First Look

October 10, 2017

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

Measuring sales the right way

A crucial metric for many sales organizations is "closed sales"—which is great information but a lagging indicator that is not much help measuring current or future trends. Frank Cespedes and Robert Marsh survey additional measures used by companies to manage sales. Find the Right Metrics for Your Sales Team.

Does crime desensitize victims?

Why do some high-crime regions such as Latin America demonstrate a tolerance for crime? The answer may be found in research that shows previous crime victims can become desensitized to crime. The paper was written by Rafael Di Tella, Lucia Freira, Ramiro H. Gálvez, Ernesto Schargrodsky, Diego Shalom, and Mariano Sigman. Crime and Violence: Desensitization in Victims to Watching Criminal Events.

Innovation in a 100-year-old medical device giant

In operation for over a century, Becton Dickinson knew something about innovation in the medical device business. But now its customers were under cost pressures that demanded more effective solutions from suppliers. A new case study by Raffaella Sadun, Rebecca Henderson, Michael Beer, and James Weber follows CEO Vince Forlenza as he rethinks how the company develops growth products. Becton Dickinson: Innovation and Growth.

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

— Sean Silverthorne
  • forthcoming
  • New York: Palgrave Macmillan

New Perspectives on the History of Political Economy

By: Fredona, Robert, and Sophus A. Reinert, eds.

Abstract—This volume offers a snapshot of the resurgent historiography of political economy in the wake of the ongoing global financial crisis and suggests fruitful new agendas for research on the political-economic nexus as it has developed in the Western world since the end of the Middle Ages. New Perspectives on the History of Political Economy brings together a select group of young and established scholars from a wide variety of disciplinary backgrounds―history, economics, law, and political science―in an effort to begin a re-conceptualization of the origins and history of political economy through a variety of still largely distinct but complementary historical approaches―legal and intellectual, literary and philosophical, political and economic―and from a variety of related perspectives, including debt and state finance, tariffs and tax policy, the encouragement and discouragement of trade, merchant communities and companies, smuggling and illicit trades, mercantile and colonial systems, economic cultures, and the history of economic doctrines more narrowly construed. The first decade of the twenty-first century, bookended by 9/11 and a global financial crisis, witnessed the clamorous and urgent return of both “the political” and “the economic” to historiographical debates. It is becoming more important than ever to rethink the historical role of politics (and, indeed, of government) in business, economic production, distribution, and exchange. The artefacts of pre-modern and modern political economy, from the fourteenth through the twentieth centuries, remain monuments of perennial importance for understanding how human beings grappled with and overcame material hardship, organized their political and economic communities, won great wealth and lost it, conquered and were conquered. The present volume, assembling some of the brightest lights in the field, eloquently testifies to the rich and powerful lessons to be had from such a historical understanding of political economy and of power in an economic age.

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  • forthcoming
  • Encyclopedia of International Economics and Global Trade, Vol. 3: Foreign Direct Investment and the Multinational Enterprise

Foreign Direct Investment, Finance and Economic Development

By: Alfaro, Laura, and Jasmina Chauvin

Abstract—Research has sought to understand how foreign direct investment affects host economies. This paper reviews the empirical literature, specifically addressing the question: How does FDI affect economic development of host countries and what is the role of local financial markets in mediating the potential benefits? We first define FDI and discuss general theories on types and drivers of FDI. This review takes a host-country perspective rather than a firm perspective and thus only highlights the key insights from the rich firm-level literature on MNCs. We then focus on how financial conditions in host countries affect the extent of FDI-related capital inflows, shape the operations of foreign firms, and mediate the extent of productivity spillovers from FDI to local firms. The survey focuses mainly on work related to developing countries.

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  • November 2017
  • Research Policy

The Career Effects of Scandal: Evidence from Scientific Retractions

By: Azoulay, Pierre, Alessandro Bonatti, and Joshua Lev Krieger

Abstract—We investigate how the scientific community's perception of a scientist's prior work changes when one of his articles is retracted. Relative to non-retracted control authors, faculty members who experience a retraction see the citation rate to their earlier, non-retracted articles drop by 10% on average, consistent with the Bayesian intuition that the market inferred their work was mediocre all along. We then investigate whether the eminence of the retracted author and the cause of the retraction (fraud vs. mistake) shape the magnitude of the penalty. We find that eminent scientists are more harshly penalized than their less distinguished peers in the wake of a retraction, but only in cases involving fraud or misconduct. When the retraction event had its source in “honest mistakes,” we find no evidence of differential stigma between high- and low-status faculty members.

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  • August 22, 2017
  • Harvard Business Review

Find the Right Metrics for Your Sales Team

By: Cespedes, Frank V., and Robert Marsh

Abstract—This article reports the results of a survey of key performance indicators (KPIs) used by more than 800 sales groups across industries. The most common KPIs are closed deals and salesperson performance against quota, which, on average, firms measure monthly. But a closed deal is an outcome and lagging indicator. This article discusses how some firms deconstruct their sales conversion funnels to identify relevant leading indicators and coach/develop selling behaviors. Thus managing sales performance and not only reviewing quotas and after-the-fact outcomes.

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  • October 2017
  • Current History

The Revolutionary Roots of Russian Foreign Policy

By: Friedman, Jeremy

Abstract—Russia continues to be caught between a need to integrate itself into the West and a desire to maintain its independence from the West.

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  • forthcoming
  • New Perspectives on the History of Political Economy

Between Economic Planning and Market Competition: U.S. Law and Economics in the 1920s

By: Phillips Sawyer, Laura

Abstract—The impact of institutional economics in shaping the American regulatory tradition has largely been dismissed as an incoherent attack on the neoclassical economic paradigm. This essay briefly reconstructs the interwar institutionalist movement, exploring the continuities among heterodox thinkers and the implications for public and private institution building. It seeks to reorient the history of U.S. political economy towards a deeper understanding of the public-private regulatory tradition that developed in the 1920s through the influence of the institutionalists and other progressive liberals. It emphasizes institutionalists acting within both public administrative agencies, such as the Federal Trade Commission and the Department of Commerce, as well as private research organizations that partnered with business groups and regulatory bodies.

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Abstract—Small business lending by the four largest banks fell sharply relative to others in 2008 and remained depressed through 2014. We explore the dynamic adjustment process following this credit supply shock. In counties where the largest banks had a high market share, the aggregate flow of small business credit fell, interest rates rose, fewer businesses expanded, unemployment rose, and wages fell from 2006 to 2010. While the flow of credit recovered after 2010 as other lenders slowly filled the void, interest rates remain elevated. Although unemployment returns to normal by 2014, the effect on wages persists in these areas.

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Crime and Violence: Desensitization in Victims to Watching Criminal Events

By: Di Tella, Rafael, Lucia Freira, Ramiro H. Gálvez, Ernesto Schargrodsky, Diego Shalom, and Mariano Sigman

Abstract—We study desensitization to crime in a lab experiment by showing footage of criminal acts to a group of subjects, some of whom have been previously victimized. We measure biological markers of stress and behavioral indices of cognitive control before and after treated participants watch a series of real, crime-related videos (while the control group watches non-crime-related videos). Not previously victimized participants exposed to the treatment video show significant changes in cortisol level, heart rate, and measures of cognitive control. Instead, previously victimized individuals who are exposed to the treatment video show biological markers and cognitive performance comparable to those measured in individuals exposed to the control video. These results suggest a phenomenon of desensitization or habituation of victims to crime exposure.

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In June 2014, MannKind Corporation announced that after years of development and billions of dollars in expenses, the FDA had finally approved its drug, Afrezza. MannKind would thus be the only company with an inhalable insulin on the market. As an alternative to injectable rapid-acting (or mealtime) insulin, Afrezza boasted a potential market of at least 4 million diabetic patients. Shortly thereafter, Sanofi, a company with vast experience in the diabetic space, became MannKind’s marketing partner and helped launch Afrezza in February, 2015. Although the drug had a black box warning and required doctors to perform a lung test on patients, expectations were high, with some analysts predicting peak sales of up to $4 billion a year. However, those lofty hopes were quickly dashed when Afrezza generated lackluster first-year sales, driving Sanofi to terminate its short-lived contract with MannKind in January 2016. MannKind's management attributed the launch’s failure to a poor marketing approach, convinced that Sanofi, despite its strong global presence and experience, did not effectively address critical barriers to adoption. The company now planned to overhaul Afrezza’s entire marketing strategy. This included rethinking which patients and physicians to target, how to position the drug to engender interest and adoption, how to lower end consumer price, through which media to convey Afrezza's benefits, and how to streamline the process of performing the lung test and getting the drug into the hands of patients. But would all these changes and initiatives, no matter how well executed, be enough to turn sales around? Would Afrezza ever realize the potential that Alfred Mann, the late founder and former CEO, saw in the novel treatment?

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  • Harvard Business School Case 717-419

Becton Dickinson: Innovation and Growth (A)

In late 2015, CEO Vince Forlenza was reviewing Becton Dickinson’s transformation efforts designed to enable the company to innovate and grow in a changing environment. Becton Dickinson had been a successful medical device company for over 100 years. In recent years, cost pressures were causing its major customers to consolidate as well as rethink their purchasing practices—moving from looking for products to looking for cost-effective solutions that added value and improved patient outcomes. These market forces caused Becton Dickinson to try to adapt to remain successful. In 2009, the company used the Growth and Innovation Profiling process to determine what barriers were preventing the company from achieving its strategic objectives. The result showed that the company needed to make changes in the areas of capabilities, coordination, and culture. Forlenza then led a transformation effort consisting of numerous initiatives to overcome these barriers. Despite significant progress over the next few years, by 2013 Forlenza and his team became convinced that these changes alone would not be enough to enable Becton Dickinson to transform into a solutions company and achieve sufficient growth to remain relevant. In early 2015, Becton Dickinson acquired CareFusion, an acquisition 25-times larger than any of its previous acquisitions, and set out to create a new, integrated company made up of the best of both. By late that year, with the integration well underway, Forlenza was asking himself how successful the transformation had been and what he should do next to continue the journey.

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  • Harvard Business School Case 717-504

Becton Dickinson: Innovation and Growth (B)

This (B) case supplements the (A) case by providing additional information and updates through early 2016.

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In July 2017, Dr. Brian M. Alexander, president and CEO of the AGILE Research Foundation, was preparing to launch a new type of clinical trial—an adaptive platform trial—to study potential therapies for glioblastoma (GBM), an aggressive form of brain cancer. Alexander believed that the standard way in which new cancer drugs were tested—the traditional randomized controlled trial (RCT)—was limited in many ways. While statistically rigorous and still considered the “gold standard” in clinical research, traditional RCTs were time-consuming, costly, and limited to testing just one new drug at a time. Adaptive platform trials, by contrast, facilitated simultaneously studying multiple therapies for a given disease and promised a number of efficiency improvements. They also used statistical techniques to allow more patients access to promising therapies. As such, they had the potential to fundamentally change the clinical research process, making clinical trials for new cancer drugs more efficient, more accessible to patients, and more ambitious in scope. For the past three years, Alexander had been working closely with a group of like-minded oncologists, statisticians, and clinical trial strategists to design an adaptive platform trial for GBM in the hopes of identifying effective therapies more quickly. By mid-2017, Alexander and his colleagues had completed a master protocol for the trial. But now the research team faced several design and operational challenges as they prepared for the trial’s launch. Most pressing, how should Alexander and his colleagues finance the trial?

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  • Harvard Business School Case 217-089

Investing in Volatility at Evanston Capital Management

No abstract available.

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