First Look

May 31, 2011

The Institutional Logic Of Great Firms

A new theory by Rosabeth Moss Kanter posits that institutional logic guides great firms to put people and society, not just profit, at the core of their missions. Yes, these companies still want to make money, but they do so by empowering their employees and contributing to the greater good of society. "Rather than viewing organizational changes as new ways to extract more economic value, these firms have created a framework for guiding decisions that makes it legitimate to use social value or human values as explicit criteria," Kanter writes in The Institutional Logic of Great Global Firms.

Do Voters Demand Responsive Governments?

Do voters demand responsive governments? To help answer that question, researchers Shawn Cole, Andrew Healy, and Eric Werker studied how the Indian government provided disaster relief after devastating monsoons, and voter response to those actions. One result: voters rewarded politicians who effectively delivered relief aid during an election cycle, so politicians increased pumped up efforts in campaign years — not optimal policymaking. The results will be published in the paper Do Voters Demand Responsive Governments? Evidence from Indian Disaster Relief in the Journal of Development Economics.

Making Payments With Smartphones

In a case study that echoes recent business news, Paydiant examines issues facing a company that wants to help retailers process electronic payments made over smartphones. Paydiant, whose software requires no new hardware for retailers to process phone-based transactions, is deciding how to bring the product to market. The case will help students understand the difficulties and potential strategies involved in entering a retail environment as a supplier. Just last week Google introduced Google Wallet, a mobile payment service.

— Sean Silverthorne


Do Voters Demand Responsive Governments? Evidence from Indian Disaster Relief


Using rainfall, public relief, and election data from India, we examine how governments respond to adverse shocks and how voters react to these responses. The data show that voters punish the incumbent party for weather events beyond its control. However, fewer voters punish the ruling party when its government responds vigorously to the crisis, indicating that voters reward the government for responding to disasters. We also find evidence suggesting that voters only respond to rainfall and government relief efforts during the year immediately preceding the election. In accordance with these electoral incentives, governments appear to be more generous with disaster relief in election years. These results describe how failures in electoral accountability can lead to suboptimal policy outcomes.

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Earnings and Ratings at Google Answers


I analyze all questions and answers from the inception of the Google Answers service through November 2003, and I find notable trends in answerer behavior: more experienced answerers provide answers with the characteristics askers most value, receiving higher ratings as a result. Answerer earnings increase in experience, consistent with learning on the job. Answerers who focus on particular question categories provide answers of higher quality but earn lower pay per hour (perhaps reflecting a lack of versatility). Answers provided during the business day receive higher payments per hour (a compensating differential for working when outside options are most attractive), but more experienced answerers tend to forego these opportunities.


Stop Stealing the Spotlight: The Perils of Extraverted Leadership

An abstract is unavailable at this time.

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Winning in Emerging Markets: Spotting and Responding to Institutional Voids

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Working Papers

The Institutional Logic of Great Global Firms


Theories of the firm have been dominated by a legacy of ideas from early industrialization that pose zero-sum opposition between capital and labor (or capital and nearly everything else), differentiating the economy from society and often posing irreconcilable conflicts. The search for mathematical models has turned the negotiated order of organizational activities, which necessarily include particularistic elements, into abstract generalizations that favor quantifiable variables. This paper offers another logic, a social or institutional logic, to let practice provoke the creation of new theory. It provides examples that show how social logic guides the practices of widely admired, high-performing companies, and why people and society are not an after-thought to be used or discarded, but core to the purpose and definition of the firm. It builds on in-depth, ongoing global field research on admired companies from four continents, followed in over 20 countries, to derive six propositions about the role of humanistic institutional logic.

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Cases & Course Materials


Jose B. Alvarez, Elizabeth C. Williamson, and James Weber
Harvard Business School Case 511-065

Kevin Laracey, founder of Paydiant, needed to figure out how to launch a payment processing company with a new technology based on smart phones. Consumers had increasingly turned to electronic payment methods such as credit cards and debit cards to make purchases. Retailers, however, felt that major credit and debit card issuers had too much market power which was leading to higher costs for retailers to accept such payment forms. Consumers were increasingly adopting smart phones and using those phones to manage their lives. Market watchers believed that consumers would soon demand to use their smart phones to make purchases. Retailers liked this because it increased competition in the payments industry. Paydiant had developed a software-based product that required no new hardware for retailers and enabled consumers to use their smart phones to make purchases. The company needed to decide how to bring this new product to market. The case also describes the existing payment processing market structure, identifies some of its major players, and introduces some other new entrants into the payment industry.

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Chegg: Textbook Rental Takes Flight

Thomas R. Eisenmann, William A. Sahlman, and Evan W. Richardson
Harvard Business School Case 811-077

In late 2010, Silicon Valley-based Chegg, the leading online college textbook rental company, is scaling rapidly. The case recounts Chegg's history from its origins as a distant competitor to Craigslist in college classified listings through a pivot into textbook rental followed by a period of explosive growth. Resulting challenges in scaling warehouse operations, customer service, and information technology are described, along with efforts to professionalize sourcing/pricing and product management functions. The case closes with questions about how Chegg should respond to the pending transition from printed textbooks to electronic textbooks.

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Braddock Industries, Inc.

William E. Fruhan
Harvard Business School Case 211-061

This case examines the drivers of economic value creation for shareholders and how these drivers are reflected in various incentive compensation programs for management. The case also looks at how the economic performance of business units can be evaluated using measures of economic value creation.

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China Environment Fund: Doing Well by Doing Good

Christopher Marquis and Nancy Dai
Harvard Business School Case 410-142

In early 2010, cleantech investment pioneer Tsing Capital was planning for the China Environment Fund IV and considering how to maintain its commitment to social and environmental practices. Tsing Capital embraced its philosophy of "Doing Well by Doing Good" and developed a proprietary system to manage social and environmental functions throughout the investment process. Some of the specific questions examined in the case are as follows: With a more diversified investor base, how could the firm balance the different expectations of investors and continue to achieve "Doing Well by Doing Good"? Despite the increasing importance of social and environmental practices, they also had a cost for the firm and its portfolio companies. How could the firm most effectively motivate its portfolio companies to actively integrate social and environmental practices with their strategies?

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Inequality in Brazil

Aldo Musacchio
Harvard Business School Case 711-086

This case examines the evolution of inequality in Brazil in the last few years and generates two debates. First, the case discusses inequality and whether it is a problem or not for capitalist societies, in this case Brazil. Second, the case discusses some of the policies the Brazilian government has used to attack poverty and inequality.

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Bling Nation

William A. Sahlman and Liz Kind
Harvard Business School Case 811-029

Bling Nation, a Palo Alto, California startup, was founded in 2007 as a mobile payment service provider that bypassed industry participants such as Visa and MasterCard. Bling Nation partnered with local community banks and merchants in small towns. The banks provided their consumers with Bling Nation "tags"-microchip stickers that could be placed on any mobile phone device. The tags allowed users to make payments directly from their checking accounts and functioned similarly to a debit card. While Bling Nation had already raised $33 million, and its founders were confident of the market potential for mobile payments, they recognized the challenges they faced in scaling their current business model.

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Office of Technology Transfer—Shanghai Institutes for Biological Sciences

Willy Shih, Sen Chai, Kamen Bliznashki, and Courtney Hyland
Harvard Business School Case 611-057

Gordon Zong is trying to teach Chinese universities and research institutes how to do effective technology transfer and IP licensing, but he is trying to do it in an environment with weak property rights and an underdeveloped support infrastructure. As the managing director of the Office of Technology Transfer at the Shanghai Institutes for Biological Sciences, he works with researchers at the forefront of biology and biotech, yet he faces seemingly insurmountable obstacles to getting the technology commercialized within domestic Chinese companies, so he has turned to global multinational pharma companies, for now. The purpose of the case is to help present and future managers at global multinationals who have responsibility for R&D strategy to understand some of the complexities of the Chinese intellectual property environment so that they can build effective participation strategies for their organizations. Understanding the misaligned incentives that result in the production of junk patents and the challenges of patent enforcement, as well as the direction of change, is vital, because as the Chinese system evolves quickly, the implications of those changes will have important commercial consequences.

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Global Strategic Management

Jordan Siegel
Harvard Business School Module Note 711-456

This module note provides introduction to the field of global strategic management/international business.

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Renewing GE: The Africa Project

David A. Thomas and Stephanie J. Creary
Harvard Business School Case 411-093

This case profiles the evolution of General Electric's African American Forum (AAF), an employee affinity group, and its efforts to increase the company's involvement in Africa. The AAF formed in 1991 to help advance GE's recruitment, retention, and development of black employees. By 1995, members of the AAF started asking Jack Welch whether the company was planning to develop business in Africa. After Welch invited the group to conduct due diligence, it was concluded that the timing was not right for GE to make a significant investment in Africa. Yet, when Jeffrey Immelt began attending the AAF Symposia in 2001, the question about GE's involvement in Africa resurfaced. In 2004, Immelt pledged $20 million to fund "The Africa Project" (later renamed, "Developing Health Globally")—a GE philanthropic effort sponsored by the GE Foundation and the AAF to improve healthcare outcomes in Africa.

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