MANAGERIAL ECONOMICS & DECISION SCIENCES; INTERNATIONAL BUSINESS & MARKETS; SOCIAL ENTERPRISE
IBM Professor of Regulation and Competitive Practice
Director of the Ford Motor Company Center for Global Citizenship
Daniel Diermeier is the IBM Professor of Regulation and Competitive Practice, a Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management., and a Professor of Political Science at the Weinberg College of Arts and Sciences, all at Northwestern University. He is the director of the Ford Motor Company Center for Global Citizenship. He also served as the founding director of the Social Enterprise at Kellogg program (SEEK) and the founding co-director of the Northwestern Institute on Complex Systems (NICO). Professor Diermeier is a co-creator and academic director of the CEO Perspective Program, a joint venture between the Kellogg School of Management and the Corporate Leadership Center and Kellogg’s most senior executive education program.
His teaching and research focuses on political institutions, the interaction of business and politics, crisis leadership, issue and reputation management, non-market strategy, and strategic aspects of corporate social responsibility. His work has been published in numerous academic journals in, economics, political science, sociology, psychology, and management, and has been featured globally in numerous media outlets such as the Wall Street Journal, the Economist, the Financial Times, Newsweek, the Chicago Tribune, and De Telegraaf.
He is the director of the Global Health Initiative part of a joint venture between Northwestern’s McCormick School of Engineering, Feinberg School of Medicines, Abbott, Inverness Medical and IDEO. The venture’s first project is to develop affordable diagnostic devices for HIV/AIDS in sub-Saharan Africa. This project has been sponsored by a Grand Challenges in Global Health Grant from the Bill and Melinda Gates Foundation. Professor Diermeier has received numerous awards including the prestigious L.G. Lavengood Professor of the Year Award (Kellogg School of Management, 2001). In 2007 he was the recipient of the prestigious Faculty Pioneer Award from the Aspen Institute, named the “Oscar of Business Schools” by the Financial Times.
Professor Daniel Diermeier is the co-founder and CEO of FirstSight Group LLC, based in Chicago, Illinois, providing clients with analysis and strategy advice in crisis leadership, reputation management, stakeholder management, issue management regulatory and political strategy. Recent clients include Abbott, Accenture, Allianz , Baker & McKenzie , BP, Cargill, the City of Chicago (Office of the Mayor), CIBC, Exelon, Exxon/Mobil, the FBI, W. W. Grainger, Guidant (now part of Boston Scientific), Heartland Automotive, Household International (now part of HSBC), IFCO Systems, Intercontinental Exchange, Johnson & Johnson, Kraft, McDonald’s, Metro AG, Metro Cash & Carry International, Nicor, People’s Energy, PricewaterhouseCoopers, Roche Diagnostics, Shell, and State Farm.
Professor Diermeier is a member of the Economic Club of Chicago. In December 2004 Professor Diermeier was appointed to the Management Board of the FBI. He is an advisory board member for Quantum Secure, a security management technology company. He has also served as a senior strategic advisor to PricewaterhouseCoopers and on the advisory board of GroupOn, a technology company facilitating social commerce.
Regulatory and Advocacy Groups (Biotechnology)
Corporate Social Responsibility
Crisis Management
Ethics
Political Economy/Design
Public Management
Reputation Management
Strategic Management
Strategy in Non-Market Environments
Voting Systems
- Recent Media Coverage
Wall Street Journal: Networking for Social Responsibility - 11/19/2009
Orlando Sentinel: Cutting travel can hurt business rebound, U.S. Travel Association warns - 3/13/2009
Wall Street Journal Radio: - 3/13/2009
Economist Intelligence Unit: Executive Briefing: Predicting Politics - 2/19/2009
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- Recent Kellogg News
Africa: the new economic frontier - 2/4/2010
Faculty Impact Awards - 12/16/2009
Centennial finale - 6/16/2009
Thriving in a world of risk and change - 2/13/2009
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In this paper we discuss the design of party classifiers for Congressional speech data. We then examine the party classifiers’ person-dependency and time-dependency. We found that party classifiers trained on 2005 House speeches can be generalized to the Senate speeches of the same year, but not vice versa. The classifiers trained on 2005 House speeches perform better on Senate speeches from recent years than older ones, which indicates the classifiers’ time-dependency. This dependency may be caused by changes in the issue agenda or the ideological composition of Congress.
Recently there has been increasing interest in constructing general-purpose political opinion classifiers for applications in e-Rulemaking. This problem is generally modeled as a sentiment classification task in a new domain. However, the classification accuracy is not as good as that in other domains such as customer reviews. In this paper, we report the results of a series of experiments designed to explore the characteristics of political opinion expression which might affect the sentiment classification performance. We found that the average sentiment level of Congressional debate is higher than that of neutral news articles, but lower than that of movie reviews. Also unlike the adjective-centered sentiment expression in movie reviews, the choice of topics, as reflected in nouns, serves as an important mode of political opinion expression. Manual annotation results demonstrate that a significant number of political opinions are expressed in neutral tones. These characteristics suggest that recognizing the sentiment is not enough for political opinion classification. Instead, what seems to be needed is a more fine-grained model of individuals' ideological positions and the different ways in which those positions manifest themselves in political discourse.
This research explores the impact of dyadic communication opportunities on group norms. We propose a link between dyadic communication and group norms such that the absence of dyadic communication enhances a norm of group unity whereas its presence enhances a norm of faction-forming. In two studies, we demonstrate that the presence of dyadic communication opportunities can both help and hurt group performance and that this depends on a fit between the content of the norm and the wider social context. In competitive negotiation tasks that benefit from group unity, the absence of dyadic communication results in a stronger focus on the group and its future as well as increased group performance. However, in problem solving tasks that benefit from faction-forming, the mere presence of dyadic communication opportunities leads to an increased openness to unique information, disagreement, and group performance. Implications for how to effectively manage technologies that create opportunities for dyadic communication during group discussions are considered.
This article discusses methods for automatic annotation of political texts for semantic fields - groups of words with related meanings. This type of annotation is useful when studying the structure of political ideology, from agendas to rhetoric. We argue that it is important to exclude the researcher from the construction of analytic categories, due to her own susceptibility to the very phenomenon under analysis. In this vein, three types of automatic annotation are presented - unsupervised clustering, dictionary-based approaches, and a method based on relevant experimental data. All methods are applied to analyzing Margaret Thatcher's political rhetoric. We find that unsupervised clustering is most useful for tracing agendas/topics; dictionary-based methods are most effective in a comparative setting, whereas the last method is the most promising for detecting off-topic, singular uses of semantic domains, which are often rhetorical tools used to achieve a political end. Validity, applicability, strengths and weaknesses of each method and of their combinations are addressed in detail.
In this paper we present a structural approach to the study of government formation in multi-party parliamentary democracies. The approach is based on the estimation of a stochastic bargaining model which we use to investigate the effects of specific institutional features of parliamentary democracy on the formation and stability of coalition governments. We then apply our methodology to estimate the effects of governmental bicameralism. Our main findings are that eliminating bicameralism does not affect government durability, but does have a significant effect on the composition of governments leading to smaller coalitions. These results are due to an equilibrium replacement effect: removing bicameralism affects the relative durability of coalitions of different sizes which in turn induces changes in the coalitions that are chosen in equilibrium.
Activist NGOs have increasingly foregone public politics and turned to private politics to change the practices of firms and industries. This paper focuses on private politics, activist strategies, and nonmarket strategies of targets. A formal theory of an encounter between an activist organization and a target is presented to examine strategies for lessening the chance of being a target and for addressing an activist challenge once it has occurred. The encounter between the activist and the target is viewed as competition. At the heart of that competition is an activist campaign, which is represented by a demand, a promised reward if the target meets the demand, and a threat of harm if the target rejects the demand. The model incorporates target selection by the activist, proactive measures and reputation building by a potential target to reduce the likelihood of being selected as a target, fighting a campaign, and credible commitment.
We experimentally test competing theories of three-player majoritarian bargaining models with fixed, known disagreement values. Subjects are randomly assigned to three roles: a proposer and two types of voters. Each role is randomly assigned a disagreement value, i.e. a given amount of money he/she will receive if the proposal is rejected. These values are known to all players before any decision is made. Proposers then make a take-it-or-leave-it offer on how to split a fixed, known amount of money among the players. If a majority of players accepts the proposal, the players’ payoffs are determined by the proposal; if the proposal is rejected, each player receives his or her reservation value.We assess the ability of three behavioral hypotheses – self-interest, egalitarianism, and inequality-aversion – to account for our results. Our primary design variable is the proposer’s reservation value, which allows us to obtain different implications from each hypothesis. We find that each hypothesis is inconsistent with our data in important respects. However, subjects strongly respond to changes in reservation values as if they were interpreted as a basic form of entitlement.
Our main goal is to quantify the returns to a career in the United States Congress. We specify a dynamic model of career decisions of a member of Congress and estimate this model using a newly collected dataset. Given estimates of the structural model, we assess reelection probabilities, estimate the effect of congressional experience on private and public sector wages, and quantify the value of a congressional seat. Moreover, we assess how an increase in the congressional wage or the imposition of term limits would affect the career decisions of politicians and the returns from a career in Congress.
Models of government formation processes in multi-party democracies are usually highly sensitive to the rules that govern the selection of formateurs (i.e. the parties selected to propose a potential government). The theoretical literature has focused on two selection rules: selection proportional to seat share, and selection in order of seat share. In this paper, we use a new data set on government formations in 11 parliamentary democracies to empirically assess which selection rule most closely approximates the data. We find that while there is little empirical support for selection in order of seat share, proportional selection fits the data well. However, we also find that a simple alternative that combines the insights of the two selection rules outperforms both of them in their ability to explain the data.
Many natural and social systems display global organization and coordination without centralized control. The origin of this global coordination is a topic of great current interest. Here we investigate a density-classification task as a model system for coordination and information processing in decentralized systems. We show that sophisticated strategies, selected under idealized conditions, are not robust to environmental changes. We also demonstrate that a simple heuristic is able to successfully complete the classification task under a broad range of environmental conditions. Our findings hint at the possibility that complex networks and ecologically efficient rules coevolve over time.
This paper presents a theory of parliamentary systems with a proportional representation electoral system, a formateur selected based on party representation in parliament, and parties that cannot commit to the policies they will implement once in government. Government formation involves efficient proto-coalition bargaining, and elections yield unique strong Nash equilibrium outcomes. Depending on the status quo, minimal-majority, surplus, or consensus governments can form. If parties and voters are myopic and the status quo is subject to shocks, consensus governments and centrist policies occur only in a crisis. Otherwise, governments are minimal winning, and policies reflect only the preferences of the government parties.
Theories of organization of legislatures have mainly focused on the U.S. Congress, explaining why committee systems emerge there, but not explaining variance in organization across legislatures of different countries. To analyze the effects of different constitutional features on the internal organization of legislatures, we adopt a vote-buying model and consider the incentives to delegate decision rights in a game among legislative chambers. We show how presidential veto power and bicameral separation can encourage a legislative chamber to create internal veto players or supermajority rules, while a unicameral structure can encourage legislators to delegate power to a leader.
We use agent-based modeling to investigate the effect of conservatism and partisanship on the efficiency with which large populations solve the density classification task – a paradigmatic problem for information aggregation and consensus building. We find that conservative agents enhance the populations' ability to efficiently solve the density classification task despite large levels of noise in the system. In contrast, we find that the presence of even a small fraction of partisans holding the minority position will result in deadlock or a consensus on an incorrect answer. Our results provide a possible explanation for the emergence of conservatism and suggest that even low levels of partisanship can lead to significant social costs.
How does the social structure of a group, organization, or society impact its collective performance? Recent work in network science puts forth the idea that a certain class of networks, called “small world” networks, may provide unique performance advantages. Small world networks are characterized by densely connected subgroups that are loosely connected to each other through a small number of nodes that serve as bridges. The theoretical appeal of small worlds comes from the following finding: if one starts with a world where people are only connected to their immediate neighbors, exchanging local connections for bridges to more distant parts of the network decreases the average number of steps it takes for people to reach each other much more quickly than it deteriorates the local structure which gives it its “community” nature. Consequently, small world networks are thought to provide the advantages of increased access to resources and information from different groups, without sacrificing the benefits of local structure, or “community.”
A limited amount of empirical work has attempted investigated the correlation between small world network properties and the performance of teams, organizations, or industries, resulting in mixed conclusions. But even if such work were more conclusive, testing for the theorized benefits of small worlds, and perhaps ultimately applying such findings to improve real social systems, requires going much further. This is because it is the mechanisms implied by the network characteristics of small worlds that impact performance, and not the network itself. In this project, we investigate the underlying mechanisms thought to give rise to performance advantage in small worlds through the use of a laboratory-controlled experiment. More specifically, we will investigate how quickly and accurately large groups solve an “information aggregation” problem – one that requires coordination to discover a piece of information that they all share – under different network topologies for communication (i.e., varying who can communication with whom).
The case describes a crisis management situation faced by Mercedes-Benz, a division of Daimler-Benz AG. In 1997 Mercedes had introduced a revolutionary new car, the A-class, Mercedes's first entry into the compact car segment. The A-class was positioned as an entry-level vehicle in the Mercedes line and represented Mercedes's attempt to grow beyond its core market. A few days after the car was officially introduced, it rolled-over during a test known as the "moose test", conducted by a Swedish journalist. The A-class's failed moose-test created extensive media coverage in Germany and other European countries, threatening the success of the A-class launch.
The case describes in detail Mercedes's management approach to the moose-test crisis. It discusses strategic and organizational issues as well as specific challenges in corporate communications, the management of difficult technical and logistical challenges and leading under crisis conditions.
The case describes Myriad Genetics and its struggle to secure exclusive testing services for the BRCA gene. After Myriad obtained licensing rights and dissolved its U.S. competition, it turned its focus to Europe, specifically the UK. The UK National Health Service had made genetic testing available to the public and Myriad had to decide which course of action would be most effective in stopping British BRCA genetic testing and expanding Myriad’s own service to this new market.
The case describes Myriad Genetics and its struggle to develop a genetic testing service while facing challenges from competitors and activist organizations. After Myriad’s discovery of the BRCA gene, capable of genetic testing for breast cancer in women, Myriad would need to choose a strategy to provide this service to the public. With several major competitors offering similar services, intense media scrutiny, and a charged activist and political climate, a poor Myriad decision could face major repercussions.
The case focuses on the actions taken by the Institute of Scrap Recycling Industries (ISRI) to overturn an unintended consequence of the Superfund legislation that dramatically increased the liability for its members, many of them small businesses.
The case focuses on ISRI’s legislative strategy in the 103rd Congress to pass a bill to protect its members from increased liability as part of the Superfund legislation.
The case focuses on the challenges to ISRI’s strategy in the 104th Congress when the majority in Congress shifted from Democratic to Republican control.
The case describes the execution of ISRI’s political strategy.
In the 1960s, Thalidomide, a popular new drug considered to be safe and effective, was revealed to cause severe nerve damage and birth defects in new-born infants, prompting health officials to ban the use of the drug and tighten overall restrictions on new drugs and drug use. Twenty years later, after recognizing the positive effects of Thalidomide when treating patients with leprosy and its potential role in treatment of certain types of cancer and cases of HIV/AIDS, the Celgene Corporation would be forced to contend with stringent FDA regulations, liability concerns, public skepticism, and poor mass media portrayal in order to secure the drug’s approval. LEARNING OBJECTIVE: Regulators are subject to political pressure, which companies much recognize and consider when making business decisions.
In the 1960s, Thalidomide, a popular new drug considered to be safe and effective, was revealed to cause severe nerve damage and birth defects in new-born infants, prompting health officials to ban the use of the drug and tighten overall restrictions on new drugs and drug use. Twenty years later, after recognizing the positive effects of thalidomide when treating patients with leprosy and its potential role in treatment of certain types of cancer and cases of HIV/AIDS, the Celgene Corporation would be forced to contend with stringent FDA regulations, liability concerns, public skepticism, and poor mass media portrayal in order to secure the drug’s approval. LEARNING OBJECTIVE: Regulators are subject to political pressure, which companies much recognize and consider when making business decisions.
After the company’s first aviation fatality, Southwest Airlines' CEO is faced with new and difficulty decisions. The alacrity and compassion that characterized the company’s response serves as a paradigm for any organization facing a future crisis situation.
After the company’s first aviation fatality, Southwest Airlines' CEO is faced with new and difficulty decisions. The alacrity and compassion that characterized the company’s response serves as a paradigm for any organization facing a future crisis situation.
After the company’s first aviation fatality, Southwest Airlines’ CEO is faced with new and difficulty decisions. The alacrity and compassion that characterized the company’s response serves as a paradigm for any organization facing a future crisis situation.
The case describes the history of the tobacco industry and its emergence as an extremely effective marketer and non-market strategist. After years of success, both publicly and politically, the leaders of the tobacco industry are faced with mounting political pressure and the financial threat of litigation from class-action lawsuits. The leaders face an industry-wide strategic decision of whether to acquiesce to government demands in exchange for immunity, focus on judicial success, or develop a new course of action.
The case describes the response of United Learning's management after its flagship educational program failed to make the U.S. Department of Education's "exemplary programs" list, prompting state education agencies and school districts to move away from United's product line. It focuses on United Learning's marketing and production decisions regarding their new product, unitedstreaming(tm), an Internet-based learning product that was critical to the company's future.
The case focuses on the lobbying and political efforts of United Learning executives to ensure their new program, unitedstreaming(tm) would be successful. Recognizing a similar political climate that ultimately excluded previous United Learning products, the company used proactive research and legislative contacts to help set unitedstreaming as a standard in Internet-based media education materials.
This course counts toward the following majors: Social Enterprise
In recent decades corporations have increasingly become the dominant source for political and social change. Increased globalization and technological progress have further accelerated this process. Businesses are now held accountable by standards other than legal compliance or financial performance. Successful business leaders have recognized that these challenges are best mastered by a commitment to values-based management. However, simply "doing the right thing" is not enough. Rather, companies increasingly find themselves as targets of aggressive legal action, media coverage and social pressure. Organizations must be prepared to handle rapidly changing environments and anticipate potential threats. This requires a deep understanding of the strategic complexities in managing various stakeholders and constituencies. To confront students with these challenges in a realistic fashion, the class is structured around a rich set of challenging case studies and crisis simulation exercises.
Strategic Management in Non-Market Environments (SEEK-441-0)
This course counts toward the following majors: Management & Strategy, Social Enterprise.
The explicit regulations and implicit norms governing a firm's market behavior are determined by myriad social, political, regulatory and legal institutions. These non-market institutions are arenas in which interest groups compete to change the rules to further their goals. This course takes the perspective of managers or consultants who must anticipate how interests and institutions within the non-market environment will react to new issues and develop strategies for affecting outcomes with the goal of improving firm performance. The course introduces students to a set of frameworks and tools that assist managers in non-market analysis and strategy development. Cases focusing on the media, activists, legislatures, regulatory agencies and international trade are used to practice applying the frameworks and formulating effective strategies.
Strategic Crisis Management provides conceptual tools for managers in high-pressure, complex crisis situations. Topics include management and media, dealing with activists and interest groups, and surviving legal, legislative and regulatory challenges.
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