Mark Zbaracki is interested in problems that have both strong managerial and academic implications. His dissertation research, “The Rhetoric and Reality of Total Quality Management,” won an award for scholarly contribution. It draws on his nine years of experience as an industrial engineer at IBM Rochester, IBM’s Malcolm Baldrige Award Winning manufacturing site. Mark’s research has reached business audiences through major publications such as The Economist, Business Week and Sloan Management Review. His pricing research was cited by George Akerlof in his Nobel Laureate address.
Mark has taught courses at the undergraduate, MBA, Ph.D., and executive level in strategy, strategy implementation, organization theory, cross disciplinary research, cross enterprise leadership, and power and politics. He has won multiple awards for excellence in teaching. He previously held faculty appointments at the Stern School of Business at New York University, the Wharton School at the University of Pennsylvania, and at the Booth School of the University of Chicago.
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Rerup, C.; Zbaracki, M., 2021, "The Politics of Learning from Rare Events", Organization Science, November 32(6): 1391 - 1414.
Abstract: Actors engaged in learning from rare events must trade off between two different criteria for effective learning: validity—the extent to which learning can be used for understanding, prediction, and control—and reliability—the extent to which understandings of experience are public, stable, and shared. Existing models of learning from rare events have elided conflict and politics by assuming that individuals and organizations always seek new valid knowledge that then becomes public, stable, and shared across actors. Here we examine the politics of learning in a historical analysis of population-level learning by four different actors following the 1994 sinking of the ferry Estonia. We show how politics shaped the trade-off between reliability and validity and, in turn, shaped the nature of the learning. Whereas the new knowledge was sometimes both valid and reliable, the more common outcome was knowledge that was only partly valid and reliable. Rather than treat these outcomes as substandard, we show how they are important to the dynamics of learning, as different population-level actors take into account different aspects of experience. The result is a model that makes conflict and contestation—and hence politics—essential to effective learning.
Link(s) to publication:
https://pubsonline.informs.org/doi/full/10.1287/orsc.2020.1424
http://dx.doi.org/10.1287/orsc.2020.1424
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Bergen, M. E.; Dutta, S.; Guszcza, J.; Zbaracki, M., 2021, "How AI Can Help Companies Set Prices More Ethically", HARVARD BUSINESS REVIEW
Abstract: Using AI and data-driven tools, companies can change the price of a good or service based on who is buying, when they’re shopping, and myriad other factors. This power raises a question: Should ethics and societal values factor into these prices — and how? Companies should consider what they’re selling, who they’re selling to, and how they’re selling their products, and consider the range of possible impacts. Then, they should 1) get creative about reducing negative externalities, 2) reach out to stakeholders, and 3) build proactive filters into their pricing deliberations.
Link(s) to publication:
https://hbr.org/2021/03/how-ai-can-help-companies-set-prices-more-ethically?ab=hero-main-text
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Maslach, D.; Branzei, O.; Rerup, C.; Zbaracki, M., 2018, "Noise as signal in learning from rare events", Organization Science, April 29(2): 225 - 246.
Abstract: Firms increasingly have access to information about the failure events of other firms through public repositories. We study one such repository that accumulates reports of adverse events in the medical device industry. We provide qualitative evidence that shows how firms select a sample of adverse events and then engage in inferential learning. We show that firms use the reports of others to extract new valid knowledge from the adverse events in other firms. We use quantitative evidence to explore how a public repository can be used to provide more direct evidence of vicarious learning. Our findings challenge some standard assumptions about vicarious learning. First, we show that the learning in a repository does not come from referent others. Instead, it emerges directly from failure events that might ordinarily be dismissed as noise. Second, we show that the learning does not come from copying others. Instead, it is constructed by firm members as they assemble individual failure events to identify possibilities they had not considered. Third, in contrast to vicarious learning where the referent others and rare events provide the context, repository-based learning requires that actors impose their own context as part of the learning process. Our qualitative and quantitative evidence serve explanatory purposes by showing how firms use a repository of failure events to identify moments of valid learning, and exploratory purposes by investigating how we can demonstrate reliable learning from a repository of failure events.
Link(s) to publication:
http://dx.doi.org/10.1287/orsc.2017.1179
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Zbaracki, M.; Bergen, M. E., 2015, "Managing Market Attention", Advances in Strategic Management, March 32: 371 - 406.
Abstract: We return to the problem that motivated the original behavioral theory of the firm, price adjustment, but from the standpoint of post-Carnegie School perspectives on cognition, attention, and routines. Whereas work in the Carnegie School tradition has tended to develop models of firms in opposition to economic theory, we seek to understand how economic ideas are used to shape decision processes. Using a combination of interview, observational, and archival data gathered at a large manufacturing firm that produced parts to maintain machinery, we develop a behaviorally plausible story of how organizations shape price adjustment. We follow three successive waves of managers seeking to improve the pricing routines through shifting attentional perspective, managing attentional engagement, and structuring attentional execution. We demonstrate how managers redesign routines to shape cognition and attention, thereby developing greater coherence in the market representations of the sales force. Our findings show how reshaping cognition and attention in pricing routines can improve organizational intelligence in pricing decisions. Economists treat markets as the ideal the best that can be imagined and organizations as second-best options the best that can be achieved, but our findings invert the story, suggesting that in modern market economies, organizations and routines are essential to making the price system work.
Link(s) to publication:
http://dx.doi.org/10.1108/S0742-332220150000032012
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Zbaracki, M., 2014, "Research in the Sociology of Organizations, vol 36, The Garbage Can Model of Organizational Choice: Looking Forward at Forty", ORGANIZATION STUDIES, March 35(3): 454 - 459.
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Johansson, M.; Hallberg, N.; Hinterhuber, A.; Zbaracki, M.; Liozu, S., 2012, "Pricing strategies and pricing capabilities", Journal of Revenue and Pricing Management, January 11(1): 4 - 11.
Abstract: This article explores the intersection of pricing strategies and pricing capabilities by summarizing four distinct streams of research. By doing so, it provides insights into the challenges involved in implementing value-based pricing strategies as well as the generic challenges of building pricing capabilities. It also outlines the strategic importance of pricing capabilities.
Link(s) to publication:
http://dx.doi.org/10.1057/rpm.2011.42
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Zbaracki, M.; Bergen, M. E., 2010, "When Truces Collapse: A Longitudinal Study of Price Adjustment Routines", Organization Science, October 21(5): 955 - 972.
Abstract: We analyze the micro-foundations of the routine in a study of price-adjustment processes at a manufacturing firm. Existing theory says that truces balance cognitive and motivational differences across functions, but we have scant evidence on how truces work. We show both stability and change in routines. For minor price adjustments, routines incorporate truces in stable but separate market interpretations by the sales and marketing groups. Major price changes put truces at risk, as latent conflict over information and interests becomes overt. The ensuing battle shows how interests, information, and truces are intertwined in performing the routine. Routines are not just stable entities, but adaptive performances that include conflict. We illustrate how our approach addresses fundamental problems such as how firms perform economics, how routines incorporate economic theory, and how routines shape macroeconomic dynamics. We argue that our approach can be extended to any routine-based organizational work.
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Zbaracki, M., 2007, "A Sociological View of Costs of Price Adjustment: Contributions from Grounded Theory Methods", Managerial and Decision Economics, September 28(6): 553 - 567.
Abstract: Economic theory and data sometimes pose problems that cannot be addressed with existing econometric methods. For example, theories of price adjustment costs rely on variables that cannot or have not been observed. In principle, such costs can be measured, but there is little reason to expect they can be measured with existing econometric methods. I argue that the grounded theory methods developed by sociologists can be used to demonstrate the validity of price adjustment costs and to address deeper questions about how firms adjust prices. Properly matched to economic problems, grounded theory may help economists to develop better theory and better test existing theory.
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Zbaracki, M.; Ritson, M.; Levy, D.; Dutta, S.; Bergen, M. E., 2004, "Managerial and Customer Dimensions of the Costs of Price Adjustment: Direct Evidence From Industrial Markets", Review of Economics and Statistics, May 86(2): 514 - 533.
Abstract: We study the price adjustment practices and provide quantitative measurement of the managerial and customer costs of price adjustment using data from a large U.S. industrial manufacturer and its customers. We find that price adjustment costs are a much more complex construct than the existing industrial-organization or macroeconomics literature recognizes. In addition to physical costs (menu costs), we identify and measure three types of managerial costs (information gathering, decision-making, and communication costs) and two types of customer costs (communication and negotiation costs). We find that the managerial costs are more than 6 times, and customer costs are more than 20 times, the menu costs. In total, the price adjustment costs comprise 1.22% of the company's revenue and 20.03% of the company's net margin. We show that many components of the managerial and customer costs are convex, whereas the menu costs are not. We also document the link between price adjustment costs and price rigidity. Finally, we provide evidence of managers' fear of antagonizing customers.brbr I have no answer to the question of how to measure these menu change costs, but these [menu cost theories will never be taken seriously until an answer is provided. Edward Prescott (1987, p. 113)brbrGiven the large number of theoretical papers that evaluate the implications of [price adjustment costs, obtaining direct evidence that such costs are present seems crucial. Margaret Slade (1998, p. 104)
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Dutta, S.; Zbaracki, M.; Bergen, M. E., 2003, "Pricing Process as a Capability: A Resource Based Perspective", Strategic Management Journal, July 24(7): 615 - 630.
Abstract: Strategists following the resource-based view argue that firms can generate rents through value creation. To create value, firms develop and use resources and capabilities that other firms cannot imitate, trade for, or substitute other assets for. Even a firm that has created value, however, may not capture the potential rents associated with that value. To capture rents, a firm must set the right prices for what it sells. Most views of pricing assume that a firm can readily set appropriate prices. In contrast, we argue that pricing is a capability. To develop the ability to set the right prices, a firm must invest in resources and routines. We base our argument on a study of the pricing process of a large Midwestern manufacturing firm. We show that pricing resources, routines, and skills may help or inhibit a firm in setting the right price-and hence in appropriating value created. Our view of pricing as a capability contributes to the resourcebased view because it suggests that strategists should consider the portfolio of value creation and value appropriation capabilities a firm uses to create competitive advantage. Our view also contributes to economics because it suggests that strategic decisions about pricing capabilities have important implications for a fundamental economic action, determining prices. Managers in firms without effective pricing processes may be unable to set prices that reflect the wishes of its customers, so the customers may misuse their resources. As a result, resources may be used ineffectively. Our view of pricing as a capability therefore takes the resource-based-view straight to the heart of what is perhaps the central economic question: the best use of resources.
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Dutta, S.; Bergen, M.; Levy, D.; Ritson, M.; Zbaracki, M., 2002, "Pricing as a strategic capability", MIT Sloan Management Review, March 43(3): 61 - 66.
Abstract: Companies that know how to set the right prices for their products and services understand that pricing isn't simply a matter of good tactics. By investing in specific areas of organizational capital, they've made it a strategic weapon that competitors can only envy.
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Zbaracki, M., 1998, "The Rhetoric and Reality of Total Quality Management", Administrative Science Quarterly, September 43(3): 602 - 636.
Abstract: A model of the evolving rhetoric and reality of total quality management is developed in 5 organizations to show how institutional forces can distort the technical reality of TQM. Using interviews, organizational documents, and observation, the social construction of TQM is followed in these organizations to trace the relationship between the technical practices and rhetoric of TQM. The model shows that managers consume a rhetoric of success about TQM, use that rhetoric to develop their TQM program, and then filter their experiences to present their own rhetoric of success. Consequently, the discourse on TQM develops an overly optimistic view of TQM. The models demonstrate how individual actions and discourse shape TQM and fuel institutional forces.
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Eisenhardt, K.; Zbaracki, M., 1992, "Strategic Decision Making", Strategic Management Journal, January 13: 17 - 37.
Abstract: This article reviews the strategic decision making literature by focusing on the dominant paradigms--i.e., rationality and bounded rationality, politics and power, and garbage can. We review the theory and key empirical support, and identify emergent debates within each paradigm. We conclude that strategic decision makers are boundedly rational, that power wins battles of choice, and that chance matters. Further, we argue that these paradigms rest on unrealistic assumptions and tried controversies which are no longer very controversial. We conclude with a research agenda that emphasizes a more realistic view of strategic decision makers and decision making, and greater attention to normative implications, especially among profit-seeking firms in global contexts.
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