- 19 Jan 2010
- Sharpening Your Skills
Sharpening Your Skills: Managing the Economic Crisis
The economic crisis is tapping the inner reserves of experienced leaders and introducing a new generation of managers to crisis management. These previous WK articles explore leadership, the role of the Board, the emotional needs of managers, and the risk to corporate giving programs. 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.
- 13 Jan 2010
- Working Paper Summaries
Private Equity and Industry Performance
In response to the global financial crisis that began in 2007, governments worldwide are rethinking their approach to regulating financial institutions. Among the financial institutions that have fallen under the gaze of regulators have been private equity (PE) funds. There are many open questions regarding the economic impact of PE funds, many of which cannot be definitively answered until the aftermath of the buyout boom of the mid-2000s can be fully assessed. HBS professor Josh Lerner and coauthors address one of these open questions, by examining the impact of PE investments across 20 industries in 26 major nations between 1991 and 2007. In particular, they look at the relationship between the presence of PE investments and the growth rates of productivity, employment, and capital formation. Key concepts include: It is still too early to assess the consequences of the economic conditions in 2008 and 2009, a period where the decrease of investment and absolute volume of distressed private equity-backed assets was far greater than in earlier cycles. Despite this caveat, it appears that: PE investments are associated with faster growth. There is little evidence that economic fluctuations are exacerbated by the presence of PE investments. In industries with PE investments, there are few significant differences between industries with a low and high level of PE activity. Activity in industries with PE backing appears to be no more volatile in the face of industry cycles than in other industries, and sometimes less so. The reduced volatility is particularly apparent in employment. These patterns continue to hold when the focus is on the impact of private equity in continental Europe, where concerns about these investments have been most often expressed. Closed for comment; 0 Comments.
- 12 Jan 2010
- First Look
First Look: Jan. 12
Assess, don't assume: How to negotiate better across cultures and borders ... Business case on Amazon's Kindle ... Article: "Five Ways to Bungle a Job Change." 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.
- 07 Jan 2010
- Working Paper Summaries
International Differences in the Size and Roles of Corporate Headquarters: An Empirical Examination
Are small headquarters more nimble and efficient than large ones? Not necessarily, according to HBS adjunct professor David Collis and coauthors David Young and Michael Goold. Even within a single industry in one country, the variance can be enormous: In Germany in the late 1990s, for instance, Hoechst, the chemical and pharmaceutical manufacturer, had only 180 people in the headquarters function at the same time that Bayer had several thousand. This paper seeks to fill gaps in the research by using a unique database of over 600 companies in seven countries to determine whether systematic differences in the size and roles of corporate headquarters between countries actually exist, and if so, how they differ. In particular, the authors examine whether there is a systematic difference between market- and bank-centered economies, and between developed and developing countries. Key concepts include: Contrary to popular expectations, corporate headquarters in the United States are about twice the size of European counterparts yet appear to be more effective. It is not universally valuable to have small corporate headquarters. While companies with small headquarters can be successful, it is clear that larger headquarters can also be correlated with high performance and executive satisfaction with their role and cost- effectiveness. Japanese headquarters are substantially larger than elsewhere—a factor of nearly four times Europe. However, those headquarters are becoming smaller because of dissatisfaction with their performance. The developing country model of headquarters appears to fit none of the developed country models. There is no "market-centered" and "bank-centered" model of corporate headquarters, suggesting that at the level of key corporate decisions, other phenomenon have important independent influences. The size and role of corporate headquarters vary widely both between countries and within countries. There is more variation within each country than there is between countries. Closed for comment; 0 Comments.
- 06 Jan 2010
- What Do You Think?
Is a Stringent Climate Change Agreement a Pot of Gold?
Reading this month's comments, HBS professor Jim Heskett wonders if we even need a climate change agreement as a catalyst to foster innovation and the VC investment required to support it. (Online forum has closed; next forum opens February 4.) Closed for comment; 0 Comments.
- 05 Jan 2010
- First Look
First Look: January 5
When communication can backfire in process improvement ... Working paper: "Private Equity and Industry Performance" ... Case study on strategy in health-case delivery: "The Joslin Diabetes Center." Closed for comment; 0 Comments.
- 04 Jan 2010
- Research & Ideas
Best of HBS Working Knowledge 2009
Social networks and their business implications were all the rage in 2009. Other most popular articles in HBS Working Knowledge included a look at leadership in good times and in tough times, managing teams, and the downside of goal-setting exercises. Greatest hits also included a "Sharpening Your Skills" collection on career and life balance as well as "10 Reasons to Design a Better Corporate Culture." Closed for comment; 0 Comments.
- 23 Dec 2009
- Working Paper Summaries
The Global Agglomeration of Multinational Firms
(Paper formerly titled "The Global Networks of Multinational Firms.") When and why do multinationals group together overseas? Do they agglomerate in the same fashion abroad as they do at home? An answer to these questions is central to the long-standing debate over the consequences of foreign direct investment (FDI). It is critical to understand interdependencies of multinational networks and how multinationals influence one another in their activities at home and overseas. HBS professor Laura Alfaro and George Washington University professor Maggie Chen examine the global network of multinationals and study the significance and causes of multinational agglomeration. Their results provide further evidence of the increasing separation of headquarters services and production activities within multinational firms. The differential specialization of headquarters and subsidiaries leads to distinct patterns of agglomeration. Key concepts include: Recent decades have witnessed an explosion in the activities of multinational corporations, but little is understood about global patterns of multinational agglomeration. Examples of this trend include firms that agglomerated in Silicon Valley and in Detroit now having subsidiaries clustered in Bangalore (termed "the Silicon Valley of India") and in Slovakia ("the Detroit of the East"). A new data set provides detailed location, ownership, and activity information for establishments in more than 100 countries. Multinational subsidiaries with knowledge spillovers, among other factors, tend to agglomerate to one another. The importance of these agglomeration economies is, however, different across headquarters, subsidiary, and employment networks. Many factors play a role in the location decisions of firms, so it may not be possible for a country to duplicate the circumstances that led to agglomeration in other nations. Policymakers need to consider the interdependence of multinational firms when making decisions about FDI. Closed for comment; 0 Comments.
- 22 Dec 2009
- First Look
First Look: Dec. 22
How new CEOs build bridges with budget allocations ... Why corporate headquarters look different everywhere you go ... Case: "Finance Myopia in a Systems Business." Closed for comment; 0 Comments.
- 21 Dec 2009
- Research & Ideas
Good Banks, Bad Banks, and Government’s Role as Fixer
Government action to stem collapse of the U.S. financial system was certainly warranted, agrees professor Robert Pozen. But results include less competition and increased risk to taxpayers. A Q&A from the HBS Alumni Bulletin and book excerpt from Too Big to Save? Key concepts include: Most of the 600 institutions recapitalized by the federal government over the last year do not satisfy basic bailout criterion. The U.S. needs to get loan securitization going because that's what drives loan volume. The Fed should not be the primary risk regulator. Splitting troubled institutions into two banks is a better approach than creating heavily subsidized public-private partnerships to try to buy toxic assets. Closed for comment; 0 Comments.
- 17 Dec 2009
- Working Paper Summaries
Integrity: Without It Nothing Works
"An individual is whole and complete when their word is whole and complete, and their word is whole and complete when they honor their word," says HBS professor Michael C. Jensen in this interview that appeared in Rotman: The Magazine of the Rotman School of Management, Fall 2009. Jensen (and his coauthors, Werner Erhard and Steve Zaffron) define and discuss integrity ("a state or condition of being whole, complete, unbroken, unimpaired, sound, in perfect condition"); the workability that integrity creates for individuals, groups, organizations, and society; and its translation into organizational performance. He also discusses the costs of lacking integrity and the fallacy of using a cost/benefit analysis when deciding whether to honor your word. Key concepts include: The personal and organizational benefits of honoring one's word are huge—both for individuals and for organizations—and generally unappreciated. We can honor our word in one of two ways: by keeping it on time and as promised, or if that becomes impossible, by owning up to the parties counting on us to keep our word in advance and cleaning up the mess our failure to keep our word creates in their lives. By failing to honor our word to ourselves, we undermine ourselves as persons of integrity, and create "unworkability" in our lives. Integrity is a necessary but not sufficient condition for maximum performance. There are unrecognized but significant costs to associating with people and organizations that lack integrity. Closed for comment; 0 Comments.
- 16 Dec 2009
- Working Paper Summaries
The End of Chimerica
Economic historians Niall Ferguson and Moritz Schularick of Freie Universität Berlin consider the problem of global imbalances and try to set events in a longer-term perspective. First published in 2009. Closed for comment; 0 Comments.
- 15 Dec 2009
- First Look
First Look: Dec. 15, 2009
A first look at faculty research: Why multinationals group together overseas and what it means for foreign direct investment ... Leveraging know-how ... Case study: "Tengion: Bringing Regenerative Medicine to Life." Closed for comment; 0 Comments.
- 14 Dec 2009
- Research & Ideas
Can Entrepreneurs Drive People Movers to Success?
Call them next-generation driverless taxis or people movers, the age of personal rapid transport is just around the bend. Could PRT change the face of public transportation in cities and smaller communities? HBS professor Benjamin G. Edelman weighs the benefits and opportunities for entrepreneurs and for society. "Right now, the field is wide open," he says. Key concepts include: A typical PRT vehicle carries one to four passengers along a dedicated track. It travels direct routes—no stops along the way—using computer control. Although it sounds futuristic, the PRT concept has been discussed seriously by engineers, designers, and academics since the mid-1950s. A PRT system has been in use since 1972 at the University of West Virginia in Morgantown. An installation at London's Heathrow Airport is slated to open in 2010. Yet general skepticism remains prevalent. PRT could reduce traffic congestion by offering a strong alternative to the private automobile. Other opportunities include establishing PRT systems on corporate or educational campuses, ultimately reducing costly and intrusive parking garages. PRT systems could also improve the value of real estate on land that is not close enough to other public transportation or services. Closed for comment; 0 Comments.
- 10 Dec 2009
- Working Paper Summaries
State Owned Entity Reform in Absence of Privatization: Reforming Indian National Laboratories and Role of Leadership
Is privatization necessary? In India and across emerging markets, state-owned entities (SOEs) continue to make up a large proportion of industrial sales, yet they lag behind private counterparts on performance measures. But SOEs may be able to significantly improve performance even in the absence of property rights, according to HBS doctoral candidate Prithwiraj Choudhury and professor Tarun Khanna. As they document, 42 Indian state-owned laboratories started from a base of negligible U.S. patents, yet in the period 1993-2006 (during which the Indian government launched an ambitious privatization program), the labs were granted more patents than all domestic private firms combined. The labs then licensed several of these patents to multinationals, and licensing revenue increased from 3 percent to 15 percent as a fraction of government budgetary support. Findings are relevant to firms and R&D entities around the world that depend on varying degrees of government budgetary support and government control, especially in emerging markets like India, where SOEs control up to one-third of all industrial activity. Key concepts include: Despite the absence of property rights, 42 Indian state-owned laboratories significantly increased U.S. patents and licensing revenue from multinationals without negatively affecting publication quality and quantity. This development may be due to incentive policy change and leadership change at the labs. U.S. patents as well as revenue from multinationals increased sharply in response to director changes, an event whose timing was dictated by rigid government employment rules. Private firms including multinationals can play a catalytic role in driving up revenue at SOEs. The state-owned labs leveraged the U.S. institutional context in effecting their turnaround. The general point is that organizations in emerging markets can leverage institutions from outside their location of origin, once they have some established source of competitive advantage (in this case, their R&D-generated know-how). Although the labs were able to commercialize projects without sacrificing publication quality and quantity, a question remains as to whether and why national labs should concern themselves with commercialization. Closed for comment; 0 Comments.
- 09 Dec 2009
- Working Paper Summaries
Mental Health in the Aftermath of Conflict
Wars are detrimental to the populations and the economy of affected countries. Over and above the human cost caused by deaths and suffering during a time of conflict, survivors of conflict are often left in poor economic circumstances and mental-health distress even after the conflict ends. How large are these costs? How long does it take for conflict-affected populations to recover from the mental stress of conflict? What policies are appropriate to assist mental health recovery? While considerable attention has been paid to post-war policies with regard to recovery in physical and human capital, mental health has received relatively less attention. The World Bank's Quy-Toan Do and HBS professor Lakshmi Iyer review the nascent literature on mental health in the aftermath of conflict, discuss the potential mechanisms through which conflict might affect mental health, and illustrate the findings from their study of mental health in a specific post-conflict setting: Bosnia and Herzegovina. Key concepts include: Mental health is an outcome that deserves greater attention from scholars and policymakers alike. Mental health is an important dimension of human capital. Mental health distress, while a matter of concern in and of itself, might also have adverse consequences for individuals' labor force participation and labor productivity in the post-conflict period, thereby delaying economic recovery after the conflict ends. Quantifying the effect of conflict on mental health is likely to be important for designing appropriate post-conflict policies for recovery. Somewhat surprisingly, findings showed no significant differences in overall mental health across people who experienced different levels of exposure to the conflict. People with more education, as well as those who move to a different locality after the conflict, suffer fewer conflict-related mental health consequences. Closed for comment; 0 Comments.
- 08 Dec 2009
- First Look
First Look: Dec. 8
New faculty research: Combating online ad fraud ... How does identity shape the way you resolve problems? ... Working paper: "Integrity: Without It Nothing Works." Closed for comment; 0 Comments.
First Look: Jan. 20
Are headquarters giving managers more freedom? ... Article: "The Dynamics of Silencing Conflict" ... Case: Marketing a congressional candidate. Closed for comment; 0 Comments.