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.

July 30

Can global health programs overcome human nature?

Global health initiatives, regardless of how well-run, run up against a fundamental fact of human nature. Even in situations of life or death, we do not always act in our best interests. With this understood, suggests Nava Ashraf in Rx: Human Nature, initiatives should tap into other universal tendencies that can work toward, rather than against, creating effective health programs. For example, our desire to avoid losses rather than chance gains; our preference for the status quo over proactive change; and our greatest motivation: showing off our decency to the people whose respect we covet.

Indecision makes no friends, influences few people

A thin line separates dignified pondering from dithering over the flavor of your soy latte—a line which has been identified in Thought Calibration: How Thinking Just the Right Amount Increases One's Influence and Appeal, by Daniella M. Kupor, Zakary L. Tormala, Michael I. Norton, and Derek D. Rucker. We prefer it when people spend time deliberating over a hard decision; we are less thrilled when an easy decision is subject to the same rigorous testing. Gaging the difficulty of the decision and the length of time spent considering it, we judge not only the decision-maker, but the quality of the decision itself as either shoddy or overwrought.

Pulling rank: How much should we trust the numbers?

"Strategic Disclosure: The Case of Business School Rankings," by Michael Luca and Jonathan Smith, found that, running contrary to the normal models of voluntary information disclosure, top business schools are least likely to display their rankings, while middle-ranking schools are the most likely and low-ranking schools fall in between. Schools that do give their rankings will typically 'coarsen' the numbers to make them seem more favorable, reporting, for example, that they are 'in the top 20,' rather than 'at number 20,' or are ranked 'number 1,' rather than 'number 1 in the Northeast.'

 

Publications

Abstract—Why doesn't a woman who continues to have unwanted pregnancies avail herself of the free contraception at a nearby clinic? What keeps people from using free chlorine tablets to purify their drinking water? Behavioral economics has shown us that we don't always act in our own best interests. This is as true of health decisions as it is of economic ones. An array of biases, limits on cognition, and motivations lead people all over the world to make suboptimal health choices. The good news is that human nature can also be a source of solutions. Through her studies in Zambia exploring the reasons for unwanted pregnancies and the incentives that would motivate hairdressers to sell condoms to their clients, the author has found that designing effective health programs requires more than providing accessible, affordable care; it requires understanding what makes both end users and providers tick. By understanding the cognitive processes underlying our choices and applying the tools of behavioral economics-such as commitment devices, material incentives, defaults, and tools that tap our desire to help others-it's possible to design simple, inexpensive programs that encourage good health decisions and long-term behavior change.

Publisher's link: https://archive.harvardbusiness.org/cla/web/pl/product.seam?c=25120&i=25122&cs=0b17ff7f3d16c64e4a6b72b71b876054

  • 2013
  • pub

Information and Subsidies: Complements or Substitutes?

By: Ashraf, Nava, B. Kelsey Jack, and Emir Kamenica

Abstract—Does providing information about a product affect the impact of price subsidies on purchases of new or unfamiliar products? This question is particularly relevant for the introduction of health products in developing countries where consumers may be uncertain about product quality, and price subsidies are common policy instruments. Through a field experiment selling an unfamiliar health product in Zambia, we find that providing precise information about product specifications significantly increases the impact of the price subsidy on take-up. Taken alone, the information manipulation has no significant impact on demand, while the price subsidy substantially increases demand. However, evaluation of either intervention in isolation fails to capture the significant complementarity between the two.

Publisher's link: http://www.people.hbs.edu/nashraf/InformationSubsidies.pdf

  • 2013
  • pub

Thought Calibration: How Thinking Just the Right Amount Increases One's Influence and Appeal

By: Kupor, Daniella M., Zakary L. Tormala, Michael I. Norton, and Derek D. Rucker

Abstract—Previous research suggests that people draw inferences about their attitudes and preferences based on their own thoughtfulness. The current research explores how observing other individuals make decisions more or less thoughtfully can shape perceptions of those individuals and their decisions and ultimately impact observers' willingness to be influenced by them. Three studies suggest that observing others make more (versus less) thoughtful decisions generates more positive reactions when a choice is difficult but more negative reactions when a choice is easy. In essence, people perceive the quality of others' decisions to be greater when other individuals engage in the right amount of thinking for the situation. These assessments then affect observers' own decisions and openness to influence.

Publisher's link: http://www.hbs.edu/faculty/Pages/download.aspx?name=kupor%20tormala%20norton%20rucker.pdf

 

Working Papers

Abstract—We use two years of inpatient data from 243 California hospitals to quantify the relationship between hospital-level workload and patient length of stay (LOS) and its "spillover" effects across patient types. Patients are categorized as medical or surgical, and the effects of same-type patient workload (occupancy) on LOS are analyzed. The analysis is repeated with workload replaced by other type patient occupancy, providing a "spillover" effect. We find that the effects of inpatient workload on LOS spillover across patient types, which we theorize results from most inpatients, regardless of type, utilizing the same shared resources (e.g., pharmacy and laboratory). These spillover effects remain even while we find that the effects of workload vary at different time points during a patient's stay: LOS increases as inpatient workload on the day of admission increases, while inpatient workload at the end of the stay has a U-shaped effect on LOS.

Download working paper: http://www.hbs.edu/faculty/Pages/download.aspx?name=13-052.pdf

Clusters and the New Growth Path for Europe

By: Ketels, Christian, and Sergiy Protsiv

Abstract—This paper outlines elements of a conceptual framework that clarifies the role that clusters play relative to government policies and actions of individual companies in supporting the emergence of "High Road" strategies that lead to better New Growth Path-related outcomes. It then focuses on creating a new set of data that can start shedding light on the empirical relevance of this framework. The first main section of the paper draws on a new set of employment and wage data across European clusters. The data is used to analyze whether cluster presence is significantly correlated with higher wages, which, as an indicator of higher productivity, are likely to signal the presence of "High Road" strategies. We then take a closer look at the scale of the relationship relative to location-specific and other effects. We find cluster presence to be significantly related to higher wages, with the effect being moderate but meaningful. This suggests that cluster presence enhances the ability of economic activities to deliver high performance but is unlikely to be able to substitute weak business environment conditions. The second section then deploys a wide range of regional performance data collected for the European Competitiveness Index and the European Cluster Observatory. We create indicators for New Growth Path performance and its main dimensions and classify European regions by their performance patterns. This provides critical insights into the compatibility of the different economic, social, and ecological objectives pursued. We then relate these outcomes to the presence of strong cluster portfolios and strong business environment conditions. Both are most strongly associated with stronger economic outcomes, with lower impact on other dimensions of the New Growth Path. The third section creates a new dataset of cluster initiative intensity at the regional and cluster category level. It also classifies close to 1,000 cluster initiatives in Europe by their engagement in New Growth Path-related activities. We then deploy this data to test the impact of cluster initiatives on regional New Growth Path performance. Overall, we find evidence consistent with clusters playing a role in making "High Road" strategies more likely to emerge. We also find evidence that European regions differ in their strategies towards these goals, with some being able to pursue all three dimensions in parallel. Cluster initiatives widely engage in New Growth Path-related activities, indicating their potential as a tool in mobilizing joint action in these areas.

Download working paper: http://www.foreurope.eu/index.php?id=766&tx_sevenpack_pi1%5bsearch%5d%5brule%5d=AND&tx_sevenpack_pi1%5bsearch%5d%5bsep%5d=space&tx_sevenpack_pi1%5bshow_abstracts%5d=0&tx_sevenpack_pi1%5bshow_keywords%5d=0&tx_sevenpack_pi1%5byear%5d=2013&tx_sevenpack_pi1%5bshow_uid%5d=26&cHash=e43051117ff808eee3856730b432e1dd#c26

Strategic Disclosure: The Case of Business School Rankings

By: Luca, Michael, and Jonathan Smith

Abstract—Using a novel data set, we present three findings about the rankings that business schools choose to display on their websites. First, the data strongly rejects patterns predicted by classic models of voluntary disclosure. In contrast with the traditional unraveling hypothesis, top schools are least likely to display their rankings. Second, schools that do poorly in the U.S. News rankings are more likely to disclose their Princeton Review certification, suggesting that schools treat different certifications as substitutes. Third, conditional on displaying a ranking, the majority of schools coarsen information to make it seem more favorable.

Download working paper: http://people.hbs.edu/mluca/strategic disclosure.pdf

Abstract—Using panel data from the RAND Health and Retirement Study, I show that rejected applicants for Social Security Disability Insurance (SSDI) possess significantly more assets immediately prior to their application and exhibit lower labor force attachment than accepted applicants. These findings are consistent with the theoretical prediction that disability insurance may encourage individuals to save more in the present and plan to apply for disability benefits in the future, regardless of the state of their future health. Because the current empirical literature does not account for this intertemporal channel, it may underestimate the total work disincentive effect of SSDI.

Download working paper: http://ssrn.com/abstract=2295538

J. Richard Hackman (1940-2013)

By: Wageman, Ruth, and Teresa M. Amabile

Abstract—When J. Richard Hackman died in Cambridge, Massachusetts, on January 8, 2013, psychology lost a giant. Six and a half feet tall, with an outsize personality to match, Richard was the leading scholar in two distinct areas: work design and team effectiveness. In both domains, his work is foundational. Throughout his career, Richard applied rigorous methods to problems of great social importance, tirelessly championing multi-level analyses of problems that matter. His impact on our field has been immense.

Download working paper: http://ssrn.com/abstract=2295054

Abstract—This paper explores how entrepreneurs' efforts to legitimate a firm and a nascent industry affect the internal development of the firm. Through a three-year case study of a firm in the nascent smart cities industry, we uncover unexpected effects of leaders' legitimation efforts. Leaders engaged in a set of legitimation activities aimed at helping external stakeholders understand and appreciate the firm and its industry. These activities had three unintended cognitive consequences for firm employees-constrained attention, overconfidence, and identity commitments-that affected the firm's ability to learn, attend to, reflect on, and dynamically respond to information and changes in its environment. Our longitudinal research reveals a downside of legitimacy building and highlights unique challenges of competing in a nascent industry.

Download working paper: http://ssrn.com/abstract=2294928

 

Cases & Course Materials

  • Harvard Business School Case 413-030

Chorus and Telecom: Building the Boards

In 2011, Sarah Naudé and Matt Stanley sat down with the chairman of Telecom New Zealand, Wayne Boyd. Telecom, a publicly listed company and the largest telecom provider in New Zealand, was being divided into two publicly traded companies, Chorus, a telecom infrastructure company, and new Telecom, a telecom retail services provider. In connection with this split, Naudé and Stanley were charged with overseeing the process of creating two new boards of directors for these companies. As part of this process, the team reviews the roles and responsibilities of a board, defines what capabilities the new boards need, and reduces a preliminary list of candidates to a short list. They must now use this short list to create two strong boards.

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  • Harvard Business School Case 413-081

Chorus and Telecom: Building the Boards (B)

This follow up to "Chorus and Telecom: Building the Boards" provides a one-page description of the new boards that were created at Telecom and Chorus.

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  • Harvard Business School Case 913-036

Massachusetts Financial Services (Abridged)

This case describes the compensation and performance evaluations at an investment management company. The senior management team of Massachusetts Financial Services (MFS) Investment Management was contemplating an introduction of hedge funds at the firm, but many believed that typical hedge fund manager pay (20% of the upside) would harm the MFS culture, which glorified "star performance but not star egos." The case presents the MFS compensation philosophy and plan (including the plan's emphasis on subjective compensation), the types of people it attracted, the resulting culture, and how the senior management team approached the hedge funds question. It includes side discussion on firm-specific human capital. This is an abridged version of an earlier case.

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  • Harvard Business School Case 113-113

Value Partners and the Evergrande Situation

In June 2012, Cheah Cheng-Hye and his colleagues at Value Partners, a Hong Kong-based investment firm, received a copy of a short-seller report alleging that Evergrande, one of China's largest property developers, was using fraudulent accounting and paying bribes to secure business. Evergrande's stock plummeted, and Value Partners, which had a sizable holding of Evergrande stock, had to determine how to respond to the allegations. The case provides an opportunity to review Value Partners' research approach to investing in Chinese companies and to assess the merits of the Evergrande allegations.

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  • Harvard Business School Case 413-124

Luca de Meo at Volkswagen Group

Luca de Meo, chief marketing officer of Volkswagen Group, reflects on his time leading the marketing department at Volkswagen Passenger Cars brand. In particular, he thinks about the environmental sustainability initiative launched by marketing called "Think Blue" and its success throughout the company. During his time at Volkswagen, de Meo focused on transforming the marketing department into an engine of innovation. De Meo and his team in marketing worked together to build a strong global brand.

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Internationally recognized Brazilian Nizan Guanaes, co-founder of Grupo ABC, a rapidly growing global advertising firm ranked 18th in 2011, had aspirations to be in the top 10 by 2015. Grupo ABC thrived by identifying national (Brazilian) challenges and incorporating them in creative messages. Guanaes steered the group toward thinking big while acting locally, tackling societal challenges and building partnerships, as he entered the world stage; serving as an informal ambassador for Brazil; playing important roles in international forums as the Clinton Global Initiative, UNESCO, and the Cannes Lions Advertising Festival. Guanaes needed to determine the best growth strategy, how to seize opportunities, and/or how to adapt to meet his ambitious goal.

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http://hbr.org/search/313095-PDF-ENG

  • Harvard Business School Case 213-080

FX Risk Hedging at EADS

In 2008, EADS, the European aerospace group that owns Airbus, was faced with the decision of how best to hedge a large and growing mismatch between its dollar revenues and its euro manufacturing costs. Specifically, the company needed to decide if it would continue hedging primarily with forward contracts, but in much higher volumes and at increasingly unfavorable rates, or to break with past practice and begin using foreign exchange option contracts. The decision would have consequences for EADS' profitability, cash flow, and its ability to fund strategic investment programs crucial to its ability to remain competitive with Boeing. Students must address questions concerning the proper way to measure foreign exchange exposures, the objectives of a rational risk management policy and program for a company like EADS competing in a duopoly with Boeing, the differences between hedging with FX options versus FX futures, counterparty risk, and hedge accounting, among other considerations.

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Transport Corporation of India (TCI) was a logistics company that provided multi-modal transport solutions to its customers. Set up in 1958, TCI had grown from a "one man, one truck, one office" setup to a company with revenues of $400 million in half a century. TCI's growth had been assisted by the creation of individual divisions that provided specialized services to its clients-Freight, Express, Supply Chain Solutions, Seaways, and Global. In 2012, the company renewed it efforts to foster cross-selling across the divisions with the hope that this would increase customer stickiness and foster growth. However, as the company tried to push the cross-selling agenda across its various divisions, it faced myriad issues. It needed to educate its divisional sales staff about the services provided by divisions other than their own, to motivate them to cross-sell, and to create intra-division confidence to facilitate cross-selling. While the joint managing director, Vineet Agarwal, under the guidance of his father D.P. Agarwal, vice-chairman and managing director, TCI, in conjunction with TCI's executive committee, had introduced initiatives like training across divisions, competitions on cross-selling, and tracking of cross-selling leads, he was not sure that these were enough. Were there other ways in which TCI could successfully cross-sell? Could they put in place a system that specifically incentivized cross-sales to motivate sales staff? The (A) case focuses on TCI's cross-selling efforts and the strategic decisions before it. Cases (B), (C), and (D) discuss specific situations that demonstrate issues related to the cross-selling initiative.

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  • Harvard Business School Case 213-003

The Madera Ranch and Water Bank

The protagonist is trying to decide whether to purchase and develop an aquifer lying beneath rural land near Fresno, California. The project could fill a void for local farmers as well as surrounding municipalities and a variety of other customers throughout California.

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  • Harvard Business School Case 312-127

Credit Rating Agency Reform in the U.S. and EU

The purpose of this note is to explore reform options for the credit rating industry. The note examines the ways in which credit rating agencies contributed to the recent financial crisis, particularly through ratings of securitized products and sovereign debt. It further describes changes already enacted by the U.S. and the EU, as well as other reform proposals considered by lawmakers.

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  • Harvard Business School Case 712-054

Foreign Direct Investment and South Africa (B)

Incoming and outgoing foreign direct investment in an environment of politics, geography, globalization, and history. Updates the 2006 case to 2012. The subsequent six years only reinforce the message of the original case. Since the end of apartheid, South Africa had undertaken substantial economic reforms in order to attract more foreign direct investment, but it was slow in coming. At the same time, South African firms had become major players in sub-Saharan Africa and beyond. Collectively, these investment decisions could have a major long-run impact on South Africa's economic growth and political stability. South African policymakers needed to decide what they wanted from the private sector and how to achieve it.

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