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.

April 15

The business of curing cancer

A case study looks at the strategy used by the for-profit Cancer Treatment Centers of America as it evaluates growth options. The case, written by Regina E. Herzlinger and Natalie Kindred, views CEO Stephen Bonner as he decides whether to "focus future expansion on building additional full-scale hospitals or pursuing a hub-and-spoke model, in which numerous oncology outpatient centers would be built in the region of each CTCA hospital."

Does poverty lead to crime?

Researchers Lakshmi Iyer and Petia Topalova study the relationship between crime, poverty, and the weather in Poverty and Crime: Evidence from Rainfall and Trade Shocks in India. They find that reductions to income in areas in rural India did lead to increased crime levels, and also supports earlier findings of relationships between rain and crime.

Understanding integrated reporting

"Integrated reporting" allows companies to report on their social and sustainability actions as part of, not separate from, their larger financial reporting. In the working paper Corporate and Integrated Reporting: A Functional Perspective, Robert Eccles and George Serafeim detail what constitutes an effective integrated report.

 

Publications

  • August 2013
  • American Economic Review

Private Equity, Jobs, and Productivity

By: Davis, Steven J., John Haltiwanger, Kyle Handley, Ron Jarmin, Josh Lerner, and Javier Miranda

Abstract—Private equity critics claim that leveraged buyouts bring huge job losses. To investigate this claim, we construct and analyze a new dataset that covers U.S. private equity transactions from 1980 to 2005. We track 3,200 target firms and their 150,000 establishments before and after acquisition, comparing outcomes to controls similar in terms of industry, size, age, and prior growth. Relative to controls, employment at target establishments declines 3% over two years post buyout and 6% over five years. The job losses are concentrated among public-to-private buyouts and transactions involving firms in the service and retail sectors. But target firms also create more new jobs at new establishments, and they acquire and divest establishments more rapidly. When we consider these additional adjustment margins, net relative job losses at target firms are less than 1% of initial employment. In contrast, the sum of gross job creation and destruction at target firms exceeds that of controls by 13% of employment over two years. In short, private equity buyouts catalyze the creative destruction process in the labor market, with only a modest net impact on employment. The creative destruction response mainly involves a more rapid reallocation of jobs across establishments within target firms.

Publisher's link: http://www.people.hbs.edu/jlerner/private-equity-jobs-and-productivity-8-march-2014-with-ables-and-figures-clean.pdf

Abstract—We explore the impact of corporate social responsibility (CSR) ratings on sell-side analysts' assessments of firms' future financial performance. We suggest that when analysts perceive CSR as an agency cost, due to the prevalence of an agency logic, they produce pessimistic recommendations for firms with high CSR ratings. Moreover, we theorize that over time, the emergence of a stakeholder focus, and the gradual weakening of the agency logic, shifts the analysts' perceptions of CSR ratings and results in increasingly less pessimistic recommendations for firms with high CSR ratings. Using a large sample of publicly traded U.S. firms over 15 years, we confirm that in the early 1990s, analysts issue more pessimistic recommendations for firms with high CSR ratings. However, in more recent years analysts progressively assess these firms less pessimistically, and eventually they assess them optimistically. Furthermore, we find that more experienced analysts and analysts at higher-status brokerage houses are the first to shift the relation between CSR ratings and investment recommendation optimism. We find no significant link between firms' CSR ratings and analysts' forecast errors, indicating that learning is unlikely to account for the observed shifts in recommendations.

Publisher's link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1507874

  • August 2013
  • A New Economic History of Colonial India

The Long Run Consequences of Colonial Institutions

By: Iyer, Lakshmi

Abstract—No abstract available.

Publisher's link: http://www.routledge.com/books/details/9781138779723/

  • August 2013
  • Journal of International Business Studies

Toward Resource Independence-Why State-Owned Entities Become Multinationals: An Empirical Study of India's Public R&D Laboratories

By: Khanna, Tarun, and Prithwiraj Choudhury

Abstract—In this paper, we build on the standard resource dependence theory and its departure suggested by Vernon to offer a novel explanation for why state-owned entities (SOEs) might seek a global footprint and global cash flows: to achieve resource independence from other state actors. In the context of state-owned entities, the power-use hypothesis of standard resource dependence theory can be used to analyze the dependence of SOEs on other state actors, such as government ministries and government agencies that have ownership and control rights in the SOE. Building on Vernon, we argue that the SOE can break free from this power imbalance and establish resource independence from other state actors by becoming a multinational firm and/or by generating global cash flows. We leverage a natural experiment in India and outline both quantitative and qualitative evidence from 42 Indian state-owned laboratories to support this argument.

  • August 2013
  • Journal of Economic History

Colonial Institutions, Commodity Booms, and the Diffusion of Elementary Education in Brazil

By: Musacchio, Aldo, André C. Martínez Fritscher, and Martina Viarengo

Abstract—We show how the decentralization of fiscal responsibility among Brazilian states between 1889 and 1930 promoted an unequal expansion of public schooling. We document how the variation in state export tax revenues, product of commodity booms, explains improvements in expenditures on education per capita, literacy, and schools per children. Yet we also find that such improvements did not take place in states that had more slaves before abolition or those that cultivated cotton during colonial times. Thus, we explain radical changes in the ranking of states as a consequence of changes in fiscal institutions and their interaction with colonial institutions.

 

Working Papers

Corporate and Integrated Reporting: A Functional Perspective

By: Eccles, Robert, and George Serafeim

Abstract—In this paper, we present the two primary functions of corporate reporting (information and transformation) and why currently isolated financial and sustainability reporting are not likely to perform those functions effectively. We describe the concept of integrated reporting and why integrated reporting could be a superior mechanism to perform these functions. Moreover, we discuss, through a series of case studies, what constitutes an effective integrated report (Coca-Cola Hellenic Bottling Company) and the role of regulation in integrated reporting (Anglo-American).

Download working paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2388716

Pay Harmony: Peer Comparison and Executive Compensation

By: Gartenberg, Claudine, and Julie Wulf

Abstract—This study suggests that peer comparison affects both wage setting and productivity within firms. We report three changes in division manager compensation following a 1991-1992 controversy over executive pay. We argue that this controversy increased wage comparisons within firms, particularly those with geographically dispersed managers-managers with the greatest information frictions. Following the controversy, pay in dispersed firms co-moves more and is less sensitive to individual performance. Relatedly, pay disparity between managers located in different states decreases relative to that of co-located managers. Finally, division productivity falls in dispersed firms, particularly among managers at the low end of the wage distribution.

Download working paper: http://ssrn.com/abstract=2419099

Abstract—Does poverty lead to crime? We shed light on this question using two independent and exogenous shocks to household income in rural India: the dramatic reduction in import tariffs in the early 1990s and rainfall variations. We find that trade shocks, previously shown to raise relative poverty, also increased the incidence of violent crimes and property crimes. The relationship between trade shocks and crime is similar to the observed relationship between rainfall shocks and crime. Our results thus identify a causal effect of poverty on crime. They also lend credence to a large literature on the effects of weather shocks on crime and conflict, which has usually assumed that the income channel is the most relevant one.

Download working paper: http://ssrn.com/abstract=2419522

Abstract—Using survey data from firms around the world I analyze how detection of bribery has impacted a firm's competitiveness over the past year. Managers report that the most significant impact was on employee morale, followed by business relations, and then reputation and regulatory relations. The impact on stock price has been much less significant, and this could be attributed to stock prices not reflecting the impact on employee morale and business relations in less competitive labor and product markets. To better understand these bribery cases I analyze detailed data on the identity of the main perpetrator, detection method, and organizational response following detection and find that both the method of detection and how an organization responds are systematically related to the seniority or type of the perpetrator. Finally, I examine how these factors are associated with the impact on competitiveness and find that internally initiated bribery from senior executives is more likely to be associated with a significant impact on firm competitiveness. Bribery detected by the control systems of the firm is less likely to be associated with a significant impact on regulatory relations. Finally, bribery cases where the main perpetrator is dismissed are less likely to be associated with a significant impact on firm competitiveness. These results shed light on the costs of bribery after detection.

Download working paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2302589

 

Cases & Course Materials

  • Harvard Business School Case 514-022

Tesco Group Food

In 2010, the world's third largest retailer created a new centralized sourcing department for fresh food and store-brand grocery products in response to changes in global supply and to better meet the needs of a new multi-channel retail environment. The case, set in late 2013, covers the development of Tesco Group Food and identifies future opportunities and challenges.

Purchase this case:
http://hbr.org/product/tesco-group-food/an/514022-PDF-ENG

  • Harvard Business School Case 514-023

Mission Produce

As the leading distributor of fresh avocados in the U.S., Mission Produce was at a crossroads in late 2013. Avocado consumption was booming and CEO Steve Barnard wanted to acquire additional land in Peru and develop new avocado farms to help fill a projected supply gap. Mission could also buy avocado farms in other countries, expand its international marketing efforts, invest in brand building in Asia, and/or add processed avocado products. This strategy case describes Mission's growth, entrepreneurial leadership, future opportunities, and financing alternatives.

Purchase this case:
http://hbr.org/product/mission-produce/an/514023-PDF-ENG

  • Harvard Business School Case 314-055

PepsiCo, Profits, and Food: The Belt Tightens

The case describes the issues facing Indra Nooyi after five years of PepsiCo's new and controversial nutrition strategy.

Purchase this case:
http://hbr.org/product/pepsico-profits-and-food-the-belt-tightens/an/314055-PDF-ENG

  • Harvard Business School Case 313-012

Cancer Treatment Centers of AmericaŽ (A)

Cancer Treatment Centers of America (CTCA), a U.S. network of four privately owned oncology focused factory hospitals, was weighing options for growth. CTCA was entirely cancer focused and specialized in treating patients with complex and advanced-stage cancers, who were reached through advertising its integrative, team-based approach to care. CEO Stephen Bonner needed to decide whether to focus future expansion on building additional full-scale hospitals or pursuing a hub-and-spoke model, in which numerous oncology outpatient centers would be built in the region of each CTCA hospital. His decision would be made in the context of CTCA's unique business model and treatment philosophy and the public policy landscape, including certificate-of-need laws and the advent of Accountable Care Organizations (ACOs) and bundled payments. CTCA's for-profit status and direct-to-consumer advertising made it a target, he knew.

Purchase this case:
http://hbr.org/product/cancer-treatment-centers-of-america-a/an/313012-PDF-ENG

  • Harvard Business School Case 614-052

SAP 2014: Reaching for the Cloud

In May 2014, Bill McDermott will become the sole CEO of SAP AG, the world leader in the Enterprise Resource Planning (ERP) field. The case occurs in January 2014 at SAP's investors meeting, at a time when the company's stock is near record high. A 2010 strategy committed the company to a transition to cloud computing. The main driver behind this transition was the development of SAP HANA, an in-memory computing technology that combined database, data processing, and application platform functionality. Ownership of cloud infrastructure was a key question. SAP could build, own, and operate its own data centers, or partner to locate SAP HANA and other products with other cloud infrastructure providers, such as Amazon, Microsoft, or IBM. McDermott also had to make decisions around the organization and leadership of the company's cloud efforts.

Purchase this case:
http://hbr.org/product/sap-2014-reaching-for-the-cloud/an/614052-PDF-ENG

  • Harvard Business School Case 314-073

Choosing a Charitable Giving Vehicle

Elaine White is an accountant advising two couples, the Carsons and the Bradleys, regarding their charitable giving options and related tax strategies. The Carsons are an upper-middle class family with $295,000 in income, a moderate amount of deductions, and straightforward charitable giving objectives. The Bradleys are a wealthy couple with substantial assets, a more complex tax situation, and a desire to control the timing and recipients of their charitable contributions. White must consider the objectives of these families in the context of several charitable giving vehicles, including Public Charities, Private Foundations, Charitable Remainder Trusts, Charitable Lead Trusts, Donor-Advised Funds, and Pooled Income Funds.

Purchase this case:
http://hbr.org/product/choosing-a-charitable-giving-vehicle/an/314073-PDF-ENG

  • Harvard Business School Case 514-086

23andMe: Genetic Testing for Consumers (A)

On November 22, 2013, the direct-to-consumer genetic testing provider, 23andMe, received a letter from the U.S. Food and Drug Administration (FDA) ordering the company to halt the sale and promotion of its genetic testing kit. The FDA stated that the product was marketed as a diagnostic and preventative tool and that it was subject to the agency's regulations for medical devices. Company co-founder Anne Wojcicki and chairman Andy Page carefully considered the potential impact of the FDA's letter on 23andMe's position in the industry and the sustainability of its operations.

Purchase this case:
http://hbr.org/product/23andme-genetic-testing-for-consumers-a/an/514086-PDF-ENG

  • Harvard Business School Case 514-095

23andMe: Genetic Testing for Consumers (B)

Following the FDA's letter in November 2013, which ordered 23andMe to cease sales of its DNA test kits, observers wondered how co-founder and CEO, Anne Wojcicki, would guide the company in the presence of uncertainty.

Purchase this case:
http://hbr.org/product/23andme-genetic-testing-for-consumers-b/an/514095-PDF-ENG

  • Harvard Business School Case 714-002

Yara International

No abstract available.

Purchase this case:
http://hbr.org/product/yara-international/an/714002-PDF-ENG

  • Harvard Business School Case 712-500

Formulating Strategy

No abstract available.

Purchase this case:
http://hbr.org/product/formulating-strategy/an/712500-PDF-ENG