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May 01, 2013

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Another Repatriation Tax Holiday?

U.S. law makers should avoid, or at least restructure, giving American firms another tax holiday in attempts to get them to reinvest their foreign earnings domestically, according to research by Mike Faulkender, associate professor of finance. His findings show the reinvestment from tax holiday created by the 2004 American Jobs Creation Act (AJCA) – which cut the tax rate from 35% to 5% -- was marginal and primarily from smaller companies. Big firms applied very little repatriated funds to new investment.

With the highest corporate income tax rate among industrialized nations, U.S. companies are keeping more than $1 trillion in foreign subsidiaries to delay paying federal taxes. Faulkender advocates creating a more competitive tax rate to create incentives for long-term domestic investment.

“Investment and Capital Constraints: Repatriations Under the American Jobs Creation Act,” is forthcoming in Review of Financial Studies.

Managing Your Emotions to Manage Better

A person’s ability to manage their feelings translates to better job performance for managers, according to a study by Myeong-gu Seo, associate professor of management and organization. Seo found managers with high emotional intelligence (EI) were better at dealing with stress and emotions triggered by the demands of managing diverse teams, functions and lines of business, with multiple stakeholders and competing agendas.

Seo surveyed 346 part-time Smith MBA students and their work supervisors. He found that people with high EI understand and interpret emotional cues and use that information to guide and inform their decision making. He also had teams of MBA students evaluate each other’s teamwork and found students with high emotional intelligence were seen as contributing more to the group. This effect was even stronger in diverse teams.

“Emotional Intelligence, Teamwork Effectiveness, and Job Performance: The Moderating Role of Job Context,” was published in the March 2012 Journal of Applied Psychology.

When Silence Isn’t Golden

Products with no online reviews are likely of low quality because consumers with bad experiences tend to refrain from posting a review, according to research from Ritu Agarwal, Robert H. Smith Dean's Chair Professor of Information Systems, and Guodong “Gordon” Gao, assistant professor in the Department of Decision, Operations and Information Technologies.

The researchers compared online ratings of physicians from RateMDs.com with reviews from a patient survey to find doctors who rated low in the survey were less likely to be rated online. They also found that online ratings skewed excessively high or low because patients who have extreme experiences are more likely to rate online, and consumers who are overwhelmingly happy or upset to tend to exaggerate their experiences.

“The medical community is so worried that ratings websites will become a channel for disgruntled patients to vent and ruin their reputations, but we find just the opposite,” Gao said. “It's more likely that patients are recommending their doctors rather than 'naming and shaming.'”

"A Changing Landscape of Physician Quality Reporting: Analysis of Patients’ Online Ratings of Their Physicians Over a 5-Year Period”, was published in the Journal of Medical Internet Research.

Uncovering Risks in Emerging Markets

Entering any new market can be risky for a company, but political prowess and mastery of new analytic tools can improve the chances for success, says Bennet Zelner, associate professor in the logistics, business and public policy department.

He studied businesses entering emerging markets to come up with best practices for managing interactions with political, social and economic institutions. Zelner says companies should use data-mining and language-parsing technology to monitor news and conversations online and in the media. Companies can learn a lot about a region’s social norms and values and use that information to assess risk, identify critical stakeholders and develop an influence strategy. Zelner says the strategy also helps when crafting a communications strategy and creating a long-term presence in the new market.

“The Hidden Risks in Emerging Markets,” appeared in the April 2010 issue ofHarvard Business Review.

Air Passengers Drive to Save Money

In a year, nearly 4.7 million travelers saved $480 million by flying to U.S. airports, then driving over the border to their Canadian destination, according to research by Martin Dresner, professor and chair of logistics, business and public policy, and Smith co-authors Robert Windle, professor of economics, and doctoral student Omar Sherif Elwakil. The frugal travelers saved an average of 28 percent over the cost of Canada-based arrivals and departures, but cost Canadian airports $1.3 billion in missed revenue in 2008.

Transborder fares are two to three times higher than those for flights between U.S. cities despite the 2005 U.S.-Canada "Open Skies" agreement. Elwakil says more open competition would help right the problem.

“Transborder Demand Leakage and the U.S.-Canadian Air Passenger Market" is accepted for publication in Transportation Research Part E: Logistics and Transportation Review.

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The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, MS in business, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.