First Look

May 24, 2011

Signing Sooner Rather Than Later

Your word may be your bond, but a signed agreement works better in court. Now new research suggests that just where on the document you sign makes a difference, too. In the paper When to Sign on the Dotted Line? Signing First Makes Ethics Salient and Decreases Dishonest Self-Reports, scholars Lisa L. Shu, Nina Mazar, Francesca Gino, Dan Ariely, and Max H. Bazerman conclude that signing before rather than after having faced the opportunity to cheat, i.e., at the top of a tax return rather than at the bottom, leads to significant reductions in dishonesty.

Prizes Spur Innovation—a Historical Perspective

Researchers seem to agree that prizes can spur innovation, especially by attracting the attention of talented people. Now the result is confirmed with a historical view offered in the paper Inducement Prizes and Innovation, which found a correlation between prize offerings and award winners for technological development offered by the Royal Agricultural Society of England. One insight: Medals can work as well as money to induce innovative thinking, according to the research team of Liam Brunt, Josh Lerner, and Tom Nicholas.

The Evolution Of Customer Loyalty Programs

Schemes to increase customer loyalty come under the microscope of Jose B. Alvarez and Aldo Sesia this week. Their note provides an overview of the origin and evolution of these programs and suggests ways to make them more effective.

— Sean Silverthorne


Clusters and Competitiveness: Porter's Contribution


While clusters have been known to exist at least since the days of Marshall, Michael Porter's work, first in The Competitive Advantage of Nations (Porter, 1990) and then in On Competition (originally published in 1998; updated edition in Porter, 2008), has undoubtedly had a singular role in raising the profile of these ideas to a wider audience. The chapter looks at the origins of Porter's interest in clusters, which turns out to be a natural extension of his earlier work on companies. It identifies the key characteristics of Porter's conceptual thinking on clusters. The discussion explores the particular perspective that Porter has taken, often as a result of his specific background and prior research interests. The chapter then turns to extensions of these core concepts in Porter's more recent work. A central focus of this work has been the creation of broad-based empirical datasets that allow the testing and further development of the original cluster framework. The fourth part then explores the policy implications to be drawn from Porter's work on clusters. Porter develops recommendations on how to leverage clusters as a tool in economic development. While many current cluster programs are broadly consistent with these ideas, some policy practice and much of the academic criticism of policies inspired by Porter's cluster work have taken a different direction, looking instead into ways of creating clusters. The fifth section discusses why Porter's work in this field has had such a profound impact, especially on practitioners. A central reason is that Porter addresses very specific needs of different practitioner constituencies, providing a framework and actionable ideas they could easily relate to. The final section turns to a number of open issues that will determine whether Porter's long-term impact on the practice and thinking in this field will reach its full potential.

From Counting Risk to Making Risk Count: Boundary-Work in Risk Management


For two decades, risk management has been gaining ground in banking. In light of the recent financial crisis, several commentators concluded that the continuing expansion of risk measurement is dysfunctional (Power, 2009; Taleb, 2007). This paper asks whether the expansion of measurement-based risk management in banking is as inevitable and as dangerous as Power and others speculate. Based on two detailed case studies and 53 additional interviews with risk-management staff at five other major banks over 2001-2010, this paper shows that relentless risk measurement is contingent on what I call the ''calculative culture'' (Mikes, 2009a). While the risk functions of some organizations have a culture of quantitative enthusiasm and are dedicated to risk measurement, others, with a culture of quantitative scepticism, take a different path, focusing instead on risk envisionment, aiming to provide top management with alternative future scenarios and with expert opinions on emerging risk issues. In order to explain the dynamics of these alternative plots, I show that risk experts engage in various kinds of boundary-work (Gieryn, 1983, 1999), sometimes to expand and sometimes to limit areas of activity, legitimacy, authority, and responsibility.


Working Papers

Inducement Prizes and Innovation


We examine the effect of prizes on innovation using data on awards for technological development offered by the Royal Agricultural Society of England at annual competitions between 1839 and 1939. We find large effects of the prizes on competitive entry and the quality of contemporaneous patents, especially when prize categories were set by a strict rotation scheme, thereby mitigating the potentially confounding effect that they targeted only "hot" technology sectors. The prizes encouraged competition and medals were particularly effective. The boost to innovation we observe can only be partly explained by the re-direction of existing inventive activity.

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The Globalization of Corporate Environmental Disclosure: Accountability or Greenwashing?


Despite the increase in corporate environmental disclosure, there remains substantial heterogeneity in the extent to which corporations reveal their environmental impacts. To better understand this heterogeneity, we identify key country- and organization-level determinants of corporate environmental disclosure. We focus on institutional factors related to firms' global embeddedness to describe how external environmental pressures emanating from governments and civil society influence corporations' environmental transparency. We also focus on the extent to which corporate environmental disclosure is symbolic and, in particular, what leads corporations to selectively disclose relatively benign environmental impacts to create an impression of transparency while masking their true environmental performance. We hypothesize that key organizational characteristics reflecting visibility, such as size and environmental impact, shape this type of symbolic compliance and that these relationships are moderated by institutional pressures. We test our hypotheses using a novel panel dataset of 4,646 public companies in many industries, headquartered in 46 countries during 2005-2008, when environmental disclosure increased among many global corporations. Controlling for a host of organizational, industry, and national characteristics, we find evidence to support most of our hypothesized relationships. Contributions to understanding the decoupling of globalization processes and how organizations respond to institutional change are discussed.

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When to Sign on the Dotted Line? Signing First Makes Ethics Salient and Decreases Dishonest Self-Reports


Many business and governmental interactions are based upon trust with the assumption that all actors generally comply with social and moral norms. Proof of compliance is typically provided through signature—e.g., at the end of tax returns or insurance policy forms. Yet even when people care about morality and want to be seen as ethical by others, they sometimes transgress when beneficial to their own self-interest, at great cost to economies across the globe. This paper focuses on testing an easy-to-implement method to discourage dishonesty: signing at the beginning rather than at the end of a self-report, as is the current common practice. Using both field and lab experiments, we find that signing before rather than after having faced the opportunity to cheat raises the saliency of ethics and morality and leads to significant reductions in dishonesty.

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Using What We Know: Turning Organizational Knowledge into Team Performance


: In this paper we theorize effects of using the knowledge stored in an organizational repository on performance for teams working in dynamic and challenging conditions. We first examine performance effects of team use, a construct assessed by aggregate individual actions. Next, because mean use, by itself, can obscure meaningful variation in individual use patterns, we investigate how the concentration of use within a team (the extent to which use is limited to a few members versus more evenly distributed within the team) affects performance. Using archival data from several hundred software development projects in an Indian software services firm, we find that knowledge repository use has a positive effect on project efficiency but not on project quality. However, when we examine two moderators, geographic dispersion and task change, that both capture the changing nature of work and create greater opportunity to benefit from knowledge repository use, we find that repository use does offer performance benefits for quality performance (and for efficiency performance in the case of task change). Lastly, concentration of repository use is positively related to project efficiency and negatively related to project quality, and concentration is even more harmful for project quality for geographically dispersed teams. Our findings offer insight for theory and practice into how organizational knowledge resources can aid team performance.

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Measuring Teamwork in Health Care Settings: A Review of Survey Instruments


Objective. To identify, review, and evaluate survey instruments used to assess teamwork, a process critical to delivering quality care, so as to facilitate high quality research on this topic.
Data sources. The ISI Web of Knowledge database, which draws articles from MEDLINE, Social Science Citation Index, and Science Citation Index.
Study design. We conducted a systematic review of articles published before January 2010 to identify survey instruments used to measure teamwork. We evaluated instruments' psychometric properties (e.g., discriminant and content validity) and assessed whether they had been shown to relate to outcomes of interest in peer-reviewed studies. Data extraction. We identified relevant articles using the search terms team, teamwork, work groups, or collaboration, in combination with survey or questionnaire.
Principal findings. We found 58 scales that measured teamwork; 12 of them have been shown to relate to non-self-report outcomes of interest. Dimensions of teamwork measured differed across scales; however, each of the 12 scales assessed some dimension of the quality of social interactions between members. All but one also assessed some dimension of the quality of task-related interactions. Only three scales met all of the criteria for psychometric validity.
Conclusions. Numerous survey instruments exist to measure teamwork. Few have demonstrated all of the psychometric properties recommended for use, and there is inconsistency in conceptualizations of teamwork. We identify several useful measures and suggest that more research is needed to develop and refine measures of teamwork for reliable use by researchers and practitioners/managers.

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Cases & Course Materials

Vodafone Qatar: Building a Telco in the Gulf

Juan Alcacer and Andrew Goodman
Harvard Business School Case 711-414

An abstract is unavailable at this time.

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Product Development at OPOWER

Thomas Eisenmann and Rob Go
Harvard Business School Case 811-075

OPOWER, a software startup that helps utilities engage their customers in ways that reduce energy consumption, is scaling rapidly. The company's new head of product management has designed a system to address a point of constant tension: whether to build custom features in response to new customers' request, even if these custom features entail expensive departures from OPOWER's product roadmap. The system grants the sales department a number of tokens it can "spend" annually on engineering work to build custom features—boosting the odds of signing contracts with new customers. In December 2010, a request for proposal from a very large utility will put the token system to the test, because the customer is demanding a custom feature that would be unusually disruptive to develop.

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Utilis: Designing, Producing, and Selling Rapid Deployment Shelters for a Troubled World

Herman B. Leonard, Daniela Beyersdorfer, and Simon Harrow
Harvard Business School Case 311-096

How can a company that supplies disaster response and humanitarian agencies best handle the intrinsically unpredictable and highly volatile demand for its products? Utilis is a French supplier of rapid-deploy high-end tent solutions for civilian and military uses (such as camps and field hospitals). In 13 years it developed from a start-up garage business into a successful firm of global reach and reputation. In 2010 its founder and CEO Philippe Prévost must decide the product and market strategy for the next phase of development allowing the company to remain competitive in terms of price and cutting edge products. Should they outsource some of their production to Eastern Europe? Market their products to new customers like non-governmental organizations? Diversify into new shelter product areas? So far their small size and nimbleness had allowed the company to thrive-but would their deeper penetration into the market of disaster and emergency response (where contracts were smaller and peaks and troughs in demand larger) still be compatible with their business model?

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Sound Group China: Urban Waste Entrepreneurs

John D. Macomber, Chad M. Carr, and Fan Zhao
Harvard Business School Case 211-086

Private sector entrepreneur in China with advanced solid waste management capability competes with state owned enterprises and also government policies supporting a rival technology. Wen Yibo has used engineering expertise and political savvy to build a major privately held company providing the entire supply chain of water treatment, waste water, and integrated municipal solid waste capabilities. The company's services include engineering, manufacturing, consulting, "engineer, procure construct," "build operate transfer," and other forms of public-private partnership. The handling of municipal solid waste takes up to 50% of the annual budget of many urban areas in the developing world. The ability to use private sector funds and expertise could be critical to urban development. However, state owned enterprises can observe the success of private business and can enter and compete using their own skills, contacts, and inexpensive capital. The government may also be interested in subsidizing incineration over composting as a part of "waste to energy" strategy, even though this is less efficient than generating electricity from a coal or gas plant. The company has to decide whether to stick to its waste management roots or expand into an opportunistic incineration technology with minimal and nominal waste-to-energy benefits.

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Innovation and Growth at Actelion Ltd

Gary P. Pisano, Daniela Beyersdorfer, and Ruth Dittrich
Harvard Business School Case 611-065

: In late 2010, Jean-Paul Clozel, CEO of the Swiss biotech pharmaceuticals firm Actelion, looks back on a successful decade. The small venture that he had started with a few of his scientist colleagues in the late 1990s to discover novel medicine in a research-driven organisation had grown into one of Europe's largest biotech firms by revenues. Their success was mainly founded on their orphan indication drug Tracleer, which Actelion sold and marketed worldwide. However, Tracleer's looming patent expiry in a few years and recent late-stage pipeline setbacks had put the company under pressure from investors. While Clozel was confident in their ability to deliver future drugs that could secure further growing revenue streams, he wondered how to maintain their entrepreneurial culture that he saw as a prerequisite for this—particularly their lean hierarchy and researchers' freedom to follow innovation where it led them—in a company of more than 2,400 people that continued to grow.

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Marlin & Associates and the Sale of Riverview Technologies

Richard S. Ruback and Royce Yudkoff
Harvard Business School Case 211-083

Riverview Technologies was a Stockholm, Sweden-based company that had developed software hedge funds. After spending more than a year in an organized sale process, the winning bidder had become increasingly difficult to work with, and the closing had been substantially delayed. Despite the late stage of the process, the selling shareholders were considering walking away.

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Pitch Your Project!

Thomas Steenburgh
Harvard Business School Exercise 511-116

No matter what you do later in your career, you are going to have to learn how to pitch ideas. Perhaps you will want to convince a venture capitalist to invest in your new business idea. Perhaps you will want to convince your company to develop an innovative product. Perhaps you will want to convince your board of directors that it is worth developing a new market segment. This exercise helps students practice the skill of getting other people interested in their ideas.

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ASAHI Net: Bringing Innovation to Education

Hirotaka Takeuchi
Harvard Business School Case 711-498

ASAHI Net developed a cloud-based platform for higher education institutions to use in Japan and was wondering if that platform can be accepted in the U.S. as well.

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A123 Systems: Power. Safety. Life

Richard H.K. Vietor
Harvard Business School Case 711-066

A123 Systems, the largest manufacturer of lithium ion batteries in North America, is producing and selling batteries for electric vehicles in China and electric buses in Europe and America. It just opened two plants in Michigan, partially funded by a grant from America's stimulus fund. At the same time, the company is expanding its business in large, grid stabilization systems in California, Chile, and New York. The simultaneous pressures of these two businesses, plus dozens of potential deals pending, are testing the company's management skills, cash reserves, and abilities to execute.

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Hermitage's Russian Quandary (A)

Eric Werker, Ray Fisman, and Lauren Weber
Harvard Business School Case 711-054

In June 2007, the offices of Russian hedge fund Hermitage Capital were raided by Moscow police; in the months that followed, Hermitage founder Bill Browder found himself banned from Russia and fending off efforts to expropriate the fund's Russian assets. This case describes the challenges faced by Hermitage in responding to these threats, and more broadly discusses the perils of doing business in a business environment with weak legal and political institutions.

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Hermitage's Russian Quandary (B)

Eric Werker, Ray Fisman, and Lauren Weber
Harvard Business School Supplement 711-055

This supplement was co-authored with Columbia Business School.

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Bridging the GAAPs

Gwen Yu
Harvard Business School Case 111-114

Inconsistencies in accounting treatment across countries are a major obstacle for global equity investment. Adoption of a single accounting standard (IFRS) has been received with much excitement, where apples to apples comparison across countries will become easier. However, adopting a global accounting standard may not necessarily mean that financial reporting in all countries will become standardized. Taking an example from HOLT, a private sector that offers standardized data for global portfolio investment, the case examines i) HOLT's adjustment process for differences in local accounting standards and ii) how IFRS adoption could change HOLT's global valuation framework. The case offers an interesting setting to examine how harmonizing accounting standards can affect global equity valuation.

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