David F. Drake
Assistant Professor of Business Administration
David Drake is an assistant professor in the Technology & Operations Management (TOM) Unit where he teaches the TOM course in the MBA required curriculum and an elective course in Operations Strategy. Professor Drake's current research focuses on sustainable operations and, in particular, on clean technology adoption. Specifically, his work focuses on how emissions regulation can impact the capacity portfolios that firms invest in; how such regulation, when unilaterally imposed, impacts technology choice, facility location, and regional competitiveness; and how creative collaboration can improve the economic feasibility of clean technologies among logistics providers. Professor Drake has also authored pedagogical cases focusing on technology choice under emissions regulation and closed-loop supply chains (product take-back). Through his research, Professor Drake has worked closely with a number of firms experiencing emission regulation under the EU-ETS, and attended the Copenhagen Climate Change Conference (UN COP15) as a delegate.
After earning his MBA in operations management from Vanderbilt University’s Owen Graduate School of Management, Professor Drake spent five years at Random House where he led the publishing operations projects and the production purchasing groups. He then earned his MSc and PhD in management from INSEAD.
Technology Choice and Capacity Portfolios under Emissions Regulation
We study the impact of emissions tax and emissions cap-and-trade regulation on a firm's technology choice and capacity decisions. We show that emissions price uncertainty under cap-and-trade results in greater expected profit than a constant emissions price under an emissions tax, which contradicts popular arguments that the greater uncertainty under cap-and-trade will erode value. We further show that two operational drivers underlie this result: i) the firm's option not to operate, which effectively right-censors the uncertain emissions price; and ii) dispatch flexibility, which is the firm's ability to first deploy its most profitable capacity given the realized emissions price. In addition to these managerial insights, we also explore policy implications: the effect of emissions price level, and the effect of investment and production subsidies. Through an illustrative example, we show that production subsidies of higher investment and production cost technologies (such as carbon capture and storage technologies) have no effect on the firm's optimal total capacity when firms own a portfolio of both clean and dirty technologies, but that investment subsidies of these technologies increase the firm's total capacity, conditionally increasing expected emissions. A subsidy of a lower production cost technology, on the other hand, has no effect on the firm's optimal total capacity in multi-technology portfolios, regardless of whether the subsidy is a production or investment subsidy.
Keywords: technology management;
Observation Bias: The Impact of Demand Censoring on Newsvendor Level and Adjustment Behavior
In an experimental newsvendor setting we investigate three phenomena: level behavior—the decision-maker's average ordering tendency; adjustment behavior—the tendency to adjust period-to-period order quantities; and observation bias—the tendency to let the degree of demand feedback influence order quantities. We find that the portion of mismatch cost due to adjustment behavior exceeds the portion of mismatch cost due to level behavior in three out of four conditions. Observation bias is studied through censored demand feedback, a situation which arguably represents the majority of newsvendor settings. When demands are uncensored, subjects tend to order below the normative quantity when facing high margin and above the normative quantity when facing low margin, but in neither case beyond mean demand (a.k.a. the pull-to-center effect). Censoring in general leads to lower quantities, magnifying the below-normative level behavior when facing high margin but partially counterbalancing the above-normative level behavior when facing low margin, violating the pull-to-center effect in both cases.
Keywords: Prejudice and Bias;
Sustainable Operations Management: An Enduring Stream or a Passing Fancy?
Paul Kleindorfer was among the first to weigh in on and nurture the stream of Sustainable Operations Management. The thoughts laid out here are based on conversations we had with Paul relating to the drivers underlying sustainability as a management issue: population and per capita consumption growth, the limited nature of resources and sinks, and the responsibility and exposure of firms to ensuing ecological risks and costs. We then discuss how an operations management lens contributes to the issue and criteria to help the Sustainable Operations Management perspective endure. This article relates to a presentation delivered by Morris Cohen for Paul's Manufacturing and Service Operations Management Distinguished Fellows Award, given at Columbia University, June 18, 2012. We wrote this article at Paul's request.
Keywords: Sustainable Operations;
Service Quality, Inventory and Competition: An Empirical Analysis of Mobile Money Agents in Africa
The use of electronic money transfer through cellular networks ("mobile money") is rapidly increasing in the developing world. The resulting electronic currency ecosystem could improve the lives of the estimated 2 billion people who live on less than $2 a day by facilitating more secure, accessible, and reliable ways to store and transfer money than are currently available. The development of this ecosystem requires a network of agents to conduct cash-for-electronic value transactions and vice versa. This paper examines how service quality, competition, and poverty are related to demand and inventory (of electronic credit and physical cash) where, in this setting, service quality consists of pricing transparency and agent expertise. Among our results, we find that average demand increases with both pricing transparency and agent expertise, and that agent expertise interacts positively with competitive intensity. We also find that competition is associated with higher inventory holdings of both cash and electronic value, and that agents in high-poverty areas hold greater amounts of cash but do not carry a smaller amount of electronic value indicating that they devote more capital to their inventory. These results offer insight to mobile money operators with respect to monitoring, training, and the business case for their agents. This paper furthers our understanding of service quality, competition and inventory, while developing a foundation for the exploration of mobile money by OM scholars.
Keywords: service operations;
base of the pyramid;
Carbon Tariffs: Effects in Settings with Technology Choice and Foreign Comparative Advantage
Carbon regulation is intended to reduce global emissions, but there is growing concern that such regulation may simply shift production to unregulated regions and increase global emissions in the process. Carbon tariffs have emerged as a possible mechanism to address these concerns by imposing carbon costs on imports at the regulated region's border. I show that, when firms choose from discrete production technologies and offshore producers hold a comparative cost advantage, carbon leakage can result despite the implementation of a carbon tariff. In such a setting, foreign firms adopt clean technology at a lower emissions price than firms operating in the regulated region, with foreign entry increasing only over emissions price intervals within which foreign firms hold this technology advantage. Further, domestic firms are shown to conditionally offshore production despite the implementation of a carbon tariff, adopting cleaner technology when they do so. As a consequence, when carbon leakage does occur under a carbon tariff, it conditionally decreases global emissions. Three sources of potential welfare improvement realized through carbon tariffs require both foreign comparative advantage and endogenous technology choice, underscoring the importance of considering both in value assessments of such a policy.
Pollution and Pollutants;
Globalized Markets and Industries;
Sustainable Fleet Operations: The Collaborative Adoption of Electric Vehicles
Keywords: fleet management;
Green Technology Industry;
Unilever: Combatting Global Food Waste
The global consumer goods company Unilever was on pace to hit a number of aggressive targets by 2020 as part of the Unilever Sustainable Living Project, including a goal to halve the waste associated with the disposal of its products. Unilever's Chief Supply Chain Officer Pier Luigi Sigismondi and his team were working towards this goal and had chosen to first focus on three key areas—sugar, tomatoes, and tea—and had analyzed where in the 'farm to fork' value chain product was wasted. This analysis showed that very little was wasted within areas of the value chain directly controlled by Unilever, and most occurred either upstream with its suppliers or downstream with consumers. How could Unilever encourage these actors to change established practices and entrenched behaviors within a short timeframe to help Unilever meet its sustainability targets and also to improve the operations of its partners in the value chain? By encouraging consumers to better manage their food purchases, did Unilever risk harming its own sales or those of its retail customers? Could Unilever encourage industry-wide changes to have a real impact on global environmental sustainability?
Keywords: food waste;
sustainable business and innovation;
sustainable supply chains;
Organizational Change and Adaptation;
Supply Chain Management;
Growth and Development Strategy;
Beauty and Cosmetics Industry;
Consumer Products Industry;
Food and Beverage Industry;
Forest Products Industry;
North and Central America;
Drake, David F., Janice H. Hammond, and Matthew G. Preble. "Unilever: Combatting Global Food Waste." Harvard Business School Case 615-040, March 2015. View Details
Whole Foods: The Path to 1,000 Stores
The case examines the operations strategy of Whole Foods, one of the largest natural grocery chains in the United States. In late 2013, Whole Foods was expanding rapidly, with a publicly-stated goal of growing from 351 to 1,000 domestic stores by 2022. It was also engaged in a strategic initiative to combat "food deserts"—areas with limited access to affordable and nutritious food. In pursuit of these initiatives, the company's rapid entry into a heterogeneous set of new markets necessitated a reexamination of its store format, target customer base, and approach to human capital.
HeidelbergCement: The Baltic Kiln Decision
HeidelbergCement: Technology Choice Under Carbon Regulation
Governing Rules, Regulations, and Reforms;
Industrial Products Industry;
Drake, David F., Paul R. Kleindorfer, and Luk N. Van Wassenhove. "HeidelbergCement: Technology Choice Under Carbon Regulation." European Case Clearing House Case, 2010. View Details
Ludo (A): Ludo Press and the Newsvendor Problem
Keywords: Problems and Challenges;
Drake, David F., and Nils Rudi. "Ludo (A): Ludo Press and the Newsvendor Problem." Institut Européen d'Administration des Affaires (INSEAD) Case, 2009. (Working Case.) View Details
Cycleon (A): Postal Networks for Reverse Logistics.
Drake, David F., Atalay Atasu, and Luk N. Van Wassenhove. "Cycleon (A): Postal Networks for Reverse Logistics." European Case Clearing House Case, 2008. View Details
Cycleon (A): Postal Networks for Reverse Logistics
Drake, David F., Atalay Atasu, and Luk N. Van Wassenhove. "Cycleon (A): Postal Networks for Reverse Logistics." 2008. (Teaching Note.) View Details
Ignore, Avoid, Abandon, and Embrace: What Drives Firm Responses to Environmental Regulation?
A regulator's ability to incentivize environmental improvement among firms is vital in achieving long-term sustainability. However, firms can and do respond to environmental regulation in a variety of ways: complying with its intent; avoiding the regulation by offshoring or by abandoning the market; or ignoring the regulation by continuing with entrenched business practices. The path a profit-maximizing firm will choose depends, in part, on the expected cost of non-compliance, which is a product of the regulator's stated penalty, the likelihood that non-compliant practices are detected, and the likelihood that detected violations are punished. The type of regulatory regime—compliance-based or "pay-to-pollute"—and three important cost thresholds also drive firm response: i) the compliance or clean technology adoption threshold; ii) the offshoring threshold; and iii) the exit threshold. In this chapter, through examples of regulatory failures and successes, we develop a framework for understanding how these thresholds interact with the type of regulatory regime being considered and the expected cost of non-compliance to determine whether profit-maximizing firms ignore, avoid, or embrace environmental regulation.
Cost vs Benefits;