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New research on law from Harvard Business School faculty on issues including law enforcement, lawfulness, and lawsuits and litigation practices.
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The Creation and Evolution of Entrepreneurial Public Markets

by Shai Bernstein, Abhishek Dev, and Josh Lerner

Since 1990, new stock exchanges geared toward fast-growing, entrepreneurial companies have proliferated around the world. This analysis shows that exchanges in countries with better shareholder protection allowed younger and less profitable companies to raise more capital. These markets alone cannot boost entrepreneurial activity but need enabling institutions.

Arbitration with Uninformed Consumers

by Mark Egan, Gregor Matvos, and Amit Seru

Using data on securities disputes, this study of information advantages in consumer arbitration finds that industry-friendly arbitrators are 40 percent more likely than consumer-friendly arbitrators to be selected to take on arbitration cases. Limiting respondents’ and claimants’ inputs over the selection process could improve outcomes for consumers.

How Does Product Liability Risk Affect Innovation? Evidence from Medical Implants

by Alberto Galasso and Hong Luo

This analysis examines how a surge in liability risk faced by upstream suppliers of general purpose technologies (polymers) affected downstream innovation in implant technologies. Implant patenting dropped by 36 percent relative to non-implant technologies.

Buying the Verdict

by Lauren H. Cohen and Umit G. Gurun

This paper documents systematic evidence that firms engage in specialized, locally targeted advertising when taken to a court trial in a given location. Policymakers should consider what impact such targeted advertising is having—and whether it is a desired impact—on juries and the judicial process more generally.

Why South Korea's Samsung Built the Only Outdoor Skating Rink in Texas

by Michael Blanding

New research by Lauren Cohen and Umit Gurun finds that when some companies are sued, they put their advertising dollars to work in unusual ways to influence local juries. Meet 'TiVo,' the championship steer. Open for comment; Comment(s) posted.

Transaction Costs and the Duration of Contracts

by Alexander MacKay

When buyers transact with sellers, they select not only whom to transact with but also for how long. This paper develops a model of optimal contract duration arising from underlying supply costs and transaction costs. The model allows for the quantification of transaction costs, which are often unobserved, and the impact of these costs on welfare.

Handgun Waiting Periods Prevent Hundreds of Homicides Each Year

by Dina Gerdeman

Waiting-period laws reduce gun-related homicides by 17 percent and gun-related suicides by up to 11 percent, according to a study by Deepak Malhotra, Michael Luca, and Christopher Poliquin. Open for comment; Comment(s) posted.

How an African History Scholar Became a Modern Righter of Wrongs

by Carmen Nobel

A scholar of colonial-era African history, Caroline M. Elkins had dramatic success turning prior knowledge into real-world action—namely, with a groundbreaking lawsuit against the British government, which revealed a chillingly bureaucratic process for destroying evidence of torture. Open for comment; Comment(s) posted.

Tort Reform and Innovation

by Alberto Galasso and Hong Luo

This paper investigates how tort reforms might affect the development of new medical device technologies. The authors find that caps on non-economic damages (such as pain and suffering) are associated with an average decline in patenting for medical instrument technologies. The effect, however, is highly varied and depends on the characteristics of both the devices and the medical fields.

When Mass Shootings Lead to Looser Gun Restrictions

by Carmen Nobel

Do mass shootings lead to more gun-related legislation? The answer is yes, with an important twist, according to new research by Michael Luca, Deepak Malhotra, and Christopher Poliquin. Open for comment; Comment(s) posted.

The ‘Mother of Fair Trade’ was an Unabashed Price Protectionist

by Dina Gerdeman

Historian Laura Phillips Sawyer unearths the story of little-known drug store owner Edna Gleason who, in a man’s world, helped fire a progressive movement to protect small-business owners from price-slashing chains. Open for comment; Comment(s) posted.

‘Does 'What We Do' Make Us 'Who We Are'? Organizational Design and Identity Change at the Federal Bureau of Investigation

by Ranjay Gulati, Ryan Raffaelli, and Jan Rivkin

Both the design and identity of the FBI changed greatly in the wake of the September 11, 2001 terrorist attacks. This study tracing the co-evolution of the Bureau’s organizational design and identity before the 9/11 attacks and through three subsequent phases finds that successful changes to organizational identity are likely to be delayed after a radical external shock: Management is likely to be constrained, appropriate design is probably unclear, or both.

Financial Patent Quality: Finance Patents After State Street

by Josh Lerner, Ann Leamon, Mark Baker & Andrew Speen

Although the past few decades have seen a surge in patents of inventions related to financial services, concerns have been raised about the quality of those patents. New research shows that finance patents in aggregate cite fewer non-patent publications and especially fewer academic publications.

Internalizing Global Value Chains: A Firm-Level Analysis

by Laura Alfaro, Pol Antras, Davin Chor & Paola Conconi

Manufacturing activities that used to be performed in close proximity are increasingly fragmented across firms and countries. This paper provides strong evidence that considerations driven by contractual frictions critically shape firms' ownership decisions along their value chains.

Dragging Patent Trolls Into the Light

by Michael Blanding

New research by Lauren Cohen and colleagues shows that patent trolls are not just the stuff of fairy tales. Open for comment; 5 Comment(s) posted.

Digital Discrimination: The Case of Airbnb.com

by Benjamin G. Edelman & Michael Luca

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. Key concepts include: Online marketplaces have the potential to reduce discrimination by facilitating more arms-length transactions. However, social platforms such as Airbnb.com, a popular online marketplace for short-term rentals, may have the opposite effect. This paper investigates the differences in prices of properties from hosts of varying races. Non-black hosts charge approximately 12% more than black hosts for comparable properties. Online marketplaces should think carefully about whether, and why, the looks of buyers and sellers should be relevant to the purchase at hand. Airbnb might consider eliminating or reducing the prominence of host photos. It is not clear what beneficial information these photos provide, while they risk facilitating discrimination by guests. Closed for comment; 0 Comment(s) posted.

Companies Choreograph Earnings Calls to Hide Bad News

by Julia Hanna

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. Closed for comment; 3 Comment(s) posted.

Standard-Essential Patents

by Josh Lerner & Jean Tirole

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 essentiality and regulation functions can be analyzed, 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. Key concepts include: Standards transform inessential patents into standard-essential ones. Price discussions within the standard setting process run the risk of expropriation of IP holders, as even balanced SSOs will "blackmail" IP owners to accept low prices in exchange for their functionalities' being selected into the standard. The ability to engage in forum shopping enables IP owners to shun SSOs that force them to charge competitive prices. This suggests imposing mandatory structured price commitments on SSOs. Closed for comment; 0 Comment(s) posted.

The Real Cost of Bribery

by Carmen Nobel

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 Comment(s) posted.

HBS Faculty on Supreme Court Health Care Ruling

Re: Multiple Faculty

We asked three Harvard Business School faculty members, all experts in the health care field, to provide their views on various facets of one of this country's most important and complex problems. Open for comment; 12 Comment(s) posted.