- 19 Oct 2020
- Working Paper Summaries
Bankruptcy and the COVID-19 Crisis
Analyzing the impact of the COVID-19 crisis on bankruptcy filing rates in the United States, this study finds that large businesses, small businesses, and consumers experience very different effects of the crisis.
- 13 May 2019
- Working Paper Summaries
The Changing Landscape of Auditor Litigation and Its Implications for Audit Quality
Data from 1996 to 2016 shows that shareholder litigation against auditors has declined in recent years. Empirical evidence shows that Rule 10b-5, the Securities Act statute used for class action lawsuits, has lost its bite for use against auditors. This decline is driven, at least in part, by the US Supreme Court’s narrowing of liability standards. These findings suggest weakened shareholder protection with profound implications for investors.
- 08 Nov 2018
- Working Paper Summaries
Arbitration with Uninformed Consumers
Using data on securities disputes, this study of information advantages in consumer arbitration finds that industry-friendly arbitrators are 40 percent more likely than consumer-friendly arbitrators to be selected to take on arbitration cases. Limiting respondents’ and claimants’ inputs over the selection process could improve outcomes for consumers.
- 11 Jun 2018
- Research & Ideas
Why South Korea's Samsung Built the Only Outdoor Skating Rink in Texas
New research by Lauren Cohen and Umit Gurun finds that when some companies are sued, they put their advertising dollars to work in unusual ways to influence local juries. Meet 'TiVo,' the championship steer. Open for comment; 0 Comments.
- 17 Jul 2016
- Working Paper Summaries
Tort Reform and Innovation
This paper investigates how tort reforms might affect the development of new medical device technologies. The authors find that caps on non-economic damages (such as pain and suffering) are associated with an average decline in patenting for medical instrument technologies. The effect, however, is highly varied and depends on the characteristics of both the devices and the medical fields.
- 22 Feb 2016
- Research & Ideas
The ‘Mother of Fair Trade’ was an Unabashed Price Protectionist
Historian Laura Phillips Sawyer unearths the story of little-known drug store owner Edna Gleason who, in a man’s world, helped fire a progressive movement to protect small-business owners from price-slashing chains. Open for comment; 0 Comments.
- 12 Mar 2015
- Working Paper Summaries
What Courses Should Law Students Take? Harvard’s Largest Employers Weigh In
An online survey of 124 practicing attorneys at major law firms suggests possible new directions for educating and training Harvard Law School students. The most salient result from the survey is that students should learn accounting and financial statement analysis, as well as corporate finance. These two subject areas are viewed as particularly valuable both for lawyers in litigation and lawyers working in corporate/transactional practice areas. Closed for comment; 0 Comments.
- 08 Oct 2014
- Working Paper Summaries
The Federal Reserve’s Abandonment of Its 1923 Principles
One of the most dramatic reversals in Federal Reserve policymaking has been the targeting of monetary policy towards financial stability. In 1923, for example, the Federal Reserve's Annual Report officially announced that the goal of monetary policy was the avoidance of speculative lending, which was thought to lead to inflation and crisis. By contrast, in 2002 there was broad agreement at the Fed with economist Ben Bernanke's view that monetary policy should be aimed exclusively at macroeconomic goals while financial stability should be ensured by regulatory means instead. In this paper the author explains when this reversal occurred and he sheds some light on why it did. He shows that two principles in 1923—the discouraging of speculative lending by commercial banks, and the desire to meet the credit needs of business—remained important in Federal Open Market Committee (FOMC) deliberations until the mid-1960's. After this, the FOMC spent less time discussing the composition of bank loans. Overall, as the author argues, an unwillingness to devote monetary policy to financial stability may well make financial crises more likely. This paper may thus contribute to the understanding of the ultimate sources of the financial crisis of 2007. Key concepts include: This paper explores the persistence and some of the consequences of the eventual abandonment by the FOMC of principles embedded in the Federal Reserve's Tenth Annual Report of 1923. As the Fed directs monetary policy towards financial stability, the history of how it abandoned this earlier goal contains lessons for the future. Understanding the abandonment of the Fed's 1923 principles also sheds light on the relevance of various views about what determines Fed policy. Closed for comment; 0 Comments.
- 20 Aug 2014
- Research & Ideas
Dragging Patent Trolls Into the Light
New research by Lauren Cohen and colleagues shows that patent trolls are not just the stuff of fairy tales. Open for comment; 0 Comments.
- 13 May 2014
- Working Paper Summaries
The Contaminating Effects of Building Instrumental Ties: How Networking Can Make Us Feel Dirty
Network ties are essential to advancement in organizations: they provide access to opportunities, political insight, and technical knowledge. Yet networking with the goal of advancement often leaves individuals feeling somehow bad about themselves—even dirty. The authors use field and laboratory data to examine how goal-oriented or instrumental networking influences individual emotions, attitudes, and outcomes, including consequences for an individual's morality. The authors argue that networking for professional goals can impinge on an individual's moral purity—a psychological state that results from a person's view of the self as clean from a moral standpoint and through which a person feels virtuous—and thus make him or her feel dirty. There are three main insights: First, the authors show the importance of a clear conceptual distinction between instrumental networking driven by individual agency versus spontaneous networking reflecting the constraints and opportunities of the social context. Second, the research establishes the relevance of moral psychology for network theory. Third, because people in powerful positions do not experience the morally contaminating effects of instrumental networking, power emerges from this research as yielding unequal access to networking opportunities, thus reinforcing and perpetuating inequality in performance. Key concepts include: Professional-instrumental networking is the purposeful creation of social ties in support of task and professional goals. The content and approach of networking each influence the psychological experience of those engaging in it, including a person's feelings of moral purity. The amount of power people have when they engage in instrumental networking for professional goals influences how dirty such networking can make them feel. Organizations need to create opportunities for emergent forms of networking, because people who need instrumental networking the most are the least likely to do it. Closed for comment; 0 Comments.
- 21 Apr 2014
- Research & Ideas
Bio-Piracy: When Western Firms Usurp Eastern Medicine
Raj Choudhury and Tarun Khanna examine the history of herbal patent applications, challenging a stereotype that characterizes Western firms as innovators and emerging markets as imitators. Open for comment; 0 Comments.
- 16 Jan 2014
- Research & Ideas
Resolving Patent Disputes that Impede Innovation
Technical standards both spur innovation and protect the innovators, but abuses in the intellectual property protection system threaten US competitiveness. Josh Lerner and Jean Tirole discuss remedies. Open for comment; 0 Comments.
- 25 Nov 2013
- Working Paper Summaries
Standard-Essential Patents
Standards play a key role in many industries, including those critical for future growth. Intellectual property (IP) owners vie to have their technologies incorporated into standards, so as to collect royalty revenues (if their patents dominate some of the functionalities embodied in the standard) or just to develop a competitive edge through their familiarity with the technology. However, it is hard to know in advance whether patents are complements or substitutes, i.e., how essential they are. Thus a major policy issue in standard setting is that patents that seem relatively unimportant may, by being included into the standard, become standard-essential patents (SEPs). In an attempt to curb the monopoly power that the standard creates, most standard-setting organizations (SSOs) require the owners of patents covered by the standard to grant licenses on fair, reasonable and non-discriminatory (FRAND) terms. Needless to say, such loose price commitments can lead to intense litigation activity. This paper constitutes a first pass at a formal analysis of standard-essential patents. It builds a framework in which essentiality and regulation functions can be analyzed, provides a precise identification of the inefficiencies attached to the lack of price commitment, and suggests a policy reform that restores the ex-ante competition called for in the literature and the policy debate. Key concepts include: Standards transform inessential patents into standard-essential ones. Price discussions within the standard setting process run the risk of expropriation of IP holders, as even balanced SSOs will "blackmail" IP owners to accept low prices in exchange for their functionalities' being selected into the standard. The ability to engage in forum shopping enables IP owners to shun SSOs that force them to charge competitive prices. This suggests imposing mandatory structured price commitments on SSOs. Closed for comment; 0 Comments.
- 14 Nov 2013
- Working Paper Summaries
What Shapes the Gatekeepers? Evidence from Global Supply Chain Auditors
Private gatekeepers, from credit rating agencies to supply-chain auditors, are supposed to provide unbiased, objective assessments of companies' internal operations, and such private assessments play a central role in contemporary regulatory regimes. While the impartiality of gatekeeping organizations has come into question over the past decade, little is known about what drives the decisions of the individual accountants, auditors, analysts, and attorneys who work at these organizations. Using data from a private, third-party social auditing firm that assesses global supply chain factories' adherence to corporate codes of conduct governing workplace conditions, this study reveals that external auditors' findings are shaped by a combination of economic incentives and social factors. The study highlights opportunities to design and staff audits to maximize their impartiality and credibility. Key concepts include: Gatekeepers, such as accountants, attorneys, auditors, and analysts, typically have substantial professional discretion to make vital gatekeeping decisions on the ground. In the supply-chain auditing context, gatekeepers are influenced by conflicts of interest and by social factors, including ongoing relationships with clients, on-the-job experience, professional training, and gender diversity. Companies using auditors and other gatekeepers should consider not only which organization to hire, but also the characteristics of the staff deployed on the gatekeeping teams. Auditing teams can benefit from gender diversity, professional training, and experience, although the marginal benefits of the latter attenuate over time. Regulatory systems reliant on private gatekeepers should be designed to mitigate the effects of conflict of interest and leverage social factors of team compositions to enhance the reliability and integrity of gatekeeping decisions. Closed for comment; 0 Comments.
- 04 Oct 2013
- Working Paper Summaries
Imperfect Information, Patent Publication, and the Market for Ideas
The market for ideas improves the innovation process by promoting division of labor between upstream inventors and downstream developers. Frictions such as asymmetric information and search costs may hinder the smooth functioning of the market and delay, or even block, mutually profitable transactions between buyers and sellers. In this paper, the authors study the effects of an important disclosure mechanism, the publication of patent applications, on mitigating these frictions and, thus, facilitating transactions in the market for ideas. In particular, they employ an important policy change in the American Inventors Protection Act (AIPA), which required that U.S. patent applications filed beginning on November 29, 2000 be published 18 months after the application date. Findings show that post-AIPA patents, on average, are licensed 8.5 months earlier than pre-AIPA inventions. This shortening of the licensing lag is economically significant, given the 20-year duration of U.S. patents, and can translate to millions of dollars in profits and licensing revenues. Key concepts include: Disclosure through patent publication facilitates transactions in the market for ideas, potentially through reducing frictions such as information asymmetries, search costs, and costs of evaluating competing ideas. For inventors that choose to license, 18-month publication accelerates licensing by 8.5 months on average. Closed for comment; 0 Comments.
- 27 Aug 2013
- Working Paper Summaries
The Impact of Patent Wars on Firm Strategy: Evidence from the Global Smartphone Market
Patents and patent enforcement strategies have become an essential part of firms' competitive strategies: They are used as isolating mechanisms to protect intellectual property or as defense mechanisms to help obtain access to external innovations. Using data from the global smartphone market, the authors of this paper investigate the effect of escalated patent litigations—the so-called patent war—on firm strategy. The smartphone industry is a classic example of a business ecosystem, as participants in this industry are highly interconnected and this interconnectivity means that effects on some ecosystem participants are likely to extend to affect the rest. The authors' findings show that the efficacy of patent enforcement systems across markets plays a significant role in firm strategy during patent wars, and ultimately shapes the global competitive landscape. As the patent war intensifies, smartphone vendors, even those not directly involved in patent litigations, gradually shift their business foci to markets with weaker intellectual property (IP) rights protection. This shift, however, is attenuated for vendors with stronger technological capabilities and is more pronounced for vendors whose home markets have weak IP systems. Together, these changes shape the competitive landscape for platform competition. Key concepts include: This study enhances our understanding of patents, patent enforcement strategies, and the dynamics of patent wars in platform competition. Patent strategy and its enforcement are becoming increasingly important for value appropriation by innovators, similar to marketing and pricing. Firms use markets with strong IP protection as a natural battleground for their patent enforcement strategies, which leads to increased litigation risk for other participants in those markets. As the patent war intensifies, smartphone vendors focus their businesses more on markets with weak IP protection than on those with strong IP protection, even when they are not involved in patent litigation themselves. This effect is more pronounced for vendors with weak technological capabilities, and vendors that come from countries with weak IP systems. Consistent with the shift at the vendor level, Android market share grows faster in weak IP countries than in strong IP countries as the patent war intensifies. Interestingly, this result suggests that the patent war intended to hamper the proliferation of Android phones may have merely shifted the sales of Android phones to weak IP countries. Consequently, the Android system has flourished in weak IP countries. Closed for comment; 0 Comments.
- 24 Sep 2012
- Research & Ideas
Why Do We Tax?
As the US presidential election bears down for November, it's prime time to ask how the income tax system could be improved. Assistant Professor Matthew C. Weinzierl suggests how. Closed for comment; 0 Comments.
- 06 Jul 2012
- Working Paper Summaries
Looking Up and Looking Out: Career Mobility Effects of Demographic Similarity among Professionals
While women and racial minorities have increasingly crossed the threshold into professional service organizations, the path to the top remains elusive. Why do inequalities persist? McGinn and Milkman study processes of cohesion, competition, and comparison by looking at career mobility in a single up-or-out professional service organization. Findings show that higher proportions of same-sex and same-race superiors enhanced the career mobility of junior professionals. On the flip side, however, higher proportions of same-sex or same-race peers increased the likelihood of women's and men's exit and generally decreased their chances of promotion. This research highlights how important it is to look at both cooperative and competitive effects of demographic similarity when trying to address the problem of persistent underrepresentation of women and minorities at the highest levels in organizations. Key concepts include: Social comparisons lead to measurable effects on individuals' careers, in turn shaping the demographic composition at the top of professional service organizations. Organizations should attend to the ways in which policies and practices invoke competition and comparison within demographic categories. Clustering same-race or same-sex junior employees to provide an increased sense of community may have the opposite effect of that desired, unless accompanied by senior professionals' active sponsorship of juniors across demographic lines. Attempts to design employment practices that are blind to the demographics of candidates are likely to succeed only if all candidates perceive and receive equal mentoring, sponsorship, and peer support regardless of their race and gender. Among peers, the potentially positive role for social cohesion could be compromised by minimal interaction in day-to-day work, while limited opportunities for choice assignments and promotion lend a distinctly competitive edge to the work environment. Junior professionals perceive that they are easily replaced by peers. Closed for comment; 0 Comments.
- 29 Oct 2010
- Research & Ideas
Will I Stay or Will I Go? How Gender and Race Affect Turnover at ‘Up-or-Out’ Organizations
Gender and racial inequalities continue to persist at "up-or-out" knowledge organizations, making it difficult for women and minorities to advance to senior levels, Kathleen McGinn says. Closed for comment; 0 Comments.
Scaling Two Businesses Against the Odds: Wendy Estrella’s Founder’s Journey
Entrepreneur Wendy Estrella is attempting to simultaneously scale her law practice, as well as her property management and development company. What strategy will benefit both businesses, and is there a downside to scaling them together, rather than focusing on each one separately? Harvard Business School senior lecturer Jeffrey Bussgang and Estrella discuss her unique founder’s journey – from immigrating to the U.S. to building both of her businesses in Lawrence, Massachusetts despite the specific challenges she faced as a minority entrepreneur. The related case is “Wendy Estrella: Scaling Multiple Businesses.”