Indiana University SPEA Edward J. Bloustein School of Planning and Public Policy University of Pennsylvania AIR American University

Panel Paper: An Experimental Analysis of the Role of Gender in Group Decision Making

Saturday, November 14, 2015 : 10:15 AM
Tuttle South (Hyatt Regency Miami)

*Names in bold indicate Presenter

Robert Greenbaum, Noah Dormady and Kimberly Young, The Ohio State University
The ability of local economies to recover from severe disruptions from unforeseen calamitous events is partially a function of the ability of local businesses to adequately prepare for such events. This paper examines the role of gender in terms of how it affects the decisions of middle-market firms to make investments in resilience. Firms balance many tradeoffs when making such investment decisions. While competition pressures firms to be lean, the threat of economic disruption from natural or manmade disasters, such as terrorism or climate change, necessitates investments to reduce the impact of such events. These investments in resilience can include diversifying locations and supply chains, increasing inventories, and purchasing more information and financial insurance products.

The paper hypothesizes that the gender of the decision makers affects these important decisions. At the individual level, prior research from the banking and personal finance literature has found that female investors tend to be more risk-averse than male investors. Less studied, however, is whether this translates to decisions made on behalf of firms and in terms of influencing decisions that are made as part of a group. The paper builds on some previous findings that individual personal investing decisions often predict business investment decisions. This research thus tests the degree to which companies that include women as part of the management team lead to decision-making that is consistent with improved resilience to calamitous events.

The focus on middle sized firms is three-fold. First, because they account for approximately one-third of the US private economy, employment in these firms is vital for state and local economies. Second, these firms are particularly vulnerable to these events. Relative to larger firms, they often lack the resources and expertise necessary to recover from or prepare for disaster. They are also less likely to be able to garner government assistance. Third, fewer than ten percent of middle market businesses are women-owned or woman-run. This lack of gender diversity may have important implications for larger economic resilience.

We propose that an important part of supporting evidence-based policy is the use of experiments, as gathering the requisite data to examine the role of the gender in group decision making would be impractical. Thus, we conduct a series of online experimental surveys (i.e., online human subjects experiments) with both actual middle market managers in firms as well as undergraduate subjects. These subjects take on the role of a business decision-maker facing a simple production decision involving the choice of two inputs, one of which has higher productivity and output and one of which is safer in the face of the risk from an external shock. Our findings not only help addresses a gap in the literature but may reveal direct implications for the best practices of middle market firms, with further implications for public policy regarding public financing of recovery, reinvestment and threat potential.