- 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.
- 07 Dec 2009
- Research & Ideas
Government’s Positive Role in Kick-Starting Entrepreneurship
The U.S. government has spent billions of dollars bailing out troubled companies. Is it time for Uncle Sam to invest in new entrepreneurial firms as well? Professor Josh Lerner makes the case for limited government involvement in his book Boulevard of Broken Dreams. Closed for comment; 0 Comments.
- 03 Dec 2009
- Working Paper Summaries
Walking the Talk in Multiparty Bargaining: An Experimental Investigation
Talk can unite, but it can also divide. In multiparty bargaining, communication can focus parties on a fair distribution of resources, but it can also focus parties on a competitive distribution of resources. As HBS professor Kathleen L. McGinn and coauthors Katherine L. Milkman and Markus Nöth show through experiments, at the onset of interaction the dominant logic in discussions—be it fairness or competition—strongly influences the equality of payoffs even in complex, full-information multiparty bargaining. Increases in the relative frequency of talk about fairness are associated with payoffs closer to an equal split. Talk about competitive reasoning has the opposite effect, driving payoffs away from an equal division, though these effects are less consistent than fairness talk effects. The researchers' results add critical insights to our understanding of the role of communication in multiparty bargaining. Key concepts include: In multiparty bargaining, as in two-party bargaining, communication may work in part through social awareness and in part by allowing players to threaten to walk away. Communicating the willingness to walk away, in conjunction with loss aversion by stronger players, may help weaker players convince stronger players to move toward a more equal split of the available surplus, but it also permits strong players to threaten weak players. In a competitive, multiparty game, communication may play a more nuanced role than observed in simpler bargaining contexts. Closed for comment; 0 Comments.
- 02 Dec 2009
- What Do You Think?
Should Immigration Policies Be More Welcoming to Low-Skilled Workers?
Immigration is a topic that stirs passions globally, judging from the responses to this month's column, says HBS professor Jim Heskett. Readers suggested ways to bring immigration policy into alignment with the reality of what is happening at borders and in workplaces around the world. (Online forum now closed. Next forum begins January 6.) Closed for comment; 0 Comments.
- 01 Dec 2009
- Working Paper Summaries
Modeling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation
We are in the midst of a major paradigm shift: technological trends are causing a change in the way innovation gets done in advanced market economies. In addition to the model of producer-based design—the idea that most important designs for innovations would originate from producers and be supplied to consumers via goods and services that were for sale—two increasingly important models are innovations by single user firms or individuals, and open collaborative innovation projects. Each of these three models represents a different way to organize human effort and investments aimed at generating valuable new innovations. HBS professor Carliss Y. Baldwin and MIT Sloan School of Management professor Eric von Hippel analyze the three models in terms of their technological properties, specifically their design costs and architectures, and their communication requirements. The researchers argue that as design and communication costs decline, single user and open collaborative innovation models will be viable for a steadily wider range of design. These two models will present an increasing challenge to the traditional paradigm of producer-based design—but, when open, they are good for social welfare and should be encouraged by policymakers. Key concepts include: When it is technologically feasible, the transition from closed producer innovation or single user innovation to open single user or open collaborative innovation is desirable in terms of social welfare and is worthy of support by policymakers. Free dissemination of innovation designs is associated with the open model. Open innovation generates innovation without exclusivity or monopoly, and so should improve social welfare, other things being equal. Intellectual property rights grants can be used as the basis for licenses that help keep innovation open as well as closed. Policymakers should seek out and eliminate points of conflict between present intellectual property policies designed to support closed innovation that at the same time inadvertently interfere with open innovation. As design costs fall, many more innovations will originate with single users. Open collaborative innovation projects thrive on low communication costs. Closed for comment; 0 Comments.
- 30 Nov 2009
- Research & Ideas
Tracks of My Tears: Reconstructing Digital Music
Record labels have depended on album sales to boost profits. But in the digital music era, consumers prefer single songs over music "bundles." The result? Harvard Business School professor Anita Elberse says it is time for the industry to rethink its products and prices. Key concepts include: The unbundling of albums into a series of separately sold songs on digital music stores is hurting record label profits. Labels are less likely to get away with selling a bundle based on the strength of one or two tracks if the other songs are far less appealing. A strong artist reputation helps to curb the negative impact of unbundling. Labels might consider pushing for higher prices online and generally more flexibility in setting prices. Giving preference to quality over quantity and designing smaller, more consistent bundles may be beneficial. Closed for comment; 0 Comments.
- 25 Nov 2009
- Working Paper Summaries
The Devil Wears Prada? Effects of Exposure to Luxury Goods on Cognition and Decision Making
Gandhi once wrote that "a certain degree of physical harmony and comfort is necessary, but above a certain level it becomes a hindrance instead of a help." This observation raises interesting questions for psychologists regarding the effects of luxury. What psychological consequences do luxury goods have on people? In this paper, the authors argue that luxury goods can activate the concept of self-interest and affect subsequent cognition. The argument involves two key premises: Luxury is intrinsically linked to self-interest, and exposure to luxury can activate related mental representations affecting cognition and decision-making. Two experiments showed that exposure to luxury led people to think more about themselves than others. Key concepts include: Luxury does not necessarily induce people to be "nasty" toward others but rather causes them to be less concerned about or considerate toward others. Experiment 1 showed that when primed with luxury, people are more likely to endorse self-interested business decisions (profit maximization), even at the expense of others. Experiment 2 further demonstrated that exposure to luxury is likely to activate self-interest but not the tendency to harm others. Exposure to luxury goods may activate a social norm that it is appropriate to pursue interests beyond a basic comfort level, even at the expense of others. It may be this activated social norm that affects people's judgment and decision-making. Alternatively, exposure to luxury may directly increase people's personal desire, causing them to focus on their own benefits such as prioritizing profits over social responsibilities. Closed for comment; 0 Comments.
- 24 Nov 2009
- First Look
First Look: Nov. 24
New faculty research: Learning from the world's tiniest businesses ... How communication can change the nature of bargaining ... Case: "Choosing a GAAP for Canada." Closed for comment; 0 Comments.
- 24 Nov 2009
- Working Paper Summaries
From Strategy to Business Models and to Tactics
Drivers such as globalization, deregulation, or technological change, just to mention a few, are profoundly changing the competitive game. Scholars and practitioners agree that the fastest-growing firms in this new environment appear to have taken advantage of these structural changes to compete "differently" and innovate in their business models. However, there is not yet agreement on what are the distinctive features of superior business models. This dispute may have arisen, in part, because of a lack of a clear distinction between the notions of strategy, business model, and tactics. HBS professor Ramon Casadesus-Masanell and Joan Enric Ricart present an integrative framework to distinguish and relate the concepts of business model, strategy, and tactics. Key concepts include: An integrative framework that cleanly separates the realm of business model, strategy, and tactics will help guide the search for novel, interesting, and profitable new ways to compete. "Business model" refers to the logic of the firm, the way it operates, and how it creates value for its stakeholders. "Strategy" refers to the choice of business model through which the firm will compete in the marketplace. "Tactics" refers to the residual choices open to a firm by virtue of the business model that it employs. Closed for comment; 0 Comments.
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.