the nation’s university-based centers for entrepreneurship. It has become the vehicle by which the top, established entrepreneurship centers as well as emerging centers work together to share best practices, develop programs and initiatives and collaborate and assist each other in advancing, strengthening and celebrating the role of universities in teaching the entrepreneurs of tomorrow.

The GCEC conference was hosted by the Stockholm School of Entrepreneurship, which is celebrating the 20th anniversary of its founding.

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Houston is hot right now! The fourth-largest city in America is home to NASA, Fortune 500 companies, the largest medical center in the world and an unparalleled music scene. The “Culinary and Cultural Capital of the South” is an exciting place to work, stay and play. Come see why this inclusive city has attracted one of the most diverse populations in the country. You’ll fit right in.

Low Cost of Living

Houstonians wake up to all the perks of big city life without the heavy price tag. Whether it’s a weekend grocery run or a stop at a local coffee shop – your dollar goes further in Houston.

The C2ER Cost of Living Index Q2 2019 Annual Average shows that Houston has the third lowest overall cost of living among the nation’s 20 most populous metropolitan areas. The same study also shows that Houston's overall after-taxes living costs are 27.4 percent below the average for the 20 largest urban areas, largely due to affordable housing costs.

Houston’s a great deal, and people are taking notice. For the tenth consecutive year, Houston ranked first in U-Haul’s annual national migration trend report, "The U-Haul 2018 Top 50 U.S. Destination Cities."

America's Most Diverse City

And in an era when human capital — ideas, practices and inventions — is the most critical resource of all, Houston enjoys a major power source. It is the most ethnically diverse city in the country. This is an asset crucial to 21st-century business, which must prioritize adaptability to new skills and technology to thrive, notes the personal finance site WalletHub.

We asked some of our current MAcc students what they love most about Houston and both Emily Romero and Claire Weddle commented on the city’s diversity.

“I love the diversity of people and activities in Houston - there is always something unique going on. Through the many festivals, restaurants, and markets, I can explore different cultures without ever having to leave town!” Emily Romero (MAcc Class of 2020)

“I love Houston because it’s so diverse. I’ve gotten to try so much food from different cultures since the city has many restaurants. You can even just go to your local grocery store in Houston and hear people speaking languages from all over the world. It’s something special here that not all places have to offer!” Claire Weddle (MAcc Class of 2020)

Always Something To Do

Home to five National Sports Teams, Houston is a major league sports town! Wind down by watching the Astros hit a home run at beautiful Minute Maid Park, soak in some sun while watching the Dynamo and the Dash score goals at BBVA Stadium, cheer on the Rockets as they shoot for a win at the Toyota Center or catch some gridiron action with the Texans at NRG Stadium. If you want to experience the original extreme sport, make sure to check out Houston Livestock Show and Rodeo each spring; it’s the largest in the world!

Vibrant Arts and Culture Scene: Take an afternoon stroll through Houston’s museum district where you’ll find the Houston Museum of Fine Arts, Houston Children's Museum, Contemporary Arts Museum Houston, Houston Museum of Natural Science and the Houston Zoo among other attractions. In the evening, attend a live performance at the Miller Outdoor Theatre in Hermann Park — just across the street! Houston is one of the few U.S. cities that offers world-class, year-round resident companies in all of the major performing arts — symphony (Houston Symphony Orchestra), opera (Houston Grand Opera), drama (The Alley Theatre) and ballet (Houston Ballet).

Culinary Capital of Texas: Houston offers a myriad of dining options to please even the pickiest of eaters. Authentic TexMex, traditional Texas barbeque, and Creole inspired cuisine are just a few of the possibilities. Houston is the Culture and Culinary Capital of the South with more than 10,000 restaurants and eating establishments covering over 60 cuisines. Home to award-winning chefs like Chris Shepherd and Hugo Ortega, you'll savor Houston's world-class restaurant scene. Learn more.

Interested in learning more? Email us at RiceMAcc@rice.edu.

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By Jennifer (Jennie) Latson

This article first appeared in the Houston Chronicle

What do we know about the whistleblower? Not THAT whistleblower, but whistleblowers in general. How do we view an individual who brings someone else’s (alleged) misdeeds to light?

President Donald Trump recently described one as “almost a spy.”

“You know what we used to do in the old days when we were smart? Right? The spies and treason, we used to handle it a little differently than we do now,” he said, according to audio obtained by the L.A. Times.

Others, meanwhile, defend whistleblowers — sometimes literally. “We must protect those who demonstrate the courage to report alleged wrongdoing, whether on the battlefield or in the workplace,” Joseph Maguire, the acting director of national intelligence, said at a September hearing.

Whether you see a whistleblower as a hero entitled to legal protection or a snitch who should be outed (and possibly convicted of treason) may depend on where you stand politically. It may also depend on whether the whistle is pointed in your direction.

“For people who wish to encourage whistleblowing, then whistleblowers can be heroic,” says Duane Windsor, a management professor at Rice University’s Jones Graduate School of Business. “People who are being reported on typically try to dismiss and vilify whistleblowers.”

Whistleblowers have met with ambivalence throughout the history of whistleblowing — and that history is a long one. Policies enabling the rank and file to expose wrongdoing by people in power have been in place since Beowulf battled Grendel. “Qui tam” provisions — short for the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” meaning “He who sues on behalf of our Lord the King and on his own behalf” — date as far back as the early Middle Ages, according to Tom Mueller, author of “Crisis of Conscience: Whistleblowing in an Age of Fraud.”

In what’s considered to be the first of the qui tam laws, King Wihtred of Kent declared in 695 A.D. that anyone caught working on the Sabbath would be fined — and whoever turned him in was entitled to half the fine. Because medieval kings didn’t have a standing police force, Mueller explains, it made sense to incentivize private citizens to do the policework. But that meant the earliest whistleblowers were essentially bounty hunters spying on their neighbors. And it didn’t make them popular in the community, particularly when they brought down its pillars. (“William Shakespeare’s father was sued, and perhaps ruined, by qui tam informers who accused him of usury and the illicit sale of wool,” Mueller writes.)

Bounties are the most controversial element of many whistleblowing laws — including our own False Claims Act, originally passed in 1863 after war profiteers swindled the Union Army by, among other things, passing sawdust off as gunpowder and selling the same horses several times. By that time, England was phasing out its own qui tam laws, since the cash reward was seen as overly corrupting, particularly for a policy meant to rout corruption. Some informers resorted to entrapment to get their share of the fine; others simply lied, according to Randy Beck, a law professor and associate dean at the University of Georgia.  

In the U.S., however, the False Claims Act still rewards whistleblowers for exposing fraud against the government. Sherry Hunt, who blew the whistle on mortgage fraud at Citigroup in 2011, was awarded $30 million of the $158 million settlement Citigroup ultimately paid. The IRS also pays informers who report tax dodgers, while those who report securities fraud are entitled to payment under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

And even profit-motivated whistleblowers can produce useful tips, Windsor argues. If anything, they’re more essential today than in medieval England, since scams are getting more complicated and harder for regulators to uncover without help from the inside. A 2018 PricewaterhouseCoopers survey found that nearly 30 percent of corporate fraud detection came via tip-offs by an internal source or from anonymous whistle-blowing hotlines.

“There may be some division of opinion about motive: unrewarded reporting is heroic; rewarded reporting is somewhat less noble or even mercenary,” Windsor says. “I do not agree. We need whistleblowers, whether heroic or mercenary. Both channels are socially valuable.”

Windsor teaches his Rice MBA students the case studies of two different whistleblowers: Sherry Hunt at Citigroup and Sherron Watkins at Enron. While Hunt went directly to the feds, Watkins blew the whistle internally, alerting Enron CEO Kenneth Lay to her discovery of widespread accounting fraud at the company. Instead of earning a reward, however, she became a pariah at the company; the CFO tried to have her fired. After Enron’s abuses became public, Congress passed the Sarbanes-Oxley Act, which includes unprecedented protection for whistleblowers like Watkins, making it a felony to retaliate against them and holding executives personally liable when they do.

“Whistleblowing can be difficult and risky, at best,” Windsor says. “It seems to me that cash awards are in order. We want to encourage whistleblowers in as many ways as possible.”

The alternative, of course, is to witness wrongdoing and say nothing. And far greater numbers of people choose this path — what management scholar Margaret Heffernan refers to by the legal term “willful blindness.” In fact, Heffernan says, when researchers surveyed employees at American corporations, 85 percent said they were aware of problems at work that they were too afraid to mention.

In a world without whistleblowers, we’d go on buying the same horses over and over, or worse, investing in Enron. But even with the promise of a cash reward, few people are willing to endanger their career by speaking out — and risk being called a spy or a traitor for their trouble.

Jennifer Latson is an editor at Rice Business and the author of “The Boy Who Loved Too Much.”

At Rice Business, we highly regard Diversity and Equity in our approach towards all students. We believe that fostering a diverse and inclusive community not only enriches the educational experience but also prepares our students to thrive in an increasingly global and interconnected world. We are committed to creating an environment where individuals from all backgrounds feel valued, respected, and empowered to succeed. Through our diverse perspectives and experiences, we cultivate innovation, creativity, and excellence in business leadership.

If you are seeking an MBA Program that prioritizes your well-being, treats you with the utmost respect, and embraces your true self and aspirations, then the Rice MBA Program is the ideal choice for you.

Meet Lina Bell, our Executive Director for Diversity, Equity, and Inclusion at Rice Business. Learn about her approach to DEI and diversity at Rice Business.

Find our Admission Blogs on the Rice Business YouTube Channel. 

Based on research by Erik Dane and Kevin W. Rockmann 

• Our daily work life can benefit from what we gain from the novelty and challenges of travel.
• Work, like travel, should involve fresh ways of interacting with our environment.
• Organizations can build conditions that help workers maintain a traveler’s mentality, in part by shedding existing labels and categories.

You’re walking to a tea ceremony in Kyoto. You look at the wet pebbles along the road, the raindrops in the half-light. A tea master beckons you into the tea house. You feel the tatami mat under your feet. No one speaks your language. You’re there for the ceremony, but you’re not sure exactly what’s happening. The candlelight flickers. You find yourself transfixed not only by the tea master’s gestures, but also by the steam from the pot of tea and the tat, tat, tat of water on the roof.

Such are the exquisite, sometimes confusing sensations of travel. In those moments, our minds grow clear of thoughts about past failures and future worries. Our brains operate in a different way than they do in the routine office life of emails, PowerPoint slides and conference calls. And it’s possible to bring that traveler’s perspective to the workplace.  

In fact, in a recent paper, former Rice Business Professor Erik Dane and colleague Kevin W. Rockmann of George Mason University argue that managers and their employees would benefit from experiencing the workday in ways akin to the experience of traveling. Cultivating the surprise and humility of travel, when we are forced to constantly come to terms with what we witness, is especially critical, Dane says.

Dane argues that, ideally, people can develop novel ways of understanding and engaging with their normal work experience.

For example, workers in a given company might view the annual performance evaluation process simply as an occasion for judgment and critique. In the mindful state of a traveler, however, one may be able to view it instead through a number of other lenses: a chance to hear useful feedback, offer suggestions to the boss or launch a talk about higher pay.

Just as there’s a profound difference between ticking off a checklist for an office project and engaging in deep research, there is a vast distinction between tourism and travel. Both in the office and on a journey, Dane writes, unique changes can occur when we toss the guidebook.

One key approach, Dane says, is immersion. Literature on student travel abroad indicates that participants show more personal development, improvement in their own language and greater cultural competence than those who chose not to travel. This points to the value of expat assignments for workers as a valuable way to boost mindfulness and the cognitive skills that come with facing new environments.

But visiting new places is not the only way to find a transformative mix of wonder and disorientation, Dane writes. To the contrary: organizations can create conditions that inspire this. Most workers, for example, are saddled with practices — daily commuting routes, patterns of information sharing, decision-making procedures — that they largely take for granted. Organizations can change that by pushing people to think more actively about the details of where, when and how they perform their jobs — and whether those routines are the best ones. Trying such thought exercises, even in the dullest conference room or cubicle, can jump-start the alertness we usually associate with visiting new places.  

Cultivating a traveler’s mind, though, is not just for new employees or rank-and-file workers. A traveler’s mindset can also improve performance at the top, Dane suggests. Senior managers can be especially prone to cognitive rigidity — stale, risk-averse thinking — that can erode adaptability and success.

To truly launch an organization toward the horizon, Dane argues, senior managers need to do more than coax a traveler’s eye from their subordinates. Leaders need to modify their own routines, actively seeking out techniques that sharpen their own vision: of their workers, the spaces where employees spend most waking hours and the unspoken rituals and beliefs guiding everything their business does.

Erik Dane is a former professor of management at Jones Graduate School of Business at Rice University.

To learn more, please see: Dane, E. & Rockmann, K. W. (2018). Traveler’s mind: A narrative-based account of working and living mindfully. Journal of Management Inquiry, 1–8.

Based on research by Marlon Mooijman, Wilco W. van Dijk, Eric van Dijk and Naomi Ellemers

• Trust is vital to running a business: Managers need to be able to trust employees to comply with instructions and keep the company’s best interests in mind.
• Without trust, workplace productivity, reciprocity and cooperation break down.
• Leaders who perceive their power is unstable are more likely to distrust their workers.

While U.S. soldiers battled in Vietnam, inside the White House, President Lyndon Johnson grew increasingly suspicious of those closest to him. The legendary political dealmaker now believed that any opposition to the war was part of a conspiracy against him; aides who questioned his policy might be part of it. According to research using newly available interviews and telephone transcripts, Johnson’s distrust may have been triggered by the very experience of being in power.

But how, exactly? In a recent paper, Rice Business professor Marlon Mooijman and a team of colleagues delve deeply into the interaction of power and trust, seeking answers about when and why wielding power degrades leaders’ belief in those around them. 

The question has deep implications not only in politics, but also in business. “Managers must trust employees’ willingness to comply with instructions and keep the company’s best interest in mind,” Mooijman notes. Without that trust, past research shows, workplace productivity, reciprocity and cooperation break down. Leaders who successfully craft trusting bonds with their coworkers and employees, on the other hand, are more effective than those who don’t.

To learn why leaders might abandon that trust, Mooijman’s team set up four studies. First, though, they had to establish a working definition of trust. Trust, they proposed, is the willingness to be vulnerable to another party’s actions, based on the expectation that the other party will perform a specific action important to the truster — even without the truster’s ability to monitor or control the activity. Essential to a trusting relationship: the expectation of the other party’s goodwill, and the willingness to expose themselves to possible exploitation if that goodwill fails.

Whether you work in an indie coffee shop or a giant software company, most workers can name a leader who lacks that kind of trust. Many also have had the good luck of a leader who isn’t lacking in that department. The difference between such managers, Mooijman’s team found, may be the stability of their power.

There are plenty of reasons for wanting to keep power, obviously. In relationships, power holders are able to disregard others’ wishes and pursue their own. Within the individual, power boosts self-esteem and encourages behaviors such as expressing amusement and happiness. Less obvious, however, is the effect of fearing a loss of power. Leaders whose power feels unstable experience this physically, with changes in heart rate and blood pressure. They have a heightened awareness of colleagues they perceive as threats, and are more prone to divide coworkers and disrupt their alliances.

When power holders or leaders perceive their power to be unstable, it’s that prospect of power loss that erodes their trust in those around them, even helpful and often unsuspecting colleagues. So strong is this effect that it occurs even when the loss of power comes with an economic benefit, Mooijman notes. “Unstable power decreases trust,” the team found, “regardless of whether we provided participants with a justification of their unstable position.”

To reach their conclusions, Mooijman’s team first surveyed 206 participants assembled through Amazon’s Mechanical Turk software. Each participant was randomly assigned a power ranking (high or low) and asked to imagine being a VP of sales at a mid-sized firm. Some were told that as part of a productivity initiative they would be reassigned to other divisions. The participants were then asked to rank their perception of their power at their firm and their perception of their job stability there. Regardless of whether their job reassignment was explained or not, the researchers found, the participants who perceived their jobs — that is, their power — to be unstable showed more mistrust of their coworkers. 

A final study, a field experiment with real life managers and subordinates, reinforced these findings. Managers in positions of relatively high power who perceived their jobs were unstable were more prone to voice distrust about their subordinates. 

While instability is built into political careers, Mooijman’s findings have practical implications in other industries. For example, the common practice of moving workers between departments, meant to build insight and productivity, may backfire. Instead of strengthening team spirit, the strategy will likely foment distrust. Similarly, at high levels of power, emphasizing job instability with tactics such as high-stakes, winner-take-all performance metrics might be counterproductive. 

Power doesn’t always erode trust, the researchers found. Leaders who felt their power was secure didn’t show the same level of suspicion as those who felt their roles were insecure. But when power seems fragile, the research revealed, even the most seasoned leaders are prone to abandon trust in their colleagues and see work as a battlefield.

Marlon Mooijman is an assistant professor in the management department (organizational behavior division) at Jones Graduate School of Business at Rice University.

To learn more, please see: Mooijman, M., Van Dijk, W. W., Van Dijk, E. & Ellemers, N. (2019). Leader power, power stability, and interpersonal trust. Organizational Behavior and Human Decision Processes, 152, 1-10.