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.

May 6

The 75 percent solution for enticing donors

In the paper ''Contingent Match Incentives Increase Donations,'' forthcoming in the Journal of Marketing Research, the authors argue that a 75 percent contingent match is effective in driving recurring donations. Matches kick in only if 75 percent of others donate. Lalin Anik, Michael I. Norton, and Dan Ariely discuss practical and theoretical implications for managers and academics.

Recent trends in funding digital startups

Silicon Valley entrepreneurs have multiple vehicles to fund innovation startups, everything from traditional venture capital to nontraditional crowdfunding. A paper written by Karim R. Lakhani, Michael Norris, and Andrew Otazo, "A Note on Funding Digital Innovation Startups," provides information on the state of Silicon Valley funding in 2013.

Mitigating unethical behavior

In the working paper Morality Rebooted: Exploring Simple Fixes to Our Moral Bugs, " Ting Zhang, Francesca Gino, and Max H. Bazerman explore two approaches to changing unethical behavior and show how a blend of both might prove most effective.

 

Publications

  • August 2013
  • Cambridge University Press

Democracy and Its Elected Enemies: American Political Capture and Economic Decline

By: Rosefielde, Steven, and Daniel Quinn Mills

Abstract—Democracy and Its Elected Enemies reveals that American politicians have usurped their constitutional authority, substituting their economic and political sovereignty for the people's. This has been accomplished by creating an enormous public service sector operating in the material interest of politicians themselves and of their big business and big social advocacy confederates to the detriment of workers, the middle class, and the nonpolitical rich, jeopardizing the nation's security in the process. The authors contend that this usurpation is the source of America's economic decline and fading international power and provide an action plan for restoring "true" democracy in which politicians only provide the services people vote for within the civil and property rights protections set forth in the constitution.

Publisher's link: http://www.cambridge.org/US/academic/subjects/economics/economics-general-interest/democracy-and-its-elected-enemies-american-political-capture-and-economic-decline

  • August 2013
  • Journal of Marketing Research

Contingent Match Incentives Increase Donations

By: Anik, Lalin, Michael I. Norton, and Dan Ariely

Abstract—We propose a new means by which non-profits can induce donors to give today and commit to giving in the future: contingent match incentives, in which matching is made contingent on the percentage of others who give (e.g., "if X% of others give, we will match all donations"). A field experiment shows that a 75% contingent match (where matches "kick in" only if 75% of others donate) is most effective in increasing commitment to recurring donations. An online experiment reveals that the 75% contingent match drives commitment to recurring donations because it simultaneously provides social proof yet offers a low enough target that it remains plausible that the match will occur. A final online experiment demonstrates that the effectiveness of the 75% contingent match extends to one-time donations. We discuss the practical and theoretical implications of contingent matches for managers and academics.

Publisher's link: http://www.hbs.edu/faculty/Pages/download.aspx?name=anik%20norton%20ariely%20in%20press.pdf

  • August 2013
  • Management Science

The Impact of Corporate Sustainability on Organizational Processes and Performance

By: Eccles, Robert G., Ioannis Ioannou, and George Serafeim

Abstract—We investigate the effect of corporate sustainability on organizational processes and performance. Using a matched sample of 180 U.S. companies, we find that corporations that voluntarily adopted sustainability policies by 1993-termed as High Sustainability companies-exhibit by 2009 distinct organizational processes compared to a matched sample of companies that adopted almost none of these policies-termed as Low Sustainability companies. The boards of directors of High Sustainability companies are more likely to be formally responsible for sustainability, and top executive compensation incentives are more likely to be a function of sustainability metrics. High Sustainability companies are more likely to have established processes for stakeholder engagement, to be more long-term oriented, and to exhibit higher measurement and disclosure of nonfinancial information. Finally, High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.

Publisher's link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1964011

  • August 2013
  • Journal of Financial Intermediation

Good Cop, Bad Cop: Complementarities Between Debt and Equity in Disciplining Management

By: Guembel, Alexander, and Lucy White

Abstract—In this paper we examine how the quantity of information generated about firm prospects can be improved by splitting a firm's cash flow into a "safe" claim (debt) and a "risky" claim (equity). The former, being relatively insensitive to upside risk, provides a commitment to shut down the firm in the absence of good news. This commitment provides the latter a greater incentive to collect information than a monitor holding the aggregate claim would have. Thus debt and equity are shown to be complementary instruments in firm finance. We show that stock markets can play a useful role in transmitting information from equity to debt holders. This provides a novel argument as to why information contained in stock prices affects the real value of a corporation. It also allows us to make empirical predictions regarding the relation between shareholder dispersion, market liquidity, and capital structure.

Publisher's link: http://www.sciencedirect.com/science/article/pii/S1042957314000138

  • August 2013
  • The Palgrave Encyclopedia of Strategic Management

Network Effects

By: Hagiu, Andrei, and David B. Yoffie

Abstract—Network effects are a key economic and strategic phenomenon in "new economy" industries. They can, but do not necessarily, lead to market tipping, unless they outweigh customers' benefits from differentiation and are accompanied by high switching and multi-homing costs. Network effects create the possibility for multiple equilibrium market configurations, which are crucially determined by market participants' expectations. While in some markets network effects are exogenously given, in other markets their existence and magnitude is endogenously determined by firms' strategic choices.

Publisher's link: http://www.palgraveconnect.com/esm/doifinder/10.1057/9781137294678.0461

  • August 2013
  • Journal of Economics & Management Strategy

Delegation in Multi-Establishment Firms: Evidence from I.T. Purchasing

By: McElheran, Kristina Steffenson

Abstract—Recent contributions to a growing theory literature have focused on the tradeoff between adaptation and coordination in determining delegation within firms. Empirical evidence, however, is limited. Using establishment-level data on decision rights over information technology investments, I find that a high net value of adaptation is strongly associated with delegation, as are local information advantages and firm-wide diversification; in contrast, a high net value of within-firm coordination is correlated with centralization. Variation across establishments within firms is widespread: most firms are neither fully centralized nor fully decentralized. Delegation patterns are largely consistent with standard team-theory predictions; however, certain findings, such as a negative correlation between delegation and firm size, call for a consideration of agency costs as well.

Publisher's link: http://onlinelibrary.wiley.com/doi/10.1111/jems.2014.23.issue-2/issuetoc

  • August 2013
  • The Palgrave Encyclopedia of Strategic Management

Product Market Strategy

By: Menon, Anoop, and Dennis Yao

Abstract—Product market strategy is the collection of choices, actions, and activities of a firm that determines how it positions itself in its product markets and allows it to achieve and maintain a competitive advantage. This article examines product market strategy from the perspective of positioning, using the value-based strategy framework.

Publisher's link: http://www.palgraveconnect.com/esm/doifinder/10.1057/9781137294678.0543

 

Working Papers

The Global Agglomeration of Multinational Firms

By: Alfaro, Laura, and Maggie Chen

Abstract—The explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms in comparison to the agglomeration of domestic firms? Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of pairwise-industry agglomeration and investigate the patterns and determinants underlying the global economic geography of multinational firms. Our analysis presents new stylized facts that suggest the emerging offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including capital-good market externality and technology diffusion play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we address potential reverse causality by exploring the regional pattern and process of agglomeration.

Download working paper: http://ssrn.com/abstract=1524857

Morality Rebooted: Exploring Simple Fixes to Our Moral Bugs

By: Zhang, Ting, Francesca Gino, and Max H. Bazerman

Abstract—Ethics research developed partly in response to calls from organizations to understand and solve unethical behavior. Departing from prior work that has mainly focused on examining the antecedents and consequences of dishonesty, we examine two approaches to mitigating unethical behavior: (1) values-oriented approaches that broadly appeal to individuals' preferences to be more moral and (2) structure-oriented approaches that redesign specific incentives, tasks, and decisions to reduce temptations to cheat in the environment. This paper explores how these approaches can change behavior. We argue that integrating both approaches while avoiding incompatible strategies can reduce the risk of adverse effects that arise from taking a single approach.

Download working paper: http://ssrn.com/abstract=2427259

 

Cases & Course Materials

  • Harvard Business School Case 914-408

IdentiGEN

Ciaran Meghen and Ronan Loftus, co-founders of IdentiGEN (an Irish company that had created a unique service called DNA TraceBack to help customers identify and trace meat products), were discussing the company's future. The recent crisis over beef products being contaminated with horsemeat in Europe had generated strong demand for IdentiGEN's services. But more than this, DNA TraceBack gave customers strong insight into their operations to ensure product was genuine and helped facilitate a continuous feedback loop between all players of the supply chain to deliver a high quality product to consumers. In light of strong demand, how should IdentiGEN proceed in terms of which customers to work with and which products should it support?

Purchase this case:
http://hbr.org/product/identigen/an/914408-PDF-ENG

  • Harvard Business School Case 914-408

Fred Khosravi and AccessClosure (C)

Ciaran Meghen and Ronan Loftus, co-founders of IdentiGEN (an Irish company that had created a unique service called DNA TraceBack to help customers identify and trace meat products), were discussing the company's future. The recent crisis over beef products being contaminated with horsemeat in Europe had generated strong demand for IdentiGEN's services. But more than this, DNA TraceBack gave customers strong insight into their operations to ensure product was genuine and helped facilitate a continuous feedback loop between all players of the supply chain to deliver a high quality product to consumers. In light of strong demand, how should IdentiGEN proceed in terms of which customers to work with and which products should it support?

Purchase this case:
http://hbr.org/product/fred-khosravi-and-accessclosure-c/an/814074-PDF-ENG

  • Harvard Business School Case 512-041

PepsiCo India: Performance with Purpose

In 2010, PepsiCo India's management is working to translate PepsiCo's new mission, "Performance with Purpose," into practice in the India market. The mission calls for continued financial performance and market leadership, as well as greater emphasis on healthy products, natural resource management, and employee empowerment. PepsiCo India and other regional PepsiCo business units have significant discretion over how to implement Performance with Purpose in their local markets. PepsiCo India has made progress under the mission but continues to be challenged by the inherent tension between short-term financial performance and long-term investments in socially responsible initiatives.

Purchase this case:
http://hbr.org/product/pepsico-india-performance-with-purpose/an/512041-PDF-ENG

  • Harvard Business School Case 614-039

A Note on Funding Digital Innovation Startups

This note provides information on the state of startup financing in Silicon Valley in 2013. It details different avenues startups have to raise funding, including venture capital, corporate venture capital, angel investors, incubators, and crowdfunding.

Purchase this case:
http://hbr.org/product/a-note-on-funding-digital-innovation-startups/an/614039-PDF-ENG

  • Harvard Business School Case 514-049

GlaxoSmithKline in China (A)

Four GlaxoSmithKline employees were accused of bribing Chinese health care workers to prescribe the company's drugs. The accusations brought to light the questionable incentive structures of the Chinese health care system and the pressure on companies to adhere to local customs while still observing local laws.

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http://hbr.org/product/glaxosmithkline-in-china-a/an/514049-PDF-ENG

  • Harvard Business School Case 514-050

GlaxoSmithKline in China (B)

In 2013, Chinese investigators detained four GlaxoSmithKline (GSK) employees for allegedly bribing health care staff to sell GSK pharmaceuticals. A month later, GSK's Asia Pacific regional president, Abbas Hussain, said the company would help identify corrupt practices. Two days later, GSK's CEO, Andrew Witty, called the allegations "shameful" and said the company would use the opportunity to "make changes."

Purchase this case:
http://hbr.org/product/glaxosmithkline-in-china-b/an/514050-PDF-ENG

  • Harvard Business School Case 514-092

GlaxoSmithKline in China (C)

This case is a follow up to "GlaxoSmithKline (A)," 514-049 and "GlaxoSmithKline (B)," 514-050.

Purchase this case:
http://hbr.org/product/glaxosmithkline-in-china-c/an/514092-PDF-ENG