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.

Jan. 18

For many of its 121 years, the National Geographic Society depended on magazine sales to further its mission and attract supporting members. The new case "The National Geographic Society," by David A. Garvin and Carin-Isabel Knoop, looks over the shoulder of CEO John Fahey as he considers a radical (at least for NGS) move: create a senior management position responsible for e-commerce. "Putting the final touches on the position and its reporting arrangements," the authors report, "has led to significant debate within the organization, and Fahey is torn about how to proceed."

Also this week, the working paper "Sustainable Cities: Oxymoron or the Shape of the Future?" explores the successes and failures of eight early "ecocity" projects. And professor Rohit Deshpandé, writing in Harvard Business Review, considers the "provenance paradox," wherein consumers shy away from buying high-quality products from regions not commonly associated with excellence in certain product categories. Download "Why You Aren't Buying Venezuelan Chocolate."

 

Publications

Blind Spots: Why We Fail to Do What's Right and What to Do about It

Abstract

When confronted with an ethical dilemma, most of us like to think we would stand up for our principles. But we are not as ethical as we think we are. In Blind Spots, leading business ethicists Max Bazerman and Ann Tenbrunsel examine the ways we overestimate our ability to do what is right and how we act unethically without meaning to. From the collapse of Enron and corruption in the tobacco industry, to sales of the defective Ford Pinto and the downfall of Bernard Madoff, the authors investigate the nature of ethical failures in the business world and beyond and illustrate how we can become more ethical, bridging the gap between who we are and who we want to be.

Publisher Link: http://press.princeton.edu/titles/9390.html

Why You Aren't Buying Venezuelan Chocolate

Abstract

The article discusses the "provenance paradox," wherein consumers are unwilling to buy high-quality products from regions not commonly associated with excellence in certain product categories. Venezuelan chocolate maker Chocolates El Rey does little international business because consumers associate premium chocolate more with Belgium or Switzerland than with Venezuela. Companies in this position have difficulty charging prices sufficient to fuel international expansion. The author presents advice on overcoming the paradox but warns it can be a lengthy process.

Read the article: http://hbr.org/2010/12/why-you-arent-buying-venezuelan-chocolate/ar/1#

Bringing Ethics into Focus: How Regulatory Focus and Risk Preferences Influence (Un)ethical Behavior

Abstract

In four laboratory studies, we find that regulatory focus induced by situational cues (such as the framing of an unrelated task) or primed influences people's likelihood to cross ethical boundaries. A promotion focus leads individuals to be more likely to act unethically than a prevention focus (Studies 1, 2, and 3). These higher levels of dishonesty are explained by the influence of a person's induced regulatory focus on his or her behavior toward risk. A promotion focus leads to risk-seeking behaviors, while a prevention focus leads to risk avoidance (Study 3). Through higher levels of dishonesty, promotion focus also results in higher levels of virtuous behavior (Studies 2 and 3), thus providing evidence for compensatory ethics. Our results also demonstrate that the framing of ethics (e.g., through an organization's ethics code) influences individuals' ethical behavior and does so differently depending on an individual's induced regulatory focus (Study 4).

Read the article: http://www.francescagino.com/publications.html

Robin Hood under the Hood: Wealth-based Discrimination in Illicit Customer Help

Abstract

This paper investigates whether an employee's perception of customer wealth affects his likelihood of engaging in illegal behavior. We propose that envy and empathy lead employees to discriminate in illicitly helping customers based on customer wealth. We test for this hypothesis in the vehicle emissions testing market, where employees have the opportunity to illegally help customers by passing vehicles that would otherwise fail emissions tests. We find that for a significant number of inspectors, leniency is much higher for those customers with standard vehicles than for those with luxury cars, although a smaller group appears to favor wealthy drivers. We also investigate the psychological mechanisms explaining this wealth-based discriminatory behavior using a laboratory study. Our experiment shows that individuals are more willing to illegally help peers when those peers drive standard rather than luxury cars and that envy and empathy mediate this effect. Collectively, our results suggest the presence of wealth-based discrimination in employee-customer relations and that envy toward wealthy customers and empathy toward those of similar economic status drive much of this illegal behavior. Implications for both theory and practice are discussed.

The Hidden Advantages of Quiet Bosses

Abstract

The article discusses research that identified situations where introverts are more apt to be effective leaders than extroverts. Although it is generally accepted that extroverts make the best leaders, the authors found that introverts can be better in unpredictable, changing environments where workers are proactive about sharing their ideas.

Read the article: http://hbr.org/2010/12/the-hidden-advantages-of-quiet-bosses/ar/1

What Factors Drive Analyst Forecasts?

Abstract

A firm's competitive environment, its strategic choices, and its internal capabilities are considered important determinants of its future performance. Yet there is little evidence on whether analysts' forecasts of firm performance actually reflect any of these factors and which are considered most important. We use survey data from 967 analysts ranking 837 companies to judge how their forecasts are related to evaluations of firms' industry competitiveness, strategic choices, and internal capabilities. Forecasts are generally associated with many of the factors that money managers rate as important in their assessments of analyst contributions, including industry growth and competitiveness, low-price strategy, strategy execution, top management quality, innovation, and performance-driven culture. We also find wide variation across variables for ratings consistency among analysts covering the same firm. On average, consistency is higher for sell-side than buy-side analysts, consistent with sell-side analysts facing greater incentives to herd.

Work Pray Love

Abstract

This article identifies five problematic issues in the intersection of work and life that create human resource challenges for organizations and their employees. These include work overload, the slow pace of adopting telecommuting, gender-related pay gaps, a household division of labor that still saddles women with a disproportionate share of caretaking chores, and the question of religious expression in the workplace.

Read the article: http://hbr.org/2010/12/column-work-pray-love/ar/1#

Collaborative Implementation: 'What If,' Asked George?

An abstract is not available at this time.

Review the book: http://www.cbspress.dk/Visning-af-titel.848.0.html?&cHash=3818d01f1b&ean=9788763002417&code=kommende

The Case for Professional Boards

Abstract

When the world's largest financial institutions had to be rescued from insolvency in 2008, many experts laid the blame at the feet of corporate boards. But insufficient board oversight is a problem that had supposedly been solved in 2002. As the United States reeled from the blatant failures of corporate governance at Enron and WorldCom, Congress passed the famous Sarbanes-Oxley Act (SOX) to prevent such failures from happening again. The new rules looked promising. The majority of a board's directors now had to be independent. And senior executives were required to conduct annual assessments of their internal controls for review by external auditors, whose work would be further reviewed by a quasi-governmental oversight board. By the time of the financial meltdown, most major financial institutions were SOX compliant-but that didn't stop the failures. More than 80% of collapsed banks' board members were independent, as were all members of their audit, compensation, and nominating committees. All the firms evaluated their internal controls yearly, and, in 2007, their external auditors' reports showed no material weaknesses. Neither did the reviews by the quasi-governmental board. So why were the SOX reforms so ineffective? In the author's view, it's because they merely added a new layer of legal obligations for governance without improving the quality of people serving on the boards or changing their behavioral dynamics. The author—formerly the president or chairman of two global financial firms, an independent director of several large industrial companies, and a longtime scholar of corporate governance—identifies three chronic deficiencies of boards: They tend to be too large to operate effectively. Members often lack sufficient expertise in the relevant industry. And few devote enough time to fully understand the complexities of the business. In this article, Pozen presents a new model for the corporate board.

Read the article: http://hbr.org/2010/12/the-big-idea-the-case-for-professional-boards/ar/1#

M@n@gement in Times of Economic Crisis: Insights into Organizational Ambidexterity

Abstract

We constantly hear of the increasing complexity of our fast-paced, globalized world, and those who did not survive the succession of crises of the last decade could certainly attest to the difficulties of strategy making in such circumstances. Of course, our reflex when confronted with fear of the future is often to run for cover, particularly if management can get away with downsizing while blaming the crisis. But of course, this only fulfils the short-term objectives of strategy. If an organization favors short-term exploitation when crisis strikes, what will become of it in the longer term? By the same token, allocating resources to long-term exploration might incur the risk of precipitating the fall.

Egalitarianism and International Investment

Abstract

This study identifies the effect of a key cultural dimension—egalitarianism—on a set of international investment outcomes. Egalitarianism expresses a society's cultural orientation with respect to intolerance for abuses of market and political power. We show egalitarianism to be based on exogenous factors including social fractionalization, religion, and war experience. Controlling for a large set of competing explanations, we find a robust influence of egalitarianism distance on cross-border investment flows of equity, debt, and mergers and acquisitions. An informal cultural institution largely determined a century or more ago, egalitarianism influences international investment via an associated set of consistent policy choices made in recent years. But even after controlling for these associated policy choices, egalitarianism continues to exercise a direct effect on cross-border investment flows, likely through its direct influence on managers' daily business conduct.

Download the paper: http://www.people.hbs.edu/jsiegel/SiegelLichtSchwartz_EII_20110107.pdf

 

Working Papers

Sustainable Cities: Oxymoron or the Shape of the Future?

Abstract

Two trends are likely to define the 21st century: threats to the sustainability of the natural environment and dramatic increases in urbanization. This paper reviews the goals, business models, and partnerships involved in eight early "ecocity" projects to begin to identify success factors in this emerging industry. Ecocities, for the most part, are viewed as a means of mitigating threats to the natural environment while creating urban living capacity by combining principles of green building with the use of information and communication technologies (ICT) to better manage complex urban systems.

Download the paper: http://www.hbs.edu/research/pdf/11-062.pdf

 

Cases & Course Materials

Zespri

Jose B. Alvarez and Mary Shelman
Harvard Business School Case 511-001

Grower-owned Zespri is the sole exporter of New Zealand grown kiwifruit outside of Australia and New Zealand. Facing growing international competition, Zespri invested in consumer branding and innovation, which has led to new types of kiwifruit that taste better and are protected with patents. Consumer response has been positive and Zespri has begun to grow kiwifruit outside of New Zealand in order to have the product on retail shelves year round. Is this the right strategy for the future?

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/511001-PDF-ENG

Asian Agri and the Future of Palm Oil

David E. Bell and Natalie Kindred
Harvard Business School Case 511-015

For Asian Agri and other Indonesian palm oil producers, the future promised rising demand from fast-growing Asian populations, but also intensifying criticism from environmental groups. With the highest yield and lowest production cost of any edible oil, palm oil constituted an abundant, inexpensive source of food for Asian and, to a lesser extent, international markets. Its production had soared from 1970 to 2010, sparking concern from environmentalists over the conversion of high-value conservation land in Malaysia and Indonesia (where nearly 90% of palm oil was produced) into palm oil plantations. Critics had intensified their campaigns in recent years, urging—at times successfully—packaged food makers and investors to boycott palm oil suppliers accused of environmental mismanagement. While noting that some accusations were unjustified, palm oil producers argued the industry was making strides towards greater sustainability and cited the unique advantages of palm oil: it was free of unhealthy trans fats, for example, and required less land to produce more oil than any known substitute. Asian Agri, an established Indonesian palm oil grower and exporter, had thus far avoided public scrutiny. The company was a key source of employment in many rural communities, had extensive experience negotiating the complex Indonesian regulatory environment, and was moving to certify its operations according to industry-set sustainability guidelines. In 2010, Asian Agri appeared well positioned to capitalize on the growing palm oil market, but the broad-strokes vilification of the palm oil industry was a source of serious concern. In the face of great uncertainty, the management team needed to devise a strategy for the future.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/511015-PDF-ENG

Malaysia: People First?

Diego Comin and John Abraham
Harvard Business School Case 710-033

On March 30, 2010, Prime Minister Najib Razak presented his new economic model (NEM) for Malaysia. With the goal of raising per capita income to over $15,000 by 2020 from the current level of $6,634, the plan included measures to improve human capital, reduce migration, and privatize inefficient government linked corporations (GLCs). However, the most controversial part of the NEM was the dismantling of the new economic policy (NEP), an affirmative action program for native Malays that had alleviated racial tensions and reduced inter-racial income inequality over the previous 40 years though, some argued, at the cost of fostering corruption.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/710033-PDF-ENG

Growing Pains at Stroz Friedberg

David A. Garvin and Carin-Isabel Knoop
Harvard Business School Case 311-008

In late spring 2009, Stroz Friedberg co-presidents Edward Stroz and Eric Friedberg had to set growth targets for 2010. The leading global consulting firm they had built specialized in managing digital risk and uncovering digital evidence and had grown very rapidly. With the firm's CFO, they believed that the firm could grow from $58 million to $72 million, a growth rate of 27% over the preceding year. However, the firm's 11 offices had submitted first draft FY 2010 plans that together added up to firm-wide revenues of only $53 million, a growth rate of negative 10.2%. The preceding years of rapid growth had been successful but challenging, and a thorough review of the firm's culture, systems, structure, and processes in late 2008 had resulted in a significant set of changes to which the organization was still adjusting. Stroz and Friedberg wondered whether to push for continued, aggressive growth.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/311008-PDF-ENG

The National Geographic Society

David A. Garvin and Carin-Isabel Knoop
Harvard Business School Case 311-002

In January 2010, John Fahey, president, CEO, and chairman of the board of trustees' executive committee of the Washington, D.C.-based National Geographic Society (NGS), must decide how best to organize the 121-year old mission-driven organization for a world of accelerating digital convergence and decreasing magazine sales. Historically a proponent of evolutionary change, he is considering a radical move: create a senior management position responsible for e-commerce to coordinate web-based offerings and outreach across the Society's various departments, transition NGS from its many disparate and independent direct mail efforts to a more integrated and strategic e-commerce strategy, and leverage the NGS relationship with its members—currently defined as magazine subscribers, since a subscription comes with Society membership. Putting the final touches on the position and its reporting arrangements has led to significant debate within the organization, and Fahey is torn about how to proceed.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/311002-PDF-ENG

Formosa Plastics Group: Business Continuity Forever

Li Jin, Joseph P. H. Fan, and Winnie S. C. Leung
Harvard Business School Case 210-026

Wang Yung-ching, legendary Taiwanese businessman and philanthropist, passed away in 2008. He left behind an estate worth U.S. $5.5 billion but did not leave a will. The case discusses the potential motivation for Wang and uses it to study succession planning for family businesses.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/210026-PDF-ENG

Using Regression Analysis to Estimate Time Equations

F. Asis Martinez-Jerez and Ariel Andres Blumenkranc
Harvard Business School Note 111-001

This note presents a simple way to estimate time equations using regression analysis in Excel. The note quickly outlines regression analysis, then presents a real-life case example from the natural gas industry that students can use to gain experience developing and interpreting the results of time equations.

Purchase this note:
http://cb.hbsp.harvard.edu/cb/product/111001-PDF-ENG

Assessing a Company's Future Financial Health

Thomas R. Piper
Harvard Business School Note 911-412

The case provides students with (1) an understanding of the essence of long-term financial health; (2) familiarity with the calculation and meaning of various financial ratios; and (3) an understanding of the influence of a company's operating and competitive characteristics on its investment in various type assets, on the profitability of these investments, and on the financial structure of its balance sheet. The case also allows a discussion of (1) the incomplete and lagging nature of financial measures; (2) the influence of financial measures on behavior; and (3) the reality that financial analysis often results in better, more focused questions to be asked of management, not conclusive answers.

Purchase this note:
http://cb.hbsp.harvard.edu/cb/product/911412-PDF-ENG

Zynga

Mikołaj Jan Piskorski and David Chen
Harvard Business School Case 710-464

In January 2010 Mark Pincus is deciding how to double the number of Zynga games' players to 500 million without sacrificing profitability. These ambitious growth plans required changes to product, corporate strategy, and customer acquisition and retention. With regard to product Pincus needed to decide to invest in evolving the successful games or develop new games. With regard to corporate strategy, Pincus had to choose whether each game should compete on its own, or force every game to build functionalities that support other Zynga games too. Finally, to ensure customer acquisition and retention Pincus faced the choice between deepening commitment to Facebook or developing its own distribution channels.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/710464-PDF-ENG

CME Group

Forest Reinhardt and James Weber
Harvard Business School Case 711-005

The case describes CME Group, the world's largest commodities exchange, futures and options on futures contracts, history, regulation, and the strategic choices the company faced. CME Group was formed from the oldest and most well-known exchanges in the world. Traders on the exchange bought and sold contracts in order to hedge risk or speculate on future price trends. In recent decades trading had undergone significant growth. From its roots in agricultural commodities, with trading typically occurring in face-to-face transactions in pits on exchange floors, CME introduced new hedging products in metals, energy, and finance, and electronic trading, which brought new market participants. Some of these new participants, such as pension funds, were significantly larger and had different strategic agendas than the traditional agricultural-related participants. The case raises the question of whether increased speculation was helping or hurting the exchange or its participants. In addition, the financial crisis of 2007 and 2008 was driving new regulation in the industry, which brought new challenges and opportunities to CME.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/711005-PDF-ENG