First Look

April 24, 2007

Why do some industries, such as auto and high-tech, agglomerate in particular regions? Many theories have been proposed, but now a new research paper points to the importance of labor pooling and input-output dependencies. Read the new working paper, "What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns." Other new publications from HBS faculty explore how foreign direct investment is effected by stock market valuations, a case study framing growth strategy questions facing Indian retailer Fabindia, and a study of publishing pioneer Henry Luce.
— Sean Silverthorne

Working Papers

Poverty, Social Divisions, and Conflict in Nepal


We conduct an econometric analysis of the economic and social factors which contributed to the spread of violent conflict in Nepal. We find that conflict intensity is significantly higher in places with greater poverty and lower levels of economic development. Violence is higher in locations that favor insurgents, such as mountains and forests. We find weaker evidence that caste divisions in society are correlated with the intensity of civil conflict, while linguistic diversity has little impact.

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What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns


Many industries are geographically concentrated. Many mechanisms that could account for such agglomeration have been proposed. We note that these theories make different predictions about which pairs of industries should be coagglomerated. We discuss the measurement of coagglomeration and use data from the Census Bureau's Longitudinal Research Database from 1972 to 1997 to compute pairwise coagglomeration measurements for U.S. manufacturing industries. Industry attributes are used to construct measures of the relevance of each of Marshall's three theories of industry agglomeration to each industry pair: (1) agglomeration saves transport costs by proximity to input suppliers or final consumers, (2) agglomeration allows for labor market pooling, and (3) agglomeration facilitates intellectual spillovers. We assess the importance of the theories via regressions of coagglomeration indices on these measures. Data on characteristics of corresponding industries in the United Kingdom are used as instruments. We find evidence to support each mechanism. Our results suggest that input-output dependencies are the most important factor, followed by labor pooling.

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Cases & Course Materials

Note on Student Outcomes in U.S. Public Education

Harvard Business School Note 307-068

Surveys educational outcomes among public school students in the United States. Educational outcomes are categorized as achievement outcomes (measured primarily by students' performance on standardized test results) and attainment outcomes (measured primarily by students' completion rates at various grade levels). Deals with outcome trends within the general U.S. school-aged population and covers educational outcomes in various subpopulations of students, including ones defined by race, income, family background, and gender. Describes student outcomes in U.S. public education; it does not explain them. For example, the first half of the note presents data on stagnating achievement levels in the general U.S. population over the last 30 years, but it does not cover in any detail the debate that surrounds the causes of this trend. Similarly, the second half of the note summarizes, but does not interpret explicitly, certain stark correlations between students' educational prospects and their race and socioeconomic status.

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Note on U.S. Public Education Finance (A): Revenues

Harvard Business School Note 307-069

Describes the revenue structure of U.S. public education. Covers funding by federal, state, and local governments. Examines in detail two federal education laws: the Elementary and Secondary Education Act (ESEA) and the Individuals with Disabilities Education Act (IDEA). Although these laws account for less than 7 percent of U.S. public funding for education, their mandates strongly influence the activities of schools and school districts. Includes a bibliography. A rewritten version of an earlier note.

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Note on U.S. Public Education Finance (B): Expenditures

Harvard Business School Note 307-070

Describes the cost structure and spending policies of U.S. public school districts.

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Nike Inc.: Heading Toward 2010

Harvard Business School Case 207-105

This is a short case (2 pages), which can be distributed and discussed in class as an update through 2006 of the Nike case series. It follows "Nike, Inc.: Entering the Millennium" (Case 299-084)

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Fabindia Overseas Pvt. Ltd

Harvard Business School Case 807-113

Fabindia is a for-profit Indian retail company with the stated mission of providing employment to weavers and traditional handicraft artisans in rural India. Established in 1960 as an exporter of home furnishings, Fabindia has grown as a consumer-facing retailer of apparel, home furnishings, organic food, and body care products, and has plans to expand further. Given their mission, their supply chain is fragmented, geographically scattered, and unpredictable. Can they overcome these challenges and still grow profitably while staying committed to their mission?

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PRG-Schultz International (A)

Harvard Business School Case 807-126

PRG-Schultz will run out of cash within a couple of months unless the new CEO can reduce costs and restructure the company's debt. PRG was the dominant market leader in the audit recovery industry. The industry consisted of firms which employed accounting professionals to audit purchasing transactions to discover and collect funds owed to their clients. PRG had historically been profitable, and clients were satisfied with their service. In recent years, however, the industry overall and PRG's sales, had been in decline. This left PRG with a cost base that was no longer sustainable. The CEO must decide where to cut costs and how to convince creditors to give the company the time it needs to turn around. A bankruptcy reorganization is one option open to the company. Describes the audit recovery industry, the company's history, the CEO, the financial problems the company faced, and the first steps taken by the CEO to save the company.

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Henry Luce and the American Century

Harvard Business School Case 407-076

Henry Luce, founder of the publishing company which produced Time, Life, Fortune, and Sports Illustrated, created the largest media company in the world by the mid-20th century. Luce's flagship magazine, Time, was able to gross over $20 million in sales during its first decade of publication and over $400 million by the time Luce retired in 1964. Entering the emerging market of magazine journalism early in the 1930s, Luce was able to cover some of the largest political and social events of the 20th century, including Charles Lindbergh's flight, World War II, the Cold War, and the Vietnam War. Combining his unique journalistic ethos and his engaging creative writing style, Luce's magazines often resonated with readers, allowing him to quickly trump competitors such as Newsweek, Forbes, The New Yorker, Esquire, and National Geographic. Yet Luce was also criticized for occasionally using his imaginative style to inject his opinion into stories, going beyond the purview of journalists. Contemporaries complained that Luce was cultivating "middlebrow" cultural tastes instead of striving for journalistic excellence. Nevertheless, Luce's media empire continues to endure into the 21st century, shaping public discourse and influencing public opinion.

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Multinationals as Arbitrageurs? The Effect of Stock Market Valuations on Foreign Direct Investment


Empirical evidence of imperfect integration across world capital markets suggests a role for cross-border arbitrage by multinationals. Consistent with the hypothesis that multinational arbitrage is a determinant of FDI patterns, we find that FDI flows increase sharply with source-country stock market valuations—particularly the component of valuations that is predicted to revert the next year, and particularly in the presence of capital account restrictions that limit other mechanisms of cross-country arbitrage. The results suggest the existence of a cheap financial capital channel in which FDI flows reflect, in part, the use of relatively low-cost capital available to overvalued parents in the source country.

On the Co-Evolution of Knowing and Doing: A Personal Perspective on the Synergies between Research and Practice


The current rigor/relevance debate is a central strategic issue for business schools and their faculty. I argue that on-going relationships with firms, rooted on the joint acknowledgement of the importance of faculty research by firms and respect for practice by faculty, increase the quality and impact of faculty research. With roles and boundaries clear, such on-going relationships with firms, particularly those rooted in executive education venues, increase the insightfulness of our research questions and the quality of our data. Further, to the extent that these relationships help faculty translate our field's research into practice, we are able to live into our institutions' promise to shape managerial practice. These engaged relationships with firms help faculty and their business schools excel in both rigor as well as relevance. This paper provides a personal example of these synergistic relationships and discusses boundary issues associated with these faculty/firm collaborations. Executive education in general, and custom programs in particular, may be an underleveraged vehicle in reducing the rigor/relevance gap between business schools and the world of practice.