Law

21 Results

 

Digital Discrimination: The Case of Airbnb.com

To build trust and facilitate transactions, online marketplaces present information not only about products, but also about the people offering the products. Many platforms now allow sellers to present personal profiles, post pictures of themselves, and even link to their Facebook accounts. While these features serve the laudable goals of building trust and accountability, they can also bring unintended consequences: Personal profiles may facilitate discrimination. Benjamin G. Edelman and Michael Luca investigate the extent of racial discrimination against hosts on the popular online rental marketplace Airbnb.com. They construct a data set combining pictures of all New York City landlords on Airbnb with their rental prices and information about characteristics and quality of their properties. The authors use this data to measure differences in outcomes according to host race. Nonblack hosts are able to charge approximately 12 percent more than black hosts, holding location, rental characteristics, and quality constant. Moreover, black hosts receive a larger price penalty for having a poor location relative to nonblack hosts. These differences highlight the risk of discrimination in online marketplaces, suggesting an important unintended consequence of a seemingly-routine mechanism for building trust. Read More

Companies Choreograph Earnings Calls to Hide Bad News

Data from thousands of Wall Street earnings conference calls suggests that many companies hide bad performance news by calling only on positive analysts, according to new research by Lauren Cohen and Christopher Malloy. Open for comment; 3 Comments posted.

Standard-Essential Patents

Standards play a key role in many industries, including those critical for future growth. Intellectual property (IP) owners vie to have their technologies incorporated into standards, so as to collect royalty revenues (if their patents dominate some of the functionalities embodied in the standard) or just to develop a competitive edge through their familiarity with the technology. However, it is hard to know in advance whether patents are complements or substitutes, i.e., how essential they are. Thus a major policy issue in standard setting is that patents that seem relatively unimportant may, by being included into the standard, become standard-essential patents (SEPs). In an attempt to curb the monopoly power that the standard creates, most standard-setting organizations (SSOs) require the owners of patents covered by the standard to grant licenses on fair, reasonable and non-discriminatory (FRAND) terms. Needless to say, such loose price commitments can lead to intense litigation activity. This paper constitutes a first pass at a formal analysis of standard-essential patents. It builds a framework in which essentialization and regulation functions can be analysed, provides a precise identification of the inefficiencies attached to the lack of price commitment, and suggests a policy reform that restores the ex-ante competition called for in the literature and the policy debate. Read More

The Real Cost of Bribery

George Serafeim finds that the biggest problem with corporate bribery isn't its effect on a firm's reputation or the regulatory headaches it causes. Rather, bribery's most significant impact is its negative effect on employee morale. Closed for comment; 22 Comments posted.

The Evolving Basis for Legitimacy of the World Trade Organization: Dispute Settlement and the Rebalancing of Global Interests

The WTO is reconfiguring people's relationships to goods and services by facilitating trade and the consequent conversion of goods and ideas into property, including ones previously gifted or kept local. Unsurprisingly, there has been considerable opposition from the losers in the free trade system and attendant challenges to the legitimacy of the WTO. Arthur Daemmrich argues that understandings of legitimacy change over time, especially as organizations like the WTO interact with organized interests, including member countries and outside NGOs. He provides a brief history of the WTO as an organizational entity managing the institution of free trade, and a case study of a lengthy international trade dispute between Brazil and the United States over agricultural subsidies generally and cotton subsidies in particular. At the WTO, he writes, an important shift has taken place from the strategy of building organizational legitimacy through expanding membership to institutional deepening via the dispute process. Thus the WTO has become one of a few key sites for working out how knowledge claims will be formulated, framed, and validated on the international level. Read More

Environmental Federalism in the European Union and the United States

Under what circumstances will individual states take the lead in passing the most stringent environmental regulations, and when will the federal government take the lead? When a state takes a leadership role, will other states follow? HBS professor Michael Toffel and coauthors describe the development of environmental regulations in the U.S. and EU that address automobile emissions, packaging waste, and global climate change. They use these three topics to illustrate different patterns of environmental policymaking, describe the changing dynamics between state and centralized regulation in the United States and the EU. Read More

Audit Quality and Auditor Reputation: Evidence from Japan

High-quality external auditing is a central component of sound corporate governance, yet what determines audit quality? Douglas J. Skinner, of the University of Chicago Booth School of Business, and Suraj Srinivasan, of Harvard Business School, study the Japanese audit market, where recent events provide a powerful setting for investigating the effect of auditor reputation on audit quality absent litigation effects. Specifically, Skinner and Srinivasan analyze events surrounding the collapse of ChuoAoyama, the PricewaterhouseCoopers affiliate in Japan that was implicated in a massive accounting fraud at Kanebo, a large Japanese cosmetics company. Taken as a whole, the researchers' evidence provides support for the view that auditor reputation is important in an economy where the legal system does not provide incentives for auditors to deliver quality. Read More

Fiduciary Duties and Equity-Debtholder Conflicts

Managerial decisions influence the distribution of value between different parties. This can lead to conflicting interests among financial claimants, such as holders of equity and debt. The Credit Lyonnais v. Pathe Communications bankruptcy ruling of 1991 before the Delaware court—a case widely perceived to have created a new obligation for directors of Delaware‐incorporated firms—provides an interesting opportunity to assess whether and how equity-debt conflict affects firm behavior. HBS professor Bo Becker and Stockholm School of Economics professor Per Strömberg outline important changes in behavior after Credit Lyonnais. Read More

Colonial Land Tenure, Electoral Competition and Public Goods in India

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. Read More

The Power of the Noncompete Clause

Noncompete clauses seem nearly universal—and not just in technology companies. But the effect is especially strong on specialist and "star" inventors, according to new research by Harvard Business School's Matt Marx, Deborah Strumsky, and Lee Fleming. Marx reflects on the business and career implications in this Q&A. Read More

Do Employment Protections Reduce Productivity? Evidence from U.S. States

Business leaders and policymakers often claim labor market rigidities reduce productivity and competitiveness by altering production choices from their unconstrained best. These theories are tested using the adoption of employment protection regulations by U.S. state courts over the last three decades. Consistent evidence is found following the introduction of the employment regulations that 1) firm production choices are altered, 2) firm employment turnover declines, and 3) firm productivity declines. Entrepreneurship rates also decline in the states after the court decisions. The interpretation of the results, however, is somewhat clouded by very large employment growth that follows the regulations too. Read More

Noncompetes and Inventor Mobility: Specialists, Stars, and the Michigan Experiment

Two years ago, Microsoft and Google wrangled publicly when Google hired away a star Microsoft employee who had signed an agreement not to compete against Microsoft for one year after leaving the company. Managers enjoy a love/hate relationship with such "noncompete" covenants depending on whether they are gaining or losing talent. This study, which looks at Michigan's inadvertent reversal of its enforcement policy in the mid-1980s, is the first to apply longitudinal analysis to the question of noncompete enforcement. Given the importance of mobility for knowledge spillovers and entrepreneurship, the evidence has implications for day-to-day behavior, careers, business, and policy. Read More

Whatever Happened to Caveat Emptor?

In many world nations, consumers enjoy vast protections that are relatively new on the scene. Why the rapid rise in consumer protectionism? Why do these efforts vary from country to country? A discussion with professor Gunnar Trumbull on his new book, Consumer Capitalism. Read More

What Companies Lose from Forced Disclosure

Increased corporate financial reporting may benefit many parties, but not necessarily the companies themselves. New research from Harvard Business School professor Romana Autrey and coauthors looks at the relationship between executive performance and public disclosure. Read More

What’s Law Got to Do with It: A Systems Approach to Management

Mainstream management theory often ignores the influence of law on the competitive environment and on the resources of the firm. The author attempts to spark greater academic interest in the legal aspects of management by proposing a systems approach to law and management "that explains how law affects the competitive environment, the firm's resources, and the activities in the value chain." Read More

Using the Law to Strategic Advantage

Used proactively, corporate legal departments can give you a strategic advantage, argues HBS professor Constance Bagley. It's time for a new relationship between managers and legal. Read More

IPR: Protecting Your Technology Transfers

Countries are adopting stronger intellectual property rights to entice international corporate investment. But who really benefits from IPR? Should multinationals feel secure that their secrets will be protected? A Q&A with professor C. Fritz Foley. Read More

Lessons from a Nasty Trade Dispute

Even if the World Trade Organization rules in favor of your country’s government, it may not mean the end of a business dispute. HBS professors Rawi Abdelal and Laura Alfaro explain why. Read More

The State of the Markets

Technology is bringing about vast changes in worldwide financial markets, generating improvements in efficiency, speed and economies of scale. But as technological change continues to occur, attention must also be paid to changes in the role that regulation plays, said industry leaders in a panel on "Technology and the Future of the Financial Markets." Read More