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.

Dec. 13

When should you sell an idea?

Technologists, startups, and partnership creators all have one thing in common: they sell ideas. But as in much of life, timing is everything. Or, as professor Hong Luo puts the question, "How completely should an innovator develop his idea before selling it?" To better understand the dynamics between sellers and buyers of ideas, Luo looks at scriptwriters in the movie industry, who have a choice of pitching an idea, which risks exposing the idea to pilfering, or submitting a film script on speculation, the more protectable but also more time-consuming alternative. Read her working paper, When to Sell Your Idea: Theory and Evidence from the Movie Industry.

The board's role in sustainability policies

As society's expectations about the role of corporations evolves, companies need to respond to the conflicting goals such changes can bring. Most on the spot: the board of directors, argue Robert G. Eccles, Ioannis Ioannou, and George Serafeim in a recent article for TrustLaw, "The Role of the Board in Creating a Sustainable Strategy." They write, "It is now essential for companies to have a deliberate process for making the tough decisions that involve short- and long-term tradeoffs involving shareholders and other stakeholders and that it is the responsibility of the board of directors to ensure that this process exists, and it is effective."

Bricks to clicks

Back in 2007, Working Knowledge readers received early exposure to ideas that are about to be tested in a forthcoming Journal of Marketing article. In "Adding Bricks to Clicks: Predicting the Patterns of Cross-Channel Elasticities over Time," researchers Jill Avery, Thomas J. Steenburgh, John Deighton, and Mary Caravella explore how sales change either positively or negatively as new channels are added, such a when a physical store is built to complement a retail website. One takeaway: The presence of a physical store increases demand in the catalog and Internet channels over time. To see the early work on this concept, read Adding Bricks to Clicks: The Effects of Store Openings on Sales through Direct Channels.

 

Publications

Adding Bricks to Clicks: Predicting the Patterns of Cross-Channel Elasticities over Time

Abstract

In this paper, we propose a conceptual framework to explain whether, when, and for which type of customer the introduction of a new channel helps and hurts sales in existing channels. Our framework separates short- and long-run effects by analyzing underlying channel capabilities. It suggests that order of entry matters, such that, for example, adding the Internet channel to a retail store channel should produce different effects than adding a retail store to the Internet channel. To test our theory, we analyze a unique data set from a high-end retailer using matching methods. Unlike previous research, which has predominantly studied the introduction of an Internet channel, we study the introduction of a retail store and find evidence of cross-channel synergy, as the presence of a retail store increases demand in the catalog and Internet channels over time.

Read the paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=961567

Confronting Market Power: Norway and International Cartels and Trusts, 1919-1939

Abstract

The article examines the relationship between the Norwegian State and international cartels and trusts in the interwar years. In this period, Norway was at the forefront with regard to implementing legislation regulating cartels, yet the legislation was not an antitrust legislation in the modern sense. It was aimed not only at protecting consumer interests, but more importantly at defending domestic businesses against foreign monopolies and cartels. In the article we examine how the Norwegian authorities interacted with international cartels and trusts in seven different cases in the interwar period. The study shows that although there was a deep seated skepticism towards concentration of market power in Norway, cartels received support from the Norwegian government when they were deemed to be beneficial to Norwegian economic interests. The legislation was used to foster the development of domestic cartels, while at the same time it was employed as a tool to limit the operations of foreign cartels and trusts.

Read the paper: http://www.tandfonline.com/doi/abs/10.1080/03585522.2011.617574

 

Working Papers

When to Sell Your Idea: Theory and Evidence from the Movie Industry

Abstract

How completely should an innovator develop his idea before selling it? In the context of selling original movie ideas, I present a model that features the writer's private information on the idea's value, different protection levels associated with different development stages, as well as costly buyer participation. The empirical results are consistent with the model's predictions: inexperienced writers are excluded from the market for earlier-stage ideas, restricting their choices to developing the idea fully or abandoning it; writers who have a choice select better ideas to sell at a later stage and sell worse ideas at an earlier stage.

Download the paper: http://www.hbs.edu/research/pdf/12-039.pdf

Charitable Giving When Altruism and Similarity Are Linked

Abstract

This paper presents a model in which anonymous charitable donations are rationalized by two human tendencies drawn from the psychology literature. The first is people's disproportionate disposition to help those they agree with while the second is the dependence of peoples' self-esteem on the extent to which they perceive that others agree with them. Government spending crowds out the charity that ensues from these forces only modestly. Moreover, people's donations tend to rise when others donate. In some equilibria of the model, poor people give little because they expect donations to come mainly from richer individuals. In others, donations by poor individuals constitute a large fraction of donations, and this raises the incentive for poor people to donate. The model predicts that under some circumstances, charities with identical objectives can differ by obtaining funds from distinct donor groups. The model then provides an interpretation for situations in which the number of charities rises while total donations are stagnant.

Download the paper: http://www.nber.org/papers/w17585

 

Cases & Course Materials

AQR's DELTA Strategy (A)

Daniel B. Bergstresser, Lauren H. Cohen, Randolph B. Cohen, and Christopher J. Malloy
Harvard Business School Case 212-038

In the summer of 2008, AQR Capital Management was considering the launch of a new hedge fund strategy. The proposed DELTA portfolio would offer investors exposure to a basket of nine major hedge fund strategies. The DELTA strategy would be innovative in two ways. First, in terms of its structure, AQR would implement these underlying strategies using a well-defined investment process, with the goal being to deliver exposure to a well-diversified portfolio of hedge fund strategies. Second, it terms of its fees, the new DELTA strategy would charge investors relatively lower fees: 1% management fees plus 10% of performance over a cash hurdle (or, alternatively, a management fee of 2% only). This fee structure was low relative to the industry, where 2% management fees plus 20% of performance, often with no hurdle, was standard.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/212038-PDF-ENG

Purchase this supplement (B):
http://cb.hbsp.harvard.edu/cb/product/212039-PDF-ENG

Natura Cosméticos, S.A.

Robert G. Eccles, George Serafeim, and James Heffernan
Harvard Business School Case 412-052

Rodolfo Guttilla, director of corporate affairs for Natura Cosméticos S.A. (Natura), prepared for a meeting with key stakeholders to discuss the future of integrated reporting at Natura. A cosmetics company with a strong brand, robust growth in international and domestic markets, and premium price and margins, Natura was consistently rated as one of the preferred places to work in Brazil. Its focus on social and environmental responsibility was a source of innovation; strong employee motivation contributed to the company's superior productivity and market share gain in Brazil's cosmetics, fragrances, and toiletries (CF&T) industry. By 2009, Natura's direct sales business model generated income for over 1 million people in Brazil and Latin America. Natura was the first organization in Brazil to produce an integrated report. Senior leadership was convinced that Natura's success over the years had been aided by its corporate responsibility and strategy to continuously seek improvements in both financial and nonfinancial (e.g., environmental, social, and governance) performance. As he prepared for the meeting, Guttilla considered the future of integrated reporting for Natura. What should the future of integrated reporting be like at Natura? How could the organization increase society's participation in the collaborative effort to develop new solutions to today's most challenging problems? How could the report provide a clearer representation of the organization's strategy and its ability to create and sustain value over the long-term? And finally, how could web-based technologies be used to promote the organization's integrated reporting and sustainable development objectives?

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/412052-PDF-ENG

Liberté, Égalité, Sororité: How Should France Achieve Boardroom Parité?

Boris Groysberg and Hilary Fischer-Groban
Harvard Business School Case 412-061

The French government is considering mandating a gender quota for corporate boards. Other countries have approached the question of gender equity in corporate governance in various ways; which model might best work for France?

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/412061-PDF-ENG

Sykué Bioenergya

Shon R. Hiatt
Harvard Business School Case 412-062

An abstract is unavailable at this time.

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http://cb.hbsp.harvard.edu/cb/product/412062-PDF-ENG

TopCoder (B)

Karim R. Lakhani, Eric Lonstein, and Stephanie Healy Pokrywa
Harvard Business School Supplement 612-044

TopCoder develops software for clients through online tournaments, drawing from a community of 275,000 people. The case provides an update on TopCoder's growth and resulting changes in its platform and business model, specifically, its decision to virtualize the project management role. Issues related to the scalability, profitability, and growth of this approach are explored.

Purchase this supplement:
http://cb.hbsp.harvard.edu/cb/product/612044-PDF-ENG