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.
The marketing value of collegiate sports
It's thought that colleges with successful intercollegiate sports programs benefit through an increased brand awareness that attracts students of all stripes—the so-called Flutie Effect, after Boston College quarterback Doug Flutie. The assertion has never been studied in depth. Doug J. Chung addresses this gap in his new paper, The Dynamic Advertising Effect of Collegiate Athletics. He finds that success on the athletic field does increase admission requests, with applications climbing almost 19 percent when a sports team goes from mediocre to great. The lure is most profound on academically inferior students but, "Surprisingly, athletic success impacts applications even among academically stronger students."
Leading in crisis
How can organizations prepare for the unknowable, crises so novel that they can't be anticipated? In a contribution to a book on crisis leadership, Herman B. Leonard and Arnold M. Howitt write about managing through cataclysmic events. "These types of emergencies ... require emergency response organizations to adopt very different leadership strategies if they are effectively to cope with the differential demands of these events." Their book chapter is titled, "Leading in Crises: Observations on the Political and Decision-Making Dimensions of Response."
Five enduring negotiation lessons
Harvard Law School's Roger Fisher, who died in 2012, had a profound effect on the art and science of negotiation, writes James K. Sebenius in a forthcoming Negotiation Journal. "The memorable propositions that he formulated have probably done more than any other academic to transform views of negotiation toward an interest-based, joint problem-solving conception." Look for "What Roger Fisher Got Profoundly Right: Five Enduring Lessons for Negotiators."
In Search of the Self at Work: Young Adults' Experiences of a Dual Identity Organization
|Authors:||Anteby, Michel, and Amy Wrzesniewski|
|Publication:||Research in Sociology of Work|
Purpose: Multiple forces that shape the identities of adolescents and young adults also influence their subsequent career choices. Early work experiences are key among these forces. Recognizing this, youth service programs have emerged worldwide with the hope of shaping participants' future trajectories through boosting future engagement in civically oriented activities and work. Despite these goals, past research on these programs' impact has yielded mixed outcomes. Our goal is to understand why this might be the case. Design/Methodology/Approach: We rely on interview, archival, and longitudinal survey data to examine young adults' experiences of a European youth service program. Findings: A core feature of youth service programs, namely their dual identity of helping others (i.e., service beneficiaries) and helping oneself (i.e., participants), might partly explain the mixed outcomes. We find that participants focus on one of the organization's identities largely to the exclusion of the other, creating a dynamic in which their interactions with members who focus on the other identity create challenges and dominate their program experience, to the detriment of a focus on the organization and its goals. This suggests that a previously overlooked feature of youth service programs (their dual identity) might prove both a blessing for attracting many diverse members and a curse for achieving desired outcomes. Originality/Value: More broadly, our results suggest that dual identity organizations might attract members focused on a select identity but fail to imbue them with a blended identity; thus, limiting the extent to which such organizations can truly "re-direct" future career choices.
Strategic Orientations in a Competitive Context: The Role of Strategic Orientation Differentiation
|Authors:||Deshpandé, Rohit, Amir Grinstein, and E. Ofek|
Strategic orientation studies often provide 'best practice prescriptions' for firms in a given context-matching orientations to environmental conditions. While this perspective has value, empirical results are equivocal, and an important reality has been overlooked: the fact that a firm's decision to emphasize a particular strategic orientation can depend on its competitors' orientation choices. Based on two studies of customer, technology, and production orientations, we show that the emphasis a firm places on a strategic orientation depends on how competitive its environment is. When competition becomes less intense, firms place emphasis on the strategic orientation that matches the dominant environmental condition (e.g., technology orientation when technology turbulence is high). However, as competition intensifies, firms tend to follow strategic orientation differentiation: de-emphasizing the strategic orientation their main rival is emphasizing. Finally, we show that the greater the competitive intensity, the greater the contribution strategic orientation differentiation has on business performance.
Boardroom Centrality and Firm Performance
|Authors:||Larcker, David F., Eric C. So, and Charles C.Y. Wang|
|Publication:||Journal of Accounting & Economics|
Firms with central or well-connected boards of directors earn superior risk-adjusted stock returns. Initiating a long position in the most central firms and a short position in the least central firms earns an average risk-adjusted return of 4.68% per year. Firms with central boards also experience higher future growth in return-on-assets (ROA) with analysts failing to fully reflect this information in their earnings forecasts. Return prediction, growth in ROA, and analyst forecast errors are concentrated among firms with high growth opportunities or firms confronting adverse circumstances, consistent with boardroom connections mattering most for firms that stand to benefit most from the information communicated and resources exchanged through the network of board members. Overall, our results suggest that board of director networks provide economic benefits that are not immediately reflected in stock prices.
Leading in Crises: Observations on the Political and Decision-Making Dimensions of Response
|Authors:||Leonard, Herman B., and Arnold M. Howitt|
|Publication:||Mega-Crises: Understanding the Prospects, Nature, Characteristics and the Effects of Cataclysmic Events|
Emergency response organizations, as we have argued in earlier writing, must deal with both "routine emergencies" (dangerous events, perhaps extremely severe, that are routine because they can be anticipated and prepared for) and "true crises" (which, because of significant novelty, cannot be dealt with exclusively by pre-determined emergency plans and capabilities). These types of emergencies therefore require emergency response organizations to adopt very different leadership strategies if they are effectively to cope with the differential demands of these events. In this paper, we develop further ideas about leadership under crisis conditions, concentrating on the political leadership and decision making functions that are thrust to the center of concern during such crisis events.
Pursuing Public Value: Frameworks for Strategic Analysis and Action
|Authors:||Leonard, Herman B., and Mark H. Moore|
|Publication:||Ports in a Storm: Public Management in a Turbulent World|
Features Harvard Kennedy School scholars who focus diverse conceptual lenses on a single high-stakes management task-enhancing port security across the United States. This title considers the challenge of driving change in a complex system involving hundreds of private organizations and scores of government agencies with their operations intertwined.
Working Together in Crises
|Authors:||Leonard, Herman B. "Dutch", and Arnold M. Howitt|
|Publication:||Crisis Response Journal|
No abstract available.
Capturing History: The Case of the Federal Radio Commission in 1927
|Authors:||Moss, David, and Jonathan Lackow|
|Publication:||Preventing Regulatory Capture: Special Interest Influence and How to Limit It|
In the study of regulation (and political economy more generally), there is a danger that historical inferences from theory may infect historical tests of theory. It is imperative, therefore, that historical tests always involve a vigorous search not only for confirming evidence, but for disconfirming evidence as well. We undertake such a search in the context of a single well-known case: the Federal Radio Commission's (FRC) 1927 decision not to expand the broadcast radio band. The standard account of this decision holds that incumbent broadcasters opposed expansion (to avoid increased competition) and succeeded in capturing the FRC. Although successful broadcaster opposition may be taken as confirming evidence for this interpretation, our review of the record reveals even stronger disconfirming evidence. In particular, we find that every major interest group, not just radio broadcasters, publicly opposed expansion of the band in 1927, and that the broadcasters themselves were divided at the FRC's hearings.
What Roger Fisher Got Profoundly Right: Five Enduring Lessons for Negotiators
|Authors:||Sebenius, James K.|
|Publication:||Negotiation Journal: On the Process of Dispute Settlement|
Roger Fisher, who died in 2012, enjoyed a remarkable career that modeled one way that an academic, especially in a professional school such as law or business, could make a significant, positive, and lasting difference in the world. Distinctive aspects of his career included deep engagement with the world of practice, combination of experience with disciplinary insight to generate practically valuable intellectual capital, research output that constituted a decades-long project rather than a series of one-off contributions, constant mentoring and co-authorship with younger colleagues, distillation of advice into accessible and memorable forms, and investment in an institutional legacy. Beyond these aspects, which I elaborated in a companion article in the Harvard Law Review (2013), the present article mainly evaluates Roger Fisher's core contributions to the content or substance of negotiation research, theory, teaching, and practice. The discussion is organized around five thematic prescriptions: 1) focus on the other party's decisions in order to craft a "yesable proposition"; 2) make the full set of underlying "interests" (versus bargaining positions) central; 3) generate fresh, mutually beneficial ideas; 4) pay attention to BATNAs (Best Alternatives To a Negotiated Agreement); and 5) use "objective criteria" to transform negotiations from a test of wills to a search for fairness principles. Fisher did not create knowledge of the deductive, experimental kind most common in social science research. Yet Roger and his colleagues developed frameworks of aphorisms that, on average, respond to widely felt practitioner needs and systematically direct negotiators' focus to aspects of the situation that reliably generate helpful prescriptions. Left to others were careful assessments of the conditions under which his advice applied-and did not. While Fisher's writings are open to various intellectual and practical challenges, it has stimulated much work by other researchers. The memorable propositions that he formulated have probably done more than any other academic to transform views of negotiation toward an interest-based, joint problem-solving conception.
The Dynamic Advertising Effect of Collegiate Athletics
|Authors:||Chung, Doug J.|
I measure the spillover effect of intercollegiate athletics on the quantity and quality of applicants to institutions of higher education in the United States, popularly known as the "Flutie Effect." I treat athletic success as a stock of goodwill that decays over time, similar to that of advertising. A major challenge is that privacy laws prevent us from observing information about the applicant pool. I overcome this challenge by using order statistic distribution to infer applicant quality from information on enrolled students. Using a flexible random coefficients aggregate discrete choice model-which accommodates heterogeneity in preferences for school quality and athletic success-and an extensive set of school fixed effects to control for unobserved quality in athletics and academics, I estimate the impact of athletic success on applicant quality and quantity. Overall, athletic success has a significant long-term goodwill effect on future applications and quality. However, students with lower than average SAT scores tend to have a stronger preference for athletic success, while students with higher SAT scores have a greater preference for academic quality. Furthermore, the decay rate of athletics goodwill is smaller for students with lower SAT scores, suggesting that the goodwill created by intercollegiate athletics resides more extensively with low-ability students than with their high-ability counterparts. But, surprisingly, athletic success impacts applications even among academically stronger students. Finally, athletic success effects are greater at public schools than at private schools.
Download the paper: http://www.hbs.edu/faculty/product/44101
Do Bonuses Enhance Sales Productivity? A Dynamic Structural Analysis of Bonus-Based Compensation Plans
|Authors:||Chung, Doug J., Thomas Steenburgh, and K. Sudhir|
We estimate a dynamic structural model of sales force response to a bonus based compensation plan. Substantively, the paper sheds insights on how different elements of the compensation plan enhance productivity. We find evidence that (1) bonuses enhance productivity across all segments, (2) overachievement commissions help sustain the high productivity of the best performers even after attaining quotas, and (3) quarterly bonuses help improve performance of the weak performers by serving as pacers to keep the sales force on track to achieve their annual sales quotas. The paper also introduces two main methodological innovations to the marketing literature: first, we implement empirically the method proposed by Arcidiacono and Miller (2011) to accommodate unobserved latent class heterogeneity using a computationally light two-step estimator. Second, we illustrate how discount factors can be estimated in a dynamic structural model using field data through a combination of (1) an exclusions restriction separating current and future payoff and (2) a finite horizon model in which there is no forward looking behavior in the last period.
Download the paper: http://www.hbs.edu/faculty/product/44102
Do Market Leaders Lead in Business Process Innovation? The Case(s) of E-Business Adoption
|Authors:||McElheran, Kristina S.|
This paper explores the relationship between market position and business process innovation. Prior research has focused on the alignment between new technologies and the internal capabilities of firms to pursue them. I extend the investigation to include external capabilities as well. I develop a framework for predicting whether market leaders will undertake business process innovation based on the complexity of the process, the firm's organizational structure, and the innovation's impact on customers. I test its predictions in the context of e-business adoption using a large multi-industry data set. Robust conditional correlations suggest that market leaders were more likely to adopt new e-business practices only in settings that required little customer investment or where customer capabilities were well aligned with the new technology. Otherwise, leaders' adoption was significantly lower than that of their less-prominent competitors. The findings highlight the strategic significance of adjustment costs in technology adoption, both within and beyond the firm boundary.
Download the paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1618840
Managing Risks: Towards a Contingency Theory of Enterprise Risk Management
|Authors:||Mikes, Anette, and Robert Kaplan|
Enterprise Risk Management (ERM) has become a crucial component of contemporary corporate governance reforms. Now that principles, guidelines, and standards abound, it is time to take stock. Has the idea of ERM reached maturity with proven, unambiguous concepts and tools? Or is it still emerging and unproven? Or is it simply taken for granted, its value "proven" by the apparent demand?
Download the paper: http://www.hbs.edu/faculty/product/44034
Developing the Guts of a GUT (Grand Unified Theory): Elite Commitment and Inclusive Growth
|Authors:||Pritchett, Lant, and Eric D. Werker|
Two key unanswered questions in theories of growth are (a) why some countries successfully initiate episodes of rapid growth while others suffer extended stagnation and (b) why some countries are able to sustain growth episodes over many decades of rapid (or steady) growth while other growth episodes end in reversion to stagnation or collapse. We create an analytical model that is capable of generating both transitory and sustained episodes of accelerated growth. The new feature is a feedback loop from existing economic conditions the pressures on policy implementing 'institutions'. This feedback loop can be positive (with economic growth leading to improved institutions for inclusive growth) or negative (with economic growth leading to worse conditions for further growth by shutting off the inclusiveness of growth and limiting economic opportunity to existing successes). Whether economic elites use their influence activities with political and bureaucratic elites to create more possibilities for economic structural transformation or, conversely, use their power to entrench their privileged position will, to a significant extent, determine whether episodes of rapid growth can be sustained, will peter out, or even be reversed. The mechanisms for elite commitment to sustained inclusive growth are discussed.
Download the paper: http://www.dfid.gov.uk/r4d/Output/191883/Default.aspx
Cases & Course Materials
Bell, David E., and Natalie Kindred
Harvard Business School Case 513-052
Patrick Coveney, CEO of Greencore, one of the top producers of private label prepared foods sold through UK grocery retailers, was assessing Greencore's growth options. Growth potential was limited in the UK, a mature market in which retailers were unlikely to grant much greater market share to Greencore or any of its competitors. In the U.S., where Greencore had struggled to gain traction since its initial entry in 2008, the market for fresh, chilled prepared foods was far less developed. Can Greencore translate its success in the UK to the U.S.? Should Coveney focus on developing the U.S. market or on maximizing Greencore's position in the UK?
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Building Brand Infosys
Deshpandé, Rohit, and Vidhya Muthuram
Harvard Business School Case 513-003
Infosys Limited was India's second largest exporter of IT services with annual revenues of $7 billion and a market capitalization of nearly $26 billion in 2012. The company, headquartered in Bangalore, India, had built its reputation as the Indian IT bellwether whose credo was to "under-promise and over-deliver." Throughout its 31-year history, Infosys and its iconic co-founder, N.R. Narayana Murthy, were admired and respected for delivering excellence while conducting business in a legal, transparent, and ethical manner. It was one of the few software companies that recognized the value of a strong brand in the business-to-business (B2B) market and chose to develop its brand not through expensive advertising but by building core values, client trust, and leveraging Murthy's personal integrity and principles. In 2011, the company introduced its new brand positioning, Infosys 3.0. A key component of the new brand positioning was the Products, Platforms, and Services (PPS) business, headed by Sanjay Purohit. This case focuses on the company's efforts to makeover its brand in the U.S. market amidst several challenges.
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Doing Deals and Leading Teams at XAF Partners
Groysberg, Boris, and Kerry Herman
Harvard Business School Case 413-032
No abstract available.
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Companion Diagnostics: Uncertainties for Approval and Reimbursement
Hamermesh, Richard G., Norman C. Selby, and Phillip Andrews
Harvard Business School Case 813-037
The FDA approvals of novel therapeutics were seen as signs in the personalized medicine community of real progress in the growth of personalized medicine. The FDA's approval of such drugs, along with companion diagnostics, suggested a shift in thinking and regulatory practices at the agency. Beyond the regulatory questions, many considered the reimbursement system archaic, dispersed, unpredictable, and unnecessarily time consuming. Many questioned whether the traditional models of reimbursement were relevant in the era of personalized medicine, and who should be covering the cost of tests needed to identify the sometimes small number of patients who could benefit from expensive targeted drugs. This case focuses on the array of possibilities and the ambiguity surrounding these regulatory and reimbursement issues.
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HCA, Inc. LBO Exit
Harvard Business School Case 813-056
No abstract available.
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TPG China: Daphne International
Harvard Business School Case 813-055
No abstract available.
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Teaming at GE Aviation
Khurana, Rakesh, Jeffrey T. Polzer, Willy Shih, and Eric Baldwin
Harvard Business School Case 413-074
Describes the challenges and successes encountered by GE's Aviation business in implementing a teaming work structure and culture in plants across its supply chain. GE Aviation leadership had seen dramatic gains in productivity, quality, and worker satisfaction in manufacturing plants where it had implemented teaming, which was designed to move decision making as close to the product as possible by delegating authority, responsibility, and accountability to front-line workers. The case describes what teaming looked like in two of GE Aviation's plants and discusses the benefits realized in teaming sites. It also describes the challenges GE Aviation leaders had encountered in implementing teaming in the face of an entrenched work structure and culture in one particular plant and discusses the difficulty management had faced in moving forward in transforming the culture of the plant.
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Gerry Pasciucco at AIG Financial Products (A)
Mukunda, Gautam, and Thomas J. DeLong
Harvard Business School Case 413-059
Gerry Pasciucco was appointed to lead American International Group's Financial Products (AIGFP) group after the government bailout of AIG in 2008 and charged with the task of shutting down the division while minimizing the government's losses. AIGFP's failed trades had threatened to bring down the entire company, and the government had responded by loaning AIG $182 billion in exchange for 79.9% of the company, because it feared that AIG's failure could trigger the collapse of the entire global financial system. Several months into his tenure, the division paid large retention bonuses to all of its professionals according to a contract negotiated before he joined AIGFP. These bonuses were seen by the public as going to the very people whose mistakes resulted in the need for a bailout in the first place and resulted in an unprecedented storm of public outrage, culminating in a Congressional hearing in which AIG's CEO, Ed Liddy, was repeatedly attacked for making the bonus payments. Liddy responded by asking people who had received the largest payments to return the money to the company. Now Pasciucco has to decide how to lead his team through this crisis while grappling with the larger issues of the justice of the retention payments.
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Coca-Cola: Residual Income Valuation Exercise
Srinivasan, Suraj, Beiting Cheng, and Edward J. Riedl
Harvard Business School Case 113-056
The exercise illustrates the use of the residual income (also known as the abnormal earnings) valuation approach. Students are asked to provide a valuation of Coca-Cola Company using the residual income valuation methodology and understand how it maps into the discounted cash flow method. Students learn how forecasts of sales, performance, dividends, and other valuation inputs feeds into a valuation model. Students also learn the modified Dupont decomposition technique and how to reclassify financial statements to perform the modified Dupont analysis.
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ABB: 'In China, for China'
Trumbull, Gunnar, Elena Corsi, and Elisa Farri
Harvard Business School Case 711-044
ABB, a power and automation Swiss engineering company had to decide if they wanted to be even more integrated into the Chinese economy, ABB's biggest market, or if they should instead increase their presence in other emerging markets such as India and Brazil.
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