- 24 Mar 2009
- First Look
- 20 Mar 2009
- Working Paper Summaries
Catering to Characteristics
Can patterns of corporate net stock issuance help identify times when particular characteristics, such as industry, size, or book-to-market ratio, are mispriced? The authors of this study argue that differences between the characteristics of issuers and repurchasers can shed light on characteristic related stock returns. Consider the case in which analysts were interested in forecasting the returns of Google. The standard approach would be to collect Google's characteristics (e.g., large, technology, non-dividend paying, etc) and associate these characteristics with an average return in the cross-section. The authors argue that if other stocks with these characteristics are issuing stock, this bodes poorly for Google's future returns, even if Google is itself not issuing. This research by HBS professor Robin Greenwood and Harvard doctoral student Samuel Hanson has implications for studying the stock market performance of seasoned equity offerings (SEOs), initial public offerings (IPOs), and recent acquirers. Key concepts include: The approach in this paper helps forecast returns to portfolios based on book-to-market, size, share price, distress, payout policy, profitability, and industry. The issuer-repurchaser spreads are informative for future returns, even controlling for firms' own issuance and repurchase decisions. Closed for comment; 0 Comments.
- 19 Mar 2009
- Working Paper Summaries
Beyond Gender and Negotiation to Gendered Negotiations
How does gender affect negotiations within organizations or rather how do organizations affect gender relations? Deborah Kolb, a professor at Simmons College School of Management, and HBS professor Kathleen McGinn explore how definitions of work, specified roles in organizations, status hierarchies, and the politics and practices of organizational realities affect how gender plays out in organizations. Considering gender in organizations from a "negotiated order perspective"—that is, from the perspective that cultural patterns and work practices are the result of past interaction and negotiation—not only expands the range of issues that are potentially negotiable, it also turns attention to rethinking certain dimensions of the negotiation process itself. Key concepts include: Following recent scholarship, the authors distinguish between "first generation" gender discrimination involving intentional acts of bias from "second generation" gender issues, practices that are embedded in organizational workings, that seem unbiased in isolation, but result in different experiences for and treatment of women and men. Certain roles may be deemed more suitable to men than women and vice versa, setting up the need to negotiate for opportunities and fit. A woman's effectiveness as a leader, and the authority she can claim, is often judged differently from that of her male counterparts. Access to networks and flexible work arrangements give rise to the need to negotiate and this need often falls along gendered lines. Closed for comment; 0 Comments.
- 18 Mar 2009
- Research & Ideas
Marketing After the Recession
This downturn has likely changed people's buying habits in fundamental ways. Professor John Quelch discusses why marketers must start planning today to reach consumers after the recession. Key concepts include: Marketers must think through how the recession has changed consumer preferences and what they think of your brand. Start preparing today by, among other steps, focusing on high-potential customers, assessing your brands, and developing scenarios. Closed for comment; 0 Comments.
- 17 Mar 2009
- First Look
- 16 Mar 2009
- Working Paper Summaries
Running Out of Numbers: Scarcity of IP Addresses and What To Do About It
Hidden from view of typical users, every Internet communication relies on an underlying system of numbers to identify data sources and destinations. Users typically specify online destinations by entering domain names (e.g. "congress.gov"). But the Internet's routers forward data according to numeric IP addresses (e.g. 140.147.249.9). To date, the Internet has enjoyed an ample supply of "IPv4" IP addresses, but demand is substantial and growing. Current allocation rates suggest IPv4 exhaustion by approximately 2011. A new numbering system, IPv6, would relieve scarcity, but incentives hinder transition: IPv4 works well for existing networks, and offers easier and simpler access to existing Internet content and services. As a result, to date few networks have begun to support v6. In principle regulators could order networks to implement v6, but the applicable Internet coordinating organizations lack authority or power to force such a transition. In the meantime, a market mechanism for v4 addresses offers important benefits, including allocating scarce v4 addresses to those who need them most, and putting a positive price on v4 space in order to encourage transition to v6. Thus, it seems v4 transfers can help both to mitigate the worst effects of v4 scarcity, and to build the incentives necessary for transition to v6. Key concepts include: IPv4 scarcity will limit future expansion, hinder some technologies, and impose new costs on networks and users. Engineers have developed a new numbering system, IPv6, which offers many more possible addresses than the current IPv4 address system. But incentives hinder transition. An IP address "market" for the paid transfer of IP addresses could offer important benefits and avoid the worst effects of v4 scarcity. Closed for comment; 0 Comments.
- 16 Mar 2009
- Research & Ideas
When the Internet Runs Out of IP Addresses
Experts predict that within three years we will see the last of new Web addresses. What will happen then? The best solution is to create a market for already assigned but unwanted numbers, says Harvard Business School professor Ben Edelman. Key concepts include: Internet regulators are running out of IP addresses to assign new Web-based sites and services. The next IP standard is probably years away from widespread deployment. In the meantime, creating a market for unused addresses could help bridge the gap. Closed for comment; 0 Comments.
- 12 Mar 2009
- Working Paper Summaries
Inflation Bets or Deflation Hedges? The Changing Risks of Nominal Bonds
Are nominal government bonds risky investments that investors must be rewarded to hold? Or are they safe investments, whose price movements are either inconsequential or even beneficial to investors as hedges against other risks? U.S. Treasury bonds have performed well as hedges during the financial crisis of 2008, but the opposite was true in the late 1970's and early 1980's. John Y. Campbell, a Visiting Scholar at HBS, Harvard Ph.D. candidate Adi Sunderam, and HBS professor Luis M. Viceira explore such changes over time in the risks of nominal government bonds. Key concepts include: A changing covariance between nominal and real variables is of central importance in understanding the term structure of nominal interest rates. Analyses of asset allocation traditionally assume that broad asset classes have a stable structure of risk over time; these new results, however, suggest that in the case of nominal bonds, at least, this assumption is seriously misleading. Closed for comment; 0 Comments.
- 11 Mar 2009
- HBS Case
The Energy Politics of Russia vs. Ukraine
A recent Harvard Business School case looks at Russia's decision in 2006 to cut off supply of natural gas to Ukraine's energy company—a move repeated this year. Is Russia just an energy bully? Students of professor Rawi Abdelal learn there is nothing black and white when it comes to Russia's energy politics. From HBS Alumni Bulletin. Key concepts include: The Western notion that Russia uses energy as a weapon is a media oversimplification of very complicated politics. Gazprom is the country's single most important company and biggest taxpayer. Because natural gas is much cleaner than oil or coal, Europe will likely become even more dependent on Russian gas. Energy can be a tool for influence but it's not an effective tool for domination. Russia will be in trouble if Europe decides to stop buying Russian gas. Closed for comment; 0 Comments.
- 10 Mar 2009
- First Look
- 09 Mar 2009
- Research & Ideas
How to Revive Health-Care Innovation
Simple solutions to complex problems lead to breakthroughs in industries from retailing to personal computers to printing. So let's try health care, too. According to HBS professor Clayton M. Christensen and coauthors of The Innovator's Prescription, such disruption to an industry might look like a threat, but it "always proves to be an extraordinary growth opportunity." Book excerpt. Key concepts include: Most disruptions have three enablers: a simplifying technology, a business model innovation, and a disruptive value network. Business model innovations are almost always forged by new entrants to an industry. Disruption of an industry rarely happens piecemeal. It is more common that entirely new value networks arise, displacing the old. Always, the technological enablers of disruption are successfully deployed against an industry's simplest problems first. Health care is no different. Closed for comment; 0 Comments.
- 05 Mar 2009
- What Do You Think?
How Frank or Deceptive Should Leaders Be?
HBS professor Jim Heskett sums up comments to this month's column. Given the possibility that a naturally pessimistic (or perhaps more realistic) CEO might adversely affect everything from market reactions to employee morale, HBS Working Knowledge readers' comments are full of advice for honesty, candor, and an optimistic bias. Closed for comment; 0 Comments.
- 05 Mar 2009
- Working Paper Summaries
CPC/CPA Hybrid Bidding in a Second Price Auction
How should online advertisers measure and pay for advertising deliveries? Options include pay per impression (CPM), per click (CPC), per action (CPA), or in proportion of the dollar value of merchandise sold. The advertisers who choose to pay one way may differ, systematically, from those who choose to pay in some other way. HBS professor Benjamin Edelman and doctoral student Hoan Soo Lee present the problem in an algebraic model in anticipation of measurement to follow in future work. Key concepts include: When advertisers and ad platforms evaluate payment metrics, it seems they currently focus on effects on parties' incentives. For example, parties recognize that if billing is proportional to the number of measured clicks, then click fraud would expose advertisers to unwarranted advertising expense. With such constraints in mind, parties attempt to balance the various competing incentives. We propose an additional factor advertisers and ad platforms ought to consider: which advertisers are systematically most likely to favor which payment metrics. Averages that fail to condition on advertisers' choices may badly misestimate an advertiser's true characteristics—causing the platform to select ads that later prove to be ill-advised. Readers with suggestions are invited to contact Professor Edelman and Hoan Soo Lee. Closed for comment; 0 Comments.
- 04 Mar 2009
- Op-Ed
Credit is Not the Bogey
"As we attempt to jump-start the economy of 2009, we should recognize both the risks and the advantages inherent in a robust credit industry," write HBS lecturer Nicolas P. Retsinas and Eric S. Belsky. The director and executive director, respectively, of Harvard University's Joint Center for Housing Studies, they offer a prescription for making credit neither too easy nor too hard to get. Key concepts include: It is time to recalibrate the country's access to credit. Tight credit threatens to shut the safety valve of the low-wage sector of the economy. At the same time, open lines of credit should no longer be available to students with no income, just as mortgages should not be extended to buyers who cannot afford the payments. Closed for comment; 0 Comments.
- 03 Mar 2009
- First Look
- 02 Mar 2009
- Research & Ideas
When Goal Setting Goes Bad
If you ever wondered about the real value of goal setting in your organization, join the club. Despite the mantra that goals are good, the process of setting beneficial goals is harder than it looks. New research by HBS professor Max H. Bazerman and colleagues explores the hidden cost when stretch goals are misguided. Closed for comment; 0 Comments.
- 26 Feb 2009
- Research & Ideas
Podcast: Preventing Future Financial Failures
Professor David Moss says we need ongoing federal regulation of the few "systemically significant" institutions whose demise could threaten financial stability. Closed for comment; 0 Comments.
- 26 Feb 2009
- Working Paper Summaries
Barriers to Acting in Time on Energy and Strategies for Overcoming Them
What can the new presidential administration do to address our energy problems? For the past decade, most experts have accepted climate change as a fact, making the issue difficult to ignore—yet many politicians, and the voters who elect them, have done exactly that: ignored the problem. Scientists, policymakers, and others have come up with good ideas to address climate change and other energy issues. Many people seek to identify one cause of climate change, when it is abundantly clear that there are multiple causes. Cognitive, organizational, and political barriers exist that prevent us from addressing energy problems despite clearly identified courses of action. The creation and implementation of wise policy recommendations requires us to anticipate resistance to change and develop strategies that can overcome these barriers. Enacting wise legislation to act in time to solve energy problems requires surmounting cognitive, organizational, and political barriers to change. Key concepts include: The new U.S. presidential administration should identify energy policies that make wise tradeoffs across issues. The administration should communicate that decisions will be made to maximize benefits to society rather than to special-interest groups. The administration should seek energy policies that make sense even if climate change is less of a problem than best current estimates suggest. The administration should identify a series of small changes (nudges) that significantly influence the behaviors of individuals and organizations in a positive direction without infringing on personal liberties. When discounting of the future creates an insurmountable barrier to the implementation of wise policies, consider implementation on a mild delay. Closed for comment; 0 Comments.
- 25 Feb 2009
- Working Paper Summaries
Fear of Rejection? Tiered Certification and Transparency
The sub-prime crisis has thrown a harsh spotlight on the practices of securities underwriters, which provided too many complex securities that proved to ultimately have little value. Certifiers such as rating agencies, journals, standard setting bodies, and providers of standardized tests play an increasingly important role in the market economies. Yet as scrutiny of rating agencies in the aftermath of the sub-prime crisis has shown, these organizations have complex incentive structures and may adopt problematic approaches. On an explicit level, all major rating agencies follow a well-defined process, whose end product is the publication of a rating based on an objective analysis. But firms have been historically able to get rating agencies not to disclose ratings that displease them. HBS professor Josh Lerner and colleagues examined when certifiers might adopt more complex rating schemes, rather than the simple pass-fail scheme, and highlight that such nuanced schemes are more likely when the costs of such ratings are lower. In addition, these schemes are more common when sellers are less averse to the revelation of information about their quality, and more impatient. Key concepts include: Absent regulation, certifiers have a strong incentive not to publicize rejected applications. Transparency regulation always benefits sellers, but need not benefit users. Closed for comment; 0 Comments.
Securing Jobs or the New Protectionism? Taxing the Overseas Activities of Multinational Firms
Popular imagination often links two significant economic developments: the rapid escalation of the foreign activities of American multinational firms over the last 15 years, and rising levels of economic insecurity, particularly among workers in certain sectors. The presumed linkages between these phenomena have led many to call for a reconsideration of the tax treatment of foreign investment. Increasing the tax burden on outbound investment by American multinational firms, it is claimed, offers the promise of alleviating domestic employment losses and insecurity while also raising considerable revenue. HBS professor Mihir A. Desai looks beneath the trends, examining the economic determinants of outbound investment decisions and synthesizing what is known about the relationship between domestic and foreign activities. Key concepts include: There is no clear evidence of significant negative impacts on domestic investment or employment due to the overseas activities of firms. Foreign activity by multinational firms does not necessarily displace domestic economic activity. Other factors—such as falling prices of investment goods, and/or trade patterns—may have driven the employment changes that are so worrisome. When policymakers decide the appropriate taxation of multinational firms, they should resist the tempting logic of protectionism. Closed for comment; 0 Comments.