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.

September 25

Do leaders have more or less stress?

High-powered jobs must surely be nerve-racking, so you might expect leaders to rank pretty high on the stress-o-meter. Not so, it turns out. Research about to be published in Proceedings of the National Academy of Sciences of the United States of America finds that higher-ups have lower problems with pressure compared to nonleaders. It's all a matter of maintaining a sense of control. Research by Associate Professor Amy Cuddy and colleagues.

Why America needs manufacturing

The reason for keeping manufacturing jobs in the US goes far beyond the need for job creation. Knowing how to make things is a key driver for innovation, argue professors Gary Pisano and Willy Shih in a book to be published next month. "In some contexts, manufacturing is just as important to the innovation ecosystem as strong universities, outstanding R&D, and vibrant venture capital…," the authors write in Producing Prosperity: Why America Needs a Manufacturing Renaissance.

Latvia, the case

Most Harvard Business School cases are about companies, not countries. But not all. A new study looks at the financial and economic strategic options open to Latvia, which is transitioning from a Soviet republic to a member of the European Union. The case—written by Professors Rafael Di Tella, Rawi Abdelal, and Senior Researcher Natalie Kindred—is titled, "Latvia: Navigating the Strait of Messina."

 

Publications

Producing Prosperity: Why America Needs a Manufacturing Renaissance

Abstract

For years-even decades-in response to intensifying global competition, American companies decided to outsource their manufacturing operations in order to reduce costs. But we are now seeing the alarming long-term effect of those choices: in many cases, once manufacturing capabilities go away, so does much of the ability to innovate and compete. Manufacturing, it turns out, really matters in an innovation-driven economy. In Producing Prosperity, Harvard Business School professors Gary Pisano and Willy Shih show the disastrous consequences of years of poor sourcing decisions and underinvestment in manufacturing capabilities. They reveal how today's undervalued manufacturing operations often hold the seeds of tomorrow's innovative new products, arguing that companies must reinvest in new product and process development in the U.S. industrial sector. Only by reviving this "industrial commons" can the world's largest economy build the expertise and manufacturing muscle to regain competitive advantage. America needs a manufacturing renaissance-for restoring itself and for the global economy as a whole. This will require major changes. Pisano and Shih show how company-level choices are key to the sustained success of industries and economies, and they provide business leaders with a framework for understanding the links between manufacturing and innovation that will enable them to make better outsourcing decisions. They also detail how government must change its support of basic and applied scientific research and promote collaboration between business and academia. For executives, policymakers, academics, and innovators alike, Producing Prosperity provides the clearest and most compelling account yet of how the American economy lost its competitive edge-and how to get it back.

Publisher's Link: http://hbr.org/product/producing-prosperity-why-america-needs-a-manufactu/an/10345-HBK-ENG?referral=00304

Relaxing the Taboo on Telling Our Own Stories: Upholding Professional Distance and Personal Involvement

Abstract

Scholars studying organizations are typically discouraged from telling, in print, their own stories. The expression "telling our own stories" is used as a proxy for field research projects that, in their written form, explicitly rely on a scholar's personal involvement in a field. (By personal involvement in a field, I mean a scholar's engagement in a set of mental activities that connect her to a field.) The assumption is that personal involvement is antithetical to maintaining professional distance. In this paper, I argue that the taboo against telling our own stories stems in part from an epistemological misunderstanding. Learning from the field entails upholding both distance and involvement; the two dimensions should not be conceptualized as opposite ends of a continuum. Moreover, I suggest that the taboo has become too extreme and stifles our collective capacity to generate new insights. To make this argument, I start by discussing the general taboo against telling one's own stories. Second, I focus on the rationale set forth to justify not only the taboo but also its limitations. Third, I examine what distance entails and how involvement, far from lessening distance, creates opportunities for generating potentially strong theoretical insight. Fourth, I showcase several areas of theoretical development that might benefit from revisiting the taboo. I conclude by reviewing key practical implications of such a shift for our profession and by arguing that organizational scholarship could gain a great deal from relaxing the taboo.

Lessons for the Financial Sector from 'Preventing Regulatory Capture: Special Interest Influence, and How to Limit It'

Abstract

An abstract is unavailable at this time.

Order the book: http://www.icffr.org/Research/Research-Publications/ICFR-Publication---The-Making-of-Good-Financial-Re.aspx

How 'Big Data' Is Different

Abstract

Many people today in the information technology world and in corporate boardrooms are talking about "big data." Many believe that, for companies that get it right, big data will be able to unleash new organizational capabilities and value. But what does the term "big data" actually entail, and how will the insights it yields differ from what managers might generate from traditional analytics?

Does Power Corrupt or Enable: Moral Identity, Power and Self-Serving Behavior

Abstract

Does power corrupt a moral identity, or does it enable a moral identity to emerge? Drawing from the power literature, we propose that the psychological experience of power, although often associated with promoting self-interest, is associated with greater self-interest only in the presence of a weak moral identity. Furthermore, we propose that the psychological experience of power is associated with less self-interest in the presence of a strong moral identity. Across a field survey of working adults and in a lab experiment, individuals with a strong moral identity were less likely to act in self-interest, yet individuals with a weak moral identity were more likely to act in self-interest, when subjectively experiencing power. Finally, we predict and demonstrate an explanatory mechanism behind this effect: the psychological experience of power enhances moral awareness among those with a strong moral identity, yet decreases the moral awareness among those with a weak moral identity. In turn, individuals' moral awareness affects how they behave in relation to their self-interest.

The Client Is King: Do Mutual Fund Relationships Bias Analyst Recommendations?

Abstract

This article investigates whether the business relations between mutual funds and brokerage firms influence sell-side analyst recommendations. Using a unique data set that discloses brokerage firms' commission income derived from each mutual fund client as well as the share holdings of these mutual funds, we find that an analyst's recommendation on a stock relative to consensus is significantly higher if the stock is held by the mutual fund clients of the analyst's brokerage firm. The optimism in analyst recommendations increases with the weight of the stock in a mutual fund client's portfolio and the commission revenue generated from the mutual fund client. However, this favorable recommendation bias towards a client's existing portfolio stocks is mitigated if the stock in question is highly visible to other mutual fund investors. Abnormal stock returns are significantly greater both for the announcement period and in the long run for favorable stock recommendations from analysts not subject to client pressure than for equally favorable recommendations from business-related analysts. In addition, we find that subsequent to announcements of bad news from the covered firms, analysts are significantly less likely to downgrade a stock held by client mutual funds. Mutual funds increase their holdings in a stock that receives a favorable recommendation, but this impact is significantly reduced if the recommendation comes from analysts subject to client pressure.

Read the paper: http://people.hbs.edu/yxuan/FirthLinLiuXuanMutualFundRelationshipsAnalystRecommendationsJAR.pdf

Leadership Is Associated with Lower Levels of Stress

Abstract

As leaders ascend to more powerful positions in their groups, they face ever-increasing demands. This has given rise to the common perception that leaders have higher stress levels than non-leaders. But if leaders also experience a heightened sense of control-a psychological factor known to have powerful stress-buffering effects-leadership should be associated with reduced stress levels. Using unique samples of real leaders, including military officers and government officials, we found that, compared to non-leaders, leaders had lower levels of the stress hormone cortisol and lower reports of anxiety (Study 1). In a second study, leaders holding more powerful positions exhibited lower cortisol levels and less anxiety than leaders holding less powerful positions, a relationship explained significantly by their greater sense of control. Altogether, these findings reveal a clear relationship between leadership and stress, with leadership level being inversely related to stress.

 

Working Papers

Prizes and the Publication of Ideas

Abstract

We examine whether prizes encourage innovation and, if so, how. We compare changes in U.S. patents per year for technology areas where U.S. inventors won prizes for exceptional innovations at the World's Fair in London in 1851 with technology areas where U.S. inventors exhibited but did not win a prize. We also compare changes in technology areas for inventions that were advertised in 1851 as lead articles in the Scientific American, a major science journal of the time. We find comparable increases in invention after 1851 through prizes and publication relative to other U.S. technologies. Since the signaling component of a World's Fair prize was replicated through publication of an invention in the Scientific American, our results suggest that publicity for promising research fields is an important mechanism by which prizes encourage innovation.

Download the paper: http://www.hbs.edu/faculty/product/43074

 

Cases & Course Materials

INRIX

Lynda M. Applegate and Ryan Johnson
Harvard Business School Case 812-112

Since its founding in 2004, INRIX, a leading global provider of traffic information and driver services, had received four rounds of financing from leading venture capital (VC) firms and by 2012 had been cash flow positive for the past six quarters. Its founder, Bryan Mistele, was looking to pivot into high growth and faced several intriguing options. However, competition in the sector was rapidly shifting, and Mistele also knew that while INRIX's industry-leading technology platform and customized services had set the firm apart, large location-based services companies could more easily enter the sector, posing a significant threat. In recent years, due to the proliferation of smartphones, large firms such as Google and Apple had increased access to location data, potentially threatening to enter the real-time traffic information (RTTI) space. Current competitors Navteq and Tele Atlas were also looking to grow through global expansion. Mistele also knew that the VC firms that held controlling stakes in his company were looking to cash out soon, either with a sale or by taking the company public through an IPO. He pondered both options and surveyed the challenges that each presented. If Mistele and INRIX decided to go public, Mistele would need to be confident that INRIX's strategic position and capabilities differentiated the company from other competitors and potential entrants. INRIX's "exit" options-sale or IPO-also implied different organizational decisions across the firm; Mistele wondered how best to organize INRIX to defend its current position and achieve growth as it continued to operate in a larger and more complex environment.

Purchase this case:
http://hbr.org/search/812112-PDF-ENG

Latvia: Navigating the Strait of Messina

Rafael Di Tella, Rawi Abdelal, and Natalie Kindred
Harvard Business School Case 711-053

This case describes Latvia's transition from a Soviet republic into an EU member, its economic boom and subsequent bust in 2008, and its policy response. After implementing significant economic and political reforms in order to qualify for EU membership in 2004, Latvia had turned its sights toward joining the single-currency eurozone, pegging its currency to the euro in 2005 as a step toward that goal. From 2000 to 2007, Latvia achieved faster GDP growth than any EU state. However, when large inflows of capital suddenly dried up in 2008, Latvia had to obtain a financial rescue package from the IMF, World Bank, EU, and several regional countries in order to avoid a full-blown financial and currency crisis. Latvia then adopted an aggressive economic adjustment program centered on maintaining its currency peg, which meant competitiveness would have to be restored by reducing domestic prices, wages, and public expenditures in order to drive down the real exchange rate. Latvia's policy program and initial results are discussed in the case.

Purchase this case:
http://hbr.org/search/711053-PDF-ENG

Lyric Dinner Theater (A)

Richard G. Hamermesh and James M. Sharpe
Harvard Business School Case 813-043

Looking back at five years of losses, Rivka Belzer, a newly minted MBA, steps into her family owned business with their mandate to turn it around or close it. In her first six months, she has made a number of changes, with mixed results, but is beginning to show a profit. Many strategic, organizational, marketing, control, and operational decisions lie ahead as she plans for the next year and tries to manage a difficult board of directors in the challenging entertainment industry.

Purchase this case:
http://hbr.org/search/813043-PDF-ENG

Lyric Dinner Theater (B)

Richard G. Hamermesh and James M. Sharpe
Harvard Business School Supplement 813-044

Supplements the (A) Case. Rivka Belzer reflects on the results and actions taken during the 12 months following her first six months on the job.

Purchase this supplement:
http://hbr.org/search/813044-PDF-ENG

The Indian Removal Act and the 'Trail of Tears'

Tom Nicholas, Ari Medoff, and Raven Smith
Harvard Business School Case 812-079

Native Americans were subjected to a protracted and painful process of forced removal from their land. The case provides "first hand" evidence on the debate over Indian removal as it took place during the early nineteenth century. The first document is excerpted from Andrew Jackson's First Annual Message to Congress in 1829 and the second document from Jackson's Second Annual Message in 1830, the year the Indian Removal Act was passed. The third and fourth documents cover the Congressional debate over the relocation of Indians, which led to strong partisan splits and divisions between the North and the South. Document three is excerpted from Whig Senator Theodore Frelinghuysen of New Jersey's six-hour speech to Congress opposing Indian removal. Document four is excerpted from a speech by Senator John Forsyth, a Democrat and former Governor of Georgia who spoke in response to Senator Frelinghuysen's remarks. A final document presents the Cherokee perspective and the reasons for their opposition to removal as represented by a memorial letter, written to the United States Congress in 1829. A statistical portrait follows the documentary evidence.

Purchase this case:
http://hbr.org/search/812079-PDF-ENG

JP Morgan Chase & the CIO Losses

Clayton Rose
Harvard Business School Case 313-033

On July 13, 2012, JP Morgan Chase & Co. announced a larger than expected loss for the quarter, $4.4 billion, from positions held in the Chief Investment Office (CIO), raising the total losses to $5.9 billion. Since the substantial risks in the CIO had first been revealed on April 5, the firm and its CEO, Jamie Dimon, had been the source of intense scrutiny by regulators, legislators, the media, shareholders, and analysts. The situation represented a rare, but significant, misstep by Dimon who had successfully steered Morgan through the financial crisis and was regarded as one of the financial industry's best leaders and risk managers. The firm also revealed that it was restating its first quarter 2012 results because of what it had learned as it investigated the CIO losses.

Purchase this case:
http://hbr.org/search/313033-PDF-ENG

Lind Equipment

Richard S. Ruback and Royce Yudkoff
Harvard Business School Case 212-012

Lind Equipment failed to meet its loan covenants with its senior bank lender in the summer of 2008, just six months after it was acquired. While the senior bank debt comprised only 6% of the capital used in the acquisition and was fully secured, it exercised its right to stop payments to Lind's subordinated lender that funded about 40% of the acquisition, pushing that debt into default as well. These financial problems were the result of declining revenues and profits at Lind as exchange rates and the impact of the Great Recession took its toll on the firm. Without a quick solution, Lind could be pushed into bankruptcy.

Purchase this case:
http://hbr.org/search/212012-PDF-ENG