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.

Feb. 8

Several ecocities have sprouted up around the world, attempting to create sustainable urban environments. How are they doing? Researchers Annissa Alusi, Robert G. Eccles, Amy C. Edmondson, and Tiona Zuzul investigate efforts underway in China, Abu Dhabi, South Korea, Finland, and Portugal. Their paper, Sustainable Cities: Oxymoron or the Shape of the Future?, is available as a free download.

In a forthcoming article in American Economic Review Papers and Proceedings, authors Peter Roberts, Mukti Khaire, and Christopher Ian Rider explore the ability of wineries that hire a star winemaker to raise prices--even before the new product hits the market.

Is there life beyond Spider-Man? In this newly abridged case from several years ago, Marvel Enterprises, Inc., professor Anita Elberse explores key decisions facing the management team of the $2 billion superhero dynasty. Should the company continue to capitalize on just a few blockbuster characters or grow a new set of characters for the future? "In exploring growth opportunities," Elberse writes, "was it wise for Marvel to venture outside its current business model and move into more capital-intensive activities? What marketing strategy would allow Marvel to sustain its success in the coming years?"

 

Publications

Prospects for the Professions in China

Abstract

Professionals are a growing group in China and increasingly make their presence felt in governance and civil society. At the same time, however, professionals in the West are under increasing pressure from commercialism or skepticism about their ability to rise above self-interest. This book focuses on professionals in China and asks whether developing countries have a fateful choice: to embrace Western models of professional organization as they now exist, or to set off on an independent path, adapting elements of Western practices to their own historical and cultural situation. In doing so, the authors in this volume discuss a wealth of issues, including the historic antecedents of modern Chinese professionalism; the implications of professionalism as an import in China; the impact of socialism, the developmental state, and the rampant commercialism on the professions in China; and the feasibility of liberal professions in an illiberal state. To conclude, the book considers whether there might be an emerging professionalism with Chinese characteristics and how this might have an impact on the professions elsewhere.

Publisher's Link: http://www.informaworld.com/smpp/title~db=all~content=t927286744

Cost Accounting: A Managerial Emphasis

Abstract

Emphasizing the "different costs for different purposes," this text focuses on strategy and the decision-making process.

Publisher's Link: http://www.pearsonhighered.com/educator/product/Cost-Accounting/9780132109178.page

Mixed Source

Abstract

We study competitive interaction between a profit-maximizing firm that sells software and complementary services and a free open source competitor. We examine the firm's choice of business model between the proprietary model (where all software modules are proprietary), the open source model (where all modules are open source), and the mixed source model (where some—but not all—modules are open). When a module is opened, users can access and improve the code, which increases quality and value creation. Opened modules, however, are available for others to use free of charge. We derive the set of possibly optimal business models when the modules of the firm and the open source competitor are compatible (and thus can be combined) and incompatible and show the following: 1) when the firm's modules are of high (low) quality, the firm is more open under incompatibility (compatibility) than under compatibility (incompatibility); 2) firms are more likely to open substitute, rather than complementary, modules to existing open source projects; and 3) there may be no trade-off between value creation and value capture when comparing business models with different degrees of openness.

Why Do Intermediaries Divert Search?

Abstract

We analyze the incentives to divert search for an information intermediary who enables buyers (consumers) to search affiliated sellers (stores). We identify two original motives for diverting search (i.e., inducing consumers to search more than they would like): 1) trading off higher total consumer traffic for higher revenues per consumer visit and 2) influencing stores' choices of strategic variables (e.g., pricing). We characterize the conditions under which there would be no role for search diversion as a strategic instrument for the intermediary, thereby showing that it occurs even when the contracting space is significantly enriched. We then discuss several applications related to online and brick-and-mortar intermediaries.

American Exceptionalism?: A Comparative Analysis of the Origins and Trajectory of U.S. Business Education Development

Abstract

As business education in an academic setting becomes an increasingly global phenomenon, the university-based business school in America remains a unique institution. This holds true despite the fact that the American business school as it evolved in the post-World War II era has become the dominant model for business schools in Europe and elsewhere in the world. Most observers looking at these institutions as they exist today, without an awareness of their differing historical origins and development, would likely conclude that business schools inside and outside of the United States exhibit more similarities than differences. Yet the uniqueness of the American business school lies not so much in the widely imitated strategies and practices it has developed over the last sixty years as in the way that, for more than a century, it has articulated and shaped for the larger society a set of ideas, aspirations, and norms concerning business and management. Moreover, the visions and values animating the university-based business school in America—which arguably account more than any other factor for the great influence it has enjoyed in American society—have changed significantly from the era when the earliest schools were founded up until the present day. Thus the institution that came to be the major influence on business education worldwide in the postwar era is significantly different from the one that preceded it in the first half of the twentieth century, when American and European business schools developed along largely separate lines.

Advance Recovery and the Development of Resilient Organizations and Societies

Abstract

Societies face a wide array of significant hazards—ranging from the possibility of natural disasters to industrial accidents to large-scale terrorist incidents.

Book: http://media.swissre.com/documents/pub_risk_dialogue_Integrative_Risk_Management.pdf

Understanding and Coping with the Increasing Risk of System-Level Accidents

Abstract

The world has seen a number of recent events in which major systems came to a standstill, not from one cause alone but from the interaction of a combination of causes. System-level accidents occur when anomalies or errors in different parts of an interconnected system negatively reinforce one another, spiraling up out of control until they eventually drive the system outside of its sustainable boundaries, resulting in system "collapse." Systems with multiple components that are tightly linked to one another are prone to such events. Increasingly, our industrial, commercial, and social systems are coming to have the characteristics that predict system-level accidents—in some cases, driven by consistent economic forces that cause tighter interconnections to form within existing systems—and there seems to be a rising frequency of such events. Since we inhabit an increasingly tightly interconnected global collection of such systems, finding ways to reduce and to manage systemic risk is an important priority.

Book: http://media.swissre.com/documents/pub_risk_dialogue_Integrative_Risk_Management.pdf

Organising Response to Extreme Emergencies: The Victorian Bushfires of 2009

Abstract

How can people and organisations best respond to emergency events that are significantly beyond the boundaries of what they had generally anticipated, expected, prepared for—or even imagined? What forms of organisations are likely to be best able to cope with such events—and what procedures and practices will aid in their ability to do so? Obviously, extreme events—events that are in scope or scale or type beyond the range of our ordinary experience and expectations—by definition will occur only relatively rarely (and very rarely to any given emergency organisation). Nonetheless, when they do occur they tend to be of defining importance to the people and institutions that are thrust into them and that must find their way through them. September 11, 2001 in Manhattan and at the Pentagon in Arlington, Virginia; the Indian Ocean Tsunami in 2004; Hurricane Katrina on the Gulf Coast of the United States in 2005; major earthquakes like the ones in Pakistan in 2005, Wenchuan in 2008, Haiti in 2010, Chile in 2010, and Christchurch in 2010—these and other catastrophic events catapult people and response agencies into a new, unfamiliar, and largely unexplored dimension.

Deliberate Learning to Improve Performance in Dynamic Service Settings: Evidence from Hospital Intensive Care Units

Abstract

Dynamic service settings—characterized by workers who interact with customers to deliver services in a rapidly changing, uncertain, and complex environment (e.g., hospitals)—play an important role in the economy. Organizational learning studies in these settings have largely investigated autonomous learning via cumulative experience as a strategy for performance improvement. Whether induced learning through the use of deliberate learning activities provides additional performance benefits has been neglected. We argue that the use of deliberate learning activities offers performance benefits beyond those of cumulative experience because these activities counter the learning challenges presented by rapid knowledge growth, uncertainty, and complexity in dynamic settings. We test whether there are additional performance benefits to using deliberate learning activities and whether the effectiveness of these activities depends on interdisciplinary collaboration in the workgroup. We test our hypotheses in a study of 23 hospital neonatal intensive care units (NICUs) involved in a quality improvement collaborative. We find that using deliberate learning activities is associated with better workgroup performance, as measured by NICUs' risk-adjusted mortality rates for 2,159 infant patients, but only after two years. In the shorter term, using these activities is associated with worse performance. By the third year, the positive impact of using deliberate learning activities is similar to the benefit of cumulative experience (18% and 20% reduction in odds of mortality, respectively). Contrary to prediction, interdisciplinary collaboration mediates, rather than moderates, the relationship between using deliberate learning activities and workgroup performance. Thus, our data suggest that using deliberate learning activities fosters interdisciplinary collaboration.

Strategy Research Initiative: Recognizing and Encouraging High-quality Research in Strategy

Abstract

The Strategy Research Initiative—a cross-disciplinary group of mid-career, research-oriented faculty—has organized to coordinate activities that promote high-quality research in the field of strategy. This editorial essay summarizes the group's view of the characteristics of high-quality research in strategy, and it calls on journal editors, teachers, and individual scholars to act to foster these characteristics.

Strategies and Tactics in NGO-Government Relations: Insights from Slum Housing in Mumbai

Abstract

Relationships between nongovernmental organizations (NGOs) and government agencies have been variously described in the nonprofit literature as cooperative, complementary, adversarial, confrontational, or even co-optive. But how do NGO-government relationships emerge in practice, and is it possible for NGOs to manage multiple strategies of interaction at once? This article examines the experience of three leading NGOs in Mumbai, India involved in slum and squatter housing. We investigate how they began relating with government agencies during their formative years and the factors that shaped their interactions. We find that NGOs with similar goals end up using very different strategies and tactics to advance their housing agendas. More significantly, we observe that NGOs are likely to employ multiple strategies and tactics in their interactions with government. Finally, we find that an analysis of strategies and tactics can be a helpful vehicle for clarifying an organization's theory of change.

Basking in Reflected Glory: Symbolic and Substantive Implications of Winemaker Mobility

Abstract

When a skilled employee moves from one organization to another, the effects on the hiring organization can be substantive (i.e., changes in actual outcomes) and symbolic (i.e., changes in expectations or valuations and therefore prices). We theorize that strong or even purely symbolic effects can materialize when former employers are highly prominent because these hires increase the hiring organization's market visibility. Leveraging an idiosyncratic feature of wine markets (i.e., the variable time lag between a wine's production and its release to the market), we isolate an effect of winemaker mobility on wine prices that is not accompanied by a substantive effect on quality. Within-winery analysis of 65 wineries' wines released before and after a hiring event reveal that hiring a winemaker from a more prominent winery negligibly influences wine quality but positively influences wine prices—even for wines that were produced and bottled prior to the new winemaker's arrival. In the absence of substantive justification (i.e., increased quality), the hiring wineries appear to be basking in the reflected glory of their prominent affiliations when setting prices. Implications for research on the substantive and symbolic effects of inter-organizational affiliations are discussed.

Management and the Financial Crisis (We Have Met the Enemy and He Is Us.)

Abstract

The financial crisis of 2008-2009 has revealed that our broad model of corporate governance is broken, independent of the shortcomings in the regulatory system. Managers and boards of directors in scores of systemically important firms failed to protect employees, customers, or shareholders, and placed the global financial system at risk. I assert that the root cause of the crisis can be found in five related systems: incentives, risk management and control, accounting, human capital, and culture. The worst firms had lethal combinations of strong incentives, weak control and risk management, flawed internal and external accounting, low skill and/or low integrity people, and corrosive cultures. Piecemeal attempts to fix elements of corporate governance will fail. The problem, to illustrate, is not just the structure of compensation. Nor will increasing required capital prevent problems at companies with strong incentives and weak controls. I believe that we may need a new kind of external agency for systemically risky firms that would take a holistic look at the five systems to identify weaknesses, make recommendations to managers and boards, and set regulatory policies, including assessing charges for insuring against losses. Without such a comprehensive assessment and improvement plan, boards cannot do their jobs, and the system will remain as subject to calamitous events as it was before the crisis.

Property Rights for Foreign Capital: Sovereign Debt and Private Direct Investment in Times of Crisis

An abstract is unavailable at this time.

Publishers Link: http://www.vcc.columbia.edu/yearbook

 

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 low carbon and resource-efficient development 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

Do US Market Interactions Affect CEO Pay? Evidence from UK Companies

Abstract

This paper examines the extent that interactions with U.S. markets impact the compensation practices of non-U.S. firms. Using a sample of large U.K. companies, we find that the total compensation of U.K. CEOs is positively related to the extent of the firm's interactions with U.S. markets, as captured by the percentage of total sales generated in the U.S., the presence of prior U.S. acquisition activity, the presence of a U.S. exchange listing, and CEO and director-level U.S. board experience. More importantly, we find that exposure to U.S. product markets is associated with the adoption of U.S.-style compensation arrangements (i.e., incentive-based pay packages). In contrast, we find no such association with exposures to other (non-U.S.) foreign product markets. Together, our evidence is consistent with U.S. market interactions impacting U.K. compensation practices through two mechanisms: 1) to alleviate internal and external pay disparities arising from the presence of U.S. operations and businesses (proxied by the percent U.S. sales and prior U.S. acquisitions) and 2) to compensate CEOs for bearing the additional risk and responsibility associated with exposure to foreign securities laws and legal environments (proxied by both U.S. and non-U.S. exchange listings).

Download the paper: http://www.hbs.edu/research/pdf/11-075.pdf

Exploring the Duality between Product and Organizational Architectures: A Test of the 'Mirroring' Hypothesis

Abstract

A variety of academic studies argue that a relationship exists between the structure of an organization and the design of the products that this organization produces. Specifically, products tend to "mirror" the architectures of the organizations in which they are developed. This dynamic occurs because the organization's governance structures, problem solving routines, and communication patterns constrain the space in which it searches for new solutions. Such a relationship is important, given that product architecture has been shown to be an important predictor of product performance, product variety, process flexibility, and even the path of industry evolution. We explore this relationship in the software industry. Our research takes advantage of a natural experiment, in that we observe products that fulfill the same function being developed by very different organizational forms. At one extreme are commercial software firms, in which the organizational participants are tightly coupled, with respect to their goals, structure, and behavior. At the other are open source software communities, in which the participants are much more loosely coupled by comparison. The mirroring hypothesis predicts that these different organizational forms will produce products with distinctly different architectures. Specifically, loosely coupled organizations will develop more modular designs than tightly coupled organizations. We test this hypothesis using a sample of matched-pair products. We find strong evidence to support the mirroring hypothesis. In all of the pairs we examine, the product developed by the loosely coupled organization is significantly more modular than the product from the tightly coupled organization. We measure modularity by capturing the level of coupling between a product's components. The magnitude of the differences is substantial—up to a factor of eight—in terms of the potential for a design change in one component to propagate to others. Our results have significant managerial implications in highlighting the impact of organizational design decisions on the technical structure of the artifacts that these organizations subsequently develop.

Download the paper: http://www.hbs.edu/research/pdf/08-039.pdf

The Importance of Work Context in Organizational Learning from Error

Abstract

This paper examines the implications of work context for learning from errors in organizations. Prior research has shown that attitudes and behaviors related to error vary between groups within organizations but has not investigated or theorized the ways in which differences in task and context influence how organizational groups best learn from error. Using process uncertainty and actor interdependence as key differentiating factors, we identify four situational domains in which errors in organizations occur: task execution, judgment, interpersonal coordination, and system interactions. We propose a contingency model in which optimal strategies for learning from errors depend upon the learning domain in which the error occurred. Work conducted in each domain varies in predictability and complexity, presenting distinct opportunities and challenges for improving performance in response to an error.

Download the paper: http://www.hbs.edu/research/pdf/11-074.pdf

 

Cases & Course Materials

Marvel Enterprises, Inc. (Abridged)

Anita Elberse
Harvard Business School Case 511-097

The management team of Marvel Enterprises, known for its universe of superhero characters that includes Spider-Man, the Hulk, and X-Men, must reevaluate its marketing strategy. In June 2004, only six years after the company emerged from bankruptcy, Marvel has amassed a market value of more than $2 billion. Originally known as a comic book publisher, the company now also has highly profitable toy, motion picture, and consumer products licensing operations. However, doubts about Marvel's business model and its growth potential continue to exist. Had Marvel's winning streak been just a fluke? Was Marvel's success dependent on a limited set of blockbuster characters, most notably Spider-Man, and should Marvel continue to capitalize on those characters? Or was it time to seek growth in a larger set of lesser known characters? In exploring growth opportunities, was it wise for Marvel to venture outside its current business model and move into more capital-intensive activities? What marketing strategy would allow Marvel to sustain its success in the coming years?

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/511097-PDF-ENG

Australian Vintage Ltd.

David F. Hawkins
Harvard Business School Case 111-034

Following International Financial Reporting Standards guidance, company records a number of significant losses and a related deferred tax asset.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/111034-PDF-ENG

Intercorporate Investments

David F. Hawkins
Harvard Business School Note 111-073

Background note for cases dealing with intercorporate investments.

Purchase this note:
http://cb.hbsp.harvard.edu/cb/product/111073-PDF-ENG

Merck/Schering-Plough Merger (A)

David F. Hawkins
Harvard Business School Case 111-017

Students have to identify the acquirer in a business combination structured as a reverse merger.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/111017-PDF-ENG

Merck/Schering-Plough Merger (B)

David F. Hawkins
Harvard Business School Supplement 111-018

Worksheet exercise to illustrate the accounting for the Merck/Schering-Plough reverse merger.

Purchase this supplement:
http://cb.hbsp.harvard.edu/cb/product/111018-PDF-ENG

Back to the Future: Redeveloping Unilever House

A. Eugene Kohn, Arthur I Segel, and Andrew Terris
Harvard Business School Case 211-038

Steve Williams, general counsel of Unilever PIc, has two key decisions to make prior to commencing construction on the redevelopment of Unilever House, the company's London corporate headquarters. The purpose of the redevelopment is to reinvigorate the corporate culture by making the company's workspace more collaborative, transparent, and efficient. Steve has to decide how to finance the project and whether the current design proposed by his architects achieves the project's goals.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/211038-PDF-ENG

The Tzu Chi Foundation's China Relief Mission

Herman B. Leonard and Yi Kwan Chu
Harvard Business School Case 311-015

A faith-based organization from Taiwan has made considerable inroads in being able to operate effectively in mainland China. Is further expansion too risky?

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/311015-PDF-ENG

Board Leadership at Entergy Corporation

Jay W. Lorsch and Melissa Barton
Harvard Business School Case 410-061

Wayne Leonard became CEO of Entergy in 1999. After serving as CEO for close to eight years, the Entergy Board named Leonard chairman and CEO.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/410061-PDF-ENG

The Risk-Reward Framework at Morgan Stanley Research

Suraj Srinivasan and David Lane
Harvard Business School Case 111-011

The case describes the Risk-Reward framework that Morgan Stanley analysts use as a systematic approach to communicate a broader range of fundamental insights about a company rather than the traditional single point estimates. The goal of the framework is to focus the analysts' work on critical uncertainties and model a limited number of scenarios relevant to key investment debates. By outlining a bear, base, and a bull case, the analysts can present the risk surrounding the expected outcome over the forecast horizon. The case outlines the key elements of the methodology and the process Morgan Stanley undertook to implement the framework on a worldwide basis starting in 2007 and discusses the challenges and opportunities that managers of the research department face as the framework is increasingly identified with their firm.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/111011-PDF-ENG