Rebecca Henderson

22 Results


Making the Numbers? ‘Short Termism’ & the Puzzle of Only Occasional Disaster

Steady and reliable earnings bring many advantages to the firms that deliver them. Share prices rise, capital costs decline, and bonuses become both bigger and more likely. Such firms grow faster and attract more talented people to manage that growth. Despite these benefits, however, scholars and practitioners have long been critical of the short-term focus that often characterizes western managers. In this paper the authors develop and describe a model suggesting that the solution to this seeming paradox lies in the fact that earnings management, above a given threshold, is relatively harmless, but below this threshold it can be disastrous. The results have important implications for understanding managerial incentives and the internal processes that create sustained advantage. Read More

The Business of Climate Change

What is the role of business and its leaders in creating positive climate change? In the middle of Climate Week, Six Harvard Business School faculty provide different perspectives. Closed for comment; 4 Comments posted.

Tackling Climate Change Will Cost Less Than We Think

Yes, addressing climate change will be expensive, but not nearly as much as the costs of delaying action, argues Rebecca Henderson. Closed for comment; 6 Comments posted.

Calderón: Economic Arguments Needed to Fight Climate Change

Former President of Mexico Felipe Calderón says the United States Congress and Chinese coal plants are the biggest obstacles to fixing climate change. Open for comment; 4 Comments posted.

Management Practices, Relational Contracts, and the Decline of General Motors

What led to General Motors' decline? Long regarded as one of the best managed and most successful firms in the world, its share of the US market fell from 62.6 to 19.8 percent between 1980 and 2009, and in 2009 the firm went bankrupt. The authors argue that the conventional explanations for GM's decline are seriously incomplete. They discuss a number of causes for the firm's difficulties, and make the case that one of the reasons that GM began to struggle was because rival Toyota's practices were rooted in the widespread deployment of effective relational contracts--agreements based on subjective measures of performance that could neither be fully specified beforehand nor verified after the fact and that were thus enforced by the shadow of the future. GM's history, organizational structure, and managerial practices made it very difficult to maintain these kinds of agreements either within the firm or between the firm and its suppliers. The authors also argue that at least two aspects of GM's experience seem common to a wide range of firms. First, past success often led to extended periods of denial: Indeed a pattern of denial following extended success appears to be a worldwide phenomenon. Second, many large American manufacturers had difficulty adopting the bundle of practices pioneered by firms like Toyota. The paper concludes by discussing the implications of this history for efforts to revive American manufacturing. Read More

Private Sector, Public Good

What role, if any, does business have in creating social good? A new seminar series at Harvard Business School tackles this complex question. Closed for comment; 12 Comments posted.

Teaching Climate Change to Skeptics

The Business and Environment Initiative at Harvard Business School aims to shift the debate about climate change from a political discussion to a practical conversation about risk and reward. Closed for comment; 36 Comments posted.

A Manager’s Moral Obligation to Preserve Capitalism

Harvard Business School's Rebecca M. Henderson and Karthik Ramanna argue that company managers have a moral obligation to preserve capitalism. Closed for comment; 20 Comments posted.

Managers and Market Capitalism

In whose interests should managers act, particularly when structuring market regulations in highly technical or specialized matters that are largely outside public purview? This paper raises questions about the role of managers in sustaining the conditions for market capitalism to achieve its normative objectives. Rebecca Henderson and Karthik Ramanna begin with a discussion of the normative arguments for fully competitive markets as a resource allocation mechanism in complex societies. They suggest that Milton Friedman's assertion that the business of business is to increase its profits was in fact a moral assertion rooted in this normative framework. Next, they discuss the conditions for the existence of competitive markets and offer a brief overview of the institutions that provide them, noting that a combination of for-profit, pure public, and public-private institutions are needed to sustain capitalism. This perspective has two implications for managers. First, in many cases the opportunity to provide market completing institutions is a significant profit opportunity. Second, in those cases in which the provision of an institution is a scarcely attended political process or a public good that cannot be easily realized by managers, managers may have a duty to mitigate this market incompleteness even if it is not immediately profit maximizing to do so. Ultimately, managers' actions are likely to shape the moral and political legitimacy of market capitalism. Read More

Pulling Campbell’s Out of the Soup

Campbell Soup had lost its way when Douglas Conant took charge in 2001. His first task: get out of his quiet zone and apply bold measures. Open for comment; 5 Comments posted.

How CEOs Sustain Higher-Ambition Goals

At a recent conference, executives underscored the importance of employee engagement, contributing to the community, and creating sustainable environment strategies. Closed for comment; 6 Comments posted.

What Do Managers Do? Exploring Persistent Performance Differences among Seemingly Similar Enterprises

Decades of research using a wide variety of detailed plant- and firm-level data has provided strong evidence of persistent performance differences among seemingly similar enterprises. But what causes these differences? In this paper, the chapter of a forthcoming book, Gibbons and Henderson focus on the role of "relational contracts" in sustaining persistent performance differences among seemingly similar enterprises. The paper provides evidence both that many important management practices rely on relational contracts, and that relational contracts can be hard to build and change. They explore a number of reasons that relational contracts may be difficult to build, exploring both "bad parameters" and "bad luck" and the difficulties inherent in communicating the full terms of an evolving contract. They suggest that this perspective opens up a rich field of research into the role that managers play in sustaining superior performance and explore a number of theoretical and empirical approaches that may prove fruitful in building further understanding. Read More

Unplugged: What Happened to the Smart Grid?

Replacing the antiquated electrical system in the United States with a super-efficient smart grid always seemed a surefire opportunity for entrepreneurs. So what went wrong? asks Professor Rebecca M. Henderson. Closed for comment; 14 Comments posted.

Relational Contracts and Organizational Capabilities

If capabilities are indeed a source of sustained competitive advantage, why don't they diffuse more rapidly? Capabilities diffuse slowly even when managers acknowledge that they are behind and are spending heavily to catch up, and where there appears to be industrywide agreement about best practice. This paper by R. Gibbons and R. Henderson suggests that the often slow diffusion of competitively significant capabilities is because many key managerial practices rely on relational contracts: an economist's term for collaboration sustained by the shadow of the future, as opposed to formal contracts enforced by courts. Building these relational contracts requires moving beyond task knowledge to the development of "relational knowledge." Relational knowledge may be substantially more difficult to develop than task knowledge both because there is much more of it and because its acquisition is complicated by incentive problems. Overall, while it is well established that organizations are replete with relational contracts, these informal understandings may be one of the reasons that competitively important practices are sometimes surprisingly slow to diffuse. Read More

Designing Cities for a Sustainable Future

The city of the past is likely not the city of the future—climate change is bringing an end to the traditional model. Harvard Business School faculty are thinking along with government leaders and business practitioners about how to create sustainable places to live and work. From HBS Alumni Bulletin. Open for comment; 8 Comments posted.

HBS Faculty Comment on Environmental Issues for Earth Day

Harvard Business School faculty members offer their views on the many business facets of "going green." Open for comment; 4 Comments posted.

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. Read More

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; 18 Comments posted.

Making the Numbers? ‘Short Termism’ & the Puzzle of Only Occasional Disaster

Executives at public companies are always under pressure to "meet the numbers" each quarter, often so much so that they sacrifice long-term investments in order to make everything look rosy in the short term. In this paper, Harvard Business School professor Rebecca M. Henderson and Sloan School of Management professor Nelson P. Repenning set out to reconcile the apparently contradictory strategies of short-term results and long-term investments. Read More

How to Speed Up Energy Innovation

We know the grand challenge posed by shifting away from dirty energy sources. The good news, says Harvard Business School professor Rebecca Henderson, is that we have seen such change before in fields including agriculture and biotech, giving us a clearer pathway to what it will take. Read More

Earth Day Reflections

On the 40th anniversary of Earth Day, April 22, Harvard Business School professors Robert G. Eccles, Rebecca Henderson, and Richard H.K. Vietor shared their views on the sustainability-related challenges and opportunities facing today's business leaders. Read More

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. Read More