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.
We are always pleasantly surprised by the breadth of topics included in business research--analyzing the putting techniques of professional golfers, for example. HBS professor Douglas Fearing and colleagues do just that in their paper How to Catch a Tiger: Understanding Putting Performance on the PGA TOUR, which appears in the current Journal of Quantitative Analysis in Sports. The team proposes a new metric, putts gained per round, that they argue more accurately reflects the skills of golfers than measures used by the Professional Golfers' Association. But no matter what is measured or how, one name keeps popping to the top.
In the 1950s, reports from the Ford Foundation and Carnegie Corporation contributed to a major rethinking of how we teach business education. A new working paper looks at Ford as an example of a "dominating institution"-one designed to create change in other institutions-to see how it works. The paper is by HBS professor Rakesh Khurana and colleagues Kenneth Kimura and Marion Fourcade. Read How Foundations Think: The Ford Foundation as a Dominating Institution in the Field of American Business Schools.
Why is it that countries with an abundance of natural resources can have slower economic growth and social progress than less well-endowed fixed countries? This "paradox of plenty" is explored in the new case study Angola and the Resource Curse, which follows oil-rich Angola as it grapples with a crumbling social structure and imbalanced economy.
Republic of China at 60-An International Assessment
|Author:||William C. Kirby|
|Publication:||Harvard University Asia Center, forthcoming|
An abstract is unavailable at this time.
Publisher's Link: http://www.hup.harvard.edu/catalog.php?recid=31216
Let the Right One In: A Microeconomic Approach to Partner Choice in Mutualisms
|Authors:||Marco Archetti, Francisco Ubeda, Drew Fudenberg, Jerry R. Green, Naomi E. Pierce, and Douglas W. Yu|
|Publication:||The American Naturalist 177, no. 1 (January 2011)|
One of the main problems impeding the evolution of cooperation is partner choice. When information is asymmetric (the quality of a potential partner is known only to himself), it may seem that partner choice is not possible without signaling. Many mutualisms, however, exist without signaling, and the mechanisms by which hosts might select the right partners are unclear. Here we propose a general mechanism of partner choice, "screening," that is similar to the economic theory of mechanism design. Imposing the appropriate costs and rewards may induce the informed individuals to screen themselves according to their types and therefore allow a noninformed individual to establish associations with the correct partners in the absence of signaling. Several types of biological symbioses are good candidates for screening, including bobtail squid, ant-plants, gut microbiomes, and many animal and plant species that produce reactive oxygen species. We describe a series of diagnostic tests for screening. Screening games can apply to the cases where by-products, partner fidelity feedback, or host sanctions do not apply, therefore explaining the evolution of mutualism in systems where it is impossible for potential symbionts to signal their cooperativeness beforehand and where the host does not punish symbiont misbehavior.
Coordinating Marketing and Sales in B2B Organizations
|Authors:||Frank V. Cespedes|
|Publication:||In Business to Business Marketing Handbook. Edward Elgar Publishing Company, forthcoming|
This chapter focuses on the topic of coordinating marketing and sales in Business-to-Business (B2B) organizations. It provides an historical overview, indicating that this is not a new issue facing firms, that the business press has outlined a recurring set of prescriptive advice about the topic to practitioners, and why (despite its recurring nature) that advice seems to have limited usefulness. The chapter then reviews some common delineations of marketing and sales activities in companies and the implications. Finally, the chapter concludes with a sample of what B2B companies have done in their attempts to improve marketing-sales coordination, including suggestions for future research.
The Many Faces of Nonprofit Accountability
|Publication:||Chap. 4 in The Jossey-Bass Handbook of Nonprofit Leadership and Management. 3rd ed., edited by David O. Renz, 110-121. San Francisco: Jossey-Bass, 2010|
Calls for greater accountability are not new. Leaders of organizations, be they nonprofit, business, or government, face a constant stream of demands from various constituents demanding accountable behavior. But what does it mean to be accountable? By and large, nonprofit leaders tend to pay attention to accountability once a problem of trust arises-a scandal in the sector or in their own organization, questions from citizens or donors who want to know if their money is being well spent, or pressure from regulators to demonstrate that they are serving a public purpose and thus merit tax-exempt status. Amid this clamor for accountability, it is tempting to accept the popular normative view that more accountability is better. But is it feasible, or even desirable, for nonprofit organizations to be accountable to everyone for everything? The challenge for leadership and management is to prioritize among competing accountability demands. This involves deciding both to whom and for what they owe accountability. This chapter provides an overview of common dilemmas of nonprofit accountability, lays out tradeoffs inherent in a range of accountability mechanisms, and closes with insights for practice.
Publisher's Link: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0470392509.html
How to Catch a Tiger: Understanding Putting Performance on the PGA TOUR
|Authors:||Douglas Fearing, Jason Acimovic, and Stephen C. Graves|
|Publication:||Journal of Quantitative Analysis in Sports 7, no. 1 (January 2011)|
Existing performance metrics utilized by the PGA TOUR have biases towards specific styles of play, which make relative player comparisons challenging. Our goal is to evaluate golfers in a way that eliminates these biases and to better understand how the best players maintain their advantage. Through a working agreement with the PGA TOUR, we have obtained access to proprietary "ShotLink" data that pinpoints the location of every shot taken on the PGA TOUR. Using these data, we develop distance-based models for two components of putting performance: the probability of making the putt and the remaining distance to the pin conditioned on missing. The first is modeled through a logistic regression, the second through a gamma regression. Both models fit the data well and provide interesting insights into the game. Additionally, by describing the act of putting using a simple Markov chain, we are able to combine these two models to characterize the putts-to-go for the field from any distance on the green for the PGA TOUR. The results of this Markov model match both the empirical expectation and variance of putts-to-go. We use our models to evaluate putting performance in terms of the strokes or putts gained per round relative to the field. Using this metric, we can determine what portion of a player's overall performance is due to advantage (or loss) gained through putting, and conversely, what portion of the player's performance is derived off the green. We demonstrate with examples how our metric eliminates significant biases that exist in the PGA TOUR's Putting Average statistic. Lastly, extending the concept of putts gained to evaluate player-specific performance, we show how our models can be used to quickly test situational hypotheses, such as differences between putting for par and birdie and performance under pressure.
Read the paper: http://www.bepress.com/jqas/vol7/iss1/5/
Scanning the Commons? Evidence on the Benefits to Startups Participating in Open Standards Development
|Authors:||Lee Fleming and David M. Waguespack|
|Publication:||Management Science (forthcoming)|
This paper contributes large-sample evidence to an emerging discussion on open innovation and firm strategy. We ask why a startup should participate in an open standards community. We propose four ways that participation might increase a startup's chances of a liquidity event: gaining endorsement of the startup's technology standard, openly developing the startup's technology within the community (but not necessarily gaining endorsement), simply attending physical meetings of the community, and having startup members elected to leadership positions. Examination of venture-funded startups in the networking/data communications industry sectors reveals that those startups that participate in an open standards community, such as the Internet Engineering Task Force (IETF), have a greater likelihood of an initial public offering or acquisition. The strongest effects are due to attendance and are conditional on high levels of attendance and those holding leadership positions within the IETF. Surprisingly, standards endorsement is insignificant when controlling for simple physical attendance. These results are robust to instrumental variable methods and alternative coding of variables. In two-stage models we also find that prominent venture capitalists might help their portfolio companies by steering them to effective technology strategies, in this case active participation in the IETF, and not simply by lending status.
Exclusivity and Control
|Authors:||Andrei Hagiu and Robin S. Lee|
|Publication:||Journal of Economics and Management Strategy (forthcoming)|
We analyze platform competition for content in the presence of strategic interactions between content distributors and content providers. We provide a model of bargaining and price competition within these industries and show that whether or not a piece of content ends up exclusive to one platform depends crucially on whether or not the content provider maintains control over the pricing of its own good. If the content provider sells its content outright and relinquishes control over its price, the content will tend to be exclusive unless there are sufficient market expansion effects. On the other hand, if the content provider maintains control of its pricing, the strategic interaction between prices set by the content provider and by the platforms leads to a non-monotonic relationship between exclusivity and content quality: both high and low quality content will multihome and join both platforms, but there will be a range of quality for which content will be exclusive despite foreclosing itself from selling to a portion of the market. In addition, we show that contrary to standard results on double marginalization and pricing of complementary goods, a platform that already has exclusive access to content may prefer to relinquish control over pricing and associated revenues from the content to the content provider in order to reduce price competition at the platform level.
|Authors:||Li Jin and Anna Scherbina|
|Publication:||Review of Financial Studies (forthcoming)|
We show that new managers who take over mutual fund portfolios sell off inherited momentum losers at higher rates than stocks in any other momentum decile, even after adjusting for concurrent trades in these stocks by continuing fund managers. This behavior is observed regardless of fund characteristics and is stronger when new managers are external hires. The tendency of continuing fund managers to hold on to losers could be consistent with either a behavior bias stemming from an inability to ignore the sunk costs associated with the stocks' past underperformance or a conscious desire to protect their careers by not admitting prior mistakes. Furthermore, we present evidence that selling off loser stocks helps improve fund performance.
A Fine Balance: Chinese Entrepreneurs and Entrepreneurship in Historical Perspective
|Publication:||In The People's Republic of China at 60—An International Assessment, edited by William C. Kirby. Cambridge: Harvard University Asia Center, forthcoming|
An abstract is unavailable at this time.
Publisher's Link: http://www.hup.harvard.edu/catalog.php?recid=31216
Breaking New Ground: The Emerging Frontier of CSR in the Extractive Sector
|Authors:||V. Kasturi Rangan and Brooke Barton|
|Publication:||Chap. 9 in Global Challenges in Responsible Business, edited by N. Craig Smith, C. B. Bhattacharya, David Vogel, and David I. Levine, 241-267. Cambridge University Press, 2010|
An abstract is unavailable at this time.
Organizational Sustainability: Organization Design and Senior Leadership to Enable Strategic Paradox
|Authors:||W. Smith, Maryanne Lewis, and Michael Tushman|
|Publication:||In Handbook on Positive Organizational Psychology, edited by K. Cameron and G. Spreitzer. Oxford University Press, in press|
Positively deviant organizations are sustainable, achieving organizational peak performance today while creating the conditions to thrive tomorrow. We argue that organizational sustainability depends on attending to strategic paradox, engaging contradictory yet interrelated strategies simultaneously. Drawing on our research and the work of others, we explore the paradoxical nature of organizational sustainability and identify organization design and leadership characteristics of differentiating and integrating that can more effectively support seemingly contradictory strategies.
The Euro as a Reserve Currency for Global Investors
|Authors:||Luis M. Viceira and Ricardo Gimeno|
|Publication:||Chap. 4 in Spain and the Euro. The First Ten Years, 149-178. Madrid, Spain: Banco de Espańa, 2010|
This article explores the demand for the euro for risk management purposes and the evidence of stock market integration in the euro area. We define a reserve currency as one that investors demand either because it helps them hedge real interest risk and inflation risk, or because it helps them reduce the volatility of their portfolio of stocks and bonds because its return is negatively correlated with the returns on those assets. This article re-examines the role of the euro as a reserve currency in the sense of Campbell, Viceira, and White (2003), updating their evidence, and reviews the evidence of Campbell, Serfaty-de Medeiros, and Viceira (2010) in detail. Consistent with the intuition that an integrated capital market is one in which there is a common discount factor pricing securities, we also investigate whether stocks in the euro area have moved from a regime in which national stock markets were priced with discount rates that were predominantly country specific, to a regime in which national stock markets are predominantly priced by a euro area-wide common discount rate. We adopt the beta decomposition approach of Campbell and Vuolteenaho (2004) and Campbell, Polk, and Vuolteenaho (2010) to test for capital market integration and find robust evidence of increased capital market integration in the euro zone and, consequently, improved risk sharing among euro zone economies."
When Does a Platform Create Value by Limiting Choice?
|Authors:||Ramon Casadesus-Masanell and Hanna W. Halaburda|
We present a theory for why it might be rational for a platform to limit the number of applications available on it. Our model is based on the observation that even if users prefer application variety, applications often also exhibit direct network effects. When there are direct network effects, users prefer to consume the same applications to benefit from consumption complementarities. We show that the combination of preference for variety and consumption complementarities gives rise to (1) a commons problem (to better satisfy their individual preference for variety, users have an incentive to consume more applications than the number that maximizes joint utility); (2) an equilibrium selection problem (consumption complementarities often lead to multiple equilibria, which result in different utility levels for the users); and (3) a coordination problem (lacking perfect foresight, it is unlikely that users will end up buying the same set of applications). The analysis shows that the platform can resolve these problems by limiting the number of applications available. By limiting choice, the platform may create new equilibria (including the allocation that maximizes users' utility), eliminate equilibria that give lower utility to the users, and reduce the severity of the coordination problem faced by users.
Download the paper: http://www.hbs.edu/research/pdf/11-030.pdf
From Social Control to Financial Economics: The Linked Ecologies of Economics and Business in Twentieth Century America
|Authors:||Marion Fourcade and Rakesh Khurana|
As the main producers of managerial elites, business schools represent strategic research sites for understanding the formation of economic practices and representations. This article draws on historical material to analyze the changing place of economics in American business education over the course of the 20th century. We use the Wharton School as an illustration of the earliest trends and dilemmas (c. 1900-1930), when business schools found themselves caught between their business connections and their striving for moral legitimacy in higher education. We show how several of the school's leaders were closely involved in progressive reforms and presided over the development of the empirical social sciences to address questions of labor regulation and control within manufacturing industries. Next, we look at the creation of the Carnegie Tech Graduate School of Industrial Administration after World War II. This episode illustrates the increasingly successful claims of social scientists, backed by philanthropic foundations, on business education and the growing appeal of "scientific" approaches to decision making and management. We also show that these transformations were homologically related to changes in the prevailing mode of governance in the American economy: business schools became essential sites for the development of tools and methods (e.g., input-output approaches, linear programming, forecasting) for the management of the new large, diversified conglomerates. Finally, we argue that the rise of the Graduate School of Business at the University of Chicago from the 1960s onwards marks the decisive ascendancy of economics, and particularly financial economics, in business education over the other behavioral disciplines, as well as the decisive ascendancy of business schools as producers of economic knowledge. By following teacher-student networks, we also document the key role of business schools in diffusing "Chicago-style" economic approaches-offering support for anti-regulatory approaches and popularizing narrowly financial understandings of the firm (Fligstein 1990, 2002)-that sociologists have described as characteristic of the modern neo-liberal regime.
Download the paper: http://www.hbs.edu/research/pdf/11-071.pdf
How Foundations Think: The Ford Foundation as a Dominating Institution in the Field of American Business Schools
|Authors:||Rakesh Khurana, Kenneth Kimura, and Marion Fourcade|
The question of institutional change has become central to organizational research (Powell, 2008). Recent scholarship has demonstrated, often through carefully researched cases, that institutions can and sometimes do change. According to this research, there are two primary factors that can cause institutions to change. First, institutional entrepreneurs, including individual actors or small groups of actors, are able to think and act outside the confines of their institutional context and, therefore, mobilize change in directions that favor new sets of interests (for a review, see Battilana, 2010). A second factor that contributes to institutional change is determining whether the processes are endogenous to the everyday functioning of institutions, such as the loose coupling between formal and informal practices or the contested meanings in the adoption of new practices (Leblibici, et al., 1991; Lounsbury and Pollack, 2001). While both research approaches have been quite productive and provocative, some scholars have raised concerns about this turn in institutional research. They point out that there is a theoretical inconsistency between the strong reliance on individuals as the primary unit of analysis and the examination of endogenously generated processes to explain institutional change (Scott, 2008). For example, the practical deficiencies of individual agency and endogenous processes as the primary sources of institutional change become especially apparent when one considers large-scale institutions such as healthcare, academic disciplines, or social services, which are nested within or cut across a variety of institutional sectors. These institutions either operate within a highly constrained environment of norms, regulations, and practices that are taken for granted or in a context of pluralistic and contested demands (D'Aunno, Succi, and Alexander, 2000; Denis, Lamothe, and Langley, 2001; Abbott, 1988; D'Aunno, Sutton, and Price, 1991). This research modestly attempts to explore a decidedly more organizational and exogenous perspective to explain institutional change. We start with a construct called dominating institutions, a class of formal organizations that are purposively designed to change other institutions. We suggest that such organizations exist and provide us with a stepping stone toward a more theoretically consistent and empirically grounded explanation for how large-scale institutional change sometimes occurs. The goal of this paper is to describe the structural characteristics and associated behaviors of dominating institutions as they incite change within other institutions. Their primary structure can best be described as adjacency, a space between institutional fields that provides these organizations with the advantages of connectivity across a wide variety of institutions and with a vantage point that allows them to think strategically about key intervention points for changing an institution. However, while adjacency is an important structural position, it is not, by itself, dominance. Dominance requires action. Dominating institutions exercise dominance by (1) brokering across different institutional sectors, (2) legitimizing or stigmatizing organizations and/or their practices, and (3) creating resource dependencies with the key organizations they are trying to change. We carry out this research by examining a large-scale foundation and its approach to reshaping one of the largest institutional sectors within higher education. Specifically, through a historical analysis, we document the Ford Foundation's organizational characteristics, its modus operandi, and substantive decisions for reshaping America's graduate schools of management between 1952 and 1965 from a vocationally disparate, but 'successful' field to a more academically and discipline-based orientation. We frame two questions in order to anchor the scope of our investigation: What are the structural characteristics of a dominant institution? What key behaviors do dominant institutions use to allow them to significantly reshape an existing institution? Our paper is organized in four parts. Part one describes, in greater detail, the constructs of dominating institutions, adjacency, and dominating behaviors. Part two introduces our research context, data sources, and research methods. Part three presents the key findings of how the Ford Foundation dramatically shifted the nature of business education. Part four discusses the implications of our findings and the potential for future research on institutional change.
Download the paper: http://www.hbs.edu/research/pdf/11-070.pdf
Leviathan as a Minority Shareholder: A Study of Equity Purchases by the Brazilian National Development Bank (BNDES), 1995-2003
|Authors:||Sergio G. Lazzarini and Aldo Musacchio|
There is a growing literature comparing the performance of private vs. state-owned companies. Yet, there is little work examining the effects of having the government as a minority shareholder of private companies. We conduct such a study using data for 296 publicly traded corporations in Brazil, looking at the effects of equity purchases by the National Bank for Economic and Social Development (BNDES) on firm performance between 1995 and 2003. Our fixed-effects regressions show that BNDES's purchases of equity lead to increases in return on assets and investment in fixed assets. Finally, we find that the positive effect of BNDES's equity purchases is reduced when the target firms belong to state-owned and private pyramidal groups. Therefore, we argue that having development banks owning minority stakes can have a positive effect on performance as long as they promote long-term investments and are shielded from governmental interference and potential minority shareholder expropriation.
Download the paper: http://www.hbs.edu/research/pdf/11-073.pdf
What Makes the Bonding Stick? A Natural Experiment Involving the Supreme Court and Cross-Listed Firms
|Authors:||Amir N. Licht, Xi Li, and Jordan I. Siegel|
Using a natural experiment to overcome the empirical challenges facing the debate over the bonding hypothesis, we analyze markets' reaction to a sudden radical change in the world of U.S.-listed foreign firms. In March 2010, the U.S. Supreme Court signaled its intention to geographically limit the reach of the U.S. antifraud regime. The Court thus excluded the overwhelming majority of investors in U.S.-listed foreign firms from the protection of the U.S. civil liability regime and cast at least partial limitations on the SEC's regulatory authority. This event nonetheless was met with positive abnormal returns of U.S.-listed foreign firms all over the world. These abnormal returns are actually higher the greater the percentage of a firm's capital listed on non-U.S. exchanges. We find no evidence that markets' reaction to this event related to the corporate governance and legal environment in foreign issuers' home country. These results challenge the legal bonding hypothesis while suggesting that the U.S. regime of civil liability as currently designed may not have been seen as a source of economic value for outside investors.
Download the paper: http://www.hbs.edu/research/pdf/11-072.pdf
The Role of Organizational Scope and Governance in Strengthening Private Monitoring
|Authors:||Lamar Pierce and Michael W. Toffel|
Governments and other organizations often outsource activities to achieve cost savings from market competition. Yet such benefits are often accompanied by poor quality resulting from moral hazard, which can be particularly onerous when outsourcing the monitoring and enforcement of government regulation. In this paper, we argue that the considerable moral hazard associated with private regulatory monitoring can be mitigated by the scope of the monitoring organizations' product/service portfolios and by their private governance mechanisms. These organizational characteristics affect the stringency of monitoring through reputation, customer loyalty, differential impacts of government sanctions, and the standardization and internal monitoring of operations. We test our theory in the context of vehicle-emissions testing in a state in which the government has outsourced these inspections to the private sector. Analyzing millions of emissions tests, we find empirical support for our hypotheses that particular product portfolios and forms of governance can mitigate moral hazard.
Download the paper: http://www.hbs.edu/research/pdf/11-004.pdf
Cases & Course Materials
Public Education in New Orleans: Pursuing Systemic Change through Entrepreneurship
Stacey Childress and James Weber
Harvard Business School Case 310-052
After Hurricane Katrina devastated the city in August 2005, the state had taken over 102 of the 118 public schools in New Orleans and shifted the management structure from a "single school system to a system of schools." Entrepreneurs from the region and around the country had flocked to New Orleans to run schools and provide the talent those schools needed to help their students succeed. State superintendent Paul Pastorek knew the system had a long way to go to achieve excellence, but he also knew the state never intended to govern local schools permanently. As he considered his options for the recommendation to the state board about future governance, his overarching goal was to position the "system of schools" for long-term success.
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Diego Comin and Richard H.K. Vietor
Harvard Business School Case 711-010
: In 2010, Wen Jiabao looked back at the financial crisis with some satisfaction. Using aggressive fiscal and monetary policy, China had weathered the crisis successfully, growing 8.7% annually in 2010. Most of the unemployed workers had returned to work, often demonstrating for higher wages or better working conditions. Wen, however, was really focused on his new development strategy-shifting away from export-led growth to ease domestic and international pressures. But many institutional challenges seemed to hamper domestic demand, and Wen was particularly concerned with pressures from America on China's policies for trade, exchange rates, energy, and investment.
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Arcadia Biosciences: Seeds of Change (Abridged)
Arthur A. Daemmrich, Forest Reinhardt, and Mary Shelman
Harvard Business School Case 711-050
Arcadia Biosciences is seeking to introduce genetically modified rice to China that will lower farmers' costs and generate environmental benefits through reduced greenhouse gas emissions. The case describes challenges facing this small agricultural biotechnology company, notably uneven enforcement of intellectual property in emerging market countries and uncertainty regarding the provision and market value of carbon credits under international climate change agreements. In September 2008, Eric Rey, Arcadia's CEO, faces an inflection point concerning his leading technology, genes for Nitrogen Use Efficiency (NUE) in rice. He can determine a price to charge for NUE seed based on savings to farmers from their reduced use of expensive nitrogen fertilizers. Or he can advance a plan to earn revenue from carbon credits allocated under the Kyoto Protocol to China for use of Arcadia's rice, since reduced nitrogen fertilizer use will lower greenhouse gas emissions. The case provides context on the company; describes advances in seed technologies focused to climate change and the associated resource issue of fertilizer use; and presents the strategic choices facing a start-up company operating at the intersection of business, agriculture, and climate change agreements.
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Stalemate at the WTO: TRIPS, Agricultural Subsidies, and the Doha Round
Arthur A. Daemmrich
Harvard Business School Note 711-043
This note analyzes disputes over intellectual property enforcement and agricultural trade barriers at the center of the Doha Round of World Trade Organization (WTO) negotiations. Fundamental principles of intellectual property rights and agricultural subsidies are described, along with the challenges of creating and operating multilateral institutions. The note begins with a brief history of multilateral negotiations under the General Agreement on Tariffs and Trade (GATT), then describes key events of the Doha Round that began in 2001, and the WTO's dispute settlement process. A stalemate has developed between developed and developing countries in WTO talks, leading to the proliferation of bilateral agreements. The note challenges readers to develop an informed position on global trade governance and the economic benefits and political tradeoffs associated with reduced trade barriers and the elimination of domestic subsidies.
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Talent Recruitment at frog design Shanghai
Robert G. Eccles, Amy C. Edmondson, and Yi Kwan Chu
Harvard Business School Case 411-040
This case illustrates the complexity and importance of hiring decisions in the Chinese operation of a global design and innovation firm.
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Washout: The Founders' Take and the Investors' Tale
Lena G. Goldberg and Chad M. Carr
Harvard Business School Case 311-078
The competing narratives of the founders of Alantec, Inc. and the venture capitalists who funded the company are explored in the context of Kalashian v. Advent VI Ltd., a California Superior Court case. The founders of the company, which produced switches for computer networks, raised several rounds of financing from venture capital firms that ended up controlling the company's board. After the company continued to fall short of its sales projections, the board ousted the founders and brought in new management. The company subsequently raised two new rounds of financing which resulted in dilution of the interests of the founders from about 8% to less than .01%. Alantec then launched a new product, "the Power Hub," which became highly successful, and the company ultimately went public. The founders sold their remaining shares shortly after the IPO. Two years later, Alantec was acquired for the equivalent of $70 per share. Following the sale, the founders sued, alleging that the venture capitalists had committed fraud and breached their fiduciary duties as controlling shareholders of Alantec. The case presents actual excerpts from the trial briefs of both the founders and the venture capitalists as well as competing views on how and why the dilution occurred.
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CHS Inc.: Cooperative Leadership in a Global Food Economy
Ray A. Goldberg and Matthew Preble
Harvard Business School Case 911-409
CHS—the largest farm cooperative in the U.S.—was planning its 2020 vision statement and the role the cooperative should play in the food system.
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Richard G. Hamermesh and Lauren Barley
Harvard Business School Case 810-027
Novasys has developed a new medical device and procedure for the treatment of female stress urinary incontinence that is cheaper and can be performed in doctors' offices. In spite of FDA approval, the American Medical Association has been unwilling to approve the product for reimbursement. The case deals with the company's struggle to obtain a reimbursement code.
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Angola and the Resource Curse
Aldo Musacchio, Eric Werker, and Jonathan Schlefer
Harvard Business School Case 711-016
Since emerging from decades of conflict in 2002, Angola has been growing at a scorching double-digit rate, led by its oil industry. But the nation remains beset with seemingly intractable problems: immense inequality, low life expectancy, a non-diversified economy, and constant grumblings of corruption. The global financial crisis and subsequent fall in state oil revenue drives a loan-seeking Angola toward either the IMF, that demands extensive reforms, or the Chinese, who seek to take a direct stake in the nation's recovery. The case explores the dynamics of post-conflict recovery as well as the challenges associated with a reliance on oil wealth, including the resource curse and Dutch disease.
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Risk and Reward in Venture Capital
William A. Sahlman
Harvard Business School Note 811-036
This note describes the payoff structure of investment in individual venture capital-backed companies and in venture capital-portfolios. Venture capital investments are characterized by high failure rate (over 50%) and a small number of given successes (greater than 10% returns). As an asset class, venture capital has produced high cyclical returns that mirror trends in capital markets and in markets for new technology. There is a large disparity in median and upper quantize performance. A small number of funds do well on a constant basis. Overall returns on venture capital have been low for the decade ending in 2009.
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AEP: Carbon Capture and Storage
Richard H. K. Vietor
Harvard Business School Case 711-036
By October 2010, American Electric Power (AEP), the largest coal-fired, electric utility in the U.S., had been operating a carbon capture and sequestration pilot plant for one year. Using a proprietary, Alstom chilled ammonia technology, AEP was capturing and sequestering 90% of the carbon dioxide in a small waste stream at its Mountaineer plant in West Virginia. As part of its larger carbon reduction strategy, AEP was launching construction of a $680 million demonstration plan, partially funded with DOE money. Mike Morris, AEP's chairman, was frustrated though that Congress had not passed a cap-and-trade bill and was worried how he would recover AEP's share of this huge investment. Could he find partners in this cutting-edge demonstration, or at least, add it to his utility rate base?
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Qualcomm Incorporated 2011 Update
David B. Yoffie
Harvard Business School Supplement 711-463
Qualcomm in 2009 and 2010 experienced both the worst of times and the best of times. During the "great recession" of 2009, smartphones growth stalled, stalling Qualcomm's revenue, but in 2010 growth surged again and was predicted to continue its upward trajectory in 2011. This brief case updates Qualcomm's struggles with FLO TV and BREW, while outlining the new opportunities for Qualcomm in emerging categories such as tablet computers, displays, and new operating systems for smartphones.
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