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.
Search results often include links labeled "sponsored links." Many of us assume that these are advertisements--but not everyone does. New research by professor Benjamin Edelman reveals that replacing "Sponsored Link" with "Paid Advertisement" results in up to a third fewer click-throughs. Policymakers should understand from this that a large segment of Web users need more information about what lies on the other side of the link. Read "Sponsored Links' or 'Advertisements'?: Measuring Labeling Alternatives in Internet Search Engines."
In a new case study by professor Matthew C. Weinzierl and a colleague, "California's Budget Crises, Tax Reform, and Domestic and International Tax Competition", the state of California and Governor Arnold Schwarzenegger are under the microscope. The authors look at the intersection of policy and politics as the state enters ever deeper into financial crisis.
Many countries regulate consumer credit, but the rules vary widely. Professor Gunnar Trumbull contributes research on the historical differences between America and France in regulating consumer credit. "I argue that national differences in the regulation of consumer credit had their roots in the historical conditions by which the small loan sector came to be legitimized," Trumbull writes in "Regulating for Legitimacy: Consumer Credit Access in France and America."
Blind Ethics: Closing One's Eyes Polarizes Moral Judgment and Discourages Dishonest Behavior
|Authors:||E. M. Caruso and F. Gino|
Four experiments demonstrate that closing one's eyes affects ethical judgment and behavior because it induces people to mentally simulate events more extensively. People who considered situations with their eyes closed rather than open judged immoral behaviors as more unethical and moral behaviors as more ethical. In addition, considering potential decisions with closed eyes decreased stated intentions to behave ethically and actual self-interested behavior. This relationship was mediated by the more extensive mental simulation that occurred with eyes closed rather than open, which, in turn, intensified emotional reactions to the ethical situation. We discuss the implications of these findings for moral psychology and ethical decision making.
The Design of Online Advertising Markets
|Author:||Benjamin G. Edelman|
|Publication:||In The Handbook of Market Design. Oxford University Press, forthcoming|
Because the market for online advertising is both new and fast-changing, participants experiment with all manner of variations. Should an advertiser's payment reflect the number of times an ad was shown, the number of times it was clicked, the number of sales that resulted, or the dollar value of those sales? Should ads be text, images, video, or something else entirely? Should measurement be performed by an ad network, an advertiser, or some intermediary? Market participants have chosen all these options at various points, and prevailing views have changed repeatedly. Online advertising therefore presents a natural environment in which to evaluate alternatives for these and other design choices. In this piece, I review the basics of online advertising, then turn to design decisions as to ad pricing, measurement, incentives, and fraud.
Read the paper: http://www.benedelman.org/publications/advertising-handbook.pdf
Política de clústers: guia per a l'Estat del Debat (Cluster Policy: The State of the Debate)
|Author:||Christian H.M. Ketels|
|Publication:||In Clústers i competitivitat: el cas de Catalunya (1993-2010), edited by Joan Miquel Hernández Gascón, Alberto Pezzi, and Antoni Soy I Casals, 129-150. Papers d'Economia Industrial. Barcelona: Generalitat de Catalunya, 2010|
The chapter provides an overview of the recent literature discussing the pros and cons of cluster policy.
Read the paper: http://www.gencat.cat/diue/doc/doc_11907125_1.pdf
People Often Trust Eloquence More Than Honesty
|Authors:||Todd Rogers and Michael I. Norton|
|Publication:||Harvard Business Review 88, no. 11 (November 2010)|
This article presents a dual interview based on a research study we conducted. Our study found that an artful dodger of questions was generally considered more likable than a person who answered the same questions directly but with less eloquence. We comment on the implications of this research for political campaigns and business management.
Read the paper: http://www.people.hbs.edu/mnorton/rogers%20norton%20HBR.pdf
Coming Clean and Cleaning Up: Does Voluntary Self-Reporting Indicate Effective Self-Policing
|Authors:||Michael W. Toffel and Jodi L. Short|
|Publication:||Journal of Law and Economics (forthcoming)|
Administrative agencies are increasingly establishing voluntary self-reporting programs both as an investigative tool and to encourage regulated firms to commit to policing themselves. We investigate whether self-reporting can reliably indicate effective self-policing efforts that might provide opportunities for enforcement efficiencies. We find that regulators used self-reports of legal violations as a heuristic for identifying firms that are effectively policing their own operations, shifting enforcement resources away from voluntary disclosers. We also find that firms that voluntarily disclosed regulatory violations and committed to self-policing improved their regulatory compliance and environmental performance, suggesting that the enforcement relief they received was warranted. Collectively, our results suggest that self-reporting can be a useful tool for reliably identifying and leveraging the voluntary self-policing efforts of regulated companies.
Read the paper: http://www.hbs.edu/research/pdf/08-098.pdf
"Sponsored Links" or "Advertisements"?: Measuring Labeling Alternatives in Internet Search Engines
|Authors:||Benjamin Edelman and Duncan S. Gilchrist|
In an online experiment, we measure users' interactions with search engines, both in standard configurations and in modified versions with improved labels identifying search engine advertisements. In particular, for a random subset of users, we change "sponsored link" labels to instead read "paid advertisement." We find that users receiving the "paid advertisement" label click 25% to 33% fewer advertisements and correctly report that they click fewer advertisements, controlling for the number of advertisements they actually click. Results are most pronounced for commercial searches and for users with low income, low education, and little online experience.
Download the paper: http://www.hbs.edu/research/pdf/11-048.pdf
Regulating for Legitimacy: Consumer Credit Access in France and America
Theories of legitimate regulation have emphasized the role of governments either in fixing market failures to promote greater efficiency or in restricting the efficient functioning of markets in order to pursue public welfare goals. In either case, features of markets serve to justify regulatory intervention. I argue that this causal logic must sometimes be reversed. For certain areas of regulation, its function must be understood as making markets legitimate. Based on a comparative historical analysis of consumer lending in the United States and France, I argue that national differences in the regulation of consumer credit had their roots in the historical conditions by which the small loan sector came to be legitimized. Americans have supported a liberal regulation of credit because they have been taught that access to credit is welfare promoting. This perception emerged from a historical coalition between commercial banks and NGOs that promoted credit as the solution to a range of social ills. The French regulate credit tightly because they came to see credit as both economically risky and a source of reduced purchasing power. This attitude has its roots in the early postwar lending environment, in which loans were seen to be beneficial only if they were accompanied by strong government protections. These cases suggest that national differences in regulation may trace to historically contingent conditions under which markets are constructed as legitimate.
Download the paper: http://www.hbs.edu/research/pdf/11-047.pdf
Cases & Course Materials
Ze-gen: Commercializing Clean Tech
Lynda M. Applegate, Kaitlyn Lyons, and Scott Prozeller
Harvard Business School Case 811-014
The Ze-gen case covers the first five years in the life of a clean-tech start-up. Ze-gen had developed an innovative technology that converted solid waste into synthesis gas (called syngas). This technology was in testing at the company's pilot plant, built next to the New Bedford, Massachusetts landfill. By summer 2010, Davis's team was poised to take the next big step in building a successful clean-tech company. It was time to take the company's technology to market, identify customers willing to pay, and scale the business for commercial success.
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Generation Health: A Pioneer in Genetics Benefit Management (A)
Robert F. Higgins, Jeffrey D. Marrazzo, and Rachel Gordon
Harvard Business School Case 810-007
Generation Health, a pioneer in the new field of genetics benefit management and a newly formed company, faces many strategic issues. CEO Per Lofberg is in the midst of negotiating a partnership with a major pharmacy benefit management company. As part of these negotiations, Lofberg must decide whether the time is right for such a strategic partner when Generation Health has only been founded for a year. At the same time, Lofberg must recruit for the critical position of Chief Medical Officer while also making decisions about Generation Health's stance on various regulatory issues that will affect the industry long-term.
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Generation Health: A Pioneer in Genetics Benefit Management (B)
Robert F. Higgins
Harvard Business School Supplement 811-005
Supplements the (A) case.
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California's Budget Crises, Tax Reform, and Domestic and International Tax Competition
Matthew C. Weinzierl, and Jacob Kuipers
Harvard Business School Case 710-038
How do (and how should) governments design fiscal policies to compete in a globalized economy while meeting internal policy priorities including redistribution? In 2009, Governor Arnold Schwarzenegger repeatedly declared fiscal emergencies as California's state budget deficit reached all-time highs. The Governor and legislative leaders established the Commission on the Twenty-first Century Economy to recommend tax reforms that would improve the state's fiscal health and competitiveness. But when the Commission issued its recommendations, many of which were consistent with domestic and international trends in taxation, legislative leaders were highly critical and the prospects for reform dimmed. The case describes the political and economic contributors to California's persistent fiscal deficits and the reforms recommended by the Commission. It summarizes recent trends in taxation by U.S. states and OECD nations, relating the empirical trends to tax theory. Finally, it engages the issue of inter-jurisdictional tax competition from both positive and normative perspectives.
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