First Look

September 5, 2017

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

Does air pollution contaminate our morality?

J. Lu, J.J. Lee, F. Gino, and A.D. Galinsky argue that air pollution has ethical costs as well as physical ones. “We propose that air pollution can increase criminal and unethical behavior by increasing anxiety,” write the authors in a forthcoming Psychological Science article. Polluted Morality: Air Pollution Predicts Criminal Activity and Unethical Behavior.

Hiding bad news from the media

A paper by by Vishal P. Baloria and Jonas Heese, to be published in the Journal of Financial Economics, finds that "firms report less negative financial information during times of high media scrutiny." The Effects of Media Slant on Firm Behavior.

The best business model for a professional skateboarding league

A new case study reviews options for Street League Skateboarding, which is thinking of not renewing a television contract with ESPN2 and instead signing with a rival network. “For a new action-sports property such as Street League, what business model made the most sense?” ask the authors, Robert F. Higgins and Christine Snively. Street League Skateboarding.

Other new publications from Harvard Business School faculty are listed below.

— Sean Silverthorne
  • forthcoming
  • Journal of Financial Economics

The Effects of Media Slant on Firm Behavior

By: Baloria, Vishal P., and Jonas Heese

Abstract—The media can impose reputational costs on firms because of its important role as an information intermediary and its ability to negatively slant coverage. We exploit a quasi-natural experiment that holds constant the information event across firms, but varies the availability of a major news outlet in local markets. We find that firms subject to the threat of slanted coverage suppress the release of negative information before the event and release it subsequently. Our results are consistent with theory on the active role firms can play in managing their reputational capital through anticipatory actions to avoid negative media coverage.

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  • 2017
  • Handbook of Regions and Competitiveness: Contemporary Theories and Perspectives on Economic Development

Upgrading Regional Competitiveness: What Role for Regional Governments?

By: Ketels, Christian H.M.

Abstract—The literature on the competitiveness of locations has traditionally focused on countries. Over the last decade, however, subnational regions have gained increasing attention both as a level of analysis and as a level for policy making. This chapter aims to explore what this new context implies for the role of regional governments. It is motivated by a concern that regional policy is facing an “implementation gap.” There is much thinking on the importance of regions and the policies that should be designed towards them. But there is comparatively little work on what regional governments’ role should be in implementing these policies relative to that of other levels of government as well as what implications this has on the capabilities they need.

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  • September 2017
  • Current History

China Gambles on Modernizing Through Urbanization

By: Looney, Kristen, and Meg Rithmire

Abstract—Contemporary discussions of urbanization and urban construction in China tend to focus on “ghost towns” on the one hand or urbanization as China’s silver bullet to growth and reform on the other. In this paper, we detail what China calls its “New Urbanization Policy.” While these plans aim to formalize previously informal movements of land, people, and capital between urban and rural, the new urbanization does not upend China’s longstanding duality between those categories. The central goals of the new urbanization are to manage urbanization so as to generate domestic demand and reorganize agricultural production without experiencing destabilizing social and political pressures. If successful, the Chinese Communist Party will forge a new path of urbanization, building cities before recruiting urban citizens. The process, however, entails possibilities of yet other social dislocations, including concentrated poverty, ill-planned cities, skyscraper villages, and rural landlessness.

Publisher's link:

  • in press
  • Psychological Science

Polluted Morality: Air Pollution Predicts Criminal Activity and Unethical Behavior

By: Lu, J., J.J. Lee, F. Gino, and A.D. Galinsky

Abstract—Air pollution is a serious problem that influences billions of people globally. Although the health and environmental costs of air pollution are well known, the present research investigates its ethical costs. We propose that air pollution can increase criminal and unethical behavior by increasing anxiety. Analysis of a 9-year panel of 9,360 U.S. cities found that air pollution predicted six different categories of crime; these analyses accounted for a comprehensive set of control variables (e.g., city and year fixed effects, population, law enforcement) and survived various robustness checks (e.g., non-parametric bootstrapped standard errors, balanced panel). Three subsequent experiments involving American and Indian participants established the causal effect of psychologically experiencing a polluted vs. clean environment on unethical behavior. Consistent with our theoretical perspective, anxiety mediated this effect. Air pollution not only corrupts people’s physical health, but can also contaminate their morality.

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  • August 2017
  • Journal of Management Education

Teaching Versus Living: Managerial Decision Making in the Gray

By: Soltes, Eugene F.

Abstract—Preparing students for the consequential ethical decisions that they will face in their careers is among the most difficult tasks of management education. I describe some of these challenges based on my book Why They Do It: Inside the Mind of the White-Collar Criminal and recent work in behavioral ethics. I explore why some decisions are much more easily resolved in the classroom than in practice and offer three ways to more effectively prepare students: integrating ethical decision-making with core-discipline teaching, cultivating moral humility rather than moral confidence, and creating opportunities for norm reinforcement.

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Strategy-Proofness of Worker-Optimal Matching with Continuously Transferable Utility

By: Jagadeesan, Ravi, Scott Duke Kominers, and Ross Rheingans-Yoo

Abstract—We give the first direct proof of one-sided strategy-proofness for worker–firm matching under continuously transferable utility. A new “Lone Wolf” theorem (Jagadeesan, et al., 2017) for settings with transferable utility allows us to adapt the method of proving one-sided strategy-proofness that is typically used in settings with discrete transfers.

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Abstract—Competitiveness research aims to enhance our understanding of the drivers of prosperity differences across locations and of policies that can sustainably raise a location’s prosperity level. The paper outlines key elements of the competitiveness framework and discusses how it relates to the idea of structural transformation. What emerges are significant similarities between the two approaches: They both take a granular and often sector-specific perspective on microeconomic structures and systems, moving beyond macroeconomic, economy-wide, or single-factor microeconomic explanations of prosperity and development. But the analysis also reveals meaningful differences between the two: Most fundamentally, the chapter argues, the competitiveness literature treats sectoral composition as a key but largely endogenous part of development, while structural economies conceptualizes it as a fundamental driver. Competitiveness policy is about leveraging existing clusters as a platform for upgrading microeconomic fundamentals, where structural policies aim to change the industrial composition of an economy more directly. While recent work has significantly narrowed the differences between the two approaches, the chapter points out where and how they still matter, especially for policy practice. Further dialogue between the approaches, the chapter concludes, could lead to actionable advice on more robust policies that drive both structural change and competitiveness upgrading.

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  • Harvard Business School Case 615-022

IDEO: Human-Centered Service Design

The case describes IDEO, one of the world's leading design firms, and its human-centered innovation culture and processes. It is an example of what managers can do to make their own organizations more innovative. In reaction to a rapidly changing competitive landscape, a team of IDEO designers has been hired by Cineplanet, the leading movie cinema chain in Peru, to reinvent the movie-going experience for Peruvians. Cineplanet wishes to better align their operating model with the needs and behaviors of its customers. Please note: This case study includes mandatory video elements, which are integrated into the pre-class assignment for students and the classroom teaching plan for instructors. Information on how to access and use these multimedia components is included in the Teaching Note.

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  • Harvard Business School Case 416-026

Gender at Work

No abstract available.

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  • Harvard Business School Case 517-040

Marketing Transformation at Mastercard

Since 2013, Mastercard CMO M.V. Rajamannar (Raja) had transformed the firm’s marketing by using unique experiences, digital technology, and social media to intensify linkages not only with cardholders, but also with Mastercard’s direct bank and merchant stakeholders. Building on its influential but dated “Priceless” advertising campaign, Raja refocused Mastercard on four “Priceless Possibilities” that engaged cardholders directly in unexpected and sometimes unique opportunities reflecting their passions. The result was increased brand differentiation and deeper collaborative ties between Mastercard and its bank and merchant partners.

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  • Harvard Business School Case 817-145

Street League Skateboarding

In 2013, Street League Skateboarding, a professional skateboarding league founded in 2010, just concluded its annual Street League World Tour. The growing action-sports property had purchased time on ESPN2 to air its events, and though ESPN was the most-watched sports television network in the U.S., Street League President Brian Atlas had become impatient with the network’s lack of support. Atlas planned to meet with network representatives in the coming months to discuss their 2014 contract, but he was recently approached by FOX Sports, which had just launched the new FOX Sports 1 cable television network and was working to sign sports properties. Atlas considered Street League’s relationship with ESPN, the league’s finances, and attempts to raise capital. For a new action-sports property such as Street League, what business model made the most sense?

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Through the challenges facing Target, the case examines ways in which corporations can become involved in political and legislative debates and processes, ranging from campaign contributions to lobbying to political activism. In 2016, Target CEO Brian Cornell must determine how to respond to the debate over North Carolina's recently signed law, commonly known as "HB2," that invalidated LGBT non-discrimination ordinances at the local level. In contrast to other organizations, Target did not threaten to leave the state. However, its public statement in support of LGBT rights prompted a boycott against its stores. Adding to the difficulty was the fact that Target was caught on the other side of the debate in 2010 in one of the earliest high-profile controversies resulting from the Supreme Court Citizens United ruling. Target had contributed to a super PAC supporting business friendly candidates. As one of the candidate's opposition to same-sex marriage became well publicized, Target faced a consumer boycott as well as a shareholder proposal to change its policies on political contributions. The case covers current campaign finance regulations as they relate to business as well as Target's lobbying activities regarding online sales tax legislation.

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Supplements the (A) Case.

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The first module of The Entrepreneurial Manager (TEM) focuses on business model analysis and lean testing. Your business model defines your company and sets its strategic direction, including customer value proposition, operations, scaling, the context in which the company operates, and so on. Designing and evaluating a business model is a complicated task, given all the considerations that must influence your decisions—external opportunities and threats, internal resources, your goals as a founder, as well as your investors’ desires, plus laws or obligation to your community or society at large. While not simple, a well-designed and properly tested business model serves as a strong guiding compass for the company and aligns priorities and critical actions.

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  • Harvard Business School Case 212-077

Maxum Petroleum, Inc.

No abstract available.

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  • Harvard Business School Case 517-129

23andMe: Genetic Testing for Consumers (C)

Supplements the (A) Case.

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  • Harvard Business School Case 118-009

Sales Misconduct at Wells Fargo Community Bank

Set in early 2017, this case examines widespread sales misconduct at Wells Fargo Community Bank. Wells Fargo's governance and controls are described in the lead up to the September 2016 announcement that Wells Fargo had settled with regulators for $185 million in relation to the years-long period of misconduct in sales. Subsequent investigations, terminations, compensation clawbacks, and other consequences are described.

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  • Harvard Business School Case 617-058

A. Lange & Söhne

The case describes how A. Lange & Söhne became one of world’s leading watch companies. Its obsession with quality and innovation were behind its initial rise in the 19th century and, after a 40-year involuntary hiatus under the East German regime, again at the end of the 20th century. In 2016 its current CEO Wilhelm Schmid and the heads of product development and production have to decide how to price its innovative watch collection and how to grow the Glashütte-based watchmaker.

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  • Harvard Business School Case 818-010

Hacking Heroin

“Hacking Heroin” was the first hackathon that Annie Rittgers, founder of Cincinnati-based 17a, had organized or even attended. “There will continue to be a lot of preventable overdose deaths and wasted potential if the opioid crisis continues unabated,” she said. “Bright spots and positive momentum matter when it comes to directing the energy that exists in Cincinnati toward addressing the epidemic.” Now though, days before Hacking Heroin in June 2017, it wasn’t clear that Rittgers’s intercession would prove to be one of these “bright spots.” Not quite 50 people had registered for the free event, and there was no guarantee that they would attend. Sponsorships for the event had been slow to materialize. The eight challenges that she and the team planned to pose to hackathon participants were mostly, but not entirely, settled. Some, but not all, of the key hospital leaders had signed on to participate in the event. Rittgers wondered what she could do to nudge the hackathon towards success. Were these just expected hurdles, and it would all turn out okay? Were they warning signs that warranted remedy? Or were they cues that hackathon skeptics had been right all along—what kind of way was this to address a problem of epidemic proportions anyway?

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