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.

January 21

Discrimination by online landlords

An online rental site, Airnb.com, is the testing ground for research on rental discrimination. Researchers Benjamin G. Edelman and Michael Luca show show that nonblack hosts charge approximately 12 percent more than black hosts for the equivalent rental. Read their paper, Digital Discrimination: The Case of Airbnb.com.

Compete for customer privacy

What if companies advertised their privacy practices right alongside their prices? In the forthcoming resesearch report, "Competing With Privacy," Ramon Casadesus-Masanell and Andres Hervas-Drane "consider a market where firms set prices and disclosure levels for consumer information, and consumers observe both before deciding which firm to patronize and how much information to provide," the researchers write. "Our findings are particularly relevant to the business models of Internet firms and contribute to inform the regulatory debate on consumer privacy."

Peer influence and mobile apps

What impact does peer behavior have on adoption of mobile apps? Researchers Joseph P. Davin, Sunil Gupta, and Mikolaj Jan Piskorski attempt to isolate the role of peer behavior from the influence of homophily--the concept that people who share things in common are more likely to be friends. One finding: peer influence accounts for 27 percent of mobile app adoptions.

 

Publications

  • August 2013
  • Journal of Economic Behavior & Organization

Awards Unbundled: Evidence from a Natural Field Experiment

By: Ashraf, Nava, Oriana Bandiera, and Scott Lee

Abstract—Organizations often use non-monetary awards to incentivize performance. Awards may affect behavior through several mechanisms: by conferring employer recognition, by enhancing social visibility, and by facilitating social comparison. In a nationwide health worker training program in Zambia, we design a field experiment to unbundle these mechanisms. We find that employer recognition and social visibility increase performance while social comparison reduces it, especially for low-ability trainees. These effects appear when treatments are announced and persist through training. The findings are consistent with a model of optimal expectations in which low-ability individuals exert low effort in order to avoid information about their relative ability.

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

  • August 2013
  • NBER Volume on African Economic Successes

Evaluating the Effects of Large Scale Health Interventions in Developing Countries: The Zambian Malaria Initiative

By: Ashraf, Nava, GŁnther Fink, and David N. Weil

Abstract—Since 2003, Zambia has been engaged in a large-scale, centrally coordinated national anti-Malaria campaign, which has become a model in sub-Saharan Africa. This paper aims at quantifying the individual and macro-level benefits of this campaign, which involved mass distribution of insecticide-treated mosquito nets, intermittent preventive treatment for pregnant women, indoor residual spraying, rapid diagnostic tests, and artemisinin-based combination therapy. We discuss the timing and regional coverage of the program and critically review the available health and program rollout data. To estimate the health benefits associated with the program rollout, we use both population based morbidity measures from the Demographic and Health Surveys and health facility based mortality data as reported in the national Health Management Information System. While we find rather robust correlations between the rollout of bed nets and subsequent improvements in our health measures, the link between regional spraying and individual health level appears rather weak in the data.

Publisher's link: http://www.nber.org/papers/w16069

  • August 2013
  • Management Science

Competing with Privacy

By: Casadesus-Masanell, Ramon, and Andres Hervas-Drane

Abstract—We analyze the implications of consumer privacy for competition in the marketplace. We consider a market where firms set prices and disclosure levels for consumer information, and consumers observe both before deciding which firm to patronize and how much information to provide. The provision and disclosure of information presents tradeoffs for all market participants. Consumers benefit from providing information to the firm, as this increases the utility they derive from the service, but they incur disutility from information disclosure. This, in turn, benefits the firm providing an additional source of revenue, but reduces consumer demand for the service. We characterize equilibrium information provision, disclosure levels, and prices and show that competition with privacy has several effects on the marketplace. First, competition drives the provision of services with a low level of disclosure. Second, competition ensures that services with a high level of disclosure subsidize consumers. Third, firms maximize profits at the extensive rather than the intensive margin, outperforming competitors by attracting a larger customer base. And fourth, higher competition intensity need not improve consumer privacy when consumers exhibit low willingness to pay. Our findings are particularly relevant to the business models of Internet firms and contribute to inform the regulatory debate on consumer privacy.

  • August 2013
  • Journal of Financial Economics

Mortgage Convexity

By: Hanson, Samuel Gregory

Abstract—Most home mortgages in the U.S. are fixed-rate loans with an embedded prepayment option. When long-term rates decline, the effective duration of mortgage-backed securities (MBS) falls due to heightened refinancing expectations. I show that these changes in MBS duration function as large-scale shocks to the quantity of interest rate risk that must be borne by professional bond investors. I develop a simple model in which the risk tolerance of bond investors is limited in the short run, so these fluctuations in MBS duration generate significant variation in bond risk premia. Specifically, bond risk premia are high when aggregate MBS duration is high. The model offers an explanation for why long-term rates may appear to be "excessively sensitive" to movements in short rates and explains how changes in MBS duration act as a positive-feedback mechanism that amplifies interest rate volatility. I find strong support for these predictions in the time series of U.S. government bond returns.

Publisher's link: http://www.people.hbs.edu/shanson/MBS_Paper_20140104.pdf

 

Working Papers

Separating Homophily and Peer Influence with Latent Space

By: Davin, Joseph P., Sunil Gupta, and Mikołaj Jan Piskorski

Abstract—We study the impact of peer behavior on the adoption of mobile apps in a social network. To identify social influence properly, we introduce latent space as an approach to control for latent homophily, the idea that "birds of a feather flock together." In a series of simulations, we show that latent space coordinates significantly reduce bias in the estimate of social influence. The intuition is that latent coordinates act as proxy variables for hidden traits that give rise to latent homophily. The approach outperforms existing methods such as including observed covariates, random effects, or fixed effects. We then apply the latent space approach to identify social influence on installation of mobile apps in a social network. We find that peer influence accounts for 27% of mobile app adoptions and that latent homophily inflates this estimate by 40% (to 38%). In some samples, ignoring latent homophily can result in overestimation of social effects by over 100%.

Download working paper: http://www.hbs.edu/faculty/Pages/download.aspx?name=14-053.pdf

Digital Discrimination: The Case of Airbnb.com

By: Edelman, Benjamin G., and Michael Luca

Abstract—Online marketplaces often contain information not only about products, but also about the people selling the products. In an effort to facilitate trust, many platforms encourage sellers to provide personal profiles and even to post pictures of themselves. However, these features may also facilitate discrimination based on sellers' race, gender, age, or other aspects of appearance. In this paper, we test for racial discrimination against landlords in the online rental marketplace Airbnb.com. Using a new data set combining pictures of all New York City landlords on Airbnb with their rental prices and information about quality of the rentals, we show that non-black hosts charge approximately 12% more than black hosts for the equivalent rental. These effects are robust when controlling for all information visible in the Airbnb marketplace. These findings highlight the prevalence of discrimination in online marketplaces, suggesting an important unintended consequence of a seemingly routine mechanism for building trust.

Download working paper: http://ssrn.com/abstract=2377353

Abstract—When to sell a novel idea is a difficult decision for many innovators. Selling early has financial benefits. But a later-stage sale of a more fully developed idea may attract greater buyer interest and allow the innovator to better protect his idea. I study the decision in a model that features a seller with private information and costly buyer participation. The empirical context of the study is the market for original movie ideas. Consistent with the theory, I find that inexperienced writers are excluded from selling early-stage ideas, restricting their choice to developing the idea fully or abandoning it. By contrast, writers who can attract buyers at any stage sell worse ideas earlier and better ideas later. The results have interesting implications not only for the timing of the sale of ideas, but also for the role of intellectual property protection and the value of intermediaries in the market for ideas.

Download working paper: http://ssrn.com/abstract=1966530

 

Cases & Course Materials

Describes a senior management team's strategic decision-making process. The division president faces three options for redesigning the process to address several key concerns. The president has extensive quantitative and qualitative data about the process to guide him as he and the senior team attempt to make improvements.

Purchase this case:
http://hbr.org/product/decision-making-at-the-top-the-all-star-sports-ebusiness-division/an/314010-PDF-ENG

  • Harvard Business School Case 114-027

Cisco Systems and Offshore Cash

No abstract available.

Purchase this case:
http://hbr.org/product/cisco-systems-and-offshore-cash/an/114027-PDF-ENG

  • Harvard Business School Case 814-032

Claritas Genomics

Claritas Genomics was formed in January 2013 when BCH spun out its Genetics Diagnostic Lab into a fully commercial entity. Claritas offered over 100 genomic tests to detect a range of conditions, including autism and intellectual disabilities, and was developing new tests that provided clearer and more relevant information for physicians to use in treating patients. Claritas wanted to increase the speed at which genomic research discoveries occurred and translate this research into better diagnostic tests. To achieve this, it planned to collaborate with other children's hospitals through a research network it was developing. BCH was the company's majority owner, and Life Technologies (Life), a major manufacturer of sequencing equipment and services, was a minority owner. By the end of the year the CEO of Claritas Genomics, Dr. Patrice Milos, had to put Claritas in a position to grow and needed to have in place the software and IT platforms-the databases, search tools, and other programs-that would help the company reach scale.

Purchase this case:
http://hbr.org/product/claritas-genomics/an/814032-PDF-ENG

  • Harvard Business School Case 514-018

Olam: Building a Sustainable Supply Chain in Cote d'Ivoire

Describes Olam's development of a sustainable cotton supply chain in Cote d'Ivoire, West Africa. Key dilemma for its managers: feasibility of introducing tractor technology for improving yield.

Purchase this case:
http://hbr.org/product/olam-building-a-sustainable-supply-chain-in-cote-d-ivoire/an/514018-PDF-ENG

  • Harvard Business School Case 713-522

Microsoft in Korea

Microsoft Korea sees a potential opportunity to dramatically improve its subsidiary's performance by actively recruiting and promoting female senior managers in South Korea. The question is to what extent multinationals can gain competitive advantage by actively hiring talented members from the so-called excluded group in a society. Related questions include which initiatives are most effective at implementing change in the organization.

Purchase this case:
http://hbr.org/product/microsoft-in-korea/an/713522-PDF-ENG

  • Harvard Business School Case 713-508

Gap, Inc., 2000

From humble beginnings as a Levi jeans store, Gap, Inc. by 2000 had grown to become the world's leading specialty clothing retailer. Its CEO, Millard S. Drexler, the "merchant prince," was credited with transforming Gap into a global empire, leading the company through eighteen years of 21% p.a. growth to reach sales of $13.6 billion in 2000. But as Gap entered the new millennium, dark clouds were building on the horizon. While sales in 2000 were up nearly 18% over the previous year, operating profits fell by 20%, only the second profit fall since 1984. Gap found itself plagued with concerns about fashion misses, logistics failures, the departure of senior managers, and increased foreign competition. New fast-fashion competition in the form of Inditex, H&M, and Club Monaco threatened Gap's market share both domestically and abroad.

Purchase this case:
http://hbr.org/product/gap-inc-2000/an/713508-PDF-ENG

  • Harvard Business School Case 713-511

Gap, Inc., 2012

Between 2000 and 2012, Gap, Inc. ceded its world leadership position in specialty fashion retailing to Inditex of Spain and H&M of Sweden. These two companies, each less than a quarter of Gap's size in 2000, were now setting the pace in the global mass fashion market, and Gap appeared to be falling ever further behind. In the intervening twelve years, three CEOs had struggled to turn around the fading brand. While several temporary profit boosts appeared to herald a recovery, a sustained rally remained elusive. However, a significant sales lift in 2012 appeared to herald a recovery. After 12 years of poor performance, had Glenn Murphy finally discovered the answers to Gap's problems?

Purchase this case:
http://hbr.org/product/gap-inc-2012/an/713511-PDF-ENG

  • Harvard Business School Case 214-001

The TELUS Share Conversion Proposal

On February 21, 2013, TELUS announced a proposal to convert the firm's non-voting shares into voting shares on a one-to-one basis, thereby eliminating the firm's dual class structure. Shareholders were scheduled to vote on the proposal at the firm's annual general meeting (AGM) on May 9, 2013. Despite strong support from management, the board, two proxy advisory firms, and several large shareholders, the proposal was opposed by Mason Capital Management, a New York-based hedge fund. Mason, which controlled almost 20% of the voting shares and a large short position in the non-voting shares, had filed a dissident proxy circular recommending that shareholders vote against the proposal based on both procedural and substantive grounds. With the success of the vote in doubt, the board had to decide what to do. Should they proceed with the vote as planned, postpone the vote with the intention of reintroducing the proposal at some point in the future, or cancel the proposal for good? And what should they do with Mason, which management viewed as an "empty voter" in this matter?

Purchase this case:
http://hbr.org/product/the-telus-share-conversion-proposal/an/214001-PDF-ENG