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.

March 29

Apple is one of the most innovative and controversial companies—even down to its accounting practices. A new case by Francois Brochet, Krishna G. Palepu, and Lauren Barley, "Accounting for the iPhone at Apple Inc.," explores Apple's decision to change how it recognized revenue associated with the iPhone from subscription accounting to a non-GAAP process where most of the revenue is recognized up front. The case provides students an opportunity to discuss criteria for revenue recognition in the context of multiple deliverables.

"Cree, Inc.: Which Bright Future?" is a case study that follows a company at a crossroads. Should its executives take Cree, a North Carolina-based LED chip and component manufacturer, into a future pursuing existing LED monitor and TV backlighting markets, or focus on the potential greenfield market of general lighting? Written by David J. Collis and Mary Furey.

Innovation requires novelty, but not all novelty contributes to an innovation. How to value the sources of novelty? Researchers Paul R. Carlile and Karim R. Lakhani propose an innovation cycle where actors develop a novel course of action and, based on the consequences identified, confirm what knowledge is necessary to transform and develop the next course of action. "By focusing on the challenge of novelty, a problem that cuts across all contexts of innovation, our goal is to develop a more generalized account of what drives the process of innovation." Read "Innovation and the Challenge of Novelty: The Novelty-Confirmation-Transformation Cycle in Software and Science."

 

Publications

Ethical Breakdowns: Good People often Let Bad Things Happen. Why?

An abstract is unavailable at this time.

Read the paper: http://hbr.org/2011/04/ethical-breakdowns/ar/1

Strategies for Learning from Failure

An abstract is unavailable at this time.

Read the paper: http://hbr.org/2011/04/strategies-for-learning-from-failure/ar/1

Give Them What They Want: The Benefits of Explicitness in Gift Exchange

Abstract

Five studies show that gift recipients are more appreciative receiving gifts they explicitly request than those they do not. In contrast, gift givers assume that both solicited and unsolicited gifts will be equally appreciated. At the root of this dilemma is a difference of opinion about what purchasing an unsolicited gift signals: gift givers expect unsolicited gifts will be considered more thoughtful and considerate by their intended recipients than is actually the case (Studies 1-3). In our final two studies, we highlight two boundary conditions for this effect: identifying a specific gift and using money as a gift. When gift recipients request one specific gift, rather than providing a list of possible gifts, givers become more willing to purchase the requested gift (Study 4). Further, although givers believe that recipients do not appreciate receiving money as much as receiving a solicited gift, recipients feel the opposite about these two gift options (Study 5).

Read the paper: http://www.francescagino.com/uploads/4/7/4/7/4747506/gino_flynn_jesp_2011.pdf

Why Leaders Don't Learn from Success

Abstract

We argue that for a variety of psychological reasons, it is often much harder for leaders and organizations to learn from success than to learn from failure. Success creates three kinds of traps that often impede deep learning. The first is attribution error or the tendency to see superior performance as rooted in one's actions rather than other factors (such as luck). The second is that success feeds overconfidence bias, which can then blind leaders to potential future problems and opportunities for innovation. The third is a tendency to fail to probe the root causes of success. Whereas post-mortems after failure are becoming a norm in many organizations, such soul searching rarely occurs after success. This causes leaders and their organizations to miss opportunities to develop deep causal knowledge that can lead to greater long-term improvements. We suggest a number of concrete actions leaders can take to help themselves and their organizations avoid the success-breeds-failure trap.

Read the paper: http://hbr.org/2011/04/why-leaders-dont-learn-from-success/ar/1

Too Guilty to Deceive: How Feeling Burdened Can Reduce Deception in Negotiation

An abstract is unavailable at this time.

Read the paper: http://www.francescagino.com/uploads/4/7/4/7/4747506/gino_shea_deception_chapter_2012.pdf

Stock Price Fragility

Abstract

We investigate the relationship between ownership structure of financial assets and non-fundamental risk. We define an asset to be fragile if it is susceptible to non-fundamental trading shocks. An asset can be fragile because of concentrated ownership or because its owners face correlated liquidity shocks, i.e., they must buy or sell at the same time. Two assets are "co-fragile" if their owners have correlated trading needs, even if the holdings of these owners do not directly overlap. We formalize this idea and apply it to the ownership of U.S. stocks between 1990 and 2007. Consistent with our predictions, fragility strongly predicts future price volatility, and co-fragility predicts cross-stock return comovement.

Read the paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1490734

Sustainability and Capital Markets: How Firms Can Manage the Crucial Link

An abstract is unavailable at this time.

Read the paper: http://www.europeanbusinessreview.com/?p=3588

 

Working Papers

Innovation and the Challenge of Novelty: The Novelty-Confirmation-Transformation Cycle in Software and Science

Abstract

Innovation requires sources of novelty, but the challenge is that not all sources lead to innovation, so its value needs to be determined. However, since ways of determining value stem from existing knowledge, this often creates barriers to innovation. To understand how people address the challenge of novelty, we develop a conceptual and an empirical framework to explain how this challenge is addressed in a software and scientific context. What is shown is that the process of innovation is a cycle where actors develop a novel course of action and, based on the consequences identified, confirm what knowledge is necessary to transform and develop the next course of action. The performance of the process of innovation is constrained by the capacities of the artifacts and the ability of the actors to create and use artifacts to drive this cycle. By focusing on the challenge of novelty, a problem that cuts across all contexts of innovation, our goal is to develop a more generalized account of what drives the process of innovation.

Download the paper: http://www.hbs.edu/research/pdf/11-096.pdf

Much Ado About Nothing: Expropriation and Compensation in Peru and Venezuela, 1968-75

An abstract is unavailable at this time.

Download the paper: http://www.hbs.edu/research/pdf/11-097.pdf

From Counting Risk to Making Risk Count: Boundary-Work in Risk Management

For two decades, risk management has been gaining ground in banking. In light of the recent financial crisis, several commentators concluded that the continuing expansion of risk measurement is dysfunctional (Taleb, 2007; Power, 2009). This paper asks whether the expansion of measurement-based risk management in banking is as inevitable and as dangerous as Power and others speculate. Based on two detailed case studies and 53 additional interviews with risk-management staff at five other major banks from 2001 to 2010, this paper shows that relentless risk measurement is contingent on what I call the "calculative culture" (Mikes, 2009a). While the risk functions of some organizations have a culture of quantitative enthusiasm and are dedicated to risk measurement, others, with a culture of quantitative skepticism, take a different path, focusing instead on risk envisionment, aiming to provide top management with alternative future scenarios and with expert opinions on emerging risk issues. In order to explain the dynamics of these alternative plots, I show that risk experts engage in various kinds of boundary-work (Gieryn, 1983, 1999), sometimes to expand and sometimes to limit areas of activity, legitimacy, authority, and responsibility.

Download the paper: http://www.hbs.edu/research/pdf/11-069.pdf

 

Cases & Course Materials

Accounting for the iPhone at Apple Inc.

Francois Brochet, Krishna G. Palepu, and Lauren Barley
Harvard Business School Case 111-003

Apple initially recognized revenue associated with its iPhone product using subscription accounting. However, in 2008, the company started providing non-GAAP supplemental numbers where substantially all of the revenue was recognized upfront. Market participants' reactions to the disclosure were mixed. Was Apple "right" in arguing that subscription accounting was inadequate for the iPhone?

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/111003-PDF-ENG

Cree, Inc.: Which Bright Future?

David J. Collis and Mary Furey
Harvard Business School Case 711-457

When global warming concerns caused governments around the world to ban the incandescent light bulb, many manufacturers began scrambling to produce products to fill the gap. Compact fluorescent light bulbs, already on the market, seemed the obvious replacement. But light-emitting diodes (LEDs) were attracting attention as a more efficient alternative in lighting, steadily working their way up the value chain from winky blinky applications into the now flourishing backlighting market. Into this changing market entered Cree, Inc., a North Carolina-based LED chip and component manufacturer. This case explores whether Cree should pursue the LED monitor and television backlighting markets or abandon them to focus on the potential "greenfield" market in general lighting.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/711457-PDF-ENG

Cree, Inc.: An Update

David J. Collis and Mary Furey
Harvard Business School Supplement 711-491

An update to "Cree Inc.: Which Bright Future?"

Purchase this supplement:
http://cb.hbsp.harvard.edu/cb/product/711491-PDF-ENG

The Full Yield

Ray A. Goldberg and Noemie Delfassy
Harvard Business School Case 911-402

New firm created to provide understanding of the role of food in health and nutrition.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/911402-PDF-ENG

The Whiz Kids

Tom Nicholas and David Chen
Harvard Business School Case 811-042

In October 1945, Henry Ford II received a telegram in his office at the Ford Motor Company in Dearborn, Michigan written by Charles "Tex" Thornton, a U.S. Air Force colonel. The telegram presented an opportunity for Ford to deploy a system of statistical control that had been developed and applied successfully in the management of the Army Air Forces. Henry Ford II had recently assumed control of his grandfather's troubled automotive empire and was looking for experienced auto industry men to help him make Ford a dominant name once again. Thornton had no industry experience whatsoever but seemed convinced that his ideas could be applicable to Ford's company. Perhaps the Ford Motor Company could use an injection of new ideas. Hiring Thornton and his men could end up being Ford's most inspired move. Or his most disastrous.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/811042-PDF-ENG

Global Diversity and Inclusion at Royal Dutch Shell (B): The Impact of Restructuring

Sandra J. Sucher and Daniela Beyersdorfer
Harvard Business School Supplement 611-051

The (B) case describes the actions taken by Royal Dutch Shell's CEO and his management team to maintain their commitment to diversity and inclusion (D&I), as introduced in the (A) case, during a major restructuring of the whole organization.

Purchase this supplement:
http://cb.hbsp.harvard.edu/cb/product/611051-PDF-ENG