Based on research by Prashant Kale, Kannan Srikanth, Anand Nandkumar, and Deepa Mani

• Specific workflow patterns can help offshore R&D centers keep a tighter grip on intellectual property. 
• Spreading information widely within the company while limiting the depth of any one person’s knowledge makes leaks less damaging.
• Even inherently risky projects can be well secured with these techniques.

Offshoring has its tradeoffs. With their lower labor costs and growing talent pool, India and China entice many multinational corporations to launch research and development (R&D) centers. But both countries have weak patent enforcement regimes, which can expose companies to the pilfering of intellectual property. Highly mobile offshore employees and all-but-unenforceable non-compete agreements add to the risk. If today's employee heads to a rival company tomorrow, secrets are likely to leak.

For the parent company, the biggest worry is the leak of widely applicable new technology. When innovation is the product of a company's overall body of knowledge, a single leak can erode a firm’s entire competitive position. The stakes rise further when a process or product is fully documented, making it easier to create a competing product from scratch.

Luckily, managers of offshore R&D centers can limit their risk, according to Rice Business professor Prashant Kale and three colleagues. In a 2015 study of offshore R&D centers in India, the team identified six organizational mechanisms to help keep corporate secrets safe.

All six were based on two principles: 1) Minimize the leakable information; and 2) ensure that anything that does reach your competitors is of little use to them. 

To measure how common these mechanisms were, Kale’s team surveyed managers of 142 Indian R&D centers in the energy, pharmaceuticals, semiconductor, IT hardware and software sectors. 

The first practice the scholars identified: Break down the R&D division's knowledge base into interlocking fragments, like parts of a jigsaw puzzle. Distribute a large share of the puzzle pieces to workers at the home location. 

Second, stress interdependence. Projects executed at headquarters should depend heavily on activities at offshore locations, and vice versa. Third, managers should tie R&D knowledge to specific assets within the company. By doing so, they help guarantee that a rival company without these assets won’t be able wring much value out of leaked knowledge.

By the same token, the fourth practice is to give headquarters control over project selection, design, implementation and/or operations. Fifth, relay key, substantive information from headquarters to the offshore location – and do it often. Using this mechanism, executives who spot a good idea can blend it with complementary knowledge from other locations. The mix makes an idea both more valuable and harder to copy.

Finally, set up internal controls so no single person has all the information a rival needs to copy an innovation. This could mean storing critical data in more than one database, controlling access to that data, placing protected servers elsewhere or even assigning employee teams to separate, restricted-access work spaces. 

Each of these six measures, the researchers found, boosts worker dependence on the system as a whole and arranges a company's institutional knowledge into more complex patterns. Competitors who get hold of leaked information won’t get much out of it if they can’t understand the components of a process and how they all fit together.

None of the respondents had adopted all six safeguards, Kale and his team noticed. Nevertheless, most companies who used one or more of these strategies reported confidence that their intellectual property was secure. They could have been mistaken, of course. But the researchers chose to use high confidence levels as a proxy for successful intellectual property security, explaining that objective data “on the extent of actual leakage … are notoriously hard to obtain.”

Interestingly, the managers’ confidence also changed the way their firms did business. Emboldened by their sense of security, Kale found, many firms in the study took on riskier projects and, in some cases, chose to hire more personnel.

Risk, the homily says, goes hand in hand with opportunity. For offshore enterprises that manage that risk intelligently, the opportunities can benefit both parent firm and local hires abroad.

Prashant Kale is associate professor of strategic management at Jones Graduate School of Business at Rice University.

To learn more, please see:  Srikanth, K., Nandkumar, A., Kale, P., & Mani, D. (2015). The role of organizational mechanisms in preventing leakage of unpatented knowledge. Academy of Management Proceedings, 2015(1), 1206.

Illustrated by Nick Anderson. Based on research by Yan Anthea Zhang, Robert E. Hoskisson and Wei Shi. 

Want to learn more about why losing can lead CEOs to take risks? Read our article Sore Losers. 

Pulitzer Prize-winning editorial cartoonist, Nick Anderson depicts the troubling results of a study by Rice Business professor Yan Anthea Zhang and Robert E. Hoskisson.  

Read the research: Shi, W., Zhang, Y. A., & Hoskisson, R. E. (2017). Ripple effects of CEO awards: Investigating the acquisition activities of superstar CEOs’ competitors. Strategic Management Journal, 38(10), 2080-2102.

Yan Anthea Zhang is Fayez Sarofim Vanguard Chair Professor of Strategic Management at Jones Graduate School of Business at Rice University. 

Robert E. Hoskisson is the George R. Brown Professor of Management at Jones Graduate School of Business at Rice University.

Nick Anderson is a Pultizer Prize-winning editorial cartoonist.

Illustrated by Nick Anderson. Based on research by Hajo Adam (former Rice Business professor), Marwan Sinaceur, Gerben A. Van Kleef and Adam D. Galinsky. 

Want to know more about using anger in negotiations? Please see our other articles based on Hajo Adam's research Crazy Like A Fox and Mad About You. 

To read the research: Sinaceur, M., Adam, H., Van Kleef, G. A., & Galinsky, A. D. (2013). The advantages of being unpredictable: How emotional inconsistency extracts concessions in negotiation. Journal of Experimental Social Psychology, 49, 498-508.

Hajo Adam is a former assistant professor of management at Jones Graduate School of Business at Rice University.

Nick Anderson is a Pultizer Prize-winning editorial cartoonist. 

By Jasmina Kelemen

The disasters of the last year have been stunning: hurricanes, earthquakes, wildfires and, most recently, the Guatemalan volcano eruption that has engulfed whole villages, leaving a hundred dead and hundreds more missing.

Around the world, we feel driven to help — yet often stymied. At the same time the media has given unprecedented detail about humans in need, it has shed light on the limits of the institutions meant to help.

Where to give when even the Red Cross no longer inspires full confidence?

"More and more, donors are becoming concerned with how their donation is used," said Sara Nason, communications manager at the nonprofit Charity Navigator, which rates charities for transparency, efficiency and effectiveness.

These concerns are valid, added Juliet Sorensen, an associate dean at Northwestern Pritzker School of Law. "In the wake of a natural disaster, corruption and fraud abounds," she said. "In part it's because the emergency atmosphere does not lend itself to quality control or meaningful oversight."

In an international city such as Houston, residents are especially attuned to the needs of friends and family abroad — and the failures of institutions to come through. When Houston sank under Harvey's floodwaters last year, for example, the American Red Cross leapt into action with shelters and meals. Yet many donors couldn't forget the shadows looming over the nonprofit ever since its performance in post-earthquake Haiti, where more than a half-billion dollars in donations failed to rebuild even one rebuilt house in some stricken areas.

This week, in the wake of the catastrophe in Guatemala, potential donors have also grappled with their distrust of the country's institutions. "It is really sad, but we don't have trust in government institutions at this point. The day of the volcano eruption, the government actually had a press conference saying, 'We don't have any money for emergency situations,'" said Benito Juarez, a member of two community service associations of Guatemalan Americans. Juarez, who is the City of Houston's Manager for Immigrant and Refugee Affairs, said his compatriots' efforts to send aid in the past have been hamstrung by the government fees or barriers to distribution.

Echoing their experience, aid experts increasingly agree that in natural disasters like the volcano eruption, cash — the one resource most easily pilfered and diverted — is also what's most desperately needed.

So how should donors choose where to give?

First, nonprofit watchdogs say, don't be afraid to crunch the numbers. Use online tools that show how much a nonprofit spends on overhead and what percentage of the donations it receives goes to relief operations. One way to assess global nonprofit spending choices is Guidestar, which offers information about the mission, reputation, finances, programs and governance, among other things, of IRS-registered nonprofits. Another good source is Charity Navigator, which breaks down a nonprofit's financials and assigns a star rating that makes it easy to compare different organizations.

Second, consider supporting projects with lower risk. While corruption taints all economic sectors, some are especially vulnerable, notes economist Peter Rodriguez, dean of Rice Business. "Infrastructure projects are especially prone to corruption," he wrote in a recent paper on foreign corruption, "because they involve large investments and complex contracts in which corrupt payments can be easily be disguised."

And it might even make sense to give to trusted individuals. In those cases, advises Charity Navigator, look for groups with deep local ties, do your homework on the targeted charity and consider a long-term view of recovery needs.

J.J. Watt, the locally beloved defensive end for the Houston Texans, raised $37 million dollars for Harvey relief after starting with a humble appeal for $200,000. In Mexico, newly prominent fundraisers include actors Diego Luna and Gael García Bernal, who confronted distrust of government institutions by appealing for relief funds personally, vowing to publish how much they received, how the funds would be used and what the outcomes were of the efforts.

Similarly, in Houston, Juarez said that he and his friends are donating to a specific gofundme.com site whose Guatemala contact they know personally.

Whatever your choice, though, keep tabs on your nonprofit — and the news around the disaster —after you donate, experts agree. For many survivors, including those in Guatemala and Puerto Rico and Houston, rebuilding is a long and even more grueling process than escaping. Staying vigilant is also the best way to protect the investment you made for fellow humans in need. Keeping that link to the nonprofit you've supported, said Nason, "is crucial to ensuring that you trust the organization and know where your donation is being used."

Gold Standard: A sampling of institutions with high ratings from the watchdogs.

Guatemala

The veteran news agency PBS offers a concise outline of the volcano's ravages and has curated a vetted list of recommended Guatemala recovery charities.

A relative newcomer to disaster relief, gofundme has won trust from donors uncomfortable with government and other traditional institutions. Though no charity option is foolproof, gofundme offers a guarantee and a protocol for making sure your money reaches the correct hands.

United States

Habitat for Humanity: Builds and restores homes for lower-income communities and has a four-star rating, the highest possible, from Charity Navigator. In the wake of Harvey, it has committed to fully rebuilding 176 homes by December 31 in Houston’s hardest hit neighborhoods.

Community Foundation Sonoma County: A philanthropic organization supporting nonprofits in Sonoma County since 1983, it has started a Resilience Fund to support reconstruction after the recent wildfires. It has received 92 out of 100 possible points from Charity Navigator.

Mexico

Los Topos: Founded after the 1985 Mexico City earthquake, Los Topos is a volunteer rescue brigade that has assisted in earthquakes from Mexico to Nepal. The unpaid force uses funds to keep volunteers regularly trained and at the ready to assist at the next disaster. Donations can be made through Paypal at donativos@brigada-rescate-topos.org.

Fondo Unido Mexico: Part of the United Way network inside of Mexico, it focuses on rebuilding schools and community centers and training a culture that’s prepared to react to emergencies. It not only responds to the most visible natural disasters, but since 2011 has attended to less publicized emergencies caused by tropical storms and earthquakes in less populated regions.

Puerto Rico

Direct Relief: A humanitarian aid organization that gets a perfect, four-star rating from Charity Navigator for accountability and transparency. According to its website, 99.4 percent of its expenses are spent on programs and services. Its efforts in Puerto Rico focus on supporting community health centers and primary care associations.

Unidos Por Puerto Rico: A nonprofit spearheaded by the First Lady of Puerto Rico that grew out of a telethon to raise money for hurricane victims. Its board of directors consists of members from the private sector, representing some of the largest corporations on the island, who are tasked with making sure the funds are directed towards hurricane relief. It has enlisted outside, private auditors such as Deloitte and KPMG to track the funds and provides a breakdown on its website of all the goods it has delivered.

Jasmina Kelemen is a journalist who divides her time between Houston and Caracas, Venezuela. A former editor for Bloomberg News, she has reported from 4 continents and contributes to Houstonia magazine and Rice Business Wisdom.

This article also appeared in Gray Matters as "How do you know where your donations go in disasters?" 

Based on research by Otilia Obodaru (former Rice Business professor) and Herminia Ibarra

• As careers become less predictable, it’s more common than ever for people to find themselves in limbo between jobs.
• These periods of transition can induce fear, depression and self-doubt. But they also offer opportunities for creative growth.
• ​Viewing periods of limbo as opportunities to better understand ourselves and our options may help make them less painful.

To really learn who you are, get lost — “lost enough to find oneself,” as Robert Frost wrote. Social scientists agree. It may be painful, but fumbling through the chaos of uncertain times can inspire personal growth and ultimately improve performance — hopeful news at a time when no job is completely secure. 

Social scientists refer to the periods of transition between jobs or social roles as liminal experiences, from “limina,” the Latin word for threshold. The concept of liminality is typically associated with anthropological research into rites of passage, but the term has also been used in sociology, psychology and even marketing. 

Now, former Rice Business professor Otilia Obodaru and Herminia Ibarra of London Business School argue in a paper that the concept of liminality should be updated to apply to the 21st-century workplace. It is, they say, an apt description of the modern experience of living through career transitions. 

Traditional liminal experiences centered on ritualized transitions from one social role to another — from childhood to adulthood, for example. Those transitions had the benefit of specific timelines, clear rules and institutionalized support in the form of guidance from elders. Perhaps most importantly, it was understood that after a period of trial one would emerge triumphantly on the next rung of the social order.

So nice, so comforting, and so not the case today for those who get laid off after years of loyalty and have no clue what’s coming next. 

Liminality, Obodaru and Ibarra write, can feel much more precarious in our world of “jobless growth.” Without choosing to, many adults find themselves in career limbo — with no guarantee that they’ll advance to a higher rung. Lacking the built-in guidance of elders or a script for how to proceed, people in modern liminal phases often feel that the narrative thread of their lives has simply been left dangling.

Of course, some people don’t mind the uncertainty of being between jobs — or hovering between the dependence of adolescence and the independence of adulthood. As Obodaru and Ibarra note, for a subset of unemployed or underemployed Millennials who still live with their parents — dubbed “twixters” — this transitional period is more likely a choice, and it can go on indefinitely. The phenomenon, the professors write, “has been diagnosed as permanent liminality.” 

But most people have a deeply ambivalent response to career uncertainty: it’s simultaneously anxiety-inducing and exciting, disorienting and liberating, frightening and exhilarating. And it is precisely from that ambivalence, if managed correctly, that personal growth can stem, Obodaru and Ibarra say. 

The key to growing from uncertainty is, paradoxically, not bringing this uncomfortable period of transition to a premature end. “Tolerating painful discrepancies and allowing time for self-exploration and self-testing” are crucial to expanding your sense of purpose and identity, the professors write. 

Whether it’s in the workplace or at home, this new model of transition can provide modern limbo-dwellers some comfort — and even guidance. 

Life is changing. It can be tough to face an unknown future. But in the early 21st century, such uncertainty is also normal. In the absence of guides and rituals, it may help to know that modern limbo is a place where we all land at some point, and that it’s worth sticking around there for a while to learn what you can before scrambling out.

Otilia Obodaru is a former assistant professor of management at Jones Graduate School of Business at Rice University.

To learn more, please see: Ibarra, H., & Obodaru, O. (2016). Betwixt and between identities: Liminal experience in contemporary careers. Research in Organizational Behavior, 36, 47-64.

By Weezie Mackey

Rice University sent its first email about Tropical Storm Harvey midday on Thursday, August 24. By 6:25 that night, the storm upgraded to a hurricane, and Rice announced early closing for the following day. With safety as the highest priority, the business school cancelled Friday afternoon and evening classes and all Saturday events and classes. No one expected the weather to unfurl as it did over the next few days.

No one, except Eric Berger.

"I’d love nothing more than to write a post expressing some optimism about the rainfall forecast ahead, but as of now it looks really quite grim."

3:15 pm Friday, 8/25/17

"Now is the time to get off the roads, get to your residence, and wait out a potentially long night of flooding." 
9:14 pm Saturday, 8/26/17

"Houston is on the cusp of a major, widespread flood event that could affect thousands of homes."
10:53 pm Saturday, 8/26/17

"A bad situation has turned worse."
12:40 am Sunday, 8/27/17

You may have heard of Eric Berger if you live in Houston or you read Wired or you caught his interview with Elon Musk just before the Falcon Heavy rocket launch. He’s a certified meteorologist and senior space editor at Ars Technica, a website covering news and opinions in technology, science, politics and society. Before that, he was a Pulitzer Prize finalist at the Houston Chronicle for his coverage of Hurricane Ike, and before that he was the SciGuy blogger writing about nanometers and parsecs (a unit of distance in astronomy, by the way). Berger covers everything “from astronomy to private space to wonky NASA policy” to the Tesla CEO and his designer jeans. Mostly, he untangles the language of science and medicine for the general public. And the general public is loving it.

In October 2015 Berger founded the website Space City Weather to “cover Houston weather news and forecasting with accuracy and without hype.” Since Hurricane Harvey, Berger and the site’s managing editor Matt Lanza have become household names and unexpected heroes in Houston. Before, during and after the storm their clear, calm updates were posted several times a day.

Most comforting was the sense that they were in the eye of the storm with you.

"For the first time ever, the National Weather Service just issued what it is calling a “Flash Flood Emergency for Catastrophic Life Threatening Flooding.” And not to sound too flippant, but that sounds really bad. You should probably heed their advice — WHICH IS SIMPLY DO NOT TRAVEL. DO NOT IMPEDE WATER RESCUES IN PROGRESS.

Is that clear enough?

My wife, bless her, just asked me if Band 3 was it for the night. I wanted nothing more than to fall in her arms and tell her yes, this was it. By God, yes. Let’s go to bed and forget this ever happened. It had to be it, surely."
2 am Sunday, 8/27/17

One week he’s covering the eclipse for Ars Technica, the next he’s got the biggest storm to ever hit Houston. Daily website traffic tripled along with speaking engagements since then. When asked why people are obsessed with weather, Berger’s quick to answer, “They’re not obsessed with weather until it makes a difference in their lives.”

During Hurricane Harvey, it’s safe to say, weather made a difference in a lot of lives. Berger and Lanza’s voices became a safe harbor during the storm. People who had never heard of Berger or Space City Weather before were impatiently awaiting the next post, more than 60 in all, some only a few hours apart at the height of the storm. On Sunday, August 27, they posted nine times, twice in the middle of the night.

Below is an edited interview with Eric Berger.

RBW: Why is “no hype” a tagline of Space City Weather? Why is that important?

EB: It was something I started doing. Writing weather reports without any nonsense. There’s an audience for the other stuff too. I’ve been doing this since Katrina and Rita, it’s evolved from recognizing that need and style that fits with my personality. In Houston, it’s boring most of the year, until there’s a storm. People are obsessed during extreme weather. TV people have known this for a long time. And the internet has allowed people to get even more obsessed. Our coverage is the alternative to the craziness.

RBW: How much has Space City Weather grown since Harvey?

EB: Daily traffic has about tripled. Maybe 12,000 page views on a slow day. Originally, it was a struggle to figure out how to build it, monetize it at all, create an LLC, taxes. But the growth is all word of mouth. Honest to god, people sharing the site, Facebook, Twitter, Reddit. On Facebook there are 20,000 to 100,000 followers by just organic sharing.

RBW: What is it like to be a celebrity? 

EB: My kids are 10 and 14. They give me a hard time. It’s nice to have people thank me. They appreciate the site. It happened after Ike. My picture was on the front page of the paper — sciguy hurricane coverage. Blog. Livechats. The intense hunger for information was eye opening. It wasn’t celebrity; it was recognition.

RBW: Would you say you have a personal brand? 

EB: No-hype guy. I’d been pushing the Chronicle to create a weather site. There’s an opening in Houston. TV was covered. Internet was a revelation to weather communication. I built it around this idea of no hype. That was really rewarding. I met Matt in 2014 and brought him in to help out. We share a similar philosophy, and he picked up on the vibe immediately. When I left the paper, I turned to him and asked, “Do you want to be a part of this?”

RBW: Tell us about your fundrasing campaign? 

EB: We have two ways to build up support to pay for server expenses. One is an annual fundraiser where we sell a t-shirt. There was a tremendous response this year. And then we stopped doing ads on the site in May 2016, so we tried to find a monthly sponsor. Reliant came on board for the second half of this year. I like that because I don’t have to deal with the hassle. When there’s weather, you’ve got to be there. A lot of people gave me advice after Harvey. But as long as I’m getting a decent amount of compensation for the time, I'm fine with that.

RBW: Are there words responsible weather casters avoid? 

EB: Until Friday [August 25, 2017], I would avoid comparing any storm as the next Tropical Storm Allison. Because Allison was extreme flooding. I would consciously not use it. The word now is Harvey.

Since Eric Berger visited Rice Business, his star continues to rise. Read more about him in in Wired's article “Meet the Unlikely Hero Who Predicted Hurricane Harvey’s Floods"

Eric Berger has an astronomy degree from the University of Texas and a master’s in journalism from the University of Missouri. He previously worked at the Houston Chronicle for 17 years, where the paper was a Pulitzer Prize finalist in 2009 for his coverage of Hurricane Ike.

Weezie Mackey is the Associate Director of Marketing and Communications at the Jones Graduate School of Business at Rice University. 

Based on research by Douglas A. Schuler, Andreas Rasche (Copenhagen Business School), Dror Etzion (McGill Unversity) and Lisa Newton (Fairfield University)

Key findings:

• The U.S.-American concept of corporate environmental ethics emerged in the late 19th century, when it became clear that exploiting the nation’s lumber supply was no longer sustainable.  
• Today, “corporate social responsibility,” “environment management” and “corporate political activity” are all familiar terms — but ones fraught with confusion.
• In the long view, all business benefits from and requires access to nature’s riches.

Business hasn’t historically seen nature as a friend. In the United States, the concept of environmental ethics only emerged at the end of the 19th century, when it became clear that exploiting the nation’s lumber supply was no longer sustainable.  

In response, government and industry joined together to create legislation setting aside critical forestland. Similarly, almost 100 years later, when the nation’s water and air reached unprecedented levels of contamination, the U.S. government implemented new pollution standards. Firms began to learn it was possible to do business in a way that both preserved their profits and the environment. 

Today, terms such as “corporate social responsibility,” “environment management” and “corporate political activity” are all supposed to reflect this notion. But corporate practice toward the environment remains fraught with tension. Is there any reason beyond immediate gain for businesses to protect the environment?

In a recent paper, Rice Business professor Douglas Schuler and coauthors Andreas Rasche of Copenhagen Business School, Dror Etzion of McGill Unversity and Lisa Newton of Fairfield University examined this question, proposing what corporate responsibility would look like if businesses saw saving the environment as being valuable in and of itself. 

As a society, Schuler and his team argue, we already do that. We don’t treat the Great Smoky Mountains, or Yosemite National Park or Sequoia National Park as resources for future exploitation. Instead, we protect these treasures because their existence is valuable in and of itself — and to the lives we want to lead. 

Thus, in 1964, when people began flocking to national parks in numbers large enough to endanger them, Congress created a new designation, the “wilderness area,” for tracts of land that would be preserved as forever wild. It was the first official U.S. recognition that the environment provides humanity with “services” beyond a supply of raw materials — services such as stabilizing the watershed, cleaning the air and protecting natural species.

Once we think of the environment as having value beyond a source of direct economic gain, it’s a short leap to perceiving animals as having certain intrinsic value — and rights — too, the researchers note. Similarly, one can imagine entire ecosystems having a fundamental right to survive and flourish. The school of thought known as deep ecology goes further, maintaining that just as people should not be allowed to exploit other people, they should not be allowed to exploit the ecosystem.

Some of this thinking may be too far into the woods for the average corporation, Schuler’s team acknowledges. But, he and his colleagues argue, there is real value in incorporating non-utilitarian environmental concepts into business culture. Most big companies already fund environmental management, corporate responsibility and political activities. But, the scholars add, they need to think of environmental defense as more than simply turning off the office lights at night.

Imagine, for example, an environmental management policy that recognizes that sustainability practices should not be defined only by the benefits they bring shareholders. In this view, managers take into account both the upstream and downstream effects of potential polluting activities — and factor them all into their decisions. Then corporations would understand such issues as risk differently. It’s already been done: IKEA, Levi’s and Unilever, for example, have recognized that multinational companies cannot exist in a world devoid of trees and fresh water or filled with oceans laden with plastic. 

Instead of managers simply pursuing established rules — “turn off the lights when you leave work” — Schuler and his team propose that they could act as individuals, charged with finding alternative ways to view the corporate role toward nature. In this scenario, corporate managers would essentially lead the corporation’s move from a profit-only framework to one in which sustaining the planet — which, of course, ultimately sustains the corporation — is itself a critical business goal. 

Corporate social responsibility would also take on a different tone if the view of environmental priorities were longer. Already, a few corporations have taken major steps toward environmental protection even when there’s no immediate financial benefit. Consider the widow of North Face cofounder Doug Tompkins, who donated one million acres to Chile for new national parks in the Patagonia region. 

True, the riches of the natural world helped create the North Face empire and are essential if the company is to stay in business in the future. In the long view, however, all business — and all human survival — depends on stewarding nature’s riches. It’s imperative for firms to value, and preserve, those resources now. 

Schuler, D., Rasche, A., Etzion, D., & Newton, L. (2017). Guest Editors’ Introduction to Business Ethics Quatertly, 27.2: “Corporate sustainability management and environmental ethics,” 213-237. 

Based on research by Jefferson Duarte, Katie Kong, Lance A. Young and Stephan Siegel. 

• In the wake of corporate fraud scandals, the Sarbanes-Oxley Act (2002) imposed major regulations upon corporations.
• Foreign firms that want to list in the U.S. must comply with these regulations.
• Reaction to Sarbanes-Oxley from foreign firm stakeholders was split: Inside management and majority shareholders were less inclined to list in the U.S., while outside minority investors were more inclined to list in the U.S.

What do you think about SOX?

If you think they could go all the way next season, this article is for you.

SOX is not the team you love (or hate) on the baseball diamond: It's short for the 2002 Sarbanes-Oxley Act, the rare regulatory measure passed with hearty bipartisan support. Only three members of the House of Representatives, and nobody in the Senate, voted against the biggest package of corporate reform legislation in 60 years. Designed to prevent corporate accounting fraud, Sarbanes-Oxley was a response to a rash of high profile, enormously costly corporate financial fraud cases. In their wake, Enron, WorldCom and Tyco all became synonymous with cooking books. The cost of these cases to the economy has been estimated at $35 billion. 

Key provisions of SOX included a mandate for senior management to personally certify the accuracy of financial statements, and a requirement for internal controls and reporting methods on the adequacy of those controls. 

At the time it was passed, the legislation was assessed in terms of its ability to prevent future accounting scandals. Now, with the passage of time and insights from recent research, a new element can be considered: How have the regulations of SOX affected foreign firms? 

The answer seems to come from left field. According to a study by Rice Business professor Jefferson Duarte and co-authors Katie Kong, Lance A. Young and Stephan Siegel of the University of Washington, foreign firms are less likely post-SOX to list in the United States relative to the UK. Yet the average abnormal return of a foreign firm listing in the U.S. is about 4 percent higher after SOX.

How could this be? 

It turns out that the regulation’s impact differs between corporate insiders and minority shareholders. While foreign firms’ insiders – that is, management and controlling shareholders – believe that SOX makes extracting value in the U.S. too costly, outside investors tend to see SOX as a boon to investment value. 

Of course, these investors realize the increased cost involved with incorporating SOX regulations. They just believe that the value gained outweighs it. But outside investors don’t make the decision of where to list. The insiders do. In the end, the people who have to do the work of complying with SOX are the ones who hesitate. 

There is one caveat: Firms in countries that have strong existing regulation have been more likely to list in the U.S. after SOX. If you are already used to playing by the home team rules, in other words, you are less daunted by the away team rules. Rules, after all, are rules. 

So the impact of SOX on foreign firms is split: Those used to rules at home are more likely to list in the U.S., while those less used to rules aren’t as likely to list. 

In the end, just as in sports, the rules are meant to preserve the integrity of the game. It is, always, a tricky balance. While no one wants regulation to be prohibitive, everyone benefits when it’s preventative. 
Now, play ball.

Jefferson Duarte is an associate professor of finance and the Gerald D. Hines Professor of Real Estate Finance at the Jones Graduate School of Business at Rice University.

To learn more, please see: Duarte, J., Kong, K., Siegel, S., & Young, L. (2014). The impact of the Sarbanes–Oxley Act on shareholders and managers of foreign firms. Review of Finance, 18(1), 417-455.

By Claudia Kolker

The photo instantly takes me back to the 1980s: boxy suits and lank haircuts, and most of all, the big-shouldered man with a broad smile. It’s a picture of President Ronald Reagan thanking the doctors who saved his life, sent to me by a relative. The man shaking Reagan’s hand in the photo was her father, George Morales — an immigrant from Mexico.

Thirty-seven years ago, Reagan became the first president to survive being shot while in office. He lived, it is believed, because of the expert care he received at George Washington University Hospital. Less widely known is that every doctor on Reagan’s anesthesia team was foreign-born.

As conflict over newcomers in our culture boils over, one argument contends that we simply can’t afford more immigrants who are poor, unskilled or even from certain countries. Only foreigners who show merit, this thinking goes, deserve entrance.

But what constitutes merit? To those making the argument, it’s simple: established credentials, tangible wealth, preferred nationalities. It’s a definition that would have excluded key doctors who saved Reagan’s life.

Back on that terrifying March day in 1981, Secret Service agents scrambled into scrubs to guard the surgery. Doctors and support staff raced Reagan’s gurney to the operating room. Then they placed him in the hands of a team of immigrants for anesthesia.

“One thing really struck me, looking at our team,” recalled Manfred Lichtmann, a staff anesthesiologist at the hospital. “Each of us had emigrated to the United States.”

Morales, who died in 2003, came from Mexico. Vickie Sidou, the anesthesiologist on call, emigrated from Greece. May Chin, then a resident at the hospital, was born in Malaysia. And Lichtmann had been a child refugee from Adolf Hitler’s Germany.

Lichtmann’s first years in the United States were disastrous. His parents fell ill, and he grew up in a children’s home. He didn't learn English until first grade, where his first word, because he heard it so much, was “S.O.B.”  

Finally, after medical school and service in Vietnam, Lichtmann joined George Washington University Hospital, where he met Morales.

“We kiddingly said that if President Reagan’s surgery failed to go well, we could be deported,” Lichtmann said. “We were proud to be immigrants and proud to be Americans.”

Like Lichtmann, Morales had fled his home country as a child refugee. Born in Nicaragua, he was shipped to Mexico — where he would become a citizen — at the age of 11. His father, a judge who once ruled against the dictator Anastasio Somoza, had sent the boy abroad to protect his life.

“George Morales was remarkable,” Lichtmann said. “Before the Republican nomination for president, I kept calling Sen. Lindsey Graham’s office but never got through. I wanted to tell him, you have a candidate who is calling Mexicans criminals — you need to know that a doctor from Mexico helped save Reagan’s life.”

No matter what one thinks about border walls, research shows that foreign-born people — rich and poor — have higher levels of one measurable merit that our economy can’t do without: potential. That is why it’s a fallacy to suppose we only have resources to absorb those who are already privileged. Immigrants themselves are the resource. And there is no sure way to predict who will skyrocket into the kind of success that changes American life.

The results of that potential are evident everywhere. You can see it in the 83 percent of winners in a youth science talent search who have foreign-born parents. You can also see it in the fact that immigrants file twice as many patents as native-born inventors, and also in the behaviors that help immigrants live an average of two years longer than people born here.

You can even quantify some of this potential. Research by Hajo Adam, a former business professor at Rice Business in Houston, suggests that living abroad markedly raises “self-concept clarity” — or confidence in one’s beliefs and goals. This quality is linked to an array of benefits, including more committed relationships, better health and even greater clarity about immediate career goals.

“It stands to reason that all the benefits from living abroad and the associated boost in self-concept clarity apply to most immigrants,” Adam said.

So it may not simply be chance that three of the doctors who treated Reagan were immigrants, equipped with some extra measure of purpose.

As the doctors at George Washington lifted the president to the operating table, Lichtmann recalled Reagan saying, “I presume you are all Republicans.” It was a quip, meant to reassure them. But it was also an acknowledgment that everyone there shared a clear, common purpose.

“We are all Republicans today, Mr. President,” the trauma chief answered.

I thought of that exchange as I studied the photo of Reagan and the doctors who saved him. Regardless of how each doctor in the photo got there, likely every one of them was the product of someone else’s will to get to this country and to flourish. Thank goodness, for all of us, America allowed that potential to grow.

Claudia Kolker is the associate director of intellectual capital at Rice Business and author of “The Immigrant Advantage: What We Can Learn From Newcomers To America About Health, Happiness, and Hope."

Hajo Adam is a former assistant professor of management at the Jones Graduate School of Business at Rice University. 

This article also appeared in the Washington Post as "The immigrant doctors who saved Ronald Reagan’s life"

Por Claudia Kolker. Traducción por Mayra Flamenco.

La fotografía me trasladó hasta los años 80 por el traje a cuadros y los peinados, casi todos con el pelo liso. En la foto aparece el presidente Ronald Reagan, con su amplia sonrisa y su ancha espalda, agradeciendo al grupo de médicos que le salvó la vida. El hombre a quien Reagan estrecha la mano es George Morales, un inmigrante mexicano. Por medio de un familiar suyo, recibí esta fotografía.

Hace 37 años, Reagan se convirtió en el primer presidente estadounidense en sobrevivir un atentado con arma de fuego. Él se salvó y se cree que fue gracias a la atención experta que recibió en el Hospital Universitario de George Washington. 

Es poco conocido el hecho de que todos los médicos del equipo de anestesia que le atendieron, habían nacido fuera de Estados Unidos. 

Conforme sigue en ebullición el conflicto sobre los recién llegados a nuestra cultura, uno de los argumentos sostiene que el país no puede permitirse más inmigrantes pobres, no calificados o que llegan de ciertos países. 

Esta línea de pensamiento sostiene que solo aquellos que puedan demostrar sus méritos merecen la entrada a este país.

Pero, ¿qué es lo que constituye un mérito? Para aquellos que apoyan este razonamiento, es simple: credenciales académicas, riqueza tangible o nacionalidades preferidas. Esta es una definición que hubiera excluido al grupo de médicos que le salvó la vida a Reagan. 

Recordando el suceso de aquel fatídico día del mes de marzo de 1981, los agentes del Servicio Secreto rápidamente se pusieron ropas quirúrgicas para entrar al quirófano y vigilar la cirugía. Los doctores y el personal de apoyo apresuraron la camilla de Reagan a la sala de operaciones. Después, lo pusieron en las manos de un equipo de doctores inmigrantes a cargo de la anestesia. 

“Una cosa que me sorprendió al ver a nuestro equipo médico”, recordó Manfred Lichtmann, anestesiólogo del hospital, “es que cada uno de nosotros había emigrado a Estados Unidos".

Morales, quien murió en el 2003, había llegado de México. May Chin, que para entonces trabajaba como médico residente en el hospital, había nacido en Malasia; y Lichtmann, de origen alemán, llegó como refugiado siendo niño, huyendo del régimen de Adolfo Hitler.

Los primeros años de Lichtmann en Estados Unidos fueron desastrosos. Sus padres enfermaron y él creció en un orfanato. No aprendió inglés hasta primer grado donde sus primeras palabras, fueron “S.O.B” (siglas en inglés para Hijo De P…), de tanto oírlas. 

Finalmente, después de terminar sus estudios en la escuela de medicina y prestar servicio militar en Vietnam, Lichtmann se incorporó al equipo del Hospital Universitario de George Washington, donde conoció a Morales. 

"Bromeando, dijimos que si la cirugía del presidente Reagan no salía bien, podríamos ser deportados", recuerda Lichtmann. “Estábamos orgullosos por ser inmigrantes y ser estadounidenses”. 

Al igual que su amigo Lichtmann, Morales había huido de su país de origen siendo niño refugiado. Nació en Nicaragua y fue llevado a México donde adquirió la nacionalidad a los 11 años. Su padre, un juez que una vez falló en contra del dictador Anastasio Somoza, lo había enviado al extranjero para proteger su vida.
 
“George Morales fue una persona extraordinaria”, recuerda Lichmann. “Antes de la nominación republicana para presidente, intenté hablar por teléfono con el senador Lindsey Graham, pero nunca me tomó la llamada. Quería decirle: ‘Usted tiene un candidato que está llamando delincuentes a los mexicanos y debe saber que un doctor de ese país salvó la vida del presidente Reagan’”.

No importa lo que uno piense sobre los muros fronterizos, las investigaciones demuestran que las personas nacidas en el extranjero, ricos y pobres, cuentan con un mérito que se mide como superior al del resto; un mérito del cual nuestra economía no puede prescindir: el potencial. 

Es por eso que es una falacia suponer que solo tenemos recursos para absorber a aquellos que ya son privilegiados. Los inmigrantes, por sí mismos, son un recurso.  No hay ningún modo seguro de predecir quien subirá como cohete a la cúspide del éxito para cambiar la vida de los estadounidenses. 

Los resultados de ese potencial son evidentes en cualquier parte. Por ejemplo, el 83 por ciento de los ganadores de una búsqueda nacional de talentos juveniles en el área de ciencias, son hijos de padres nacidos en el extranjero. 

También se puede ver en el hecho, de que los inmigrantes registran el doble de patentes a comparación de los inventores nacidos en Estados Unidos.  Además, por sus hábitos, viven un promedio de dos años más que las personas nacidas aquí. 

Incluso se puede cuantificar parte de este potencial. Una investigación realizada por Hajo Adam, catedrático de ciencias empresariales de la Universidad Rice en Houston, sugiere que vivir en el extranjero aumenta la “claridad del autoconcepto”, es decir, la confianza en lo que se cree y los objetivos personales. 

Esta cualidad está vinculada a una serie de beneficios, que incluyen relaciones más comprometidas, mejor salud y mayor claridad en los objetivos profesionales inmediatos. 

"Esto da pie a pensar en todas las ventajas de vivir en el extranjero y al impulso asociado a la claridad del autoconcepto, lo que aplica a la mayor parte de los inmigrantes", dice Adam.

Por lo tanto, no es tan simple decir que fue una casualidad que los cuatro médicos que trataron a Reagan, fueran inmigrantes equipados con algún tipo sentido adicional de propósito.

Lichtmann recordó que cuando los médicos de George Washington llevaron al presidente a la mesa de operaciones, Reagan les dijo: “asumo que todos ustedes son republicanos”. Fue una broma destinada a tranquilizarlos. Pero también era un reconocimiento de que todos allí compartían un propósito claro y común. “El día de hoy todos somos republicanos, señor Presidente”, respondió el jefe de traumatología. 

Pensé en todo eso mientras veía la foto de Reagan y los doctores que le salvaron la vida. Independientemente de cómo vinieron, probablemente cada uno de ellos fue el resultado de la voluntad de otra persona para llegar a este país y prosperar. Gracias a Dios, para todos nosotros, Estados Unidos permitió que ese potencial creciera.

Claudia Kolker es directora asociada de Rice Business School y autora del libro: “La ventaja de la inmigración: Lo que podemos aprender de los recién llegados a Estados Unidos sobre salud, felicidad y esperanza”. (The Inmigrant Advantage: What We Can Learn From Newcomers To America About Health, Happiness, and Hope)