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.

Nov. 1

India's lower caste entrepreneurs

While India's lower castes have won greater political representation, they have not realized as much entrepreneurial success, according to preliminary data published in the new working paper, Caste and Entrepreneurship in India. Researchers Lakshmi Iyer, Tarun Khanna, and Ashutosh Varshney write that the Scheduled Castes and Scheduled Tribes "are significantly under-represented in the ownership of enterprises and the share of the workforce employed by them," citing census data from 1990, 1998, and 2005. One potential reason is that these groups have relatively smaller networks from which to find the right workers, suppliers, and customers.

Del Monte in a pickle

A recently introduced case series explores fiduciary and other responsibilities between a board of directors, a potential buyer, and the board's financial advisor. "In a Pickle: Barclays Capital and the Sale of Del Monte Foods" hinges on a lawsuit challenging the foodmaker's sale to an investment group. The A, B, and C cases lay out the legal challenge, Delaware Chancery Court Vice Chancellor J. Travis Laster's finding of too cozy a relationship between Del Monte's financial counsel, Barclay's Capital, and the investment group headed by Kohlberg Kravis Roberts, and the ultimate outcome of the sale. The case was written by John Coates, Clayton Rose, and David Lane.

Creating strategy in a Chinese state-owned enterprise

The unique management challenges faced by a manager in a state-owned enterprise in China are discussed in a case about Dongfeng Passenger Vehicle Company in Wuhan, China. Authors Willy Shih and Nancy Hua Dai look over the shoulder of Mr. Li Chunrong, who is trying to build a brand as a latecomer to a market with plenty of competition. Should his business unit concentrate on an underserved five-province market or attack more competitive coastal areas?

 

Publications

Blind Spots

An abstract is unavailable at this time.

Read the article: http://www.themontrealreview.com/2009/Blind-Spots-Bazerman-and-Tenbrunsel.php

KFC's Radical Approach to China

An abstract is unavailable at this time.

Read the article: http://hbr.org/2011/11/kfcs-radical-approach-to-china/ar/1

Tax Policy and the Efficiency of U.S. Direct Investment Abroad

Abstract

Deferral of U.S. taxes on foreign source income is commonly characterized as a subsidy to foreign investment, as reflected in its inclusion among "tax expenditures" and occasional calls for its repeal. This paper analyzes the extent to which tax deferral and other policies inefficiently subsidize U.S. direct investment abroad. Investments are dynamically inefficient if they consistently generate fewer returns to investors than they absorb in new investment funds. From 1982 to 2010, repatriated earnings from foreign affiliates exceeded net capital investments by $1.1 trillion in 2010 dollars; and from 1950 to 2010, repatriated earnings and net interest from foreign affiliates exceeded net equity investments and loans by $2.1 trillion in 2010 dollars. By either measure, cash flows received from abroad exceeded 160% of net investments, implying that foreign investment over these periods was dynamically efficient.

Read the article: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1875750

How Great Companies Think Differently

Abstract

Corporate leaders have long subscribed to the belief that the sole purpose of business is to make money. That narrow view, deeply embedded in the American capitalist system, molds the actions of most corporations, constraining them to focus on maximizing short-term profits and returns to shareholders at the expense of worker safety and health, the environment, and society in general. In this article, I argue that a very different logic informs the practices of most high-performing and sustainable companies: institutional logic. These companies believe that they are more than money-making machines: they are a vehicle for advancing societal goals. They deliver more than just financial returns; they also build enduring institutions. At great companies researched for this article, institutional logic takes its place beside financial logic in managerial decision making. Six facets of institutional logic-a common purpose, a long-term focus, emotional engagement, partnering with the public, innovation, and self-organization-radically alter leadership and corporate behavior and form the building blocks of a more sustainable competitive advantage.

Read the article: http://hbr.org/2011/11/how-great-companies-think-differently/ar/1

Managing the Multiple Dimensions of Risk—Part I

Abstract

Based on an extensive program of case-writing and teaching on risk management, we identify three categories of risk and elaborate on the ways companies can identify and mitigate them, with particular emphasis on strategy execution risks.

Managing the Multiple Dimensions of Risk—Part II: The Office of Risk Management

Abstract

In the second article of our two-part series, we explore the concept of an Office of Risk Management along with a case study of an innovative risk management function at JP Morgan Private Bank. We also look at the "softer" components of risk management, including a comparison of two different, equally effective risk officer styles and roles.

Social Strategies That Work

An abstract is unavailable at this time.

Read the article: http://hbr.org/2011/11/social-strategies-that-work/ar/1

 

Working Papers

Carbon Tariffs: Impacts on Technology Choice, Regional Competitiveness, and Global Emissions

Abstract

Carbon regulation is intended to reduce global emissions, but there is growing concern that such regulation may simply shift production to unregulated regions, potentially increasing overall carbon emissions in the process. Carbon tariffs have emerged as a possible mechanism to address this concern by imposing carbon costs on imports at the regulated region's border. Advocates claim that such a mechanism would level the playing field, whereas opponents argue that such a tariff is anti-competitive. This paper analyzes how carbon tariffs affect technology choice, regional competitiveness, and global emissions through a model of imperfect competition between "domestic" (i.e., carbon-regulated) firms and "foreign" (i.e., unregulated) firms, where domestic firms have the option to offshore production and the number of foreign entrants is endogenous. Under a carbon tariff, results indicate that foreign firms would adopt clean technology at a lower emissions price than domestic producers, with the number of foreign entrants increasing in emissions price only over intervals where foreign firms hold this technology advantage. Further, domestic firms would only offshore production under a carbon tariff to adopt technology strictly cleaner than technology utilized domestically. As a consequence, under a carbon tariff, foreign market share is non-monotonic in emissions price, and global emissions conditionally decrease. Without a carbon tariff, foreign share monotonically increases in emissions price, and a shift to offshore production results in a strict increase in global emissions.

Download the paper: http://www.hbs.edu/research/pdf/12-029.pdf

To Groupon or Not to Groupon: The Profitability of Deep Discounts

Abstract

We examine the profitability and implications of online discount vouchers, a new marketing tool that offers consumers large discounts when they prepay for participating merchants' goods and services. Within a model of repeat experience good purchase, we examine two mechanisms by which a discount voucher service can benefit affiliated merchants: price discrimination and advertising. For vouchers to provide successful price discrimination, the valuations of consumers who have access to vouchers must systematically differ from-and typically be lower than-those of consumers who do not have access to vouchers. Offering vouchers is more profitable for merchants that are patient or relatively unknown and for merchants with low marginal costs. Extensions to our model accommodate the possibilities of multiple voucher purchases and merchant price re-optimization.

Download the paper: http://www.hbs.edu/research/pdf/11-063.pdf

Spatial Determinants of Entrepreneurship in India

Abstract

We analyze the spatial determinants of entrepreneurship in India in the manufacturing and services sectors. Among general district traits, quality of physical infrastructure and workforce education are the strongest predictors of entry, with labor laws and household banking quality also playing important roles. Looking at the district-industry level, we find extensive evidence of agglomeration economies among manufacturing industries. In particular, supportive incumbent industrial structures for input and output markets are strongly linked to higher establishment entry rates. We also find substantial evidence for the Chinitz effect where small local incumbent suppliers encourage entry. The importance of agglomeration economies for entry hold when considering changes in India's incumbent industry structures from 1989, determined before large-scale deregulation began, to 2005.

Download the paper: http://www.hbs.edu/research/pdf/12-027.pdf

Caste and Entrepreneurship in India

Abstract

It is now widely accepted that the lower castes have risen in Indian politics. Has there been a corresponding change in the economy? Using comprehensive data on enterprise ownership from the Economic Censuses of 1990, 1998, and 2005, we document substantial caste differences in entrepreneurship across India. The Scheduled Castes and Scheduled Tribes are significantly under-represented in the ownership of enterprises and the share of the workforce employed by them. These differences are widespread across all states, have decreased very modestly between 1990 and 2005, and cannot be attributed to broad differences in access to physical or human capital.

Download the paper: http://www.hbs.edu/research/pdf/12-028.pdf

 

Cases & Course Materials

"In a Pickle: Barclays Capital and the Sale of Del Monte Foods (A)

John Coates, Clayton Rose, and David Lane
Harvard Business School Case 312-003

In February 2011, Judge Laster of the Delaware Chancery Court was considering a suit claiming that Del Monte board members had breached their fiduciary duty to shareholders by not pursuing the best transaction for Del Monte. In the course of the discovery phase of the trial, the plaintiffs, and Del Monte's board, had learned that the company's financial advisor, Barclays Capital, had also been working with KKR and its partners to create a bid process that could favor them. In addition to the fee from Del Monte for advising on a successful sale, Barclays also desired to play a leading role in the lucrative financing that the private equity firms would organize to fund the deal following a successful bid. The plaintiffs asked the court to delay the shareholder vote on the merger to solicit additional bidders.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/312003-PDF-ENG

In a Pickle: Barclays Capital and the Sale of Del Monte Foods (B)

John Coates, Clayton Rose, and David Lane
Harvard Business School Supplement 312-004

The (B) case describes Laster's ruling and thoughts. Del Monte's board had violated its fiduciary duty to shareholders by allowing Barclays to play a dual role, for the seller and the buyer, that disadvantaged the Del Monte shareholders. Laster saved his most severe criticism for Barclays, suggesting that, among other things, it had misled its client's board.

Purchase this supplement:
http://cb.hbsp.harvard.edu/cb/product/312004-PDF-ENG

In a Pickle: Barclays Capital and the Sale of Del Monte Foods (C)

John Coates, Clayton Rose, and David Lane
Harvard Business School Supplement 312-005

The (C) case describes the remedy that Laster imposes, his rationale for doing so, and the final outcome of the sale of Del Monte.

Purchase this supplement:
http://cb.hbsp.harvard.edu/cb/product/312005-PDF-ENG

CP Group: Balancing the Needs of a Family Business with the Needs of a Family of Businesses

William C. Kirby and Tracy Yuen Manty
Harvard Business School Case 312-059

As a second generation business leader, Chairman Dhanin Chearavanont took over the family agribusiness company and built it to become a major diversified conglomerate in Thailand and expanded the business in Southeast Asia and China. While growing the business, he and his brothers created a holding company to both maintain and separate the interests of the family from the growing business units. As a third and possibly fourth generation of Chearavanonts enter the company, how has Chairman Dhanin created a business culture that maintains the closeness of a family business with the strategic vision, innovations, and transparency of a professionally run company-especially given the fact that many business units are public companies? This case seeks to outline the balance of a family business with the needs of a growing and competitive international conglomerate.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/312059-PDF-ENG

High Wire Act: Credit Suisse and Contingent Capital (A)

Clayton Rose and Aldo Sesia
Harvard Business School Case 312-007

Late in 2010, Credit Suisse CEO Brady Dougan and his team closed in on the decision of whether or not to issue contingent capital, which Swiss regulators would require by 2019. There were a number of substantial issues facing Dougan and his team, including whether contingent capital would provide sufficient loss absorption when called upon, would there be sufficient demand for this new instrument, would it be cost effective capital, and what were the risks to Credit Suisse' reputation with clients and regulators if an issue did not go well? In addition, The Basel Committee, the body that recommended global bank capital standards, had decided that much of the existing bank "hybrid debt" would no longer count as capital for regulatory purposes, meaning banks would need to replace this portion of their equity accounts with some other form of capital. However, Basel had yet to decide whether contingent capital would be allowable in the new "Basel III" regulatory regime.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/312007-PDF-ENG

High Wire Act: Credit Suisse and Contingent Capital (B)

Clayton Rose and Aldo Sesia
Harvard Business School Supplement 312-008

The (B) case describes the process and terms of the very successful offerings of contingent capital in February 2011, as well as the Basel Committee's preliminary decision not to allow contingent capital to count as Tier 1 equity.

Purchase this supplement:
http://cb.hbsp.harvard.edu/cb/product/312008-PDF-ENG

Dongfeng Passenger Vehicle Company: Marketing Challenges for the 'Underprivileged Latecomer'"

Willy Shih and Nancy Hua Dai
Harvard Business School Case 612-029

As Mr. Li Chunrong visited the new assembly line for the Dongfeng Passenger Vehicle Company in Wuhan, China, he contemplated the position his business unit found itself in: a latecomer. As a state-owned enterprise, Dongfeng had entered into numerous joint ventures to produce automobiles under foreign brands, but its foray into selling vehicles under its own brand had only started recently, and now the unit faced a crowded market filled with fierce competition. As he walked back to the office, he reflected on the time it was taking to establish the Dongfeng brand. Would his business unit grow strong enough in its five-province geographic focus before other hungry competitors looking for growth piled into these market areas? Or should it go more aggressively to attack the coastal areas with its new 2000 cc model to be launched in late 2011?

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/612029-PDF-ENG

Mike Mayo Takes on Citigroup

Suraj Srinivasan and Amy Kaser
Harvard Business School Case 112-025

The case details the conflict between Mike Mayo, an influential banking analyst, and Citigroup about what Mayo considers aggressive accounting policies. Mike Mayo questions Citigroup's lack of a valuation allowance against its Deferred Tax Assets despite Citi's recent losses. The case discusses the economics of and accounting for deferred tax assets. It also focuses on management-analyst relations and challenges faced by analysts in providing a negative opinion on companies. The inclusion of deferred tax assets in Tier 1 capital and implications for regulatory capital are also discussed.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/112025-PDF-ENG

Driving Profitable Growth at U.S. Auto Parts

Mary Tripsas, Amit Bhatia, and Anita M. McGahan
Harvard Business School Case 812-032

USAP faces extraordinary opportunities to change the way that automobiles are serviced in the U.S. by selling parts at fair prices though online channels.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/812032-PDF-ENG

South Africa (A): Stuck in the Middle?

Richard H. K. Vietor and Diego Comin
Harvard Business School Case 711-084

Fifteen years after apartheid ended, formal unemployment in South Africa was still at 24%. While the country had grown at 4% to 5% annually during the 2000s, the financial crisis set it back by 1 million more unemployed. Moreover, it seemed as if the nation were stuck between low-wage and fully developed competitors. The government of Jacob Zuma has just adopted a "New Growth Path," hoping to create several million jobs over the next few years. Both the finance minister and the head of the Central Bank support the initiative but worry how they can sustain fiscal discipline and control inflation, in light of these stimulative policies. Organized labor, meanwhile, has little sympathy for any sort of sacrifice.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/711084-PDF-ENG

Purchase this supplement (B):
http://cb.hbsp.harvard.edu/cb/product/711085-PDF-ENG