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.

February 23, 2016

Was Price right in lowering CEO pay at Gravity?

Gravity Payments CEO Dan Price made world headlines in 2015 after taking a massive paycut to raise salaries of the rest of his employees. In a case study of the action, The $70K CEO at Gravity Payments, Mitchell Weiss, Michael I. Norton, and colleagues ask whether Price made the right move.

Large gender gaps at Swedish companies

When it comes to appointing women to chief executive roles and paying them the same as men, Sweden is as behind as many countries. In the working paper Equal Opportunity? Gender Gaps in CEO Appointments and Executive Pay, Matti Keloharju and colleagues find significantly fewer women are named CEOs and their pay is about 27 percent less. The results, according to the researchers, "are consistent with the view that male and female executives sharing equal attributes neither have equal opportunities to reach the top, nor are they equally paid."

Creating culture change and other reforms at BRF

In a case study, David E. Bell and Natalie Kindred look in at new leadership at the Brazilian protein foods giant BRF. CEO Pedro Faria is undertaking a number of reforms including reducing bureaucracy, streamlining decision making, and, most importantly, creating a unified culture. The case is titled BRF.

A complete list of new research and publications from Harvard Business School faculty follows.

— Sean Silverthorne
 
  • February 2016
  • Review of Financial Studies

Industry Window Dressing

By: Chen, Huaizhi, Lauren Cohen, and Dong Lou

Abstract— We explore a new mechanism by which investors take correlated shortcuts and present evidence that managers undertake actions—in the form of sales management—to take advantage of these shortcuts. Specifically, we exploit a regulatory provision wherein a firm’s primary industry is determined by the highest sales segment. Exploiting this regulation, we provide evidence that investors classify operationally nearly identical firms vastly differently depending on their placement around this sales cutoff. Moreover, managers appear to exploit this by manipulating sales to be just over the cutoff in favorable industries. Further evidence suggests that managers then engage in activities to realize large, tangible benefits from this opportunistic action.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50625

  • February 2016
  • Harvard Business Review

The Harvard Contest That’s Trying to Improve Health Care Delivery

By: Hamermesh, Richard G., Robert S. Huckman, Barbara McNeil, Joseph P. Newhouse, and Cara Sterling

Abstract— No abstract available.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50571

  • February 2016
  • Games and Economic Behavior

Contract Design and Stability in Many-to-Many Matching

By: Hatfield, John William, and Scott Duke Kominers

Abstract— We develop a model of many-to-many matching with contracts that subsumes as special cases many-to-many matching markets and buyer/seller markets with heterogeneous and indivisible goods. In our setting, substitutable preferences are sufficient to guarantee the existence of stable outcomes; moreover, in contrast to results for the setting of many-to-one matching with contracts, if any agent’s preferences are not substitutable, then the existence of a stable outcome cannot be guaranteed. In many-to-many matching with contracts, a new market design issue arises: the design of the contract language can impact the set of stable outcomes. Bundling contractual primitives encourages substitutability of agents’ preferences over contracts and makes stable outcomes more likely to exist; however, bundling also makes the contractual language less expressive. Consequently, we see that, in choosing contract language, market designers face a tradeoff between expressiveness and stability.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50636

  • February 2016
  • Stanford University

Incommensurable Values

By: Hsieh, Nien-hê

Abstract— Values, such as liberty and equality, are sometimes said to be incommensurable in the sense that their value cannot be reduced to a common measure. The possibility of value incommensurability is thought to raise deep questions about practical reason and rational choice as well as related questions concerning topics as diverse as akrasia, moral dilemmas, the plausibility of utilitarianism, and the foundations of liberalism. This entry outlines answers in the contemporary literature to these questions, starting with questions about the nature and possibility of value incommensurability.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50622

  • February 2016
  • Harvard Business Review

The Untapped Potential of Health Care APIs

By: Huckman, Robert S., and Maya Uppaluru

Abstract— No abstract available.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50570

  • February 2016
  • Theoretical Economics

Matching with Slot-Specific Priorities: Theory

By: Kominers, Scott Duke, and Tayfun Sonmez

Abstract— We introduce a two-sided, many-to-one matching with contracts model in which agents with unit demand match to branches that may have multiple slots available to accept contracts. Each slot has its own linear priority order over contracts; a branch chooses contracts by filling its slots sequentially, according to an order of precedence. We demonstrate that in these matching markets with slot-specific priorities, branches’ choice functions may not satisfy the substitutability conditions typically crucial for matching with contracts. Despite this complication, we are able to show that stable outcomes exist in the slot-specific priorities framework and can be found by a cumulative offer mechanism that is strategy proof and respects unambiguous improvements in priority.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50637

Patent Publication and the Market for Ideas

By: Hegde, Deepak, and Hong Luo

Abstract— In this paper, we study the effect of invention disclosure through patent publication on the market for ideas. We do so by analyzing the effects of the American Inventor's Protection Act of 1999 (AIPA)—which required U.S. patent applications to be published 18 months after their filing date rather than at patent grant—on the timing of licensing deals in the biomedical industry. We find that post-AIPA U.S. patent applications are significantly more likely to be licensed before patent grant and shortly after 18-month publication. Licensing delays are reduced by about 10 months, on average, after AIPA's enactment. These findings suggest a hitherto unexplored benefit of the patent system: by requiring inventions to be published through a credible, standardized, and centralized repository, it mitigates information costs for buyers and sellers and, thus, facilitates transactions in the market for ideas.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=45527

Equal Opportunity? Gender Gaps in CEO Appointments and Executive Pay

By: Keloharju, Matti, Samuli Knüpfer, and Joacim Tåg

Abstract— This paper uses exceptionally rich data on Swedish corporate executives and their personal characteristics to study gender gaps in CEO appointments and pay. Both gaps are sizeable: 18% for CEO appointments and 27% for pay. At most one-eighth of the gaps can be attributed to observable gender differences in executives’ and their firms’ characteristics. Further tests suggest that unobservable gender differences in characteristics are unlikely to account for the remaining gaps. Instead, our results are consistent with the view that male and female executives sharing equal attributes neither have equal opportunities to reach the top, nor are they equally paid.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=50623

  • Harvard Business School Case 516-058

BRF

In 2015, BRF's new leadership team is transforming several aspects of the Brazilian protein giant, which had grown sluggish after the 2011 merger that created it. Underlying their reforms are the common goals of reducing bureaucracy, streamlining decision making, and, most importantly, creating a unified culture that, to date, the company has been missing. CEO Pedro Faria believes a strong culture, in which both BRF employees and its thousands of supply partners feel a sense of pride and ownership in working with BRF, will be critical to enabling BRF's global ambitions.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/516058-PDF-ENG

  • Harvard Business School Case 116-031

Alibaba Goes Public (B)

Update on Alibaba Group's share price performance and related events in the year following its September 2014 IPO.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/116031-PDF-ENG

  • Harvard Business School Case 116-024

Air Products' Pursuit of Airgas (A)

No abstract available.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/116024-PDF-ENG

  • Harvard Business School Case 116-025

Air Products' Pursuit of Airgas (B)

No abstract available.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/116025-PDF-ENG

  • Harvard Business School Case 816-010

The $70K CEO at Gravity Payments

In 2015, Gravity Payments CEO Dan Price took a massive pay cut to raise the minimum wage at his company to $70,000 annually. In the wake of a national discussion of wage equality, he was met with cheers and jeers. The company hoped that the unorthodox move would, through a range of levers, cover the increasing costs of compensation. Did Price make the right move? Would Gravity thrive or even survive?

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/816010-PDF-ENG