First Look

June 22, 2010

When Mexico seized its own oil industry from the hands of U.S. interests in 1938, the event entered international business-government lore as a David vs Goliath triumph. A weaker country had, after all, regained control of its most valuable natural resource and Washington had learned its limits. But according to research by HBS professor Noel Maurer, this seemingly simple story is infinitely more complicated. As Maurer concludes based on historical research, some behind-the-scenes maneuvers by key players in the executive branch meant that Mexico ended up holding a less valuable asset than it imagined, since the Mexican oil industry was already in decline for geological (not political) reasons, and U.S. oil companies deliberately provoked the expropriation. Describing his findings in "The Empire Struck Back: The Mexican Oil Expropriation of 1938 Reconsidered" [PDF], Maurer writes, "The U.S. government succeeded using sanctions and the threat of sanctions to force Mexico to compensate—in fact, overcompensate—American companies." Why does corporate culture hold steady despite employee turnover? Eric J. Van den Steen explores the influence of key staff in his article "On the Origin of Shared Beliefs (and Corporate Culture)" in a forthcoming issue of The RAND Journal of Economics. Cases focus on designing, building, and marketing an affordable car for India's middle class ("Tata Nano—The People's Car"); the dramatic interplay in Dubai of financial upheaval, geopolitics, and local history ("Dubai in Crisis"); and business-government issues concerning part of the U.S. Bankruptcy Code ("Chrysler's Sale to Fiat"), among other topics.
— Martha Lagace


Pathologies of Online Display Advertising Marketplaces


Much has been written about online search advertising, where Google enjoys 90% plus market share in numerous countries and a dominant position almost everywhere. That's a remarkable situation, a sea change from Google's late entry in 1998, and a subject of substantial concern for the users, advertisers, and publishers who depend on Google for information, leads, and advertising payments. But I'd like to look at a different troubled online advertising market—one that suffers quite a different set of problems. Display advertising systems place ads-typically, rectangular "banners"—on the majority of popular web sites. Though display ads are widespread, they are also troubled—ignored by many users, priced at levels that fail to adequately support many online publishing businesses, and riddled with complex relationships that hinder accountability.

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Constraints and Entrepreneurship


Financing constraints are one of the biggest concerns impacting potential entrepreneurs around the world. Given the important role that entrepreneurship is believed to play in the process of economic growth, alleviating financing constraints for would-be entrepreneurs is also an important goal for policymakers worldwide. We review two major streams of research examining the relevance of financing constraints for entrepreneurship. We then introduce a framework that provides a unified perspective on these research streams, thereby highlighting some important areas for future research and policy analysis in entrepreneurial finance.

Organizational Designs and Innovation Streams


This article empirically explores the relations between alternative organizational designs and a firm's ability to explore as well as exploit. We operationalize exploitation and exploration in terms of innovation streams—incremental innovation in existing products as well as architectural and/or discontinuous innovation. Based on in-depth, longitudinal data from 13 business units and 22 innovations, we describe the consequences of organization design choices on innovation outcomes as well as the ongoing performance of existing products. We find that ambidextrous organization designs are relatively more effective in executing innovation streams than functional, cross-functional, and spinout designs. Further, transitions to ambidextrous designs are associated with increased innovation outcomes, while shifts away from ambidextrous designs are associated with decreased innovation outcomes. We describe the nature of ambidextrous organizational designs—their characteristics, underlying processes, and boundary conditions. More broadly, we suggest that the locus of integration and degree of structural differentiation together affect a firm's ability to explore and exploit. We suggest that the senior team's ability to attend to and deal with contradictory internal architectures is a crucial determinant of a firm's ability to exploit in the short-term and explore over time.

On the Origin of Shared Beliefs (and Corporate Culture)


This article shows how corporate culture, in the sense of shared beliefs and values, originates (often unintentionally) through screening, self-sorting, and manager-directed joint learning. It shows that such culture will be stronger among more important employees and in older and more successful firms where employees make important decisions and the manager has strong beliefs. It further shows how a manager's beliefs influence culture, how culture persists despite turnover, and why the suggested link between culture and performance may be a case of inverse causality. It finally shows that, from an outsider's perspective, organizations may tend to over-invest in corporate culture.

Going Green in Annual Reports

There is no abstract available at this time.

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Working Papers

The Insurance Industry in Brazil: A Long-term View


This paper surveys the formation and development of the insurance business in Brazil. It describes its origins, from colonial times and the imperial era to recent events. Particular attention is given to regulatory changes, showing how they evolved in response to macroeconomic shocks that affected the Brazilian economy during this period.

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The Mirroring Hypothesis: Theory, Evidence and Exceptions (revised)


The mirroring hypothesis predicts that the organizational patterns of a development project (e.g., communication links, geographic collocation, team and firm co-membership) will correspond to the technical patterns of dependency in the system under development. Scholars in a range of disciplines have argued that mirroring is either necessary or a highly desirable feature of development projects, but evidence pertaining to the hypothesis is widely scattered across fields, research sites, and methodologies. In this paper, we formally define the mirroring hypothesis and review 102 empirical studies spanning three levels of organization: within a single firm, across firms, and in open community-based development projects. The hypothesis was supported in 69% of the cases. Support for the hypothesis was strongest in the within-firm sample, less strong in the across-firm sample, and relatively weak in the open collaborative sample. Based on a detailed analysis of the cases in which the mirroring hypothesis was not supported, we introduce the concept of actionable transparency as a means of achieving coordination without mirroring. We present examples from practice and describe the more complex organizational patterns that emerge when actionable transparency allows designers to "break the mirror."

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The Empire Struck Back: The Mexican Oil Expropriation of 1938 Reconsidered


The Mexican expropriation of 1938 was the first large-scale non-Communist expropriation of foreign-owned natural resource assets. The literature generally makes three assertions: the U.S. government did not fully back the companies, Mexico did not fully compensate them for the value of their assets, and the oil workers benefitted from the change in ownership. This paper presents data and evidence that supports only the first of those assertions, and only to a limited extent: the companies devised political strategies that maneuvered Roosevelt into supporting their interests, and they were more than fully compensated by the Mexican government as a result.

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Cases & Course Materials

Chrysler's Sale to Fiat

C. Fritz Foley, Lena G. Goldberg, and Linnea Meyer
Harvard Business School Case 210-022

This case provides students with an opportunity to analyze the restructuring of Chrysler in the midst of the financial crisis of 2008-2009. It describes how debtors can use section 363 of the U.S. Bankruptcy Code to sell assets quickly. It allows for discussion of who benefits and who loses in such restructurings, and it also raises a variety of policy issues concerning 363 sales and the appropriate role of government entities in restructurings.

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TeamLease: Putting India to Work (Il) Legally

Tarun Khanna and Anjali Raina
Harvard Business School Case 710-402

This case focuses on the growth dilemmas facing Manish Sabharwal, co-founder, TeamLease Services Pvt. Ltd. TeamLease is a human resource outsourcing and temp staffing company located in India, which has grown rapidly from 2002 to 2009. Set in the context of the highly regulated Indian labour market, the case raises the questions of how entrepreneurial leadership and strategy formulation can leverage the opportunities represented by the gaps between what the law says and what the market needs. It provides an opportunity to examine the concepts of power and influence and how they can be created and wielded to catalyze change and build a new industry that is technically illegal.

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Dubai in Crisis

Noel Maurer
Harvard Business School Case 710-061

On November 25, 2009, the small city-state of Dubai shook financial markets across the world when the Dubai World holding companies announced that it would ask its creditors to standstill its debts. After three decades of phenomenal growth, something had gone off the rails with Dubai's development model. What caused the trouble? Was it simply a temporary setback or a sign that the city-state needed to change its business model? Could Dubai maintain its independence from Abu Dhabi in the wake of the bailout? And if the emirate's current model was not sustainable, then how exactly should it change? This case explores all these issues, in light of the Great Recession, the geopolitical context, and Dubai's history.

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Malden Mills (A) (Abridged)

Nitin Nohria and Thomas R. Piper
Harvard Business School Case 410-083

CEO Aaron Feuerstein of Malden Mills decided to pay idled workers after a massive fire at his mill in 1995. Focuses on the decisions made post-fire and the rebuilding process and eventual bankruptcy of the company. Also outlines creditors' struggle to decide whether to lend Feuerstein additional funds to enable him to regain control of the company after emerging from bankruptcy.

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Tata Nano—The People's Car

Krishna G. Palepu, Bharat N. Anand, and Rachna Tahilyani
Harvard Business School Case 710-420

The case explores how Tata Motors, India's largest automobile company, developed the Nano, the world's cheapest car. The case focuses on the translation of Ratan Tata's (chairman of Tata Motors) vision of a safe affordable car for the masses by Ravi Kant, managing director of Tata Motors into the Nano Project. The case raises questions around breaking the price-quality barrier and changing existing internal processes to accommodate revolutionary new ideas. The dilemma of success—Tata Nano was a runaway bestseller—left Tata Motors debating how large a bet they should make on the Nano and what kind of capacity commitment this requires.

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