First Look

Abstract—United Airlines has pledged to improve its training programs and empower its employees to put customers first in the wake of a video showing a passenger being dragged from a plane. Of all the U.S. air carriers, United should have known the power of social media and public outrage. It had learned years earlier in a prominent case about how fast viral content spreads and the ability of consumers to talk back to corporations. But the moral of this story is not how to do crisis management faster and better in a lightning-fast digital world. It’s that even the nimblest and deftest crisis management response cannot contain the damage of going straight to “call security” and crossing the last line of defense in customer service design. And an audience of customers standing by with their smartphones to record any spectacle seems to have had, until now, unfortunately, no discernable impact on corporate policy guidelines for dealing with uncooperative customers. Companies building computer-assisted rules for customer management in predictably difficult situations need to understand that human judgment is still one of the most important tools. Company leaders need to offer better employee training on all these points.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=52591

Abstract—No abstract available.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=52581

Abstract—No abstract available.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=52592

Abstract—No abstract available.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=52573

Abstract—No abstract available.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=52575

Abstract—We study the determinants of value creation within U.S. commercial banks. We begin by constructing two new measures of bank productivity: one focused on deposit-taking productivity and one focused on asset productivity. We then use these measures to evaluate the cross-section of bank value. Both productivity measures are strongly value relevant, with variation in banks' deposit productivity responsible for the majority of variation in bank value. We also find evidence consistent with synergies between deposit-taking and lending activities: banks with high deposit productivity have high asset productivity, a relationship driven by the tendency of deposit-productive banks to hold illiquid loans. Our results suggest that both sides of the balance sheet contribute meaningfully to bank value creation, with the liability side playing a primary role.

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Abstract—We provide evidence on the value of patents to start-ups by leveraging the random assignment of applications to examiners with different propensities to grant patents. Using unique data on all first-time applications filed at the U.S. Patent Office since 2001, we find that start-ups that win the patent “lottery” by drawing lenient examiners have, on average, 55% higher employment growth and 80% higher sales growth five years later. Patent winners also pursue more, and higher quality, follow-on innovation. Winning a first patent boosts a start-up’s subsequent growth and innovation by facilitating access to funding from VCs, banks, and public investors.

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Abstract—Global banks use their global balance sheets to respond to local monetary policy. However, sources and uses of funds are often denominated in different currencies. This leads to a foreign exchange (FX) exposure that banks need to hedge. If cross-currency flows are large, the hedging cost increases, diminishing the return on lending in foreign currency. We show that, in response to domestic monetary policy easing, global banks increase their foreign reserves in currency areas with the highest interest rate while decreasing lending in these markets. We also find an increase in FX hedging activity and its rising cost, as manifested in violations of covered interest rate parity.

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Yushan Bicycles, one of Taiwan's leading bicycle manufacturers, is pursuing an international expansion strategy by increasing demand for its range of traditional and electric bicycles and shifting its product mix toward higher-margin models sold through specialty bicycle retail shops. However, the manager of its new Australian subsidiary has taken a different approach that focuses on selling lower-priced models through large sporting-goods retailers. The manager's strategy has yielded disappointing financial results so far, and he and company executives disagree on the cause and next steps. The Yushan case was specifically developed for international management and international business courses, but it can also be used in competitive strategy, corporate strategy, and general management programs. It is especially useful for analyzing situations in which issues of strategy, organization, and management converge.

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Teaching Note for HBS No. 917-539.

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