- 31 Jan 2011
- Research & Ideas
Taking the Fear out of Diversity Policies
Workplace policies regarding race, gender, and sexual orientation often are borne of studies that focus on the problem of discrimination—rather than on the benefits of a diverse workforce. HBS professors Lakshmi Ramarajan and David Thomas argue that focusing on the benefits of a diverse organization will lead to workplace policies that embrace diversity, instead of grudgingly accepting it or dancing around it. Closed for comment; 0 Comments.
- 28 Jan 2011
- Working Paper Summaries
Agglomerative Forces and Cluster Shapes
HBS professor William R. Kerr and doctoral candidate Scott Duke Kominers develop a theoretical model for analyzing the forces that drive agglomeration, or industrial clustering. It is rare that researchers systematically observe the forces like technology sharing, customer/supplier interactions, or labor pooling that lead to firm clustering. Instead, the data only portray the final location decisions that firms make (for example, firms that utilize one type of technology are clustered over 50 miles, while those using another technology are clustered over 100 miles). The researchers' model identifies how these observable traits can be used to infer properties of the underlying clustering forces. Key concepts include: Most industries exhibit spatial clustering. The paper's framework provides a theoretical foundation for inferring properties of agglomerative forces through observed spatial concentrations of industries. The model demonstrates that agglomeration clusters generally cover a substantially larger area than the micro-interactions among firms upon which they build. This structure is present, for example, in the technology and labor flows in Silicon Valley. Agglomerative forces with longer micro-interactions are associated with fewer, larger, and less-dense clusters. These patterns are evident in both technology clusters and industrial agglomerations. Closed for comment; 0 Comments.
- 27 Jan 2011
- Working Paper Summaries
A Brief Postwar History of US Consumer Finance
The growth of the consumer finance sector after World War II provided a bevy of new financial options for Americans. These options led to a "do-it-yourself" approach to consumer finance, and an increase in household risk taking. In this paper, Harvard Business School professors Gunnar Trumbull and Peter Tufano, along with former HBS research associate Andrea Ryan, discuss the major themes that dominated the expansive postwar sector, including some of the factors that set the stage for the recent subprime mortgage crisis. Key concepts include: The authors identify four major consumer finance trends from the past 65 years: an increase in the number of available financial options including innovations; greater access to those options for more Americans; a trend toward a do-it-yourself approach in consumer financial services; and a resultant increase in household risk taking. The type of debt households carry has changed dramatically over the past several decades. The share of household financial liabilities represented by mortgages increased from 59 percent in 1950 to 73 percent in 2008, while the share represented by consumer debt fell from 31 percent to 18 percent. Closed for comment; 0 Comments.
- 26 Jan 2011
- Working Paper Summaries
Conveniently Upset: Avoiding Altruism by Distorting Beliefs about Others
This paper explores the idea that people who can take advantage of a particular situation will tend to believe that others would choose to take advantage of the same situation if given the chance-thus helping to justify the decision to act selfishly. In their research, Harvard Business School professor Rafael Di Tella and Harvard PhD student Ricardo Pérez-Truglia test their hypothesis on a group of well-heeled Argentinean college students, using a modified version of the "dictator game" in which both the "dictators" and the "recipients" are given the chance to make a selfish choice. Key concepts include: The researchers conducted a modified dictator game in which the "dictator" player could take any percentage of tokens from the "recipient" player (à la taxation), but the recipient player could reduce the overall size of the pie in exchange for a personal side payment (à la hiding economic activities from the authorities). In general, the dictators who chose to take a large number of tokens from the recipients reported believing that the recipients would choose to take the side payment-that is, to make a selfish choice. The results of the experiment support the idea that people often avoid altruistic actions by letting themselves believe that others are selfish, too. Closed for comment; 0 Comments.
- 25 Jan 2011
- First Look
First Look: Jan. 25
Are creative people more likely to cheat? … Why we buy feature-bloated products … A note on agricultural cooperatives. Closed for comment; 0 Comments.
- 24 Jan 2011
- HBS Case
Terror at the Taj
Under terrorist attack, employees of the Taj Mahal Palace and Tower bravely stayed at their posts to help guests. A look at the hotel's customer-centered culture and value system. Open for comment; 0 Comments.
- 21 Jan 2011
- Working Paper Summaries
Learning from Customers in Outsourcing: Individual and Organizational Effects
In farming out work to an external service provider, companies often count on volume-based learning--the idea that outsourced workers will build experience and improve their productivity if there is a large volume of work for them to do, and that the bigger the volume, the more productive and efficient they'll eventually become. However, there are several factors that challenge that education process. This paper explores whether and how repetition can breed competence in a business setting, using data from a provider of outsourced radiological services. Research was conducted by Harvard Business School professor Robert S. Huckman, Jonathan R. Clark (HBS PhD 2010) of Pennsylvania State University, and Bradley R. Staats (HBS MBA 2002, DBA 2009) of the University of North Carolina at Chapel Hill. Key concepts include: In addition to technical aspects of the task, volume-based learning depends on the interpersonal interactions between the individual completing the task and the customer. The rate at which a worker learns depends independently on the customer, knowledge domain, and technology within which the worker accumulates volume-based experience. Workers learn faster from completing an individual task for a specific customer than they do from completing multiple tasks for multiple customers. Spreading a worker's experience over multiple customers may hinder the learning process, particularly with respect to the needs of specific customers. Closed for comment; 0 Comments.
- 20 Jan 2011
- Working Paper Summaries
Testing Coleman’s Social-Norm Enforcement Mechanism: Evidence from Wikipedia
Harvard Business School professor Mikolaj Jan Piskorski and doctoral candidate Andreea Gorbatai look to the editing process on Wikipedia to test and validate the well-accepted (but little-verified) theory of sociologist James Coleman that social norm violations decline as network density increases. Support for Coleman's mechanism would alert us to the importance of punishments for norm violations and rewards for such punishments, and thus help us to design social systems in which norms are observed. Key concepts include: Coleman argued that high-density networks provide an opportunity structure within which third parties can compensate norm enforcers for the expense of chastising norm violators. Such payments encourage actors to punish those who violate norms, which in turn reduce the incidence of norm violation. Despite ubiquitous citations of Coleman's explanation, little empirical work has tested it convincingly. The researchers identified the improper use of the revert command by Wikipedia contributors-by which users can quickly knock out text they don't agree with and revert it back to a prior state-as a norm violation. The research found substantial support for the theory, suggesting that increasing network density to elicit norm compliance is justified. On Wikipedia, norm violations, punishments for such violations, and rewards for those who punish violators are all highly visible. Replicating these conditions in the design of a social system is critical; otherwise, norm violations will remain undetected and therefore unpunished. Open for comment; 0 Comments.
- 19 Jan 2011
- First Look
First Look: Jan. 18
National Geographic contemplates a digital life … What makes a successful ecocity? … Why you aren't buying Venezuelan chocolate Closed for comment; 0 Comments.
- 19 Jan 2011
- Research & Ideas
Activist Board Members Increase Firm’s Market Value
Board members nominated by activist investors presumably have one primary goal: change the status quo. Does that agenda create or diminish value of the firm in the eyes of shareholders? New evidence offered by Harvard Business School professors Bo Becker, Daniel B. Bergstresser, and Guhan Subramanian suggests financial markets value a new approach. Key concepts include: Firms that would have been most affected by the Federally-proposed shareholder proxy access rule, based on institutional ownership, lost share price value on October 4, 2010. This finding suggests that financial markets place positive value on shareholders' access to the company's proxy statement. The loss in value was greatest at firms at which activist investors such as hedge fund managers, held significant stakes. Open for comment; 0 Comments.
- 17 Jan 2011
- Research & Ideas
Being the Boss
Striking the right balance between good management and good leadership is a daunting but necessary challenge for anyone endeavoring to be a good boss. In Being the Boss: The 3 Imperatives for Becoming a Great Leader, Harvard Business School professor Linda A. Hill and former executive Kent Lineback discuss the steps to take and the roadblocks to avoid in order to meet that challenge. Q&A with Hill, plus book excerpt. Key concepts include: You have three key imperatives as a manager: manage yourself, manage your network, and manage your team. Formal authority on its own will fail to influence people and get results. It's important to manage your relationship with your boss, if only to avoid powerlessness, which can be as corruptive a force as power. Closed for comment; 0 Comments.
- 12 Jan 2011
- Working Paper Summaries
Modularity for Value Appropriation--How to Draw the Boundaries of Intellectual Property
Many firms have adopted models of "open innovation," in which they seek ideas from external sources such as university labs, independent entrepreneurs, customers, and other companies. While such a business model has the potential to create value, the inherent intellectual property issues can be sticky. This paper discusses how companies can address these issues by adopting a system of modularity, wherein innovation in one part of a project will not require changes in all the other parts. Research was conducted by Joachim Henkel of Technische Universität München and Harvard Business School professor Carliss Y. Baldwin. Key concepts include: Controlling too much of the system's intellectual property will deter outside innovation, but controlling too little can prevent a firm from capturing value. A system can use different, incompatible forms of intellectual property and still be IP-modular, provided that the incompatible chunks of knowledge are associated with different modules within the whole system. The optimal modular structure for capturing value is not necessarily the same as the optimal structure for creating value. Closed for comment; 0 Comments.
- 11 Jan 2011
- First Look
First Look: Jan. 11
Rethinking how you make decisions … Being the boss … What dooms business models? Closed for comment; 0 Comments.
- 11 Jan 2011
- Working Paper Summaries
Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable Challenge
In August 2010, the Security and Exchange Commission announced a highly anticipated rule that would make it easier for investors to nominate new board members and get rid of existing ones. It allowed shareholders to have their board candidates included in the company's proxy materials--if those shareholders had owned at least 3 percent of the firm's shares for at least the prior three years. On October 4, the SEC unexpectedly and indefinitely postponed the implementation of that rule, pending the outcome of a lawsuit aimed at overturning it. This paper gauges the significance of the proxy access rule by measuring whether certain firms gained or lost market value on news of the delay. Research was conducted by Harvard Business School professors Bo Becker, Daniel Bergstresser, and Guhan Subramanian. Key concepts include: Firms that would have been most affected by the proxy access rule, based on institutional ownership, lost value on October 4, 2010, following the news of the rule's delay. This suggests that financial markets placed positive value on shareholders' access to the board. The loss in value was greatest at firms that had large positions held by activist investors. The paper's findings may help prove that the SEC has met the federal rule mandating that all proposed rules "will promote efficiency, competition, and capital formation." Closed for comment; 0 Comments.
- 10 Jan 2011
- Research & Ideas
Is Groupon Good for Retailers?
For retailers offering deals through the wildly popular online start-up Groupon, does the one-day publicity compensate for the deep hit to profit margins? A new working paper, "To Groupon or Not to Groupon," sets out to help small businesses decide. Harvard Business School professor Benjamin G. Edelman discusses the paper's findings. Key concepts include: Discount vouchers provide price discrimination, letting merchants attract consumers who would not ordinarily patronize their business without a major price incentive. These vouchers also benefit merchants through advertising, simply by informing consumers of a merchant's existence via e-mail. For some merchants, the benefits of offering discount vouchers are sharply reduced if individual customers buy multiple vouchers. As a marketing tool, discount vouchers are likely to be most effective for businesses that are relatively unknown and have low marginal costs. Closed for comment; 0 Comments.
- 06 Jan 2011
- What Do You Think?
How Should Management Deal With “Anonymous”?
Summing Up When it comes to the leaky Web, Jim Heskett's readers say assume the worst and act accordingly. (New forum on February 3.) Closed for comment; 0 Comments.
- 05 Jan 2011
- Op-Ed
Funding Unpredictability Around Stem-Cell Research Inflicts Heavy Cost on Scientific Progress
Funding unpredictability in human embryonic stem-cell research inflicts a heavy cost on all scientific progress, says professor William Sahlman. Open for comment; 0 Comments.
- 04 Jan 2011
- Working Paper Summaries
The Learning Effects of Monitoring
It's a challenge that all good managers face: How do you strike the right balance between encouraging autonomy among your employees and mitigating the risk that they'll make bad decisions? Using both field and quantitative data from the MGM-Mirage Group, this paper discusses how management controls affect the learning rates of lower-level employees. Research, focusing on hotel casino hosts, was conducted by Dennis Campbell and Francisco de Asís Martinez-Jerez of Harvard Business School and Marc Epstein of Rice University. Key concepts include: Tightly monitored employees were less likely to make independent decisions, even if their job descriptions allowed them to do so. They were even less likely to adjust their decisions to account for information they could easily show to their superiors to justify those decisions. The lower frequency of experimentation in their decision-making leaves employees in tightly monitored environments with few opportunities to learn. The researchers question whether employees in these micromanaged environments made up for the lack of experimentation by paying more attention to and learning more from each experiment. The researchers found strong learning effects among employees in settings where they were monitored by their bosses somewhat loosely. In settings where they were more tightly monitored, employees learned very little. Closed for comment; 0 Comments.
- 03 Jan 2011
- Research & Ideas
Most Popular Articles of 2010
Voting with their fingertips, HBS Working Knowledge readers identify the most popular articles and working papers from Harvard Business School faculty. Tell us what you think will be the top business management trends of 2011. Open for comment; 0 Comments.
First Look: Feb. 1
Better understanding competitive advantage in sports … Introducing the "dominating institution" … The resource curse hits Angola. Closed for comment; 0 Comments.