- 12 Sep 2007
- Op-Ed
Building Sandcastles: The Subprime Adventure
The early days of the subprime industry seemed to fulfill a market need—and millions of renters became homeowners as a result. But rapidly escalating home prices masked cracks in the subprime foundation. HBS professor Nicolas P. Retsinas, who is also director of Harvard University's Joint Center for Housing Studies, lays out what went wrong and why. Closed for comment; 0 Comments.
- 12 Sep 2007
- Working Paper Summaries
The Ethnic Composition of U.S. Inventors
The contributions of immigrants to U.S. technology formation are staggering. While the foreign-born account for just over 10 percent of the U.S. working population, they represent 25 percent of the U.S. science and engineering workforce and nearly 50 percent of those with doctorates. Even looking within the Ph.D. level, ethnic researchers make an exceptional contribution to science as measured by Nobel Prizes, election to the National Academy of Sciences, patent citation counts, and so on. The magnitude of these ethnic contributions raises many research and policy questions: 4 examples are debates regarding the appropriate quota for H1-B temporary visas, the possible crowding out of native students from the science and engineering fields, the brain-drain or brain-circulation effect on sending countries, and the future prospects for U.S. technology leadership. This paper describes a new approach for quantifying the ethnic composition of U.S. inventors with previously unavailable detail. Key concepts include: Ethnic scientists and engineers are an important and growing contributor to U.S. technology development. The rapidly increasing ethnic contribution in high-tech sectors is due to the strong growth of the Chinese and Indian ethnicities. Shifts in the concentration of ethnic inventors appear to facilitate changes in the geographic composition of U.S. innovation. Closed for comment; 0 Comments.
- 06 Sep 2007
- Working Paper Summaries
The Excess Burden of Government Indecision
Virtually all U.S. policymakers, budget analysts, and academic experts agree that the United States faces a very serious, if not a grave, long-term fiscal problem. Yet few policymakers will publicly say how or when they would fix it, perhaps because they fear being the bearer of bad news and getting voted out of office. Delaying the resolution of fiscal imbalances incurs two costs, however. First, it leaves a larger bill for a smaller number of people to pay. Second, and of primary interest to this research, it perpetuates uncertainty, leading economic agents to make suboptimal saving, investment, and other decisions, and reducing welfare. This research identifies and measures this "excess burden" of government indecision and finds that it is economically significant. Key concepts include: Whatever policymakers gain from delaying bad news, delay fosters and exacerbates economic uncertainty. As individuals wait to learn the level of future Social Security benefits, the fact of having to wait materially affects their consumption, saving, and portfolio decisions. Most important, it reduces welfare. The result of government indecision, in this instance, can exceed more than .5 percent of individuals' resources, a significant amount. The excess burden is highly sensitive to the degree of risk aversion, the number of years one must wait to have the policy uncertainty resolved, and the size and probability of policy changes. People experience sizable welfare gains from learning early about future changes in benefits and tax rates regardless of their attitudes toward risk or the uncertainty they face about their own labor earnings. Closed for comment; 0 Comments.
- 27 Aug 2007
- Op-Ed
Mattel: Getting a Toy Recall Right
Mattel has been criticized heavily for having to recall not once but twice in as many weeks 20 million toys manufactured in China. But Mattel also deserves praise for stepping up to its responsibilities as the leading brand in the toy industry. Harvard Business School professor John Quelch examines what Mattel did right. Key concepts include: Mattel's recall of 20 million toys made in China was handled deftly: The CEO took personal charge of the problem. Consumers are being empowered by Mattel's communications. The recall Web site is a model of excellence. Mattel's compensation program to customers may not be sufficient. Closed for comment; 0 Comments.
- 13 Aug 2007
- Research & Ideas
The Dark Side of Trust
It has been well documented that strong trust between a buyer and supplier provides many advantages, such as increased productivity. But according to new research coauthored by HBS professor Felix Oberholzer-Gee, trusting relationships can also have a negative side that managers must take into account. Key concepts include: Many scholars agree that trust between suppliers and buyers generates significant benefits including motivating better performance and reducing negotiation time. Breaking apart a trusted buyer-supplier relationship can be a significant barrier to entry for competitors. The negative side of trust is that it can blind you to opportunities that arise outside established relationships. Closed for comment; 0 Comments.
- 25 Jul 2007
- Lessons from the Classroom
The Evolution of Apple
Apple's continuing development from computer maker to consumer electronics pioneer is rich material in a number of Harvard Business School classrooms. Professor David Yoffie discusses his latest case study of Apple, the 5th update in 14 years, which challenges students to think strategically about Apple's successes and failures in the past, and opportunities and challenges in the future. Key concepts include: Apple has an undeniable hit with the iPod, yet faces the question of whether the growth of that business and Apple overall can be sustained. Looking at Apple through the lens of the company's previous chief executives gives students insights into why Apple lost its way after Steve Jobs left the company. Student opinion of Apple tends to be excessively positive or excessively negative, depending on the company's current fortunes. Closed for comment; 0 Comments.
- 19 Jul 2007
- Research & Ideas
Podcast: Rupert Murdoch and the Wall Street Journal
Media baron Rupert Murdoch's bid to acquire Dow Jones and the Wall Street Journal is one step closer to fruition. In this interview, Professor Bharat N. Anand discusses the proposed deal and pressures facing the newspaper business. Closed for comment; 0 Comments.
- 10 Jul 2007
- Working Paper Summaries
The Persuasive Appeal of Stigma
Are minority groups more persuasive when their conversations with majority groups are conducted face-to-face? Interracial interactions are among the most perilous social occasions in contemporary America, full of opportunities for things to go awry. People in stigmatized groups, for instance, may worry that members of majority groups hold prejudiced attitudes that can lead to discriminatory or offensive behavior. Members of majority groups, for their part, may fear coming across as biased or racist. While psychology has traditionally explored the damaging effects of such interactions on social exchange, new findings contribute to the growing recognition that stigma may be a two-sided construct, marked with a host of costs but occasional benefits. This study demonstrates the persuasive power of stigmatized individuals and shows how self-presentational concerns may change attitudes. Key concepts include: During face-to-face interactions, stigmatized minorities may sometimes have an edge in persuading majority group members. The stigma of being labeled racist may in some situations be potent enough to promote an ironic power reversal. While whites may assume the more solicitous role typically associated with stigmatized minorities, it is important to add that the discomfort that accompanies such efforts may simply pose yet another problem for members of stigmatized groups to manage. This research underscores the need to examine social interactions around stigma in real-world contexts, from organizations to interpersonal relationships. Closed for comment; 0 Comments.
- 25 Jun 2007
- Research & Ideas
HBS Cases: Beauty Entrepreneur Madam Walker
She may have been the first self-made African American millionaire. Born of emancipated slaves, Madam C.J. Walker traveled from the cotton fields to business fame as a purveyor of hair-care products that offered beauty and dignity. Harvard Business School's Nancy F. Koehn and Katherine Miller explain what motivated her triumph. Closed for comment; 0 Comments.
- 18 Jun 2007
- Op-Ed
Leveling the Executive Options Playing Field
Harvard Business School professor Mihir A. Desai recently presented testimony to a U.S. Senate subcommittee looking at the subject of executive stock options. His theme: A "dual-reporting system" makes it difficult for investors and tax authorities to learn the real numbers. Closed for comment; 0 Comments.
- 04 Jun 2007
- Research & Ideas
Is Health Care Making You Better—or Dead?
Professor Regina Herzlinger has been studying the US health care system for decades, advocating for consumer-driven reform as the best remedy. But the slow pace of change, which she attributes to a fat-cat network of insurers, policymakers, hospitals, and even employers, has her fed up. Her new book, Who Killed Health Care? adopts the emotional language of a manifesto in demanding change to make health care more responsive to customers, affordable to those in need, and a hotbed of innovation and entrepreneurship. Closed for comment; 0 Comments.
- 30 May 2007
- Research & Ideas
Health Care Under a Research Microscope
Perhaps no industry has caught the research attention of Harvard Business School faculty as much as health care. Researchers are investigating business-focused solutions on everything from improving team work among surgical teams to developing market motivations that increase the use of water purification in poor villages. Key concepts include: The $2 trillion American health care system has grown bloated and overly expensive, and it delivers poor service to many patients. Harvard Business School faculty are looking at the system through a business management perspective to recommend changes in almost all aspects of health care research and delivery. Around the world, HBS researchers are studying ways to improve medical services to the poor using techniques that include everything from motivational marketing to microfinance. Closed for comment; 0 Comments.
- 23 May 2007
- Working Paper Summaries
What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns
Most industries exhibit some degree of geographic concentration. Although many theories attempt to explain this agglomeration, empirical tests of these theories are difficult as they all predict similar outcomes within individual industries. This study considers how industries coagglomerate—that is, which industry pairs locate together—to form a tractable analysis. The authors specifically study the relative importance of proximity to suppliers and customers, to firms using similar labor, and the sharing of ideas for explaining agglomeration. Key concepts include: In manufacturing, transport costs for goods, people, and ideas all still seem to matter. Given the remarkable decline of transportation costs over the 20th century, it is striking that transport costs remain so important. It is unclear how these results would extend to non-manufacturing industries. Services are costly to transport since they involve face-to-face interaction, and idea flows might take precedence in non-manufacturing industries. Closed for comment; 0 Comments.
- 22 May 2007
- Working Paper Summaries
Strategy-Proofness versus Efficiency in Matching with Indifferences: Redesigning the NYC High School Match
One of the goals of school matching systems is to limit the extent to which students and parents feel it necessary to "game the system" to be accepted at a favored school. Several years ago, the authors of this paper assisted the New York City Department of Education in redesigning the way it matched over 90,000 students entering public high schools each year. The situation in New York City is a hybrid: Some schools actively rank potential students, others have no preferences, and still others fall in between. This paper concentrates on the welfare considerations and incentives that arise in school choice due to the fact that many students are regarded by schools as equivalent. The research develops and expands on economic theory demanded by the design of school choice mechanisms. Key concepts include: As economists are more often asked to design practical markets and allocation mechanisms, they will increasingly navigate two-way feedback between theory and design. The paper raises new theoretical questions. It would be helpful to have answers before the next major design or redesign of school matching systems. Closed for comment; 0 Comments.
- 18 May 2007
- Working Paper Summaries
Media Markets and Localism: Does Local News en Español Boost Hispanic Voter Turnout?
The increased integration of markets for news and entertainment means that more viewers can watch shows that better match their preferences, whether that means American football, Japanese anime, or Mexican soap operas. But is there an attendant risk to civic society, as some scholars claim? Do locally engaged citizens turn into passive viewers? The explosion in the U.S. of local television news in Spanish provides an ideal stage for probing these questions. This paper tests whether the presence of local television news affects local civic engagement in the form of voter turnout. Key concepts include: The availability of Spanish-language local television news significantly boosts Hispanic voter turnout. Regulatory policies should protect local media. Closed for comment; 0 Comments.
- 13 Apr 2007
- Working Paper Summaries
Incorporating Price and Inventory Endogeneity in Firm-Level Sales Forecasting
Benchmarking and forecasting firm level performance are key activities for both managers and investors. Retailer performance can be tracked using a number of metrics including sales, inventory, and gross margin. For operational reasons, the sales, inventory, and gross margin for a retailer are interrelated. Retailers often use inventory and margin to increase sales; and sales, conversely, provide input to the retailer’s decisions on inventory and margins. Inventory and margin also influence each other. This research uses firm-level annual and quarterly data for a large cross-section of U.S. retailers listed on NYSE, AMEX, or NASDAQ to construct a model that examines the interrelationships among sales per store, inventory per store, and margin. Key concepts include: This model can be used to benchmark retailers' performance in sales, inventory, and gross margin simultaneously. The model can also be used to generate sales forecasts even when sales were managed using inventory and gross margin. Closed for comment; 0 Comments.
- 26 Mar 2007
- Research & Ideas
Learning from Failed Political Leadership
Strategic independence and better leadership assessment—these are the critical issues for both business and government in the future, says Professor D. Quinn Mills. In this Q&A he describes key lessons from his new book, Masters of Illusion, coauthored with Steven Rosefielde. A book excerpt follows. Key concepts include: Business leaders must be able to predict changing dynamics between powerful organizations under multiple international economic and geopolitical scenarios. A major failing of current leadership models is the lack of knowledge, awareness, or even interest in life beyond our country's borders, a limitation of growing importance as the global economy expands. The most important threats to America in the decade ahead are from major powers, not terrorists per se. Closed for comment; 0 Comments.
- 19 Mar 2007
- Research & Ideas
Handicapping the Best Countries for Business
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. Key concepts include: Governments create the overall environment for successful competition in the global economy. Bad government can only lead to less competitive businesses. To be competitive, countries need to offer businesses sound fiscal and monetary policies, secure property rights, high savings and investment, an absence of corruption, and exports that are competitive in enough areas to eventually balance imports. Business people must understand where markets and countries are headed by analyzing the present and then extending current performance trends forward three to five years. Although each has issues, Singapore, China, and India are currently the best bets for FDI and, pending political stability, so is Russia. Closed for comment; 0 Comments.
- 14 Mar 2007
- Op-Ed
Government’s Misguided Probe of Private Equity
The U.S Department of Justice has begun an inquiry into potentially anti-competitive behavior on the part of leading private equity firms. Professor Josh Lerner looks to history to underscore why this move carries the prospect of damaging what is actually an incredibly competitive industry that creates much value. Key concepts include: The Justice Department, which has little understanding of the nuances of the private equity business, could repeat missteps of the past by mistaking competition for collusion. Deal sharing, in the crosshairs of the inquiry, actually helps investors make better investment decisions, helps companies' managements, and helps limit risk. The benefits to society from widespread venture syndication appear to substantially outweigh the costs. Washington must understand that the many benefits private equity provides by facilitating economic growth are unlikely to be sustained if the heavy hand of government intrudes, whether through litigation or regulation. Closed for comment; 0 Comments.
The FDA: What Will the Next 100 Years Bring?
With the possible exception of the Internal Revenue Service, no other governmental agency touches the lives of more Americans than the U.S. Food and Drug Administration, which ensures the safety of $1.5 trillion worth of consumer goods and medicines. Harvard Business School professor Arthur A. Daemmrich discusses the impact and challenges of the agency and his new book, Perspectives on Risk and Regulation: The FDA at 100. Closed for comment; 0 Comments.