Technology →
- 28 Oct 2010
- Working Paper Summaries
The Distinct Effects of Information Technology and Communication Technology on Firm Organization
At what point in the corporate food chain are big decisions made? It depends on technology, according to new research, which finds that information-based software will help to push decisions further down the corporate ladder, whereas communication technologies will push decisions up to the top. Research was conducted by Nicholas Bloom of Stanford University; Assistant Professor Raffaella Sadun of Harvard Business School; and Luis Garicano and John Van Reenen of the London School of Economics. Key concepts include: Enterprise Resource Planning software is a decentralizing technology: It provides information that enables lower-level managers to make more decisions without consulting their superiors. By the same token, Computer Assisted Design software creates a situation in which the worker needs less access to superiors in order to make a decision. On the other hand, the better the data network, the easier it is for workers to communicate with their superiors and to rely on them to make decisions. Closed for comment; 0 Comments.
- 26 Oct 2010
- Working Paper Summaries
When Does a Platform Create Value by Limiting Choice?
Platforms such as video games and smartphones need to attract users, and the best way to do so is to offer more and more applications. Is there ever a point where a platform should limit the variety available? Researchers Ramon Casadesus-Masanell and Hanna Halaburda observe that in many situations users enjoy consuming applications together. When such consumption complementarities are present, users may benefit if the platform limits choice. With fewer applications to choose from, it is easier for users to take full advantage from shared consumption. Key concepts include: Platforms have traditionally encouraged user adoption by providing as many applications as possible. This works because users value having more choices. When users prefer both using many applications and using the same applications as other users (multiplayer video games, for example), they face a trade-off. As it turns out, there is the tendency to use too many applications, a situation similar to a Prisoners' Dilemma: everybody would be better off consuming fewer applications but each user individually has the desire to consume more. By limiting the number of applications, the platform prevents users from consuming too many applications. If there are many applications to choose from, it is less likely that users will purchase the same set. In this case, limiting the number of applications helps the users coordinate on the same set. To limit choice, the platform has a variety of direct and indirect alternatives including imposition of high prices for developers to access the platform or directly restricting the number of applications available. The insight to practitioners is that maximizing the number of applications available is not always the best strategy for platforms. Instead, actively managing the number of applications may result in substantial value creation, which could be captured though access fees. Closed for comment; 0 Comments.
- 05 Aug 2010
- What Do You Think?
What Is Customer Opinion Good For?
Summing Up: Are customer wishes irrelevant when creating a new product? Jim Heskett's readers say it depends on the product, on market goals, and where you are in the development cycle. (Online forum has closed; next forum opens September 2.) Closed for comment; 0 Comments.
- 04 Aug 2010
- Working Paper Summaries
The Effect of Market Leadership in Business Process Innovation: The Case(s) of E-Business Adoption
The connection between market leadership and the adoption of new technologies is central to understanding how firms maintain or gain competitive advantage over time. One key determinant of firm openness to either product or process innovation is how radical or incremental a particular change is for the organization. Using the context of IT-enabled business processes for e-buying and e-selling, a setting that offers a complementary view to studies that have focused on R&D expenditure and patents as measures of innovation, HBS professor Kristina McElheran sheds light on whether, when, and why market leaders might be more likely to adopt new innovations. This study represents the first robust, multi-industry evidence that market leaders are far more likely to adopt incremental rather than radical business process innovations. Key concepts include: Extensive survey data for 1999 show that e-buying constituted a relatively incremental process innovation, while e-selling was far more radical. Market leaders were more likely than laggards to adopt incremental business process innovations. External market factors and internal characteristics reinforced each other to make adoption relatively more beneficial and/or easier for the largest, most successful firms. Market leaders were less likely than laggards to adopt radical business process innovations. For the complex, strategically sensitive activity of e-selling, market leaders faced disproportionate risks and adjustment costs, making adoption less attractive for firms with the largest market shares. The combination of complexity, strategic sensitivity, and boundary-spanning created the particular challenge observed for market leaders in the case of e-selling and potentially other business process innovations. Inter-firm coordination is an important strategic consideration as businesses grow ever more dependent on the performance of their extended value chain for success. Lagging firms may discover new opportunities to leapfrog their larger competitors using certain business-to-business process innovations and IT-enabled supply chain relationships. Closed for comment; 0 Comments.
- 07 Apr 2010
- Working Paper Summaries
Location Strategies for Agglomeration Economies
Locations thick with similar economic activity expose firms to pools of skilled labor, specialized suppliers, and potential inter-firm knowledge spillovers that can provide firms with opportunities for competitive advantage. While certainly attractive, the lure of these agglomeration economies varies. Some firms should be wary of aiding their competitors by co-locating with them, for example, because each "agglomeration economy" differs in how readily competitors can leverage contributions made by others. HBS professor Juan Alcácer and Wilbur Chung of the University of Maryland develop a framework to better understand how firms respond to agglomeration economies. Key concepts include: Firms' location choices balance the perceived risk of aiding competitors with a recognition that some agglomeration economies will be of limited use to others. Firms, on average, place more value on pools of skilled labor and specialized suppliers than on potential knowledge inflows from competitors. The priority placed on labor and suppliers persists even for industries that are more R&D intensive. Economically larger firms are less attracted to industry employment, but more attracted to industry supplier activity. Closed for comment; 0 Comments.
- 29 Mar 2010
- Research & Ideas
Ruthlessly Realistic: How CEOs Must Overcome Denial
Even the best leaders can be in denial—about trouble inside the organization, about onrushing competitors, about changing consumer behavior. Harvard Business School professor Richard S. Tedlow looks at history and discusses how executives can acknowledge and deal with reality. Plus: Book excerpt. Key concepts include: Denial is the unwillingness to acknowledge and deal with reality. What is different today is that the cost of denial has become so high. Being ruthlessly realistic with oneself is one of the greatest challenges for any CEO. Closed for comment; 0 Comments.
- 25 Mar 2010
- Working Paper Summaries
Local R&D Strategies and Multi-location Firms: The Role of Internal Linkages
While geographic co-location has obvious benefits for firm innovation, it can also have serious drawbacks. HBS professor Juan Alcácer and Ross School of Business professor Minyuan Zhao explore how firms tap into the rich resources of technology clusters while protecting the value of their innovations. To understand R&D dynamics in a cluster, the scholars argue, we must recognize that a firm located in a particular cluster may also be part of an extended network, with its operations strategically integrated across multiple locations and multiple business lines. Key concepts include: When surrounded by direct competitors, the technology leaders in a cluster favor technologies that can be quickly developed internally, and more of their R&D projects involve researchers from other locations, particularly from primary R&D sites. Internal linkages across a firm protect firm knowledge from appropriation not only in countries where intellectual property rights protection is weak, but also in risky competitive environments in general. Closed for comment; 0 Comments.
- 24 Feb 2010
- Working Paper Summaries
Accelerating Innovation In Energy: Insights from Multiple Sectors
How should the energy sector best respond to the threat of climate change? In this introductory chapter to a forthcoming book, Harvard Business School's Rebecca M. Henderson and Richard G. Newell of Duke University frame the discussion by highlighting the volume's contributions concerning four particularly innovative sectors of the U.S. economy: agriculture, chemicals, life sciences, and information technology. These four sectors have been extraordinarily important in driving recent economic growth. Henderson and Newell describe why accelerating innovation in energy could play an important role in shaping an effective response to climate change. Key concepts include: An effective innovation system has three key elements: accelerating demand for new technology; institutions that support abundant generation and dissemination of fundamental scientific and technical knowledge; and a vibrant, competitive private sector. Public policy has played a role in building and/or sustaining all three elements. If the goal of federal policy is to encourage effective technological solutions to mitigate climate change, then a short-term commitment is unlikely to meet expectations, even if the commitment is extraordinarily intense, such as was seen with the Department of Defense's Manhattan Project. If federal agencies increase investment in energy innovation at the same time that vigorous efforts are made to enhance the demand for carbon-free technology, it is likely that technological innovation could play a decisive role in mitigating some of the key economic and social risks arising from climate change. Closed for comment; 0 Comments.
- 08 Feb 2010
- HBS Case
Looking Behind Google’s Stand in China
Google's threat to pull out of China is either a blow for Internet freedom or cover for a failed business strategy, depending on with whom you talk. Professor John A. Quelch looks behind the headlines in a new case. Key concepts include: China has become more emboldened and self-confident as a result of its increasing economic significance. Google acted precipitously without giving due consideration to the impact of its announcement on stakeholders. The Google issue has become a cause célèbre that exacerbates the already fragile and festering U.S.-China relationship. Closed for comment; 0 Comments.
- 07 Dec 2009
- Research & Ideas
Government’s Positive Role in Kick-Starting Entrepreneurship
The U.S. government has spent billions of dollars bailing out troubled companies. Is it time for Uncle Sam to invest in new entrepreneurial firms as well? Professor Josh Lerner makes the case for limited government involvement in his book Boulevard of Broken Dreams. Closed for comment; 0 Comments.
- 15 Oct 2009
- Working Paper Summaries
Mixed Source
As most managers know, commercial firms may benefit from participating in open source software development by selling complementary goods or services. Open source has the potential to improve value creation because it benefits from the efforts of a large community of developers. Proprietary software, on the other hand, results in superior value capture because the intellectual property remains under the control of the original developer. While the straightforward rationale for "mixed source" (a combination of the two) is appealing, what does it mean for a business model? Under what circumstances should a profit-maximizing firm adopt a mixed source business model? How should firms respond to competitors' adoption of mixed source business models? And what are the right pricing structures under mixed source compared with the proprietary business model? In this paper the researchers analyze a model where firms with modular software must decide which modules to open and which to keep proprietary. Findings can be directly applied to the design of optimal business strategies. Key concepts include: Firms may become more closed in response to competition from an outside open source (OS) project, and are more likely to use a proprietary business model. Firms are more likely to open substitute, rather than complementary, modules to existing OS projects. Low-quality firms are generally more prone to opening some of their technologies than firms with high-quality products. Closed for comment; 0 Comments.
- 30 Sep 2009
- Working Paper Summaries
Breakthrough Inventions and Migrating Clusters of Innovation
In just a short period of time the spatial location of invention can shift substantially. The San Francisco Bay Area grew from 5 percent of U.S. domestic patents in 1975-1984 to over 12 percent in 1995-2004, for example, while the share for New York City declined from 12 percent to 7 percent. Smaller cities like Austin, Texas, and Boise, Idaho, seem to have become clusters of innovation overnight. Despite the prevalence of these movements, we know very little about what drives spatial adjustments in U.S. invention, the speed at which these reallocations occur, and their economic consequences. In this paper, HBS professor William R. Kerr investigates whether breakthrough inventions draw subsequent research efforts for a technology to a local area. Evidence strongly supports the conclusion that centers of breakthrough innovations experience subsequent growth in innovation relative to their peer locations. Key concepts include: Breakthrough inventions spur higher subsequent growth in innovation within a local area and technology compared to peer locations that, for example, have the same overall numbers of patents and similar technologies at the time when the breakthrough occurred. The underlying mobility of the workforce is quite important for the speed at which spatial adjustments occur. Immigrants, and particularly new immigration to the United States, can facilitate faster spatial reallocation. Closed for comment; 0 Comments.
- 23 Jul 2009
- Working Paper Summaries
Informed and Interconnected: A Manifesto for Smarter Cities
To make our cities and communities smarter, we must become a little smarter ourselves, seeking information and an agenda to forge connections enabling collaboration, according to HBS professor Rosabeth Moss Kanter and IBM's Stanley S. Litow. Their vision is that someday soon, leaders will combine technological capabilities and social innovation to help produce a smarter world. That world will be seen on the ground in smarter cities composed of smarter communities that support the well-being of all citizens. This paper outlines eight challenges facing cities and the communities they encompass, based on experience in the United States. Kanter and Litow provide examples of practices and programs led by both government and nonprofit organizations, many technology-enabled, that point the way to solutions, and they conclude with a call for leaders to embrace an agenda for change. Key concepts include: The need for a new approach to U.S. communities is an urgent imperative because of the biggest global economic crisis since the Great Depression. Significant barriers to solving urban problems include geographic sprawl, residential mobility, the location of jobs, the lack of overarching strategic impact goals, weakened civic leadership, and social isolation. By examining each barrier in turn (and the ways they reinforce each other), it is possible to see the opportunities for significant transformation if communities could become "smarter," with technology helping spread information and facilitate interconnections. Closed for comment; 0 Comments.
- 20 Jul 2009
- Research & Ideas
Markets or Communities? The Best Ways to Manage Outside Innovation
No one organization can monopolize knowledge in any given field. That's why modern companies must develop a new expertise: the ability to attract novel solutions to difficult or unanticipated problems from outside sources around the world. A conversation with Harvard Business School professor Karim R. Lakhani on the keys to managing distributed innovation. Key concepts include: Many organizations find they cannot monopolize knowledge in any given field of endeavor. Firms need to consider three key factors in deciding to pursue either a community- or market-based external innovation model. Successful models developed by Apple, InnoCentive, SAP, and TopCoder create incentives for many entrants to generate a variety of products and services on a platform. The firm's role is to define the boundaries of the platform and then encourage entry and innovation by outsiders. Closed for comment; 0 Comments.
- 02 Jul 2009
- Working Paper Summaries
Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations
A central challenge to modern business cycle analysis is that standard macro models are unable to generate fluctuations in the stock market with the amplitude, persistence, and lead-lag pattern observed in the data. At the same time, standard macro models predict that good news about future, such as those received during 1994-1995 on the arrival of IT, lead to recessions rather than expansions. HBS professor Diego Comin and coauthors develop a model that overcomes these two problems by explicitly incorporating an endogenous speed of diffusion of technologies that is increasing in the resources spent in adoption. Revisions in beliefs about future profits generate fluctuations in the stock market with the amplitude and lead over output observed in the data. The firms' investment decisions in adoption leads to a shift in labor demand that increases hours worked and output. Key concepts include: In the model, news about future growth prospects produces movements in current output and hours that are positively correlated with the news. The mechanism described here is also potentially relevant to business fluctuations driven by factors other than news about future technological prospects. In particular, endogenous technology adoption amplifies the effects of these shocks vis-à-vis a model without this mechanism. The framework also broadly captures the cyclical pattern of stock price movements. It can account for the run-up of stock prices in the mid 1990s and also some of the decline preceding the most recent recession. Closed for comment; 0 Comments.
- 01 Jul 2009
- Working Paper Summaries
File-Sharing and Copyright
The researchers argue that file-sharing technology has not undermined the incentives of artists and entertainment companies to create, market, and distribute new works. The advent of new technology has allowed consumers to copy music, books, video games, and other protected works on an unprecedented scale at minimal cost. Such technology has considerably weakened copyright protection, first of music and software and increasingly of movies, video games, and books. While policy discussion surrounding file-sharing has largely focused on the legality of the new technology and the question of whether declining sales in music are due to file-sharing, the debate has been overly narrow. Copyright protection exists to encourage innovation and the creation of new works—in other words, to promote social welfare. This essay analyzes the landscape and identifies areas for more research. Key concepts include: Digital technology has lowered the cost of producing movies and music and allowed artists to reach their audience in novel ways. It's difficult to argue that weaker copyright protection has had a negative impact on artists' incentives to be creative. File-sharing has not discouraged authors and publishers. The publication of new books rose by 66 percent over the 2002-2007 period. Since 2000, the annual release of new albums has more than doubled, and worldwide feature film production since 2003 is up by more than 30 percent. How markets for complementary goods (such as concerts, electronics, and communications infrastructure) have responded to file-sharing remains largely unexplored in academic research. Closed for comment; 0 Comments.
- 21 May 2009
- Working Paper Summaries
Do Friends Influence Purchases in a Social Network?
In spite of the cultural and social revolution in the rise of social networking sites such as Facebook and MySpace (and in South Korea, Cyworld), the business viability of these sites remains in question. While many sites are attempting to follow Google and generate revenues from advertising, will advertising be effective? If friends influence the purchases of a user in a social network, it could potentially be a significant source of revenue for the sites and their corporate sponsors. Using a unique data set from Cyworld, this study empirically assesses if friends indeed influence purchases. The answer: It depends. Findings are relevant for social networking sites and large advertisers. Key concepts include: There is a significant and positive impact of friends' purchases on the purchase probability of a user. However, there are significant differences across users. Specifically, this social effect is zero for 48 percent of the users, negative for 12 percent of the users, and positive for 40 percent of the users. "Moderately connected" users exhibit "keeping up with the Joneses" behavior. On average, this social influence translates into a 5 percent increase in revenues. Highly connected users tend to reduce their purchases of items when they see their friends buying them. This negative social effect reduces the revenue for this group by more than 14 percent. This finding is consistent with the typical fashion cycle wherein opinion leaders or the elite in the fashion industry tend to abandon one type of fashion and adopt the next in order to differentiate themselves from the masses. Closed for comment; 0 Comments.
- 20 Mar 2009
- Working Paper Summaries
Catering to Characteristics
Can patterns of corporate net stock issuance help identify times when particular characteristics, such as industry, size, or book-to-market ratio, are mispriced? The authors of this study argue that differences between the characteristics of issuers and repurchasers can shed light on characteristic related stock returns. Consider the case in which analysts were interested in forecasting the returns of Google. The standard approach would be to collect Google's characteristics (e.g., large, technology, non-dividend paying, etc) and associate these characteristics with an average return in the cross-section. The authors argue that if other stocks with these characteristics are issuing stock, this bodes poorly for Google's future returns, even if Google is itself not issuing. This research by HBS professor Robin Greenwood and Harvard doctoral student Samuel Hanson has implications for studying the stock market performance of seasoned equity offerings (SEOs), initial public offerings (IPOs), and recent acquirers. Key concepts include: The approach in this paper helps forecast returns to portfolios based on book-to-market, size, share price, distress, payout policy, profitability, and industry. The issuer-repurchaser spreads are informative for future returns, even controlling for firms' own issuance and repurchase decisions. Closed for comment; 0 Comments.
- 26 Nov 2008
- Working Paper Summaries
The Sciences of Design: Observations on an Emerging Field
This paper examines the sciences of design as an emerging field of study that cuts across disciplinary boundaries. The paper summarizes and synthesizes the positions, reflections, opportunities, and challenges expressed at the first doctoral consortium to explore the topic, held in 2008. It thus provides a useful agenda for clarifying and articulating important strands of this nascent field. Key concepts include: Design sciences is a movement that affects not only the information systems discipline but also several allied disciplines, which must also contribute to its definition and participation. When a common language exists across disciplines, it enables an ongoing, productive pursuit of scientific knowledge. But common languages only come about through intense, repeated conversations between individuals with disparate views and open minds. Closed for comment; 0 Comments.
Data.gov: Matching Government Data with Rapid Innovation
Data.gov is a young initiative of President Barack Obama for making raw data available on the Web. In an HBS executive education class for technology specialists, professor Karim Lakhani and the US Chief Information Officer, Vivek Kundra, sparked dialogue about new routes to innovation. Key concepts include: Data.gov makes government data--as long as it does not compromise national security or individual privacy--available on the Web in raw, machine-readable format. Data.gov is part of the Open Government initiative launched by President Barack Obama on his first day in office. As a lean organization with a mandate to move fast, Data.gov posted the first datasets five months later. Its goals are transparency, participation, collaboration, and management of systems and processes. The HBS case study of Data.gov, coauthored by professor Karim R. Lakhani, highlights a number of useful applications sparked by the Web site. One in particular creates benefits for taxpayers by sharing information between the Internal Revenue Service and the Department of Education. Closed for comment; 0 Comments.