First Look

June 4, 2013

Do Big Devices Make Users More Assertive?

Harvard Business School professor Amy J. C. Cuddy has garnered much attention with research showing that expansive body postures (hands on hips, feet on desk) can trigger physiological changes that boost confidence and lower stress. Now comes evidence that "working on larger devices, which forces people to physically expand, causes users to behave more assertively." Post-doctoral Research Fellow Maarten Bos and Cuddy investigate the potential perils of too much iPhone use in iPosture: The Size of Electronic Consumer Devices Affects Our Behavior.

Curbing An International Currency War

In February of this year, G-20 finance ministers met in Moscow to address speculation that some countries were purposely devaluing their currencies in order to improve their competitiveness in global markets. "Currency Wars," a new case study by by Laura Alfaro and and Hilary White, explores how developing countries are responding to the "expansionist" monetary policies of major central banks.

An American Manager Under Fire In Asia

In the case "Transitions Asia: Managing Acrosss Cultures," authors Roy Y.J. Chua and Dawn Lau illustrate a management culture clash between east and west in China. The conflict is seen through the eyes of the director of a search firm, whose posting of an American middle manager in a family owned garment manufacturing business is causing trouble.

— Sean Silverthorne


  • 2006
  • O'Reilly Media, Inc.

Managing Startups: Best Blog Posts

By: Eisenmann, Tom, ed.

Abstract—Harvard Business School Professor Tom Eisenmann annually compiles the best posts from many blogs on technology startup management, primarily for the benefit of his students. This book makes his latest collection available to the broader entrepreneur community. Divided into 13 areas of focus, the book's contributors explore the metrics you need to run your startup, discuss lean prototyping techniques for hardware, identify costly outsourcing mistakes, provide practical tips on user acquisition, offer branding guidelines, and explain how a choir of angel investors often will sing different parts.

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  • 2006
  • Journal of Economic Behavior & Organization

Making a Difference Matters: Impact Unlocks the Emotional Benefits of Prosocial Spending

By: Aknin, Lara B., Elizabeth W. Dunn, Ashley V. Whillans, Adam M. Grant, and Michael I. Norton

Abstract—When does giving lead to happiness? Here, we present two studies demonstrating that the emotional benefits of spending money on others (prosocial spending) are unleashed when givers are aware of their positive impact. In Study 1, an experiment using real charitable appeals, giving more money to charity led to higher levels of happiness only when participants gave to causes that explained how these funds are used to make a difference in the life of a recipient. In Study 2, participants were asked to reflect upon a time they spent money on themselves or on others in a way that either had a positive impact or had no impact. Participants who recalled a time they spent on others that had a positive impact were happiest. Together, these results suggest that highlighting the impact of prosocial spending can increase the emotional rewards of giving.

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  • 2006
  • ABA Business Law Today

Guidance from ARIN on Legal Aspects of the Transfer of Internet Protocol Numbers

By: Edelman, Benjamin, and Stephen M. Ryan

Abstract—Every device connected to the global Internet needs a numeric identifier, an "Internet Protocol" address ("IP address"). The Internet's continued growth presents a challenge: most IP addresses have already been assigned to networks and organizations, leaving few left for newcomers and growth. In this context, some networks seek to sell the addresses they previously received-sales that can usefully transfer resources to the networks that most need them, but with certain risks that must be handled with appropriate care. We examine the legal basis of applicable rights and identify the circumstances in which such transfers are permitted.

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  • 2006
  • Review of Financial Studies

The Price of Diversifiable Risk in Venture Capital and Private Equity

By: Ewens, Michael, Charles M. Jones, and Matthew Rhodes-Kropf

Abstract—This paper explores the private equity and venture capital (VC) markets and extends the standard principal-agent problem between the investors and venture capitalist to show how it alters the interaction between the venture capitalist and the entrepreneur. Since the investor-VC contract is set before the VC finds any investments, we show that it is the entrepreneur who must compensate the venture capitalist for any extra risk in the project even though it is the investor who requires the VC to hold the risk and even though the entrepreneur holds all of the market power in the model. Furthermore, although perfectly competitive investors expect zero alpha in equilibrium, the nature of the three-way interaction results in a correlation between total risk and investor returns even net of fees. Thus, we show how and why diversifiable risk should be priced in VC deals even though investors are fully diversified. We then take our theory to a unique data set and show that while investors do earn zero alpha on average there is a strong correlation between realized risk and investor returns, exactly as predicted by the theory.

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Abstract—The Cleveland Clinic has long had a reputation for medical excellence. But in 2009 the CEO acknowledged that patients did not think much of their experience there, and he decided to act. Since then the Clinic has leaped to the top tier of patient-satisfaction surveys, and it now draws hospital executives from around the world who want to study its practices. The Clinic's journey also holds lessons for organizations outside health care that must suddenly compete by creating a superior customer experience. The authors, one of whom was critical to steering the hospital's transformation, detail the processes that allowed the Clinic to excel at patient satisfaction without jeopardizing its traditional strengths.

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  • 2006
  • Encyclopedia of Management Theory

Managerial Decision Biases

By: Zhang, Ting, and Max Bazerman

Abstract—No abstract available.

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Working Papers

Do Prices Determine Vertical Integration? Evidence from Trade Policy

By: Alfaro, Laura, Paola Conconi, Harald Fadinger, and Andrew F. Newman

Abstract—What is the relationship between product prices and vertical integration? While the literature has focused on how integration affects prices, this paper shows that prices can affect integration. Many theories in organizational economics and industrial organization posit that integration, while costly, increases productivity. If true, it follows from firms' maximizing behavior that higher prices cause firms to choose more integration. The reason is that at low prices, increases in revenue resulting from enhanced productivity are too small to justify the cost, whereas at higher prices, the revenue benefit exceeds the cost. Trade policy provides a source of exogenous price variation to assess the validity of this prediction: higher tariffs should lead to higher prices and therefore to more integration. We construct firm-level indices of vertical integration for a large set of countries and industries and exploit cross-section and time-series variation in import tariffs to examine their impact on firm boundaries. Our empirical results provide strong support for the view that output prices are a key determinant of vertical integration.

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Abstract—We examined whether incidental body posture, prompted by working on electronic devices of different sizes, affects power-related behaviors. Grounded in research showing that adopting expansive body postures increases psychological power, we hypothesized that working on larger devices, which forces people to physically expand, causes users to behave more assertively. Participants were randomly assigned to interact with one of four electronic devices that varied in size: an iPod Touch, an iPad, a MacBook Pro (laptop computer), or an iMac (desktop computer). As hypothesized, compared to participants working on larger devices (e.g., an iMac), participants who worked on smaller devices (e.g., an iPad) behaved less assertively-waiting longer to interrupt an experimenter who had made them wait, or not interrupting at all.

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Abstract—This paper presents a methodology to study implied cost of capital's (ICC) measurement errors, which are relatively unstudied empirically despite ICCs' popularity as proxies of expected returns. By applying it to the popular implementation of ICCs of Gebhardt, Lee, and Swaminathan (2001) (GLS), I show that the methodology is useful for explaining the variation in GLS measurement errors. I document the first direct empirical evidence that ICC measurement errors can be persistent, can be associated with firms' risk or growth characteristics, and thus confound regression inferences on expected returns. I also show that GLS measurement errors and the spurious correlations they produce are driven not only by analysts' systematic forecast errors but also by functional form assumptions. This finding suggests that correcting for the former alone is unlikely to fully resolve these measurement-error issues. To make robust inferences on expected returns, ICC regressions should be complemented by realized-returns regressions.

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Cases & Course Materials

  • Harvard Business School Case 713-074

Currency Wars

In February 2013, the G-20 finance ministers met in Moscow, Russia to discuss the rising anxieties over a potential international currency war. It was speculated that certain countries were purposely devaluing their currencies in order to improve their competitiveness in global markets. Emerging markets contended that the expansionary monetary policies of the major central banks, such as the U.S. Federal Reserve, European Central Bank, and the Bank of England, were causing significant and detrimental spillover effects, such as currency appreciation, declining exports, and rising inflation, in less developed economies. Conversely, the major central banks insisted that such policies were necessary for reviving economic growth both domestically and internationally. Would these policies successfully create a resurgence of growth? Can expansionary monetary policies be considered "beggar-thy-neighbor" actions by emerging markets? How should developing nations respond?

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  • Harvard Business School Case 413-099

Transitions Asia: Managing Across Cultures

The director of an interim executive search firm, Chee Lung Tham, faced a clash of culture and management styles when his mainland Chinese client threatened to fire the American interim manager that Tham had assigned. The client, Wong Lung, ran a family-owned garment manufacturing business along with his younger brother, as well as his two overseas-educated children. While Wong needed the American manager's technology expertise, his own brother and his team of middle managers were showing resistance to the new changes. Meanwhile, the American manager found himself caught in the web of family and company politics, and completing his assignment without the cooperation of the middle management was impossible. How should Tham approach the conflict and bring all sides into a productive working relationship?

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  • Harvard Business School Case 512-047

Four Products: Predicting Diffusion (2011)

An updated "Four Products" case. This 2011 version includes sliced peanut butter, artificial dirt for thoroughbred race tracks, interactive tombstones, and stride-changing running shoes. These four products form the basis to assess the drivers of new product adoption. In particular, one of the critical tasks in marketing new innovations is predicting demand and rates of diffusion for those products. And while one can speculate on the scope and rate of diffusion for any given product, it's helpful to compare and contrast diffusion across products. Doing so allows one to focus on the drivers or product characteristics that influence product diffusion, making one product a star and another a dog. Specifically, looking across products allows one to pick up on things that get lost in discussing a single product. Note that this case often gets used with HBS No. 505-075, "Note on Innovation Diffusion: Rogers' Five Factors," which can be distributed along with the case or after the case has been taught.

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  • Harvard Business School Case 413-003

Naina Lal Kidwai: Investing in Her Country

This case showcases the 30-year career of Naina Lal Kidwai, chairman of HSBC India, a leading woman business leader globally. It demonstrates how Kidwai spent a lifetime overcoming barriers as a woman in a male-dominated profession and as an Indian in the global marketplace. Now, as opportunities to play a role in the environment are beginning to open up, she has to decide the next direction to take in her career.

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  • Harvard Business School Case 213-102

Bay Partners (A)

In April 2010, Salil Deshpande has recently resigned from Palo Alto, California-based Bay Partners (Bay) where he had been a general partner. Although Deshpande had built a successful track record at the venture firm, he resigned with two other Bay general partners as disagreement about internal economics and governance continued among the Bay's six-member management team. This triggered the "key man" clause in the limited partnership agreement of Bay's most recent fund, Bay XI. The case considers the options that Deshpande and the Bay XI limited partners face as the firm and fund's futures are thrown into doubt.

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  • Harvard Business School Case 213-103

Bay Partners (B)

In December 2012, Salil Deshpande has rejoined Bay Partners (Bay), which had been restructured following the 2010 departures of three of its general partners. Life was good for Deshpande: his firm had distributed roughly $1 billion to its limited partners (LPs) over the past 18 months as four of its portfolio companies filed for IPOs and four more were acquired; several of Bay's exits through acquisitions were from Deshpande's seed investments; Bay's LPs were ecstatic with Bay's turnaround; and the office atmosphere was upbeat and fun. Now was a logical time to begin fundraising for the next fund, Bay XII. Although several Bay XI LPs were encouraging Deshpande to raise a new fund under the Bay Partners' banner, Deshpande wondered if that was realistic, and even desirable, given the firm's tumultuous history over the last seven years. Other Bay XI LPs and some other potential investors were urging Deshpande to raise a smaller, solo fund. Recruiters and venture firms also regularly contacted Deshpande "to see where his head was at."

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This module note on business-government relations introduces students to the state of campaign contributions and lobbying by corporations in the United States. The note develops two hypotheses as to the impact of corporate political engagement: (i) a vehicle to facilitate good government and (ii) an instrument of special-interest capture. The note can be used to generate a discussion on the following issues: (1) In a democratic capitalist society, what is the appropriate role of business in government? (2) When it comes to political contributions, should corporations have the same rights and responsibilities as individuals? The note also describes the various practical choices businesses face on political engagement, including disclosure options and options to engage through trade or ideological associations. This description can be used to encourage business students to develop an aspiration for their companies' political engagement strategies.

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  • Harvard Business School Case 713-055

Persephone's Pomegranate: Crédit Agricole and Emporiki

In 2006 the French bank Crédit Agricole bought the Greek Emporiki bank, for €2.8 billion, at the peak of a bull market for bank takeovers. Six years, a major financial crisis, and €5.2 billion of losses later, in a context of great uncertainty in the European banking sector, what decision should Crédit Agricole take regarding Emporiki? Through the example of this European cross-border acquisition the case looks at the Greek banking system before and during the unprecedented Greek sovereign debt crisis; the efforts of Greece and the main actors of the European financial system to prevent the embattled country from having to exit the Euro zone; and the potential scenarios for Greek banks in mid-2012.

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  • Harvard Business School Case 313-075

Barclays and the LIBOR Scandal

In June of 2012, Barclays plc admitted that it had manipulated LIBOR-a benchmark interest rate that was fundamental to the operation of international financial markets and that was the basis for trillions of dollars of financial transactions. Between 2005 and 2009 Barclays, one of the world's largest and most important banks, manipulated LIBOR to gain profits and/or limit losses from derivative trades. In addition, between 2007 and 2009 the firm had made dishonestly low LIBOR submission rates to dampen market speculation and negative media comments about the firm's viability during the financial crisis. In settling with U.K. and U.S. regulators the firm agreed to pay $450 million in fines. Within a few days of the settlement, Barclays' CEO, Robert Diamond, had resigned under pressure from British regulators. Diamond blamed a small number of employees for the derivative trading related LIBOR rate violations and termed their actions as "reprehensible." As for rigging LIBOR rates to limit market and media speculation of Barclays' financial viability, Diamond denied any personal wrongdoing and argued that, if anything, Barclays was more honest in its LIBOR submissions than other banks-questioning how banks that were so troubled as to later be partly nationalized could appear to borrow at a lower rate than Barclays. This case explains why LIBOR was an essential part of the global financial market, the mechanism used to establish the rate, and what Barclays did wrong. The case allows for an examination of i) the consequences of violating the trust of market participants; ii) cultural and leadership flaws at Barclays; iii) the challenge of effectively competing in a market where systemic, and widely understood, corruption is taking place; iv) the complicity of regulators in perpetuating a corrupt system; and v) what might, or might not, be effective remedies for the systemic flaws in LIBOR.

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