Wang, Stuart and Li (2020). Fraud and Innovation

Yanbo Wang – The University of Hong Kong
Toby Stuart – University of California, Berkeley
Jizhen Li – Tsinghua University

Xuan Ye – Nottingham University Ningbo Campus, Business School
Daiteng Ren – Nottingham University Ningbo Campus, Business School

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1. Firstly, tell us about the motivation that brought the three of you together. How did it happen? 

Wang: I have known both collaborators for a long period of time before working on this paper together. Toby was on my dissertation committee, and I took his doctoral seminar on entrepreneurship back in graduate school. Jizhen was a Sloan Faculty Fellow when I was a student at MIT. The three of us complement each other well on this project, in terms of China knowledge, theoretical perspectives, research design, writing and navigating the review process. It has been great fun working with Toby and Jizhen.

2. We noticed that this is a case where the same dataset has been used for different papers. We know that this is encouraged if the purpose of the papers is different, because their contributions will also be different. However, we wonder if this also brings with it extra caution during the process of writing and review.

Wang: My rule of thumb is to have at least three papers in mind before committing yourself to any serious data collection effort. More likely than not, your first idea will not work out and even all three or four ideas would not work out. I once spent like two years accessing and cleaning up a dataset that I thought was a gold mine. Unfortunately, nothing worked out and eventually I gave up after doing cross-tabulations after cross-tabulations of raw data.

If you have an interesting empirical setting and unique research designs, you should leverage them to the fullest and write as many papers as possible. By going vertical, i.e. focusing on settings that are interconnected, you would have the opportunity to develop insights about the relevant players, their power dynamics and the surrounding institutions that shape their options. All these insights can help you to come up with research questions that are both interesting in terms of theory and relevant in relation to practice.

3. The empirical research setting seems to require deeper upfront knowledge into the organization you studied. Could you tell us how you successfully built this collaboration? And what is your experience in balancing your needs as a researcher with the needs of the industrial partner over time?

Wang: Most scholars have horror stories to share about review processes but ours has been a blessed one. Both the editor and the three reviewers provided us with very concrete and constructive feedback throughout the process. Some of the reviewer questions were challenging and hard to answer, but they helped push us to think much more carefully and in a more systematic way about the mechanisms, potential confounding factors and possible ways to disentangle one from another.

Just to share one example. Our paper aimed to investigate the potential linkage between fraud (a way of resource acquisition) and innovation (an outcome of resource allocation). One major pushback from the reviewers was how to distinguish the actors (fraudsters) from the action (fraud). We had only one-shot observation about financial book cooking and thus could not distinguish the fraudsters from the fraudulent deals empirically. My coauthors and I spent much time on this issue and eventually we followed the suggestion by the editor. We acknowledged our dataset’s limitations, made the effort to distinguish “born fraudulent” from “opportunistically fraudulent” firms, and then carefully discussed the differentiation’s theoretical and empirical implications. While not being able to address the reviewers’ question directly, we did try our best and explore alternative ways to reduce their concerns.

To be published in a reputable journal, most papers need to have at least one well-defined strength. For Fraud and Innovation, we felt that one particularly appealing part of the project is that it connects two independently important yet often perceived to be disparate research topics together. By investigating the linkages between resource acquisition and resource allocation, our project has the potential to help explain a wide range of seemingly unconnected phenomena such as why big-ticket lottery winners often end up in bankruptcy, why family wealth rarely gets sustained beyond the third generation, and why corrupt CEOs often buy big yachts and fancy cars.    

4. Data are ubiquitous today: the availability of computing power coupled with expanding network capacity make it faster and easier to obtain and analyse data. Still, corporate fraud news continues to headline business journals. What is your view of this conundrum?

Wang: This is a very important question, and I am not sure myself being qualified to answer this, but I will give it a try. Clearly big data, no matter how you define it, is playing an ever-important role in fraud identification. Just think about how Sino-Forest and Luckin Coffee got caught. However, we also need to think how many individuals and agencies are willing to take the pains to collect truly reliable data like Carson Block and Muddy River Research did. Very rare! In contrast, we have armies of individuals equipped with cheap computing powers and strong skills in writing complex models who sit in their office chairs, downloading and analyzing large amount of data from the websites. For sure their data can be vast, but we should also worry about data quality and get worried about “garbage in, garbage out”. Or put it another way, what truly matters is not necessarily the number of observations but your research design – how you can leverage institutional insights to creatively collect and interpret data for fraud identification.

5. Lastly, what are your suggestions for young PhD students and early career scholars, in particular on writing and publishing articles aiming for theoretical contribution and practical implications?

Wang: From time to time, I do rethink how I would have spent my time differently if I had the opportunity to go through a doctoral program again. Along with reading the classics, attending seminars, and asking as many questions as possible, I would also spend more time hanging out with policy makers, entrepreneurs, investors, tech workers, and news reporters. These are the individuals who spend 365 days in the field to observe or make things happen. Talking with them can truly help one to understand how management works as a practice and get the opportunity to identify empirical patterns and even “theoretical” perspectives that do not align well with what the established literatures prescribe. For me, these abnormalities represent fun research opportunities. I would also force myself to write routinely and widely. No matter if it is a short literature review, a research proposal, a critique of the seminar attended twenty minutes ago, or some random research ideas. Writing is an active way of thinking. It forces you to think coherently, to draw upon the prior research, and see your own idea’s limits and strengths. When English is not your mother tongue, academic writing does not come naturally, and it takes years’ practice to master it. Keep in mind, writing is more than an art. It is a way of organizing one’s thoughts so that he/she can have a meaningful conversation with the community.

Interviewer Bios:

Xuan Ye ( is a PhD candidate in Strategy at Business School of University of Nottingham, Ningbo China. His work centers around institutional change in organizations, for example the convergence between social enterprise and commercial firms. Furthermore, he is interested in innovation and technology implementation. Xuan has over a decade of experience within international business spanning from Europe to China. He started his career in the Non Profit sector.

Daiteng Ren ( is a doctoral student in Strategy at Business School of University of Nottingham, Ningbo China. Her work is to understand the value logics of family business, aiming at exploring different patterns of family business models as well as how and to what extent family models are being shaped by institutional work. Her research mainly adopts the qualitative methodology through conducting interviews and case study analysis. She is also a lecturer in Ningbo University of Finance and Economics, responsible for Strategy Management, Financial management and Financial Analysis courses.

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