Detecting Change in Professional Conduct Using Information from the Internet

Abstract

Increasing reliance on the Internet's perpetual memory has raised concerns regarding how dated information that would otherwise be forgotten or inaccessible can unduly or disproportionally influence current assessments and decisions. I investigate aspects of this topic for two major business entity types: one-person businesses (i.e., sole proprietors) and firms. Results show that one-person businesses tend to be more severely impacted by past adverse information than firms, and furthermore their improvement trends over time are more likely to be dismissed as noise than recognized as signals of change. While firms can offset old unfavorable conduct by engaging in new favorable behaviors, a sole proprietor's current favorable operations can remain dominated by decades-old actions. Results also indicate that decision makers perceive firms as more capable of truly changing. Moreover, while only decision makers with certain personality characteristics recognize signs of positive change from a sole proprietor, all decision makers detect and appreciate such changes in a firm's conduct. This study finds that limiting access to adverse past information is likely to be more helpful (or necessary) for one-person businesses, or more generally for individuals, than for firms.