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 8, 2010

With the emerging world of smartphone app development as a backdrop, a new case study explores how early inflection points can make a difference to a start-up's trajectory. AirStrip Technologies has developed smartphone apps that help doctors monitor patient vital signs remotely. "As one of the early pioneers in delivering medical applications over the iPhone, AirStrip Technologies must contend with a major dilemma: the fast-cycle tech world's expectations must inevitably collide with the more deliberate and slower pace of product development and approval that is typical in health care."

On the working paper front this week, Yasheng Huang, Li Jin, and Yi Qian find evidence that ethnically Chinese firms invest far less in intangible assets and human capital as compared with non-ethnically Chinese firms of similar size, age, and other characteristics. They report their findings in Does Ethnicity Pay.

Especially in today's damaged world economy, policymakers and researchers looking at international trade and foreign direct investment issues need accurate data. Unfortunately, the quality of the data is uneven and has even been affected by budget cuts. Harvard Business School's C. Fritz Foley is one of a number of coauthors of a new report prepared for the Committee on Economic Statistics of the American Economic Association.

 

Publications

Willpower in Children and Adults: A Survey of Recent Results and Economic Implications

Abstract

This paper reviews key contributions to the psychology and economics literature on willpower. Understanding how willpower develops can shed important light on time-inconsistent economic decision making, a topic that has received substantial attention over recent decades. In particular, we argue that measures of willpower for the child provide useful insights into the nature of willpower and are reliable predictors of economic outcomes in the adult. The implication is that one might, for example, be able to strengthen a "weak" child's ability to resist temptation, and in so doing offer welfare enhancements not only to the child but also to the ultimate adult decision maker. Finally, we list a set of open questions that could be profitably addressed by future research.

Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts

Abstract

This paper reports a three-phase experiment on a stylized labor market. In the first two phases, agents face simple games, which we use to estimate subjects' social and reciprocity concerns. In the last phase, four principals compete by offering agents a contract from a fixed menu. Then, agents "choose to work" for a principal by selecting one of the available contracts. We find that i) (heterogeneous) social preferences are significant determinants of choices, ii) for both principals and agents, strategic uncertainty aversion is a stronger determinant of choices than fairness, and iii) agents display a marked propensity to work for principals with similar distributional concerns.

 

Working Papers

Report on the State of Available Data for the Study of International Trade and Foreign Direct Investment

Abstract

This report, prepared for the Committee on Economic Statistics of the American Economic Association, examines the state of available data for the study of international trade and foreign direct investment. Data on values of imports and exports of goods are of high quality and coverage, but price data suffer from insufficient detail. It would be desirable to have more data measuring value-added in trade as well as prices of comparable domestic and imported inputs. Value data for imports and exports of services are too aggregated and valuations are questionable, while price data for service exports and imports are almost non-existent. Foreign direct investment data are of high quality, but quality has suffered from budget cuts. Data on trade in intellectual property are fragmentary. The intangibility of the trade makes measurement difficult, but budget cuts have added to the difficulties. Modest funding increases would result in data more useful for research and policy analysis.

Download the paper: http://papers.nber.org/papers/w16254

Does Ethnicity Pay

Abstract

One of the most important and one of the most heavily studied ethnic networks in the world is overseas Chinese. However, almost all of the analysis on the economic dimensions of the overseas Chinese network has been about the effects of ethnic ties on the aggregate volume of trade or the effects of ethnic ties on foreign direct investment (FDI) at the country level. In this paper, we add to the large and important collection of literature on the subject by studying the profitability of foreign direct investments made by overseas Chinese in China. Our paper takes advantage of a large dataset—over 50,000 firms over a period of eight years—that is comprised of two types of foreign firms with investments in China—those owned by ethnic Chinese and those owned by non-ethnic Chinese. Against common perceptions, we find that ethnically Chinese firms in China do not outperform non-ethnically Chinese firms by a set of conventional profitability measures. We also find that the performance of ethnically Chinese firms deteriorates over time. One hypothesis explaining this result is that ethnically Chinese firms tend to under-invest in those firm attributes that may enhance long-term performance, such as human capital and technology (proxied by intangible assets in our paper). Indeed we do find evidence that ethnically Chinese firms invest far less in intangible assets and human capital as compared with non-ethnically Chinese firms of similar size, age, and other characteristics. In addition, within strata of matched firms based on their intangible assets and human capital, ethnically Chinese firms no longer display significant dynamic disadvantage relative to non-ethnic firms after controlling for other firm characteristics and fixed effects.

Download the paper: http://papers.nber.org/papers/w16294

Law and Finance c. 1900

Abstract

How persistent are the effects of legal institutions adopted or inherited in the distant past? A substantial literature argues that legal origins have persistent effects that explain clear differences in investor protections and financial development around the world today (La Porta et al., 1998, 1999 and passim). This paper examines the persistence of the effects of legal origins by examining new estimates of different indicators of financial development in more than 20 countries in 1900 and 1913. The evidence presented does not yield robust results that can sustain the hypothesis of persistence effects of legal origin, but it is not powerful enough to reject it either. Then the paper examines whether there were systematic differences in the extent of investor protections across countries, since that is the main channel through which legal origin affects financial development, and shows that all the evidence supports the idea of relative convergence in corporate governance practices across legal families circa 1900. The paper concludes that, if the evidence presented is representative, the variation observed in financial development around the world today is likely a product of events of the twentieth century rather than a consequence of long-term (and persistent) differences occasioned by legal traditions.

Download the paper: http://papers.nber.org/papers/w16216

 

Cases & Course Materials

Emerging Nokia?

Juan Alcácer, Tarun Khanna, Mary Furey, and Rakeen Mabud
Harvard Business School Case 710-429

By late 2009, Nokia was grappling with the decision of whether to recover its leading position in the high-profit developed markets, where they were losing market share to the likes of Apple and Samsung, or defend its market leadership in the low-margin, high-volume emerging markets. This case poses the following questions: Should Nokia stay the course, operating in both the developed and emerging markets, or should they forego one for the other? And what would this imply for the types of handsets and services they would need to offer?

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/710429-PDF-ENG

Dr. Cameron Powell and AirStrip Technologies: After the Apple Worldwide Developers Conference

Bhaskar Chakravorti and N. Venkatraman
Harvard Business School Case 810-143

Dr. Cameron Powell and his partner, Trey Moore, co-founders of the innovative company, AirStrip Technologies, have developed a series of apps for the iPhone and other smartphones that can help doctors monitor the vital signs of their patients anytime, anywhere. They have presented their technology at one of the highest profile tech conferences and now face a choice of focusing on the first̬and only—FDA-approved product targeted at obstetricians and driving its penetration or following through on the promise of their presentation and spreading their resources to build out the entire platform aimed at multiple specialties. As one of the early pioneers in delivering medical applications over the iPhone, AirStrip Technologies must contend with a major dilemma: the fast-cycle tech world's expectations must inevitably collide with the more deliberate and slower pace of product development and approval that is typical in healthcare.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/810143-PDF-ENG

The Guggenheims and Chilean Nitrates

Geoffrey G. Jones and Felipe Tâmega Fernandes
Harvard Business School Case 810-141

The case describes the growth of Guggenheim Brothers as one of the largest mining companies in the world in the early twentieth century. Global expansion led the firm to Chile, first in copper and later in natural nitrates. Chile's economic growth was driven by the profits from mining, especially its world monopoly of nitrates. The Guggenheims invested in Chilean nitrates after synthetics were developed by German chemists. Their strategies to modernize the industry collapsed with the outbreak of the Great Depression, during which Chile experienced the greatest fall of incomes of any country. The case serves as a vehicle to explore the devastating economic and political impact of the Great Depression on the countries of the South, such as Chile, which had specialized in primary commodities, and on mining and financial capitalists such as the Guggenheims.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/810141-PDF-ENG

Whole Foods Acquires Wild Oats (A)

Michael D. Kimbrough, Sudhakar Balachandran, Madhav Srinivasan, and Rachel Gordon
Harvard Business School Case 109-029

Examines the implications of Whole Foods' CEO's anonymous message board postings including its potential impact on the company's proposed merger with Wild Oats.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/109029-PDF-ENG

Purchase this supplement (B):
http://cb.hbsp.harvard.edu/cb/product/109030-PDF-ENG

Avi Kremer

Joshua D. Margolis and Mark Wetzel
Harvard Business School Case 411-022

If you were diagnosed with a terminal illness, how would you respond and what would you do with your remaining time? Avi Kremer contemplates four options for how to devote himself 18 months after being diagnosed with ALS. His experience thus far and the choices he faces foster insight into building resilience and finding purpose. The case documents Kremer's personal history before and after diagnosis, describing the ups and downs in his life both prior to and after the diagnosis, lending insight into what enabled him to respond in the extraordinary way he has. The case highlights Kremer's remarkable efforts to fight for a cure; the doubts and obstacles he experiences along the way; and the current options Kremer faces, from returning home to spend time with family to founding a new biotech venture. Through this stark, realistic, and inspiring example, the case prompts discussion relevant to anyone at any point in life about resilience and purpose, prompting all students to reflect upon handling adversity and leading a purpose—driven life—and what it takes to equip oneself to do both.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/411022-PDF-ENG

U.S. Department of Energy & Recovery Act Funding: Bridging the "Valley of Death"

Michael J. Roberts, Joseph B. Lassiter, and Ramana Nanda
Harvard Business School Case 810-144

The case focuses on the U.S. Department of Energy (DOE) and the $38 billion of stimulus funding the DOE received to encourage clean tech. They focus on "bridging the valley of death" (i.e., helping young, innovative companies finance technically risky and very capital intensive development and commercialization programs). The case focuses on two DOE programs in particular, the Loan Guarantee Program and ARPA-E. The case raises the question of why these valleys of death exist, what can be done to deal with them, and how these DOE programs are designed and implemented.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/810144-PDF-ENG