- 03 Aug 2010
- First Look
First Look: August 3
When front-line workers know the best solutions ... Three questions for entrepreneurship researchers ... Case: "India: The Road to Inclusive Growth." Closed for comment; 0 Comments.
- 02 Aug 2010
- Research & Ideas
Modern Indian Art: The Birth of a Market
Before 1995, there was little market for twentieth-century Indian fine art. That's when artists, auction houses, critics, and others defined a new product category—modern Indian fine art—resulting in worldwide demand and soaring prices. Professor Mukti Khaire explains the dynamics behind new market categories. Closed for comment; 0 Comments.
- 28 Jul 2010
- Working Paper Summaries
Disagreement about the Team’s Status Hierarchy: An Insidious Obstacle to Coordination and Performance
What happens when team members disagree about how much status each of the other members actually deserves? Does it matter that members might not even be aware that they disagree with one another? Published research on status conflict has so far focused primarily on the effects of overt status challenges, often originating from high-status members jockeying for top positions to attain valuable resources such as power, credit, and a better reputation. Yet new research by HBS professor Heidi K. Gardner explores how small differences, even latent ones, in team members' perceptions about their group's status hierarchy can undermine group collaboration, heighten team conflict, and lower performance. Key concepts include: The author used survey data from a longitudinal field study of 89 consulting and accounting teams from a Big Four firm to test a model of how teams experience status disagreement over time. Difference in team members' perceptions of the status hierarchy is itself enough to hamper team coordination and generate task conflict. The difference in perceptions of the status hierarchy doesn't have to generate blatant status rivalries—or even be recognized at all—in order to cause trouble. Somewhat surprisingly, when members are highly familiar with one another the negative results of status disagreement are even worse for team processes and outcomes. The author reasons that people who have worked together before wrongly assume that they have achieved consensus about each other's "place" and that they can coordinate their actions without a lot of explicit discussion. When disagreements do arise, they are especially damaging in teams that assumed they were well-aligned. Third-party performance data for each team demonstrate how suboptimal coordination and increased conflict ultimately jeopardize its performance with clients. Closed for comment; 0 Comments.
- 27 Jul 2010
- First Look
First Look: July 27
New book: The Squam Lake Report: Fixing the Financial System ... Dilemmas in corporate governance at the World Bank ... Case: "Breaking the Buck." Closed for comment; 0 Comments.
- 26 Jul 2010
- Research & Ideas
Yes, You Can Raise Prices in a Downturn
If you and your customers understand the value represented in your pricing, you can—and should—charge more for delivering more. An interview on "performance pricing" with researchers Frank Cespedes, Benson P. Shapiro, and Elliot Ross. Key concepts include: Pricing builds or destroys value faster than almost any business action. Performance pricing seeks to maximize both the customer benefit and the selling company's profitability. The idea is to create more space between the value provided to customers and your cost. Performance pricers make attractive returns in almost every business—at least over the full business cycle. Closed for comment; 0 Comments.
- 22 Jul 2010
- Working Paper Summaries
Business Model Innovation and Competitive Imitation
When and why should an entrant adopt a new business model when the innovation could be imitated by an incumbent? In this paper, HBS professor Ramon Casadesus-Masanell and University of Southern California professor Feng Zhu examine the desirability, or lack thereof, of business model innovations when they cannot be protected, opening the door to competitive imitation. Issues of competing through new business model design become more important given the increasing number of opportunities for business model configurations enabled by technological progress, new customer preferences, and deregulation. Key concepts include: New entrants in a wide array of industries (such as Ryanair in the airline industry and IKEA in furniture) demonstrate that innovative business models can provide the basis for sustainable business success, even in industries with strong and well-established incumbents. Firms should take into account the likely competitive effects and responses before revealing a business model innovation. Just as product and process innovations are hard to protect, business model innovations can be imitated. For many years to come, firms in all kinds of industries will continue to surprise with unprecedented new ways of capturing value through sponsor-based business model innovation. Closed for comment; 0 Comments.
- 21 Jul 2010
- Research & Ideas
HBS Faculty Debate Financial Reform Legislation
Harvard Business School professors Robert Steven Kaplan, David A. Moss, Robert C. Pozen, Clayton S. Rose and Luis M. Viceira share their perspectives on the Dodd-Frank Wall Street Reform and Consumer Protection Act, slated to be signed this week by U.S. President Barack Obama. Key concepts include: Overall, faculty see reasons for optimism as well as concern and caution. We need appropriate risk-taking and credit extension to fuel economic growth, says Robert Steven Kaplan. While the Dodd-Frank bill creates safeguards, will it discourage and impede these activities? According to David A. Moss, an open question is how the regulators will use the new authority granted to them. The Dodd-Frank bill fails to reform large mortgage finance institutions such as Fannie Mae, Freddie Mac, and the housing agencies, says Robert C. Pozen. While the bill does tackle some causes of the crisis, says Clayton S. Rose, it may increase risk to the U.S. financial system by skirting the issues of firms "too big to fail" and the excessive use of market-based short-term funding by financial firms. At first sight, Dodd-Frank has elements that indicate we are moving in the right direction, while other parts of the bill leave us uncertain about its future success, says Luis M. Viceira. Closed for comment; 0 Comments.
- 21 Jul 2010
- Working Paper Summaries
Foreign Entry and the Mexican Banking System, 1997-2007
What are the effects of foreign bank entry in developing economies? In recent years, governments around the world have been opening up their banking systems to foreign competition. In Mexico, for example, the market share of foreign ownership of banks increased fivefold between 1997 and 2007. In this paper, Stanford professor Stephen Haber and HBS professor Aldo Musacchio describe their detailed study of the impact of foreign entry in Mexico during that period. Overall, results suggest that while foreign entry in Mexico is associated with greater stability of the banking system, it has not increased the availability of credit, and foreign entry is not a solution to a property rights environment that makes contract enforcement costly. Key concepts include: Foreign entry in Mexico is associated with greater banking system stability. Foreign entry, however, has not increased the availability of credit. Mexican banks that were sold to foreign multinationals were invested in housing loans with a high risk of default and a low rate of interest. Foreign purchasers appear to have shifted the loan portfolio away from these investments. However, foreign entry, whether by mergers and acquisitions or by greenfield banks, has not led to an increase in financial intermediation. At the end of 1997, GDP was 18 percent, and 12 years later it had grown to only 23 percent, low by any comparative standard. In Mexico, foreign entry is not a solution to a property rights environment that makes contract enforcement costly. Closed for comment; 0 Comments.
- 20 Jul 2010
- First Look
First Look: July 20
Global focus: cases this week on India ... China ... Brazil, and more. Closed for comment; 0 Comments.
- 19 Jul 2010
- Research & Ideas
How Mercadona Fixes Retail’s ’Last 10 Yards’ Problem
Spanish supermarket chain Mercadona offers aggressive pricing, yet high-touch customer service and above-average employee wages. What's its secret? The operations between loading dock and the customer's hands, says HBS professor Zeynep Ton. Key concepts include: The last 10 yards of the supply chain lies between the store's loading dock and the customer's hands. Poor operational decisions create unnecessary complications that lead to quality problems and lower labor productivity and, in general, make life hard for retail employees. Adopting Mercadona's approach requires a long-term view and a leader with a strong backbone. Closed for comment; 0 Comments.
- 15 Jul 2010
- Working Paper Summaries
Trade Policy and Firm Boundaries
What is the impact of trade policies on firms' ownership structures? Drawing on analysis based on a unique database from Dun and Bradstreet that contains both listed and unlisted plant-level observations in more than 200 countries, HBS professor Laura Alfaro and coauthors describe a simple model in which firms' boundaries depend on the prices of the products they sell: The higher the prices, the more integrated firms will be. More generally, when equilibrium prices converge across economies, so do ownership structures. The reason behind these predictions is that integration, although more productive than non-integration because of its comparative advantage in the coordination of firms' operating decisions, also imposes higher private costs on enterprise managers. At low prices, the productivity gains from integrating have little value, and managers choose non-integration. As prices rise, the relative value of coordination increases, favoring integration. Key concepts include: Results lend empirical support to a simple model of the determination of firm boundaries in a global economy. There is systematic relationship between firm boundaries and the equilibrium price in the product market. Higher prices, as proxied by higher most-favored-nation tariffs, lead to more vertical integration at the firm level. The impact of tariffs on vertical integration is significant. Enterprises' integration choices affect not only their productivity, but also aggregate economic performance and consumer welfare. Closed for comment; 0 Comments.
- 14 Jul 2010
- Working Paper Summaries
From Russia with Love: The Impact of Relocated Firms on Incumbent Survival
The relocation of the machine tool industry from the Soviet-occupied zone of postwar Germany to western regions is a unique laboratory for studying the impact of industrial structures on incumbent survival. Typically, geographic agglomerations of similar firms offer benefits to each member firm by reducing the transportation costs for material goods, specialized workers, and industry knowledge among the firms. Of course, tight geographic concentration comes with countervailing costs as firms compete for local inputs. In this paper, HBS professor William R. Kerr and coauthors study the impact of increased local concentration on incumbent firms by considering postwar Germany, when the fear of expropriation (or worse) in the wake of World War II prompted many machine tool firm owners to flee to western Germany, where they reestablished their firms. Key concepts include: Relocations significantly increased the likelihood of incumbent failure, which suggests that the costs of increased competition for local inputs dominated the potential benefits from agglomeration economies. By contrast, during the same postwar period, new start-up entrants—whose location choices were more opportunistic—were not associated with increased incumbent failure rates. The increased failure rates of incumbents in western Germany due to relocating firms was concentrated in regions where labor forces were constrained due to low inflows of expellees from eastern Germany. In regions with a significant inflow of expellees and favorable input conditions, there was no effect of relocations on incumbent firms' risk of failure. The relocation of the machine tool industry from eastern to western Germany was substantial. In total, a fifth of the industry present in eastern Germany migrated during a narrow window of 1949-1956, representing an 8 percent increase in total industry size for the receiving zones. These location choices were made under extreme duress, with little regard to existing business conditions across regions in western Germany. Upon arrival, the relocating firms substantially impacted local industrial conditions as they quickly regained much of their former production capacity. Closed for comment; 0 Comments.
- 13 Jul 2010
- First Look
First Look: July 13
Clay Christensen on what really matters ... Working papers on banking, network effects, and systemic risk ... Case: "Globalization at Komatsu." 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.
- 09 Jul 2010
- Working Paper Summaries
The Limits of Nonprofit Impact: A Contingency Framework for Measuring Social Performance
The social sector is in the midst of a search for metrics of impact. Over the past 20 years, there has been an explosion in methodologies and tools for assessing social performance and impact, but with little systematic analysis and comparison across these approaches. In this paper, HBS professors Alnoor Ebrahim and V. Kasturi Rangan provide a synthesis of the current debates and, in so doing, offer a typology and contingency framework for measuring social performance. Their contingency approach suggests that—given the varied work, aims, and capacities of social sector organizations—some organizations should be measuring long-term impacts, while others should stick to measuring shorter-term results. The researchers provide a logic for determining which kinds of measures are appropriate, as driven by the goals of the organization and its operating model. Key concepts include: With the contingency framework, organizational leaders and managers can clarify what types of results they seek to achieve, and thus for what they should be held to account. Doing so requires them to articulate a causal logic, or theory of change, that they expect will lead to long-term goals. This framework suggests that social sector organizations can increase their control over long-term societal impacts in at least two ways: by expanding their operations in order to reach a threshold population or critical mass (scale), and by offering more comprehensive services or partnering with others in order to tackle a problem (scope). It is not feasible, or even desirable, for all organizations to develop metrics at all levels on the logic chain. This contingency framework offers some general cautions about performance measurement. First, it suggests that measuring impacts makes sense under a limited set of circumstances—when an organization operates at an ecosystem level, and yet can exercise sufficient control over results to attribute impacts to its work. Second, many organizations face a double challenge of measuring performance in a variety of areas separately, while also integrating across them in order to gauge possible synergistic effects at the ecosystem level. Third, funders such as foundations, governmental departments, and international aid agencies are far better positioned than most nonprofits to measure impacts. Finally, given the diversity of actors engaged in social change, the four broad types of results in the framework should be taken as suggestive rather than as silver bullets. The very basis of the framework—contingency—suggests that there are no panaceas to results measurement in complex social contexts. Closed for comment; 0 Comments.
- 08 Jul 2010
- Working Paper Summaries
Surviving the Global Financial Crisis: Foreign Direct Investment and Establishment Performance
In 2008 and 2009 the world economy suffered the deepest global financial crisis since World War II. Countries around the globe witnessed major declines in output, employment, and trade, and world trade volume plummeted by more than 40 percent in the second half of 2008. Using a new dataset that reports operational activities of over 12 million establishments worldwide before and after 2008, HBS professor Laura Alfaro and George Washington University professor Maggie Chen study how multinationals around the world responded to the crisis relative to local firms, and the underlying mechanisms of those differential responses. By taking into account establishments both at the epicenter and on the periphery of the crisis, their analysis also considers multinationals' role as an international linkage in transmitting economic shocks. Key concepts include: Responses to the crisis differed sharply between multinational and local firms. On average, establishments with multinational ownership performed better than local competitors, but there was considerable differentiation in the role of foreign direct investment. Multinationals located in host countries that have experienced sharper declines in aggregate demand and credit conditions displayed a greater advantage over local firms in economic performance. Multinationals headquartered in countries with a greater incidence of the crisis, including lower demand and worse credit conditions, fared less satisfactorily overseas, suggesting a potential spillover of home-country shocks. Multinational corporation subsidiaries that share vertical production linkages with parent firms exhibited more resilient performance while horizontally linked subsidiaries responded less positively. The size of multinational networks matters. Being part of a larger multinational network, on average, was associated with superior economic performance during the crisis. But there was a negative interdependence across establishments with horizontal production linkages. Closed for comment; 0 Comments.
- 07 Jul 2010
- First Look
First Look: July 7
When firms relocate, what happens to incumbents? ... What hierarchies mean for teams ... Case: "Arup: Building the Water Cube." Closed for comment; 0 Comments.
- 06 Jul 2010
- Research & Ideas
Renewable Energy: Winds at Our Back?
It certainly stirred up controversy in 2001 when an entrepreneur proposed erecting 130 wind turbines off the coast of Massachusetts' Cape Cod. After nine years of struggle over regulatory, environmental, safety, and social issues, the plan appears closer to becoming a reality. HBS professor Richard Vietor reflects on wind energy and innovations in the renewable energy industry. Key concepts include: The Cape Wind project has sparked controversy in the eastern United States related to regulatory, political, environmental, and social concerns. Wind power is important for the near term, but in the longer term solar and nuclear power may gain ground. The United States is rapidly falling behind other developed countries in its approach to renewable energy sources. Nevertheless, President Obama's stimulus package provides significant incentives and subsidies for green energy projects. More than 30 states have renewable production standards that require utilities to purchase or develop from 15 percent to 30 percent of their power from renewables over the next 10 to 15 years. Closed for comment; 0 Comments.
- 02 Jul 2010
- What Do You Think?
Is Profit as a “Direct Goal” Overrated?
Summing Up: The word profit provoked a wide range of issues and emotions among respondents, says Jim Heskett. It also launched debates, and many readers argued for measures of success other than profit. (Online forum has closed; next forum opens August 5.) Closed for comment; 0 Comments.
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.