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. 28

The dark side of competition

Capitalism is built on competition, the mechanism that provides consumers with a greater variety of products and services, higher quality, and lower prices. Now researchers have identified a downside: "a darker side when firms can gain competitive advantage through illicit and corrupt activities." Examining the impact of competition on the vehicle emissions testing market, the researchers found that firm misconduct increased with competitive pressure and the threat of losing customers to rival firms. Read, Competition and Illicit Quality, by Victor Manuel Bennett, Lamar Pierce, Jason A. Snyder, and Michael W. Toffel.

How short-termism increases investor risk

Companies that manage for the short term present their investors with more risk. That's one of the findings from the recent working paper, Short-Termism, Investor Clientele, and Firm Risk, by Francois Brochet, Maria Loumioti, and George Serafeim. For one thing, short-term firms have share prices that are more volatile than companies managing to a longer time horizon. Firms focused on near-term results are characterized by "high absolute discretionary accruals, high likelihood of just beating analyst forecasts, reporting very small positive earnings, and just avoiding violating loan covenants."

Shedding debt at Houghton Mifflin Harcourt

To deal with several years of a sour economy, many companies (as well as individuals) have had to consider bankruptcy or other severe measures to survive. Houghton Mifflin Harcourt, a leading textbook publisher, was no exception. A new case looks over the shoulder of company execs as they look to slash billions of dollars of debt by exploring alternatives including Chapter 11 bankruptcy, out-of-court restructuring, and filing a "pre-packaged" Chapter 11 bankruptcy. The case provides students with an understanding of the economic tradeoffs between legal bankruptcy reorganization and out-of-court restructuring.

 

Publications

The Power of Political Voice: Women's Political Representation and Crime in India

Abstract

Using state-level variation in the timing of political reforms, we find that an increase in female representation in local government induces a large and significant rise in documented crimes against women in India. Our evidence suggests that this increase is good news, driven primarily by greater reporting rather than greater incidence of such crimes. In contrast, we find no increase in crimes against men or gender-neutral crimes. We also examine the effectiveness of alternative forms of political representation: large-scale membership of women in local councils affects crime against them more than their presence in higher level leadership positions.

Creating Leaders: An Ontological/Phenomenological Model

Abstract

The sole objective of our ontological/phenomenological approach to creating leaders is to leave students actually being leaders and exercising leadership effectively as their natural self-expression. By "natural self-expression" we mean a way of being and acting in any leadership situation that is a spontaneous and intuitive effective response to what one is dealing with. In creating leaders we employ the ontological discipline (from the Latin ontologia "science of being," see Heidegger, 1927). The ontological model of leader and leadership opens up and reveals the actual nature of being when one is being a leader and opens up and reveals the source of one's actions when exercising leadership. And ontology's associated phenomenological methodology (explained in [2] below) provides actionable access to what has been opened up. The being of being a leader and the actions of the effective exercise of leadership can be accessed, researched, and taught either 1) as being and action are observed and commented on "from the stands," specifically as these are observed by someone, and then described, interpreted, and explained (third-person theory of) or 2) as being and action are actually experienced "on the court," specifically as these are actually lived (real-time first-person experience of). As a formal discipline, the "on the court" method of accessing being and action (that is, as being and action are actually lived) is named phenomenology. In short, an epistemological mastery of a subject leaves one knowing. An ontological mastery of a subject leaves one being.

Read the paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1681682

Reflected Knowledge and Trust in Global Collaboration

Abstract

Scholars argue that direct knowledge about distant colleagues is crucial for fostering trust in global collaboration. However, their arguments focus mainly on how trust accrues from knowledge about distant collaborators' personal characteristics, relationships, and behavioral norms. We suggest that an equally important trust mechanism is "reflected knowledge," knowledge focal actors' gain about the personal characteristics, relationships, and behavioral norms of their own site through the lens of their distant collaborators. Based on surveys gathered from 140 employees in a division of a global chemical company, we found that direct knowledge and reflected knowledge enhanced trust differentially. While both enhanced feelings of closeness with others, results indicate that direct knowledge increased focal actors' understanding of their distant colleagues, while reflected knowledge promoted feelings of being understood. We discuss implications of reflected knowledge to theories of trust and interpersonal dynamics in globally distributed collaboration.

Psychological Safety: A Foundation for Speaking Up, Collaboration, and Experimentation

An abstract is unavailable at this time.

Publisher's link: http://www.oup.com/us/catalog/general/subject/Psychology/Health/?view=usa&ci=9780199734610

A Positive Approach to Studying Diversity in Organizations

An abstract is unavailable at this time.

Publisher's link: http://www.oup.com/us/catalog/general/subject/Psychology/Health/?view=usa&ci=9780199734610

 

Working Papers

Competition and Illicit Quality

Abstract

Competition among firms can have many positive outcomes, including decreased prices and improved quality. Yet competition can have a darker side when firms can gain competitive advantage through illicit and corrupt activities. In this paper, we argue that competition can lead organizations to provide illicit quality that satisfies customer demand but violates laws and regulations and that this outcome is particularly likely when price competition is restricted. Using 28 million vehicle emissions tests from more than 11,000 facilities, we show that increased competition is associated with greater inspection leniency, a form of illicit quality that customers value but is illegal and socially costly. Firms with greater numbers of local competitors pass customers at considerably higher rates and are more likely to lose customers they fail to pass, suggesting that the alternatives that competition provides to customers intensify pressure to illegally provide leniency. We also show that, at least in contexts when pricing is restricted, firms use illicit quality as an entry strategy.

Download the paper: http://www.hbs.edu/research/pdf/12-071.pdf

Short-Termism, Investor Clientele, and Firm Risk

Abstract

Using conference call transcripts, we measure the time horizon that senior executives emphasize when they communicate with investors. We show that firms focusing more on the short-term have a more short-term oriented investor base. Moreover, we find that short-term oriented firms have higher stock price volatility, and that this effect is mitigated for firms with more long-term investors. We also find that short-term oriented firms have higher equity betas and as a result higher cost of capital. However, this result is not mitigated by the presence of long-term investors, consistent with these investors requiring a risk premium for holding the stock of short-term oriented firms. Overall, our evidence suggests that corporate short-termism is associated with greater risk and thus affects resource allocation.

Download the paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1999484

Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China

Abstract

Our paper provides a comparative perspective on the development of public primary education in four of the largest developing economies circa 1910: Brazil, Russia, India and China (BRIC). These four countries encompassed more than 50% of the world's population in 1910, but remarkably few of their citizens attended any school by the early 20th century. We present new, comparable data on school inputs and outputs for BRIC drawn from contemporary surveys and government documents. Recent studies emphasize the importance of political decentralization and relatively broad political voice for the early spread of public primary education in developed economies. We identify the former and the lack of the latter to be important in the context of BRIC, but we also outline how other factors such as factor endowments, colonialism, serfdom, and, especially, the characteristics of the political and economic elite help explain the low achievement levels of these four countries and the incredible amount of heterogeneity within each of them.

Download the paper: http://www.nber.org/papers/w17852

Expertise Dissensus: A Multi-level Model of Teams' Differing Perceptions about Member Expertise

Abstract

Why do some teams fail to convert members' knowledge into valued outcomes? We propose that members' differing perceptions of each other's levels of expertise is a critical factor. To capture this phenomenon, we introduce the concept of expertise dissensus, a team property that reflects the variance in team members' perceptions of one another's levels of expertise. We argue that it matters how team members perceive all others' expertise-not just how they view the most expert team member-and develop and test a multi-level model to explain how expertise dissensus affects team processes and outcomes. We further advance theory by investigating the effects of expertise dissensus on all dimensions of team effectiveness: team performance, team viability, and individual member development (Hackman, 1987).

Download the paper: http://www.hbs.edu/research/pdf/12-070.pdf

Private and Public Decisions in Social Dilemmas: Evidence from Children's Behavior

Abstract

Substantial research with adult populations has found that selfish impulses are less likely to be pursued when decisions are publicly observable. To the best of our knowledge, however, this behavioral regularity has not been systematically explored as a potential solution to social dilemmas. This paper takes a step in that direction. We report data on the self-control decisions of children aged 6 to 11 who participated in games that require one to resist a selfish impulse for several minutes in order to benefit others. In one condition children make decisions in public view of the group of other participants, while in another they can make decisions either publicly or privately. In both conditions, we allow the group size to vary. We find that children aged 9 and higher are better able to resist selfish impulses in public environments. Younger children, however, display no such effect. Further, we find self-control substantially impacted by group size. When decisions are public, larger groups lead to better self-control, while in the private condition the opposite holds. Our findings suggest that announcing decisions publicly and to large groups may be part of a solution to some social dilemmas. In addition, the fact that public decision-making promotes pro-social behavior only in older children suggests this positive effect may stem from a desire to avoid shame.

Download the paper: http://www.hbs.edu/research/pdf/12-073.pdf

Author-Level Eigenfactor Metrics: Evaluating the Influence of Authors, Institutions and Countries within the SSRN community

Abstract

In this paper, we show how the Eigenfactor® score, originally designed for ranking scholarly journals, can be adapted to rank the scholarly output of authors, institutions, and countries based on author-level citation data. Using the methods described herein, we provide Eigenfactor rankings for 84,808 disambiguated authors of 240,804 papers in the Social Science Research Network (SSRN), a pre- and post-print archive devoted to the rapid dissemination of scholarly research in the social sciences and humanities. As an additive metric, the Eigenfactor scores are readily computed for collectives such as departments or institutions. We show that a collective's Eigenfactor score can be computed either by summing the Eigenfactor scores of its members or by working directly with a collective-level cross-citation matrix. To illustrate, we provide Eigenfactor rankings for institutions and countries in the SSRN repository. With a network-wide comparison of Eigenfactor scores and download tallies, we demonstrate that Eigenfactor scores provide information that is both different from and complementary to that provided by download counts. We see author-level ranking as one filter for navigating the scholarly literature and note that such rankings generate incentives for more open scholarship, as authors are rewarded for making their work available to the community as early as possible and prior to formal publication.

Download the paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1636719

 

Cases & Course Materials

ReSource Pro

Lynda M. Applegate, William R. Kerr, Elisabeth Koll, and David Lane
Harvard Business School Case 812-031

Matt Bruno, founder and general manager of ReSource Pro, left his job working for a New York City-based insurance program shortly after the World Trade Center bombing and arrived in China. Initially he planned to teach English, but soon the entrepreneurial spirit of the country caused him to begin exploring opportunities. He returned to New York and talked his former boss into allowing him to start a back-office services firm for their insurance company clients, which grew into ReSource Pro. By year-end 2007, ReSource Pro employed 250 people, of whom only four were U.S. based. With aggressive growth plans, Bruno began examining potential cities in China for expansion. After narrowing his list of potential expansion sites to the five Chinese cities of Chengdu (the capital of Sichuan Province), Jinan (capital of Shandong Province), Nanjing (capital of Jiangsu Province), Suzhou (Jiangsu), and Wuhan (capital of Hubei Province), he now had to make a final choice.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/812031-PDF-ENG

Houghton Mifflin Harcourt

Stuart C. Gilson and Sarah L. Abbott
Harvard Business School Case 211-027

One of the leading publishers of textbooks and other educational materials for the U.S. K-12 educational instruction market has suffered a dramatic decline in sales and profits in the wake of the 2008-2009 financial market crisis and economic recession and is now overburdened with debt. To regain its competitiveness, the company has to significantly reduce its debt by billions of dollars. Company management is trying to decide which of several options is best for achieving this goal, including filing for Chapter 11 bankruptcy, restructuring its debt out-of-court, or filing a "pre-packaged" Chapter 11 bankruptcy.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/211027-PDF-ENG

Associated British Foods, Plc.

Ray A. Goldberg, Carin-Isabel Knoop, and Matthew Preble
Harvard Business School Case 912-402

George Weston, CEO of Associated British Foods, and his top executives are deciding how to position the company, a major agribusiness involved in a range of food and processed food categories, ingredients, consumer brands, sugar, and also clothing, in the constantly evolving global food system.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/912402-PDF-ENG

Jain Irrigation Systems Limited: Inclusive Growth for India's Farmers

Ray A. Goldberg, Carin-Isabel Knoop, and Matthew Preble
Harvard Business School Case 912-403

Dr. Bhavarlal Jain and his son Anil Jain are engaged in a discussion about long-term planning for Jain Irrigation Systems Limited (JISL)-a company engaged in micro-irrigation, processed foods, and a range of other agronomical activities-with an emphasis on how the company will meet the challenges that the food system of the future presents: a changing climate, booming global population, the need for increased production of nutritious foods, and scarce land and water resources among many other challenges. Both Dr. and Anil Jain are trying to understand how they can take the success they have had in helping India's farmers boost production and productivity through JISL's micro-irrigation systems and continue to tailor their services to meet the needs of Indian farmers.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/912403-PDF-ENG

City Year: The Journey

Rosabeth M. Kanter and James Weber
Harvard Business School Case 311-080

This case explores the strategic and organizational development of City Year over its 22-year history.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/311080-PDF-ENG

Li & Fung 2012

F. Warren McFarlan, Michael Shih-ta Chen, and Keith Chi-ho Wong
Harvard Business School Case 312-102

Midway through its current three-year plan, Li & Fung stop to assess the path it is taking in extending its distribution network business in Asia.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/312102-PDF-ENG

China Novartis Institute for Biomedical Research: Building a Sustainable, Globally Integrated Research Enterprise

Vicki Sato, Christoph Jaeker, and Pooja Mehta Solanki
Harvard Business School Case 612-048

As the head of the Novartis Institute for Biomedical Research in China, En Li was shepherding a $1 billion R&D investment in China. So far he had been able to attract a large number of Chinese-born but U.S.-trained scientists to play a critical role in establishing the site. How sustainable was this strategy, and what were the key things he had to do right to establish a globally integrated R&D unit in China?

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/612048-PDF-ENG

Aviva Investors

George Serafeim, Robert G. Eccles, and Kyle Armbrester
Harvard Business School Case 112-047

The case describes Aviva Investors' engagement strategy with companies and stock exchanges to improve its sustainability performance and the flow of sustainability related information to markets. Aviva Investors, a GBP 259 billion fund, is the investment arm of the large British insurance company, Aviva plc. Aviva Investors is committed to sustainability under the leadership of its CEO, Paul Abberley, and head of sustainability research and engagement, Steve Waygood. The case describes Aviva Investors' policies on materiality, engagement, and its corporate responsibility voting policy. It then explores how the company is implementing these policies in the case of a particular company, the FTSE 100 diversified mining company Vendanta, and the Sustainable Stock Exchange Initiative under the sponsorship of the UN Principles for Responsible Investment.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/112047-PDF-ENG

Ingrid Johnson and Nedbank Business Banking

Michael L. Tushman and David Kiron
Harvard Business School Case 712-011

An abstract is unavailable at this time.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/410003-PDF-ENG

Liberia

Eric Werker and Jasmina Beganovic
Harvard Business School Case ###-###

An abstract is unavailable at this time.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/712011-PDF-ENG