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 10

Do managers add value?—a Google perspective

Ask an engineer what value managers add, and you are likely to get a response worthy of a Dilbert punchline. But when Google asked the question, it put rigorous analytics to work to find out. So, are managers worth keeping around? Read David Garvin's account, "How Google Sold Its Engineers on Management," in this month's Harvard Business Review.

Managing affiliate marketing programs

Affiliate marketing programs have their advantages, but managing and rewarding a diverse network of dozens, hundreds, or even thousands of business referrers has it challenges. In the working paper Information and Incentives in Online Affiliate Marketing, Benjamin G. Edelman and Wesley Brandi evaluate the comparative advantages of in-house monitoring versus using outside specialists.

Leveraging intangilbes in the credit market

In the case "Gordon Brothers: Collateralizing Corporate Loans by Brands," Paul Healy and Maria Loumioti explore the increasing use of intellectual property as a form of loan collateralization. "Leveraging intangibles in the credit market is a new practice that has significantly grown over the past few years," the authors note. "However, estimating their liquidation value is not directly intuitive...."

 

Publications

  • August 2013
  • Strategic Management Journal

Location Choices under Strategic Interactions

By: Alcácer, Juan, Minyuan Zhao, and Cristian Dezso

Abstract—The literature on location choices has mostly emphasized the impact of location and firm characteristics. However, most industries with a significant presence of multi-location firms are oligopolistic in nature, which suggests that strategic interaction among firms plays an important role in firms' decision-making processes. This paper explores how strategic interaction among competitors affects firms' geographic expansion across time and markets. Specifically, we build a model in which two firms that differ in their capabilities enter sequentially into two markets with different potentials for profit. The model is solved using game theory under three learning scenarios that capture the ability of a firm to transfer its capabilities across markets: no learning, local learning, and global learning. Three equilibrium strategies arise: accommodate, marginalize, and collocate. We identify how these strategies emerge depending on the tradeoff between the opportunity costs of absence (giving competitors a lead in a market) and the entrenchment benefits (the cost advantage firms develop through learning-by-doing when they enter early). Both the opportunity costs of absence and the entrenchment benefits vary according to initial relative firm capabilities, relative market profitability, and learning rates. Our model offers a comprehensive approach to understanding the drivers of firm location choices by modeling not only the impact of location and firm heterogeneity, but also the strategic interaction among firms.

  • August 2013
  • Harvard Business Review

How Google Sold Its Engineers on Management

By: Garvin, David A.

Abstract—High-performing knowledge workers often question whether managers actually contribute much, especially in a technical environment. Until recently, that was the case at Google, a company filled with self-starters who viewed management as more destructive than beneficial and as a distraction from "real work." But when Google's people analytics team examined the value of managers, applying the same rigorous research methods the company uses in its operations, it proved the skeptics wrong. Mining data from employee surveys, performance reviews, and double-blind interviews, the team verified that managers indeed had a positive impact. It also pinpointed exactly how, identifying the eight key behaviors of great Google managers. In this article, I describe how Google has incorporated the detailed findings from the research into highly specific, concrete guidelines; classes; and feedback reports that help managers hone their essential skills. Because these tools were built from the ground up, using the staff's own input, they've been embraced by Google employees. Managers say that they've found their training to be invaluable, and managers' ratings from direct reports have steadily risen across the company.

Publisher's link: http://hbr.org/product/how-google-sold-its-engineers-on-management/an/R1312D-PDF-ENG

  • August 2013
  • Review of Economics and Statistics

Entrepreneurship and Urban Growth: An Empirical Assessment with Historical Mines

By: Glaeser, Edward L., Sari Pekkala Kerr, and William R. Kerr

Abstract—Measures of entrepreneurship, such as average establishment size and the prevalence of start-ups, correlate strongly with employment growth across and within metropolitan areas, but the endogeneity of these measures bedevils interpretation. Chinitz (1961) hypothesized that coal mines near Pittsburgh led that city to specialization in industries, like steel, with significant scale economies and that those big firms led to a dearth of entrepreneurial human capital across several generations. We test this idea by looking at the spatial location of past mines across the United States: proximity to historical mining deposits is associated with bigger firms and fewer start-ups in the middle of the 20th century. We use mines as an instrument for our entrepreneurship measures and find a persistent link between entrepreneurship and city employment growth; this connection works primarily through lower employment growth of start-ups in cities that are closer to mines. These effects hold in cold and warm regions alike and in industries that are not directly related to mining, such as trade, finance, and services. We use quantile instrumental variable regression techniques and identify mostly homogeneous effects throughout the conditional city growth distribution.

  • August 2013
  • Harvard Business Review

The Hidden Benefits of Keeping Teams Intact

By: Huckman, Robert S., and Bradley Staats

Abstract—No abstract available.

Publisher's link: http://hbr.org/2013/12/the-hidden-benefits-of-keeping-teams-intact/ar/1

  • August 2013
  • Stanford Social Innovation Review

Inside the Buy-One Give-One Model

By: Marquis, Christopher, and Andrew Park

Abstract—No abstract available.

Publisher's link: http://www.people.hbs.edu/cmarquis/Inside_the_Buy_One_Give_One_Model.pdf

  • August 2013
  • Journal of Accounting Research

Private Interaction Between Firm Management and Sell-Side Analysts

By: Soltes, Eugene F.

Abstract—Although sell-side analysts often privately interact with managers of publicly traded firms, the private nature of this contact has historically obscured direction examination. By examining a set of proprietary records compiled by a large-cap NYSE traded firm, I offer insights into which analysts privately meet with management, when analysts privately interact with management, and why these interactions occur. I also compare private interaction to public interaction between analysts and managers on conference calls. The evidence suggests that private interaction with management is an important communication channel for analysts for reasons other than firm-specific forecasting news.

 

Working Papers

Abstract—This paper takes a close look at the reasons, procedures, and results of cluster identification methods. Despite being a popular research topic in strategy, economics, and sociology, geographic clusters are often studied with little consideration given to the underlying economic activities, the unique cluster boundaries, or the appropriate benchmark of economic concentration. Our goal is to increase awareness of the complexities behind cluster identification and to provide concrete insights and methodologies applicable to various empirical settings. The organic cluster identification methodology we propose is especially useful when researchers work in global settings where data available at different geographic units complicates comparisons across countries.

Download working paper: http://ssrn.com/abstract=2359611

Information and Incentives in Online Affiliate Marketing

By: Edelman, Benjamin G., and Wesley Brandi

Abstract—We consider alternative methods of supervising staff who have significant discretion and whose efforts are subject to both incomplete information and skewed incentives. Specifically, we examine online affiliate marketing programs in which merchants oversee thousands of affiliates they have never met. Some merchants hire specialist outside advisors to set and enforce policies for affiliates, while other merchants ask their ordinary marketing staff to perform these functions. For clear violations of applicable rules, we find that outside advisors are most effective at excluding the responsible affiliates-which we interpret as a benefit of specialization. However, in-house staff are more successful at identifying and excluding affiliates whose practices are viewed as "borderline" (albeit still contrary to merchants' interests), foregoing the efficiencies of specialization in favor of the better incentives of a company's staff. We consider implications for marketing of online affiliate programs and for online marketing more generally.

Download working paper: http://ssrn.com/abstract=2358110

 

Cases & Course Materials

  • Harvard Business School Case 413-097

Unilever's Paul Polman: Developing Global Leaders

No abstract available.

Purchase this case:
http://hbr.org/search/413097-PDF-ENG

  • Harvard Business School Case 114-016

Gordon Brothers: Collateralizing Corporate Loans by Brands

The case explores the collateralization of intellectual property in a loan agreement between a highly leveraged apparel company and a large U.S. bank. Leveraging intangibles in the credit market is a new practice that has significantly grown over the past few years. However, estimating their liquidation value is not directly intuitive, since intangibles are highly illiquid assets and have uncertain future cash flows. Can banks reliably secure corporate loans by intellectual property, and how can they alleviate the challenges in estimating a loan-to-value ratio for this collateral?

Purchase this case:
http://hbr.org/search/114016-PDF-ENG

  • Harvard Business School Case 214-037

Blackstone and the Sale of Citigroup's Loan Portfolio

This case describes the sale of Citigroup's leveraged loan portfolio in 2008 to a group of large private equity funds. The portfolio was sold at a discount given difficulties at the portfolio companies and disruptions in credit markets. The case takes the perspective of a private equity firm evaluating the deal to determine whether buying leveraged loans is a good investment opportunity.

Purchase this case:
http://hbr.org/search/214037-PDF-ENG

  • Harvard Business School Case 313-096

Wanxiang Group: A Chinese Company's Global Strategy (B)

Supplements the (A) case 308-058. With an almost forty-year history as a business in China, the Wanxiang Group has navigated through the significantly different political and economic changes in China to succeed as a global leader in the auto parts industry and to develop into a broad business conglomerate. Beginning in 1994, when it first began its operations in the United States, Wanxiang started to expand its role as a parts supplier into a discerning acquirer of distressed companies in the U.S. While it saw acquisition as an exciting means for growth, company strategy at its Hangzhou, China headquarters also included vertical integration with a goal of developing a full-on electric car. Were these two goals divergent or complementary, mutually supportive or exclusive?

Purchase this case:
http://hbr.org/search/313096-PDF-ENG

Global electrical products company assesses growth and market demands in India. Company must decide between a product acquisition or developing a service business. Students need to be aware of different country conditions, demands on implementation of different strategies, and impact on culture. Also discusses energy performance contracting in the context of making India's energy generation capability more efficient.

Purchase this case:
http://hbr.org/search/212082-PDF-ENG

  • Harvard Business School Case 213-069

Generator Hostels: The Way Out

Josh Wyatt, director of Patron Capital Partners, needs to make an exit decision for a successful investment in Generator Hostels. After five years of explosive growth and in the middle of a financial crisis, Wyatt needs to evaluate Patron's alternatives: IPO the platform, seek a strategic investor, or sell the platform outright.

Purchase this case:
http://hbr.org/search/213069-PDF-ENG

  • Harvard Business School Case 212-003

The Paris Opera Hotel

Real estate investor Javier Faus invests in a luxury hotel development in central Paris and must select a management company.

Purchase this case:
http://hbr.org/search/212003-PDF-ENG