Four little words have cost U.S. taxpayers dearly in government bailouts of once-mighty Wall Street firms. Congress can put an end to such costly rescues, says HBS professor David A. Moss, and the Federal Reserve could be a super regulator, adds senior lecturer Robert C. Pozen. But will Congress enact the regulatory cure that is required? From the HBS Alumni Bulletin.
The effects of public policy on organizations and economic activities have been widely observed. This line of research has contributed to organizational theory by showing the importance of state action for constructing economic systems, as well as firm structures and strategies. But there are a number of reasons why this perspective may in fact overemphasize the importance of public policy. This working paper, forthcoming as an article in the Academy of Management Journal, more fully investigates the contingent nature of the effects of policy on organizations, with the orienting premise that policy is just one of the external conditions that organizations face, and policy effects are more or less powerful to the extent that they are interactive with other elements of the environment. Specifically, the authors focus on how policy that regulated bank branching and other environmental factors affected—independently as well as interactively—the emergence and growth of large-scale firms in U.S. commercial banking from 1896 to 1978.
Published in 2008
Economists generally agree that a system of transparent and secure property rights is beneficial for growth and development. A large literature emphasizes the role of property rights in spurring long-term investments, improving productivity, changing labor allocations, and increasing access to formal sources of credit. This paper describes U.S. attempts to implement property rights reforms in the Philippines in the early twentieth century. Iyer and Maurer document that, two decades after the arrival of the Americans, property rights in the Philippines had become unambiguously less secure, and that political and budgetary constraints played a large role in inhibiting the progress of reforms.
Business history is a rich source of knowledge and inspiration for today's executives. Do we pay enough attention to the past? Here are four Working Knowledge articles that provide lessons from history about leaders, leadership, and business organization.
Mexico was the first emerging market compelled to reformulate the financial reporting of its banks as a result of a financial crisis. In the last decade, Mexico has undergone a process of internationalization of its banking industry. Today, more than 80 percent of the equity of Mexican banks belongs to internationally active bank corporations. This internationalization demands more transparent regulation, including standardized accounting rules and better disclosure of information. The case of Mexico can therefore serve as an example of the relevance of these changes, as well as of their scope and limitations. This paper attempts to clarify the nature and structure of the new accounting standards, and explains how they have affected financial statements and their interpretation.
Compiling a handbook on the current thinking in any area of study seems daunting enough, but the just-published Oxford Handbook of Business History carries an even larger mission: bring the lessons of business history to current research in other disciplines and to the practice of business management itself. A Q&A with coeditor Geoffrey Jones.
How is the impact of historical institutions felt today? This comparative analysis by Banerjee and Iyer highlights the impact of a specific historical institution on long-term development, specifically the land tenure systems instituted during British colonial rule. The paper compares the long-term development outcomes between areas where controls rights in land were historically given to a few landlords and areas where such rights were more broadly distributed. The paper also documents the impact of these differing historical institutions on political participation and electoral competition in the post-colonial period.
A significant number of recent papers find legal origins to be strongly correlated with current indices of rule of law, financial development, the regulation of entry and labor, and the concentration of ownership, among other things. Few studies, however, have explored whether correlations between institutions and economic and financial outcomes hold in the past. For this reason, we cannot be certain that the alleged persistence of the effects of these institutions passes the scrutiny of history. This paper examines specifically the relationship between legal origins and financial development by analyzing countries' legal traditions and the extent of investor protections and financial development over time.
The early development of large multidivisional corporations in Latin America required much more than capable managers, new technologies, and large markets. Behind such corporations was a market for capital in which entrepreneurs had to attract investors to buy either debt or equity. This paper examines the investor protections included in corporate bylaws that enabled corporations in Brazil to attract investors in large numbers, thus generating a relatively low concentration of ownership and control in large firms before 1910. The case of Brazil is particularly interesting because, in Latin America before World War I, it boasted the second-largest equity market and largest number of traded companies. As HBS professor Aldo Musacchio shows, the considerable variation of investor protections over time at the country level, and even at the company level, urges cautions against notions about the persistency of institutions, especially of legal traditions.
Published in 2006
Brazil today looks like a typical case in which business groups and close relations between companies and banks play an important role to overcome information and monitoring problems. This was not always the case. To study how the development of financial markets can change the interaction between banks and corporations, Musacchio compared the importance of interlocking boards of directors between corporations and banks in Brazil, Mexico, and the United States at the turn of the twentieth century. This paper and previous research support Musacchio's hypothesis that financial markets in Brazil were sustained by an institutional framework that protected investors, enforced credit contracts, and promoted regular financial disclosure of company accounts. The development of bond and stock markets, and the relatively good corporate governance practices in Brazil before 1930, made connections with bankers less necessary.
Professor Noel Maurer's historical research into Mexico and other countries with unstable governments shows that their economies perform better than might be expected. Why?
The Panama Canal was expected to bring great economic benefits to the people of Panama. Instead, the United States received most of the benefits. This was a deliberate act on the part of the U.S. The U.S. didn't allow Panamanian businesses to sell goods or services in the Canal Zone, it avoided the employment of Panamanian workers, and it used its military leverage to force Panama into accepting a low payment for the Canal territory.
Academic studies of entrepreneurship have focused on people and firms but ignored the context of history. The result is an over-reliance in the experiences of high-tech start-ups in the U.S., leading to generalizations using empirical evidence from an exceptional and atypical industry and location. Economist Joseph Schumpeter believed the study of entrepreneurial behavior made little sense without the equal study of the broader industrial, social, and economic setting in which they operated. An exchange between historical and social scientific approaches will yield far richer understanding.
Adam Smith is best known for The Wealth of Nations, but professor Nava Ashraf believes another of his works, The Theory of Moral Sentiments, presaged contemporary behavioral economics.
Published in 2004
International Business scholars often talk about history, but rarely take it seriously. The first generation of International Business scholars placed a high priority on evolutionary and historical perspectives and methodology, but little work these days grapples with the history of International Business or uses historical data to explore an issue. Jones and Khanna discuss new avenues for researching business groups in history and in contemporary emerging markets, resource-based and path-dependent theories of the firm, and foreign direct investment and development over time.
Published in 2003
Polar explorer Sir Ernest Shackleton is the subject of a new HBS case study. Professor Nancy F. Koehn discusses lessons for leaders from the voyage of the Endurance.
Published in 2002
A new book by Harvard Business School professor David A. Moss explores government's under-appreciated role as risk manager in everything from disaster relief to Social Security. How did this role evolve into something today that touches on almost every aspect of economic life?
Published in 2001
What do great innovators of the past have in common? "They live in the future," according to HBS professor and business historian Richard S. Tedlow. In this essay, Tedlow describes tactics of master innovators including Andrew Carnegie, Henry Ford, and Charles Revson, and finds key lessons for executives today.
Published in 2000
Published in 1999
John H. Patterson's sales management techniques built National Cash Register into the dominant force in its industry and had a major impact on the development of modern selling. This excerpt from Business History Review looks at one aspect of the Patterson method.
