First Look

Publications

Foreign Direct Investment and Growth: On the Role of Complementarities, the Search for Mechanisms, and the Potential for Linkages

Abstract

This paper examines the evolution of the literature on the relationship between foreign direct investment (FDI) and growth in host countries, particularly developing countries. It provides a broad overview, with a focus on two elements that have recently become particularly important, (1) the role of complementary local conditions conducive to reaping the benefits of FDI (which relate to when FDI will generate growth) and (2) the mechanisms by which FDI creates positive externalities (which relate to how FDI generates growth).

Technology and Innovation Management

Abstract

The goal of this annotated bibliography on technology and innovation is to organize and present the most important literature relevant to a scholar seeking to understand and advance the field. It includes articles that are highly cited and foundational pieces, as well as recent articles that help give the reader a sense of where the field is headed and where likely opportunities for future research lie. This article seeks to strike an equilibrium among the variety of perspectives that exist in technology and innovation literature, balancing new and old research as well as economic, organizational, and cross-disciplinary methodologies. The innovative process is broadly considered here, as well as the technologies that result from it, including business model innovation, service-level innovation, and product innovation, highlighting articles that utilize diverse levels of analysis.

Paper: http://www.oxfordbibliographies.com/obo/page/management

Learning from Customers: Individual and Organizational Effects in Outsourced Radiological Services

Abstract

The ongoing fragmentation of work has resulted in a narrowing of tasks into smaller pieces that can be sent outside the organization and, in many instances, around the world. This trend is shifting the boundaries of organizations and leading to increased outsourcing. Though the consolidation of volume may lead to productivity improvement, little is known about how this shift toward outsourcing influences learning by providers of outsourced services. When producing output, the content of the knowledge gained can vary from one unit to the next. One dimension along which output can vary-a dimension with particular relevance in outsourcing-is the end customer for whom it is produced. The performance benefits of such customer experience remain largely unexamined. We explore this dimension of volume-based learning in a setting where doctors at an outsourcing firm complete radiological reads for hospital customers. We examine more than 2.7 million cases read by 97 radiologists for 1,431 customers and find evidence supporting the benefits of customer-specific experience accumulated by individual radiologists. Additionally, we find that variety in an individual's customer experience may increase the rate of individual learning from customer-specific experience for a focal task. Finally, we find that the level of experience with a customer for the entire outsourcing firm also yields learning and that the degree of customer depth moderates the impact of customer-specific experience at the individual level. We discuss the implications of our results for the study of learning as well as for providers and consumers of outsourced services.

Preference Heterogeneity and Optimal Capital Income Taxation

Abstract

We examine a prominent justification for capital income taxation: goods preferred by those with high ability ought to be taxed. In an environment where commodity taxes are allowed to be nonlinear functions of income and consumption, we derive an analytical expression that reveals the forces determining optimal commodity taxation. We then calibrate the model to evidence on the relationship between skills and preferences and extensively examine the quantitative case for taxes on future consumption (saving). In our baseline case of a unit intertemporal elasticity, optimal capital income tax rates are 2% on average and 4.5% on high earners. We find that the intertemporal elasticity of substitution has a substantial effect on optimal capital taxation. If the intertemporal elasticity is one-third, optimal capital income tax rates rise to 15% on average and 23% on high earners; if the intertemporal elasticity is two, optimal rates fall to 0.6% on average and 1.6% on high earners. Nevertheless, in all cases that we consider, the welfare gains of using optimal capital taxes are small.

Caste and Entrepreneurship in India

Abstract

It is now widely accepted that the lower castes have risen in Indian politics. Has there been a corresponding change in the economy? Using comprehensive data on enterprise ownership from the Economic Censuses of 1990, 1998, and 2005, we document substantial caste differences in entrepreneurship across India. The Scheduled Castes and Scheduled Tribes are significantly under-represented in the ownership of enterprises and the share of the workforce employed by them. These differences are widespread across all states, have decreased very modestly between 1990 and 2005, and cannot be attributed to broad differences in access to physical or human capital.

Open Innovation and Firm Boundaries: Task Decomposition, Knowledge Distribution and the Locus of Innovation

Abstract

This paper contrasts traditional, organization-centered models of innovation with more recent work on open innovation. These fundamentally different and inconsistent innovation logics are associated with contrasting organizational boundaries and organizational designs. We suggest that when critical tasks can be modularized and when problem-solving knowledge is widely distributed and available, open innovation complements traditional innovation logics. We induce these ideas from the literature and with extended examples from Apple, NASA, and LEGO. We suggest that task decomposition and problem-solving knowledge distribution are not deterministic but are strategic choices. If dynamic capabilities are associated with innovation streams, and if different innovation types are rooted in contrasting innovation logics, there are important implications for firm boundaries, design, and identity.

The Consequences of Financial Innovation: A Counterfactual Research Agenda

Abstract

Financial innovation has been both praised as the engine of growth of society and castigated for being the source of the weakness of the economy. In this paper, we review the literature on financial innovation and highlight the similarities and differences between financial innovation and other forms of innovation. We also propose a research agenda to systematically address the social welfare implications of financial innovation. To complement existing empirical and theoretical methods, we propose that scholars examine case studies of systemic (widely adopted) innovations, explicitly considering counterfactual histories had the innovations never been invented or adopted.

Book: http://www.nber.org/books/lern11-1

Hybrid Innovation in Meiji Japan

Abstract

Japan's hybrid innovation system during the Meiji era of technological modernization provides a useful laboratory for examining the effectiveness of complementary mechanisms to patents. Patents were introduced in 1885, and by 1911, 1.2 million mostly non-pecuniary prizes were awarded at 8,503 competitions. Prizes provided a strong boost to patent outcomes, especially in less developed prefectures, and they also induced large spillovers of technical knowledge in prefectures adjacent to those with prizes, relative to distant control prefectures without prizes. Linking competition expenditures with the expected market value of patents induced by the prizes permits a cost-benefit assessment of the prize competitions to be made.

Paper: http://www.people.hbs.edu/tnicholas/Hybrid_Japan.pdf

Intermediary Functions and the Market for Innovation in Meiji and Taishō Japan

Abstract

Japan experienced a transformational phase of technological development during the late nineteenth and early twentieth centuries. We argue that an important, but so far neglected, factor was a developing market for innovation and a patent attorney system that was conducive to rapid technical change. We support our hypothesis using patent data, and we also present a detailed case study on Tomogorō Ono, a key developer of salt production technology who used attorneys in connection with his patenting work at a time when Japan was still in the process of formally institutionalizing its patent attorney system. In accordance with Lamoreaux and Sokoloff's influential study of trade in invention in the United States, our quantitative and qualitative evidence highlights how inventors and intermediaries in Japan interacted to create a market for new ideas.

Paper: http://www.people.hbs.edu/tnicholas/Japan_Market.pdf

Intermediation and Diffusion of Responsibility in Negotiation: A Case of Bounded Ethicality

Abstract

This article compares direct deception with deception via an intermediary in the bargaining context. It describes a growing experimental literature that suggests how perceived ethics surrounding transactions with multiple partners can encourage misbehavior. It is noted that causing harm indirectly through another can protect harm doers. Harm doers are apparently protected from punishment as well. The hypothesis that intermediation reduces punishment runs counter to predictions coming from a model in which solely unfair actions are punished. Experiments are also presented that show a phenomenon about the attribution of responsibility and subsequent blame (and praise) in negotiation and conflict resolution settings. It is believed that by making people more aware of their failure to notice and punish indirect unethical behavior, others can create a world where the use of intermediation will no longer provide harm doers an easy escape from public awareness.

Immigration and Employer Transitions for STEM Workers

Abstract

We analyze the career trajectories of STEM workers and firm-level hiring of immigrants using the Longitudinal Employer-Household Dynamics (LEHD) database of the U.S. Census Bureau. We find STEM career adjustments during periods of abnormally high immigration into the firm to be more difficult on several dimensions compared to non-STEM workers. Most notably, STEM workers do not acquire a new job as quickly as non-STEM workers; moreover, their earnings are reduced after the job transition occurs. This latter earnings effect is strongest for the first five years after the transition, abating somewhat by the tenth year.

Paper: http://www.people.hbs.edu/wkerr/Kerr-Kerr-AEAPP13-STEM.pdf

Shattering the Myth of Separate Worlds: Negotiating Non-Work Identities at Work

Abstract

How much of our self is defined by our work? Fundamental changes in the social organization of work are destabilizing the relationship between work and the self. As a result, parts of the self traditionally considered outside the domain of work, i.e., "non-work" identities, are increasingly affected by organizations and occupations. Based on an interdisciplinary review of literature on identity and work we develop a model of how people negotiate non-work identities (e.g., national, gender, family) in the context of organizational/occupational pressures and personal preferences regarding this identity. We propose that the dual forces of pressures and preferences vary from inclusion (e.g., incorporating the non-work identity within the work identity) to exclusion (e.g., keeping the identities separate). We suggest that the alignment or misalignment of these pressures and preferences shapes peoples' experience of the power relationship between themselves and their organization/occupation and affects how they manage their non-work identities. We describe how people enact different non-work identity management strategies-namely assenting to, complying with, resisting, or inverting the pressures-and delineate the consequences of these strategies for people and their organizations/occupations.

Expected Firm Altruism, Quality Provision, and Brand Extensions

Abstract

A setting is considered where consumers keep track of the extent to which brands care about them, which is modeled as altruism of brands towards their target consumers. Consumers who purchase an experience good of high quality reasonably deduce that the supplier of this good is relatively altruistic towards them and are therefore more keen to purchase a brand extension that is also directed at them. As a result, the success of brand extensions depends on the overlap between the customers of its original product and the target customers of the extension product. The quality and demand for a brand extension can be higher if the brand is perceived as caring only for its most quality-conscious consumers rather than for all possible buyers of the good.

Not Just for Stereotyping Anymore: Racial Essentialism Reduces Domain-General Creativity

Abstract

Individuals who believe that racial groups have fixed underlying essences use stereotypes more than do individuals who believe that racial categories are arbitrary and malleable social-political constructions. Would this essentialist mind-set also lead to less creativity? We suggest that the functional utility derived from essentialism induces a habitual closed-mindedness that transcends the social domain and hampers creativity. Across studies, using both individual difference measures (in a pilot test) and experimental manipulations (Experiments 1, 2a, and 2b), we found that an essentialist mind-set is indeed hazardous for creativity, with the relationship mediated by motivated closed-mindedness (Experiments 2a and 2b). These results held across samples of majority cultural-group members (Caucasian Americans, Israelis) and minority-group members (Asian Americans), as well as across different measures of creativity (flexibility, association, insight). Our findings have important implications for understanding the connection between racial intolerance and creativity.

IP Modularity in Software Ecosystems: How SugarCRM's IP and Business Model Shape Its Product Architecture

Abstract

We provide a case study of the concept of "IP modularity," analyzing the case of SugarCRM. The modular architecture of this platform software is aligned with its intellectual property structure in such a way that the firm can derive, from the same code tree, an open source community version and a proprietary version. The software's IP modular structure also facilitates the development of complements by distributed and anonymous complementors and simplifies downstream customizations, thus enhancing the platform's attractiveness. We find that SugarCRM implements IP modularity on three different levels of the architectural hierarchy, in some cases down to the source code level. Our study thus extends the concept of IP modularity to comprise the notion of hierarchy levels.