First Look

April 4, 2017

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

VC turns to ‘spray and pray’

Less funding is required by startups these days to get going, thanks to advances in technologies such as cloud computing. This fact has venture capitalists rethinking their own investment models, according to Michael Ewens, Ramana Nanda, and Matthew Rhodes-Kropf. Coming more in favor is a “spray and pray” model, providing less initial funding and limited governance to an increased number of startups “that they are more likely to abandon,” according to a new journal article, Cost of Experimentation and the Evolution of Venture Capital, scheduled to be published in a forthcoming issue of Journal of Financial Economics.

Through the eyes of African American entrepreneurs

Three African American entrepreneurs pursuing opportunities and overcoming challenges are the subjects of case studies by Steven Rogers and co-authors. In Carmichael Roberts: To Create a Private Equity Firm? students follow an African American venture capitalist as he considers setting up his own VC firm. The second case, Eve Hall: The African American Investment Fund in Milwaukee, discusses a well-regarded multisector leader asked to revive Wisconsin’s African American chamber of commerce. In case three, Earl Gordon—Eastern Circle, students accompany an entrepreneur through the process of sourcing a potential acquisition, valuing a company, and securing the funding to purchase the company.

Finding a growth strategy for Hello Alfred

Hello Alfred is a personal services firm that assigns its members a personal butler, who arrives weekly to do chores, perform household tasks—whatever (within reason, one presumes) makes life run smoother. In the case study Hello Alfred: Come Home Happy, the founders of the popular service must start planning for growth. The case asks, “Should they expand Alfred beyond their present operating cities, New York and Boston, or should they focus on their current markets? Should they increase public visibility to attract more customers, or should they enroll landlords in Alfred and reach consumers in that way?” The case was written by Joseph Fuller and Carin-Isabel Knoop.

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

— Sean Silverthorne
  • forthcoming
  • American Political Science Review

Voter Registration Costs and Disenfranchisement: Experimental Evidence from France

By: Braconnier, Céline, Jean-Yves Dormagen, and Vincent Pons

Abstract—A large-scale randomized experiment conducted during the 2012 French presidential and parliamentary elections shows that voter registration requirements have significant effects on turnout, resulting in unequal participation. We assigned 20,500 apartments to one control or six treatment groups that received canvassing visits providing either information about registration or help to register at home. While both types of visits increased registration, home registration visits had a higher impact than information-only visits, indicating that both information costs and administrative barriers impede registration. Home registration did not reduce turnout among those who would have registered anyway. On the contrary, citizens registered due to the visits became more interested in and knowledgeable about the elections as a result of being able to participate in them, and 93% voted at least once in 2012. The results suggest that easing registration requirements could substantially enhance political participation and interest while improving representation of all groups.

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  • December 2016
  • Strategic Management Journal

Through the Mud or in the Boardroom: Examining Activist Types and Their Strategies in Targeting Firms for Social Change

By: Eesley, Charles, K.A. DeCelles, and Michael Lenox

Abstract—We examine the variety of activist groups and their tactics in demanding firms’ social change. While extant work does not usually distinguish among activist types or their variety of tactics, we show that different activists (e.g., social movement organizations vs. religious groups and activist investors) rely on dissimilar tactics (e.g., boycotts and protests vs. lawsuits and proxy votes). Further, we show how protests and boycotts drag companies “through the mud” with media attention, whereas lawsuits and proxy votes receive relatively little media attention yet may foster investor risk perceptions. This research presents a multifaceted view of activists and their tactics and suggests that this approach in examining activists and their tactics can extend what we know about how and why firms are targeted.

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  • forthcoming
  • Journal of Financial Economics

Cost of Experimentation and the Evolution of Venture Capital

By: Ewens, Michael, Ramana Nanda, and Matthew Rhodes-Kropf

Abstract—We study how technological shocks to the cost of starting new businesses have led the venture capital model to adapt in fundamental ways over the prior decade. We both document and provide a framework to understand the changes in the investment strategy of VCs in recent years—an increased prevalence of a “spray and pray" investment approach—where investors provide a little funding and limited governance to an increased number of startups that they are more likely to abandon, but where initial experiments significantly inform beliefs about the future potential of the venture. This adaptation and related entry by new financial intermediaries has led to a disproportionate rise in innovations where information on future prospects is revealed quickly and cheaply and has reduced the relative share of innovation in complex technologies where initial experiments cost more and reveal less.

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  • 2017
  • Ethical Capitalism: Shibusawa Eiichi and Business Leadership in Global Perspective

Gapponshugi in Global Perspective: Debating the Responsibility of Capitalism

By: Jones, G.

Abstract—This chapter places the concepts of ethical capitalism developed by the 19th century Japanese venture capitalist Shibusawa Eiichi in a global historical perspective. The chapter reviews the similarities and differences over time and between countries of proponents of corporate responsibility, including Andrew Carnegie and Robert Anderson in the United States, Paul Rijkens in Europe, and Jamnalal Bajaj in India, as well as HBS Deans Wallace Donham and Donald David. It shows that there were quite different drivers that led business leaders to advocate corporate responsibility. Often strong religious and spiritual values were the principal justification, although Shibusawa Eiichi himself framed his arguments in secular terms. In the United States, fears of government intervention if business was perceived as acting badly also drove some to advocate corporate responsibility.

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  • February 2017
  • Annals of Corporate Governance

Understanding Boards of Directors: A Systems Perspective

By: Lorsch, Jay W.

Abstract—In this essay, my goal is to explore why, despite the tireless efforts of talented people, research on corporate governance has been slow and uneven, and where that research should turn to next to be most valuable to practitioners. My belief is that the most fruitful work thus far has recognized that corporate boards are dynamic social systems, has identified all the forces that shape those systems, and has acknowledged that boards should seek to represent a wide variety of stakeholders, not just shareholders. The best way for me to establish this argument is to trace the history of research on corporate boards and analyze the trends in that research, including the relative value of the types of data that researchers in this field have used. Ultimately, I identify what I consider to be the best path forward in studying these complex social systems. I have made a deliberate choice to focus primarily on research that reflects firsthand experience with boards rather than on research that utilizes data derived from questionnaires and other secondary sources. Not everyone will agree with my choices, but my hope is that my perspective will nonetheless provide some guidance for people working in this evolving field to understand the true complexity of corporate boards.

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Abstract—This paper seeks to explain the technological forces that led to the rise of vertically integrated corporations in the late 19th century and the opposing forces that led to a vertical-to-horizontal transition in the computer industry 100 years later. I first model the technology of step processes with bottlenecks and show how this technology rewards vertical integration, a hierarchical organization, and the use of direct authority. These properties in turn became the organizational hallmarks of so-called "modern" corporations. I then model platform systems, showing that, in contrast to step processes, this technology rewards the multiplication of options, increasing risk, and modularity. Moreover, given a modular architecture, a platform system can be open, with different components supplied by separate firms with no loss of interoperability or efficiency. Openness multiplies options and expands diversity, thus increasing the platform system’s value. The last two decades of the 20th century saw the rise of three distinct types of open platforms in the computer industry: (1) "forward open" platforms with downstream complementors, (2) "backward open" modular supply networks, and (3) "open exchange" platforms designed to facilitate transactions and other forms of social interaction. Whereas in 1980, vertically integrated firms dominated the industry, by 2000, the "verticals" had essentially disappeared. The largest firms in the industry in 2000 were sponsors and participants in open platform systems. I argue that the vertical-to-horizontal transition in the computer industry was an organizational response to a fundamental change in economic rewards to the technologies of rationalized step processes vs. open platform systems.

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Firm Selection and Corporate Cash Holdings

By: Begenau, Juliane, and Berardino Palazzo

Abstract—Among stock market entrants, more firms over time are R&D intensive with initially lower profitability but higher growth potential. This sample-selection effect determines the secular trend in U.S. public firms’ cash holdings. A stylized firm industry model allows us to analyze two competing changes to the selection mechanism: a change in industry composition and a shift toward less profitable R&D firms. The latter is key to generating higher cash ratios at IPO, necessary for the secular increase, whereas the former mechanism amplifies this effect. The data confirm the prominent role played by selection and corroborate the model’s predictions.

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Abstract—Do online communities segregate into separate conversations about “contestable knowledge”? We analyze the contributors of biased and slanted content in Wikipedia articles about U.S. politics and focus on two research questions: (1) Do contributors display tendencies to contribute to topics with similar or opposing bias and slant? (2) Do contributors learn from experience with extreme or neutral content, and does that experience change the slant and bias of their contributions over time? Despite heterogeneity in contributors and their contributions, we find an overall trend towards less segregated conversations. Contributors tend to edit articles with slants that are the opposite of their own views, and the slant from experienced contributors becomes less extreme over time. The experienced contributors with the most extreme biases decline the most. We also find some significant differences between Republicans and Democrats.

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  • Harvard Business School Case 517-014

Godrej Agrovet Ltd (GAVL)

Nadir Godrej, chairman, and B. Yadav, managing director of Godrej Agrovet Ltd (GAVL), grapple with the challenge of growing their cattle feed business—should they integrate vertically despite the challenges of the dairy industry and risk the profitability of the current business? The ban on cow slaughter in India adds to the dilemma.

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  • Harvard Business School Case 817-081

Tesla in 2015

No abstract available.

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  • Harvard Business School Case 516-051


Unigrains is a French agribusiness-focused private equity firm that has provided specialized financing to France's agribusiness sector for decades and, as a result, cultivated a strong reputation and relationships in that space. Now that the broader investment community around the globe has become more interested in agribusiness, Unigrains faces growing competitive pressure. This case describes the general private equity model, provides an overview of agribusiness investing trends, and invites students to weigh the relative merits for Unigrains of expanding its reach globally versus maintaining its specialized position in French agribusiness.

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  • Harvard Business School Case 316-154

Hello Alfred: Come Home Happy

On a mission to "automate the on-demand economy," Harvard Business School classmates Marcela Sapone and Jessica Beck launched Hello Alfred in 2013 to provide subscribers with an "Alfred" to complete various chores for a monthly fee. In early 2016, the company has built an infrastructure, including a mobile app, to develop Alfred’s routes and respond to customer requests in conjunction with other service providers, for example grocery delivery services, in what the founders describe as their "B2B2C" business model. Alfred won the coveted TechCrunch San Francisco Disrupt Cup in 2014, and by April 2015 had secured $12.5 million in seed and Series A funding. The founders must determine the best growth strategy for Alfred. Should they expand Alfred beyond their present operating cities, New York and Boston, or should they focus on their current markets? Should they increase public visibility to attract more customers, or should they enroll landlords in Alfred and reach consumers in that way?

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Royal DSM CEO Feike Sijbesma was pondering the challenges of shifting DSM’s global organization from the constant transformations of the past 100 years to creating organic growth. When Sijbesma took the helm as CEO in 2007, he further pushed and completed the company’s final moves away from commodity chemicals and toward more sustainable businesses whereby DSM could create value with differentiated offerings. Sijbesma emphasized innovation and moving into “sunrise” businesses that would fuel future growth by playing a positive role in the broader society. Sijbesma asked himself, did DSM’s current portfolio in life sciences and materials sciences provide sufficient growth opportunities to sustain consistent and superior performance? Would DSM’s 21,000 employees worldwide embrace the DSM Strategy 2018: “Driving profitable growth through science-based sustainable solutions,” anchored via the Lead & Grow support and development program for key managers of the company? Should DSM continue making moves in mergers and acquisitions (M&A) to complement organic growth, or could its growth goals be achieved by focusing on organic growth for now, followed later by M&A activities again? What new markets should it look to in order to ensure sustainable growth? Sijbesma felt that after a decade of transformations (divestments and acquisitions), it would be healthy for the company to focus fully on organic growth for several years. During that period, the company had already indicated it would divest three of its major holdings in joint venture companies, which would generate the financial capacity for M&A activities again in later years. In the meantime, Sijbesma wanted the company to prove it could grow organically as well.

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  • Harvard Business School Case 816-075

Tenet Healthcare and Conifer Health Solutions

This case explores the relationship between Tenet Healthcare, the third largest for-profit hospital chain, and its subsidiary Conifer Health Solutions, a health services company. Conifer's IT programs help healthcare providers with revenue cycle management and population health management; the case provides an overview of both sectors. Conifer has been growing rapidly, leading some to question what the best relationship is for Tenet and Conifer going forward. The current parent-subsidiary arrangement presents synergies as well as potential conflicts.

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  • Harvard Business School Case 817-030

SIN Capital and the Fullerton Health IPO

In early 2016, David Sin, founder of the Singapore-based private equity group SIN Capital and chairman of its primary holding, Fullerton Health, was deeply involved in preparations for taking Fullerton public on the Singapore stock exchange. Three years after SIN Capital had invested in Fullerton—a provider of enterprise health management—and two years ahead of the original plan, it had attained a valuation of over S$1 billion. Listing the company would provide a number of important benefits as the management team and the investors expanded the operation throughout South Asia. This case describes the benefits and drawbacks of Fullerton’s planned IPO, along with the strategy that had propelled its impressive growth. It also presents David Sin’s vision for SIN Capital as a different type of private equity firm.

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  • Harvard Business School Case 317-027

The Black List

Franklin Leonard founded The Black List in 2005 as an innovative approach to identifying potential hit movie scripts via crowdsourcing. As the annual Black List proved to hold the scripts of some of Hollywood’s most successful films, from “Slumdog Millionaire” to “Spotlight,” it became widely respected and highly anticipated throughout the industry. In 2012, Leonard uses the momentum to bring The Black List online as a database where unproduced screenplays can be reviewed and discovered by industry experts. Now in 2016, Leonard is considering other avenues for supporting great screenwriters, including launching a film fund to finance low-budget productions. He reflects on the movie-making business and on the numerous barriers to entry he may face in entering the competitive motion picture industry.

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  • Harvard Business School Case 817-054

Square, Inc. IPO

In November 2015, Square, Inc. launched its initial public offering (IPO). The IPO had an offering price of $9 per share, lower than the $11 to $13 estimate that had been outlined in the preliminary prospectus and 42% below the $15.50 share price in its most recent financing less than a year before. The lower-than-anticipated pricing of Square’s IPO, and the implied valuation, had left investors and market observers wondering if this was an indication of a valuation bubble or a shift in the market. The case provides an overview of the IPO process and examines U.S. IPO trends from the 1980s to mid-2010s. It explores the rationales behind an increasing number of billion-dollar-plus private valuations, known as “unicorns” and explores who the winners and losers are when such firms go public at lower valuations.

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  • Harvard Business School Case 717-003

Sovereign Wealth Funds

No abstract available.

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  • Harvard Business School Case 317-079

Carmichael Roberts: To Create a Private Equity Firm?

Carmichael Roberts, a rare African-American venture capitalist, considered leaving his general partnership in a private equity firm near Boston and setting up his own in 2015. He weighed whether the timing was right, with the economy still not fully recovered from the Great Recession of 2007–2009. Where to base such a firm was another factor in his decision-making. A member of the board of the National Venture Capital Association, Roberts knew the industry was gravitating to the San Francisco Bay area, to invest in the social media and software startups centered there. His specialty and passion was bringing to market new products made from advanced materials that help people solve problems in their daily lives. That investment focus on manufacturing would go against the private equity trend, another factor he considered. But he knew few, if any, general partners at major private equity firms were focused singularly on the kinds of businesses in which he wanted to invest. Roberts also took into account the possible impact on his mutually respectful relations with his fellow partners. From a housing project in Brooklyn, New York, Roberts became a scientist who did advanced study at Duke and Harvard, capped off with an MBA from MIT. He had experience as a developer of technical products for Fortune 500 companies, an executive of cutting-edge startups, and a venture capitalist for eight years. This case study also reviews how private equity investment works, the private equity spectrum, the history of venture capital, stages of venture capital funds, and their locations.

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The case highlights the role of minority chambers of commerce and the background of Eve Hall, a well-regarded multi-sector leader asked to revive Wisconsin’s African-American chamber. This case study examines the lending options that a minority chamber of commerce considers when seeking to maximize value to its constituency. Students learn the challenges minority small business owners and entrepreneurs face, the role of non-financial institutions/community-based organizations in addressing those challenges, and the financial tools available to lenders and borrowers in this segment. Students learn how to analyze financing opportunities by assessing the value propositions of chambers of commerce, developing the risk-reward profile of each party involved, and deliberating as members of a board to reach a final lending decision.

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  • Harvard Business School Case 317-061

Earl Gordon—Eastern Circle

This case follows an African-American entrepreneur through the process of sourcing a potential acquisition, valuing a company, and securing the funding to purchase the company. This entrepreneur must decide if he should close the deal and which financing term sheet to accept.

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  • Harvard Business School Case 217-056


Publicly listed in November 2005, Link REIT was the first real estate investment trust (REIT) in Hong Kong after the Hong Kong government decided to privatize a portfolio of community shopping malls, car parks, and fresh produce markets. Run by CEO George Hongchoy, the company had evolved from managing retail spaces in public housing estates in Hong Kong into new property types such as offices as well as into new geographies such as Beijing and Shanghai in mainland China. The case centers around the many questions Hongchoy faced on whether the strategic shift would dilute Link's mission of servicing the local community with affordable yet quality retail experience, while balancing his responsibilities to his shareholders and pursuing other growth opportunities.

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