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. 25

According to new research, there is a dark side to being creative. Researchers Francesca Gino (Harvard Business School) and Dan Ariely (Duke) find evidence for their hypothesis that a creative personality--the ability to think outside the box--can lead to unethical behavior. Their studies showed that dispositional creativity is a better predictor of unethical behavior than intelligence; that participants primed to think creatively were more likely to behave dishonestly because of their creativity motivation; and that creative types showed greater ability to justify their dishonest behavior. "The results provide evidence for an association between creativity and dishonesty, thus highlighting a dark side of creativity," according to Gino and Ariely.

In other new publications:

Michael I. Norton (HBS) and Debora V. Thompson (Georgetown) explore the social benefits of people who buy products with too many features. Writing in a forthcoming issue of Journal of Marketing Research, the authors explain that even though "feature-rich" cars, TVs, and other products might be more difficult to use, we buy them to raise our status in the eyes of others.

A new note by HBS professor emeritus Ray A. Goldberg and research associate Matthew Preble looks behind agricultural cooperatives, explaining how they are organized, financed, and the ways in which they partner with each other and other players in the food system.



The Strategic Use of Brand Biographies


We introduce the concept of a brand biography to describe an emerging trend in branding in which firms author a dynamic, historical account of the events that have shaped the brand over time. Using a particular type of brand biography, "the underdog," we empirically show how managers can strategically use brand biographies in brand positioning, in this case to mitigate the curse of success. As brands grow and become successful, they are often marked by the negative stigma associated with size and power, which elicits anticorporate sentiment from consumers. An underdog brand biography can be strategically wielded to prevent or offset anticorporate backlash stemming from consumers' negative perceptions of firms' size and/or market power.

Benchmarks as Limits to Arbitrage: Understanding the Low-Volatility Anomaly


Contrary to basic finance principles, high-beta and high-volatility stocks have long underperformed low-beta and low-volatility stocks. This anomaly may be partly explained by the fact that the typical institutional investor's mandate to beat a fixed benchmark discourages arbitrage activity in both high-alpha, low-beta stocks and low-alpha, high-beta stocks.

An Empirical Analysis of Innovation Contests: Strategic Incentives, Problem Uncertainty and Independent Experimentation along Parallel Paths


Contests are a historically important and increasingly popular mechanism for encouraging innovation. A central concern in designing innovation contests is how many competitors to admit. Using a unique data set of 9,661 software contests, we provide evidence of two coexisting and opposing forces that operate when the number of competitors increases. Greater rivalry reduces the incentives of all competitors in a contest to exert effort and make investments. At the same time, adding competitors increases the likelihood that at least one competitor will find an extreme-value solution. We show that the effort-reducing effect of greater rivalry dominates for less uncertain problems whereas the effect on the extreme value prevails for more uncertain problems. Adding competitors thus systematically increases overall contest performance for high-uncertainty problems. We also find that higher uncertainty reduces the negative effect of added competitors on incentives. Thus uncertainty and the nature of the problem should be explicitly considered in the design of innovation tournaments. We explore the implications of our findings for the theory and practice of innovation contests.

The Intensive Margin of Technology Adoption


We present a tractable model for analyzing the relationship between economic growth and the intensive and extensive margins of technology adoption. The "extensive" margin refers to the timing of a country's adoption of a new technology; the "intensive" margin refers to how many units are adopted (for a given size economy). At the aggregate level, our model is isomorphic to a neoclassical growth model, while at the microeconomic level it features adoption of firms at the extensive and the intensive margin. Based on a data set of 15 technologies and 166 countries our estimations of the model yield four main findings: (1) there are large cross-country differences in the intensive margin of adoption; (2) differences in the intensive margin vary substantially across technologies; (3) the cross-country dispersion of adoption lags has declined over time while the cross-country dispersion in the intensive margin has not; and (4) the cross-country variation in the intensive margin of adoption accounts

New Sources in Living Kidney Donation

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How to Do Well and Do Good

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Corporate Governance When Founders Are Directors


We examine CEO compensation, CEO retention policies, and M&A decisions in firms where founders serve as a director with a non-founder CEO (founder-director firms). We find that founder-director firms offer a different mix of incentives to their CEOs than other firms. Pay for performance sensitivity for non-founder CEOs in founder-director firms is higher and the level of pay is lower than that of other CEOs. CEO turnover sensitivity to firm performance is also significantly higher in founder-director firms compared to non-founder firms. Overall, the evidence suggests that boards with founder-directors provide more high powered incentives in the form of pay and retention policies than the average U.S. board. Stock returns around M&A announcements and board attendance are also higher in founder-director firms compared to non-founder firms.

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Error's Lessons: The Importance of Work Context in Organizational Learning from Error

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The Social Utility of Feature Creep


Previous research shows that consumers frequently choose products with too many features that they later find difficult to use. Our research shows that this seemingly suboptimal behavior may in fact confer benefits when factoring in the social context of consumption. Our studies demonstrate that choosing products with more capabilities (i.e., feature-rich products) provides social utility over and above inferences of wealth, signaling consumers' technological skills and openness to new experiences, and that consumers' beliefs about the social utility of feature-rich products are predictive of their choices of such products. Further, we examine when impression management concerns increase consumers' likelihood of choosing feature-rich products. We find that public choices in which participants display their preferences to others encourage feature-seeking behavior, but that the anticipation of having to use a product in front of others provides an incentive to avoid additional features.

Overconfidence by Bayesian Rational Agents


This paper derives two mechanisms through which Bayesian-rational individuals with differing priors will tend to be relatively overconfident about their estimates and predictions, in the sense of overestimating the precision of these estimates. The intuition behind one mechanism is slightly ironic: in trying to update optimally, Bayesian agents overweight information of which they overestimate the precision and underweight in the opposite case. This causes overall an overestimation of the precision of the final estimate, which tends to increase as agents get more data.


Working Papers

The Dark Side of Creativity: Original Thinkers Can Be More Dishonest


Creativity is a common aspiration for individuals, organizations, and societies. Here, however, we test whether creativity increases dishonesty. We propose that a creative personality and creativity primes promote individuals' motivation to think outside the box and that this increased motivation leads to unethical behavior. In four studies, we show that participants with creative personalities who scored high on a test measuring divergent thinking tended to cheat more (Study 1); that dispositional creativity is a better predictor of unethical behavior than intelligence (Study 2); and that participants who were primed to think creatively were more likely to behave dishonestly because of their creativity motivation (Study 3) and greater ability to justify their dishonest behavior (Study 4). Finally, a field study constructively replicates these effects and demonstrates that individuals who work in more creative positions are also more morally flexible (Study 5). The results provide evidence for an association between creativity and dishonesty, thus highlighting a dark side of creativity.

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Issuer Quality and Corporate Bond Returns


Changes in the pricing of credit risk disproportionately affect the debt financing costs faced by low credit quality firms. As a result, time-series variation in the average quality of debt issuers may be useful for forecasting excess corporate bond returns. We show that when issuance comes disproportionately from lower quality borrowers, future excess returns on high yield and investment grade bonds are low and often significantly negative. The degree of predictability is large in both economic and statistical terms, with univariate R2 statistics as high as 30% at a 3-year horizon. The results are difficult to reconcile with integrated-markets models in which the rationally determined price of risk fluctuates in a countercyclical fashion. The results can be partially explained by models in which shocks to intermediary capital or agency problems drive variation in required returns. Finally, we consider models in which investor over-extrapolation plays a role and find some evidence in favor of these models.

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and Cynicism in Negotiations and Other Competitive Contexts


A wealth of literature documents how the common failure to think about the decisions of others contributes to suboptimal outcomes. Yet sometimes, an excess of cynicism appears to lead us to over-think the actions of others and make negative attributions about their motivations without sufficient cause. In the process, we may miss opportunities that greater trust might capture. We review the research about when people think too little and when they think too much about the decisions of others, as contrasted with rational behavior. We also discuss the antecedents and consequences of these na´ve and cynical errors, as well as some potential strategies to buffer against their effects and achieve better outcomes in competitive contexts.

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Cases & Course Materials

FreshTec: Revolutionizing Fresh Produce

Jose B. Alvarez and Ryan Johnson
Harvard Business School Case 511-059

Entrepreneurial produce packaging firm, which has developed a disruptive technology that keeps fresh produce and flowers fresh for significantly longer, faces strategic growth decisions. CEO Bob Wright must decide how best to bring his company's unique packaging product to market. The technology holds promise after a long development phase, but the packaging is more expensive, and Wright and his team must convince the industry stakeholders of the packaging's value.

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The Creative Industries: Managing and Marketing Talent

Anita Elberse
Harvard Business School Module Note 509-078

This module note examines issues concerning the management and marketing of talent in the creative industries. It describes the characteristics of the market for creative talent; discusses how individual talent creates and captures value; and explores how professional firms can best recruit, develop, manage, and market creative talent.

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The Creative Industries: Managing Products and Product Portfolios

Anita Elberse
Harvard Business School Module Note 509-077

This module note examines the way in which professional content producers in the creative industries approach product and product portfolio management and explores the underlying reasons for their strategies.

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Agricultural Cooperatives: Origins, Structure, Financing, and Partnerships

Ray A. Goldberg and Matthew Preble
Harvard Business School Note 911-410

This technical note explains how agricultural cooperatives are structured and financed, as well as how they form partnerships with one another and other elements of the food system.

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Building a Developmental Culture: The Birth of Deloitte University

Boris Groysberg, Maureen Gibbons, and Joshua Bronstein
Harvard Business School Case 411-059

It is October 2009 and Barry Salzberg, CEO of Deloitte LLP, has just returned from the groundbreaking of Deloitte University. When completed, Deloitte University would be a world class learning and development center owned by, and for the exclusive use by the employees of, Deloitte. Deloitte spent a significant amount of time and money on the training and development of its employees. Historically, this training had taken place at hotels and conference centers not affiliated with Deloitte. The idea for the construction of a special-purpose, Deloitte-owned learning facility had been championed by Salzberg. He believed Deloitte University would allow the firm to "instill our values in our people through learning and development," which he thought was critical to Deloitte's long-term success. Salzberg had won over the necessary majority of the partners, but not all of them supported the University concept. As he thought about the future of this new facility, how could he ensure it would be successful?

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The Smart Grid

Rebecca Henderson, Noel Maurer, and Catherine Ross
Harvard Business School Case 310-072

The development of the smart grid-the integration of traditional elements of energy transmission and delivery with information technology-heralds a new era in the power industry. Many new business opportunities will be created as the smart grid gets developed. What strategies should Cisco employ to become a leader in this industry? What obstacles and challenges must Cisco overcome to compete successfully in this new industry?

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The Global Sight Network Initiative

Regina E. Herzlinger
Harvard Business School Case 311-034

How to replicate a 'one of' social entrepreneurship effort: To cure blindness, Seva took the Aravind Eye Hospital and scaled it up to 100 hospitals globally.

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Whose Money Is It Anyway? (A)

V. G. Narayanan, Richard G. Hamermesh, and Rachel Gordon
Harvard Business School Case 810-008

The Brigham and Women's Physician's Organization (BWPO) and its corporate parent disagree over who has jurisdiction over significant legacy funds. Are they controlled by the BWPO or do they belong to BWPO's corporate parent? The BWPO and its corporate parent must negotiate who has control of the funds, which impacts how the funds may be used.

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Toyota Recalls (A): Hitting the Skids

John A. Quelch, Carin-Isabel Knoop, and Ryan Johnson
Harvard Business School Case 511-016

In the fall of 2009, Toyota Motor Corporation, once revered for its commitment to quality and reliability, faced a highly publicized series of recalls in the U.S. representing approximately a year's worth of sales in one of its most important markets. While the first Toyota recall was met with widespread disbelief but continuing support for the brand, subsequent revelations and recalls tested the brand's resilience in the U.S. The firm's initial public response to the problems—a mixture of silence from top executives and vague, misleading public statements—frustrated U.S. government officials and the public. Not until weeks after the news first broke did Toyota organize a clear message around its commitment to return to quality. In late February 2010 Toyota President Akio Toyoda reluctantly accepts an invitation to testify to the U.S. Congress, 148 days after the first recall announcement. He has to decide what to say.

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Toyota Recalls (B): Mr. Toyoda Goes to Washington

John A. Quelch, Carin-Isabel Knoop, and Ryan Johnson
Harvard Business School Supplement 511-041

Case describes the testimony to the U.S. Congress of the Toyota CEO and the head of its U.S. motor sales.

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Toyota Recalls (C): Bumpy Road Ahead

John A. Quelch, Carin-Isabel Knoop, and Ryan Johnson
Harvard Business School Supplement 511-042

Between February and July 2010, Toyota sales recover thanks to the use of extensive PR and sales incentives. Yet recalls continue. Can Toyota stem the tide and correct its organizational flaws to address the underlying issues?

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