Focus on Research

August 24, 2012 10:19 am

Something for the weekend

Have you behaved badly? Perhaps cheated in your exams, submitted inflated expenses into the office or “forgotten” supplemental income when returning your income tax form? An onlooker might assume that as a result you felt ashamed of yourself and rather guilty, but research from academics in the US and UK finds that nothing could be further from the truth. Far from feeling awash with guilt and negative feelings, such individuals actually felt very positive and experienced - what the writers describe as a “cheater’s high”.

Authors Nicole Ruedy, a post-doctoral research associate at the Center for Leadership and Strategic Thinking at the Foster School of Business, University of Washington, Celia Moore, an assistant professor of organisational behaviour at London Business School, Francesca Gino, an associate professor of business administration at Harvard Business School and Maurice Schweitzer, a professor of operations and information management at the Wharton School at the University of Pennsylvania, conducted a series of six experiments examining the link between unethical behaviour and its effect.

The authors discovered that although individuals anticipated that bad behaviour would result in negative emotions, in fact their behaviour gave them a psychological boost - “a sense of thrill”. The writers point out that cheating in an exam or exaggerating an expenses claim are not carried out at the request of a third party and neither do they cause direct harm to an identifiable victim.“Rather they result from a conscious or unconscious choice a person makes to engage in unethical behaviour.”

The writers warn that their results are potentially troubling. “If there are circumstance under which unethical behaviour leads to positive psychological benefits, this could lead to a potentially dangerous situation in which individuals are rewarded both materially and psychologically for unethical behaviour, creating powerful incentives for decision makers to behave consistently or even more unethically in the future.”

Working with a friend is for many the ideal scenario, however in the venture capital industry friendship can be costly.

Paul Gompers and Yuhai Xuan of Harvard Business School and Vladimir Mukharlyamov of the department of economics at Harvard University, set out to discover what were the personal characteristics that attracted individuals to work together in the venture capital industry, and then whether these attractions enhanced or hindered the investment performance.

More than 3,500 venture capitalists were questioned. The authors discovered that venture capitalists were more likely to work with others in the industry who shared the same characteristics as themselves, ie both for reasons of ability and affinity. However the academics discovered that while shared abilities enhanced investment performance, those venture capitalists who collaborated for reasons of friendship were more likely to damage their investment returns. The authors suggest that weaker returns might be due to “poor decision-making by high affinity syndicates post investment”.

The writers warn that the old adage of birds of a feather flock together effect can be costly for collaborating venture capitalists.

The cost of friendship is published online on the National Bureau of Economic Research.

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