- 27 Oct 2010
- Working Paper Summaries
The Intensive Margin of Technology Adoption
To anyone who observes the world, it's pretty clear that a country's poverty level is at least somewhat related to its adoption of new technologies. Historically, though, this fact has been difficult to quantify. Harvard Business School professor Diego Comin and MIT researcher Martí Mestieri are developing a model to analyze the relationship between economic growth and technology adoption. In their paper, they discuss both "extensive" margins (the length of time it takes a country to adopt any given new technology) and "intensive" margins (the number of technology units--smartphones, PCs, etc.--that the country adopts). Key concepts include: The role of technology is crucial to understanding per capita income differences. Differences just in the intensive margin of technology adoption account for some 45 percent of cross-country differences in per capita income. As a whole, technology adoption seems to account for 70 percent of differences in cross-country per capita income. Closed for comment; 0 Comments.
- 11 Aug 2010
- Working Paper Summaries
The Influence of Prior Industry Affiliation on Framing in Nascent Industries: The Evolution of Digital Cameras
Firms entering a new product market face tremendous ambiguity and competitive uncertainty, particularly when the new market is sparked by radical technological change. Potential customers have little or no experience with products, and during this period of turbulence, firms experiment with alternative product configurations, functions, and technologies. By studying the emergence of the consumer mass market for digital cameras, Carlson School of Management professor Mary J. Benner and HBS professor Mary Tripsas explore what factors influence a firm's initial introduction of product features during the nascent stage of a product market, and how the process of convergence on a standard set of features unfolds. In particular, they assess how a firm's prior industry affiliation influences its conceptualization of the product. Key concepts include: The authors used a dataset that includes the entry date and features of almost every camera in the history of the U.S. consumer digital camera industry from its inception in 1991 through 2006. Results suggest that firms from the same prior industry shared similar beliefs about what features (such as optical zoom) would be valued, as reflected in their concurrent introduction of features. Firms were likely to imitate the behavior of firms from the same prior industry, as opposed to that of firms from different prior industries, in introducing some but not all features. Finally, as a firm's experience with a particular feature increased, the influence of prior industry decreased. Closed for comment; 0 Comments.
- 04 Aug 2010
- Working Paper Summaries
The Effect of Market Leadership in Business Process Innovation: The Case(s) of E-Business Adoption
The connection between market leadership and the adoption of new technologies is central to understanding how firms maintain or gain competitive advantage over time. One key determinant of firm openness to either product or process innovation is how radical or incremental a particular change is for the organization. Using the context of IT-enabled business processes for e-buying and e-selling, a setting that offers a complementary view to studies that have focused on R&D expenditure and patents as measures of innovation, HBS professor Kristina McElheran sheds light on whether, when, and why market leaders might be more likely to adopt new innovations. This study represents the first robust, multi-industry evidence that market leaders are far more likely to adopt incremental rather than radical business process innovations. Key concepts include: Extensive survey data for 1999 show that e-buying constituted a relatively incremental process innovation, while e-selling was far more radical. Market leaders were more likely than laggards to adopt incremental business process innovations. External market factors and internal characteristics reinforced each other to make adoption relatively more beneficial and/or easier for the largest, most successful firms. Market leaders were less likely than laggards to adopt radical business process innovations. For the complex, strategically sensitive activity of e-selling, market leaders faced disproportionate risks and adjustment costs, making adoption less attractive for firms with the largest market shares. The combination of complexity, strategic sensitivity, and boundary-spanning created the particular challenge observed for market leaders in the case of e-selling and potentially other business process innovations. Inter-firm coordination is an important strategic consideration as businesses grow ever more dependent on the performance of their extended value chain for success. Lagging firms may discover new opportunities to leapfrog their larger competitors using certain business-to-business process innovations and IT-enabled supply chain relationships. Closed for comment; 0 Comments.
- 12 Jul 2010
- Research & Ideas
Rocket Science Retailing: A Practical Guide
How can retailers make the most of cutting-edge developments and emerging technologies? Book excerpt plus Q&A with HBS professor Ananth Raman, coauthor with Wharton professor Marshall Fisher of The New Science of Retailing: How Analytics Are Transforming the Supply Chain and Improving Performance. Key concepts include: Retailers can better identify and exploit hidden opportunities in the data they generate. Integrating new analytics within retail organizations is not easy. Raman outlines the typical barriers and a path to overcome them. Incentives must be aligned within organizations and in the supply chain. The first step is to identify the behavior you want to induce. To attract and retain the best employees, successful retailers empower them in specific ways. Closed for comment; 0 Comments.
- 04 Mar 2010
- Working Paper Summaries
The Determinants of Individual Performance and Collective Value in Private-Collective Software Innovation
Why do people expend personal time and effort toward creating a public good? Over the past decade, collaborative, community-based approaches to developing knowledge-intensive products like encyclopediae, music, and software have gained prominence in both practice and scholarly analysis. "Open source software development," for example, is distinguished by self-selection of distributed participants into tasks, free revealing of knowledge, collective creation of shared software artifacts, and participants' ability to generate new innovations by reinterpreting and repurposing knowledge and artifacts created by others. The MathWorks' Ned Gulley and HBS professor Karim R. Lakhani study the determinants of individual performance and collective value in software innovation by analyzing 11 programming competitions that mimic the working of the open source software community. Key concepts include: Knowledge creation and reuse are important dual goals of social systems organized to collectively solve technical problems. Collective value relies on the ability of others to understand and comprehend the design structure of knowledge to enable reuse. Thus deviations from commonly understood rules of practice, while beneficial to the individual innovator, impede adoption by others. Although free riding is a concern in most collective systems, innovators need to realize that the value of the reuse of their work by others depends as much on the new knowledge they create as on the old knowledge they borrow. Closed for comment; 0 Comments.
- 11 Feb 2010
- Working Paper Summaries
The Architecture of Complex Systems: Do Core-periphery Structures Dominate?
All complex systems can be divided into a nested hierarchy of subsystems. However, not all these subsystems are of equal importance: Some subsystems are core to system performance, whereas others are only peripheral. In this study, HBS professor Carliss Y. Baldwin and coauthors developed methods to detect the core components in a complex software system, establish whether these systems possess a core-periphery structure, and measure important elements of these structures. The general patterns highlight the difficulties a system architect faces in designing and managing such systems. Results represent a first step in establishing stylized facts about the structure of real-world systems. Key concepts include: Core-periphery structures dominate the sample, with 75-80 percent of systems in the sample possessing such a structure. It is significant that a substantial number of systems lack such a structure. This implies that a considerable amount of managerial discretion exists when choosing the "best" architecture for a system. Variations in system structure can be explained, in part, by the different models of development used to develop systems. Legacy code is rarely rewritten, but instead forms a platform upon which new systems are built. With such an approach, today's developers bear the consequences of design decisions made long ago. Closed for comment; 0 Comments.
- 08 Feb 2010
- HBS Case
Looking Behind Google’s Stand in China
Google's threat to pull out of China is either a blow for Internet freedom or cover for a failed business strategy, depending on with whom you talk. Professor John A. Quelch looks behind the headlines in a new case. Key concepts include: China has become more emboldened and self-confident as a result of its increasing economic significance. Google acted precipitously without giving due consideration to the impact of its announcement on stakeholders. The Google issue has become a cause célèbre that exacerbates the already fragile and festering U.S.-China relationship. Closed for comment; 0 Comments.
- 22 Jan 2010
- Working Paper Summaries
Competing Ad Auctions
Joining ad platforms can attract substantial regulatory attention: In November 2008, the Department of Justice planned to file antitrust charges to stop the proposed Google-Yahoo transaction. More recently, in September 2009, the Department of Justice sought additional information from Microsoft and Yahoo about their proposed partnership. At first glance it might seem paradoxical to claim that the Google-Yahoo transaction is undesirable, for advertisers and for the economy as a whole, while the Microsoft-Yahoo transaction offers net benefits. But that conclusion is entirely possible. HBS professor Benjamin G. Edelman and doctoral candidates Itai Ashlagi and Hoan Soo Lee explore competition among ad platforms that offer search engine advertising services. In addition, the authors evaluate possible transactions among ad platforms—building tools to predict which transactions improve welfare and which impede it. Key concepts include: Participation costs exist and matter, affecting bidders' decisions about which ad platforms to use, and changing the welfare consequences of mergers or joins among platforms. By creating a joined ad platform of larger size than Microsoft or Yahoo alone, the transaction lets advertisers spread participation costs over a larger purchase, making it worthwhile for small to midsize advertisers to sign up with the joined Microsoft-Yahoo platform even though they do not use Microsoft or Yahoo separately. Preventing a competing platform from attracting advertisers reduces the quality of that competing platform (fewer ads yielding an inferior match with users' searches), cuts that platform's revenue (impeding future investment), and generally hinders that platform's efforts at growth. Closed for comment; 0 Comments.
- 14 Jan 2010
- Working Paper Summaries
Optimal Auction Design and Equilibrium Selection in Sponsored Search Auctions
Reserve prices may have an important impact on search advertising marketplaces. But the effect of reserve prices can be opaque, particularly because it is not always straightforward to compare "before" and "after" conditions. HBS professor Benjamin G. Edelman and Yahoo's Michael Schwarz use a pair of mathematical models to predict responses to reserve prices and understand which advertisers end up paying more. Key concepts include: A search engine's optimal reserve price is independent of the number of bidders and also independent of the rate at which click-through rate declines over positions. Most incremental revenue from setting reserve price optimally comes from the indirect effects on high bidders—not from the low bidder's direct effect, nor from indirect effects on other low bidders. This result may appear counter-intuitive because top bidders' large valuations place them, in an important sense, "furthest from" the reserve price. Closed for comment; 0 Comments.
- 11 Jan 2010
- Research & Ideas
Mixing Open Source and Proprietary Software Strategies
Open source and proprietary software development used to be competing strategies. Now software firms are experimenting with strategies that mix the two models. Researcher Gaston Llanes discusses recent research into these "mixed source" strategies. Key concepts include: Software companies are taking a "best of both worlds" approach by creating products that use a combination of OS and proprietary software code. The researchers wanted to get a clearer sense of when a profit-maximizing firm should adopt a mixed-source business model and what that model might look like under different circumstances. Results indicate recurring patterns and strategies that managers can take into consideration when setting strategy. Closed for comment; 0 Comments.
- 19 Oct 2009
- Research & Ideas
Why Are Web Sites So Confusing?
Just as bread and milk are often found at far-away ends of the supermarket, Web sites that match consumers with certain products have an incentive to steer users to products that yield the highest margins. The result: a compromise between what users want and what produces the most revenues, say HBS professor Andrei Hagiu and Toulouse School of Economics researcher Bruno Jullien. A look inside the world of search. Key concepts include: "Search diversion"—strategically complicating the search process—began in the brick-and-mortar world. The digital economy provides many more subtle ways to divert search. If an intermediary helped consumers find what they wanted more quickly and efficiently, it would lose valuable potential revenues. On Google, the 11th objective search result might be more relevant than any of the sponsored search results displayed on the right—yet it will be displayed on the second search page only. Closed for comment; 0 Comments.
- 15 Oct 2009
- Working Paper Summaries
Mixed Source
As most managers know, commercial firms may benefit from participating in open source software development by selling complementary goods or services. Open source has the potential to improve value creation because it benefits from the efforts of a large community of developers. Proprietary software, on the other hand, results in superior value capture because the intellectual property remains under the control of the original developer. While the straightforward rationale for "mixed source" (a combination of the two) is appealing, what does it mean for a business model? Under what circumstances should a profit-maximizing firm adopt a mixed source business model? How should firms respond to competitors' adoption of mixed source business models? And what are the right pricing structures under mixed source compared with the proprietary business model? In this paper the researchers analyze a model where firms with modular software must decide which modules to open and which to keep proprietary. Findings can be directly applied to the design of optimal business strategies. Key concepts include: Firms may become more closed in response to competition from an outside open source (OS) project, and are more likely to use a proprietary business model. Firms are more likely to open substitute, rather than complementary, modules to existing OS projects. Low-quality firms are generally more prone to opening some of their technologies than firms with high-quality products. Closed for comment; 0 Comments.
- 17 Aug 2009
- Research & Ideas
Quantifying the Economic Impact of the Internet
Businesses around the advertising-supported Internet have incredible multiplier effects throughout the economy and society. Professor John Quelch starts to put some numbers on the impact. Open for comment; 0 Comments.
- 27 Jul 2009
- Research & Ideas
Social Network Marketing: What Works?
Purchase decisions are influenced differently in social networks than in the brick-and-mortar world, says Harvard Business School professor Sunil Gupta. The key: Marketers should tap into the networking aspect of sites such as Facebook. Key concepts include: Some social network users are influenced by the purchases of their friends. Of these users, 40 percent show a strong "keeping up with the Joneses" behavior, increasing sales by 5 percent. "High-status" users are more likely to not purchase something that others have bought. On social networks, viral campaigns may work better than advertising. Closed for comment; 0 Comments.
- 01 Jul 2009
- Working Paper Summaries
File-Sharing and Copyright
The researchers argue that file-sharing technology has not undermined the incentives of artists and entertainment companies to create, market, and distribute new works. The advent of new technology has allowed consumers to copy music, books, video games, and other protected works on an unprecedented scale at minimal cost. Such technology has considerably weakened copyright protection, first of music and software and increasingly of movies, video games, and books. While policy discussion surrounding file-sharing has largely focused on the legality of the new technology and the question of whether declining sales in music are due to file-sharing, the debate has been overly narrow. Copyright protection exists to encourage innovation and the creation of new works—in other words, to promote social welfare. This essay analyzes the landscape and identifies areas for more research. Key concepts include: Digital technology has lowered the cost of producing movies and music and allowed artists to reach their audience in novel ways. It's difficult to argue that weaker copyright protection has had a negative impact on artists' incentives to be creative. File-sharing has not discouraged authors and publishers. The publication of new books rose by 66 percent over the 2002-2007 period. Since 2000, the annual release of new albums has more than doubled, and worldwide feature film production since 2003 is up by more than 30 percent. How markets for complementary goods (such as concerts, electronics, and communications infrastructure) have responded to file-sharing remains largely unexplored in academic research. Closed for comment; 0 Comments.
- 18 May 2009
- Research & Ideas
The Unseen Link Between Savings and National Growth
Professor Diego Comin and fellow researchers find a little observed link between private savings and country growth. The work may offer a simple interpretation for the East Asia "miracle" and for failures in Latin America. Q&A. Key concepts include: Companies in poor countries must attract FDI to gain access to "frontier technologies" that drive productivity and growth. Savings become key to attracting these investors, who expect the local company to have colateral in the deal. A 10 percent increase in the savings rate over the previous 10 years leads to an increase in the average growth rate over the next 10 years of 1.3 percent. Developing countries should consider policies that foster domestic savings. Closed for comment; 0 Comments.
- 11 May 2009
- Research & Ideas
The IT Leader’s Hero Quest
Think you could be CIO? Jim Barton is a savvy manager but an IT newbie when he's promoted into the hot seat as chief information officer in The Adventures of an IT Leader, a novel by HBS professors Robert D. Austin and Richard L. Nolan and coauthor Shannon O'Donnell. Can Barton navigate his strange new world quickly enough? Q&A with the authors, and book excerpt. Key concepts include: The role of CIO is one of the most volatile, high-turnover jobs in business. Why? The driving cause is more than rapid change in IT. Rather, IT is at the crossroads of major organizational change. Barton soon realizes that IT-specific knowledge is not a key to success. Instead, he must take care to collaborate equally with the senior management team and his own staff. Like Barton, today's senior executives are continuously confronted with situations with multiple uncertainties, needing collaboration and input from experts who may know more than they do about the specifics. 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.
- 03 Apr 2009
- What Do You Think?
How Much Obsolescence Can Business and Society Absorb?
This month's question brought out both the poets and the engineers among respondents. The rapid pace of new technology adoption within organizations implies change for management and society, says HBS professor Jim Heskett. How does change affect the open sharing of information? (Forum now closed; next forum begins May 1.) Closed for comment; 0 Comments.
The Distinct Effects of Information Technology and Communication Technology on Firm Organization
At what point in the corporate food chain are big decisions made? It depends on technology, according to new research, which finds that information-based software will help to push decisions further down the corporate ladder, whereas communication technologies will push decisions up to the top. Research was conducted by Nicholas Bloom of Stanford University; Assistant Professor Raffaella Sadun of Harvard Business School; and Luis Garicano and John Van Reenen of the London School of Economics. Key concepts include: Enterprise Resource Planning software is a decentralizing technology: It provides information that enables lower-level managers to make more decisions without consulting their superiors. By the same token, Computer Assisted Design software creates a situation in which the worker needs less access to superiors in order to make a decision. On the other hand, the better the data network, the easier it is for workers to communicate with their superiors and to rely on them to make decisions. Closed for comment; 0 Comments.