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    First Look: January 20

    First Look

    20 Jan 2015

    Pricing In A Multichannel Environment

    Retailers sometimes use different pricing strategies for their online and offline businesses, which can confuse—let's just call it anger—customers. Should retailers offer to match prices across channels? Pavel Kireyev, Vineet Kumar, and Elie Ofek explore the strategic forces behind self-matching in the paper Match Your Own Price? Self-Matching as a Retailer's Multichannel Pricing Strategy.

    Can Robots Improve Customer Service?

    The new case study Quiet Logistics (A) studies the growth prospects of a startup e-commerce fulfillment company. One distinguishing element of Quiet Logistics is the use of robots, which pick up items from a warehouse and deliver them to workstations—freeing up time for human employees to deliver better customer service. Case readers are asked to ponder growth strategies for the innovative company's future.

    Reorganization Or Liquidation?

    In the working paper Cashing Out: The Rise of M&A in Bankruptcy, the authors examine current trends in M&A activity. "In this paper, we argue that the rise of M&A has blurred traditional distinctions between 'reorganization' and 'liquidation," write researcher Stuart Gilson and colleagues.

    —Sean Silverthorne
    LinkedIn
    Email
     

    Publications

    • January 2015
    • Journal of Economic Behavior & Organization

    Prosocial Norms in the Classroom: The Role of Self-regulation in Following Norms of Giving

    By: Blake, P.R., M. Piovesan, N. Montinari, F. Werneken, and F. Gino

    Abstract—Children who are prosocial in elementary school tend to have higher academic achievement and experience greater acceptance by their peers in adolescence. Despite this positive influence on educational outcomes, it is still unclear why some children are more prosocial than others in school. The current study investigates a possible link between following a prosocial norm and self-regulation. We tested 433 children between 6 and 13 years of age in two variations of the Dictator Game (DG). Children were asked what they should or would give in the game and then played an actual DG. We show that most children hold a common norm for sharing resources, but that some children fail to follow that norm in the actual game. The gap between norm and behavior was correlated with self-regulation skills on a parent-report individual differences measure. Specifically, we show that failure to follow the norm is significantly related to the ability to plan and follow through on a goal and not related to impulsivity, suggesting that some children are poorer at holding the norm in mind and following through on enacting it. We discuss the implications of these results for education and programs that promote social and emotional learning (SEL).

    Publisher's link: http://dx.doi.org.ezp-prod1.hul.harvard.edu/10.1016/j.jebo.2014.10.004

    • January 2015
    • Economic Journal

    Does Management Matter in Schools?

    By: Bloom, Nicholas, Renata Lemos, Raffaella Sadun, and John Van Reenen

    Abstract—We collect data on operations, targets, and human resources management practices in over 1,800 schools educating 15-year-olds in eight countries. Overall, we show that higher management quality is strongly associated with better educational outcomes. The UK, Sweden, Canada, and the U.S. obtain the highest management scores closely followed by Germany, with a gap to Italy, Brazil, and then finally India. We also show that autonomous government schools (i.e., government funded but with substantial independence like UK academies and U.S. charters) have significantly higher management scores than regular government schools and private schools. Almost half of the difference between the management scores of autonomous government schools and regular government schools is accounted for by differences in the principal's leadership and better governance.

    Publisher's link: http://www.people.hbs.edu/rsadun/Management_Schools_November2014.pdf

    • January 2015
    • Harvard Business Review

    The Art of Giving and Receiving Advice

    By: Garvin, David A., and Joshua D. Margolis

    Abstract—The article looks at giving and receiving advice as an element of organizational leadership and managerial ability. It suggests that the skills related to these actions, such as self-awareness and diplomacy, are not innate talents but can be learned. It lists problems that research has shown often occur in the process of seeking or giving advice, including being overconfident about one's own perspective, failing to seek advice from those with different perspectives, and not defining the problem at hand in a clear manner. It offers recommendations for both those seeking and giving advice to make the process as effective as possible.

    Publisher's link: https://hbr.org/2015/01/the-art-of-giving-and-receiving-advice

    • January 2015
    • Journal of Healthcare Management

    Using Time-Driven Activity-Based Costing to Identify Value-Improvement Opportunities in Healthcare

    By: Kaplan, Robert S., Mary L. Witkowski, Megan Abbott, Alexis Guzman, Laurence Higgins, John Meara, Erin Padden

    Abstract—As healthcare providers cope with pricing pressures and increased accountability for performance, they should be rededicating themselves to improving the value they deliver to their patients: better outcomes and lower costs. Time-driven activity-based costing offers the potential for clinicians to redesign their care processes toward that end. This costing approach, however, is new to healthcare and has not yet been systematically implemented and evaluated. This article describes early time-driven activity-based costing work at several leading healthcare organizations in the United States and Europe. It identifies the opportunities they found to improve value for patients and demonstrates how this costing method can serve as the foundation for new bundled payment reimbursement approaches.

    Publisher's link: http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1634452215/fulltextPDF/4F2F96135E4D4D7CPQ/6?accountid=11311

    • January 2015
    • Harvard Business Review

    The Truth about CSR

    By: Kaplan, Robert S., Mary L. Witkowski, Megan Abbott, Alexis Guzman, Laurence Higgins, John Meara, Erin Padden

    Abstract—The article discusses corporate social responsibility (CSR) programs. In the authors' view many of these programs consist of disparate, uncoordinated initiatives that fail to maximize their impact. They recommend a more coherent strategy that divides CSR efforts into three categories including those related to philanthropy, operational effectiveness, and shaping the firm's business model to better create shared value. Consideration is also given to developing metrics for assessing CSR performance.

    Publisher's link: https://hbr.org/2015/01/the-truth-about-csr

     

    Working Papers

    Auditor Lobbying on Accounting Standards

    By: Allen, Abigail M., Karthik Ramanna, and Sugata Roychowdhury

    Abstract—We examine how Big N auditors' changing incentives impact their comment-letter lobbying on U.S. GAAP over the first thirty-four years of the FASB (1973-2006). We examine the influence of auditors' lobbying incentives arising from three basic factors: managing expected litigation and regulatory costs; catering to clients' preferences for flexibility in GAAP; and being conceptually aligned with the FASB, particularly on the use of fair values in accounting. We find evidence that auditor lobbying is driven by prevailing standards of litigation and regulatory scrutiny and by support for fair-value accounting. But we find no evidence that catering to clients' preferences for flexibility in GAAP drives auditor lobbying. Broadly, our paper offers the first large-sample descriptive analysis of the role of Big N auditors in the accounting standard-setting process.

    Download working paper: http://ssrn.com/abstract=2545378

    Cashing Out: The Rise of M&A in Bankruptcy

    By: Gilson, Stuart, Edith Hotchkiss, and Matthew Osborn

    Abstract—The use of M&A in bankruptcy has increased dramatically in recent years, leading to concerns that the Chapter 11 process has shifted toward excessive liquidation of viable firms. In this paper, we argue that the rise of M&A has blurred traditional distinctions between "reorganization" and "liquidation." We examine the drivers of M&A activity, based on factors specific to Chapter 11 as well as more general factors that drive M&A waves for non-distressed firms. M&A in bankruptcy is counter-cyclical and is more likely when the costs of financing a reorganization are greater than financing costs to a potential acquirer. Consistent with a senior creditor liquidation bias, the greater use of secured debt leads to more sales in bankruptcy-but, this result holds only for sales that preserve going concern value. We also show that overall creditor recovery rates are higher, and unsecured creditor recoveries and post-bankruptcy survival rates are not different when bankrupt firms sell businesses as going concerns.

    Download working paper: http://www.hbs.edu/faculty/Publication%20Files/15-057_22238ffa-00d7-4637-bd63-265fdfef9ccc.pdf

    Regulator Leniency and Mispricing in Beneficent Nonprofits

    By: Heese, Jonas, Ranjani Krishnan, and Frank Moers

    Abstract—We posit that nonprofits that provide a greater supply of unprofitable services (beneficent nonprofits) face lenient regulatory enforcement for mispricing in price-regulated markets. Consequently, beneficent nonprofits exploit such regulatory leniency and exhibit higher mispricing. Drawing on organizational legitimacy theory, we argue that both regulators and beneficent nonprofits seek to protect their legitimacy with stakeholders, including those who demand access to unprofitable services. Using data from hospitals, we examine mispricing via "upcoding," which involves misclassifying ailment severity. Archival analysis indicates less stringent regulatory enforcement of upcoding for beneficent nonprofit hospitals, defined as hospitals that provide higher charity care and medical education. After observing regulator leniency, beneficent hospitals demonstrate higher upcoding. Our results suggest that lenient enforcement assists beneficent nonprofits to obtain higher revenues in price-regulated markets.

    Download working paper: http://ssrn.com/abstract=2545972

    Match Your Own Price? Self-Matching as a Retailer's Multichannel Pricing Strategy

    By: Kireyev, Pavel, Vineet Kumar, and Elie Ofek

    Abstract—Multichannel retailing has created several new strategic choices for firms. With respect to pricing, an important decision is whether to offer a "self-matching policy." Self-matching allows a multichannel retailer to offer the lowest of its online and in-store prices to consumers. In practice, we observe considerable heterogeneity in self-matching policies: there are firms that offer to self-match and firms that explicitly state they will not match prices across channels. Using a game-theoretic model, we investigate the strategic forces behind the adoption (or non-adoption) of self-matching across a range of competitive scenarios, including a monopolist, a mixed duopoly comprised of a multichannel retailer competing with a pure e-tailer as well as two competing multichannel retailers. Even though self-matching is likely to reduce a retailer's profits, with some consumers paying the lower price, we uncover two novel mechanisms that can make self-matching profitable in a duopoly setting. Specifically, self-matching can dampen competition, both online and in-store, and its effectiveness in this respect depends on the decision-making stage of various consumers and the heterogeneity of their preference for the online vs. store channels. Surprisingly, self-matching strategies can also be profitable when stores face consumers using smartphones to discover online prices. Our findings provide insights for managers on how and when self-matching can be an effective pricing strategy to embrace.

    Download working paper: http://www.hbs.edu/faculty/Publication%20Files/15-058_9db37061-42bd-492f-96be-5e3cc2473a7c.pdf

    Scrutiny, Norms, and Selective Disclosure: A Global Study of Greenwashing

    By: Marquis, Christopher, and Michael W. Toffel

    Abstract—Under increased pressure to report environmental impacts, some firms selectively disclose relatively benign impacts, creating an impression of transparency while masking their true performance. We identify key company- and country-level factors that, by intensifying scrutiny on firms and diffusing global norms to their headquarters countries, limit firms' use of selective disclosure. We test our hypotheses using a novel panel dataset of 4,750 public companies across many industries and headquartered in 45 countries during the years 2004 to 2007. Results show that firms that are more environmentally damaging, particularly those in countries where they are more exposed to scrutiny and global norms, are less likely to engage in selective disclosure. We discuss contributions to the literature that span institutional theory and strategic management and to the literature on information disclosure.

    Download working paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1836472

    Henry A. Kissinger as Negotiator: Background and Key Accomplishments

    By: Sebenius, James K., and Laurence A. Green

    Abstract—Following a brief summary of Henry A. Kissinger's career, this paper describes three of his most pivotal negotiations: the historic establishment of U.S. diplomatic relations with the People's Republic of China; the easing of geopolitical tension with the Soviet Union, symbolized by the signing of the first Strategic Arms Limitation Treaty (SALT I); and the mediation of the agreement on Sinai disengagement between Egypt and Israel. An appendix lists other important negotiations in which Kissinger played key roles. In a subsequent paper (forthcoming), the authors will examine these and other major events in which Henry Kissinger played leading roles in order to extract their most important insights into the principles and practice of effective negotiation.

    Download working paper: http://ssrn.com/abstract=2532613

     

    Cases & Course Materials

    • Harvard Business School Case 715-006

    Europe, Russia, and the Age of Gas Revolution

    The 2014 Ukraine crisis once again exposed the mutually limiting knot-a web of commercial relationships and oil and gas pipelines-that historically tied the European Union and Russia closely. In this crisis, a familiar conundrum preoccupied minds in the corridors of power in Western capitals: how to compel Russia to respect the Western geopolitical preferences without harming European allies? The answer, as in the past, pointed to the lack of viable short-term solutions and the longer-term need for gaining energy independence without sacrificing energy security in the EU. The case chronicles latest efforts, and unintended consequences, by all-union authorities in Brussels to untie the Russian knot by implanting American inventions in the European soil: liberalized, transparent natural gas markets and shale gas production. Executives of European and Russian energy companies present their views.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/715006-PDF-ENG

    • Harvard Business School Case 515-035

    MasterCard: Driving Financial Inclusion

    MasterCard CEO Ajay Banga was investing significant time and attention to increase financial inclusion among individuals with historically no access to banking or financial services in countries around the world with large underserved populations. The effort included partnerships with governments and banks to issue MasterCard branded debit cards to millions of individuals. Financial inclusion could potentially help these individuals by increasing financial literacy, building credit records, improving savings rates, providing access to loans and other financial products, and, in general, by increasing the economic opportunities for these newly banked consumers. And by adding more customers, MasterCard potentially could also grow its bottom line. Financial inclusion raised questions for MasterCard. Was the management time and attention well spent given the low returns expected from adding millions of mostly very poor customers? What risks might MasterCard encounter-particularly in some countries where citizens resented their government partnering with and providing personal data to a large U.S. company?

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/515035-PDF-ENG

    • Harvard Business School Case 815-058

    OvaScience

    In early April 2012, Michelle Dipp, MD, Ph.D, CEO and co-founder of OvaScience, had just received a buyout offer from PG Ventures, a private equity firm interested in acquiring the innovative fertility treatments company. The company's first promising fertility treatment, Autologous Germ-line Mitochondrial Energy Transfer (AUGMENT), had the potential to improve egg quality, increase the success of IVF cycles, and decrease the incidence of multiple births (i.e., twins, triplets). OvaScience had been in operation since 2011, and AUGMENT had not yet reached the market. Dipp and her partners had high hopes for the success of AUGMENT and the impact the underlying technology could have on millions of infertility cases around the world. How fast might Dipp and her team grow OvaScience? Would they have the resources? Dipp considered the best way to build out OvaScience's business model and whether AUGMENT's potential outweighed the PG Ventures offer.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/815058-PDF-ENG

    • Harvard Business School Case 515-004

    KGFS: A New Approach to Rural Finance

    No abstract available.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/515004-PDF-ENG

    • Harvard Business School Case 514-084

    Vision 2020: Takeda and the Vaccine Business

    In 2014, Yasuchika Hasegawa was orchestrating the transformation of Takeda from a Japanese pharmaceutical company with a global footprint into a global company with a Japanese heritage. A 33-year veteran of Takeda, Hasegawa-san was appointed president of Takeda in 2003 and chief executive in 2009. By 2013, Takeda was in the midst of implementing its new Vision 2020 plan, a strategic plan for the evolving global corporation, which included developing a global vaccine business.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/514084-PDF-ENG

    • Harvard Business School Case 415-031

    Jean-Claude Biver (A): The Re-Emergence of the Swiss Watch Industry

    In the early 1980s, the Swiss watch industry was near collapse after failing to adapt to Japanese competition from battery-powered quartz technology. In 1982, Jean-Claude Biver purchased Blancpain, a watch company that had been out of business since 1961 but had once made mechanical watches for $16,000. After successfully reviving Blancpain, Biver sold the company to Nicolas G. Hayek (chairman of the Swatch Group) for $43 million a decade later. Hayek agreed to have Biver stay on and gave him responsibility to revive the once venerable, but ailing, watch company Omega. Between 1995 and 1999, Biver led another turnaround effort that increased Omega's revenues from $350 million to $900 million. While it was presumed across the industry that Biver would be the next CEO of Swatch Group, in early 2000 Biver began to sense that he might not receive the top position when Hayek retired. At the end of the case, Biver must decide whether he should leave the Swatch Group and retire himself, or possibly start over yet again and take the reins of a small but struggling watch company, Hublot. The case examines the actions that Biver took to transform Blancpain and Omega, and how his broad vision ultimately transformed the entire Swiss watch industry. It presents Biver as a complex leader who at times could be very harsh on his employees, but whose passion and vision engendered fierce loyalty from those who worked with him.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/415031-PDF-ENG

    • Harvard Business School Case 415-032

    Jean-Claude Biver (B): Leading Change at Hublot

    No abstract available

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/415032-PDF-ENG

    • Harvard Business School Case 115-001

    Quiet Logistics (A)

    This two-part case focuses on how to identify and manage strategic uncertainties in an innovative, entrepreneurial start-up company. In the (A) case, students learn about Quiet Logistics, an e-commerce fulfillment company working with high-end apparel retailers such as Bonobos, Gilt Groupe, and Zara. What distinguishes the company from its rivals is its use of Kiva robots, which collect customer items within the warehouse and bring them to the appropriate workstation for employees to package and prepare for shipment. Processing up to 8,000 orders per day, the robots help make Quiet Logistics a highly efficient firm and free its workers to complete additional value-added services such as handwritten thank-you notes. The company has also developed proprietary software to collect data on productivity measures, resulting in 99.99% accuracy in its inventory system and completing orders on-time. At the end of the (A) case, students are asked to list the strategic uncertainties that should be keeping the two co-founders awake at night as they consider growth opportunities for their company.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/115001-PDF-ENG

    • Harvard Business School Case 115-003

    Quiet Logistics (B)

    The one-page (B) case reveals a surprising strategic twist that throws their plans into disarray. Students are asked to figure out how to respond.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/115003-PDF-ENG

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