I examine medical adherence among patients and health care providers. Non-adherence is common throughout health care: providers frequently do not follow clinical practice guidelines, and patients often do not take their prescribed treatments. These behaviors are widespread and highly consequential: in a given year in the United States alone, it is estimated that diagnostic errors lead to 40,000 to 80,000 deaths, and patient non-adherence to medication leads to $300 billion in preventable health care costs. For these reasons, the World Health Organization has stated that “increasing adherence may have a greater effect on health than improvements in specific medical therapy”. Using data from Chile's public, primary health care system I first show that sending reminders to patients with chronic conditions can improve health-seeking behavior. Through nudging patients at the beginning of the cascade of care, preventative care visit reminders increase not only visits but also testing, medication adherence, and tertiary care utilization. In the second paper I show that healthcare providers deviate from clinical practice guidelines, using discretion to make diagnostic and treatment decisions about hypertension. This behavior leads to a more accurate sorting of patients on either side of the diagnostic threshold, and ultimately benefits patients through avoiding unnecessary diagnoses.

This dissertation examines product positioning and development strategies by firms. Product strategies not only determine a firm's performance, but they also influence the types of goods that are available in the market. I conduct empirical evaluations on how rivalries shape product decisions, and propose a framework that guides firms to devise incentive schemes to spur new ideas which are vital to the development of innovative products.

I begin by focusing on product differentiation strategy among rivals. I develop a theoretical model on programming choice by rival broadcasters in the media industry. The model predicts that the level of product differentiation is determined by the relative strengths of the rivals. I test this model using data from the Chinese satellite television industry. I analyze dynamic product positioning activities of 30 satellite television channels with respect to their dominant rival. Consistent with theory, the empirical evidence shows that weaker firms are more responsive when compared to the stronger ones to differentiate their products from the dominant rival.

In a second study, I focus on product imitation strategy among rivals. I empirically examine whether rivals imitate each other when they operate in uncertain market environments. Using data from the Chinese satellite television industry, I analyze product spatial distances between the satellite television channels before and after the commercialization of the dominant rival. I find that rivals cluster in product space when they are attacked by the dominant rival. Moreover, the level of clustering is most intense immediately following the industry shock, and less so as time progresses. I find mixed evidence on firms selectively cluster with rivals that are perceived to possess superior market information.

In the final essay, co-authored with John Morgan, we propose how firms may employ tournament incentive schemes to stimulate innovations which are essential to creating new products. Governments and foundations have successfully harnessed tournaments to generate innovative ideas. Yet this tool is not widely used by firms. We offer a framework for managers seeking to organize tournaments for ideas. We present the theoretical underpinnings of tournaments. We then connect the theory with three recent business concepts - the power of the network, the wisdom of crowds, and the leverage of intrinsic motivations - that boost the effectiveness of tournaments.

At least half the world's 7.5 billion people lack access to essential health services, and many of the world's poor who seek care are at risk of catastrophic and impoverishing out-of-pocket spending. In low- and middle-income countries, well-established private sectors and low levels of quality, even in places with high access, contribute to the challenges of improving health care for the disadvantaged. To address these issues across Kenya, the 2012-2019 African Health Markets for Equity (AHME) program delivered a comprehensive package of interventions at private clinics to improve clinical decision making and to expand high quality health care access for the poor. By taking advantage of a randomized field experiment, we examine AHME's effects on quality of care and answer the question, “Can we improve quality of care in private health sectors?” We collected and analyzed unique data (including data from standardized patients, the state-of-the-art method to assess provider practice) to examine the program's effects on three quality of care dimensions: structures, processes, and health care outcomes. We find some significantly positive effects on structural quality, and surprisingly, AHME reduced correct care by 12% (p-value = 0.021). This relative reduction was consistent but not significant for rates of unnecessary testing and medicines, which dropped by 12.3% and 8.5% respectively, suggesting reduced waste. Since average knowledge of correct care was remarkably high (90% for diarrhea; 98% for malaria), effects may be because lowering quality is in the financial interest of these for-profit clinics, especially since patients and households did not recognize reductions in quality. We examine this hypothesis with a modified dictator game and find that the least altruistic providers at AHME clinics were the ones to reduce correct care, while charging 121% more than the least altruistic at non-AHME clinics. Across all clinics, we further uncover alarming deficits in laboratory quality and in the care given to poor clients compared to the non-poor. Since highly competent private providers give lower quality care to patients due to patient characteristics and provider preferences, the success of quality improvement in the private sector requires (1) stronger accountability with careful monitoring and (2) nuanced policies to account for patient and provider heterogeneity.

Managerial ability influences firm performance in various industries. This suggests that improving business performance through better management in health care can result in productivity gains in countries with low and varied quality of care. We report results from a field experiment of a large and comprehensive management consulting intervention designed to improve business management and care delivery in the Kenyan private health sector. We find large improvements in management practices and a shift of provider preferences towards profit-maximization and away from altruism towards clients. The intervention also increased structural quality that translated into better business performance in terms of increased investment, output, higher prices, increased revenue, lower unit costs and higher profits. However, better management and structural quality did not translate into improved process (clinical) quality. In fact, we surprisingly find the program significantly reduced correct clinical case management of patient care by 7.8% (p-value < 0.001). We also find that the fall in quality did not register with clients and did not affect demand, consistent with demand being quality inelastic. Hence, it was optimal for profit-maximizing firms to lower quality and raise prices. We further examine intervention mechanisms using causal mediation analysis. We find that the effects on quality of care and price of services are mediated by the shift in provider preferences, while the increase in profits and reduction in non-labor unit costs are mediated by changes in management practices.

JEL classification codes: O16, F23, E32, O12

Abstract:

We investigate whether capital market imperfections constrain investment during an emerging market financial crisis. Both large currency devaluations and widespread collapse of the banking sector characterize recent crises. Although a currency devaluation should increase exporters’ competitiveness and investment, a failing banking system may limit credit to these firms. Foreign-owned firms, which have greater access to overseas financing but otherwise face the same investment prospects, provide an ideal control group for determining the effect of liquidity constraints. We test for liquidity constraints in Indonesia following the 1997 East Asian financial crisis, a period when the issuance of new domestic credit declined rapidly. Exporters’ value added and employment increased after the crisis, suggesting that they profited from the devaluation and had sufficient cash flow to finance more workers. However, only exporters with foreign ownership increased their investment significantly. The failure of domestic firms to invest under profitable conditions suggests that they may have faced liquidity constraints. Investment by foreign-owned firms increased post-crisis capital stock by about 4% more than would have occurred if all the firms were domestically owned.