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.

November 15, 2016

Among the highlights included in new research papers, case studies, articles, and books released this week by Harvard Business School faculty:

Why gender inequality persists

Researchers look at why women’s career advancements remain stalled despite recognition that the conflict between family and long-hour jobs is at the heart of the problem. Research suggests, the authors say, that "mitigating the conflict through flexible work policies has done little to improve women’s advancement prospects and often hurts them.” Explaining the Persistence of Gender Inequality: The Work-Family Narrative as a Social Defense against the 24/7 Work Culture was written by Irene Padavic, Robin J. Ely, and Erin M. Reid.

Is hiring best left to hiring managers?

Carolyn Deller and Tatiana Sandino examine whether a rertail company’s central office or store managers make the best hires in the working paper Employees, the Head Office or the Unit Manager? Consequences of Centralizing Hiring at a Retail Chain. “We find that, on average, centralized hiring does not increase the quality of employee-company matches … except when store managers are inexperienced and/or overly busy,” the researchers conclude. The research also finds that centralized hiring is associated with higher employee departure rates in stores where the manager is likely to be more informed than headquarters.

Understanding brand portfolio strategy

Jill Avery writes a background note for educators on the topic of developing strategy around product portfolios. “Done well, (brand portfolio strategy) informs the allocation of investment across brands, identifies underperforming brands as candidates for pruning or revitalization, and pinpoints gaps in the portfolio that indicate growth opportunities for new brands.” The note is titled Brand Portfolio Strategy and Brand Architecture.

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

— Sean Silverthorne
 
  • Fall 2016
  • Journal of Economic Perspectives

Global Talent Flows

By: Kerr, William R., Sari Pekkala Kerr, and Çağlar Özden

Abstract—The global distribution of talent is highly skewed and the resources available to countries to develop and utilize their best and brightest vary substantially. The migration of skilled workers across countries tilts the deck even further. Using newly available data, we first review the landscape of global talent mobility, which is both asymmetric and rising in importance. We next consider the determinants of global talent flows at the individual and firm levels and sketch some important implications. Third, we review the national gatekeepers for skilled migration and broad differences in approaches used to select migrants for admission. Looking forward, the capacity of people, firms, and countries to successfully navigate this tangled web of global talent will be critical to their success.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51813

Fiscal Rules and Sovereign Default

By: Alfaro, Laura, and Fabio Kanczuk

Abstract—We provide a quantitative analysis of fiscal rules in a standard model of sovereign debt accumulation and default, modified to incorporate quasi-hyperbolic preferences. For reasons of political economy or aggregation of citizens’ preferences, government preferences are present biased, resulting in an over-accumulation of debt. Calibrating this parameter with values in the literature, the model can reproduce debt levels and frequency of default typical of emerging markets even if the household impatience parameter is calibrated to local interest rates. A quantitative exercise calibrated to Brazil finds welfare gains of the optimal fiscal policy to be economically substantial and the optimal rule to not entail a countercyclical fiscal policy. A simple debt rule that limits the maximum amount of debt is analyzed and compared to a simple deficit rule that limits the maximum amount of deficit per period. Whereas the deficit rule does not perform well, the debt rule yields welfare gains virtually equal to the optimal rule.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=50545

Abstract—We examine whether centralized hiring (in this study, by the head office of a U.S. retail chain) or decentralized hiring (by store managers) leads to higher quality employee-company matches. While centralized hiring can ensure that enough resources are invested in consistently hiring people aligned with company values, it can also neglect the unit managers’ knowledge about which individuals would best match local conditions. We use difference-in-differences analyses to examine the effects of a switch from decentralized hiring to centralized hiring at our research site. We find that, on average, centralized hiring does not increase the quality of employee-company matches (measured through employee departures of newly hired employees, store-level employee turnover, and store performance) except when store managers are inexperienced and/or overly busy. Yet, we find that centralized hiring is associated with higher employee departure rates in stores where the manager is likely to be more informed than headquarters (e.g., in stores that are far from headquarters or that serve repeat customers).

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=50576

The Stock Market and Bank Risk-Taking

By: Falato, Antonio, and David Scharfstein

Abstract—We present evidence that pressure to maximize short-term stock prices and earnings leads banks to increase risk. We start by showing that banks increase risk when they transition from private to public ownership through a public listing or an acquisition. The increase in risk is greater than for a control group of banks that intended but failed to transition from private to public ownership, a result that is robust to using a plausibly exogenous instrument for failed transitions. The increase in risk is also greater than for a control group of banks that were acquired but did not change their listing status. We establish that pressure to maximize short-term stock prices helps to explain these findings by showing that the increase in risk is larger for newly public banks that are more focused on short-term stock prices and performance.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=49916

Abstract—Using a difference-in-difference approach, we study how intellectual property right (IPR) protection affects innovation in China in the years around the privatizations of state-owned enterprises (SOEs). Innovation increases after SOE privatizations, and this increase is larger in cities with strong IPR protection. Our results support theoretical arguments that IPR protection strengthens firms’ incentives to innovate and that private sector firms are more sensitive to IPR protection than SOEs.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=50643

Fiscal Risk and the Portfolio of Government Programs

By: Hanson, Samuel G., David S. Scharfstein, and Adi Sunderam

Abstract—In this paper, we develop a new model for government cost-benefit analysis in the presence of risk. In our model, a benevolent government chooses the scale of a risky project in the presence of two key frictions. First, there are market failures, which cause the government to perceive project payoffs differently than private households do. This gives the government a "social risk management" motive: projects that ameliorate market failures when household marginal utility is high are appealing. The second friction is that government financing is costly because of tax distortions. This creates a "fiscal risk management" motive: incremental spending that occurs when total government spending is already high is particularly unattractive. A first key insight is that the government's need to manage fiscal risk frequently limits its capacity for managing social risk. A second key insight is that fiscal risk and social risk interact in complex ways. When considering many potential projects, government cost-benefit analysis thus acquires the flavor of a portfolio choice problem. We use the model to explore how the relative attractiveness of two technologies for promoting financial stability—bailouts and regulation—varies with the government's fiscal burden and characteristics of the economy.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=47178

Abstract—It is widely accepted that the conflict women experience between family obligations and professional jobs’ long hours lies at the heart of their stalled advancement. Yet research suggests that this “work-family narrative” is partial at best: men, too, experience work-family conflict and nevertheless advance; moreover, mitigating the conflict through flexible work policies has done little to improve women’s advancement prospects and often hurts them. Drawing on an in-depth case study of a professional service firm, we offer two connected explanations for the work-family narrative’s persistence. We first present data suggesting that this belief has become a “hegemonic narrative”—a pervasive, status-quo-preserving story that is uncontested, even in the face of countervailing evidence. We then take a systems psychodynamic perspective to show how organizations use this narrative and attendant policies and practices as an unconscious “social defense” to help employees fend off anxieties raised by a 24/7 work culture. Due to the social defense, two beliefs remain unchallenged—the necessity of long work hours and the inescapability of women’s stalled advancement. The result is that women’s thin representation at senior levels remains in place.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=51896

Abstract—This paper studies the uncertainty associated with screening early stage ventures. Using data on 652 ventures in high-growth industries, we examine whether experienced entrepreneurs, executives, and investors can predict the outcomes of early stage ventures by reading succinct summaries of their business ideas without meeting the founding teams. We find that the predictability of venture outcomes varies with the intensity of research and development (R&D) in the sector. In R&D-intensive sectors, such as life sciences, the ideas that elicit more positive evaluations are significantly more likely to reach commercialization and/or to raise substantial funding; this pattern does not hold for ventures in non-R&D–intensive sectors such as enterprise software. Our results suggest that, despite the many uncertainties associated with innovating at the technological frontier, early stage ventures in R&D-intensive sectors can be screened effectively using information on their non-human capital assets. In contrast, such information is not sufficient to screen ventures in non-R&D-intensive sectors.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=49454

  • Harvard Business School Case 517-021

Brand Portfolio Strategy and Brand Architecture

While companies choose to brand their products and services in many different ways, there are some central tenets that help define an optimal brand portfolio and associated brand architecture. Brand portfolio strategy involves the design, deployment, and management of multiple brands as a coordinated portfolio of meaning-based assets that address the needs of diverse customers in a marketplace and maximize return while minimizing risk. It specifies the optimal portfolio of brands a company should maintain for comprehensive market coverage with minimal overlap, determines the role and scope of each brand in the portfolio, and designs a strategic, logical, and efficient brand architecture that knits the brands together into an interdependent system. Done well, it informs the allocation of investment across brands, identifies underperforming brands as candidates for pruning or revitalization, and pinpoints gaps in the portfolio that indicate growth opportunities for new brands.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/517021-PDF-ENG

  • Harvard Business School Case 617-021

Ekal Vidyalaya: Education for Rural India

By examining Ekal Vidyalaya (Ekal), a nonprofit network of schools in India, this case focuses on the classic challenge faced by organizations that grow through replication (e.g., McDonald's, Starbucks, Walmart, Whole Foods): How can they continue to drive growth when their well of attractive locations begins to dry up? In 1986, a group of social entrepreneurs reimagined education in India, developing a low-cost, "one-teacher school" model to provide educational access in regions that had proven cost prohibitive for government schools. They founded Ekal to fulfill the vision of a network of 100,000 one-teacher schools throughout rural India. More than a quarter century later, in 2014, the Ekal network included over 54,000 schools. However, with the emergence of India as an economic power, government schools had received the mandate and funds to extend their reach to many of the regions that Ekal serves. Was it time for Ekal to reevaluate their vision; was the target of 100,000 schools, which had driven their growth thus far, still the best path forward? Or was it time to declare their mission of universal access to education a success in the regions that government schools now served and begin to scale back from those areas?

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https://cb.hbsp.harvard.edu/cbmp/product/617021-PDF-ENG

Zurich Insurance was undergoing organizational change after implementing five new people practices focused on manager development, diversity and inclusion, job model and data analytics, recruitment, and talent pipeline. The case provides background for the company, as well as a description of how its culture was changing and how its allocation of resources was being examined as it tried to improve its position in the marketplace. Students are asked to prioritize which people practices are most important for Zurich as it tries to shift its culture and more effectively leverage its human capital in order to reach its organizational goals.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/417035-PDF-ENG

  • Harvard Business School Case 417-036

Zurich Insurance: Zurich Oxygen

Zurich Insurance was undergoing organizational change after implementing five new people practices focused on manager development, diversity and inclusion, job model and data analytics, recruitment, and talent pipeline. The case “Zurich Insurance: Fostering Key People Management Practices” (HBS No. 417-035) provides background for the company and an outline of each people practice. This case takes a closer look at the implementation of the manager development initiative “Zurich Oxygen.”

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https://cb.hbsp.harvard.edu/cbmp/product/417036-PDF-ENG

  • Harvard Business School Case 417-037

Zurich Insurance: Diversity and Inclusion

Zurich Insurance was undergoing organizational change after implementing five new people practices focused on manager development, diversity and inclusion, job model and data analytics, recruitment, and talent pipeline. The case “Zurich Insurance: Fostering Key People Management Practices” (HBS No. 417-035) provides background for the company and an outline of each people practice. This case takes a closer look at the company’s efforts around diversity and inclusion.

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https://cb.hbsp.harvard.edu/cbmp/product/417037-PDF-ENG

  • Harvard Business School Case 417-038

Zurich Insurance: Global Job Structure and Data Analysis

Zurich Insurance was undergoing organizational change after implementing five new people practices focused on manager development, diversity and inclusion, job model and data analytics, recruitment, and talent pipeline. The case “Zurich Insurance: Fostering Key People Management Practices” (HBS No. 417-035) provides background for the company and an outline of each people practice. This case takes a closer look at the implementation of a global job model and how it has enabled the use of data analytics in the human resources function.

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https://cb.hbsp.harvard.edu/cbmp/product/417038-PDF-ENG

  • Harvard Business School Case 417-039

Zurich Insurance: Recruitment

Zurich Insurance was undergoing organizational change after implementing five new people practices focused on manager development, diversity and inclusion, job model and data analytics, recruitment, and talent pipeline. The case “Zurich Insurance: Fostering Key People Management Practices” (HBS No. 417-035) provides background for the company and an outline of each people practice. This case takes a closer look at the adoption of new recruitment practices.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/417039-PDF-ENG

  • Harvard Business School Case 417-040

Zurich Insurance: Talent Pipeline

Zurich Insurance was undergoing organizational change after implementing five new people practices focused on manager development, diversity and inclusion, job model and data analytics, recruitment, and talent pipeline. The case “Zurich Insurance: Fostering Key People Management Practices” (HBS No. 417-035) provides background of the company and an outline of each people practice. This case takes a closer look at succession planning at the top of the organization, including a focus on leadership competencies and development.

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https://cb.hbsp.harvard.edu/cbmp/product/417040-PDF-ENG

  • Harvard Business School Case 317-028

Joan Bavaria and Multi-Dimensional Capitalism

The case examines the career of Joan Bavaria, a pioneer of socially responsible investing and founder of Trillium Asset Management and Ceres, the nonprofit organization advocating for sustainability leadership. It describes her personal journey from art student and college dropout to financier and campaigner for corporate sustainability. Trillium grew out of Bavaria's initial work in Boston-based Franklin Research and Development Corporation and became an independent entity in 1982. Bavaria argued that investment houses could use their funds to promote corporate social responsibility and that such investments could be profitable. This was considered extremely unorthodox in the industry at the time. In the wake of the giant oil spill from the tanker Exxon Valdez in Alaska in 1989, Bavaria launched the Ceres Principals aimed to generate standardized corporate reporting on environmental performance. Ceres grew as an organization and launched the Global Reporting Initiative in 1997. The case provides an opportunity to explore the opportunities and challenges of both SRI and corporate environmental reporting.

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https://cb.hbsp.harvard.edu/cbmp/product/317028-PDF-ENG

  • Harvard Business School Case 917-404

Transferring Knowledge Between Projects at NASA JPL (A)

The Jet Propulsion Laboratory (JPL)—formally part of the California Institute of Technology—is one of a number of federally funded research institutions within NASA, the U.S. National Aeronautics and Space Administration. JPL has played a large role in many space and planetary explorations, and in particular in missions to the planet Mars. As a project-based organization, JPL has many opportunities to learn between successive missions, but there are also many challenges to the development and exchange of experience-based knowledge. The main case decision point focuses on one such challenge in particular: how to instill in junior engineers the practice-based experience of their seniors. Jennifer Trosper, project manager for the Mars 2020 mission, is trying to decide whether or not to seek funding for a hands-on training program building miniature, educational versions of a Mars surface vehicle. However, the cases address a number of other decisions, such as determining the balance between innovation and replication of prior solutions, given that Trosper has been charged with re-using engineering designs from prior projects, but for an expanded mission. The cases also explore generic knowledge-transfer issues faced by JPL’s Chief Knowledge Officer, David Oberhettinger, such as the role of documentation, uses of formal “lessons learned,” and how best to use the scarce time of the most valuable JPL engineers.

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https://cb.hbsp.harvard.edu/cbmp/product/917404-PDF-ENG

  • Harvard Business School Case 917-405

Transferring Knowledge Between Projects at NASA JPL (B)

The Jet Propulsion Laboratory (JPL)—formally part of the California Institute of Technology—is one of a number of federally funded research institutions within NASA, the U.S. National Aeronautics and Space Administration. JPL has played a large role in many space and planetary explorations, and in particular in missions to the planet Mars. As a project-based organization, JPL has many opportunities to learn between successive missions, but there are also many challenges to the development and exchange of experience-based knowledge. The case “Transferring Knowledge Between Projects at NASA JPL (A)” (HBS No. 917-405) provides background on the knowledge management challenges facing Jennifer Trosper, and in particular on her decision whether or not to seek funding for a hands-on training program building miniature, educational versions of a Mars surface vehicle. This case describes her decision and provides further information on subsequent efforts made after the initial decision.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/917405-PDF-ENG