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.

March 19

When daily deals misfire on merchants

Retailers have been quick to follow the Groupon model of offering subscription customers daily promotions, essentially pre-paid vouchers deeply discounted. But do they work? "Our evaluation of daily deals is a cautionary tale for merchants: a substantial percentage are unlikely to benefit, and might well lose money, by using this type of campaign," write Sunil Gupta, Ray Weaver, Timothy Keiningham, and Luke Williams. To find out why, and which merchants are expected to benefit from the promotions, order the note, "Are Daily Deals Good for Merchants?"

Lessons of war for negotiators

As negotiation expert Michael A. Wheeler points out in a new paper, the goals of war (win at all costs) and negotiation (all parties win) appear opposite. But Wheeler, writing in the January issue of Negotiation Journal, finds similarities. "Specifically, both involve the interaction of motivated agents with distinct interests, perceptions, and values (especially in high-stakes contexts). As a result, robust strategy, creativity, and nimble tactics are essential both on the battlefield and at the bargaining table." Read "The Fog of Negotiation: What Negotiators Can Learn from Military Doctrine."

The unexpected effect of electronic monitoring of criminals

Rafael Di Tella has an interesting research beat at Harvard Business School: crime. Working under the broader subject umbrella of institutional development, his past work has included looks at corruption and media bias. In an upcoming article for the Journal of Political Economy, Di Tella and Ernesto Schargrodsky find a large correlation between treating individuals with electronic monitoring instead of jail time and their likelihood of committing more crime. Look for their piece, "Criminal Recidivism after Prison and Electronic Monitoring."

 

Publications

Setting Health Priorities: Strategy versus Tactics

Abstract

Health decision makers throughout the world are faced with a multiplicity of challenges. As resource limitations are a fundamental fact of life, choices necessarily have to be made about which challenges to address and the best way to tackle them. In this piece, we discuss the distinction between these distinct components of priority setting in health: the strategic and tactical.

Criminal Recidivism after Prison and Electronic Monitoring

Abstract

We study criminal recidivism in Argentina by focusing on the re-arrest rates of two groups: individuals released from prison and individuals released from electronic monitoring. Detainees are randomly assigned to judges, and ideological differences across judges translate into large differences in the allocation of electronic monitoring to an otherwise similar population. Using these peculiarities of the Argentine setting, we argue that there is a large, negative causal effect on criminal recidivism of treating individuals with electronic monitoring relative to prison.

The Fog of Negotiation: What Negotiators Can Learn from Military Doctrine

Abstract

On the surface, warfare and negotiation may seem to be polar opposites. The objective in war is to defeat the enemy. In negotiation, the goal is to find a solution that satisfies all the parties. Not surprisingly, little cross-learning and exchange has occurred across the two domains. In spite of important differences, however, the dynamics of war and negotiation have much in common. Specifically, both involve the interaction of motivated agents with distinct interests, perceptions, and values (especially in high-stakes contexts). As a result, robust strategy, creativity, and nimble tactics are essential both on the battlefield and at the bargaining table. Just as negotiation theory could be enriched by principles of maneuver warfare, military doctrine offers officers and soldiers a potentially useful foundation to better understand and manage the negotiation process, especially in complex, cross-cultural contexts.

Paper: http://onlinelibrary.wiley.com/doi/10.1111/nejo.12003/abstract

 

Working Papers

Investment Incentives in Open-Source and Proprietary Two-Sided Platforms

Abstract

We study incentives to invest in platform quality in open-source and proprietary two-sided platforms. Open platforms have open access, and developers invest to improve the platform. Proprietary platforms have closed access, and investment is done by the platform owner. We present four main results. First, the successful development of an open platform may require either wide or limited access by developers, depending on the characteristics of the applications market. Second, giving open access to one side in a proprietary platform may lead to fewer users and developers and to lower investment, relative to a platform with closed access to both sides. Third, the structure of access prices of the proprietary platform depends on (i) how changes in the number of developers affect the incentives to invest in the open platform and (ii) how investment in the open platform affects the revenues of the proprietary platform. Finally, a proprietary platform may benefit from higher investment in the open platform. This result helps explain why the owner of a proprietary platform such as Microsoft has chosen to contribute to the development of Linux.

Download the paper: http://www.hbs.edu/faculty/Publication%20Files/12-114_60db6865-8e08-4861-98d2-4ba4dd99352a.pdf

Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management

Abstract

Top management structures in large U.S. firms have changed significantly since the mid-1980s. While the size of the executive team-the group of managers reporting directly to the CEO-doubled during this period, this growth was driven primarily by an increase in functional managers rather than general managers, a phenomenon we term "functional centralization." Using panel data on senior management positions, we show that changes in the structure of the executive team are tightly linked to changes in firm diversification and IT investments. These relationships depend crucially on the function involved: those closer to the product ("product" functions, e.g., marketing / R&D) behave differently from functions further from the product ("administrative" functions, e.g., finance / law / HR). We argue that this distinction is driven by differences in the information-processing activities associated with each function and apply this insight to refine and extend existing theories of centralization. We also discuss the implications of our results for organizational forms beyond the executive team.

Download the paper: http://ssrn.com/abstract=1982531

Causes and Consequences of Firms' Self-Reported Anticorruption Efforts

Abstract

We use Transparency International's ratings of self-reported anticorruption efforts for 480 corporations to examine factors underlying firms' efforts and their consequences. We find that firms with high anticorruption efforts are domiciled in countries with low corruption ratings and strong anticorruption enforcement, operate in high corruption risk industries, have recently faced a corruption enforcement action, employ a Big Four audit firm, and have a higher percentage of independent directors. Controlling for these effects, we find that firms with abnormally low anticorruption efforts have relatively higher subsequent media allegations of corruption. They also report higher future sales growth and show a negative relation between profitability change and sales growth in high corruption geographic segments compared to firms with high anticorruption efforts. The net effect on valuation from sales growth and profitability is close to zero. We conclude that, on average, firms' self-reported anticorruption efforts reflect real efforts to combat corruption and are not merely cheap talk.

Download the paper: http://ssrn.com/abstract=2229039

When to Sell Your Idea: Theory and Evidence from the Movie Industry

Abstract

How completely should an innovator develop his idea before selling it? In the context of selling original movie ideas, I present a model that features the writer's private information on the idea's value, different protection levels associated with different development stages, as well as costly buyer participation. The empirical results are consistent with the model's predictions: inexperienced writers are excluded from the market for earlier-stage ideas, restricting their choices to developing the idea fully or abandoning it; writers who have a choice sell better ideas at a later stage and worse ideas at an earlier stage; and lastly, intermediaries facilitate earlier-stage sales for inexperienced writers.

Download the paper: http://www.people.hbs.edu/hluo/whentosell_2012.pdf

Did Bank Distress Stifle Innovation During the Great Depression?

Abstract

Bank distress during the Great Depression had a significant negative impact on the level, quality, and trajectory of firm-level innovation, particularly for R&D firms operating in capital intensive industries. However, because a sufficient number of R&D intensive firms were located in counties with lower levels of bank distress, or were operating in less capital intensive industries, the negative effects were mitigated in aggregate. Although Depression-era bank distress did stifle innovation, our results also help to explain why technological development was still robust following one of the largest shocks in the history of the U.S. banking system.

Download the paper: http://www.hbs.edu/faculty/Publication%20Files/12-106_d9833135-0192-4c99-abab-476fa0ea84a2.pdf

 

Cases & Course Materials

Say on Pay at The Walt Disney Company

Gow, Ian D., and Gaizka Ormazabal
Harvard Business School Case 113-052

This case focuses on the lead-up to Disney's 2012 annual meeting where Disney would face a vote on the compensation package of its CEO, Robert Iger. Leading proxy advisory firms were recommending that shareholders reject the proposed compensation.

Purchase this case:
http://hbr.org/search/113052-PDF-ENG

Are Daily Deals Good for Merchants?

Gupta, Sunil, Ray Weaver, Timothy Keiningham, and Luke Williams
Harvard Business School Case 513-059

In the relatively short time since Groupon was founded, the response to "daily deals"-services that promote businesses by marketing deeply discounted, pre-paid vouchers to an online subscriber base-has by all accounts been spectacular. Our evaluation of daily deals is a cautionary tale for merchants: a substantial percentage are unlikely to benefit, and might well lose money, by using this type of campaign. But a careful analysis of the right data provides clear indicators of both what types of merchants are likeliest to benefit and which factors that influence profits should receive the most management attention.

Purchase this case:
http://hbr.org/search/513059-PDF-ENG

EverTrue: Mobile Technology Development (A)

Kerr, William R., and Alexis Brownell
Harvard Business School Case 813-122

Brent Grinna is evaluating different options for the technology development of his start-up's iPhone app, including hiring local programmers, finding a CTO, or outsourcing. He only has a little over two months before he presents his alumni networking app to Brown University, in the hope that they will adopt it and fund his company, EverTrue. He lacks the technical knowledge necessary to make the prototype himself, and so has to quickly decide on the best option. He is considering multiple ways to find a developer, including hiring a local programmer or making use of a local app-development company; using an outsourcing platform like oDesk; contracting with Dashfire, a friend's company that charges low fees for product development in exchange for equity; or finding and hiring a CTO or technical co-founder. Grinna must weigh issues like cost, speed of development, equity retention, proximity and ease of collaboration, and control of intellectual property. The case further provides an opportunity for discussing the business models of global firms like oDesk and Dashfire.

Purchase this case:
http://hbr.org/search/813122-PDF-ENG

EverTrue: Mobile Technology Development (B)

Kerr, William R., and Alexis Brownell
Harvard Business School Case 813-123

Brent Grinna has one customer signed up for his alumni-networking mobile app and is now trying to choose among three possibilities for a CTO. He decided to contract with a friend's company, Dashfire, to create a prototype of the app and has signed up Brown University as a customer. Since the end of the events of the A case, Grinna's company, EverTrue, has launched the app, found an advisor and office space, and been covered in the Boston Globe. He is still unsure about how to move forward with EverTrue and is struggling with issues like a conflict in his B2B2C business models and what his next steps should be as well as personal concerns. At the moment, he is trying to decide among three candidates for CTO, and he must weigh the importance of having an MBA and having experience in app development as well as consider how hiring a CTO will affect his relationship with Dashfire.

Purchase this case:
http://hbr.org/search/813123-PDF-ENG

micro Home Solutions: A Social Housing Initiative in India

Kerr, William R., and Alexis Brownell
Harvard Business School Case 813-092

mHS is a social enterprise for the provision of affordable housing in India. After India's microfinance industry collapses, mHS needs to reposition itself for continued operations and long-term growth.

Purchase this case:
http://hbr.org/search/813092-PDF-ENG

AmTran Technology Ltd.

Shih, Willy, Jyun-Cheng Wang, and Karen Robinson
Harvard Business School Case 613-069

As an original design manufacturer (ODM) of television sets and a leading supplier to Vizio, a market leader in the U.S. for LCD flat panel TVs, AmTran Technology Ltd. uses what founder Alpha Wu describes as a "WE" model in which western companies perform sales, marketing, and product definition work, while eastern companies in Asia like his perform the engineering and manufacturing work. Confronted with commoditization pressure, Wu is presented with the opportunity to license a major TV brand. Is this consistent with his model? The case explores the changes that have taken place in the consumer television receiver market and the challenges faced by leaders of the analog market, like Sony. It is intended for use with the technical note, "Competency-destroying Technology Transitions: Why the Transition to Digital Is Particularly Challenging," HBS No. 613-024.

Purchase this case:
http://hbr.org/search/613069-PDF-ENG