First Look

Abstract—Find, acquire, and run your own business. Are you looking for an alternative to a career path at a big firm? Does founding your own start-up seem too risky? There is a radical third path open to you: you can buy a small business and run it as CEO. Purchasing a small company offers significant financial rewards—as well as personal and professional fulfillment. Leading a firm means you can be your own boss, put your executive skills to work, fashion a company environment that meets your own needs, and profit directly from your success. But finding the right business to buy and closing the deal isn't always easy. In the HBR Guide to Buying a Small Business, we help you: determine if this path is right for you, raise capital for your acquisition, find and evaluate the right prospects, avoid the pitfalls that could derail your search, understand why a "dull" business might be the best investment, negotiate a potential deal with the seller, and avoid deals that fall through at the last minute.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50854

Abstract—Gender differences in the propensity to negotiate are often used to explain the gender wage gap, popularizing the push for women to “lean-in." We use a laboratory experiment to examine the effect of leaning-in. Despite men and women achieving similar and positive returns when they are forced to negotiate, we find that women avoid negotiations more often than men. While this suggests that women would benefit from leaning-in, a direct test proves otherwise. Women appear to positively select into negotiations and to know when to ask. By contrast, we find no significant evidence of such a positive selection for men.

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Abstract—This article traces the growing popularity of Junior Achievement’s “Company Program” in the two decades after World War II. The program provided high school students with the opportunity to form teams and start mini-corporations that would last for most of the school year and would compete to sell goods or services. The learn-by-doing program gave teenagers the chance to prepare for corporate life by experiencing different positions within the company—sales manager, treasurer, president, and manufacturer, for instance. The essay also features the leading proponents of this program, especially Charles Hook of ARMCO, and reasons for its eventual decline.

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Abstract—This article looks back at the publication and influence of Wesley Mitchell’s Business Cycles published in 1913. It surveys some of the key ideas in the book and explains the reasons why it resonated with a variety of people, including economists, statisticians, economic forecasters, and politicians in the years after its publication.

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Abstract—Though fundamental to innovation and essential to many industries and occupations, the creative act has received limited attention as an economic behavior and has historically proven difficult to study. This paper studies the incentive effects of competition on individuals' creative production. Using a sample of commercial logo design competitions, and a novel, content-based measure of originality, I find that competition has an inverted-U effect on creativity: some competition is necessary to induce agents to produce radically novel, untested ideas over incrementally tweaking their earlier work, but heavy competition drives them to stop investing altogether. The results are consistent with economic theory and reconcile conflicting evidence from an extensive literature on the effects of competition on innovation, with implications for R&D policy, competition policy, and organizations in creative or research industries.

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Abstract—Performance feedback is ubiquitous in competitive settings where new products are developed. This paper introduces a fundamental tension between incentives and improvement in performance evaluation. Using a sample of 4,000 commercial logo design tournaments, I show that feedback reduces participation but improves the quality of subsequent submissions with an ambiguous effect on high-quality output. To evaluate this tradeoff, I develop a procedure to estimate agents’ effort costs and simulate counterfactuals under alternative feedback policies. The results suggest that feedback on net increases the number of high-quality ideas produced and may thus be desirable for a principal seeking innovation.

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Abstract—Using the farm tractor as a case study, I show that lags in technology diffusion arise along two distinct margins: scale and scope. Though tractors are now used in nearly every agricultural field operation and in the production of nearly all crops, they first developed with much more limited application, and early diffusion was accordingly limited in scope until tractor technology generalized. The results are consistent with theory and other historical examples, suggesting that the key to understanding technology diffusion lies not only in explaining the number of different users, but also in explaining the number of different uses.

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Abstract—Working in teams often leads to productivity loss because the need to feel accepted prevents individual members from making a unique contribution to the team in terms of the information or perspective they can offer. Drawing on self-affirmation theory, we propose that pre-team relational self-affirmation can prepare individuals to contribute to team creative performance more effectively. We theorize that relationally affirming one's self-views increases general feelings of being socially valued by others, leading to better information exchange and creative performance. In a first study, we found that teams in which members affirmed their best selves prior to team formation (i.e., by soliciting and receiving narratives that highlight one's positive impact on close others) outperformed teams that did not do so on a creative problem-solving task. In the second experiment, conducted using virtual teams, we show that pre-team relational self-affirmation leads to heightened feelings of social worth, which in turn explains the effect of the treatment on the team's ability to exchange information.

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Abstract—In the presence of managerial short-termism and asymmetric information about skill and effort provision, firms may opportunistically shift earnings from uncertain to more certain times. We document that firms report more negative discretionary accruals when financial markets are less certain about their future prospects. Stock-price responses to earnings surprises are moderated when firm-level uncertainty is high, consistent with performance being attributed more to luck rather than skill and effort, which can create incentives to shift earnings toward lower-uncertainty periods. We show that the resulting opportunistic earnings management is concentrated in CEOs, firms, and periods where such incentives are likely to be strongest: (1) where CEO wealth is sensitive to change in the share price, (2) where announced earnings are particularly likely to be an important source of information about managerial ability and effort, and (3) before implementation of Sarbanes-Oxley made opportunistic earnings management more challenging. Our evidence highlights a novel channel through which uncertainty affects managerial decision making in the presence of agency conflicts.

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In March 2012, Hon Hai Precision Industry Company, Ltd. (Hon Hai) announced its investment in the Sharp Corporation (Sharp). The deal was structured in two parts: the first had Hon Hai investing in Sharp, and the second involved Hon Hai founder, chairman, and CEO Terry Guo personally purchasing a stake in Sharp's unprofitable Sakai manufacturing plant. This case explores the dynamics of the deal and specifically focuses on valuation of the investment in the Sakai plant as well as the structure of the deal. It presents a vehicle by which to consider net present value (NPV) calculations and corporate deal structuring.

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In June 2015 William A. Ackman, the CEO and founder of New York hedge fund Pershing Square Capital, reflects on the success of the fund he has spent over a decade building. Since its inception in 2004, Pershing Square's assets under management had grown from $500 million to well over $18 billion. Ackman is now considering a sizable new portfolio position and must decide how he should raise capital to undertake this new investment. This choice is affected by the recent launch of his new, $6 billion closed-end vehicle, Pershing Square Holdings, as well as the firm's lengthening investment horizon. Although always activist in nature, Ackman and his fund had in recent years become substantively involved in the management of portfolio companies, often working to drive shareholder value by improving operating performance.

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No abstract available.

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By 2015, technological innovations—the smartphone and the advanced data connectivity that enabled it—created new opportunities for people to move around cities quickly and conveniently without owning a car, via car-sharing services like Zipcar or new ride-sharing services. Uber, a five-year-old startup, enabled users to order private rides via a smartphone app. In mid-2015, the company had achieved pre-IPO market valuation of $50 billion, with operations in 311 cities in 58 countries. Despite its scale and success, Uber often found itself embroiled in controversy, with resistance from a broad range of unhappy stakeholders—regulators, competitors, drivers, and even some customers and partners—across the U.S. and the world. Could Uber continue on this route?

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