First Look

March 21, 2017

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

The rise and fall of the circus

Recent news that the Ringling Bros. and Barnum & Bailey circus plans to fold up its tent this year leads many to wonder whether the circus industry is in peril. A recent case study "explores the origins of the traditional circus, including its rise to popularity in the United States in the 1800s, and examines the factors that led to its decline in the 20th and 21st centuries," write the authors, Ramon Casadesus-Masanell and Karen Elterman. The case can be used to teach concepts related to blue ocean strategy.

Do CEOs impact firm performance?

In a study involving the daily job tasks of 1,114 CEOs around the world, new research attempts to correlate CEO behavior with firm performance. The reseach was conducted by Oriana Bandiera, Stephen Hansen, Andrea Pratt, and Raffaella Sadun. The paper is titled CEO Behavior and Firm Performance.

The hidden power of a job-candidate referrer

New research suggests that the background of a person referring a job candidate can set off a complex chain reaction that ultimately affects the hiring in unexpected ways. The paper, Compromised Ethics in Hiring Processes? How Referrers’ Power Affects Employees’ Reactions to Referral Practices, was written by R. Delfer-Rozin, B. Baker, and F. Gino. It is scheduled to be published in an forthcoming issue of the Academy of Management Journal.

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

— Sean Silverthorne
  • in press
  • Academy of Management Journal

Compromised Ethics in Hiring Processes? How Referrers’ Power Affects Employees’ Reactions to Referral Practices

By: Delfer-Rozin, R., B. Baker, and F. Gino

Abstract—In this paper, we explore referral-based hiring practices and show how a referrer’s power (relative to the hiring manager) influences other organizational members’ support (or lack thereof) for who is hired through perceptions of the hiring manager’s motives and morality. We apply principles derived from the literature on attribution of motives to research on relational power to delineate a model that explains employees’ moral evaluations of and reactions to referral practices based on the power relationship between a referrer and a hiring manager. Specifically, we predict that employees are more likely to see the acceptance of a referral from a higher- (as opposed to a lower-) power referrer as a way for the hiring manager to gain more power in the relationship with the referrer, thereby attributing more self-interested motives and more counter-organizational motives to the hiring manager in such situations. These motives are then associated with harsher moral judgments of the hiring manager, which in turn lead to less support for the hiring decision. We find support for our model in two experimental studies and two field studies. We discuss implications for the literature on referral practices, ethics, and observers’ reactions to power dynamics.

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CEO Behavior and Firm Performance

By: Bandiera, Oriana, Stephen Hansen, Andrea Pratt, and Raffaella Sadun

Abstract—We measure the behavior of 1,114 CEOs in Brazil, France, Germany, India, UK, and U.S. using a new methodology that combines (i) data on every activity the CEOs undertake during one workweek and (ii) a machine learning algorithm that projects these data onto scalar CEO behavior indices. Low values of the index are associated with plant visits and one-on-one meetings with production or suppliers, while high values correlate with meetings with high-level C-suite executives and several functions together, both from inside and outside the firm. We use these data to study the correlation between CEO behavior and firm performance within the framework of a firm-CEO assignment model. We show results consistent with significant firm-CEO assignment frictions, which appear to be more severe in lower-income regions. The productivity loss generated by inefficient assignment is equal to 13% of the productivity gap between high- and low-income countries in our sample.

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Abstract—New-industry pioneers confront the challenge of creating a new market category and achieving significance within it. However, prior research largely emphasizes the collective benefits of market creation and overlooks the costs borne by individual evangelists. Through an inductive multiple-case study of five startup competitors, we traced firms’ efforts to stake out a new online investing category between 2007 and 2011. As entrepreneurs deployed cultural resources in different ways to influence several relevant audiences, three firms experienced a conspicuous decline resulting in a diminished standing vis-à-vis the two category leaders. We introduce an emergent theoretical framework, proposing a set of underappreciated organizational processes that help explain pioneers’ divergent trajectories. For these category commoners, scattershot rhetorical attacks generate unanticipated costs while benefitting competitors; embracing imposed labels constrains strategic flexibility and creates category lock-in; and founding stories can obstruct change necessitated by unexpected deviations from the plan. More broadly, by contrasting vigorous missionary work and reluctant evangelism as alternative pathways, we demonstrate how market-creation efforts can undermine startups’ standing in a new market. In addition to contributing to cultural entrepreneurship, our study has implications for category emergence and strategic entrepreneurship in nascent industries.

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Abstract—Prior research examines how firms navigate nascent markets but overlooks an imperative for entrepreneurial firms that pioneer in these contexts: finding a viable business model. Through an in-depth, multiple-case study of ventures in the nascent social investing market, we induce a theoretical framework to explain how firms efficiently accomplish this important strategic objective. Our core contribution is the concept of parallel play—a theoretical construct characterizing the search process by which entrepreneurial firms efficiently reach a viable business model ahead of competitors. Parallel play’s three components, enacted in sequence, map onto how very young children play. These components are (1) focusing on substitutes and borrowing selectively from peers, (2) testing assumptions about profit logics before committing to one, and (3) pausing with a loosely connected activity system to await surprise before completing the business model. We describe how parallel play promotes efficient search by unpacking the mechanisms by which it leads to fast, inexpensive, and reliable problem solving. We offer a richer and more realistic view of search in nascent markets and contribute to search theory and its nexus with learning theory.

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  • Harvard Business School Case 517-048

Pete & Gerry's

No abstract available.

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  • Harvard Business School Case 717-444

The Rise and Fall of the Circus

This case describes the origins of the traditional circus, including its rise to popularity in the United States in the 1800s, and examines the factors that led to its decline in the 20th and 21st centuries.

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  • Harvard Business School Case 716-073

Nigeria on the Move: Governing the ‘New’ Economy

No abstract available.

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In 1950 it looked highly doubtful that Indian democracy would hold—typical family income was $6 a month, only about 15% of the population was literate, there were deep religious and ethnic differences, and more than a dozen national languages were spoken. But after a half a century, India had proved to be the first democracy anywhere near so poor to survive. Why? As well, in 1950 India's economic prospects looked bright for a developing country—it had a well-trained government bureaucracy bequeathed by the British, a secure legal system, national railroads, and more advanced industry than, for example, China. Why did the economy do so poorly?

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  • Harvard Business School Case 417-073

Leading Global Teams

This module aims to help students become effective leaders and members of global teams that must work together across national boundaries and toward a common goal. Students will learn to diagnose the challenges that global teams often face as well as strategies that they can employ to foster effective collaboration in those teams. Learning to navigate the challenges associated with global teams is a critical component of today's MBA curricula. Students will emerge from their MBA programs to join companies that rely on employees from around the world to help the firms capitalize on the promise of their global reach and resources. Global teams, however, face significant challenges; physical separation and demographic differences can create social distance, or lack of emotional connection between groups, that then contributes to disruptive misunderstandings and mistrust. This module prepares students with the knowledge and skills necessary to address these challenges.

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  • Harvard Business School Case 617-051

Designing Transformational Customer Experiences

Anyone who has recently travelled, gone shopping, or tried to have a problem solved may have little recollection of the experience. Worse yet, some are frustrated by the lack of responsiveness or empathy that they encountered. The reality is that most customer experiences are mediocre, forgettable, and some are plain awful. But once in a blue moon, an experience is so great that it leaves positive memories for years. Why do some product or service experiences have that undeniable “wow” factor, while others lack that pizzazz, relegating them to either being loathed or erased from memory? This case prepares participants for an in-class exercise in which they discover design principles that make experiences great. The exercise uses two methodologies: LEGO® Serious Play® (LSP) and Storytelling. It requires the purchase of special purpose LEGO® elements.

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