Reputation and Competition: Evidence from the Credit Rating Industry
| Authors: | Bo Becker and Todd Milbourn |
|---|---|
| Published: | July 22, 2009 |
| Paper Release Date: | October 2008 |
| Feature: | Working Papers |
Credit ratings are a key aspect of the financial system. The quality of these ratings is certainly sustained in part by the reputational concerns of rating agencies, whose paying customers have no inherent interest in the quality of ratings. Competition in this industry has been increasing, and there have been calls for yet more competition. Whether competition will reduce quality or improve it is not yet clear. HBS professor Bo Becker and Washington University in St. Louis professor Todd Milbourn test these conflicting predictions in the ratings industry. Their evidence is more or less consistent with a reduction in credit rating quality as Fitch increased its market presence. Their empirical findings suggest that the system will work better when competition is not too severe. These results have potential policy implications.
Monopolistic Competition Between Differentiated Products With Demand For More Than One Variety
| Author: | Andrei Hagiu |
|---|---|
| Published: | May 28, 2009 |
| Paper Release Date: | April 2009 |
| Feature: | Working Papers |
How and when is price competition most significant among firms? This paper develops a theoretical framework for studying price competition between multiple firms. Two examples of markets that fit the description for study are software applications and videogames: There are thousands of software applications as well as games, and different users are interested in different applications and/or games. A given software or game user's tastes may overlap with another's, yet they may have nothing in common with a third's. Thus, although there is a sense in which competition is localized (any given firm competes only with firms whose brands are similar to its own), it is not clear how the fact that consumers are generally interested in purchasing multiple products affects the type of competition waged among firms.
Quantity vs. Quality and Exclusion by Two-Sided Platforms
| Author: | Andrei Hagiu |
|---|---|
| Published: | May 14, 2009 |
| Paper Release Date: | April 2009 |
| Feature: | Working Papers |
It is common for two-sided platforms to deny participation to some potential customers, who would otherwise be willing to pay the platforms' access and/or transaction fees. Videogame console manufacturers such as Microsoft, Sony, and Nintendo, for example, restrict access to a select set of game developers and exclude many others by including security chips in their consoles, even though the latter would also be willing to pay the per-game royalties levied by the manufacturers. Apple routinely excludes certain application developers from its highly popular iPhone store. Professor Andrei Hagiu builds a simple model formalizing profit-maximizing two-sided platforms' choice of exclusion policies, which is fundamentally determined by a tradeoff between quality and quantity.
Published in 2008
Bank Structure and the Terms of Lending to Small Businesses
| Authors: | Rodrigo Canales and Ramana Nanda |
|---|---|
| Published: | June 24, 2008 |
| Paper Release Date: | June 2008 |
| Feature: | Working Papers |
Access to "soft information" and the greater sensitivity of decentralized banks to the local institutional environment can have both positive and negative consequences for small firms. Hence there may be a dark side to decentralized bank lending in certain instances. This paper argues that the same ability of decentralized banks to act on soft information also makes them more responsive to the local environment when setting terms of their loans. While this can be beneficial for small businesses in competitive markets, it also implies that the organizational structure of decentralized banks might allow them to better exploit their market power in concentrated banking markets by restricting credit or charging higher interest rates from small businesses.
What is the Future of State Capitalism?
| Published: | May 2, 2008 |
|---|---|
| Feature: | What Do YOU Think? |
| Forum: | closed | 43 Comments posted |
In state capitalism, is the operative word "capitalism"? State capitalism is neither to be applauded nor feared, judging from the tone of responses to May's column. Jim Heskett sums up. Online forum now closed.
Published in 2007
Handicapping the Best Countries for Business
| Q&A with: | Richard H.K. Vietor |
|---|---|
| Published: | March 19, 2007 |
| Feature: | Research & Ideas |
India? South Africa? Russia? Which are the best countries for a firm to invest in? In a new book, Professor Richard Vietor looks at the economic, political, and structural strengths and weaknesses of ten countries and tells readers how to analyze the development of these areas in the future. Read our Q&A and book excerpt.
Tata-Corus: India's New Steel Giant
| Published: | February 14, 2007 |
|---|---|
| Feature: | Op-Ed |
By acquiring Anglo-Dutch steel firm Corus, India's Tata Steel is now one of the world's top five steel makers. Professor Tarun Khanna says the fact that the deal is the largest out of India and generated by the private sector makes this a notable event. But now comes the hard part—making the merger work. Can Tata avoid mistakes made by Chinese companies? From The Economic Times/India Times.
Published in 2006
American Auto's Troubled Road
| Published: | April 10, 2006 |
|---|---|
| Feature: | Views on News |
Harvard Business School faculty dissect where U.S. auto makers went wrong, and how they might again get on the road to growth. From HBS Alumni Bulletin.
Published in 2005
The Truck Driver Who Reinvented Shipping
| Published: | October 3, 2005 |
|---|---|
| Feature: | Research & Ideas |
Malcolm P. McLean (1914-2001) hit on an idea to dramatically reduce labor and dock servicing time. An excerpt from In Their Time: The Greatest Business Leaders of the Twentieth Century by Harvard Business School's Anthony J. Mayo and Nitin Nohria.
The Rise of Innovation in Asia
| Published: | March 7, 2005 |
|---|---|
| Feature: | Research & Ideas |
Asian countries are no longer just a place to get cheap labor or programming skills. Innovation is on the rise. A report from the Harvard Business School Asia Business Conference.
Published in 2004
How Important are Big Ideas?
| Published: | June 7, 2004 |
|---|---|
| Feature: | What Do YOU Think? |
| Forum: | closed | 21 Comments posted |
A couple new books, including most controversially Does IT Matter? focus on sources of competitive advantage. Are management concepts on their own the best way to compete? And, does it matter that new concepts—and their guru practitioners—seem to come from the U.S.?
Mission to Mars: It Really Is Rocket Science
| Q&A with: | Alan D. MacCormack |
|---|---|
| Published: | March 1, 2004 |
| Feature: | Lessons from the Classroom |
Do the successful Mars missions mean NASA again has the right stuff? Professor Alan MacCormack dissects the space agency’s "Faster, Better, Cheaper" program.
Where Does Apple Go from Here?
| Q&A with: | David B. Yoffie |
|---|---|
| Published: | February 2, 2004 |
| Feature: | Research & Ideas |
Macintosh market share continues to decline, but the iPod and iTunes are hit products. Where does Apple Computer’s future lie? An interview with HBS professor David Yoffie.
Published in 2003
Sometimes Success Begins at Failure
| Published: | December 1, 2003 |
|---|---|
| Feature: | Research & Ideas |
Projects that appear to be duds may have unintended upsides—Viagra started life and failed as a drug for hypertension. Here are tips for turning negative test results into gold.
The Lessons of New-Market Disruption
| Published: | September 15, 2003 |
|---|---|
| Feature: | Research & Ideas |
Teradyne was successful. Hewlett-Packard was not. Professor Clark Gilbert writes about how two companies had such different results with disruptive innovation.
Why IT Does Matter
| Published: | August 25, 2003 |
|---|---|
| Feature: | Research & Ideas |
HBS professors F. Warren McFarlan and Richard L. Nolan respond to the much-discussed assertion by Nicholas Carr that company investments in IT are less and less likely to produce competitive advantage.
XTV: Xerox's Attempted Recovery From "Fumbling the Future"
| Published: | April 7, 2003 |
|---|---|
| Feature: | Research & Ideas |
Following failures to capitalize on its own innovation, Xerox formed Xerox Technology Ventures to look for spin-off opportunities. Professor Henry Chesbrough outlines the history of XTV in this Business History Review excerpt.
Published in 2002
The Secret of How Microsoft Stays on Top
| Q&A with: | Marco Iansiti and Alan D. MacCormack |
|---|---|
| Published: | December 2, 2002 |
| Feature: | Research & Ideas |
Critics say Microsoft's incredible two-decade run at the top of the computer industry has less to do with innovation than it does with bully tactics. But new research from Harvard Business School professors Marco Iansiti and Alan MacCormack suggest a different reason: the company's ability to spot technological trends and exploit key software technologies.
Understanding the Process of Innovation
| Published: | August 5, 2002 |
|---|---|
| Feature: | Research & Ideas |
Just what is the BIG idea? In this Harvard Management Update piece, Harvard Business School professor Clayton Christensen helps us understand the sources of innovation inside companies and what blocks it.
Disruption: The Art of Framing
| Published: | June 10, 2002 |
|---|---|
| Feature: | Research & Ideas |
Your chief competitor creates a breakthrough technology. Should you frame that event inside your company as a threat or opportunity? The answer in this Harvard Business Review excerpt by HBS professors Clark Gilbert and Joseph L. Bower just may surprise you.
Read All About It! Newspapers Lose Web War
| Published: | January 28, 2002 |
|---|---|
| Feature: | Research & Ideas |
Newspapers saw a threat to their livelihood from the Internet, and aggressively put their own competing products online. Problem is, says Harvard Business School professor Clark Gilbert, they didn't take advantage of the power of disruptive technology.
Published in 2001
Healthcare Conference Looks At Ailing Industry
| Published: | December 3, 2001 |
|---|---|
| Feature: | Research & Ideas |
What's plaguing healthcare? Experts including HBS professor Clayton Christensen make the diagnosis on future trends for biology and medicine—and the business opportunities within—at the 2nd HBS Alumni Healthcare Conference.
How One Center of Innovation Lost its Spark
| Published: | July 23, 2001 |
|---|---|
| Feature: | Research & Ideas |
It's no secret that innovation is what has always made places like Silicon Valley and Hollywood so special. Creativity and expertise centered in one location, it seems, spurs yet more innovation at ever increasing speeds. But what happens when the well runs dry?
Angels Face the Innovator's Dilemma
| Published: | April 16, 2001 |
|---|---|
| Feature: | Research & Ideas |
According to HBS professor Clayton M. Christensen, the venture capital industry—like computers, telephony, and brokerage before it—is susceptible to the same forces that have waylaid many seemingly invincible players. What that means, said the author of the influential bestseller The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, is that the time is ripe for the right people to create new, disruptive forms of financing.
Breaking the Code of Change
| Published: | April 16, 2001 |
|---|---|
| Feature: | Research & Ideas |
How can firms maximize economic value while developing their organizational capabilities? In a corporate environment where change is constant, business leaders are continually challenged by this dilemma. In this excerpt from "Resolving the Tension between Theories E and O of Change," from Michael Beer and Nitin Nohria's Breaking the Code of Change, the authors present a framework toward "an integrative theory of change."
David, Goliath, and Disruption
| Published: | February 26, 2001 |
|---|---|
| Feature: | Research & Ideas |
When introduced with speed and flair, disruptive technologies have the power to boost new companies and lay low other, seemingly invincible incumbents. Technology-savvy experts at Cyberposium considered their own successes and failures with the volatile medium, and passed on a bit of advice, too.
Published in 2000
The Dynamics of Standing Still: Firestone Tire & Rubber and the Radial Revolution
| Published: | November 27, 2000 |
|---|---|
| Feature: | Research & Ideas |
In the late 1960s, Firestone was perhaps the best managed company in its industry. But when Michelin introduced the radial tire and shook up the U.S. market, writes HBS professor Donald Sull, Firestone's historical success proved its own worst enemy.
Minding the Muse: The Impact of Downsizing on Corporate Creativity
| Published: | May 23, 2000 |
|---|---|
| Feature: | Research & Ideas |
HBS Professor Teresa Amabile's in-house study of creativity at a high-tech Fortune 500 firm took on new implications when the company began a significant reduction in the size of its global workforce. Expanding the research to measure changes in the creative environment during and after the layoffs, Amabile and colleague Regina Conti of Colgate University showed that downsizing can have surprising effects on the creativity of remaining employees and the company's strategic position in the marketplace.
Growing Pains: Prescriptions for U.S. Health Care
| Published: | February 15, 2000 |
|---|---|
| Feature: | Research & Ideas |
The health care industry may look seriously ill, says HBS Professor Clayton M. Christensen, but it's merely suffering the growing pains of a natural evolution as technology forces change at both the high and low ends of the market.
