First Look

Working Papers

Corporate Social Responsibility and Access to Finance

Abstract

In this paper, we investigate whether superior performance on corporate social responsibility (CSR) strategies leads to better access to finance. We hypothesize that better access to finance can be attributed to a) reduced agency costs due to enhanced stakeholder engagement and b) reduced informational asymmetry due to increased transparency. Using a large cross-section of firms, we find that firms with better CSR performance face significantly lower capital constraints. Moreover, we provide evidence that both of the hypothesized mechanisms, better stakeholder engagement and transparency around CSR performance, are important in reducing capital constraints. The results are further confirmed using an instrumental variables and a simultaneous equations approach. Finally, we show that the relation is driven by both the social and the environmental dimension of CSR.

Download the paper: http://www.hbs.edu/research/pdf/11-130.pdf

The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance

Abstract

We investigate the effect of a corporate culture of sustainability on multiple facets of corporate behavior and performance outcomes. Using a matched sample of 180 companies, we find that corporations that voluntarily adopted environmental and social policies by 1993-termed as High Sustainability companies-exhibit fundamentally different characteristics from a matched sample of firms that adopted almost none of these policies-termed as Low Sustainability companies. In particular, we find that the boards of directors of these companies are more likely to be responsible for sustainability, and top executive incentives are more likely to be a function of sustainability metrics. Moreover, they are more likely to have organized procedures for stakeholder engagement, to be more long-term oriented, and to exhibit more measurement and disclosure of nonfinancial information. Finally, we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance. The outperformance is stronger in sectors where the customers are individual consumers, companies compete on the basis of brands and reputation, and in sectors where companies' products significantly depend upon extracting large amounts of natural resources.

Download the paper: http://www.hbs.edu/research/pdf/12-035.pdf

The Consequences of Mandatory Corporate Sustainability Reporting

Abstract

We examine the effect of mandatory sustainability reporting on several measures of socially responsible management practices. Using data for 58 countries, we show that after the adoption of mandatory sustainability reporting laws and regulations, the social responsibility of business leaders increases. We also document that both sustainable development and employee training become a higher priority for companies and that corporate governance improves. Furthermore, we find that companies implement more ethical practices, including reducing bribery and corruption, which increases managerial credibility. These effects are larger for countries with stronger law enforcement and more widespread assurance of sustainability reports. We conclude with thoughts about mandatory sustainability and integrated reporting.

Download the paper: http://www.hbs.edu/research/pdf/11-100.pdf

Open Innovation and Organizational Boundaries: The Impact of Task Decomposition and Knowledge Distribution on 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.

Download the paper: http://www.hbs.edu/research/pdf/12-057.pdf

Creating a Venture Ecosystem in Brazil: FINEP's INOVAR Project

Abstract

An abstract is unavailable at this time.

Download the paper: http://www.hbs.edu/research/pdf/12-099.pdf

Mexico's Financial Crisis of 1994-1995

Abstract

This paper explains the causes leading to the Mexican crisis of 1994-1995 (known as "The Tequila Crisis"), and its short- and long-term consequences. It argues that excessive enthusiasm on the part of foreign investors, not based on Mexico's fundamentals, and weak regulation of the banking system built the vulnerabilities that left Mexico exposed to a sudden change in investor appetite for Mexican securities in 1994. Political violence in Mexico and changes in monetary policy in the United States then led to radical changes in investor perceptions of the future of the country and to a balance of payments and banking crisis. The paper then explains how the crisis unraveled and describes the U.S. bailout of the Mexican government in 1995. Since the exchange rate crisis of December of 1994 then translated into a banking crisis in 1995, the chapter ends examining the subsequent development of the Mexican banking system.

Download the paper: http://www.hbs.edu/research/pdf/12-101.pdf

Conflict Policy and Advertising Agency-Client Relations: The Problem of Competing Clients Sharing a Common Agency

Abstract

What restrictions should be placed on advertising agencies with respect to serving accounts or clients that are competitors of one another in order to avoid conflicts in interest? In recent decades, the advertising and marketing services industry has undergone a number of structural changes that forced an ongoing re-examination and modification of traditional norms and policies emphasizing exclusivity in agency-client relationships. A typology of conflicts that have arisen in the United States shows the variety and complexity of contemporary conflicts. Cases of conflicts reported in the trade literature are used to illustrate policy issues as well as the spillover effects and resolution of disputes. To cope with these developments, two significant changes in conflict policies evident in current U.S. practice are identified. First, safeguards to preserve proprietary information that function as organizational, location, and personnel mobility barriers among quasi-autonomous units within a mega-agency or holding company have become an essential component of conflict policies. Subject to the protection against security breaches afforded by safeguards, rival clients may be served by separate organizational units that are under common control and/or ownership. Second, a family of hybrid conflict polices has evolved that feature elements of the split account system long practiced in Japan, augmented by safeguards that serve as partial substitutes for the umbrella prohibition on serving rivals imposed by exclusivity. By relying on safeguards and splitting account assignments in a variety of ways among different organizational units within a given mega-agency or holding company that may also serve rivals (or across different mega-agencies or holding companies), clients exert a measure of control over the access of those agencies to confidential information while also offering them incentives to avoid conflicts of interest. Findings from the existing body of conceptual and empirical research bearing on the sources and consequences of conflicts are reviewed and directions for further research are discussed.

Download the paper: http://www.msi.org/publications/publication.cfm?pub=1983