First Look

April 10, 2018

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

Religious shoppers spend less

How does religion affects people’s non-religious routine? In a paper scheduled to be published in the Journal of Experimental Social Psychology, researchers Kurt Didem, Jeffrey Inman, and Francesca Gino answer part of that question by looking at the spending habits of the faithful. One conclusion: “We find that grocery spending decreases with religiosity.” Religious Shoppers Spend Less Money.

Innovating with corn flakes

Kellogg Company created the cold cereal category with the introduction of Toasted Corn Flakes. But in recent years the food maker has hit leaner times as consumer tastes shifted and more competition arrived. Can the company innovate itself out its cardboard box? The case study was written by David E. Bell, Damien P. McLoughlin, and Natalie Kindred. Kellogg Company/eighteen94 capital

What online and offline stores can learn from each other

Thanks to increasing competition from online shopping, retailers are rethinking the mission of brick-and-mortar stores—even as online merchants open their own storefronts. In this recent story from MIT Sloan Management Review, authors David R. Bell, Santiago Gallino, and Antonio Moreno explain how “offline-first retailers can benefit from mimicking the showroom concepts started by online-first retailers and why online-first retailers can benefit from opening more traditional stores.

The Store Is Dead—Long Live the Store.

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

— Sean Silverthorne
 
  • Spring 2018
  • MIT Sloan Management Review

The Store Is Dead—Long Live the Store

By: Bell, David R., Santiago Gallino, and Antonio Moreno

Abstract—In this article, we pursue two interconnected themes: the expansion of online-first retailers into offline stores that serve the purpose of “supercharging” customer value, and the transformation of the stores of offline-first retailers from fulfillment-dominant centers into experience-dominant centers, which simultaneously reduce store size and inventory while improving the customer experience. In doing so, we explain how offline-first retailers can benefit from mimicking the showroom concepts started by online-first retailers and why online-first retailers can benefit from opening more traditional stores.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54316

  • March 29, 2018
  • Harvard Business Review

Divided We Lead: CEO Activism Has Entered the Mainstream

By: Chatterji, Aaron K., and Michael W. Toffel

Abstract—Leaders in all sectors, from business to sports to education, are increasingly wading into controversial political and social issues. Based on interviews with leaders who have made activism part of their core activities, we found that they feel compelled to address hot-button issues and are guided by their own values as well as the history and culture of their organization. They also complement their public activities with a “ground game” executed out of the limelight.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54331

  • forthcoming
  • American Economic Journal: Economic Policy

Physician Beliefs and Patient Preferences: A New Look at Regional Variation in Health Care Spending

By: Cutler, David, Jonathan Skinner, Ariel Dora Stern, and David Wennberg

Abstract—There is considerable controversy about the causes of regional variations in health care expenditures. Using vignettes from patient and physician surveys linked to fee-for-service Medicare expenditures, this study asks whether patient demand-side factors or physician supply-side factors explain these variations. The results indicate that patient demand is relatively unimportant in explaining variations. Physician organizational factors matter, but the most important factor is physician beliefs about treatment. In Medicare, we estimate that 35% of spending for end-of-life care and 12% of spending for heart attack patients (and for all enrollees) is associated with physician beliefs unsupported by clinical evidence.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54341

  • forthcoming
  • Journal of Experimental Social Psychology

Religious Shoppers Spend Less Money

By: Didem, Kurt, J. Jeffrey Inman, and Francesca Gino

Abstract—Although religion is a central aspect of life for many people across the globe, there is scant research on how religion affects people’s non-religious routines. In the present research, we identify a frequent consumption activity that is influenced by religiosity: grocery shopping. Using both field and laboratory data, we find that grocery spending decreases with religiosity. Specifically, we document that people who live in more religious U.S. counties spend less money on groceries and make fewer unplanned purchases. We also demonstrate this negative relationship by measuring religiosity at the individual level and employing a religious prime. That is, the more religious people are, the less willing they are to follow through on novel purchase opportunities that arise during their grocery shopping trips. This effect is consistent with the account that many religions emphasize the value of being prudent with money. Additional analysis supports our predicted indirect effect of religiosity on spending through frugality.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54362

  • 2018
  • The New Oxford Handbook of Economic Geography

How Geography Shapes—and Is Shaped by—the Internet

By: Greenstein, Shane, Avi Goldfarb, and Chris Forman

Abstract—The first 15 years of the 21st century have thrown into sharp relief the challenges of growth, equity, stability, and sustainability facing the world economy. In addition, they have exposed the inadequacies of mainstream economics in providing answers to these challenges. This volume gathers over 50 leading scholars from around the world to offer a forward-looking perspective of economic geography to understanding the various building blocks, relationships, and trajectories in the world economy. The perspective is at the same time grounded in theory and in the experiences of particular places. Reviewing state-of-the-art of economic geography, setting agendas, and with illustrations and empirical evidence from all over the world, the book should be an essential reference for students and researchers as well as strategists and policy makers.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=50820

  • in press
  • Applied Psychology: Health and Well-Being

Long-term Health Implications of Students' Friendship Formation During the Transition to University

By: Klaiber, Patrick, Ashley V. Whillans, and Frances Chen

Abstract—The transition to university is a major life change wherein young adults' primary support system shifts from the family to peers. Can social integration (operationalized as the number of friends) during the first term at university contribute to students' health years later and if so, how? The friendship formation of students at a large Canadian university was assessed during their first term. These data were used to predict self-reported health and health behaviors (physical exercise, diet, tobacco, alcohol, and marijuana consumption) at a follow-up assessment that occurred near the end of their time at university (2 or 3 years later). Linear regression models showed that students who made more friends in their first term reported better health and a healthier diet at the follow-up (2–3 years later). Perceived social support at the follow-up mediated the relationship between friendship formation and self-reported health but not diet. This study provides evidence for both an indirect effect of friendship formation on self-reported health via perceived social support and a direct effect of friendship formation on a healthy diet. Broadly, these results highlight the importance of friendship formation and social integration for the long-term well-being of university students.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54330

Abstract—We estimate a sales response model to evaluate the short- and long-term value of a sales representative’s detailing visit to different types of physicians. By understanding the dynamic effect of sales calls across heterogeneous physicians, we provide guidance on the design of optimal call patterns in route sales. Our analyses reveal that the long-term persistence effect of detailing is more pronounced for specialist physicians, whereas the contemporaneous marginal effect is higher for generalists. We also provide a key methodological insight to the marketing and economics literature. We show that in the Nerlove-Arrow framework, moment conditions typically used in conventional dynamic panel data methods become vulnerable to serial correlation in the error structure. We discuss the associated biases and present a robust set of moment conditions for both lagged dependent and predetermined explanatory variables in estimation. Furthermore, we show that conventional tests to detect serial correlation have weak power and can be misleading, resulting in a misuse of moment conditions, which leads to incorrect inference. We provide theoretical illustrations and Monte Carlo simulations to validate our claims.

Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=52743

Abstract—Even as the demand for managerial skills continues to grow, executive education worldwide has entered a period of disruption caused by the digitalization of content, connectivity, and communication. The current offerings of many executive education program providers fall short of creating new skills in executives and developing fresh capabilities for organizations. Based on a study of all the programs offered by the business schools, consultancies, corporate universities, and online education providers, we analyze the advantages, and the constraints, of the existing programs. We also map the vehicles for skill development—such as case discussions, lectures, simulations, coaching sessions, live projects, etc.,—in terms of their potential to develop executives for the future. We then examine the impact of the forces of digital disruption—the disaggregation and disintermediation of activity chains and the decoupling of the sources of value in education programs—on the future of executive education.

Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=54353

Molino Cañuelas was a vertically integrated food company with a management system that allowed it to innovate and grow systematically. With sales of $2 billion in 2016, the firm not only produced flour, vegetable oil, and packaged food products, it also owned a port terminal, a packaging plant, and an Agribusiness Services Division to support over 8,000 agricultural producers. CEO and Chairman Aldo Navilli, who had run the company since 1986 and had developed its management system, wanted to ensure that as the company grew and expanded, it would maintain its culture and working style. The company was exporting to 32 countries and had manufacturing plants in Brazil and Uruguay. As it continued its international expansion, should it follow the same vertical integration strategy in other countries, or should it develop its retail business through partnerships or alliances?

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/518046

  • Harvard Business School Case 518-061

Kellogg Company/eighteen94 capital

With 33,000 employees and revenues of $13 billion in 2016, Kellogg Company was the world’s largest producer of branded packaged cereal and a leader in branded convenience foods. Founded in 1906 and based in Michigan, the company had a proud history of product and marketing innovation starting with its first product, Kellogg’s Toasted Corn Flakes, which created the cold cereal category. In recent years, however, Kellogg’s revenue had declined due to a number of factors, including changing consumer tastes, increased competition, and evolving advertising trends and sales channels. Seeing innovation as a key to future success, in 2016 the company established eighteen94 capital, its corporate venture capital arm, which had announced investments in three startups as of late 2017. eighteen94 was conceived as a platform for giving Kellogg access to the kinds of skills, products, and ingredients that could help drive future growth. It was also a vehicle for changing mindsets and culture by reviving the entrepreneurial spirit that some felt had eroded within Kellogg. This case allows students to consider what sort of impact on internal culture and behavior Kellogg should expect from eighteen94 in its current form. Does eighteen94 have the potential to drive the kind of changes and benefits that Kellogg needs?

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/518061

  • Harvard Business School Case 518-041

The ABN AMRO World Tennis Tournament

Should the ABN AMRO World Tennis Tournament gamble most of its player budget on superstar player Rafael Nadal, even after the event’s previous two editions saw Nadal and Roger Federer pull out at the last moment due to injury, leaving the tournament without any top-five players? That is the question that Richard Krajicek, former Wimbledon champion and current tournament director, is debating with Jolanda Jansen, the director of the venue that hosts the event. It is June 2017, and earlier in the day, Nadal won the French Open (“Roland Garros”) for a record tenth time. Krajicek’s plan for the upcoming edition was to focus his recruiting efforts on five exciting, mostly younger, players, and assemble a group of top-20 players around them—but after Nadal’s record-breaking performance, Krajicek is now considering pursuing the Spanish superstar for the 2018 tournament after all. What is the best course of action?

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/518041

  • Harvard Business School Case 218-033

Tesla Motors (A): Financing Growth

The case analyzes the equity market value of Tesla Motors, the electronic car company founded and led by Elon Musk. Wall Street analysts are wildly divided on the future growth prospects for this company, and analysts’ one year share price targets range from $160 to $500. The case explores in detail the valuation case made by two analysts covering Tesla, one a bull on the stock and one who is bearish. Students are asked to consider the arguments and the analytical approaches employed by each. Is Tesla a good investment or not?

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/218033

  • Harvard Business School Case 218-038

Tesla Motors (B): Merging with SolarCity

In 2016, electric car manufacturer Tesla announced that it was making an offer to acquire solar panel manufacturer SolarCity in an all-stock offer worth $2.6 billion in Tesla stock. Tesla’s co-founder and CEO, Elon Musk, believed that the merger would generate significant cost and revenue synergies, based on his vision of the future of transportation, energy storage, and a “green” economy. However, most Wall Street analysts were highly skeptical of the deal, voicing concerns that the merger would burden Tesla with excessive debt and that Musk was using the deal to advance his personal interests (at the expense of public shareholders) and bail out Tesla. Concerns were raised over possible conflicts of interest, given that Musk owned over 20% of the stock, and sat on the board of directors of both companies. The viability of the merger was also questioned given that neither Tesla nor SolarCity had ever been profitable.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/218038

  • Harvard Business School Case 318-048

Aetna and the Transformation of Health Care

Mark Bertolini, chairman and CEO of the health insurer Aetna, faces a number of questions as he seeks to transform Aetna from a classic insurance company into a business that will engage much more deeply with its members around their personal health goals. His strategy depends on Aetna’s ability to facilitate behavioral changes amongst its members to live healthier lives and requires very significant investments in digital capabilities and on-the-ground community-orientated health care resources. Will it work? Can he implement it? The case explores both the strategic issues inherent in this potential transformation and the organizational and leadership questions that it raises. Bertolini is a highly purpose-driven leader, and the case allows for a rich discussion of the degree to which this changes both his strategic and his organizational options.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/318048

  • Harvard Business School Case 318-125

Module Note for Instructors: Responsibilities to Society

This note outlines a framework to help managers discern and deliver on their responsibilities to society that has been taught in the “Responsibilities to Society” module in Leadership and Corporate Accountability (LCA), a semester-long, first-year required course for MBAs at Harvard Business School. The module outlined in this note also can be used as the basis for a short standalone course on the role and responsibilities of business in society. The framework developed in this module centers on managing harms to third parties—i.e., parties with whom companies do not transact commercially or have direct contractual relations. The framework aims to ground the responsibilities of managers in an intuitively plausible standard that is widely recognizedd—duty not to harm others—and to make tractable the concept of society, which is often seen as amorphous and vaguely defined. The framework aids managers in 1) identifying relevant harms, 2) determining the responsibility for them, 3) developing appropriate responses, and 4) recognizing political limits on what companies ought to do.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/318125

  • Harvard Business School Case 318-079

Apple: Privacy vs. Safety (B)

This case supplements “Apple: Privacy vs. Safety (A),” covering select events in 2017, including a mass shooting in which U.S. law enforcement was not able to access the shooter’s encrypted iPhone; and Apple’s compliance with the Chinese government’s request to make it more difficult for iPhone users to download “Virtual Private Network” apps.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/318079

  • Harvard Business School Case 618-012

Flying into the Future: HondaJet

This cases examine Honda’s diversification into the light jet market. In 1985, Honda initiated a secret program to develop a small jet. Over the years, the program had many ups and downs (it was almost canceled several times). Then, a breakthrough in the configuration of the engines lead Honda to believe it could successfully introduce a very light jet to the market (the “Civic” of the private jet market). In 2015, the company’s HondaJet received FAA certification. The HondaJet is now the number one selling jet in the very light jet segment of the market, and the CEO of Honda Aircraft Corporation, Michimasa Fujino (who started with the program in 1985) must now decide on ways to grow the business.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/618012

  • Harvard Business School Case 318-019

Uruguay: Facing the 21st Century

In the fall of 2017, self-made business leader Edgardo Novick pondered his campaign to be elected President of Uruguay, “the Switzerland of Latin America.” Inspired by populist revolts against the status quo observable worldwide, Novick hoped he could ride popular momentum to break the political monopoly of the traditional parties and return the country to its past greatness. Uruguay had been one of the world’s most successful countries in the nineteenth and early twentieth centuries but had since experienced a long period of relative decline. Could Novick’s campaign turn the tide of history? And what policy should Uruguay adopt with regard to the world economy?

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/318019

  • Harvard Business School Case 718-027

Kickstarting Tomato Jos in Nigeria

In the spring of 2016, Mira Mehta (HBS 2014), faced a difficult decision. Following a successful Kickstarter campaign and winning the second place in the HBS New Venture Competition—Social Enterprise Track, she had moved to Northern Nigeria, where she founded the tomato paste company Tomato Jos. Though her brand had gained traction, she had, in the face of endless foreseen and unforeseen obstacles, yet to produce any actual paste. As the Nigerian government pondered new tariffs to protect local alternatives against the competition of ostensibly cheap and low-quality “killer tomato paste,” Mehta considered a job offer from a major agricultural company that would secure her financially, but at the cost of her independence and, perhaps, of her dreams.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/718027