First Look

March 15, 2011

It's well understood that private web surfing at work is the No. 1 time waster for employees. That's why many employers ban the use of the Internet, at least until after work hours. But new research from Marco Piovesan and colleagues shows the weakness of this strategy. People tend to be less productive and make more mistakes when they've been asked to resist temptation. The alternative for employers? Provide set times for private Internet use, or make sure corporate browsers can't connect to outside sites, according to the working paper "Temptation at Work."

Every organization has technical experts on staff, but not all experts are listened to or have influence at higher levels. To increase expert influence on strategic thinking, researcher Anette Mikes and her team followed the organizational transformation of risk experts in two large UK banks, one of whom became successful, the other not. The results are reported in the paper "From Box-Tickers to Frame-Makers: Transformations in the Roles of Functional Experts."

Finally this week, another working paper explores "The IKEA Effect." When consumers purchase something from IKEA, it is often with the understanding that they will be doing the assembling of the product. Does building it yourself increase the value of the object? "We discuss the implications of the IKEA effect for marketing managers and organizations more generally," write the authors, who include HBS researcher Michael I. Norton.

— Sean Silverthorne


Do Strong Fences Make Strong Neighbors?


Many features of U.S. tax policy towards multinational firms—including the governing principle of capital export neutrality, the byzantine system of expense allocation, and anti-inversion legislation—reflect the intuition that building "strong fences" around the United States advances American interests. This paper examines the interaction of a strong fences policy with the increasingly important global markets for corporate residence, corporate control, and corporate equities. These markets provide opportunities for entrepreneurs, managers, and investors to circumvent a strong fences policy. The paper provides simple descriptive evidence of the growing importance of these markets and considers the implications for U.S. tax policy.

Teams and Team Effectiveness in Health Services Organizations

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Accounting Scholarship That Advances Professional Knowledge and Practice


Recent accounting scholarship has used statistical analysis on asset prices, financial reports and disclosures, laboratory experiments, and surveys of practice. The research has studied the interface among accounting information, capital markets, standard setters, and financial analysts and how managers make accounting choices. But as accounting scholars have focused on understanding how markets and users process accounting data, they have distanced themselves from the accounting process itself. Accounting scholarship has failed to address important measurement and valuation issues that have arisen in the past 40 years of practice. This gap is illustrated with missed opportunities in risk measurement and management and the estimation of the fair value of complex financial securities. The paper encourages accounting scholars to devote more resources to obtaining a fundamental understanding of contemporary and future practice and how analytic tools and contemporary advances in accounting and related disciplines can be deployed to improve the professional practice of accounting.

Whites See Racism as a Zero-Sum Game That They Are Now Losing


Although some have heralded recent political and cultural developments as signaling the arrival of a post-racial era in America, several legal and social controversies regarding "reverse racism" highlight Whites' increasing concern about anti-White bias. We show that this emerging belief reflects Whites' view of racism as a zero-sum game, such that decreases in perceived bias against Blacks over the past six decades are associated with increases in perceived bias against Whites—a relationship not observed in Blacks' perceptions. Moreover, these changes in Whites' conceptions of racism are extreme enough that Whites have now come to view anti-White bias as a bigger societal problem than anti-Black bias.

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Working Papers

Sustainable Cities: Oxymoron or the Shape of the Future?


Two trends are likely to define the 21st century: threats to the sustainability of the natural environment and dramatic increases in urbanization. This paper reviews the goals, business models, and partnerships involved in eight early "ecocity" projects to begin to identify success factors in this emerging industry. Ecocities, for the most part, are viewed as a means of mitigating threats to the natural environment while creating urban living capacity by combining low carbon and resource-efficient development with the use of information and communication technologies (ICT) to better manage complex urban systems.

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Payout Taxes and the Allocation of Investment


When corporate payout is taxed, internal equity (retained earnings) is cheaper than external equity (share issues). If there are no perfect substitutes for equity finance, payout taxes may therefore have an effect on the investment of firms. High taxes will favor investment by firms that can finance internally. Using an international panel with many changes in payout taxes, we show that this prediction holds well. Payout taxes have a large impact on the dynamics of corporate investment and growth. Investment is "locked in" to profitable firms when payout is heavily taxed. Thus, apart from any level effects, payout taxes change the allocation of capital.

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Temptation at Work


To encourage worker productivity, offices prohibit Internet use. Consequently, many employees delay Internet activity to the end of the workday. Recent work in social psychology, however, suggests that using willpower to delay gratification can negatively impact performance. We report data from an experiment where subjects in a Willpower Treatment are asked to resist the temptation to join others in watching a humorous video for 10 minutes. In relation to a baseline treatment that does not require willpower, we show that resisting this temptation detrimentally impacts economic productivity on a subsequent task.

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Box-Tickers to Frame-Makers: Transformations in the Roles of Functional Experts


How do experts increase their influence in organizations? We examine the organizational transformation of risk experts in two large U.K. banks, where we study the dynamics of the risk management function over a period of five years. Our findings indicate that the rising influence of a staff function on strategic decision making combines two interdependent initiatives. First, influential staff functions transform personally communicable, tacit expert knowledge to tool-generated, highly communicable knowledge. Second, the experts avoid detaching themselves completely from the resulting knowledge and maintain a high degree of personal involvement in producing analysis and interpretation, while operating in key decision-making fora. In the first bank ("Saxon Bank"), the risk function was successful in achieving such influence. The risk experts established a tight collaboration with top management, which they employed as a platform for incorporating their qualitative and quantitative measures in central organizational planning, decision making, and accountability mechanisms. We call the experts that achieve such positions of influence "frame-makers." In the second bank ("Anglo Bank"), the parallel existence of two groups of risk experts left a divided risk function incapable of promoting risk mangers towards the position of frame-makers. Instead, we found these two groups of risk experts in less influential roles: one in the role of a "box ticking" function; the other playing a role we call the "ad hoc advisor." Using the two cases we develop a conceptual framework that generalizes the different routes that experts follow in their diverse attempts to gain influence in organizations.

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The Power of Political Voice: Women's Political Representation and Crime in India


Using state-level variation in the timing of political reforms, we find that an increase in female representation in local government induces a large and significant rise in documented crimes against women in India. Our evidence suggests that this increase is good news, as it is driven primarily by greater reporting rather than greater incidence of such crimes. In contrast, we find no increase in crimes against men or gender-neutral crimes. We also examine the effectiveness of alternative forms of political representation: large-scale membership of women in local councils affects crime against them more than their presence in higher-level leadership positions.

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The 'IKEA Effect': When Labor Leads to Love


In a series of studies in which consumers assembled IKEA boxes, folded origami, and built sets of Legos, we demonstrate and investigate the boundary conditions for what we term the "IKEA effect"—the increase in valuation of self-made products. Participants saw their amateurish creations—of both utilitarian and hedonic products—as similar in value to the creations of experts and expected others to share their opinions. Our account suggests that labor leads to increased valuation only when labor results in successful completion of tasks; thus when participants built and then destroyed their creations, or failed to complete them, the IKEA effect dissipated. Finally, we show that labor increases valuation of completed products not just for consumers who profess an interest in "do-it-yourself" projects, but even for those who are relatively uninterested. We discuss the implications of the IKEA effect for marketing managers and organizations more generally.

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Cases & Course Materials

Community Health Workers in Zambia: Incentive Design and Management

Nava Ashraf and Natalie Kindred
Harvard Business School Case 910-030

This case examines the various considerations relevant to selecting and compensating workers in a context where their work involves a pro-social component. This is relevant to not only health care in Zambia, but also to NGO and public sector workers who are both motivated by the mission of their positions and the remuneration. Zambia was facing a healthcare human resource crisis with less than half of the healthcare workers needed to meet health needs. Yet, it was simultaneously burdened by high incidence of diseases such as HIV/AIDS, TB, malaria, malnutrition, and respiratory and diarrheal diseases. The Zambian Ministry of Health (MoH) realized that in the short-term it would be impossible to train the number of doctors and nurses needed to fill this gap. Thus, they were considering incorporating the primarily volunteer community health worker (CHW) force into salaried health workers of the MoH. Given the high level of personal commitment and dedication combined with the proper education and skill needed to be an effective community health worker, the MoH was struggling to identify the best strategy to recruit and retain motivated and capable CHWs.

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Brazil: Leading the BRICs?

Arthur A. Daemmrich and Aldo Musacchio
Harvard Business School Case 711-024

Brazil's new president, Dilma Rousseff, had announced plans to sustain GDP growth above 5% annually and continue the country's leadership role among emerging economies. Between 2003 and 2010, Brazil benefited from strong economic growth and stable policies under the Lula administration. Brazil also increasingly led the BRICs (the fast-growing countries Brazil, Russia, India, and China) in multilateral negotiations, notably in the World Trade Organization's Doha Round. Yet Brazil's actions to enforce a compulsory license of a patented therapy for HIV/AIDS and its victory in a longstanding WTO dispute with the United States over cotton subsidies had created tensions with major trading partners. Entering office in January 2011, Rousseff had the opportunity to outline a new agenda for international trade. Specifically, she had to decide whether to seek completion of the Doha Round, which was in a stalement due to disputes over global intellectual property rules and agricultural subsidies and tariffs, or instead to pursue regional trade agreements in South and Central America. Rousseff also pledged active government involvement in the economy, described in the case as "Brazilian capitalism," but it was unclear whether fiscal expansion coupled to conservative monetary policies would reduce bottlenecks to growth and further temper Brazil's high inequality.

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Rebranding Gallagher

Rohit Deshpande and Keith Chi-ho Wong
Harvard Business School Case 511-098

Steve Tucker, the Deputy CEO of Gallagher Group Limited (GGL), the world's largest electric fence company, was about to present a new branding strategy to the company's senior managers and Bill Gallagher, Jr., CEO. After spending more than 18 months with brand consultants, Tucker devised an umbrella brand strategy that would instill a uniform brand across all three business units: Animal Management Systems, Security Management Systems, and Fuel Pumps, which marketed themselves under the respective brand names of Gallagher, Cardax, Powerfence, and PEC. However, Tucker knew that the unit heads believed the differences in their clienteles, product categories, and distributor relationships made it impractical to adopt one single brand. GGL's overseas distributors had also raised concerns about a uniform brand. In many cases, GGL only owned minority interests in these distributors and retained limited control over their activities.

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Development and Promotion at North Atlantic Hospital

Boris Groysberg, Lisa Leffert, Kerry Herman, and Libby Williams
Harvard Business School Case 411-018

Dr. Elizabeth Harris, Chair of the Department of Anesthesiology (DA) at North Atlantic Hospital (NAH), faces several significant challenges. Staff satisfaction surveys confirmed her assessment that department faculty morale was low, the tenure and promotion system was perceived as opaque and biased towards researchers over clinicians, and overall, faculty felt the organization had little interest in their professional development and well-being. NAH had mandated career conferences across all departments one year prior, and Harris felt this initiative could serve as an important building block for a comprehensive staff performance and development program for the DA. In designing the DA career conference initiative, Harris and her team polled DA faculty representing all promotion tracks and length of service. They also captured best practices from across other NAH divisions and other peer institutions.

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Hollywood in India: Protecting Intellectual Property (A)

Lakshmi Iyer and Namrata Arora
Harvard Business School Case 711-017

In January 2010, Fox Star Studios is preparing to release the Bollywood film "My Name is Khan" in Indian and international markets. What strategies should the company adopt to protect their intellectual property? How much should the company invest in anti-piracy initiatives? Should releases be restricted only to more secure digital screens? Should the company be concerned about the frequent comparisons of the movie with Forrest Gump, in light of several recent cases of Hollywood studios suing Bollywood producers for plagiarism?

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Restaurant Valuation: O'Charley's and AFC

Edward J. Riedl and Jenny Everett
Harvard Business School Case 111-081

This case is a comparative analysis of the strategy, accounting, performance, and valuation for two restaurant chains alternatively having a company-owned versus franchising strategy. It requires students to identify these two different strategies and the related impact on the financial statements, assessment of current performance, choice of comparable firms, and prediction of future performance to perform the valuation.

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