Publications
- October 2014
- John Wiley & Sons
International Strategy: Context, Concepts and Implications
Abstract—This book is designed for every student who will be involved in managing and advising companies that compete internationally or face international competitors. Designed around the course at Harvard Business School, Collis' new text takes the firm that operates across borders as a unit of analysis and the senior manager in a multinational as the typical decision maker. Illustrated with examples from companies of all sizes from around the globe, this text provides students with the means to navigate their way through the decisions they will face and formulate an effective business strategy. This is a much-needed guide to the common strategic issues that arise when firms compete internationally.
Publisher's link: http://www.amazon.com/dp/1405139684
- October 2014
- Review of Financial Studies
Corporate Investment and Stock Market Listing: A Puzzle?
Abstract—We investigate whether short-termism distorts the investment decisions of stock market listed firms. To do so, we compare the investment behavior of observably similar public and private firms using a new data source on private U.S. firms, assuming for identification that closely held private firms are subject to fewer short-termist pressures. Our results show that compared to private firms, public firms invest substantially less and are less responsive to changes in investment opportunities, especially in industries in which stock prices are most sensitive to earnings news. These findings are consistent with the notion that short-termist pressures distort investment decisions.
Publisher's link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1603484
- October 2014
- Journal of Economic Behavior & Organization
Prosocial Norms in the Classroom: The Role of Self-regulation in Following Norms of Giving
Abstract—Children who are prosocial in elementary school tend to have higher academic achievement and experience greater acceptance by their peers in adolescence. Despite this positive influence on educational outcomes, it is still unclear why some children are more prosocial than others in school. The current study investigates a possible link between following a prosocial norm and self-regulation. We tested 433 children between 6 and 13 years of age in two variations of the Dictator Game (DG). Children were asked what they should or would give in the game and then played an actual DG. We show that most children hold a common norm for sharing resources, but that some children fail to follow that norm in the actual game. The gap between norm and behavior was correlated with self-regulation skills on a parent-report individual differences measure. Specifically, we show that failure to follow the norm is significantly related to the ability to plan and follow through on a goal and not related to impulsivity, suggesting that some children are poorer at holding the norm in mind and following through on enacting it. We discuss the implications of these results for education and programs that promote social and emotional learning (SEL).
- October 2014
- Quarterly Journal of Economics
Waves in Ship Prices and Investment
Abstract—We study the link between investment boom and bust cycles and returns on capital in the dry bulk shipping industry. We show that high current ship earnings are associated with high used ship prices and heightened industry investment in new ships, but we forecast low future returns. We propose and estimate a behavioral model of industry cycles that can account for the evidence. In our model, firms over-extrapolate exogenous demand shocks and partially neglect the endogenous investment response of their competitors. As a result, firms overpay for ships and overinvest in booms and are disappointed by the subsequent low returns. Formal estimation of the model suggests that modest expectational errors can result in dramatic excess volatility in prices and investment.
Publisher's link: http://www.people.hbs.edu/shanson/ships_qje_2014.pdf
Working Papers
Bottlenecks, Modules and Dynamic Architectural Capabilities
Abstract— Architectural capabilities are an important subset of dynamic capabilities that provide managers with the ability to see a complex technical system in an abstract way and change the system's structure by rearranging its components. In this paper, I argue that the essence of dynamic architectural capabilities lies in the effective management of bottlenecks and modules in conjunction with organizational boundaries and property rights in a technical system. Bottlenecks are points of value creation and capture in any complex man-made system. The tools a firm can use to manage bottlenecks are first, an understanding of the modular structure of the technical system, and second, an understanding of the contract structure of the firm, especially its organizational boundaries and property rights. Although these tools involve disparate bodies of knowledge, they must be used in tandem to achieve maximum effect.
Download working paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2512209
Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement
Abstract—Reducing tax evasion is a key priority for many governments, particularly in developing countries. A growing literature has argued that the ability to verify taxpayer self-reports against reports from third parties is critical for modern tax enforcement and the growth of state capacity. However, there may be limits to the effectiveness of third-party information if taxpayers can make offsetting adjustments on less verifiable margins. We present a simple framework to demonstrate the conditions under which this will occur and provide strong empirical evidence for such behavior by exploiting a natural experiment in Ecuador. We find that when firms are notified by the tax authority about detected revenue discrepancies on previously filed corporate income tax returns, they increase reported revenues, matching the third-party estimate when provided. Firms also increase reported costs by 96 cents for every dollar of revenue adjustment, resulting in minor increases in total tax collection.
Download working paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2512196
Design of Search Engine Services: Channel Interdependence in Search Engine Results
Abstract—The authors examine prominent placement of search engines' own services and effects on users' choice of destinations. Using a natural experiment in which different results were shown to users who performed similar searches, they find that Google's prominent placement of its Flight Search service increased the clicks on paid advertising listings by more than half while decreasing the clicks on organic search listings by about the same quantity. User substitution disproportionately affected the most visited travel sites, reducing use of organic listings sending no-charge traffic to those sites by lowering their prominence and perceived importance, while highlighting paid listings to the same sites. The authors consider the implications of such changes for online marketers and for search engine operators.
Download working paper: http://www.benedelman.org/publications/gfs-2014-10-17.pdf
Adding Value Through Venture Capital in Latin America and the Caribbean
Abstract—Venture capital (VC) investment has long been recognized as an engine for economic growth and development. Unlike bank loans, where the entrepreneur receives money and is left alone as long as the payments arrive on the pre-arranged schedule, venture capital investments add the quality of active investing to the cash infusion. In exchange for taking on the risk of young companies in uncertain environments, venture capitalists receive board level oversight privileges, which range from approval of budgets and advice on product development to the right to replace the management team should they consistently under-perform. This activity, performed by individuals with substantial experience in shepherding young companies to maturity, creates substantial value in the portfolio company.
Download working paper: http://www.hbs.edu/faculty/Publication%20Files/15-024_235931ea-2a0d-4875-9d7b-1aef3047bc83.pdf
Making the Numbers? 'Short Termism' & the Puzzle of Only Occasional Disaster
Abstract—Much recent work in strategy and popular discussion suggests that an excessive focus on "managing the numbers" ―delivering quarterly earnings at the expense of longer-term investments―makes it difficult for firms to make the investments necessary to build competitive advantage. "Short termism" has been blamed for everything from the decline of the U.S. automobile industry to the low penetration of techniques such as TQM and continuous improvement. Yet a vigorous tradition in the accounting literature establishes that firms routinely sacrifice long-term investment to manage earnings and are rewarded for doing so. This paper presents a model that reconciles these apparently contradictory perspectives. We show that if the source of long-term advantage is modeled as a stock of capability that accumulates over time, a firm's proclivity to manage short-term earnings at the expense of long-term investment can have very different consequences depending on whether the firm's capability is close to a critical "tipping threshold." When the firm operates above this threshold, managing earnings smoothes revenue and cash flow with few long-term consequences. Below it, managing earnings can tip the firm into a vicious cycle of accelerating decline. Our results have important implications for understanding managerial incentives and the internal processes that create sustained advantage.
Download working paper: http://www.hbs.edu/faculty/Publication%20Files/15-027_a00eeeb6-c5c6-41cc-b4f4-8047926c067a.pdf
Cases & Course Materials
- Harvard Business School Case 615-019
Whole Foods: The Path to 1,000 Stores
The case examines the operations strategy of Whole Foods, one of the largest natural grocery chains in the United States. In late 2013, Whole Foods was expanding rapidly, with a publicly stated goal of growing from 351 to 1,000 domestic stores by 2022. It was also engaged in a strategic initiative to combat "food deserts"-areas with limited access to affordable and nutritious food. In pursuit of these initiatives, the company's rapid entry into a heterogeneous set of new markets necessitated a reexamination of its store format, target customer base, and approach to human capital.
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http://hbr.org/product/Whole-Foods--the-Path-to-/an/615019-PDF-ENG
- Harvard Business School Case 915-001
Pivots and Incentives at LevelUp
LevelUp's mobile payments service lets users scan a smartphone barcode rather than swipe a credit card. Will consumers embrace the service? Will merchants? LevelUp considers adjustments to make the service attractive to both consumers and merchants, while trying to accelerate deployment at reasonable cost.
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http://hbr.org/product/pivots-and-incentives-at-levelup/an/915001-PDF-ENG
- Harvard Business School Case 815-003
Building Life Science Businesses Fall Term 2014: Course Outline and Syllabus
This course outline and syllabus gives an overview of the fall 2014 class "Building Life Science Businesses."
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http://hbr.org/product/Building-Life-Science-Bus/an/815003-PDF-ENG
- Harvard Business School Case 815-005
Entrepreneurship in Healthcare IT Services (EHITS) Fall Term 2014: Course Outline and Syllabus
This is the syllabus and course outline for "Entrepreneurship in Healthcare IT and Services (EHITS)" taught by Professor Bob Higgins in the fall of 2014. Contains the course overview, objectives, goals, and themes.
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http://hbr.org/product/Entrepreneurship-in-Healt/an/815005-PDF-ENG
- Harvard Business School Case 313-116
Advanced Leadership Pathways: Gilberto Dimenstein Opens Connections in Brazil
In 2011, Gilberto Dimenstein, a well-known Brazilian journalist, created a new model that connected disparate resources to revitalize Sao Paulo. He wanted his model to expand across Brazil and the world. As a journalist, Dimenstein covered many of the social issues facing Brazil and became determined to create solutions. Dimenstein started two social ventures, ANDI and Escola Aprendiz, before creating and developing Catraca Livre (meaning "open turnstile" in Portuguese) while he was an Advanced Leadership fellow at Harvard. Dimenstein pursued his idea of "learning neighborhoods," which meant a localized, low cost, and effective way to leverage the existing available resources as educational opportunities. The resources were underutilized because of a lack of awareness. He believed that education should not be limited to the classroom and instead should be expanded to the entire city. Catraca Livre enabled Sao Paulo's residents to utilize untapped resources by aggregating all of the available resources and disseminating the information through multiple avenues including a website, subways, restaurants, workplaces, and more. This case shows how Dimenstein spearheads his solution to improve his city and offers a model for revitalizing cities around the world.
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http://hbr.org/product/Advanced-Leadership-Pathw/an/313116-PDF-ENG
- Harvard Business School Case 615-702
Havas: Change Faster
As of 2013, Havas was the sixth largest global advertising, digital, and communications group in the world. Headquartered in Paris, France, the group was highly decentralized, with semi-independent agencies in more than 100 countries offering a variety of services. The largest unit of Havas was Havas Worldwide, an integrated marketing communications agency headquartered in New York. CEO David Jones was determined to make Havas Worldwide the most future-focused agency in the industry by becoming a leader in digital innovation. The case explores the tensions within the company as David Jones attempts to change the company to compete in an industry undergoing digital transformation. The case uses the example of the acquisition of Victors & Spoils, a crowdsourcing advertising agency, to examine internal reactions.
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http://hbr.org/product/Havas--Change-Faster/an/615702-MMC-ENG
- Harvard Business School Case 415-701
Victors & Spoils: 'Born Open'
Victors & Spoils (V&S), located in Boulder, Colorado, was the first advertising agency built on open innovation and crowdsourcing principles from the ground up. V&S was cofounded in 2009 by John Winsor, Claudia Batten, and Evan Fry, all former members of the advertising agency Crispin Porter + Bogusky (CP+B). V&S crowdsourced creative ideas for its ad campaigns through Agency Machine, its proprietary online platform. CEO John Winsor wanted to change the way that advertising was done, a difficult task in an industry entrenched in traditional models. The case follows Winsor as he prepares to scale his business and determine the best way to do so. He has an offer from Havas, a leading global advertising company interested in acquiring V&S, which would give V&S access to unprecedented resources. However, Winsor and the V&S team have concerns about how their innovative processes may be affected by partnering with a large, traditional company.
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http://hbr.org/product/Victors---Spoils---Born-O/an/415701-MMC-ENG
- Harvard Business School Case 515-016
USAA in the Digital World
No abstract available.
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http://hbr.org/product/USAA-in-the-Digital-World/an/515016-PDF-ENG
- Harvard Business School Case 215-012
EcoMotors International
Eco-Motors, funded in part by Khosla Ventures, has to decide how to go to market with a new technology for internal combustion engines for automotive and industrial use. The OPOC engine has opposed pistons and is a two-stroke engine, as compared to a more traditional in-line or V-oriented 6, 8, or 12 cylinder gas or diesel engine. A two-stroke engine is cheaper to build and has higher power output than a four-stroke engine but historically has been more polluting. At present in the U.S., two-stroke engines are mostly deployed in lawnmowers and chainsaws with four-stroke engines the leaders in cars, boats, and generators. Should the company be an invention company licensing its technology; an engine designer and manufacturer selling to auto, marine, and fixed OEM companies; or a fully integrated power and transport solution? How is the value chain currently organized, what obstacles are there in going to market, and how can this company thrive with this innovation that is cleaner and cheaper than the incumbent but hard to explain and to deploy?
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http://hbr.org/product/EcoMotors-International/an/215012-PDF-ENG
- Harvard Business School Case 515-007
Pfizer and AstraZeneca: Marketing an Acquisition (A)
In 2014, Pfizer proposed a friendly acquisition of AstraZeneca, but the AstraZeneca board resisted over price and strategy concerns. Was this good for pharmaceutical consumers? Pfizer, like pharmaceutical companies in general, faced difficulties in growing sales due to the challenges of developing new drugs. Over the previous decade or more, Pfizer had pursued acquisitions as a way to acquire new drugs, increase sales, and reduce costs by combining operations and cutting staff. Pfizer, a U.S. company, was also interested in AstraZeneca, a UK company, as a way to reduce its corporate taxes. In recent years, AstraZeneca had significantly strengthened its pipeline of potential new drugs, and its board felt it was in a strong position to go it alone. The company's CEO also indicated that an acquisition would be disruptive to its drug development efforts and delay new drugs coming to market. UK politicians expressed concerns over downsizing and job losses in the economically important pharmaceutical sector. The case allows readers to explore who benefits from a potential acquisition (shareholders, employees, drug consumers) and which of these stakeholders should be considered when deciding on an acquisition.
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http://hbr.org/product/Pfizer-and-AstraZeneca--M/an/515007-PDF-ENG
- Harvard Business School Case 515-008
Pfizer and AstraZeneca: Marketing an Acquisition (B)
This (B) case provides a brief description of the outcome of the (A) case.
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http://hbr.org/product/Pfizer-and-AstraZeneca--M/an/515008-PDF-ENG
- Harvard Business School Case 115-012
Responsibilities to Society: The Capitalist's Contract
Societies face many pressing challenges with serious implications for business leaders. These include pollution and climate change, poverty and income inequality, obesity and public health, and corruption and regulatory capture. This note presents a way of analyzing the economic, legal, and ethical implications of these challenges for business leaders, in their capacities as corporate fiduciaries and citizens. The note offers a unifying framework by organizing major contemporary societal challenges into four "tragedies of the commons" and by developing the notion of a "capitalist's contract" that can help students consider how they, as future business leaders, will respond to these tragedies.
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http://hbr.org/product/Responsibilities-to-Socie/an/115012-PDF-ENG
- Harvard Business School Case 515-019
Showrooming at Best Buy
Best Buy is a consumer electronics retailer with nearly 2,000 stores worldwide. In 2012, the rising popularity of price-matching apps for mobile phones made price differences between retailers transparent, online and offline. Shoppers' desire to test electronics first-hand before purchase drove them to use Best Buy stores as "showrooms" to see new products and then search for better deals on their smartphones. This case examines how brick-and-mortar stores battle showrooming through changes in product assortment, the development of apps, loyalty programs, and changes in pricing policy. The case asks whether Best Buy can survive by permanently price-matching their online-only competitors, primarily Amazon, despite having higher costs.
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http://hbr.org/product/Showrooming-at-Best-Buy/an/515019-PDF-ENG