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.

September 5, 2007

Ever wander around a store and wonder why it's so hard to find what you're looking for? Don't worry, it might not be you. New research shows that retailers—and malls, magazines, brokers, familiar search engines, and Internet shopping sites—can sometimes have an economic incentive to purposefully complicate things for consumers.

A working paper, "Designing a Two-Sided Platform: When to Increase Search Costs?" explains all. It's by HBS professor Andrei Hagiu and colleague Bruno Jullien and is available as a pdf.

"This paper challenges the conventional wisdom that intermediaries—be they traditional merchants or two-sided platforms—create value by reducing search and transaction costs," write the authors.

Also new this week, an interesting study in pdf about how people generally aren't as ethical as they think they are; and case studies of an Indian challenger to auction houses Sotheby's and Christie's; investment bank Piper Jaffray; and the World Wildlife Fund.

 

Working Papers

Designing a Two-Sided Platform: When to Increase Search Costs?

Abstract

We propose a model for analyzing an intermediary's incentives to increase the search costs incurred by consumers looking for sellers (stores). First, we show that the quality of the search service offered to consumers is more likely to be degraded (i.e. the probability that consumers find their favorite store in the first round of search is less than 1) when the intermediary derives higher revenues from consumers shopping at the lesser-known store relative to revenues from consumers shopping at the more popular store. Second, the intermediary may have an incentive to degrade the quality of search even further when its design decision influences the prices charged by stores. By altering the composition of demand faced by stores, the intermediary can force the latter to price lower and thereby increase total consumer traffic.

Download the paper: http://www.hbs.edu/research/pdf/08-010.pdf

Exclusivity and Control

Abstract

We analyze platform competition for content in the presence of strategic interactions between content distributors and content providers. We provide a model of bargaining and price competition within these industries, and show that whether or not a piece of content ends up exclusive to one platform depends crucially on whether or not the content provider maintains control over the pricing of its own good. If the content provider sells its content outright and relinquishes control over its price, the content will tend to be exclusive unless there are sufficient market expansion effects. On the other hand, if the content provider maintains control of its pricing, the strategic interaction between prices set by the content provider and by the platforms leads to a non-monotonic relationship between exclusivity and content quality: both high- and low-quality content will multihome and join both platforms, but there will be a range of content that will maintain exclusivity despite foreclosing itself from selling to a portion of the market. In addition, we show that contrary to standard results on double marginalization and pricing of complementary goods, a platform who already has exclusive access to content may prefer to relinquish control over pricing of that content and the associated revenues to the content provider as a result of the incentive to reduce price competition at the platform level.

Download the paper: http://www.hbs.edu/research/pdf/08-009.pdf

The Ethnic Composition of U.S. Inventors

Abstract

The ethnic composition of U.S. scientists and engineers is undergoing a significant transformation. This study applies an ethnic-name database to individual patent records granted by the United States Patent and Trademark Office to document these trends with greater detail than previously available. Most notably, the contributions of Chinese and Indian scientists to U.S. technology formation increased dramatically in the 1990s, before noticeably leveling off after 2000 and declining in the case of India. Growth in ethnic innovation is concentrated in high-tech sectors; the institutional and geographic dimensions are further characterized.

Download the paper: http://www.hbs.edu/research/pdf/08-006.pdf

Why We Aren't as Ethical as We Think We Are: A Temporal Explanation

Abstract

This paper explores the biased perceptions that people hold of their own ethicality. We argue that the temporal trichotomy of prediction, action and evaluation is central to these misperceptions: People predict that they will behave more ethically than they actually do, and when evaluating past (un)ethical behavior, they believe they behaved more ethically than they actually did. We use the want/should theoretical framework to explain the bounded ethicality that arises from these temporal inconsistencies, positing that the "should" self dominates during the prediction and evaluation phases but that the "want" self is dominant during the critical action phase. We draw on the research on behavioral forecasting, ethical fading, and cognitive distortions to gain insight into the forces driving these faulty perceptions and, noting how these misperceptions can lead to continued unethical behavior, we provide recommendations for how to reduce them.

Download the paper: http://www.hbs.edu/research/pdf/08-012.pdf

Thinking about Technology: Applying a Cognitive Lens to Technical Change

Abstract

We apply a cognitive lens to understanding technology trajectories across the life cycle. We develop a coevolutionary model of technological frames and the technology life cycle to explain sources of variation in the era of ferment, conditions under which a dominant design may be achieved, the underlying architecture of the era of incremental change and the dynamics associated with discontinuities. We show that interactions of producers, users and institutions shape the development of collective frames around the meaning of new technologies.

Download the paper: http://www.hbs.edu/research/pdf/04-039.pdf

The Malleability of Environmentalism

Abstract

In this paper, we predict and find that self-perceptions of environmentalism are changed by subtle manipulations of context and, in turn, affect environmental behavior. In Study 1, we found that people exhibit greater positive assessments of their environmental behaviors (1) in the context of denying harm to the environment than in the context of claiming to help the environment, and (2) in situations where behaviors are evaluated subjectively than in situations where behaviors are evaluated more objectively. In Study 2, we explored the relationship between self-perceptions of environmentalism and environmental behaviors. Our data suggest that environmentally friendly behaviors may be promoted by leading people to perceive themselves as good environmentalists.

Download the paper: http://www.hbs.edu/research/facpubs/workingpapers/papers2/0001/01-066.pdf

 

Cases & Course Materials

Acelero Learning: Building a Culture of Performance

Harvard Business School Case 307-048

No abstract available.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=307048

Cintas y Lazos, Inc.

Harvard Business School Case 108-012

A recent Cuban immigrant establishes a new notions store. The initial 3-month, GAAP-based income statement differs from one prepared by an economist friend. The store owner wants to know why one shows a profit and the other a loss.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=108012

GE's Imagination Breakthroughs: The Evo Project

Harvard Business School Case 907-048

In September 2003, Jeff Immelt challenged the business leaders at GE to come up with "Imagination Breakthroughs," innovative new projects that would serve as the centerpiece of GE's organic growth initiative. Follows the company as these changes are driven through the business units, focusing on GE Transportation as it launches a series of groundbreaking, green products—from the Evolution Locomotive to the Hybrid Locomotive. The growth process transforms the culture within GE Transportation, leading to a redefinition of the marketing role, the implementation of a "growth leader" profile and new decision-making processes to encourage innovation and risk. Finally, presents a critical decision point, as Transportation executives must decide whether or not to support the high-risk Hybrid Locomotive project.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=907048

Leasing Computers at Persistent Learning

Harvard Business School Case 108-014

Newly public Persistent Learning is acquiring vital computer assets. They need to determine how the lease or purchase decision will impact their financial statements, and how the market will react given previously forecast earnings and competitor's accounting.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=108014

Saffronart.com: Bidding for Success

Harvard Business School Case 808-027

Saffronart, a five-year-old online art auction company, leads the market for modern Indian art and now faces competitors in the market it created. Established in 2000 by the wife-and-husband team of Minal and Dinesh Vazirani, Saffronart.com is an innovative online auction firm that specializes in modern and contemporary Indian art. Having been the first firm to offer Indian fine art with authenticity guarantees in an auction setting that increased the transparency of prices, Saffronart succeeded in establishing the genre of modern and contemporary Indian art in the art world, and in creating a market for it. This market, and Saffronart's revenues, grew rapidly from 2000 to 2005. Saffronart's estimate was that the Indian art auction market would be worth $125 million in 2006, with their revenues being $45 million. While this success was gratifying, the firm and its founders faced new internal and external pressures; particularly worrisome was the entry of auction giants Christie's and Sotheby's into the market. The Vaziranis' main challenge now is to consolidate their leading position in the market they created in the face of the unpredictable cyclicality of the secondary art market and increasingly strong competitors.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=808027

A Strategic Perspective on Bankruptcy

Harvard Business School Note 407-035

Provides an overview of bankruptcy procedures in U.S. courts and a framework for evaluating the different sources of uncertainty and their implications for various stakeholders of the firm when attempting a reorganization with creditors or considering opening a court-supervised reorganization under Chapter 11 of the Bankruptcy Code. Suggests that while the stigma associated with bankruptcy for executives and boards of directors has diminished, among other stakeholders it has come to be viewed as merely a vehicle for corporations to circumvent obligations.

Purchase this note:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=407035

Tad Piper and Piper Jaffray

Harvard Business School Case 406-033

In 2005, Tad Piper reflects on the successful spin-off from US Bancorp of Piper Jaffray, the investment bank founded by his grandfather. Profiles the development of Piper Jaffray from a Midwestern brokerage house to a national, diversified financial services firm. In 1994, a crisis in its mutual fund unit nearly destroyed the firm. Provides information about the protagonist's youth, career, family life, aspirations, and motivations. Raises questions about leadership in times of crisis, openness with stakeholders, and the value of showing vulnerability as an authentic leader.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=406033

World Wildlife Fund for Nature (WWF)

Harvard Business School Case 708-417

Nearly all environmental organizations have a similar aim: to stop the degradation of the natural environment. However, the strategies which environmental organizations choose to employ are sometimes starkly different. Compares the models of two dissimilar environmental powerhouses: Greenpeace and World Wildlife Fund for Nature (WWF). Active in 100 countries, WWF works with governments, businesses, other NGOs, and communities to set up conservation programs to preserve natural habitat. In contrast, Greenpeace works to campaign for environmental change against governments and corporations and accepts funding only through individuals and foundation grants. Explores the detailed history and business models of both organizations.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=708-417

 

Publications

Leading and Creating Collaboration in Decentralized Organizations

Download the paper:
http://www.hbs.edu/research/pdf/07-090.pdf

Tradeoffs in Staying Close: Geographic Dispersion and Corporate Decision-Making

Abstract

We investigate whether the geographic dispersion of a firm affects corporate decision-making. Our findings suggest that social factors work alongside informational considerations to make geography important to corporate decisions. We show that: (i) geographically dispersed firms are less employee friendly; (ii) dismissals of divisional employees are less common in divisions located closer to corporate headquarters; and (iii) firms appear to adopt a "pecking-order" and divest out-of-state entities before in-state. To explain these findings, we consider both information and social factors. We find that firms are more likely to protect proximate employees in soft information industries (i.e., when information is difficult to transfer over long distances). However, employee protection only holds when headquarters is located in a less-populated county suggesting a role for social factors. Additionally, stock markets respond favorably to divestitures of in-state divisions.

Investigative Negotiation

Abstract

Negotiators often fail to achieve results because they channel too much effort into selling their own position and too little into understanding the other party's perspective. To get the best deal—or, sometimes, any deal at all—negotiators need to think like detectives, digging for information about why the other side wants what it does. This investigative approach entails a mind-set and a methodology, say Harvard Business School professors Malhotra and Bazerman. Inaccurate assumptions about the other side's motivations can lead negotiators to propose solutions to the wrong problems, needlessly give away value, or derail deals altogether. Consider, for example, the pharmaceutical company that deadlocked with a supplier over the issue of exclusivity in an ingredient purchase. Believing it was a ploy to raise the price, the drug maker upped its offer—unsuccessfully. In fact, the supplier was balking because a relative's company needed a small amount of the ingredient to make a local product. Once the real motivation surfaced, a compromise quickly followed. Understanding the other side's motives and goals is the first principle of investigative negotiation. The second is to figure out what constraints the other party faces. Often when your counterpart's behavior appears unreasonable, his hands are tied somehow, and you can reach agreement by helping overcome those limitations. The third is to view onerous demands as a window into what the other party prizes most—and use that information to create opportunities. The fourth is to look for common ground; even fierce competitors may have complementary interests that lead to creative agreements. Finally, if a deal appears lost, stay at the table and keep trying to learn more. Even if you don't win, you can gain insights into a customer's future needs, the interests of similar customers, or the strategies of competitors.

Purchase the article:
http://www.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=R0709D

The Emergence of Affect in Negotiations Research

No abstract available.

The Malleability of Environmentalism

Abstract

In this paper, we predict and find that self-perceptions of environmentalism are changed by subtle manipulations of context and, in turn, affect environmental behavior. In Study 1, we found that people exhibit greater positive assessments of their environmental behaviors (1) in the context of denying harm to the environment than in the context of claiming to help the environment, and (2) in situations where behaviors are evaluated subjectively than in situations where behaviors are evaluated more objectively. In Study 2, we explored the relationship between self-perceptions of environmentalism and environmental behaviors. Our data suggest that environmentally friendly behaviors may be promoted by leading people to perceive themselves as good environmentalists.