First Look

June 20, 2017

Among the highlights included in new research papers, case studies, articles, and books released this week by Harvard Business School faculty:

Should governments nudge?

To motivate citizens to comply with laws and regulations, governments often turn to such incentives as tax benefits or fines. The paper Should Governments Invest More in Nudging? suggests adding another approach: psychological “nudges.” Written by John Beshears with eight colleagues, the paper is scheduled for publication in a forthcoming issue of Psychological Science.

A new model for describing bubbles

A forthcoming paper in the Journal of Financial Economics offers a new model for describing the start and collapse of bubbles. Extrapolation and Bubbles was written by Nicholas Barberis, Robin Greenwood, Lawrence Jin, and Andrei Shleifer.

Exceptional management practices in India

A recent book looks at “win-win corporations” in India to learn from their successes. Win-Win Corporations: The Indian Way of Shaping Successful Strategies discusses the strategies used by companies including Taj Hotels, HDFC Bank, and Hindustan Unilever Limited. It was written in 2016 by Shashank Shah.

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

— Sean Silverthorne
  • 2016
  • Gurgaon, India: Penguin Random House

Win-Win Corporations: The Indian Way of Shaping Successful Strategies

By: Shah, Shashank

Abstract—Why did Ratan Tata decide to pay for all the victims of 26/11 whether injured in the Taj or anywhere else? Why did HDFC’s Aditya Puri insist that employees leave for home by 5:30 p.m.? How did HUL develop a cheaper, better product to beat its competitor, Nirma? What do Taj Hotels, HDFC, HUL, L&T, and BPCL have in common? They are the win-win corporations! Based on over a decade of research, Shashank Shah takes these truly outstanding Indian companies and studies how they do business. Each of these companies has exceptional practices when it comes to stakeholder management. Whether the stakeholder is an employee, customer, investor, vendor, or even society at large, these companies reveal how looking at everyone else’s interests doesn’t really mean compromising on your own. Often, the two complement each other and that is what makes a win-win solution for everyone. This book gives an inside look into what motivates exceptional companies and how they are a cut above the rest. Full of fascinating anecdotes, leadership philosophy, and background stories of organizations, Win-Win Corporations is an inspiring read into what makes companies great.

Publisher's link:

  • forthcoming
  • Journal of Financial Economics

Extrapolation and Bubbles

By: Barberis, Nicholas, Robin Greenwood, Lawrence Jin, and Andrei Shleifer

Abstract—We present an extrapolative model of bubbles. In the model, many investors form their demand for a risky asset by weighing two signals: an average of the asset’s past price changes and the asset’s degree of overvaluation. The two signals are in conflict, and investors “waver” over time in the relative weight they put on them. The model predicts that good news about fundamentals can trigger large price bubbles. We analyze the patterns of cash-flow news that generate the largest bubbles, the reasons why bubbles collapse, and the frequency with which they occur. The model also predicts that bubbles will be accompanied by high trading volume and that volume increases with past asset returns. We present empirical evidence that bears on some of the model’s distinctive predictions.

Publisher's link:

  • forthcoming
  • Psychological Science

Should Governments Invest More in Nudging?

By: Benartzi, Shlomo, John Beshears, Katherine L. Milkman, Cass R. Sunstein, Richard H. Thaler, Maya Shankar, Will Tucker-Ray, William J. Congdon, and Steven Galing

Abstract—Governments are increasingly adopting behavioral science techniques for changing individual behavior in pursuit of policy objectives. The types of “nudge” interventions that governments are now adopting alter people’s decisions without coercion or significant changes to economic incentives. We calculated ratios of impact to cost for nudge interventions and for traditional policy tools, such as tax incentives and other financial inducements, and we found that nudge interventions often compare favorably with traditional interventions. We conclude that nudging is a valuable approach that should be used more often in conjunction with traditional policies, but more calculations are needed to determine the relative effectiveness of nudging.

Publisher's link:

The Rise of American Ingenuity: Innovation and Inventors of the Golden Age

By: Akcigit, Ufuk, John Grigsby, and Tom Nicholas

Abstract—We examine the golden age of U.S. innovation by undertaking a major data collection exercise linking inventors from historical U.S. patents to Federal Censuses between 1880 and 1940 and to regional economic aggregates. We provide a theoretical framework to motivate the micro- and macro-level stylized facts we uncover in the data. We show that inventors were highly educated and that father’s income and education were important intergenerational transmission channels. Inventors tended to migrate to places that were conducive to innovation, and they were positively selected through exit early in their careers. New inventors received more patent citations than incumbent inventors, suggesting a cycle of creative destruction. The financial returns to technological development were high. At the macro level we identify a strong relationship between patented inventions and long-run economic growth and use an instrumental variables approach exploiting an historical shift in innovation activity during World War II to show that this relationship could be causal. Finally, we document a U-shaped relationship between top income inequality and innovation, yet innovative places tended to be more socially mobile. Our new data help to address important questions related to innovation and long-run growth dynamics.

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  • Harvard Business School Case 517-108

Tequila Patrón

Tequila Patrón was one of the most successful tequila marketers in the United States. Patrón needed to grow, and in Mexico, the second largest market for tequila, the brand was perceived as American. What portfolio and branding strategy would best serve Patrón to conquer the Mexican market? Furthermore, what would expanding in Mexico imply for the company’s marketing operations?

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The Electronic Product Code (EPC) is a successor to the Uniform Product Code and will improve the efficiency and traceability of the global food system. This case focuses on how best to implement this new system and respect the privacy of the ultimate consumer, and the teaching purpose is to analyze the impact of EPC on the global food system.

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Responsibility for working conditions in contract factories within the supply chain presents an ongoing challenge for managers and an area of debate. Much of the debate approaches the challenge from the perspective of large global apparel brands. This case helps students take the perspective of a Bangladeshi contract factory that is part of the brands' supply chain but must also deal with challenges in its own supply chain. The case leads up to the Tazreen factory fire of 2012, in which over 100 people died, and covers subsequent developments in Bangladesh and the apparel industry.

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Supplements the (A) case.

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Supplements the (A) case.

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PharmAccess is an Amsterdam-based NGO working to support the development of the private health care market in Africa. This work is critical as over 50% of care is delivered through the private sector, but well-intentioned efforts to address global health through the public sector have the unintended consequence of crowding out capital formation in the private sector. PharmaAccess is working to crowd-in funding instead through the development of a three-pronged effort in Kenya. They are working to address supply through efforts to improve the quality of health care facilities through education and through a micro-lending program. At the same time, they are working to address demand through the development of the M-TIBA mobile health wallet. The critical question for this case is whether these efforts, in essence the development of a novel platform simultaneously addressing supply and demand, will be enough to change the dynamics of the private health care market.

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