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.

December 4

How big events affect philanthropy

A new report by András Tilcsik and Christopher Marquis investigates how enormous events affect the philanthropic spending of locally-headquartered Fortune 1000 firms--whether those events are planned (the Olympics) or unplanned (natural disasters). "Results show that philanthropic spending fluctuated dramatically as mega-events generally led to a punctuated increase in otherwise relatively stable patterns of giving by local corporations," they write. Read "Punctuated Generosity: Events, Communities, and Corporate Philanthropy" in a forthcoming issue of Administrative Science Quarterly.

The value of advice

In a new working paper, Shawn Cole and Nilesh Fernando look at whether management practices influence agricultural productivity around the world. Specifically, they evaluate the introduction of a mobile-phone-based consulting service for cotton farmers in Gujarat, India. Those who are offered the service tend to seek less advice from their fellow farmers. Furthermore, "Farmers appear willing to follow advice without understanding why the advice is correct," write the authors in "The Value of Advice: Evidence from Mobile Phone-Based Agricultural Extension."

Texting crop prices to farmers

Thomas R. Eisenmann and Tanya Bijlani also discuss how mobile phone services help Indian farmers in the case, "Intuit Inc.: Project AgriNova." The case follows a team of employees at the accounting software company's Bangalore office, as they evaluate a new venture that would use SMS to deliver crop price information to farmers in India.

 

Publications

When Does a Platform Create Value by Limiting Choice?

Abstract

We present a theory for why it might be rational for a platform to limit the number of applications available on it. Our model is based on the observation that even if users prefer application variety, applications often also exhibit direct network effects. When there are direct network effects, users prefer to consume the same applications to benefit from consumption complementarities. We show that the combination of preference for variety and consumption complementarities gives rise to (i) a commons problem (to better satisfy their individual preference for variety, users have an incentive to consume more applications than the number that maximizes joint utility); (ii) an equilibrium selection problem (consumption complementarities often lead to multiple equilibria, which result in different utility levels for the users); and (iii) a coordination problem (lacking perfect foresight, it is unlikely that users will end up buying the same set of applications). The analysis shows that the platform can resolve these problems and create value by limiting the number of applications available. By limiting choice, the platform may create new equilibria (including the allocation that maximizes users' utility); eliminate equilibria that give lower utility to the users; and reduce the severity of the coordination problem faced by users.

Read the paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=38648

The Costs of Ambient Cultural Disharmony: Indirect Intercultural Conflicts in Social Environment Undermine Creativity

Abstract

Intercultural tensions and conflicts are inevitable in the global workplace. This paper introduces the concept of ambient cultural disharmony-indirect experience of intercultural tensions and conflicts in individuals' immediate social environment-and demonstrates how it undermines creative thinking in tasks that draw on knowledge from multiple cultures. Three studies (a network survey and two experiments) found that ambient cultural disharmony decreased individuals' effectiveness at connecting ideas from disparate cultures. Beliefs that ideas from different cultures are incompatible mediated the relationship between ambient cultural disharmony and creativity. Alternative mechanisms such as negative affect and cognitive disruption were not viable mediators. Although ambient cultural disharmony disrupted creativity, ambient cultural harmony did not promote creativity. These findings have theoretical and practical implications for research in workplace diversity and creativity.

The Microwork Solution: A New Approach to Outsourcing Can Support Economic Development—and Add to Your Bottom Line

Abstract

An abstract is unavailable at this time.

Read the article: http://hbr.org/2012/12/the-microwork-solution/ar/1

Are There Too Many Safe Securities? Securitization and the Incentives for Information Production

Abstract

We present a model that helps explain several past collapses of securitization markets. Originators issue too many informationally insensitive securities in good times, blunting investor incentives to become informed. The resulting endogenous scarcity of informed investors exacerbates primary market collapses in bad times. Inefficiency arises because informed investors are a public good from the perspective of originators. All originators benefit from the presence of additional informed investors in bad times, but each originator minimizes his reliance on costly informed capital in good times by issuing safe securities. Our model suggests regulations that limit the issuance of safe securities in good times.

Read: http://www.people.hbs.edu/shanson/info_tranching_appendix_20120907.pdf

Discretion Within Constraint: Homophily and Structure in a Formal Organization

Abstract

Homophily in social relations results from both individual preferences and selective opportunities for interaction, but how these two mechanisms interact in large, contemporary organizations is not well understood. We argue that organizational structures and geography delimit opportunities for interaction such that actors have a greater level of discretion to choose their interaction partners within business units, job functions, offices, and quasi-formal structures. This leads us to expect to find a higher proportion of homophilous interactions within these organizational structures than across their boundaries. We test our theory in an analysis of the rate of dyadic communication in an e-mail data set comprising thousands of employees in a large information technology firm. These findings have implications for research on homophily, gender relations in organizations, and formal and informal organizational structure.

Exclusivity, Contingent Control Rights, and the Design of Internet Portal Alliances

Abstract

We explore the relationship between exclusivity and state-contingent control rights using a sample of over 100 Internet portal alliance contracts. We find that stronger exclusivity arrangements are associated with more frequent usage of contingent control rights. For both portals and their partners, the more exclusively bound one party is, the more likely its counterparty is to be granted contingent control rights. Additionally, we find that portals' alliance partners are more likely to receive contingent control rights when they are prohibited from doing business with other portals and that contingent control rights are less likely to appear as the industry matures. Our findings are consistent with theoretical explanations that exclusivity provisions and contingent control rights both provide incentives to invest in the face of potential holdup problems and also with the proposition that exclusive arrangements lead firms to seek contingent control rights to avoid lock-in when environmental uncertainty is high.

Private Equity and Long-Run Investment: The Case of Innovation

Abstract

A long-standing controversy is whether LBOs relieve managers from short-term pressures of dispersed shareholders, or whether LBO funds themselves are driven by short-term profit motives and sacrifice long-term growth to boost short-term performance. We investigate 495 transactions with a focus on one form of long-term activities, namely investments in innovation as measured by patenting activity. We find no evidence that LBOs decrease these activities. Relying on standard measures of patent quality, we find that patents applied for by firms in private equity transactions are more cited (a proxy for economic importance), show no significant shifts in the fundamental nature of the research, and are more concentrated in the most important and prominent areas of companies' innovative portfolios.

Sustaining Innovation When Outsourcing Components in Multi-technology, Multi-component Systems

Abstract

Firms producing multi-technology, multi-component systems are increasingly outsourcing selected components to achieve both reduced cost and enhanced innovation benefits. Given typical inter-dependence between innovation at the system and component levels, an important challenge for the system firm is to align innovation trajectories, priorities, and pacing between the system and component firms and sustain overall system-level innovation over the longer term. We present two longitudinal case studies, drawn from the IT industry, which provide contrasting examples of outsourcing strategies in terms of the number of suppliers per component and the inter-firm arrangements that a system firm put in place to align innovation. These cases help us to identify the range of outsourcing strategies that system firms could pursue and the factors that appear to influence which one is most appropriate.

Read the paper: http://www.innovation-enterprise.com/archives/vol/15/issue/1/article/4941/sustaining-innovation-when-outsourcing-components

Ethically Adrift: How Others Pull Our Moral Compass from True North

Abstract

This chapter is about the social nature of morality. Using the metaphor of the moral compass to describe individuals' inner sense of right and wrong, we offer a framework to help us understand social reasons why our moral compass can come under others' control, leading even good people to cross ethical boundaries. Departing from prior work focusing on the role of individuals' cognitive limitations in explaining unethical behavior, we focus on the socio-psychological processes that function as triggers of moral neglect, moral justification and immoral action, and their impact on moral behavior. In addition, our framework discusses organizational factors that exacerbate the detrimental effects of each trigger. We conclude by discussing implications and recommendations for organizational scholars to take a more integrative approach to developing and evaluating theory about unethical behavior.

Learning from Roger Fisher

Abstract

Roger Fisher's career and writings not only offer lessons about negotiation but also about how an academic, especially in a professional school such as law or business, can make an important, positive difference in the world. By his relentless engagement in vexing disputes-whether in South Africa, at Camp David, on the Peruvian-Ecuadorian border, or elsewhere-Fisher gained a firsthand sense of the issues as negotiators actually experienced them. This enabled him to ask better questions and to formulate more valuable answers. Fisher collaborated across academic disciplines and wrote a series of books, mostly coauthored with junior colleagues, that are best understood as project around an evolving theme--an interest-based, problem-solving conception of negotiation-rather than as a series of one-off products. His commitment to expressing powerful insights simply, concisely, and memorably led to the remarkable influence of Getting to Yes, which has sold over eight million copies and has spawned endless academic and popular offshoots. While the most familiar form of intellectual capital in the social sciences is the deductive proposition, supported by experimental and observational evidence, other forms of knowledge can be both valid and useful. In particular, Fisher and his colleagues constructed frameworks of prescriptions that, on average, respond to widely felt practitioner needs and systematically direct the focus of negotiators to aspects of the situation that generate helpful insights.

Level Two Negotiations: Helping the Other Side Meet Its 'Behind the Table' Challenges

Abstract

A long analytic tradition has explored the challenge of productively synchronizing "internal" with "external" negotiations, with a special focus on how each side can best manage internal opposition to agreements negotiated "at the table." Implicit in much of this work has been the view that each side's leadership is best positioned to manage its own internal conflicts, often by pressing for deal terms that will overcome internal objections and by effectively "selling" the agreement to key constituencies. Far less frequently have analysts considered how each side-to further its own goals-can help the other side with the other's "behind-the-table" barriers to successful agreement. Following Robert Putnam's (1988) two-level games schema, I characterize such "behind the table," or "Level Two," barriers more broadly, offer several innovative private and public sector examples of how each side can help the other overcome them, and develop more general advice on doing so most effectively. As a fuller illustration of a Level Two negotiator helping the other side with its formidable behind-the-table challenges, I pay special attention to the end-of-Cold-War negotiations over German reunification in which former United States Secretary of State James Baker played a key role.

Is a Nuclear Deal with Iran Possible? An Analytical Framework for the Iran Nuclear Negotiations

Abstract

Varied diplomatic approaches by multiple negotiators over several years have failed to conclude a nuclear deal with Iran. Mutual hostility, misperception, and flawed diplomacy may be responsible. Yet, more fundamentally, no mutually acceptable deal may exist. To assess this possibility, a "negotiation analytic" framework conceptually disentangles two issues: 1) whether a feasible deal exists and 2) how to design the most promising process to achieve one. Focusing on whether a "zone of possible agreement" exists, a graphical negotiation analysis precisely relates input assumptions about the parties' interests, their no-deal options, and possible deals. Under a plausible, mainstream set of such assumptions, the Iranian regime's no-deal options, at least through summer 2012, appear superior to potential nuclear agreements. If so, purely tactical and process-oriented initiatives will fail. Opening space for a mutually acceptable nuclear deal-that avoids both military conflict and a nuclear-armed or nuclear-capable Iran-requires relentlessly and creatively worsening Iran's no-deal options while enhancing the value to Iranian regime of a "yes." Downplaying both coercive options and upside potential, as international negotiators have often done, works against this integrated strategy. If this approach opens a zone of possible agreement, sophisticated negotiation will be key to reaching a worthwhile agreement.

Read the paper: http://www.people.hbs.edu/jsebenius/articles_scans/12_IS_NuclearDealWithIran.pdf

Punctuated Generosity: Events, Communities, and Corporate Philanthropy

Abstract

Geographic communities have been shown to affect organizations through their enduring features, but less attention has been given to communities as sites of human-made and natural events that occasionally disrupt the lives of organizations. We develop a social-normative perspective to unpack how and why major events within communities affect organizations. To test this framework, we examine how different types of mega-events (the Olympics, the Super Bowl, political conventions) and natural disasters (such as floods and hurricanes) affected the philanthropic spending of locally headquartered Fortune 1000 firms between 1980 and 2006. Results show that philanthropic spending fluctuated dramatically as mega-events generally led to a punctuated increase in otherwise relatively stable patterns of giving by local corporations. The impact of natural disasters depended on the severity of damage: while major disasters had a negative effect, smaller-scale disasters had a positive impact. Firms' philanthropic history and communities' inter-corporate network cohesion moderated some of these effects. This study extends institutional and community literatures by illuminating the geographic distribution of punctuating events as a central mechanism for community influences on organizations; sheds new light on the temporal dynamics of both endogenous and exogenous punctuating events; and provides more nuanced understanding of corporate-community relations.

When Power Makes Others Speechless: The Negative Impact of Leader Power on Team Performance

Abstract

We examine the impact of subjective power on leadership behavior and demonstrate that the psychological effect of power on leaders spills over to impact team effectiveness. Specifically, drawing from the approach/inhibition theory of power, power-devaluation theory, and organizational research on the antecedents of employee voice, we argue that a leader's experience of heightened power produces verbal dominance, which reduces perceptions of leader openness and team open communication. Consequently, there is a negative effect of leader power on team performance. Three studies find consistent support for this argument. The implications for theory and practice are discussed.

South Sudan: The Birth of an Economy

Abstract

We discuss the birth of a new economy in a society that has only recently emerged from a 22-year-long civil war. The pace of growth so far has been fast but uneven. We find that aid and oil money are flowing rapidly into certain sectors, while other employment-generating areas of the economy, particularly agriculture, have barely changed their centuries-old ways. As a result, the recent windfall of wealth has yet to translate into tangible development benefits for the majority of the population. In order to achieve growth in these other sectors, there is a need for more innovation in both government policy and business strategy.

"America Needs a Chief Strategy Officer

Abstract

The White House needs someone to look beyond the crisis of the day and focus on the United States' role in the world.

Read the paper: http://www.foreignpolicy.com/articles/2012/11/02/america_needs_a_chief_strategy_officer

 

Working Papers

Modularity and Organizations

Abstract

Modularity describes the degree to which a complex system can be broken apart into subunits (modules) that can be recombined in various ways. Modularity is important for organizations and the economy because the boundaries of organizational units and corporations are likely to match the boundaries of underlying technological modules. (This correspondence is called "mirroring.") In this essay, I explain the concept of modularity and describe how systems can be modularized. I then explain why mirroring is likely to be a commonly observed organizational pattern and review the empirical evidence. I conclude with open research questions.

Download the paper: http://ssrn.com/abstract=2178640

The Impact of Modularity on Intellectual Property and Value Appropriation

Abstract

Modularity is a means of partitioning technical knowledge about a product or process. When state-sanctioned intellectual property rights are ineffective or costly to enforce, modularity can be used to hide information and thus protect intellectual property (IP). We investigate the impact of modularity on IP protection by formally modeling three different threats to the value of IP: unauthorized use by known agents, imitation or substitution by third parties, and the withdrawal of IP by agents or third-party owners. For each threat, we consider the impact of modularity in the presence or absence of an effective legal system. The models permit us to identify specific strategies for protecting IP and thus capturing value in modular systems. We illustrate each of the major strategies with examples from practice.

Download the paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1971203

The Value of Advice: Evidence from Mobile Phone-Based Agricultural Extension

Abstract

Attempts to explain the astonishing differences in agricultural productivity around the world typically focus on farm size, farmer risk aversion, and credit constraints, with an emphasis on how they might serve to limit technology adoption. This paper takes a different tack: can managerial practices explain this variation in productivity? A randomized evaluation of the introduction of a mobile-phone based agricultural consulting service, "Avaaj Otalo (AO)" to cotton farmers in Gujarat, India, reveals the following: demand for agricultural advice is high, with more than half of farmers calling AO in the first seven months. Farmers offered the service turn less often to other farmers and input sellers for agricultural advice. Management practices change as well: we observe an increase in the adoption of more effective pesticides and reduced expenditure on less effective and hazardous pesticides. Treated farmers also sow a significantly larger quantity of cumin, a lucrative but risky crop. Interestingly, use of the service is increasing in the level of farmer education, but education levels do not affect the size of treatment effects. Farmers appear willing to follow advice without understanding why the advice is correct: the average respondent does not demonstrate improved agricultural knowledge, though there is some evidence educated farmers learn from the service.

Download the paper: http://ssrn.com/abstract=2179008

Optimal Aggregation of Consumer Ratings: An Application to Yelp.com

Abstract

Consumer review websites such as Yelp.com leverage the wisdom of the crowd, with each product being reviewed many times (some with more than 1,000 reviews). Because of this, the way in which information is aggregated is a central decision faced by consumer review websites. Given a set of reviews, what is the optimal way to construct an average rating? We offer a structural approach to answering this question, allowing for (1) reviewers to vary in stringency (some reviewers tend to leave worse reviews on average) and accuracy (some reviewers are more erratic than others), (2) reviewers to be influenced by existing reviews, and (3) product quality to change over time. We apply this approach to reviews from Yelp.com to derive optimal ratings for each restaurant (in contrast with the arithmetic average displayed by Yelp). Because we have the history of reviews for each restaurant and many reviews left by each reviewer, we are able to identify these factors using variation in ratings within and across reviewers and restaurants. Using our estimated parameters, we construct optimal ratings for all restaurants on Yelp and compare them to the arithmetic averages displayed by Yelp. As of the end of our sample, a conservative finding is that roughly 25%-27% of restaurants are more than 0.15 stars away from the optimal rating, and 8%-10% of restaurants are more than 0.25 stars away from the optimal rating. This suggests that large gains could be made by implementing optimal ratings. Much of the gains come from our method responding more quickly to changes in a restaurant's quality. Our algorithm can be flexibly applied to many different review settings.

Download the paper: http://www.hbs.edu/faculty/product/43620

Pay for Environmental Performance: The Effect of Incentive Provision on Carbon Emissions

Abstract

Corporations are increasingly under pressure to improve their environmental performance and to account for potential risks and opportunities associated with climate change. In this paper, we examine the effectiveness of monetary and nonmonetary incentives provided by companies to their employees in order to reduce carbon emissions. Specifically, we find evidence that the use of monetary incentives is associated with higher carbon emissions. This result holds both in cross-sectional and time-series analysis. Moreover, we find that the use of nonmonetary incentives is associated with lower carbon emissions. Consistent with monetary incentives crowding out motivation for pro-social behavior, we find that the effect of monetary incentives on carbon emissions is mitigated when these incentives are provided to employees with formally assigned responsibility for environmental performance. Furthermore, by employing a two-stage multinomial logistic model, we provide insights into factors affecting companies' decisions on incentive provision, as well as showing that the impact of monetary incentives on carbon emissions remains significant even when we control for potential selection bias in our sample.

Download the paper: http://ssrn.com/abstract=2133004

Identifying Peer Firms: Evidence from EDGAR Search Traffic

Abstract

Using Internet traffic patterns from the Securities and Exchange Commission Electronic Data-Gathering, Analysis, and Retrieval (EDGAR) website, we show that firms appearing in chronologically adjacent searches by the same individual are fundamentally similar on multiple dimensions. In fact, traffic-based peer firms identified by our algorithm significantly outperform peer firms based on six-digit Global Industry Classification Standard (GICS) groupings in explaining cross-sectional variations in base firms' stock returns, valuation multiples, forecasted and realized growth rates, research and development expenditures, and various other key financial ratios. Our results highlight the usefulness of EDGAR data, as well as the latent intelligence in search traffic patterns.

Download the paper: http://ssrn.com/abstract=2171497

Reinforcing Regulatory Regimes: How States, Civil Society, and Codes of Conduct Promote Adherence to Global Labor Standards

Abstract

In response to pressure from various stakeholders, many transnational businesses have developed codes of conduct and monitoring systems to ensure that working conditions in their supply chain factories meet global labor standards. Many observers have questioned whether these codes of conduct have any impact on working conditions or are merely a marketing tool to deflect criticism of valuable global brands. Using a proprietary dataset from one of the world's largest social auditors, containing audit-level data for 31,915 audits of 14,922 establishments in 43 countries on behalf of 689 clients in 33 countries, we conduct one of the first large-scale comparative studies of adherence to labor codes of conduct to determine what combination of institutional conditions promotes compliance with the global labor standards embodied in codes. We find that these private transnational governance tools are most effective when they are embedded in states that have made binding domestic and international legal commitments to protect workers' rights and that have high levels of press freedom and nongovernmental organization activity. Taken together, these findings suggest the importance of multiple, robust, overlapping, and reinforcing governance regimes to meaningful transnational regulation.

Download the paper: http://ssrn.com/abstract=2178540

Fostering Organizational Learning: The Impact of Work Design on Workarounds, Errors, and Speaking Up About Internal Supply Chain Problems

Abstract

A potential avenue for organizational learning is frontline employees' experience with internal supply chain problems. However, extensive research has established that employees rarely speak up to managers about problems. They tend to work around problems without additional effort to create organizational learning. This paper tests the premise that managerial action, via work design, can alter this dynamic. We use laboratory experiments to test the impact of three work design variables on proactive, improvement-oriented behaviors, workarounds, and errors. We find that two out of the three work design variables were effective at inducing proactive improvement-oriented behavior. Our results suggest that small changes in job design can reduce employee silence about organizational problems. Furthermore, we test the impact of the variables on risky workarounds and errors to account for unanticipated negative effects of work design to facilitate speaking up.

Download the paper: http://www.hbs.edu/faculty/product/43673

 

Cases & Course Materials

Intuit Inc.: Project AgriNova

Thomas R. Eisenmann and Tanya Bijlani
Harvard Business School Case 813-062

In late 2008, a team from Intuit's office in Bangalore, India, is evaluating an opportunity to launch a new venture that would use SMS to deliver crop price information to farmers in India. The case describes the structure of Indian agriculture and the problems experienced by farmers, who were often exploited by middlemen who entered into obtuse private arrangements with wholesale buyers. After five weeks of research, the team concludes that the opportunity warrants further exploration. The question is, what should they do next?

Purchase this case:
http://hbr.org/search/813062-PDF-ENG

Harvard Business School: Investing in Innovation

Robert Steven Kaplan and Tracy L. Van Dorpe
Harvard Business School Case 413-057

Dean Nitin Nohria wished to increase flexible funding available for innovation at HBS. Nohria prepared to address the need with alumni leaders of HBS's capital campaign. The case focuses on the School's priorities, its business model, and its fundraising structure. The case helps create a discussion around increasing the resources available to fund research and development at the School.

Purchase this case:
http://hbr.org/search/413057-PDF-ENG

Carolina for Kibera

Kathleen L. McGinn, Beth-Ann Kutchma, and Cailin B. Hammer
Harvard Business School Case 913-701

Carolina for Kibera (CFK) is an international non-profit organization whose mission is to promote youth leadership and gender and ethnic cooperation in Kibera, the largest unstructured settlement situated in the heart of Nairobi, Kenya. CFK's programs constructively leverage the power of the community, offering an exemplar of participatory development. CFK's affiliation with University of North Carolina offers a new model of social enterprise. After eight years of success under the founding leadership of Salim Mohamed, Rye Barcott, and Kim Chapman, CFK is at a critical juncture. Mohamed, executive director of all operations in Kibera, is leaving to go to graduate school. Rye Barcott, founder and president, has a new career and a growing family and can no longer play an active role in CFK's operations. Kim Chapman, chair of the U.S. board of directors, has accepted a full-time faculty position and must step down from her roles at CFK. These departures come at a time when the Gates Foundation has just awarded CFK a two-year, $1 million grant. The case ends as CFK begins to grapple with impending changes in organizational leadership and activities.

Purchase this case:
http://hbr.org/search/913701-PDF-ENG

Convertible Notes in Angel Financing

Ramana Nanda and William R. Kerr
Harvard Business School Note 813-017

This note introduces convertible notes in angel financing. It begins by delineating the differences between a priced and non-priced round. It then describes a specific example of a convertible note, with attention paid to technical details regarding valuation caps.

Purchase this note:
http://hbr.org/search/813017-PDF-ENG

The Fall of Circuit City Stores, Inc.

John R. Wells and Galen Danskin
Harvard Business School Case 713-402

On January 16, 2009, after a dismal holiday season, Circuit City was forced into liquidation. Unable to meet creditors' demands, and with no acquirer in sight, Circuit City began the process of liquidating its remaining 567 U.S. stores. Circuit City had been the leader in consumer electronics retailing for nearly twenty years when its profits peaked in 2000. What led to its dramatic decline? Why did three CEOs fail to turn it around? Were these problems present before the 2000 peak?

Purchase this case:
http://hbr.org/search/713402-PDF-ENG

The Rise of Circuit City Stores, Inc.

ohn R. Wells and Galen Danskin
Harvard Business School Case 713-401

In fiscal 2000, Circuit City was at the top of its game. The world's leading consumer electronics retailer had delivered record sales and profits for the first year of the new millennium. It was a fitting moment for Richard Sharpe, the CEO of the last 14 years, to step down. Over his tenure, revenues had increased 18 times and operating profits 13 times. In June 2000, Alan McCollough succeeded him as CEO. A 12-year veteran of Circuit City, McCollough expressed confidence in the future, citing trends such as the digitization of televisions, music players, and cameras. But challenges loomed from the increasingly aggressive discount sector. Was Circuit City as strategically strong as its financial results suggested? Would it be able to maintain momentum and retain its leadership?

Purchase this case:
http://hbr.org/search/713401-PDF-ENG