- 15 Oct 2007
- Research & Ideas
Businesses Beware: The World Is Not Flat
With apologies to Thomas Friedman, managers who believe the hype of a flat world do so at their own risk, says HBS professor Pankaj Ghemawat. National borders still matter a lot for business strategists. While identifying similarities from one place to the next is essential, effective cross-border strategies will take careful stock of differences as well. A Q&A and book excerpt follow. Key concepts include: Some indicators of globalization aren't increasing as many experts have claimed. Toyota and Wal-Mart are examples of companies that understand how to deal with distance in a strategic way. Take a broad view of differences, figure out the ones that matter the most in your industry, and look at them not just as difficulties to be overcome but also as potential sources of value creation. Closed for comment; 0 Comments.
- 12 Oct 2007
- Working Paper Summaries
Mental Accounting and Small Windfalls: Evidence from an Online Grocer
In the course of daily life, people occasionally receive small windfalls. Every so often we are handed a gift certificate for $5 off a meal, find a $10 bill on the street, or win $20 in an impromptu game of poker. According to standard economic theory, these types of small windfalls should have no noticeable effect on spending decisions because such windfalls constitute meaningless changes to lifetime wealth. However, if you have ever been the recipient of a small windfall, you may remember thinking about ways to spend this unexpected cash, buying items you might not have otherwise purchased. This kind of behavior can be interpreted as an example of "mental accounting" as theorized by economists Richard H. Thaler and Hersh M. Shefrin. This paper presents evidence supporting some of the implications of a theory of mental accounting in the domain of online grocery shopping. Key concepts include: In the domain of online groceries, the redemption of a $10-off coupon increases an individual's spending, as predicted by Thaler and Shefrin. The increase in spending stimulated by the redemption of a $10-off coupon is focused on groceries that customers would not purchase in the absence of such a coupon. Closed for comment; 0 Comments.
- 11 Oct 2007
- Working Paper Summaries
How Firms Respond to Being Rated
(Previously titled "Shamed and Able: How Firms Respond to Information Disclosure.") As national governments lose the ability to regulate business activities, interest groups and concerned citizens are turning to private governance to monitor global supply chains, ensure product safety, and provide incentives for improved corporate environmental performance. Proponents hope that private governance incentives will encourage firms to act responsibly, but critics worry that these developments will merely forestall necessary government regulation. Social ratings provide one way to benchmark and compare firms' social performance. But are such ratings schemes effective? This paper investigates the effects of third-party environmental ratings, and finds that firms are particularly likely to respond to such ratings by improving their environmental performance when two circumstances arise simultaneously: (1) when the ratings threaten their legitimacy, and (2) when they face relatively low cost improvement opportunities. Key concepts include: Ratings provided by nongovernment organizations will be more influential on firm behavior if they do 2 things: highlight poor social issue management and performance while at the same time help firms identify low-cost improvement opportunities. The role of third-party monitoring will be increasingly important as private governance replaces government regulations around the world. Closed for comment; 0 Comments.
- 10 Oct 2007
- Research & Ideas
“Blank” Inside: Branding Ingredients
When Intel launched the Intel Inside campaign in the 1990s, many marketers thought the chip giant was nuts. Who cared about the microprocessor inside their PC? Turns out Intel created a branding sensation and raised awareness of the importance of ingredient branding, says professor John Quelch. Today's best example: The Boeing Dreamliner. Closed for comment; 0 Comments.
- 10 Oct 2007
- First Look
- 10 Oct 2007
- Working Paper Summaries
Harnessing Our Inner Angels and Demons: What We Have Learned About Want/Should Conflicts and How That Knowledge Can Help Us Reduce Short-Sighted Decision Making
Many of the most important problems facing the world today are exacerbated by myopic decision-making. Examples include climate change, under-saving for retirement, deficit spending, and obesity. As observed by Freud, contemporary psychologists and researchers, and entertainers, people everywhere struggle to choose between doing what they want to do and what they should do. This paper synthesizes 15 years of empirical explorations of this "want/should" conflict and discusses the most important applications of this work. The results of recent studies have the potential to help individuals and policymakers by arming them with insights about how to increase the chances that they and their constituents, respectively, will favor options that are in their best interest. Key concepts include: Knowledge of the want/should self could help individuals and policymakers learn how to design circumstances that steer people away from making impulsive, short-sighted decisions. Closed for comment; 0 Comments.
- 08 Oct 2007
- Research & Ideas
Management Education’s Unanswered Questions
Managers want the status of professionals, but not all managers want the constraints that go along with professions. Why? For more than 100 years, business education at the top universities has been searching for its soul. HBS professor Rakesh Khurana, author of a new book, says business school education is at a turning point. Key concepts include: Is management a profession? After more than a century of business education, it remains an open question. The founders of today's top business schools envisioned a world in which managers served the best interests of society, not narrow self-interests. Management education is closely linked with the prevailing winds of society. Elite business schools today are at a crossroads, especially since the rise of business education in China and India. Closed for comment; 0 Comments.
- 04 Oct 2007
- What Do You Think?
Has Managerial Capitalism Peaked?
Summing Up. Professor Jim Heskett considers his reader's comments on the growing imbalance between what John Bogle terms managerial capitalism and owners' capitalism. Closed for comment; 0 Comments.
- 04 Oct 2007
- Working Paper Summaries
Fair (and Not So Fair) Division
"Fair" could be defined as what people of good will would want to be. This does not constitute an operational definition, however. This paper provides a specific procedure to calculate what could be considered fair and reasonable for various situations that require a fair division. A simple example would be a family that has inherited objects of artistic and/or sentimental value and wants to divide them up fairly while taking into account differences in taste. Laymen, mathematicians, and economists all have their own proposals for creating a fair division. Pratt suggests a procedure that, when put to the test of a range of examples, produces outcomes that accord with our intuitive sense of what is fair and desirable while previously proposed procedures do not. Key concepts include: The procedure measures the value of each object in terms of its desirability to the various participants. It allocates the objects so that the participants receive the same total value (or value proportional to their entitlements if they are unequal), without envy or waste ("money left on the table"). Randomization is used if needed to accomplish this. Many procedures work well on average problems. Indeed, all reasonable procedures are much alike in near-symmetric problems. It is the lopsided examples that test the procedures, especially with more than two participants. Participants are not penalized for receiving objects of no value to anyone else or for being honest about their values for such objects. Closed for comment; 0 Comments.
- 03 Oct 2007
- Working Paper Summaries
The Causes and Consequences of Industry Self-Policing
The corporate confession is a paradox, as described in this paper aimed at managers, policymakers, and citizens. Why would a firm that identifies regulatory compliance violations within its own operations turn itself in to regulators, rather than quietly fix the problem? Economic intuition suggests that firms will self-disclose violations only when the cost of doing so is less than the expected cost of hiding violations. However, while the cost of doing so can be increased regulatory scrutiny, there is often almost no expected cost of hiding violations. To explore the complex behavior of corporate self-disclosure, Short and Toffel conducted a large-scale analysis in the context of the U.S. Environmental Protection Agency's Audit Policy. They investigated what factors lead organizations to self-disclose violations that went undiscovered by regulators, and asked whether these self-disclosing organizations were obtaining any unofficial regulatory benefits above and beyond formal penalty mitigation. They also evaluated whether self-policing promotes the regulatory objective of improving compliance records. Key concepts include: Government regulatory scrutiny is a leading factor that drives firms in a public-private partnership where firms self-police their own regulatory compliance and self-disclose violations. Self-policing and self-disclosing provide mutual benefits for regulators and firms, although ongoing investment in government enforcement remains a critical success factor. Closed for comment; 0 Comments.
- 03 Oct 2007
- Research & Ideas
Dealing with the ‘Irrational’ Negotiator
"Negotiators who are quick to label the other party 'irrational' do so at great potential cost to themselves," say HBS professors Deepak Malhotra and Max H. Bazerman. Their new book, Negotiation Genius, combines expertise in psychology with practical examples to show how anyone can improve dealmaking skills. In this excerpt, Malhotra and Bazerman describe what to do when the other party's behavior does not make sense. Open for comment; 0 Comments.
- 02 Oct 2007
- First Look
- 01 Oct 2007
- Working Paper Summaries
Team Familiarity, Role Experience, and Performance:Evidence from Indian Software Services
In contexts ranging from product development to service delivery, a significant amount of an organization's work is conducted by "fluid teams" that strive for innovative output. Fluid project teams exist only for the duration of a single project, and are comprised of members who may join or leave a team during the course of a project. In such settings, simple measures of cumulative output may not accurately capture team experience, particularly when changes in team composition are substantial over time. This study of an Indian software services firm, Wipro Technologies, considers an approach for capturing the experience held by fluid teams. It extends the concept of team fluidity in a way that allows for greater granularity in the measurement of team experience and a finer understanding of the determinants of team performance. Key concepts include: The findings underscore the need to use caution in assuming cumulative output wholly captures experience when team membership is not constant from one project to the next. These results build on previous research on team familiarity by considering longitudinal data on the individual members of teams. The findings also emphasize the importance of considering role experience and studying experience at different levels of seniority. Closed for comment; 0 Comments.
- 01 Oct 2007
- Research & Ideas
Encouraging Dissent in Decision-Making
Our natural tendency to maintain silence and not rock the boat, a flaw at once personal and organizational, results in bad—sometimes deadly—decisions. Think New Coke, The Bay of Pigs, and the Columbia space shuttle disaster, for starters. Here's how leaders can encourage all points of view. Key concepts include: All organized human groups are susceptible to suppression of views deemed contentious or disruptive to an organization's foundational beliefs. Decisions are seldom better for silence, and overcoming that is a key task for the leader of any organization. Candor should be rewarded and incentives designed to encourage opposing points of view. An aware, open, and inquiring senior team is critical to sound decision-making. Closed for comment; 0 Comments.
- 28 Sep 2007
- Working Paper Summaries
Digital Interactivity: Unanticipated Consequences for Markets, Marketing, and Consumers
For digital marketing practice and theory, the last decade has brought two related surprises: the rise of social media and the rise of search media. Marketing has struggled to find its place on these new communication pathways. Old paradigms have been slow to die. This paper reviews early beliefs about interactive marketing, then identifies 5 discrete roles for interactive technology in contemporary life and 5 ways that firms respond. It concludes that the new media are rewarding more participatory, more sincere, and less directive marketing styles than the old broadcast media rewarded. Key concepts include: Successful interactive marketing may be less a matter of domination and control, and more a matter of fitting in. There is a human need to assert and present to the world a self-serving identity and to manage one's personal reputation. The form of interactivity most attractive to marketing is one that facilitates people's ability to construct their identity and contribute to the making of meaning. Closed for comment; 0 Comments.
- 26 Sep 2007
- Sharpening Your Skills
- 25 Sep 2007
- First Look
- 24 Sep 2007
- Research & Ideas
The FDA: What Will the Next 100 Years Bring?
With the possible exception of the Internal Revenue Service, no other governmental agency touches the lives of more Americans than the U.S. Food and Drug Administration, which ensures the safety of $1.5 trillion worth of consumer goods and medicines. Harvard Business School professor Arthur A. Daemmrich discusses the impact and challenges of the agency and his new book, Perspectives on Risk and Regulation: The FDA at 100. Closed for comment; 0 Comments.
- 21 Sep 2007
- Working Paper Summaries
Intra-Industry Foreign Direct Investment
One of the enduring puzzles for researchers on FDI has been the role and importance of "horizontal" and "vertical" FDI. Horizontal FDI tends to mean locating production closer to customers and avoiding trade costs. Vertical FDI, on the other hand, represents firms' attempts to take advantage of cross-border factor cost differences. A central challenge for study has been the absence of firm-level data to distinguish properly among the types of and motivations for FDI. Alfaro and Charlton analyzed a new dataset, and in this paper present the first detailed characterization of the location, ownership, and activity of global multinational subsidiaries. Key concepts include: Most FDI occurs between rich countries. In contrast to previous research, it appears that the share of vertical FDI is larger than commonly thought, even within developed countries. Multinational firms have tended to embrace vertical FDI for highly skilled and later stages of production, and for arm's-length transactions for lower-skill inputs and processes. Closed for comment; 0 Comments.
First Look: October 16, 2007
Closed for comment; 0 Comments.