First Look

August 29, 2006

Why does entrepreneurism flourish in some countries and struggle in others? The reasons are varied and complex, and include the country's governing philosophies and values, attitudes toward business, and access to capital. A new working paper by Laura Alfaro and Andrew Charlton finds relationships between international financial integration—that is, a country's links to international capital markets—and the level of entrepreneurial activity in that country. Other new material published this week include two new case studies—one looking at Apple Computer's innovation model in contrast to its established businesses, and another detailing an African-American woman's experiences in the classrooms of Harvard Business School where she wonders if her masculine, aggressive style is compromising her effectiveness as a leader.
— Sean Silverthorne

Working Papers

International Financial Integration and Entrepreneurship


We explore the relation between international financial integration and the level of entrepreneurial activity in a country. Using a unique data set of approximately 24 million firms in nearly 100 countries in 1999 and 2004, we find suggestive evidence that international financial integration has been associated with higher levels of entrepreneurial activity. Our results are robust to using various proxies for entrepreneurial activity such as entry, size, and skewness of the firm-size distribution; controlling for level of economic development, regulation, institutional constraints, and other variables that might affect the business environment; and using different empirical specifications. We further explore various channels through which international financial integration can affect entrepreneurship (a foreign direct investment channel and a capital/credit availability channel) and provide consistent evidence to support our results.

Download working paper:


Cases & Course Materials

Apple Computer, 2006

Harvard Business School Case 706-496

Apple has reaped the benefits of its innovative music player, the iPod. However, its PC and server business continue to hold small market share relative to the worldwide computer over the past few years. Will the iPod lure new users to the Mac? Will Apple be able to produce another cutting-edge device quickly?

Purchase this case:

Managing a Public Image: Cheri Mack

Harvard Business School Case 406-096

Cheri Mack, an African-American woman, has just arrived at Harvard Business School after working for three years at a major consulting firm where she learned to adopt the demeanor of her male colleagues in order to fit in. Some of her male classmates are critical of her masculine, aggressive style in the classroom. As she begins to plan for a new career in healthcare, their criticisms cause her to wonder whether having shed much of her femininity will compromise her effectiveness as a leader.

Purchase this case:



Finding Lost Profits: An Equilibrium Analysis of Patent Infringement Damages


We examine the impact of patent infringement damages in an equilibrium oligopoly model of process innovation where the choice to infringe is endogenous and affects market choices. Under the lost profits measure of damages, we find that infringement always occurs in equilibrium with the infringing firm making market choices that manipulate the resulting market profit of the patent holder. In equilibrium, infringement takes one of two forms: a "passive" form in which lost profits of the patent holder are zero, and an "aggressive" form where they are strictly positive. Even though the patentee's profits are protected with the lost profits damage measure, innovation incentives are reduced relative to a regime where infringement is deterred.

Estimating Demand Uncertainty Using Judgmental Forecasts


Measuring demand uncertainty is a key activity in supply chain planning. Of various methods of estimating the standard deviation of demand, one that has been employed successfully in the recent literature uses dispersion among experts' forecasts. However, there has been limited empirical validation of this methodology. In this paper we provide a general methodology for estimating the standard deviation of a random variable using dispersion among experts' forecasts. We test this methodology using three datasets, demand data at item level, sales data at firm level for retailers, and sales data at firm level for manufacturers. We show that the standard deviation of a random variable (demand and sales for our datasets) is positively correlated with dispersion among experts' forecasts. Further we use longitudinal datasets with sales forecasts made three-nine months before earnings report date for retailers and manufacturers to show that the effects of dispersion and scale on standard deviation of forecast error are consistent over time.