- Journal of Financial Economics
Abstract—Many have argued that overoptimistic thinking on the part of lenders helps fuel credit booms. We use new microdata on mutual funds' holdings of securitizations to examine which investors are susceptible to such boom-time thinking. We show that firsthand experience plays a key role in shaping investors' beliefs. During the 2003–2007 mortgage boom, inexperienced fund managers loaded up on securitizations linked to nonprime mortgages, accumulating twice the holdings of more seasoned managers. Moreover, inexperienced managers who personally experienced severe or recent adverse investment outcomes behaved more like seasoned managers. Training and institutional memory can serve as partial substitutes for personal experience.
Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50573
- Shaping Entrepreneurial Mindsets: Innovation and Entrepreneurship in Leadership Development
Abstract—In 2012 we set out to answer two key questions. Can anyone, including MBAs and executives with superb analytical skills, learn to think more innovatively? If so, how might we go about developing these skills? Through close collaboration with individuals from major design thinking practices and innovation firms (e.g., IDEO, frog design, LUMA Institute), we have developed a semester long, cross-disciplinary, “doing” course that presents students with a conceptual framework for a human-centered innovation process and provides them with tools for engaging in that process, as well as many opportunities to practice. After several years our conclusion is that these skills can be developed by anyone open and willing to practice and develop these critical skills. This chapter gives an overview of the course curriculum, complete with the conceptual framework, underlying principles, range of tools, and examples of how these tools can be applied.
Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50595
- in press
- Proceedings of the National Academy of Sciences of the United States of America
Abstract—Using test data for all children attending Danish public schools between school years 2009–-2010 and 2012–2013, we examine how the time of the test affects performance. Test time is determined by the weekly class schedule and computer availability at the school. We find that, for every hour later in the day, test performance decreases by 0.9% of a standard deviation (95% CI: 0.7%–1.0%). However, a 20–30 minute break improves average test performance by 1.7% of a standard deviation (95% CI: 1.2%–2.2%). These findings have two important policy implications: First, cognitive fatigue should be taken into consideration when deciding on the length of the school day and the frequency and duration of breaks throughout the day. Second, school accountability systems should control for the influence of external factors on test scores.
Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50588
- Marketing Science
Abstract—Manufacturers in many industries frequently use vertical price policies, such as minimum advertised price (MAP), to influence prices set by downstream retailers. Although manufacturers expect retail partners to comply with MAP policies, violations of MAP are common in practice. In this research, we document and explain both the extent and the depth of MAP policy violations. We also shed light on how retailers vary in their propensity to violate MAP policies and the depth by which they do so. Our inductive research approach documents managerial wisdom about MAP practices. We confront these insights from practice with a large empirical study that includes hundreds of products sold through hundreds of retailers. Consistent with managerial wisdom, we find that authorized retailers are more likely to comply with MAP than are unauthorized partners. By contrast to managerial wisdom, we find that authorized and unauthorized markets are largely separate, and that violations in the authorized channel have a small association with violations in the unauthorized channel. Last, we link our results to the literatures on agency theory, transaction cost analysis, and theories of price obfuscation.
Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50605
- February 2016
- International Journal of Marketing Studies
Abstract—This paper provides an update on the current state of in-house agencies. Whereas traditional consideration of internalizing advertising services was framed as a binary choice of build or buy, today's advertisers frequently pursue hybrid policies of build and buy to procure the customized bundle required to develop, produce, and implement relevant, resonant promotional campaigns. Increasing numbers of advertisers are discovering that the demand for advertising and marketing services is best served through the coordination and integration of resources from both inside and outside the company, rather than assuming that these options are mutually exclusive. A review of advertising industry history reveals why internal agencies have long operated in the shadows of their external counterparts and how the former organization form has evolved over time. The core competencies underlying the contemporary in-house agency model are analyzed, and the competitive position that in-house agencies presently occupy in relation to external providers is assessed. Two case examples of successful internal/external agency collaboration are presented. Finally, recommendations are offered for advertisers seeking to bring their internal and external agency resources together and arrive at a more collaborative operating model for advertising services.
Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50591
Abstract—Using data from a retail chain, this paper studies the effects of a preferential plan providing incentives only to exemplary employees. Such plans incorporate elements of tournaments (through the selection of employees chosen largely on the basis of past performance but incorporating some managerial discretion) and linear incentives to align employees with company goals and values. We find that, on average, the implementation of the preferential incentive plan was associated with improvements in sales. Also, we find that this plan was associated with greater improvements in sales and gross profits as well as reductions in the incidence of bad audits in stores where employees were initially less likely to be aligned with company goals. However, the plan was associated with lower sales and gross profits and higher incidence of bad audits, absenteeism, and turnover in some situations where employees could have perceived the plan to be unattainable or unfair. Our study sheds light on the impact of preferential incentive plans and the conditions under which these plans are more or less effective.
Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=50575
Who Should Select New Employees, the Head Office or the Unit Manager? Consequences of Centralizing Hiring at a Retail Chain
Abstract—This paper contributes to an emerging literature in management control that studies employee selection as a mechanism to align employees with corporate goals and values. Specifically, we examine whether centralized hiring (in this study, by the head office of a U.S. retail chain) or decentralized hiring (in this study, by the store managers), leads to lower employee turnover. On one hand, a centralized model of hiring can allow a company to ensure enough resources and efforts are invested into consistently selecting job candidates fitting the company's values. On the other hand, centralization can neglect the potential informational advantage a unit manager may have to determine the candidates' fit with the unit team and local environment where s/he will work. We examine three major factors that may affect these tradeoffs: 1) the need to align new hires to company values, 2) the complexity of operations (which we claim reduces the time the unit manager has to select new employees), and 3) the informational advantage a unit manager has in selecting a candidate relative to the head office (based on the unit's location, the relevance of the unit managers' knowledge of local customers, and the unit manager's knowledge of his/her team). We conduct difference-in-differences analyses to examine the effects of centralized hiring on employee turnover. The overall effect of centralized hiring on employee turnover is insignificant. However, consistent with the notion that centralized hiring would improve the alignment of employees with the company, we find that in more distant stores or stores operating in non-mainstream markets, centralized hiring is associated with greater retention of employees, especially employees highly aligned with the company's goals/values. On the other hand, we find that centralization is less beneficial for stores serving customers that are highly sensitive to service quality.
Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=50576
The U.S. Chamber of Commerce and the Modern Administrative State, 1912–1925: Trade Associations, Codes of Fair Competition, and State Building
Abstract—From its founding in 1912 through the interwar years, the Chamber's history shows a persistent preoccupation with progressive economics and policy-making. Rather than flouting the new ideas of institutional economics, which favored federal regulators overseeing data collection and dissemination among businesses so as to stabilize prices and facilitate interfirm cooperation instead of so-called cutthroat competition, many members of the Chamber embraced these progressive prescriptions for public-private regulation. This essay explains how a subset of USCC members fostered industry-wide "codes of fair competition" by participating in experimental studies like those undertaken at the Harvard Bureau of Business Research and by supporting new collaborative efforts with government agencies, including the Department of Commerce and the Federal Trade Commission. Both the private and public initiatives at industry rationalization challenged existing ideas of antitrust law, which had favored either corporate consolidation or free market competition. The codes, instead, popularized a third way, an alternative vision for American capitalism that partnered private trade associations with government agencies. The codes of fair competition discussed at the Chamber and other trade association meetings, supported by academic literature on systematized trade practices and promulgated by FTC trade practice conferences through the 1920s, eventually became a lynchpin in New Deal competition policy. Ultimately, a new understanding of fair competition redefined American government by pushing administrative agencies into their modern role as intermediaries in determining the lawful parameters of trade practices.
Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=50589
Who Should Be Running Ahead? The Roles of Two Types of Entrepreneurship in China's Contemporary Economy
Abstract—One of the most important transitions of China from a centrally planned economy to a market-based economy was the emergence of entrepreneurship in two different forms of private enterprise, viz. getihu and siyingqiye. Using a unique database of 31 Chinese regions over the period 1997–2009, we investigate the economic antecedents of regional rates of getihu and siyingqiye and find that the antecedents of these rates are substantially different. We also investigate the mutual interactions between getihu and siyingqiye at the regional level. Our analysis suggests that both types of entrepreneurship play important but distinct roles in stimulating China’s economic development.
Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=50600
- Harvard Business School Case 616-043
No abstract available.
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- Harvard Business School Case 516-027
On September 9, 2014, in front of a packed audience in Cupertino, California, Tim Cook, the chief executive officer of Apple, announced the much anticipated launch of Apple Pay. "Our vision is to replace this [wallet] and we are going to start with payments." Cook then invited Eddy Cue, Apple's senior vice president of Internet software and services, to the stage to explain how Apple Pay would transform the mobile payments industry. He explained how Apple Pay would allow consumers to complete the checkout process within apps with a single touch and without needing to repeatedly enter credit card information, the billing address, or shipping address. On October 20, 2014, U.S. consumers could start using Apple Pay in stores with their iPhone 6 or iPhone 6 Plus (and later Apple Watch) and within apps using iPhone 6, iPhone 6 Plus, iPad Air 2, and iPad mini 3. By March 2015, Apple Pay was accepted in 700,000 retail locations including Coca-Cola vending machines. "We are the fastest adopted mobile payment service by a long shot," noted Jennifer Bailey, vice president of Apple Pay. However, Cue and Bailey were aware that the landscape of mobile wallets and payment services was littered with failures. Reflecting on these challenges, Bailey wondered, "What should Apple do to continue the early momentum for the adoption and use of Apple Pay?"
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- Harvard Business School Case 816-060
No abstract available.
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- Harvard Business School Case 715-440
In 2013, Vanderbilt University Medical Center (VUMC) was the top ranked hospital in Tennessee by U.S. News & World Report and among the leading academic medical centers in the entire southeast region. The 2012 U.S. News & World Report hospital rankings listed Vanderbilt's care for kidney transplant (11th), women's health (16th), heart (25th), and cancer (29th) as among the best in the nation. Its $292 million in National Institutes of Health research grants ranked ninth in the nation. Over the previous decade, the medical center had grown revenues, more than tripled its operating margin, and was operating at capacity in many areas, with average inpatient bed occupancy approaching 90%, versus the national average of 68%. Despite its growth, VUMC was facing a revenue shortfall of $250 million over the next two years as more patients shifted to lower reimbursement Medicare coverage, and there were rising price pressures from commercial insurers, employers, and individual consumers. Dr. Jeffrey Balser, CEO of VUMC, had to address the shortfall while maintaining the quality of patient care, education, and medical research.
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- Harvard Business School Case 714-031
In the first decade of the 21st century, national debt as a share of GDP rose dramatically in the United States and across the developed world. This case consists of excerpts from leading commentators explaining and commenting on this trend and the economic and moral problems it poses. Instructors may also obtain a Teaching Note, written by this case's author, which provides suggestions for using this case effectively in the classroom.
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