First Look

First Look summarizes new working papers, case studies, and publications produced by Harvard Business School faculty. Readers receive early knowledge of cutting-edge ideas before they enter the mainstream of business practice. For complete details on faculty research, see our Working Papers section.

April 10, 2007

How do leaders emerge in open innovation communities? What types of human and social capital do engineers draw upon to rise to leadership? Professor Lee Fleming and colleague David M. Waguespack explore these organizational dynamics this month in Organization Science using longitudinal analyses of careers within data from the Internet Engineering Task Force. "Consistent with the norms of an engineering culture, we find that future leaders must first make strong technical contributions. Beyond technical contributions, they must then integrate their communities in order to mobilize volunteers and avoid the ever-present danger of forking and balkanization," they write.

Also new this week: a paper on how multinational firms use internal markets opportunistically; and many business cases including three focused respectively on investor bias at JP Morgan, urban development in China, and lobbying in the U.S., the European Union, and Japan.

 

Working Papers

None this week.

 

Cases & Course Materials

Ascent Media Group (A)

Harvard Business School Case 607-064

Ascent Media races to adapt to the changes resulting from increasing digitalization of its business, from creative post-production services to warehousing and repurposing of old media content. Raises issues of how technology interacts with creative processes and outcome possibilities, and also invites discussion of strategic and organizational questions raised by the very different business models of the company's different operating divisions.

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Ascent Media Group (B)

Harvard Business School Supplement 607-080

Supplements the (A) case.

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Behavioral Finance at JP Morgan

Harvard Business School Case 207-084

Following a successful model in Europe, JP Morgan has introduced a set of five U.S. retail mutual funds with an investment philosophy and marketing strategy grounded in behavioral finance. The asset management group believes that understanding investor biases like overconfidence, anchoring, and loss aversion is key to generating returns on the investment side and educating clients on the advisory side.

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Board of Directors of Medtronic, Inc.

Harvard Business School Case 407-045

The board of directors of Medtronic, Inc., a company known for its commitment to effective corporate governance, must prepare for the departure of Chairman & CEO Bill George and the retirement of four long-time directors. The company had experienced rapid growth in the early 1990s as well as significant change in the composition of its board. Now the Medtronic directors must evaluate how the board has changed, how it will continue to change, and how it should prepare for the future.

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A Brief Note on Deferred Taxes: An Analysis Perspective

Harvard Business School Note 107-047

Provides an overview of accounting for deferred taxes. The primary objective is to provide external users with a basic understanding of deferred taxes. A simple illustrative example is provided, which is followed by a discussion of several important issues likely to be encountered in the analysis of deferred taxes (e.g., deferred tax assets vs. liabilities, balance sheet classification, permanent differences, statutory vs. effective tax rate, net operating loss carry forwards, and valuation allowances). The discussion of these issues is brief and non-technical. Provides actual deferred tax information from AOL's Form 10-K, where net operating loss carry forwards result in a large deferred tax asset and the accounting for software and deferred subscriber acquisition costs generate a large differed tax liability.

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Chongqing Tiandi

Harvard Business School Case 207-019

In late 2000, Vincent Lo, a prominent Hong Kong developer was invited by the Deputy Mayor of Chongqing, China to undertake a major redevelopment of the urban core. Lo had previously successfully developed the landmark Xintiandi retail and entertainment district in Shanghai. Lo must decide if the opportunity is the right fit in terms of place, timing, government support, and market demand.

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CMM versus Agile: Methodology Wars in Software Development

Harvard Business School Case 607-084

A CIO decides whether to adopt the "Capability Maturity Model" (CMM) within her IT department. The decision is proving surprisingly controversial; some of her best developers prefer adopting an "agile" methodological approach instead. Compares and contrasts the CMM and agile methodologies, such as Kent Beck's eXtreme Programming.

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Edward Jones in 2006: Confronting Success

Harvard Business School Case 707-497

When Jim Weddle took over as Managing Partner of Edward Jones in January 2006, the brokerage firm was at a critical juncture. The firm's distinctive strategy had enabled it to grow from its roots in small-town America to become the 4th largest broker in the U.S. Weddle was concerned, however, that the firm's success, and the changing landscape of the financial services industry, were challenging the core aspects of the strategy that had brought the firm so far. He knew that the impending strategic decisions would determine whether Edward Jones could sustain its extraordinary performance and achieve its goal of growing to 20,000 financial advisors by 2017.

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Introduction to the RC Strategy Course

Harvard Business School Course Overview 707-492

Introduces the Required Curriculum Strategy course to students at Harvard Business School.

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Kerr-McGee

Harvard Business School Case 207-020

Activist investors Carl Icahn and Barry Rosenstein acquire a stake in Oklahoma-based company Kerr-McGee. They demand two board seats and ask the company to make several operational and financial changes, including the repurchase of equity and divestiture of their chemicals business. The case protagonist, Luke Corbett, CEO, opposes these changes.

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Li Ning-Anything Is Possible

Harvard Business School Case 507-024

A leading sporting goods company in China competes aggressively against global brands Nike and Adidas, with marketing strategies adapted to geographic segments. In the main cities, where competition takes place at a very conceptual level, Li Ning has chosen to adopt a very controversial "oriental theme" for its brand, while becoming at the same time a major sponsor of international athletes of the highest caliber.

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Lobbying

Harvard Business School Note 707-471

Describes how companies engage the political and legal system and the rules and ethics associated with doing so. Focuses on the U.S. political and legal system, but also seeks to familiarize readers with lobbying norms and structures in the European Union and Japan.

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McDonald's Corp.: Managing a Sustainable Supply Chain

Harvard Business School Case 907-414

McDonald's seeks to learn from a successful response to Greenpeace's Amazon deforestation campaign in order to make its supply chain more socially and environmentally responsible.

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Motilal Oswal Financial Services Ltd.: An IPO in India

Harvard Business School Case 807-095

The executives of Motilal Oswal Financial Services, Ltd., one of the largest brokerages in India, are considering an IPO on the Indian markets. The company recently received a small private equity investment from two global private equity firms, which it has not yet fully invested. Historically, the Indian markets have favored higher-revenue companies. Should Motilal Oswal go public now, to take advantage of the hot Indian market, or hold off and build its revenue for a higher valuation?

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NCH Capital and Univermag Ukraina

Harvard Business School Case 807-143

NCH Capital is considering whether to sell its Ukrainian company Univermag Ukraina, which it has held and built up over the past decade.

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The Nikkei 225 Reconstitution

Harvard Business School Case 207-109

Taka Haneda, a proprietary trader at the Tokyo office of Goldman Sachs, has just learned that the Nikkei 225 will undergo a significant redefinition over the coming week. He faces several billion dollars of customer orders, as well as the opportunity to commit the firm's capital to provide liquidity for the event. He must decide what positions to establish, and at what price he is willing to get out.

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Parmalat Uruguay (A)

Harvard Business School Case 807-103

Three young MBAs create a partnership to acquire the assets of Parmalat in Uruguay. Focuses on their analysis prior to submitting a bid and their plan for improving the operations once their bid is accepted. In addition to improving operations, they must negotiate with creditors to reduce the debt burden on the company.

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Parmalat Uruguay (B)

Harvard Business School Supplement 807-119

Supplements the (A) case.

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Strategies Beyond the Market

Harvard Business School Note 707-469

Strategists are not alone in finding failing markets irresistible. Governments and social groups ranging from unions to the World Wildlife Fund also respond to market failures. Governments typically seek to fix failing markets, often with prescriptions of what companies can and cannot do. Activist groups are also out to change corporate behavior, but they rely on social pressure to reach their goals. Many companies that compete successfully in the market environment stumble when it comes to dealing with governments and social groups. Microsoft's near breakup by the U.S. Department of Justice and Wal-Mart's less-than-stellar performance against groups who oppose the retailer's stores are just two of many examples. "Strategies Beyond the Market" overviews an additional set of tools that strategists can use to contend with and exploit forces in a company's government, legal, and social environment.

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U.S. Taxation of Foreign-Source Corporate Income

Harvard Business School Note 207-085

Identifies several of the problems and policy choices associated with taxing foreign-source income. Examples are given of the practical after-tax effects of the major alternatives. Foreign tax credit and "tax haven" based business activities receive special attention. Provides an understanding of the basic problems and principles associated with U.S. taxation of foreign-source corporate income.

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WildChina (A)

Harvard Business School Case 807-046

WildChina (A) tells the story of Mei Zhang, a Chinese-born HBS alumna, and her pursuit of a dream: to share her passion for travel, her appreciation of China's beauty and culture, and her desire to start her own business. Describes the startup of WildChina, a tour company targeting a high-end clientele with unusual and high-quality products, and its survival of two business crises. The focus is on Zhang's decision to bring in a COO, transition him to CEO, and assume the position of Chairperson. Also describes communication and control challenges faced when Zhang moves to Los Angeles with her family, and tries to remain involved in her Beijing-based business. The decision Zhang faces is how to proceed when, in the midst of sales and operational problems and financial pressures, her CEO announces that he will be leaving the company in a matter of months.

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Worldwide Orphans Foundation

Harvard Business School Case 807-069

How does a small non-profit build its organization, funding, and visibility to become sustainable? Traces the history of Worldwide Orphans Foundation from its early days as little more than the dream of its impassioned founder, Dr. Jane Aronson, to a thriving global operation "doing some of the best work around" in serving the needs of orphans around the world.

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Publications

The Internal Markets of Multinational Firms

Download paper: http://www.bea.gov/scb/pdf/2007/03March/0307ResearchSpotlight.pdf

The Power of Stars: Do Star Actors Drive the Success of Movies?

Abstract

Is the involvement of star actors critical to the success of motion pictures? Film studios, which they regularly pay multimillion-dollar fees to star actors, seem driven by that belief. I shed light on the returns on this investment using an event study that considers the impact of over 1,200 casting announcements on trading behavior in a simulated and real stock market setting. I find evidence that the involvement of stars impacts movies' expected theatrical revenues, and I provide insight into the magnitude of that effect. For instance, my estimates suggest that, on average, stars are worth about $3 million in theatrical revenues. In a cross-sectional analysis grounded in the literature on group dynamics, I also examine the determinants of the magnitude of stars' impact on expected revenues: among other things, I show that the stronger a cast already is, the greater is the impact of a newly recruited star with a track record of box office successes or with a strong artistic reputation. Finally, in an extension to the study, I do not find that the involvement of stars in movies increases the valuation of film companies that release those movies, thus providing insufficient grounds to conclude that stars add more value than they capture. I discuss implications for managers in the motion picture industry.

Brokerage, Boundary Spanning, and Leadership in Open Innovation Communities

Abstract

What types of human and social capital identify the emergence of leaders of open innovation communities? Consistent with the norms of an engineering culture, we find that future leaders must first make strong technical contributions. Beyond technical contributions, they must then integrate their communities in order to mobilize volunteers and avoid the ever-present danger of forking and balkanization. This is enabled by two correlated but distinct social positions: social brokerage and boundary spanning between technological areas. An inherent lack of trust associated with brokerage positions can be overcome through physical interaction. Boundary spanners do not suffer this handicap and are much more likely than brokers to advance to leadership. The research separates the influence of human and social capital on promotion, and highlights previously unexamined differences between brokerage- and boundary-spanning positions. Longitudinal analyses of careers within the Internet Engineering Task Force community from 1986-2002 support the arguments.

Relevance and Rigor: Executive Education as a Lever in Shaping Practice and Research

Abstract

As professional schools, business schools aspire to couple research rigor with managerial relevance. There has been, however, a concern that business schools are increasingly uncoupled from practice and that business school research lacks real world relevance. This relevance-rigor gap affects the quality of our teaching as well as the institutional legitimacy of our business schools. We argue that executive education is an underutilized context that can enhance the quality of faculty research as well as our impact on managerial practice. Using evaluation data from variations of a single executive education program, we find that action-learning programs significantly enhance both individual and organizational outcomes compared to traditional executive education formats. Action-learning programs also enhance our teaching and research efforts. Building on these results and experiences, we suggest that executive education in general, and action-learning in particular, are fertile contexts where business schools can bridge the relevance-rigor gap.