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.

August 7, 2007

It's well acknowledged that ethnic networks help to stoke entrepreneurship in developing countries. But how much do local entrepreneurs rely on the diaspora for business leads and financing? Can disapora networks serve as a substitute when local, formal institutions are weak and barriers to trade are high? A new working paper for download explores the case of India, whose diaspora is reckoned at over 18 million people across 130 countries. Among the findings: "[Local] entrepreneurs located outside software hubs—in cities where monitoring and information flow on prospective clients is harder—rely significantly more on diaspora networks for business leads and financing." The paper provides a number of insights for leveraging these important networks. Titled "Diasporas and Domestic Entrepreneurs: Evidence form the Indian Software Industry," it is authored by professors Ramana Nanda and Tarun Khanna.

Another working paper for download describes how hospital front-line staff—physicians, nurses, and respiratory therapists—can share decision making and better interact, as recommended by the Institute of Medicine. Also new this week: a Marketing Science article on price partitioning; an article on the governance of open-source initiatives; and cases on the commercial arm of the British Broadcasting Corporation; JetBlue financing; and New York City School Chancellor Joel Klein's efforts to revive public schools through the creation of a Leadership Academy for principals.

 

Working Papers

The New Market for Federal Judicial Law Clerks

Abstract

In the past, judges have often hired applicants for judicial clerkships as early as the beginning of the second year of law school for positions commencing approximately two years down the road. In the new hiring regime for federal judicial law clerks, by contrast, judges are exhorted to follow a set of start dates for considering and hiring applicants during the fall of the third year of law school. Using the same general methodology as we employed in a study of the market for federal judicial law clerks conducted in 1998-2000, we have broadly surveyed both federal appellate judges and law students about their experiences of the new market for law clerks. This paper analyzes our findings within the prevailing economic framework for studying markets with tendencies toward "early" hiring. Our data make clear that the movement of the clerkship market back to the third year of law school is highly valued by judges, but we also find that a strong majority of the judges responding to our surveys has concluded that nonadherence to the specified start dates is very substantial—a conclusion we are able to corroborate with specific quantitative data from both judge and student surveys. The consistent experience of a wide range of other markets suggests that such nonadherence in the law clerk market will lead to either a reversion to very early hiring or the use of a centralized matching system such as that used for medical residencies. We suggest, however, potential avenues by which the clerkship market could stabilize at something like its present pattern of mixed adherence and nonadherence, thereby avoiding the complete abandonment of the current system.

Download the paper: http://papers.nber.org/papers/W13213

Institutional Tax Clienteles and Payout Policy

Abstract

This paper employs heterogeneity in institutional shareholder tax characteristics to identify the relationship between firm payout policy and tax incentives. Analysis of a panel of firms matched with the tax characteristics of the clients of their institutional shareholders indicates that "dividend-averse" institutions are significantly less likely to hold shares in firms with larger dividend payouts. This relationship between the tax preferences of institutional shareholders and firm payout policy could reflect dividend-averse institutions gravitating to low-dividend paying-firms or managers adapting their payout policies to the interests of their institutional shareholders. Evidence is provided that both effects are operative. Instrumental variables analysis indicates that plausibly exogenous changes in payout policy result in shifting institutional ownership patterns. Similarly, exogenous changes in the tax code indicate that as the tax cost of paying dividends changes, managers alter their dividend policy to serve their institutional shareholders.

Download the paper: http://papers.nber.org/papers/W13283

Taxes and Portfolio Choice: Evidence from JGTRRA's Treatment of International Dividends

Abstract

This paper investigates how taxes influence portfolio choices by exploring the response to the distinctive treatment of foreign dividends in the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA). JGTRRA lowered the dividend tax rate to 15% for American equities and extended this tax relief only to foreign corporations from a subset of countries. This paper uses a difference-in-difference analysis that compares US equity holdings in affected and unaffected countries. The international investment responses to JGTRRA were substantial and imply an elasticity of asset holdings with respect to taxes of -1.6. This effect cannot be explained by several potential alternative hypotheses, including differential changes to the preferences of American investors, differential changes in investment opportunities, differential time trends in investment or changed tax-evasion behavior.

Download the paper: http://papers.nber.org/papers/W13281

Diasporas and Domestic Entrepreneurs: Evidence from the Indian Software Industry

Abstract

This study explores the importance of cross-border social networks for entrepreneurship in developing countries by examining ties between the Indian expatriate community and local entrepreneurs in India's software industry. We find that entrepreneurs located outside software hubs—in cities where monitoring and information flow on prospective clients is harder—rely significantly more on diaspora networks for business leads and financing. Relying on these networks is also related to better firm performance, particularly for entrepreneurs located in weaker institutional environments. Our results provide micro-evidence consistent with a view that cross-border social networks serve an important role in helping entrepreneurs to circumvent the barriers arising from imperfect local institutions in developing countries.

Download the paper: http://www.hbs.edu/research/pdf/08-003.pdf

Improving Patient Outcomes: The Effects of Staff Participation and Collaboration in Healthcare Delivery

Abstract

Front-line staff possess an immense amount of functional and experiential knowledge from which their organizations can learn. This paper examines two distinct processes for leveraging front-line staff knowledge in organizational learning—participation and collaboration. Participation describes front-line staff sharing decision-making authority with hierarchical superiors (e.g., managers). Collaboration refers to front-line staff respectfully working together by sharing information and coordinating activities to achieve a goal. Using a sample of hospital intensive-care units, we found beneficial effects of front-line staff participation and collaboration on organizational performance, as measured by improvement in risk-adjusted unit mortality. However, the positive effects had contingencies. Participation's effect was contingent on the type of participation. Participation in daily unit management had no effect on unit mortality, while participation in process improvement was positively related to improvement in unit mortality. The positive relationship between collaboration and improvement in mortality was greater for units with larger staff sizes. The implications of these findings for organizational learning, process improvement and human resource management are discussed.

Download the paper: http://www.hbs.edu/research/pdf/08-002.pdf

Deferred Acceptance Algorithms: History, Theory, Practice, and Open Questions

Abstract

The deferred acceptance algorithm proposed by Gale and Shapley (1962) has had a profound influence on market design, both directly, by being adapted into practical matching mechanisms, and, indirectly, by raising new theoretical questions. Deferred acceptance algorithms are at the basis of a number of labor market clearinghouses around the world, and have recently been implemented in school choice systems in Boston and New York City. In addition, the study of markets that have failed in ways that can be fixed with centralized mechanisms has led to a deeper understanding of some of the tasks a marketplace needs to accomplish to perform well. In particular, marketplaces work well when they provide thickness to the market, help it deal with the congestion that thickness can bring, and make it safe for participants to act effectively on their preferences. Centralized clearinghouses organized around the deferred acceptance algorithm can have these properties, and this has sometimes allowed failed markets to be reorganized.

Download the paper: http://papers.nber.org/papers/W13225

 

Cases & Course Materials

AARP Foundation (A)

Harvard Business School Case 107-051

AARP Foundation—a leading non-profit corporation—must create a new "Dashboard" performance measurement tool to track the effectiveness of its new strategic plan.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=107051

AARP Foundation (B)

Harvard Business School Supplement 107-052

Supplements the (A) case.

Purchase this supplement:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=107052

BBC Worldwide: Global Strategy

Harvard Business School Case 507-034

In January 2007, John Smith, chief executive officer of BBC Worldwide (BBC WW), the commercial arm of the British Broadcasting Corporation (BBC), was preparing to meet with his senior managers to discuss BBC WW's global strategy options. BBC WW exploited and exported BBC-branded content around the globe through all formats, including magazines, television, books, DVDs, audio books, merchandise, mobile phones, downloads, and other emerging digital media (such as Internet Protocol TV). BBC WW delivered its profits back to the BBC. Since 2004, BBC WW profits had more than doubled.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=507034

Ben Walter

Harvard Business School Case 207-070

Ben Walter is thinking of purchasing Butler Lumber and needs to decide how he would run the business and how much to pay for it.

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=207070

Cable & Wireless America

Harvard Business School Case 908-004

Describes the auction of Cable & Wireless America (CWA), a bankrupt subsidiary of the British telecommunications company Cable & Wireless. While an initial "stalking-horse" bid valued the assets at $125 million, after a long day and night of bidding between eight groups, the best bid was in the high $60 million range. The sell-side team, comprised of bankers from the Blackstone Group and Greenhill, and lawyers from Wachtell Lipton and Kirkland & Ellis, is forced to regroup and reconsider their options for galvanizing the bidding process. Describes these events in detail, while providing information for students on CWA's history, the nature of Section 363 auctions, and the bidders who were involved in the process.

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=908004

Connectivity in Health Care

Harvard Business School Note 307-047

This note describes the current state of information technology connectivity in the health care sector.

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=307047

Ericsson: Leading in Times of Change

Harvard Business School Case 507-074

After its dramatic corporate turnaround, the Swedish telecom infrastructure company Ericsson hires a new CEO to bring the former Swedish flagship company back on track. Puts students in the shoes of Carl-Henric Svanberg, an industry outsider and CEO of locks group Assy Abloy, who does not hesitate a moment when he gets the call in early 2003. Looks back on the reasons for Ericsson's current situation and the recent restructuring programs that cut the company's staff and operating expenses in half. Presents Svanberg's vision for how to re-energize the ailing company and reach profitability once again, and gives students the opportunity to debate these issues.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=507074

Grosvenor Group Ltd.

Harvard Business School Case 207-064

A global real estate investment firm is trying to decide whether to enter into a property-derivative transaction to help it effect a change in asset allocation. The market for real estate derivatives is beginning to grow quite rapidly and the firm is trying to understand how to use these instruments in managing its business.

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=207064

HCL Technologies (B)

Harvard Business School Supplement 407-093

Supplements the (A) case.

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=407093

JetBlue: Prepare for Financing

Harvard Business School Case 207-061

The CFO of JetBlue is trying to decide which of two financing proposals to pursue. A straight equity issue will dilute his principal shareholders' ownership, but seems like the safer alternative in an industry that is notorious for its high failure rate. On the other hand, a convertible debt alternative seems less dilutive, and cheaper, but brings with it an increased risk of default and financial problems. Which option should John Owen pursue?

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=207061

Joel Klein and Leadership in the NYC Public Schools

Harvard Business School Case 407-065

Reviews the work of the New York City School Chancellor Joel Klein and his attempt to create a Leadership Academy in order to better train principals to lead New York City public schools. Assesses what leadership skills and strategies are necessary for Klein to create a new cohort of effective site-based leaders for New York City Public Schools and further, what methodology Klein and the Leadership Academy establish to accomplish this task. The key question involves Klein's attempt to assess whether an institution dedicated to training better administrators can serve as the key component of a larger effort to improve the performance of the New York City public school system; on a more micro basis is the question of whether the Leadership Academy itself and its program to train principals has been effective in the context of the larger problems the school system faces. If so, will the principals trained be able to be successfully integrated and effectively utilized as organizational elements capable of leading site efforts necessary to improve New York City public school system performance?

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=407065

Lazard LLC.

Harvard Business School Case 907-046

Describes Lazard's situation in 2001, and supplies context for the subsequent negotiation between its Chairman and his hand-picked successor. In 2001 Lazard, the last of the great investment houses to remain both private and in the control of its founding family, is in a state of decline. Infighting throughout the 1990s led to a defection of talent that left many wondering if Lazard could compete with the diversified financial behemoths of the 21st Century. It also left Chairman Michel David-Weill looking for a successor. David-Weill believes he has found one in M&A star Bruce Wasserstein: going into their negotiation, what should Wasserstein's strategy be?

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=907046

Reinventing Ericsson

Harvard Business School Case 507-075

Carl-Henric Svanberg, CEO of the Swedish telecom infrastructure company Ericsson, has to reorganize the recovering company in late 2003 after a major industry downturn. He is convinced that only a more market-orientated and customer-focused organization will be able to remain competitive in this maturing, high-technology-focused industry. Presents his change project, in which the sales and marketing structure play a central role. Will his ideas allow the company to keep its customers and successfully go after new markets?

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=507075

Shinsei Bank: Developing an Integrated Firm (B)

Harvard Business School Supplement 407-103

Supplements the (A) case.

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=407103

The Tale of the Lynx (C)

Harvard Business School Supplement 807-153

Supplements the (A) case.

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=807153

Technology Transfer at U.S. Universities

Harvard Business School Note 807-124

Technology transfer from U.S. universities to industry has increased dramatically in the last 25 years. Reviews the history of technology transfer with particular emphasis on the Bayh-Dole Act of 1980. It then examines how universities responded to Bayh-Dole, the growth of technology transfer offices, and compares how three different universities (MIT, Stanford, and Harvard) approach technology transfer. Provides an overview of the technology transfer process and issues around current practices.

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=807124

U.S. Food and Drug Administration

Harvard Business School Note 807-050

Describes the U.S. FDA with particular emphasis on its role in the development of new drugs, biologic products, and medical devices today. Provides context for the drug approval process by describing the FDA's history and organizational structure.

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http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=807050

 

Publications

Attention Arousal Through Price Partitioning

Abstract

Existing evidence suggests that preferences are affected by whether a price is presented as one all-inclusive expense or partitioned into a set of mandatory charges. To explain this phenomenon, we introduce a new mechanism whereby price partitioning affects a consumer's perception of the secondary (i.e., non-focal) benefits derived from a transaction. Four experiments support the hypothesis that a partitioned price increases the amount of attention paid to secondary attributes tagged with distinct price components. Characteristics of the offered secondary attributes such as their perceived value, relative importance, and evaluability can therefore determine whether price partitioning stimulates or hinders demand. Beyond its descriptive and prescriptive implications, this theory contributes to the emerging notion that pricing can transform, as well as capture, the utility of an offer.

Interdisciplinary Research Within a Modified Competing Values Model of Organizational Performance: Results from Brazil

Abstract

An interdisciplinary model of firm performance based on a modified and extended Competing Values Model of Organizational Culture combines elements drawn from three different research traditions—organizational culture and climate from organizational behavior, innovativeness from economics, and market orientation from marketing. The model has been used to analyze firm performance in business-to-business markets in a number of countries in the industrial and the industrializing worlds. In general, successful firms are found to be innovative, market oriented, and to have organizational cultures and decision-making climates which are externally oriented. In most countries, there are also identifiable national culture-specific patterns. In this paper, we focus on the inter-relationships among the streams of research upon which the model is built. Using Brazil, previously unstudied in this context, we attempt to identify a structure among the model elements to test hypotheses about (1) the inter-relationships of the explanatory variables, and (2) the relationships of the explanatory variables to each other and to firm performance. We find that the contributing disciplines produce interpretable results, and that performance is improved by achieving good results simultaneously along several inter-related dimensions.

The Transformation from 'I' to 'We'

The Governance of Open Source Initiatives: What Does It Mean to Be Community Managed?

Abstract

The concept of "open source" software initially referred to software projects managed by grassroots communities in public forums. Since 1998, the concept has been adapted and diffused to new settings that extend beyond software. While the open source community has maintained control over which software licenses can be considered "open source", little attention has been paid to the elements that constitute community management. More private parties now contribute to OSS communities and more hybrid governance models have emerged. Before we can understand how hybrid models differ from a community-managed model, a more precise definition is needed. This essay takes a step in this direction by identifying five core principles critical to community-managed governance.