- forthcoming
- Entrepreneurship and Collaboration
Inter-Organizational Collaboration and Start-Up Innovation
Abstract—This chapter presents an overview of the literature on collaborative relationships between start-ups and incumbent firms, focusing on the implications of these relationships for start-up innovation and performance. Value creation in such relationships occurs when assets are exchanged by the parties involved: collaboration allows for passive knowledge flows and active knowledge creation; in addition, collaboration provides start-ups with access to the complementary assets of the incumbent. At the same time, value creation presents opportunities for value capture by either party, where value capture by the start-up is determined by their knowledge appropriation regime and social capital. The form in which the start-up appropriates value has implications for the assets that enable value creation. The framework for value creation and capture in bilateral start-up-incumbent collaborations extends to start-up-incumbent collaborations in a platform and ecosystem context where there are fruitful future research opportunities.
Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55322
- forthcoming
- Journal of Financial Economics
Governance Through Shame and Aspiration: Index Creation and Corporate Behavior
Abstract—After decades of deprioritizing shareholders' economic interests and low corporate profitability, Japan introduced the JPX-Nikkei400 in 2014. The index highlighted the country's "best-run" companies by annually selecting the 400 most profitable of its large and liquid firms. We find that managers competed for inclusion in the index by significantly increasing ROE, and they did so at least in part due to their reputational or status concerns. The ROE increase was predominantly driven by improvements in margins, which were in turn partially driven by cutting R&D intensity. Our findings suggest that indexes can affect managerial behavior through reputational or status incentives.
Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55333
- forthcoming
- Review of Corporate Finance Studies
Short-Termism and Capital Flows
Abstract—During 2007–2016, S&P 500 firms distributed to shareholders $7 trillion via buybacks and dividends, over 96% of their aggregate net income, prompting claims that "short-termism" is impairing firms' ability to invest and innovate. We show that, when taking into account both direct and indirect equity issuances, net shareholder payouts by all public firms during this period were only 41% of net income. And, in fact, during this decade investment increased substantially while cash balances ballooned. In short, S&P 500 shareholder-payout figures cannot provide much basis for the notion that short-termism has been depriving public firms of needed capital.
Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55334
- 2018
- Handbook of Healthcare Analytics: Theoretical Minimum for Conducting 21st Century Research on Healthcare Operations
Competing Interests
Abstract—The editors, aided by a team of internationally acclaimed experts, have curated this timely volume to help newcomers and seasoned researchers alike to rapidly comprehend a diverse set of thrusts and tools in this rapidly growing cross-disciplinary field. The Handbook covers a wide range of macro-, meso- and micro-level thrusts—such as market design, competing interests, global health, personalized medicine, residential care, and concierge medicine, among others—and structures what has been a highly fragmented research area into a coherent scientific discipline. The Handbook also provides an easy-to-comprehend introduction to five essential research tools—Markov decision process, game theory and information economics, queueing games, econometric methods, and data science—by illustrating their uses and applicability on examples from diverse healthcare settings, thus connecting tools with thrusts. The primary audience of the Handbook includes analytics scholars interested in healthcare and healthcare practitioners interested in analytics.
Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55291
- forthcoming
- Accounting Review
Who Consumes Firm Disclosures? Evidence from Earnings Conference Calls
Abstract—Using a set of proprietary records, we examine who consumes quarterly earnings conference calls and under which circumstances the calls are consumed. While there is significant interest in calls by institutional investors and sell-side analysts, we find that investors who do not hold a position in the firm are leading consumers. We show that buy-side non-holders who consume calls are more likely to hold positions in competitors and to purchase the stock in the future. In addition, many investors who hold large positions only consume calls periodically. We also document a benefit of consuming calls by finding that the consumption of calls is associated with more informed trading decisions. Overall, our investigation illuminates the actual consumption of conference calls by different consumers and the potential benefits of consuming additional firm disclosures.
Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55303
- November 2018
- Australian Economic History Review
Business, Governments and Political Risk in South Asia and Latin America since 1970
Abstract—This article contributes to the literature on political risk in business and economic history by examining both new perspectives (risk encountered by companies domestically, rather than risk for foreign investors) and new settings (emerging markets economies in Latin America and South Asia). It makes use of the Creating Emerging Markets oral history database at the Harvard Business School to examine business leaders’ perceptions of political risk over time between the 1970s and the present day, employing NVivo coding of the dataset to move beyond simple descriptive use of the content. The article identifies five major sources of risk operating in both geographies. Macroeconomic and policy turbulence emerged as the biggest source of risk for Latin Americans, while excessive bureaucracy was the biggest source of risk for South Asians. Political instability, corruption, and violence were other sources of risk encountered by many firms. The article examines not only the types of risk found in different environments, but also how interviewees discussed and responded to risk. In the case of corruption, although most countries surveyed had similarly high levels of corruption, it manifested itself differently in different regions. Especially informative was the issue of bureaucratic risk. Although interviewees in both regions reported having to dedicate significant time to navigating government regulation, interviewees in South Asia frequently reported attempting to stay away from highly regulated industries, while many interviewees in Latin America discussed how they adapted to heavier government oversight by forming closer ties or working relationships with incumbent administrations. This article demonstrates how oral history testimony can deepen and nuance current understandings of the evolution of business in emerging markets over the last half century. It can shed light on sensitive topics that are hard to study using written sources alone and adds nuance to phenomena commonly surveyed or measured qualitatively.
Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55290
Work from Anywhere or Co-locate? Autonomy versus Learning Effects at the United States Patent Office
Abstract—While employees might prefer work arrangements that offer greater autonomy, such as work from anywhere (WFA) policies, there are possible negative productivity effects of WFA, due to a lack of learning from co-located peers and increased coordination costs. We study the effects of WFA on productivity at the United States Patent and Trademark Office (USPTO) and exploit two features of the setting that lend themselves to econometric analysis: First, our setting allows us to tease out how the lack of opportunities to learn from co-located peers affects productivity. Second, we exploit a natural experiment in which the implementation of WFA was driven by negotiations between managers and the union of patent examiners, leading to exogeneity in the timing of individual examiners’ transition to WFA. We observe mixed results of WFA across experienced and new hires: for experienced hires, WFA results in a 3.9% increase in output and a 24% reduction in turnover, without affecting the proportion of rework; however, for new hires, an increase in output due to WFA is followed by an additional increase in rework, indicating a negative learning effect from the lack of co-location with experienced peers. We employ micro-data on cost of living, degree of autonomy, and proxies for examiner effort to shed light on mechanisms. Back-of-the-envelope welfare estimates indicate that the 3.9% increase in patent grants at the USPTO could potentially create $1.16 billion in value for the U.S. economy.
Southern Responses to Gold Certification: Cooperate, Compete, Reject, Revise
Abstract—Southern responses to Northern-led certification programs are understandable and largely predictable if the ideas, interests, and power of key actors are accurately assessed. When alignment and power are high, Northern programs will likely succeed. When they are low, they will likely fail. When they are at medium levels, Southern actors will likely launch competing programs and producer participation might be low but will likely skew South. This paper presents a case study of Southern responses to Northern certification of artisanal and small-scale gold mining (ASGM), which are emblematic of the latter, medium-level state. It details four key Southern responses: cooperation, competition, low uptake levels, and program revision via supplementation. The Southern-led Alliance for Responsible Mining first cooperated with Fairtrade International, then built enough capacity to compete with it. Miners’ and programs’ interests aligned on income and deforestation, but diverged on chemicals and legality, leading to low uptake. The Alliance responded by launching a second sustainability standard called the CRAFT Code in 2018. Whereas certification rewards the use of best mining practices, the CRAFT Code rewards avoidance of the worst. By focusing on conflict and relaxing their stance on legality, mercury use, price floors, and the use of third-party audits, the Alliance created a program that aligns with the majority of actors’ interests and is likely to experience broad uptake but limited effects.
Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=55323
- Harvard Business School Case 119-020
LendingClub (A): Data Analytic Thinking (Abridged)
LendingClub was founded in 2006 as an alternative, peer-to-peer lending model to connect individual borrowers to individual investor-lenders through an online platform. Since 2014 the company has worked with institutional investors at scale. While the company assigns grades and sub-grades to each application using its own risk evaluation model, it also makes detailed data on each loan application available to both kinds of investors for their own analyses. The case follows MBA graduate Emily Figel as she researches LendingClub as a potential investment vehicle for the small wealth management firm she will join in the fall. Using LendingClub’s historical data, she learns the fundamentals of predictive analytics to see whether she can build models to predict whether a borrower will repay or, ultimately, default on the obligation. This first case (A) presents students with relevant, detailed data about how the LendingClub model works. This includes LendingClub’s business model, the grading of loans, the unique opportunities, and the risks. It also follows Figel as she dives into the data to use it to build a model.
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- Harvard Business School Case 119-021
LendingClub (B): Decision Trees & Random Forests
This case builds directly on the LendingClub (A) case. In this case students follow Emily Figel as she builds two tree-based models using historical LendingClub data to predict, with some probability, whether borrower will repay or default on his loan.
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- Harvard Business School Case 119-022
LendingClub (C): Gradient Boosting & Payoff Matrix
This case builds directly on the LendingClub (A) and (B) cases. In this case students follow Emily Figel as she builds an even more sophisticated model using the gradient boosted tree method to predict, with some probability, whether a borrower would repay or default on his loan. Having now built three models, Figel compares them to determine which model is most effective at classifying borrowers correctly then uses that model to determine how to invest in a portfolio of loans. Students explore the relationship between her model’s confusion matrix, which organizes the model’s correct and incorrect classifications, the cutoff point on the curve that matches true positives and true negatives, and the payoff matrix Figel constructs. Students can then follow the link directly from the model Figel builds to her specific investment decisions.
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- Harvard Business School Case 807-028
Jamnalal Bajaj, Mahatma Gandhi, and the Struggle for Indian Independence
Describes the role of a leading Indian business leader in the campaign for independence before 1947 and his close relationship with the legendary Mahatma Gandhi. Provides the opportunity to consider the impact of colonialism on shaping Indian entrepreneurship and the role of the small Marwari group, originally from the Marwar region of Rajasthan, in creating many of India's leading business houses, including the Bajaj. The Bajaj, like other Marwari, were traders who after World War I transitioned into manufacturing, including sugar manufacturing and steel rolling.
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- Harvard Business School Case 718-024
Portugal: Can Socialism Survive?
Portugal was not ready to join the European Monetary Union in 1999. With strong unions, weak competitiveness, and a legacy of socialism, it could not compete with north-European countries. After borrowing extensively to fund deficits, Portugal went into debt crisis in 2011 and had to borrow from the Troika. As banks failed, structural adjustment followed. Today several structural issues and the threat of external risks continue to cast a shadow on its otherwise remarkable recovery.
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- Harvard Business School Case 718-034
Saudi Arabia: Vision 2030
Saudi Arabia’s King Salman faces several challenges, both domestic and foreign. Domestically, he needs to build the country’s economy to accommodate a "youth bulge" while balancing between liberals and conservatives. And he needs to diversify the economy away from its reliance on oil. Internationally, he must cope with the Arab Spring, with war in Syria and Yemen, as well as the threats from Iran and ISIS and continuing friction between Palestinians and Israelis. The key to these issues is Vision 2030—the plan his son, the Crown Prince, has introduced and begun implementing.
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