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    First Look at New Research and Ideas, April 18, 2018

    First Look

    18 Apr 2018

    Of special interest among new research papers, case studies, articles, and books released this week by Harvard Business School faculty:

    In America, immigrants do get the job done

    Authors Sari Pekkala Kerr and William R. Kerr survey business owner data to draw a rich portrait of immigrant entrepreneurship and firm ownership. Among the findings: "First-generation immigrants create about 25 percent of new firms in the United States, but this share exceeds 40 percent in some states." Immigrant Entrepreneurship in America: Evidence from the Survey of Business Owners 2007 & 2012.

    Political ideology can hasten your job departure

    Research by Y. Sekou Bermiss and Rory McDonald shows that professionals in private equity whose political ideology is significantly different than the prevailing culture increases their likelihood of switching employers. "Conservatives are more likely to depart than liberals regardless of fit, and departing misfits tend to join new organizations that are closer to their own ideology," according to the paper. Ideological Misfit? Political Affiliation and Employee Departure in the Private-Equity Industry.

    Warning! Why These Label Warnings Don't Work

    Do text-based labels or those featuring graphics work better to discourage unwanted behavior, such as too much sugar consumption? Researchers Grant Donnelley, L. Zatz, Daniel Svirsky, and Leslie John say their findings "could spur more effective labeling policies that facilitate healthier choices, do not decrease overall beverage purchases, and are publicly accepted." The Effect of Graphic Warnings on Sugary Drink Purchasing.

    A complete list of new research and publications from Harvard Business School faculty follows.

    —Sean Silverthorne
    LinkedIn
    Email
    • forthcoming
    • Academy of Management Journal

    Ideological Misfit? Political Affiliation and Employee Departure in the Private-Equity Industry

    By: Bermiss, Y. Sekou, and Rory McDonald

    Abstract—Though organizations are increasingly active participants in the political realm, little research has investigated how an organization’s heightened focus on political ideology impacts employees. We address this gap by exploring how an individual’s political ideological misfit with an organization’s prevailing ideology impacts mobility. By tracking the movements of over 40,000 investment professionals in the U.S. private equity industry over 10 years, we investigate the consequences of the ideological misfit that arises when individuals’ political ideologies diverge substantially from the prevailing ideology of their firms. We hypothesize that ideological misfit increases the likelihood of mobility, though the effects vary with liberal/conservative ideological orientation. Polynomial regression analyses reveal that the fit relationship between individual and organizational political ideology deviates from the idealized congruence relationship that underlies prevailing theory. Through a supplemental, qualitative investigation, we propose some potential interpretations for our findings.

    Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54356

    • forthcoming
    • Psychological Science

    The Effect of Graphic Warnings on Sugary Drink Purchasing

    By: Donnelly, Grant, L. Zatz, Daniel Svirsky, and Leslie John

    Abstract—Governments have proposed text warning labels to decrease consumption of sugary drinks—a contributor to chronic diseases like diabetes. However, they may be less effective than more evocative, graphic warning labels. We field-tested the effectiveness of graphic warning labels (vs. text warning labels, calorie labels, and no labels), provided insight into psychological mechanisms driving effectiveness, and assessed consumer sentiment. Study 1 indicated that graphic warning labels reduced the share of sugary drinks purchased in a cafeteria, from 21.4% at baseline to 18.2%—an effect driven by substitution of water for sugary drinks. Study 2 showed that graphic warning labels work by heightening negative affect and prompting consideration of health consequences. Study 3 indicated that public support for graphic warning labels can be increased by conveying effectiveness information. These findings could spur more effective labeling policies that facilitate healthier choices, do not decrease overall beverage purchases, and are publicly accepted.

    Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54008

    • 2018
    • Business Groups in the West: Origins, Evolution and Resilience

    Britain: Global Legacy and Domestic Persistence

    By: Jones, G.

    Abstract—This chapter explores the British experience in a volume which examines the historical evolution of business groups in developed Western economies. The chapter argues that during the nineteenth century British merchant houses established business groups with diversified portfolio and pyramidal structures overseas, especially in developing economies, including both British colonies and the independent nations of Latin America. While these types of business groups remained a significant form of firm organization among enterprises specializing in overseas ventures, they did not become the dominant form of large enterprises within British economy itself. Business groups organized under the holding company such as Calico Printers' Association and Associated Portland Cement, as their names imply, were eventually a federation of many specialized companies. As they seldom committed to administrative centralization, their efficiency gain as a business organization remained marginal. The chapter first looks at the appearance and development of industry-focused and family-owned companies before World War II and the relative decline in importance of internationally-focused business groups during the second half of the twentieth century. The chapter then discusses the rise and fall of diversified and conglomerate type of groups like Hanson Trust and BTR, and the more durable Virgin Group and its counterparts. The empirical evidence presented in the chapter demonstrates that diversified business groups can add value in mature markets such as Britain. Even the much-criticized conglomerates of the 1970s-1990s were quite successful forms of business enterprise, and the demise of many of them appears to owe more to management fads than to serious underperformance.

    Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54369

    Seeker Beware: The Interpersonal Costs of Ignoring Advice

    By: Blunden, Hayley, Jennifer M. Logg, Alison Wood Brooks, Leslie John, and Francesca Gino

    Abstract—Prior advice research has focused on why people rely on (or ignore) advice and its impact on judgment accuracy. We expand the consideration of advice-seeking outcomes by investigating the interpersonal consequences of advice-seekers’ decisions. Across nine studies, we show that advisors interpersonally penalize seekers who disregard their advice, and that these reactions are especially strong among expert advisors. This penalty also drives advisor reactions to a widely recommended advice-seeking strategy: soliciting multiple advisors to leverage the wisdom of crowds. Advisors denigrate and distance themselves from seekers who they learn consulted others, an effect mediated by perceptions that their own advice will be disregarded. Underlying these effects is an asymmetry between advisors’ and seekers’ beliefs about the purpose of the advice exchange: whereas advisors believe giving advice is more about narrowing the option set by providing direction, seekers believe soliciting advice is more about widening the option set by gathering information.

    Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=54145

    Immigrant Entrepreneurship in America: Evidence from the Survey of Business Owners 2007 & 2012

    By: Kerr, Sari Pekkala, and William R. Kerr

    Abstract—We study immigrant entrepreneurship and firm ownership in 2007 and 2012 using the Survey of Business Owners (SBO). The survival and growth of immigrant-owned businesses over time relative to native-founded companies is evaluated by linking the 2007 SBO to the Longitudinal Business Database (LBD). We quantify the dependency of the United States as a whole, as well as individual states, on the contributions of immigrant entrepreneurs in terms of firm formation and job creation. We describe differences in the types of businesses started by immigrants and the quality of jobs created by their firms. First-generation immigrants create about 25% of new firms in the United States, but this share exceeds 40% in some states. In addition, Asian and Hispanic second-generation immigrants start about 6% of new firms. Immigrant-owned firms, on average, create fewer jobs than native-owned firms, but much of this is explained by the industry and geographic location of the firms. Immigrant-owned firms pay comparable wages, conditional on firm traits, to native-owned firms, but are less likely to offer benefits.

    Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=54377

    Is Overconfidence a Motivated Bias? Experimental Evidence

    By: Logg, Jennifer M., Uriel Haran, and Don A. Moore

    Abstract—Are overconfident beliefs driven by the motivation to view oneself positively? We test the relationship between motivation and overconfidence using two distinct, but often conflated, measures: better-than-average (BTA) beliefs and overplacement. Our results suggest that motivation can indeed affect overconfidence, but only under limited conditions. We find that motivation does indeed inflate BTA beliefs. However, introducing some specificity and clarity to the standards of assessment (Experiment 1) or to the trait’s definition (Experiments 2 and 3) reduces or eliminates this bias in judgment. We find stronger support for a cognitive explanation for overconfidence, which emphasizes the effect of task difficulty. The difficulty of possessing a desirable trait (Experiment 4) or succeeding on math and logic problems (Experiment 5) affected overconfidence in ways that are consistent with the cognitive account proposed by prior research, above and beyond motivation. Finally, we find the lack of an objective standard for vague traits allows people to create idiosyncratic definitions and view themselves as better than others in their own unique ways (Experiment 6). Overall, the results suggest motivation’s effect on overconfidence is driven more by idiosyncratic construals of assessment than by self-enhancing delusion. They also suggest that by focusing on vague measures (BTA rather than overplacement measures) and vague traits, prior research may have exaggerated the role of motivation in overconfidence.

    Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=54379

    The Impact of the Entry of Biosimilars: Evidence from Europe

    By: Scott Morton, Fiona, Ariel Dora Stern, and Scott Stern

    Abstract—Biologics represent a substantial and growing share of the U.S. drug market. Traditional “small molecule” generics quickly erode the price and share of the branded product upon entry, however only a few biosimilars have been approved in the U.S. since 2015, thereby largely preserving biologics from competition. We analyze European markets, which have had biosimilar competition since 2006. Using our own survey, we analyze how market features and public policies predict biosimilar entry, price, and penetration, finding significant heterogeneity across countries and products. Effective buyer institutions are associated with increased biosimilar penetration. Our estimates can inform ongoing policy discussions.

    Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=51309

    • Harvard Business School Case 918-406

    JPMorgan Chase: Invested in Detroit (A)

    Beginning in 2014, JPMorgan Chase launched Invested in Detroit, a $100 million philanthropic investment in the city over five years. The bank worked with local economic development organizations, workforce development organizations, small businesses, philanthropies, and the city government to put in place a series of investments to help turn around the struggling city. In 2017, JPMorgan Chase's chairman and CEO, Jamie Dimon, is faced with the decision of whether or not to expand the program to other locations in the U.S.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/918406

    • Harvard Business School Case 918-410

    JPMorgan Chase: Invested in Detroit (B)

    Supplements the (A) case.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/918410

    • Harvard Business School Case 915-415

    The Climate Corporation: New Options for Farmers

    No abstract available.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/915415

    • Harvard Business School Case 915-413

    Bay State Milling

    No abstract available.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/915413

    • Harvard Business School Case 909-403

    Transformation of COFCO in a Changing Environment

    China's COFCO, the country's leading edible oil and food importer and exporter and its largest food manufacturer, had in its 50-plus years of operation undergone four stages of transformation and was about to embark on a fifth. The global agriculture system was undergoing major changes and the standard of living in China was increasing, changing the food consumption and dietary habits of the nation's 1.3 billion people. COFCO's management needed to decide how the company should transform to seize the opportunities in the industry and in China.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/909403

    • Harvard Business School Case 216-052

    Bankruptcy at Caesars Entertainment

    Caesars Entertainment was a large casino operator in the United States that had been purchased in a 2008 leveraged buyout by Apollo and TPG. In January 2015, Caesars Entertainment Operating Company (CEOC), its largest subsidiary, filed for Chapter 11. This set up a battle between the company and a set of large, distressed investors. At issue was not only how to restructure the business and reduce Caesars' debt, but also multiple lawsuits alleging that the company had damaged creditors in their quest to preserve equity value. Of particular focus were a series of transactions that took place during 2013 and 2014 to sell assets from one subsidiary to another and to eliminate a valuable parent guarantee that had been granted to CEOC creditors. This case provides a good example of a variety of "defensive maneuvers" employed by companies and their private equity sponsors to protect a troubled investment.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/216052

    • Harvard Business School Case 217-058

    Bankruptcy at Caesars Entertainment (B)

    No abstract available.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/217058

    • Harvard Business School Case 918-003

    Henry Kissinger: Negotiating Black Majority Rule in Rhodesia (A)

    In 1976, a growing crisis in Southern Africa drew the attention of United States Secretary of State Henry A. Kissinger. White Rhodesian leader Ian Smith's refusal to accede to black majority rule threatened to widen into a regional conflict involving apartheid South Africa and newly independent leftist African states. Kissinger and others feared that the region was on the brink of becoming a new battleground in the Cold War. In light of these developments Kissinger decided to intervene, seeking a negotiated solution that might bring about a peaceful end to minority rule. The account in this case carefully describes—but does not analyze nor draw lessons from—these challenging circumstances.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/918003

    • Harvard Business School Case 918-004

    Henry Kissinger: Negotiating Black Majority Rule in Rhodesia (B)

    Supplements the (A) case.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/918004

    • Harvard Business School Case 718-501

    Short Note on Complements, Platforms, and Network Effects

    No abstract available.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/718501

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