- 15 May 2009
- Working Paper Summaries
Barriers to Household Risk Management: Evidence from India
Insurance markets are growing rapidly in developing countries. Despite the promise of these markets, however, adoption to date has been relatively slow. Yet households often remain exposed to movements in local weather; regional house prices; prices of commodities like rice, heating oil, and gasoline; and local, regional, and national income fluctuations. In many cases, financial contracts simply do not exist to hedge these exposures, and when contracts do exist their use is not widespread. Why don't financial markets develop to help households hedge these risks? Why don't more households participate when formal markets are available? HBS professor Shawn Cole and coauthors attempt to shed light on these questions by studying participation in rural India in a rainfall risk-management product that provides a payoff based on monsoon rainfall. The results suggest that it may take a significant amount of time—and substantial marketing efforts—to increase adoption of risk-management tools at the household level. Key concepts include: To increase the insurance penetration rate of insurance products, it is important to minimize transaction and administrative costs and foster competition among insurance providers. Technological advances and contractual innovations may improve these products. The estimated significance of trust and vendor experience suggests that product diffusion through the population may be relatively slow until a track record is established. Optimal contract design could help by paying a positive return with sufficient frequency. "Catastrophe"-type insurance might be most beneficial for households, since it provides payouts that are concentrated in states of nature where the marginal utility of consumption is particularly high. Closed for comment; 0 Comments.
- 15 May 2009
- Working Paper Summaries
Money or Knowledge? What Drives Demand for Financial Services in Emerging Markets?
Why is there apparently limited demand for financial services in emerging markets? On the one hand, low-income individuals may not want formal services when informal savings, credit, and insurance markets function reasonably well, and the benefits of formal financial market participation may not exceed the costs. On the other hand, limited financial literacy could be the barrier: If people are not familiar or comfortable with products, they will not demand them. These two views carry significantly different implications for the development of financial markets around the world, and would suggest quite different policy decisions by governments and international organizations seeking to promote "financial deepening." HBS professor Shawn Cole and coauthors found that financial literacy education has no effect on the probability of opening a bank savings account for the full population, although it does significantly increase the probability among those with low initial levels of financial literacy and low levels of education. In contrast, modest financial subsidies significantly increase the share of households that open a bank savings account within the subsequent two months. Key concepts include: Subsidies or price reductions may represent a more cost-effective way of drawing households into the financial system. Financial literacy efforts targeted at the general population may be relatively ineffective. These results do not necessarily constitute support for financial literacy education even among the low-literacy subpopulation. Even if financial literacy programs are carefully targeted, they may still not be cost-effective. Closed for comment; 0 Comments.
- 14 May 2009
- Working Paper Summaries
Quantity vs. Quality and Exclusion by Two-Sided Platforms
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. Key concepts include: A simple model captures the incentives that two-sided platforms have to exclude some participants who would be willing to pay the platform's access fees. Platforms' exclusion incentives are fundamentally determined by a tradeoff between quality and quantity. Closed for comment; 0 Comments.
- 08 May 2009
- Working Paper Summaries
Capitalizing On Innovation: The Case of Japan
How can Japan create a better business environment for innovation? Japan presents a unique case of industrial structures that have produced remarkable developments in certain sectors but seem increasingly inadequate to do the same in modern technology industries, which rely on ecosystems of firms producing complementary products. Robert Dujarric and HBS professor Andrei Hagiu present three case studies of software, animation, and mobile telephony to illustrate potential sources of inefficiencies. Like all advanced economies, Japan faces two interconnected challenges. The first challenge is rising competition from lower-cost countries with the capacity to manufacture midrange and in some cases advanced industrial products. At the same time, Japan confronts changes in the relative weights of manufacturing and services, including soft goods, which go against the country's long-standing competitive advantage and emphasis on manufacturing. If Japan is to continue to prosper in a world where its ability to rely principally on manufacturing will diminish, its policymakers will need to capitalize on its untapped innovative power. Key concepts include: The Japanese hierarchical industry organizations can simply "lock out" certain types of innovation indefinitely by perpetuating established business practices. This is the case with software, an industry in which Japan is strikingly weak. Even when vertical hierarchies produce highly innovative sectors in the domestic market—as is the case with animation and wireless mobile communications—the exclusively domestic orientation of the "hierarchical industry leaders" can entail large missed opportunities for other members of the ecosystem, who are unable to fully exploit their potential in global markets. Private-sector initiative is critical in developing the venture-capital sector, which is a key and necessary ingredient for stimulating innovation in modern industries. Closed for comment; 0 Comments.
- 07 May 2009
- Working Paper Summaries
Broadening Focus: Spillovers and the Benefits of Specialization in the Hospital Industry
What is the optimal scope of operations for firms? This question has particular relevance for the US hospital industry, because understanding the effects of focus and spillovers might help hospitals determine how they should balance focusing in a single clinical area with building expertise in related areas. While some scholars argue that narrowing an organization's set of activities improves its operational efficiency, others have noted that seemingly unfocused operations perform at a high level and that a broader range of activities may in fact increase firm value. This study by HBS doctoral student Jonathan Clark and professor Robert Huckman highlights the potential role of spillovers—specifically complementary spillovers—in generating benefits from focus at the operating unit level. Key concepts include: Hospitals devoting a greater portion of their business to treating patients in related service categories (i.e., those with the potential for knowledge spillovers) experience higher returns to specialization in a focal service. Ultimately, these results provide a potential explanation for why there might be decreasing returns to focusing an organization on a single operating activity (or narrow set of activities), especially when it is possible to invest in other activities that complement the organization's area of concentration. Closed for comment; 0 Comments.
- 04 May 2009
- Working Paper Summaries
An Ounce of Prevention: The Power of Public Risk Management in Stabilizing the Financial System
The present financial crisis should remind us that private financial institutions and markets cannot always be counted upon to manage risk optimally on their own. Almost everyone now recognizes that the government has a critical role to play—as the lender, insurer, and spender of last resort—in times of crisis. But effective public risk management is also needed in normal times to protect consumers and investors and to help prevent financial crises from starting in the first place. According to HBS professor David Moss, the biggest threat to our financial system today is posed not by commercial banks (as in 1933), but rather by systemically significant institutions (outside of commercial banking) that have the potential to trigger financial avalanches. The threat posed by these financial institutions is only compounded by the unprecedented federal guarantees introduced in response to the current crisis and the pervasive moral hazard they spawn. Under the system that Moss proposes, no financial institution would be too big to fail. Key concepts include: Ensure financial stability in the future by identifying and regulating systemically significant institutions on an ongoing basis, before crisis strikes. The biggest risk management problem we face today in the financial sector is not commercial banks, but rather systemically significant institutions that pose a threat to the broader financial system (because of their size and interconnectedness) and, as a result, carry implicit federal guarantees. The fifty years of relative financial calm that followed the Glass-Steagall Act of 1933, the Securities Exchange Act of 1934, and the Banking Act of 1935 strongly suggest that sound public risk management can make a positive difference. To the extent that systematically significant financial institutions will receive federal support in the event of a general financial crisis, such support should be formalized (and paid for) in advance. Although all government guarantees can generate moral hazard, implicit guarantees are often the worst kind. Closed for comment; 0 Comments.
- 30 Apr 2009
- Working Paper Summaries
Earnings Quality and Ownership Structure: The Role of Private Equity Sponsors
Although 99 percent of the companies operating in the United States are private, according to the American Institute of Certified Public Accountants, their accounting practices remain largely unknown due mainly to the lack of publicly available financial statements. In this study, HBS professor Sharon P. Katz used a unique database of firms with privately held equity and publicly held debt to examine how two different ownership structures-private equity sponsorship and non-private equity sponsorship-affect firms' financial reporting practices, financial performance, and stock returns in the years preceding and following the initial public offering (IPO). Key concepts include: Despite their economic importance and the management expertise they bring, little is known about the role private equity (PE) sponsors play in their portfolio companies' accounting practices. The presence of and monitoring by PE sponsors restrains upward earnings management and induces a higher frequency of timely loss recognition, both pre- and post-IPO. Majority ownership by a PE sponsor is associated with better stock price performance relative to management-owned firms. Larger PE sponsor size is positively associated with better long-term financial and stock price performance when a firm goes public. Closed for comment; 0 Comments.
- 29 Apr 2009
- Working Paper Summaries
Female Empowerment: Impact of a Commitment Savings Product in the Philippines
Does access to personal savings increase female decision-making power in the household? The answer could be important for policymakers looking to increase female empowerment. HBS professor Nava Ashraf and colleagues developed a commitment savings product called a SEED (Save, Earn, Enjoy Deposits) account with a small, rural bank in the Philippines. The SEED account requires that clients commit not to withdraw funds that are in the account until they reach a goal date or amount, but it does not explicitly commit the client to continue depositing funds after opening the account. This working paper examines the impact of the commitment savings product on both self-reported decision-making processes within the household and the subsequent household allocation of resources. Key concepts include: The commitment savings product positively impacts household decision-making power for women (i.e., the household is more likely to buy female-oriented durables) and self-perception of savings behavior (time-inconsistent females report being more disciplined savers), as well as actual consumption decisions regarding durable goods. A simple design feature such as a restriction on withdrawals or encouraging savings through marketing or door-to-door deposits can benefit women in search of self-control devices as well as those who desire to have more decision-making power in the household. Closed for comment; 0 Comments.
- 24 Apr 2009
- Working Paper Summaries
Corporate Social Entrepreneurship
Accelerated organizational transformation faces a host of obstacles well-documented in the change management literature. Because corporate social entrepreneurship (CSE) expands the core purpose of corporations and their organizational values, it constitutes fundamental change that can be particularly threatening and resisted. Furthermore, it pushes the corporation's actions more broadly and deeply into the area of social value creation where the firm's experiences and skill sets are less developed. The disruptive social innovations intrinsic to the CSE approach amplify this zone of discomfort. Fortunately, the experiences of innovative companies such as Timberland and Starbucks show how these challenges may be overcome. Key concepts include: Values-based leadership, the synergistic generation of social and economic value, and strategic cross-sector alliances are key ingredients to achieving a sustainably successful business. For companies to move their corporate social responsibility (CSR) activities to the next level, they need to rethink their current approaches to CSR, tapping into the creativity of each individual. Like all entrepreneurship, CSE is about creating disruptive change in the pursuit of new opportunities. It combines the willingness and desire to create joint economic and social value with the entrepreneurial redesign, systems development, and action necessary to carry it out. Closed for comment; 0 Comments.
- 23 Apr 2009
- Working Paper Summaries
Does Public Ownership of Equity Improve Earnings Quality?
The quality of accounting information is influenced by an array of factors, most of which stem from the demand for such information for use in contractual arrangements and from the incentives and opportunities of management to manage the reported numbers. Both the demand for quality accounting information for contractual purposes and management incentives to adjust the reported earnings are likely to be influenced by whether the equity of the company is privately held or publicly traded. This study examines the differential earnings quality of private equity and public equity firms in order to shed light on how public ownership of equity affects the quality of firms' earnings. The research highlights how the presence of public equity investors affects management's reporting behavior. Key concepts include: While public equity and private equity firms differ along various quality and financial attribute dimensions, neither type of firm "dominates" the other as having the highest quality of financial reports. Management of firms whose equity is publicly traded has stronger incentives to manage earnings, thus reducing the reliability and usefulness of financial reports. Public equity firms report more conservatively than privately held firms, although this result does not necessarily imply a higher quality of reporting for the former group of firms. Closed for comment; 0 Comments.
- 22 Apr 2009
- Working Paper Summaries
Where is the Pharmacy to the World? International Regulatory Variation and Pharmaceutical Industry Location
The era of paternalistic medicine has passed, but the notion that patients can act as consumers and make appropriate decisions concerning medical treatment poses countervailing risks of its own. A better accommodation among key players needs to be struck to foster the safe use of pharmaceuticals, according to HBS professor Arthur Daemmrich. The "pharmacy to the world," once located at the intersection of Germany, Switzerland, and France, today is found in the United States. Studies of the industry have attributed this sustained competitive advantage to a variety of factors, including U.S. intellectual property policies, funding for biomedical research through the National Institutes of Health, the absence of government controls on drug prices, and the availability of venture capital and other factors that fostered the growth of the biotechnology industry. The data and analysis presented in this working paper, however speculative, are an initial step toward deepening the understanding of interrelationships between government regulation, patients' mobilization both as regulators and as consumers, and the functioning of the pharmaceutical industry. Key concepts include: An open question is whether the current "pharmacy to the world" of the United States will lose ground to competitors from developing countries, especially India and China. Regulation plays a role in the success and failure of the pharmaceutical industry. The consumer mode that has emerged in the United States has proven easy to manipulate for the industry, as in cases of corporate-financed organizations claiming to be self-organized by patients. The consumer mode in the United States has also driven a focus on disease prevalent in wealthy countries, to the detriment of research into HIV/AIDS, malaria, and other ailments prevalent in the developing world. The combination of public attention to drug prices, health concerns from product withdrawals due to adverse reactions, and criticisms of the failure to deliver medicines to patients in developing countries pose significant challenges to the industry and regulators. The emergence of a consumer model of regulation poses a number of critical, unresolved questions about the longer-term role of government, industry, the medical profession, and citizens. Closed for comment; 0 Comments.
- 20 Apr 2009
- Working Paper Summaries
Corporate Misgovernance at the World Bank
This paper examines the politics of corporate governance at the world's largest appropriations committee, the World Bank's Board of Executive Directors, and exposes a weakness in the design of the World Bank's decision-making structure. Any large public organization faces a challenge of representation and management. Since all decisions cannot be made by all members, founders often grant a more nimble body with decision-making powers. But representatives on the decision-making body may face a temptation to govern in the interests of their own wallet or narrow constituency rather than in the interests of the larger body. In 2008, the Bank's two primary component institutions—the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)—committed nearly $25 billion in loans and grants through some 300 development projects around the globe. Where did it go? By exploring the political dynamics and corporate governance of an international appropriations committee, we not only learn about international organizations but also the nature of the international system itself. Key concepts include: A majority of World Bank member countries never or rarely get a seat at the table. The Executive Board is used as a platform to channel more or greater Bank loans and grants to the home countries of the directors. Countries receive a large increase in Bank loans and grants during years when they have a seat on the board. On average, a developing country serving on the board can expect a doubling of its normal funding levels. In absolute terms, board membership is rewarded with a nearly $60 million bonus, on average. Finding that countries can take advantage of their position of power has implications for other international appropriations committees like the European Union, International Monetary Fund, regional development banks, and United Nations agencies. Closed for comment; 0 Comments.
- 17 Apr 2009
- Working Paper Summaries
The Investment Strategies of Sovereign Wealth Funds
The role of sovereign wealth funds (SWFs) in the global financial system has been increasingly recognized in recent years, and many reports suggest that SWFs are often employed to further the geopolitical and strategic economic interests of their governments. The resources controlled by these funds—estimated to be $3.5 trillion in 2008—have grown sharply over the past decade. Projections, while inherently tentative due to the uncertainties about the future path of economic growth and commodity prices, suggest that they will be increasingly important actors in the years to come. Despite this significant and growing role, financial economists have devoted remarkably little attention to these funds. The lack of scrutiny must be largely attributed to the deliberately low profile adopted by many SWFs, which makes systematic analysis challenging. Bernstein, Lerner, and Schoar analyze how SWFs vary in their investment styles and performance across various geographies and governance structures. Taken as a whole, results suggest that high levels of home investments by SWFs, particularly those with the active involvement of political leaders, are associated with trend chasing and worse performance. Key concepts include: Sovereign wealth funds (SWFs) present an ideal object of investigation to understand the interaction between finance and political economy. The direct private equity investments analyzed here are one of the few dimensions of SWF investments on which it is possible to obtain comprehensive information. SWFs seem to engage in a form of trend chasing, since they are more likely to invest at home when domestic equity prices are higher, and invest abroad when foreign prices are higher. SWFs where politicians are involved have a much greater likelihood of investing at home than those where external managers are involved. Funds with politicians involved invest in higher P/E (price earnings ratio) industries, which have a negative valuation change in the year after the investment. Much research remains to better understand the underlying investment objectives of SWFs, their investment strategies, and their organizational differences, as well as the constraints they face due to internal and external pressures. Closed for comment; 0 Comments.
- 16 Apr 2009
- Working Paper Summaries
Phenomenological Assumptions and Knowledge Dissemination within Organizational Studies
Field-wide integration of knowledge generated by subfield specialists is critical for new discoveries and for a more comprehensive and accurate understanding of complex phenomena. In spite of the value of broadly disseminating knowledge within the social and physical sciences, scholarly discourse tends to be contained within subfields of research. Further constraining innovation and understanding, knowledge dissemination between academics and practitioners or clinicians is often limited and inaccurate. In this article, UCLA professor Corinne Bendersky and HBS professor Kathleen L. McGinn introduce "phenomenological assumptions"—revealed beliefs about the fundamental qualities of the phenomenon under investigation and its relationship to the environment in which it occurs—as barriers limiting the integration of knowledge generated within a subfield into the broader intellectual discourse of its field. Key concepts include: Explicating assumptions underlying academic research may make new information more transparent and easily adopted. Assumptions can pose a barrier limiting the integration of knowledge generated within a subfield into the broader intellectual discourse of its field. Specifically, assumptions that negotiations are one-shot "at the table" interactions make it more difficult for non-negotiations organizational scholars to recognize and appreciate the relevance of the findings to broader organizational research. The negotiation studies in this data set, spanning 15 years of published research in top-tier journals, seldom were explicit about the assumptions made and seldom acknowledged reasonable boundary conditions for their findings. Closed for comment; 0 Comments.
- 16 Apr 2009
- Working Paper Summaries
Gray Markets and Multinational Transfer Pricing
Gray market goods are brand-name products that are initially sold into a designated market but then resold through unofficial channels into a different market. Gray markets can arise when transaction and search costs are low enough to allow products to "leak" from one market segment back into another. Examples of industries with active gray markets include pharmaceuticals, automobiles, and electronics. Understandably, reactions to gray market encroachment are mixed. On the one hand, consumer advocates and governments have applauded the increasing role that gray markets have played in improving competition for domestic goods. On the other hand, multinationals have decried the increasing role of gray markets in the economy, with an estimated $40 billion in cannibalized sales resulting from gray markets in the information technology sector alone. This study investigates the optimal price of a multinational's internal transfers and the consequences of regulations mandating arm's-length transfer pricing. Key concepts include: A shift to arm's-length transfer pricing erodes domestic consumer surplus by making the gray market less competitive domestically. In the presence of a gray market, the transfer price that maximizes a multinational's profits may also be the same one that maximizes the social welfare of the domestic economy that houses it. Arm's-length standard enforcement efforts targeting multinationals that observe little product leakage from foreign markets or that operate in domestic markets that are sufficiently competitive may lead to net welfare gains for the domestic economy. At the same time, focusing arm's-length standard enforcement efforts on multinationals that work in industries where gray markets provide the only means of domestic competition may make the domestic economy worse off. Closed for comment; 0 Comments.
- 09 Apr 2009
- Working Paper Summaries
The Economics of Structured Finance
This paper investigates the spectacular rise and fall of structured finance. HBS professor Joshua Coval, Princeton professor Jakub Jurek, and HBS professor Erik Stafford begin by examining how the structured finance machinery works. They construct simple examples of collateralized debt obligations (CDOs) that show how pooling and tranching a collection of assets permits credit enhancement of the senior claims. They then explore the challenge faced by rating agencies, examining, in particular, the parameter and modeling assumptions that are required to arrive at accurate ratings of structured finance products. They conclude with an assessment of what went wrong and the relative importance of rating agency errors, investor credulity, and perverse incentives and suspect behavior on the part of issuers, rating agencies, and borrowers. Key concepts include: Small errors that would not be costly in the single-name market are significantly magnified by the collateralized debt obligation structure, and can be further magnified when CDOs are created from the tranches of other collateralized debt obligations, as was common in mortgage-backed securitizations. Explicitly acknowledging that parameters are uncertain would go a long way towards solving this problem. However, adopting this perspective on parameter uncertainty means far fewer AAA-rated securities can be issued and therefore present fewer opportunities to offer investors attractive yields. Investors need to recognize the fundamental difference between single name and structured securities in terms of exposure to systematic risk. Unlike traditional corporate bonds, whose fortunes are primarily driven by firm-specific considerations, the performance of securities created by tranching large asset pools is strongly affected by the performance of the economy as a whole. Senior structured finance claims have the features of economic catastrophe bonds, in that they are designed to default only in the event of extreme economic duress. Because credit ratings do not indicate conditions in which default is likely to happen, they do not capture exposure to systematic risks. The lack of consideration for certain types of exposure reduces the usefulness of ratings, no matter how precise they are made to be. Closed for comment; 0 Comments.
- 03 Apr 2009
- Working Paper Summaries
Applying the Care Delivery Value Chain: HIV/AIDS Care in Resource Poor Settings
The prevention and treatment of a complex disease such as HIV/AIDS in resource‐poor settings presents enormous challenges. Many of the social and economic factors that make populations living in these settings vulnerable to HIV/AIDS such as poverty, malnutrition, and political instability conspire to create barriers to effective care delivery. Understanding how interventions are related to each other and how local socioeconomic factors influence them is critical to effective program design. The Care Delivery Value Chain (CDVC) looks at care as an overall system, not as a series of discrete interventions, and describes the activities required to deliver care, illustrating their sequence and organization. Government agencies, philanthropic organizations, and non‐governmental organizations can use the framework to improve HIV/AIDS care delivery. Key concepts include: The CDVC framework allows one to outline and analyze the process of care delivery for a medical condition and provide maximize value for patients. The CDVC framework can map the activities associated with HIV/AIDS care delivery in resource-poor settings to illuminate effective linkage and coordination. The CDVC framework allows synthesis of knowledge about the overall system of care delivery and provides a common language for improving it. Closed for comment; 0 Comments.
- 02 Apr 2009
- Working Paper Summaries
The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization
Corporate hierarchies are becoming flatter: Spans of control have broadened, and the number of levels within firms has declined. But why? Maria Guadalupe of Columbia University and HBS professor Julie M. Wulf investigate how increased competition in product markets—and, in particular, product market competition resulting from trade liberalization—may be fundamentally altering how decisions are being made. Guadalupe and Wulf also shed light on the possible reasons behind certain organizational choices and on the importance of communication and decision-making processes inside firms. Key concepts include: As firms become flatter, they also fundamentally alter how decisions are made. Greater international competition following trade liberalization leads to flatter firms. When competition increases the value of quick and responsive decision-making, firms eliminate layers to improve the quality and speed of the transmission of information or increase the authority of division managers to become more adaptive to local information. U.S. firms in manufacturing industries more exposed to the trade liberalization reduce the number of hierarchical levels, broaden the span of control for the chief executive, and increase total pay and incentive-based pay for division managers. Closed for comment; 0 Comments.
- 01 Apr 2009
- Working Paper Summaries
The Contingent Nature of Public Policy and Growth Strategies in the Early Twentieth-Century U.S. Banking Industry
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. Key concepts include: The histories of firms' external environments may be essential to an understanding of their structure and current success, with implications for organizational theory. Closed for comment; 0 Comments.
On Good Scholarship, Goal Setting, and Scholars Gone Wild
When confronted by anecdotal evidence and some causal evidence, how should scholars—and indeed businesses and society—react? In this response to a critique in the journal Academy of Management Perspectives, the authors articulate the aims of their article "Goals Gone Wild: How Goals Systematically Harm Individuals and Organizations," describe points of disagreement with the critics, offer a definition of good scholarship, and suggest a program of research for future studies of goal setting. Key concepts include: Future research should investigate both the constructive and harmful effects of goals. These studies will require new and creative approaches. Anecdotal evidence matters. Given that one large negative effect can overwhelm the influence of many positive effects, anecdotes and empirical results linking goals with harmful outcomes deserve more attention and systematic research. As financial crises, Ponzi schemes, and the collapse of the automotive industry demonstrate, the combination of unethical behavior, risk-taking and poor judgment can be toxic. Three areas of research with significant prospects for illuminating potential problems are the links between goal setting and unethical behavior, goal setting and excessive risk-taking, and goal setting and judgment. Closed for comment; 0 Comments.