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.

February 24, 2009

Doctors perform sometimes-painful procedures, police officers make arrests, and managers carry out layoffs or firings. How do such professionals—and many others—cope with the fact that sometimes they must do "necessary evils"? To explore this question, HBS professor Joshua Margolis and colleague Andrew Molinsky gathered information on the experiences of more than 100 managers, doctors, police officers, and addiction counselors.

Margolis and Molinsky documented the ways in which professionals engage and disengage when carrying out unpleasant tasks, and noted four styles of response for handling these difficult aspects of work. Their article, "Navigating the Bind of Necessary Evils: Psychological Engagement and the Production of Interpersonally Sensitive Behavior," appeared in the Academy of Management Journal.

In addition to other diverse publications this week, cases look at President Barack Obama's choices for handling the tax cuts established by former President George W. Bush, and at the different pricing models and consumer benefits of online restaurant promotions such as OpenTable and Restaurant.com, among others.

 

Working Papers

Learn-how to Improve Collaboration and Performance

Abstract

Organizational learning, a prerequisite for high performance in dynamic environments, is a challenge for many organizations. One set of activities shown to improve organizational learning of new work practices is learn-how. Learn-how refers to learning activities that combine experimentation, adaptation-in-use, and staff participation (e.g., dry runs). This paper proposes that organizations that use learn-how not only experience project-level success with the implementation of new work practices, but also organizational-level success as indicated by overall measures of performance. We tested our hypothesis in a longitudinal study of 23 hospital neonatal intensive care units (NICUs) involved in a quality improvement collaboration. The results support our hypothesis that learn-how is positively related to organizational performance, as measured by NICUs' risk-adjusted mortality rates for 1,061 infant patients. Moreover, our data reveal that interdisciplinary collaboration mediates this relationship and has a more positive relationship to performance for organizations that perform more complex tasks. The theoretical and practical implications of these findings are discussed.

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

 

Cases & Course Materials

Barack Obama and the Bush Tax Cuts

Harvard Business School Case 709-037

As his inauguration approached, President-elect Obama faced a financial sector meltdown, a costly bailout, and massive government deficits. With the economy in recession, interest rates near zero, and joblessness on the rise, Obama needed to decide whether, and how much, to use fiscal stimulus to resuscitate the economy. To help students understand Obama's options, the case reviews both the recent tax cuts under President George W. Bush, including the supply-side and demand-management justification given for them, and the broad history of fiscal policy in the United States.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=709037

Consumer Payment Systems—United States

Harvard Business School Case 909-006

In 2008, the U.S. consumer payments landscape was characterized by the ongoing prevalence of credit and debit card networks, the decline of checks, the rise of stored value cards, and the growth of new payment methods such as PayPal, Bill Me Later, and decoupled debit. This case presents the structure of these payment methods, focusing on incentives for both consumers and merchants, including direct costs, efficiency benefits, rebates, and treatment in case of loss or fraud.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=909006

Distribution at American Airlines (A)

Harvard Business School Case 909-035

American Airlines sought to reduce the fees it pays to global distribution services (GDSs)—such as SABRE—to reach travel agents. But GDSs held significant tactical advantages. For example, GDSs had signed long-term exclusive contracts with the corporate customers who were American's best customers. Furthermore, travel agents tended to favor whichever GDS offered the highest commissions-impeding price competition among GDSs. Against this backdrop, American considered how best to cut its GDS costs.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=909035

Purchase this supplement:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=909036

Esser & Ackermann at Mannesmann

Harvard Business School Case 209-095

No abstract is available at this time.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=209095

Mylan Lab's Proposed Merger with King Pharmaceutical

Harvard Business School Case 209-097

Perry Capital owns shares in King and, to facilitate approval of the merger, buys shares in Mylan, whilst hedging out its economic exposure to Mylan's share price using derivatives. The price at which Mylan proposes to merge with King is generous to King shareholders, but the merger does not look likely to be approved by Mylan shareholders, who must vote upon it. If Perry can swing the voting in favor of the deal, it will gain handsomely on its King shares without facing any corresponding losses on its Mylan holdings since those are hedged. Carl Icahn, another shareholder in Mylan, opposed the deal and sued Perry for alleged vote buying.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=209097

Online Restaurant Promotions

Harvard Business School Case 909-034

A variety of services offer consumers benefits for dining at participating restaurants. This case examines four such services: Entertainment Book, Restaurant.com, Rewards Network, and OpenTable. Despite key functional similarities, each of the services chooses an importantly different approach—different pricing, different benefits to consumers, different benefits to restaurants, and different underlying technologies.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=909034

PlanetTran

Harvard Business School Case 209-029

No abstract is available at this time.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=209029

The Restructuring of Daiei

Harvard Business School Case 209-060

In 2004, the Industrial Revitalization Corporation of Japan (IRCJ) was given the task of restructuring Daiei, one of the largest Japanese retailers and the country's most prominent zombie companies. The IRCJ was a government-sponsored organization that was funded with 50 billion yen in equity capital and 10 trillion yen of government-guaranteed funds. Daiei presented the IRCJ with a unique opportunity to demonstrate the effectiveness of its restructuring strategy which would require a significant write-down of Daiei's bank debts, substantial store closures and workforce reductions, and sufficient new private equity capital to help reposition and revitalize Daiei's retail operations. Overcoming these hurdles in a large and visible company like Daiei would be an important accomplishment for the IRCJ. But, failure, too, would have far reaching consequences.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=209060

 

Publications

Instructor's Manual to Accompany Corporate Information Strategy and Management: Text and Cases. 8th ed.

Abstract

This new edition examines how information technology enables organizations to conduct business in radically different and more effective ways. The authors objective is to provide readers with a better understanding of the influence of twenty-first century technologies on business decisions. The 8th edition discusses today's challenges from the point of view of the executives who are grappling with them. This text is comprised of an extensive collection of Harvard Business cases devoted to Information Technology.

Leadership Competencies for Implementing Planned Organizational Change

Abstract

This paper bridges the leadership and organizational change literatures by exploring the relationship between managers' leadership competencies (namely, their effectiveness at person-oriented and task-oriented behaviors) and the likelihood that they will emphasize the different activities involved in planned organizational change implementation (namely, communicating the need for change, mobilizing others to support the change, and evaluating the change implementation). We examine this relationship using data from 89 clinical managers at the United Kingdom National Health Service who implemented change projects between 2003 and 2004. Our results lend overall support to the proposed theory. This finding suggests that treating planned organizational change as a generic phenomenon might mask important idiosyncrasies associated both with the different activities involved in the change implementation process and with the unique functions that leadership competencies might play in the execution of these activities.

Organizational Design and Control across Multiple Markets: The Case of Franchising in the Convenience Store Industry

Abstract

Many companies operate units that are dispersed across different types of markets, and thus serve significantly diverging customer bases. Such market-type dispersion is likely to compromise the headquarter's ability to control its local managers' behavior and satisfy the divergent needs of different types of customers. In this paper we find evidence that market-type dispersion is an important determinant of delegation and the provision of incentives. Using a sample of convenience store chains, we show that market-type dispersion is related to the degree of franchising at the chain level as well as the probability of franchising a given store within a chain. Our results are robust to alternative definitions of market-type dispersion and to other determinants of franchising such as the stores' geographic distance from headquarters and geographic dispersion. Additional analyses also suggest that chains that do not franchise at all may cope with market-type dispersion by decentralizing operations from headquarters to their stores, and, to a weaker extent, by providing higher variable pay to their store managers.

Placing the Normative Logics of Accountability in 'Thick' Perspective

Abstract

This article provides a critical reflection on the heavily normative nature of current accountability debates. In particular, it explores three streams of normative discourse on nonprofit accountability: improving board governance, improving performance-based reporting, and demonstrating progress toward mission. The article describes how these logics are associated with three basic accountability regimes: coercive, technocratic, and adaptive. It then discusses how a focus on these normative logics and regimes, although important, can mask the realities of social structure and the relations of power that underlie them. The article proposes a more empirical approach to framing accountability—"thick description"—that might enable scholars to better understand how social regimes of accountability actually operate in different contexts and in which the instruments of accountability are at least as likely to reproduce relationships of inequality as they are to overturn them.

Deterring Online Advertising Fraud Through Optimal Payment in Arrears

Abstract

Online advertisers face substantial difficulty in selecting and supervising small advertising partners. Fraud can be well hidden, and limited reputation systems reduce accountability. But partners are not paid until after their work is complete, and advertisers can extend this delay both to improve detection of improper partner practices and to punish partners who turn out to be rule-breakers. I capture these relationships in a screening model with delayed payments and probabilistic delayed observation of agents' types. I derive conditions in which an advertising principal can set its payment delay to deter rogue agents and to attract solely or primarily good-type agents. Through the savings from excluding rogue agents, the principal can increase its profits while offering increased payments to good-type agents. I estimate that a leading affiliate network could have invoked an optimal payment delay to eliminate 71% of fraud without decreasing profit.

Download the paper: http://www.hbs.edu/research/pdf/08-072.pdf

Red Light States: Who Buys Online Adult Entertainment?

Abstract

This paper studies the adult online entertainment industry, particularly the consumption side of the market. In particular, it focuses on the demographics and consumption patterns of those who subscribe to adult entertainment websites. On the surface, this business would seem to face a number of obstacles. Regulatory and legal barriers have already been mentioned. In addition, those charging for access to adult entertainment face competition from similar content available without a fee. In the context of adult entertainment, free access offers consumers an extra benefit: online payments tend to create records documenting the fact of a customer's purchase; consumers of free content may feel more confident that their purchases will remain confidential. More broadly, measured levels of religiosity in American are high. On the other hand, social critics often argue that the rise of Internet pornography is contributing to a coarsening of American culture. Do consumption patterns of online adult entertainment reveal two separate Americas? Or is the consumption of online adult entertainment widespread, regardless of legal barriers, potential for embarrassment, and even religious conviction?

Running Out of Numbers: Scarcity of IP Addresses and What to Do About It

Abstract

The Internet's current numbering system is nearing exhaustion. Existing protocols allow only a finite set of computer numbers ("IP addresses"), and central authorities will soon deplete their supply. I evaluate a series of possible responses to this shortage: Sharing addresses impedes new Internet applications and does not seem to be scalable. A new numbering system ("IPv6") offers greater capacity, but network incentives impede transition. Paid transfers of IP addresses would better allocate resources to those who need them most, but unrestricted transfers might threaten the Internet's routing system. I suggest policies to create an IP address "market" while avoiding major negative externalities—mitigating the worst effects of v4 scarcity, while obtaining price discovery and allocative efficiency benefits of market transactions.

The Performer's Reactions to Procedural Injustice: When Prosocial Identity Reduces Prosocial Behavior

Abstract

Considerable research has examined how procedural injustice affects victims and witnesses of unfavorable outcomes, with little attention to the "performers" who deliver these outcomes. Drawing on dissonance theory, we hypothesized that performers' reactions to procedural injustice in delivering unfavorable outcomes are moderated by prosocial identity—a helping-focused self-concept. Across two experiments, individuals communicated unfavorable outcomes decided by a superior. Consistent with justice research, when prosocial identities were not primed, performers experienced greater negative affect and behaved more prosocially toward victims when a superior's decision-making procedures were unjust. Subtly activating performers' prosocial identities reversed these reactions. Results highlight how roles and identities shape the experience and delivery of unfavorable outcomes; when procedures are unjust, prosocial identity can reduce prosocial behavior.

Entrepreneurship and the History of Globalization

Abstract

In this article, we build on the recent efforts of scholars to reintroduce entrepreneurship into the research agenda of business historians. We examine the value and limitations of adapting recent social scientific theories and methods on entrepreneurship to research on international business history. Specifically, we focus on three recent areas of social scientific work on entrepreneurship and weigh their value to business history research. First, we consider how scholars can employ research on entrepreneurial cognition to understand the historical ownership advantages of multinational firms. Second, we draw on concepts from entrepreneurial strategy and finance and examine their use in understanding the history of how firms allocated resources to uncertain international ventures. Finally, we look at the question of the diffusion of the benefits of globalization and its impact on entrepreneurship within host economies. We conclude that the cautious adoption of some of these recent conceptual developments offers fertile opportunities for further research in international business history.

Navigating the Bind of Necessary Evils: Psychological Engagement and the Production of Interpersonally Sensitive Behavior

Abstract

We develop grounded theory about how individuals respond to the subjective experience of performing "necessary evils" and how that influences the way they treat targets of their actions. Despite the importance and difficulty of delivering just, compassionate treatment when it is most needed—when necessarily harming another person—little research has focused on those who must do so. Using qualitative data from 111 managers, doctors, police officers, and addiction counselors, we document how performers both engage and disengage when doing these tasks, unearth multiple forms of interpersonal justice, and identify four styles of response for handling necessary evils.

Market Culture: How Rules Governing Exploding Offers Affect Market Performance

Abstract

Many markets have organizations that influence or try to establish norms concerning when offers can be made, accepted, and rejected. Examining a dozen previously studied markets suggests that markets in which transactions are made far in advance are markets in which it is acceptable for firms to make exploding offers, and unacceptable for workers to renege on commitments they make, however early. But this evidence is only suggestive, because the markets differ in many ways other than norms concerning offers. Laboratory experiments allow us to isolate the effects of exploding offers and binding acceptances. In a simple environment, in which uncertainty about applicants' quality is resolved over time, we find inefficient early contracting when firms can make exploding offers and applicants' acceptances are binding. Relaxing either of these two conditions causes matching to take place later, when more information about applicants' qualities is available, and consequently results in higher efficiency and fewer blocking pairs. This suggests that elements of market culture may play an important role in influencing market performance.

Corporate Social Responsibility Through an Economic Lens

Abstract

Business leaders, government officials, and academics are focusing considerable attention on the concept of "corporate social responsibility" (CSR), particularly in the realm of environmental protection. Beyond complete compliance with environmental regulations, do firms have additional moral or social responsibilities to commit resources to environmental protection? How should we think about the notion of firms sacrificing profits in the social interest? May they do so within the scope of their fiduciary responsibilities to their shareholders? Can they do so on a sustainable basis, or will the forces of a competitive marketplace render such efforts and their impacts transient at best? Do firms, in fact, frequently or at least sometimes, behave this way, reducing their earnings by voluntarily engaging in environmental stewardship? And finally, should firms carry out such profit-sacrificing activities (i.e., is this an efficient use of social resources)? We address these questions through the lens of economics, including insights from legal analysis and business scholarship.

Disagreement and the Allocation of Control

Abstract

This article studies the allocation of control when there is disagreement—in the sense of differing priors—about the right course of action. People then value control rights since they believe that their decisions are better than those of others. More disagreement (due to, for example, fundamental uncertainty) increases the value that players attach to control. The article shows that all income and control of a project should then be concentrated in one hand: income rights should go more to people with more control since such people value income higher (because they have a higher opinion of the decisions made); control rights should go more to people with more income since they care more (and believe that they make better decisions). Different projects may be optimally "owned" by different people. Furthermore—with residual income exogenously allocated—complementary decisions should be more colocated, whereas substitute decisions should be more distributed. Confident people with a lot at stake should—in a wide range of settings—get more control.

Learning in a New Cardiac Surgical Center: An Analysis of Precursor Events

Abstract

Background: Few studies of learning in the health care sector have analyzed measures of process, as opposed to outcomes. We assessed the learning curve for a new cardiac surgical center using precursor events (incidents or circumstances required for the occurrence of adverse outcomes). Methods: Intraoperative precursor events were recorded prospectively during major adult cardiac operations, categorized by blinded adjudicators, and counted for each case (overall and according to these categories). Trends in the number of precursor events were analyzed by hospital and by defining 10 equal-sized groups across time, as were trends in outcomes obtained from institutional databases. Results from the first 101 cases performed at a new cardiac surgical site (hospital A) were compared with 2 established centers. Results: A steep reduction in the total number of precursor events over time was observed in the early experience of hospital A (9.2 ± 4.9 to 2.0 ± 1.2 events per case, from first to last decile of time, Ptrend < .0001) compared with qualitatively stable levels in the other hospitals; this reduction was driven largely by decreases in the minor severity (Ptrend < .0001), compensated (Ptrend < .0001), and environment (Ptrend < .0001) categories of precursor events. No detectable changes over time were observed in postoperative mortality and complications. No significant improvement was observed in patient comorbid conditions or medical status over time to explain the trend in hospital A. Conclusion: Analyzing and targeting specific kinds of process-related failures (precursor events) may provide a novel and sensitive means of tracking, deconstructing, and optimizing organizational learning in medicine.