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.

May 1

Understanding dishonesty

What makes good people do bad things? Max Bazerman and Francesca Gino argue for a behavioral approach to the question in an upcoming issue of Annual Review of Law and Social Science. "By focusing on a descriptive rather than a normative approach to ethics, behavioral ethics is better suited than traditional approaches to address the increasing demand from society for a deeper understanding of what causes even good people to cross ethical boundaries," they write in their article, "Behavioral Ethics: Toward a Deeper Understanding of Moral Judgment and Dishonesty."

The downside of CSR programs

You might think that developing a corporate social responsibility strategy is a good way to gain favor with the public, especially when the going gets tough. But that's not the case, according to a new working paper by Jiao Luo, Stephan Meier, and Felix Oberholzer-Gee. As it turns out, media are much more likely to report accidents if they occur at a firm with a superior CSR record. "Companies hoping to minimize the risk of media attention to accidents need to be careful not to place their organizations at the very top or the very bottom of CSR rankings," they explain in "No News Is Good News: CSR Strategy and Newspaper Coverage of Negative Firm Events."

Construction crisis in India

In July 2009, a bridge collapsed in Delhi, killing six people and injuring 15. The accident happened under the watch of the Delhi Metro Rail Corporation, the organization tasked with building a mass transit system for India's capital city. A new case explores the issues that the company faced in the wake of the tragedy—the pressure to fire the construction contractor vs. the pressure to finish the project under a tight deadline. Read "Delhi Metro Rail Corporation" by V.G. Narayanan and Saloni Chaturvedi.

 

Publications

Behaviorial Ethics: Toward a Deeper Understanding of Moral Judgment and Dishonesty

Abstract

Early research and teaching on ethics focused on either a moral development perspective or philosophical approaches, and used a normative approach by focusing on the question of how people should act when resolving ethical dilemmas. In this paper, we briefly describe the traditional approach to ethics and then present a (biased) review on the behavioral approach to ethics. We define behavioral ethics as the study of systematic and predictable ways in which individuals make ethical decisions and judge the ethical decisions of others that are at odds with intuition and the benefits of the broader society. By focusing on a descriptive rather than a normative approach to ethics, behavioral ethics is better suited than traditional approaches to address the increasing demand from society for a deeper understanding of what causes even good people to cross ethical boundaries.

Schumpeterian Competition and Diseconomies of Scope: Illustrations from the Histories of Microsoft and IBM

Abstract

We address a longstanding question about the causes of creative destruction. Dominant incumbent firms, long successful in an existing technology, are often much less successful in new technological eras. This is puzzling, since a cursory analysis would suggest that incumbent firms have the potential to take advantage of economies of scope across new and old lines of business and, if economies of scope are unavailable, to simply reproduce entrant behavior by creating a "firm within a firm." There are two broad streams of explanation for incumbent failure in these circumstances. One posits that incumbents fear cannibalization in the marketplace and so under-invest in the new technology. The second suggests that incumbent firms develop organizational capabilities and cognitive frames that make them slow to "see" new opportunities and that make it difficult to respond effectively once the new opportunity is identified. In this paper we draw on two of the most important historical episodes in the history of the computing industry, the introduction of the PC and of the browser, to develop a third hypothesis. Both IBM and Microsoft, having been extremely successful in an old technology, came to have grave difficulties competing in the new, despite some dramatic early success. We suggest that these difficulties do not arise from cannibalization concerns or from inherited cognitive frames. Instead they reflect diseconomies of scope rooted in assets that are necessarily shared across both businesses. We show that both Microsoft and IBM were initially very successful in creating freestanding business units that could compete with entrants on their own terms, but that as the new businesses grew, the need to share key firm-level assets imposed significant costs on both businesses and created severe organizational conflict. In IBM and Microsoft's case this conflict eventually led to control over the new business being given to the old and that in both cases effectively crippled the new business.

Book: http://www.nber.org/books/lern11-1

 

Working Papers

Learning by Supplying

Abstract

Learning processes lie at the heart of our understanding of how firms build capabilities to generate and sustain competitive advantage: learning by doing, learning by exporting, learning from competitors, users, and alliance partners. In this paper we focus attention on another locus of learning that has received less attention from academics despite popular interest: learning by supplying. Using a detailed panel dataset on supply relationships in the mobile telecommunications industry, we address the following questions: What factors contribute to a firm's ability to learn by supplying and build technological and market capabilities? Does it matter to whom the firm supplies? Is involvement in product design important, or is manufacturing the key locus of learning? How does a supplier's initial resource endowment play into the dynamic? Our empirical analysis yields interesting findings that have implications for theory and practice, and that suggest new directions for future research.

Download the paper: http://www.hbs.edu/research/pdf/12-093.pdf

Information Technology and Boundary of the Firm: Evidence from Plant-Level Data

Abstract

We study the relationship between different margins of information technology (IT) use and vertical integration using plant-level data from the U.S. Census of Manufactures. Focusing on the short-run decision of whether to allocate production output to downstream plants within the same firm or to external customers, we find that customer-focused IT, by itself, has surprisingly little impact. In contrast, adoption of upstream supplier-focused IT at a plant is associated with a significant decline in downstream vertical integration. However, the greatest decline in within-firm transfers occurs when supplier- and customer-facing IT are adopted together, suggesting the presence of complementarities in supply chain technology adoption. These results are consistent with the view that, by reducing external coordination costs, IT investments promote a decline in plant-level vertical integration, but only when those investments are made jointly with both suppliers and customers. Our results provide less support for the view that IT investments led to a decline in vertical integration by lowering transactions risks.

Download the paper: http://www.hbs.edu/research/pdf/12-092.pdf

No News Is Good News: CSR Strategy and Newspaper Coverage of Negative Firm Events

Abstract

One of the benefits of Corporate Social Responsibility (CSR) programs, it has been argued, is that they build up a reservoir of public good will, shielding companies in times of trouble. In this paper, we test the view that CSR provides protection from public ire by analyzing the media's response to corporate crises. Our application is spills in the oil industry. We find the media far more likely to report accidents if they occur at a company with a superior CSR record. Rather than acting as an effective form of insurance, our results suggest that a strong CSR record can be a liability. Moreover, the tone of coverage is no less critical for organizations with a greener reputation. At the same time, firms with substantial past environmental problems are also more likely to find their corporate failings broadcast in the news. Companies hoping to minimize the risk of media attention to accidents need to be careful not to place their organizations at the very top or the very bottom of CSR rankings. This result has important implications for thinking about CSR and the privately optimal level of such activities.

Download the paper: http://www.hbs.edu/research/pdf/12-091.pdf

Delegation in Multi-Establishment Firms: Evidence from I.T. Purchasing

Abstract

Recent contributions to a growing theory literature have focused on the tradeoff between adaptation and coordination in determining delegation within firms. Empirical evidence, however, is limited. Using establishment-level data on decision rights over information technology investments, I find that a high net value of adaptation is strongly associated with delegation, as are local information advantages and firmwide diversification; in contrast, a high value of within-firm coordination is correlated with centralization. Variation across establishments within firms is widespread: most firms are neither fully centralized nor fully decentralized. Delegation patterns are largely consistent with standard team-theory predictions; however, certain findings, such as a negative correlation between delegation and firm size, call for a consideration of agency costs, as well.

Download the paper: http://www.hbs.edu/research/pdf/11-101.pdf

 

Cases & Course Materials

The Korean Model of Shared Growth, 1960-1990

Aldo Musacchio, Rafael Di Tella, and Jonathan Schlefer
Harvard Business School Case 712-052

This case narrates the development of the Republic of Korea from 1960 to 1990. The case discusses three broad issues. First, the case provides a discussion of industrial policy in Korea. Second, the case explains the relationship between industrialization and inequality and how Korea developed without increasing inequality. Finally the case has a brief discussion of the role of education in industrialization and development.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/712052-PDF-ENG

Delhi Metro Rail Corporation

V.G. Narayanan and Saloni Chaturvedi
Harvard Business School Case 112-013

In 2009, the Delhi Metro Rail Corporation, the organization tasked with building a Mass Transit System for India's capital city Delhi, witnessed the biggest crisis in its history. A bridge under construction collapsed killing six people and injuring 15 more. Despite its history of meeting deadlines and working with allocated costs, the Corporation came under a lot of public censure. There was immense pressure on the Corporation to suspend its engineers and fire the construction contractor. On the other hand, it had to meet the deadline of operationalizing the second phase of the Metro Network by October 2010 in time for the XIXth Commonwealth Games. The case focuses on the challenges that the managing director, Dr. E. Sreedharan, faced as the crisis unfolded. It examines the Corporation's unique structure and management ethic that had so far enabled it to function within timeline and costs.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/112013-PDF-ENG