- 22 Mar 2011
- First Look
First Look: March 22
Each week First Look summarizes new working papers, case studies, and publications produced by Harvard Business School faculty. Closed for comment; 0 Comments.
- 22 Mar 2011
- Working Paper Summaries
Platform Competition under Asymmetric Information
Research by Hanna Halaburda (Harvard Business School) and Yaron Yehezkel (Tel Aviv University) shows how pricing, profits, and market efficiency are affected in two-sided markets, such as with smartphone and video game platforms, when users and developers do not know the utility or costs associated with the platform until they join. Key concepts include: Under competition, asymmetric information-where one party has more or better information than the other-may lead to a downward distortion of trade, even market failure, while under monopoly full efficiency is achieved. The combination of the informational problem and the presence of competition creates the market inefficiency. A third main result concerns multi-homing, the ability for a developer to create applications for multiple platforms. The incumbent platform earns higher profit under multi-homing, and multi-homing eliminates the incumbent's need to distort the quantity downward. The model underscores why it is usually entrants, not incumbents, that bring major technological innovations to the market. Entrants are more likely to adopt a new, highly risky technology given the information problem. Closed for comment; 0 Comments.
- 21 Mar 2011
- Research & Ideas
Are We Thinking Too Little, or Too Much?
In the course of making a decision, managers often err in one of two directions—either overanalyzing a situation or forgoing all the relevant information and simply going with their gut. HBS marketing professor Michael I. Norton discusses the potential pitfalls of thinking too much or thinking too little. Closed for comment; 0 Comments.
- 18 Mar 2011
- Working Paper Summaries
Schumpeterian Competition and Diseconomies of Scope: Illustrations from the Histories of Microsoft and IBM
Firms dominant in one era are often less successful in new technological eras, despite being able to exploit economies of scope and other incumbent advantages. What leads to this Schumpeterian creative destruction? Researchers Timothy Bresnahan (Stanford), Shane Greenstein (Northwestern), and Rebecca Henderson (Harvard Business School) look to IBM and Microsoft for an answer. Key concepts include: Traditional explanations for creative destruction include the view that an incumbent, fearing cannibalization of its own business, under-invests in new technology. Another explanation has an incumbent, blinded by its own biases, slow to see new opportunities. Looking at the introduction of the PC and web browser, the researchers propose a third explanation: that initial successes by both IBM and Microsoft in their respective new areas was stalled by corporate resistance after they requested more resources to grow. In IBM and Microsoft's case this conflict eventually led to control of the new business being given to the old and, in both cases, effectively crippled the new business. Closed for comment; 0 Comments.
- 17 Mar 2011
- Research & Ideas
Harvard Business School Faculty Comment on Crisis in Japan
Harvard Business School faculty share their views and insights about the challenges that lie ahead for Japan's business leaders and for global companies operating there. Closed for comment; 0 Comments.
- 17 Mar 2011
- Working Paper Summaries
Marketplace Institutions Related to the Timing of Transactions
Certain markets face the problem of "unraveling," in which competition for good talent leads a firm to make job offers earlier and earlier, without sufficient knowledge about any given applicant—and in which applicants are forced to decide whether to accept a job before they really know much about working for that firm. Harvard Business School professor Alvin E. Roth discusses how this issue affects the labor markets for new lawyers and gastroenterology fellows, as well as the market for postseason college football bowls. Key concepts include: The market for postseason college bowls is one in which the negative effects of unraveling can be easily quantified: If two teams are matched to play a postseason game before they have finished the regular season, it's possible that one or both will lose some of their remaining regular season games, making the postseason bowl game less attractive to potential TV viewers than it would have been if it had featured more successful teams. Efforts to stop the problem of unraveling in the market for law graduates have generally been unsuccessful, as have attempts to establish uniform dates for recruiting and hiring. This proves that unraveling is a problem even in markets such as law, where salaries are easily adjustable. On the other hand, the market for new medical residents has faced little unraveling ever since that market introduced a stable resident matching system. This negates the idea that rigid pricing is the cause of unraveling, because the medical field generally pays its new residents uniformly across the board. Closed for comment; 0 Comments.
- 16 Mar 2011
- Working Paper Summaries
Driven by Social Comparisons: How Feedback about Coworkers’ Effort Influences Individual Productivity
Francesca Gino and Bradley R. Staats explore how the valence (positive versus negative), type (direct versus indirect), and timing (one-shot versus persistent) of performance feedback affects an employee's job productivity. Specifically, through field experiments at a Japanese bank, they investigate the extent to which job performance is affected when employees learn where they stand relative to their coworkers. Key concepts include: Telling an employee that her job performance falls in the bottom of her group will lead that employee to better her performance. But telling her that she is at the top of the group will not significantly affect performance. An indirect approach yields different results. An employee who simply learns that he doesn't fall in the bottom of his group is likely to worsen his productivity, while an employee who simply learns that he isn't in the top of his group is not likely to change his work habits at all. Persistence is effective. Employees who receive persistent feedback from employers are likely to perform better at work than those who don't, and that goes for both positive and negative feedback. Closed for comment; 0 Comments.
- 15 Mar 2011
- First Look
First Look: March 15
The downside of preventing personal Internet use at work … From technical experts to game changers … The IKEA effect. Closed for comment; 0 Comments.
- 14 Mar 2011
- Research & Ideas
Water, Electricity, and Transportation: Preparing for the Population Boom
By 2050, the world's cities will have to support 3 billion more inhabitants, mostly in developing countries, with crucial investments needed in three areas: water, energy, and transportation. Several of the planet's top city planning and environmental business experts gathered at Harvard Business School earlier this month to discuss available options. Closed for comment; 0 Comments.
- 14 Mar 2011
- Research & Ideas
Keeping Credit Flowing to Consumers in Need
Regulators and policymakers are debating the best ways to revamp our damaged system of consumer and housing finance. The problem: turning the regulatory spigot too tightly could shut off the flow of needed credit to millions of lower-income Americans. A discussion with professor Nicolas P. Retsinas. Key concepts include: The economy will continue to depend on large numbers of low-wage workers. If lenders tighten credit too stringently, millions of Americans will be barred from borrowing. The challenge is to recalibrate the country's access to credit so that more responsibility for making good loans lies with lenders, and so that the burden is not almost entirely on borrowers. Open for comment; 0 Comments.
- 10 Mar 2011
- What Do You Think?
To What Degree Does the Job Make the Person?
Summing Up: Jobs shape us as much as we shape our jobs, Jim Heskett's readers suggest. Closed for comment; 0 Comments.
- 09 Mar 2011
- Working Paper Summaries
Accounting Scholarship That Advances Professional Knowledge and Practice
Accounting scholars generally do a fine job of analyzing how we process accounting data, but they ought to spend more time looking at how that data is produced, says Harvard Business School professor Robert S. Kaplan. In this paper—in response to a newly minted professor who sought his advice—Kaplan reminds young scholars that accounting is more of a professional discipline than an academic subject. To that end, he advises them not just to teach their students the common body of accounting knowledge, but also to advance that body of knowledge by bridging the gap between scholarship and practice. Key concepts include: Accounting professors have a responsibility not just to dispense knowledge but also to advance it, especially in a time when the profession is changing rapidly. Risk management is a great issue for accounting academics to tackle. One, it is clearly relevant, due to the massive bank failures in the past few years. Two, it encompasses issues important to both academic study and professional practice-including reporting, disclosure, management control, and auditing. Young accounting professors should spend time teaching in executive education programs, which will give them an opportunity to get feedback from experienced professionals. Closed for comment; 0 Comments.
- 08 Mar 2011
- First Look
First Look: March 8
What do CEOs do? … Building "risky trust" … The Wright Brothers and open innovation. Closed for comment; 0 Comments.
- 08 Mar 2011
- Working Paper Summaries
Memory Lane and Morality: How Childhood Memories Promote Prosocial Behavior
Little Damien from The Omen notwithstanding, we generally associate childhood with goodness, purity, and innocence. This paper investigates whether feelings of moral purity can be triggered by reminding adults of their childhoods, and whether this can help to induce kind and philanthropic behavior both in social settings and in the workplace. Research was conducted by Harvard Business School professor Francesca Gino and Sreedhari D. Desai of the Edmond J. Safra Center for Ethics at Harvard University. Key concepts include: Through four experiments, the researchers show that triggering childhood memories induces feelings of moral purity in adults, which leads them to behave pro-socially—that is, to do kind, ethical things that benefit others. Recalling childhood memories also can lead adults to judge (and punish) unethical behavior more harshly than they would have otherwise. Businesses can promote positive, ethical behavior by using tasks and triggers that cause employees to hearken back to their childhoods. For example, Google, Disney, and IDEO decorate their offices with toys and colorful furniture. Closed for comment; 0 Comments.
- 07 Mar 2011
- Research & Ideas
Why Companies Fail—and How Their Founders Can Bounce Back
Leading a doomed company can often help a career by providing experience, insight, and contacts that lead to new opportunities, says professor Shikhar Ghosh. Closed for comment; 0 Comments.
- 04 Mar 2011
- Working Paper Summaries
From Social Control to Financial Economics: The Linked Ecologies of Economics and Business in Twentieth Century America
No transformation looks more consequential for the history of American higher education than the extraordinary rise of business schools and business degrees in the twentieth century. Marion Fourcade (UC Berkeley) and Rakesh Khurana (HBS) analyze the changing place of economics in American business education as reflected in the teaching of three elite business schools over the course of the twentieth century: the Wharton School (1900-1930), the Carnegie Tech Graduate School of Industrial Administration (post World War II), and the Graduate School of Business at the University of Chicago (1960s-present). Key concepts include: Wharton is an illustration of the earliest trends and dilemmas, when business schools found themselves caught between their business connections and their striving for moral legitimacy in higher education. The Carnegie Tech Graduate School of Industrial Administration reflects a new vision, starting in the 1950s, of the contribution of business to society with the rise of "management science"-a new formation that broke from the existing disciplinary system and sought to legitimatize itself through its hard-core technical capabilities. The University of Chicago's Graduate School of Business marks the decisive ascendancy of economics, and particularly financial economics, in business education over the other behavioral disciplines. This transformation helped produce and sustain new understandings of the nature of the firm, with far-reaching consequences for business practices and economic relations in society. Theories from each period provided a new language, and new categories of understanding and action, that not only became naturalized in the teachings of American business schools but also came to sustain and even instigate profound alterations in the nature of American corporations and markets-at least until the next series of tools, concepts, and business recipes came along. Closed for comment; 0 Comments.
- 03 Mar 2011
- Research & Ideas
HBS Faculty on Revolution in the Middle East and North Africa
The historic events in North Africa and the Middle East are examined by three professors: Deepak Malhotra, an authority on negotiation strategy; Noel Maurer, an expert on the politics and economics of the energy business; and Magnus Thor Torfason, an authority on how behavior is influenced by the social structures of individuals and organizations. Key concepts include: The US response to events in the Middle East and North Africa needs to be guided by three key tenets of effective diplomacy: considering our enemies tomorrow, not just our friends today; identifying what makes these situations different from other, similar situations; and being steered by values that can be clearly and consistently articulated. Although they bring uncertainty and higher oil prices in the short term, these revolutions offer the possibility of enhanced representation that will bring the people in these nations more stability, public goods, and a better and more competitive business environment. In autocratic states, protestors always face the threat of violent retribution. Social media networks helped to allay fears by showing people beforehand that the protests would be huge, thus providing some reassurance that it would be difficult for the regimes to retaliate. However, powerful international networks formed through major organizations, such as the United Nations, may be necessary to determine whether the protests are ultimately successful. Open for comment; 0 Comments.
- 03 Mar 2011
- Working Paper Summaries
How Firm Strategies Influence the Architecture of Transaction Networks
In business, an "ecosystem" refers to a group of firms that work together through a series of shared transactions to provide a complex product or service. Using data from the disparate Japanese electronics and automotive sectors, this paper tackles the following questions: Do hierarchies of interfirm transaction networks vary across different ecosystems? What practices explain the difference in hierarchy across these two ecosystems? How do firms' strategies influence hierarchy? And what environmental factors explain the differences in the largest firm's strategies in each ecosystem? Research was conducted by Carliss Y. Baldwin of Harvard Business School and Jianxi Luo, Daniel E. Whitney, and Christopher L. Magee of the Massachusetts Institute of Technology. Key concepts include: There is a much lower degree of hierarchy in the electronics sector than in the automotive sector, due to the numerous interfirm transaction cycles in the former. Many electronics firms have adopted the strategy of "vertically permeable boundaries," meaning that they allow goods to flow from division to division within the firm, but at the same time, internal divisions can buy from and sell to external suppliers and customers. This strategy, which apparently leads to an increase in transaction cycles and innovation, is virtually nonexistent in the automotive sector. Several environmental factors explain the difference in strategy at these firms. Electronics firms face short product life cycles, low transaction costs, and low levels of asset specificity (meaning investments initially meant to support one transaction are likely to retain their value even if they are used for a different transaction). Automotive firms, on the other hand, have long product life cycles, high transaction costs, and high levels of asset specificity. Closed for comment; 0 Comments.
- 02 Mar 2011
- Research & Ideas
Managing the Open Source vs. Proprietary Decision
In their new book, The Comingled Code, HBS professor Josh Lerner and London School of Economics professor Mark Schankerman look at the impact of open source software on economic development. Our book excerpt discusses implications for managers. Closed for comment; 0 Comments.
China’s 60-Year Road from Revolution to World Power
In a new book, The People's Republic of China at 60: An International Assessment, HBS professor William C. Kirby discusses common assumptions about pre-revolutionary China and its development into an economic power. Key concepts include: Essays in the book address four main themes: politics; social transformations; wealth and well-being; and culture, belief, and practice. Kirby refers to the first three decades of the PRC as "a regime of wasted, and wasteful—not to mention criminal—youth." However, he says, many of the essays in the book show how the country has taken good advantage of the last three decades. Mid-century revolutionaries and scholars cited the economy as a major reason that China needed a revolution. However, the country actually sustained decent financial growth, fueled by private enterprise, from the 1910s until the onset of the global depression of the 1930s and the Sino-Japanese war in 1937. While China's central government was weak in the first half of the twentieth century, the country during that time developed strong methods of institution-building at the national, provincial, municipal, and local levels. Closed for comment; 0 Comments.