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    First Look: November 18

    First Look

    18 Nov 2014

    Advertising Versus Personal Selling In Us Presidential Campaigns

    Companies often use hybrid marketing methods to reach consumers, but so do presidential candidates. A new working paper by Doug Chung and Lingling Zhang studies the effectiveness of candidates' use of the "air war" (mass media advertising) and the "ground game" (personal selling through the use of field offices). One finding: Personal selling accounted for the Democratic victories in the 2008 and 2012 elections. The paper is titled, The Air War versus The Ground Game: An Analysis of Multi-Channel Marketing in U.S. Presidential Elections.

    Trends In Funding Innovation

    William R. Kerr and and Ramana Nanda survey recent research to understand how large companies as well as startups finance innovation. "This research strand has been very active over the past five years, generating important new findings, questioning some long-held beliefs, and creating its own puzzles," the authors report in the paper, Funding Innovation.

    How India's Indus Towers Balances Competition And Cooperation

    In today's business environment, one's competitors can often be partners; just look at Apple and Samsung. But balancing those competing interests inside of these organizations can be tricky. The new case study "Indus Towers: From Infancy to Maturity" explores these crosscurrents from the point of view of of the chief executive of Indus Towers, India's largest provider of telecom towers. Indus was formed by three fierce competitors—Bharti Airtel, Vodafone India, and Idea Cellular. But to grow, Indus needs to make independent strategic and tactical decisions while also balancing the operators' interests.

    —Sean Silverthorne
    LinkedIn
    Email
     

    Publications

    • November 2014
    • Wiley Encyclopedia of Management

    Management as a Profession

    By: Khurana, Rakesh, and Eric Baldwin

    Abstract—No abstract available.

    Publisher's link: http://www.wiley.com/WileyCDA/WileyTitle/productCd-1119972515.html

    • November 2014
    • Marketing Science

    Television Advertising and Online Shopping

    By: Liaukonyte, Jura, Thales Teixeira, and Kenneth C. Wilbur

    Abstract—Media multitasking competes with television advertising for consumers' attention, but it also may facilitate immediate and measurable response to some advertisements. This paper explores whether and how television advertising influences online shopping. We construct a massive dataset spanning $3.4 billion in spending by 20 brands, including measures of brands' website traffic and transactions as well as ad content measures for 1,224 commercials. We use a quasi-experimental design to estimate whether and how TV advertising influences changes in online shopping within two-minute pre/post windows of time. We use non-advertising competitors' online shopping in a difference-in-differences approach to measure the same effects in two-hour windows around the time of the ad. The findings indicate that television advertising does influence online shopping and that advertising content plays a key role. Action-focus content increases direct website traffic and sales. Information-focus and emotion-focus ad content actually reduce website traffic while simultaneously increasing purchases, with a net effect on sales that is positive for most brands. These results imply that brands seeking to attract multitaskers' attention and dollars must select their advertising copy carefully.

    Publisher's link: http://www.hbs.edu/faculty/Publication%20Files/Teixeira%20et%20al%20(2014)%20Television%20Advertising%20and%20Online%20Shopping_7d5c54e1-fd1b-4dcc-bd41-06e2978d4f23.pdf

     

    Working Papers

    The Air War versus The Ground Game: An Analysis of Multi-Channel Marketing in U.S. Presidential Elections

    By: Chung, Doug J., and Lingling Zhang

    Abstract—Firms increasingly use both mass-media advertising and targeted personal selling to successfully promote products and brands in the marketplace. In this study, we jointly examine the effect of mass-media advertising and personal selling in the context of U.S. presidential elections, where the former is referred to as the "air war" and the latter the "ground game." Specifically, we look at how different types of advertising―candidates' own ads vs. outside ads―and personal selling―in the form of utilizing field offices―affect voter preferences. Further, we ask how these various campaign activities affect the outcome of elections through their diverse effects on various types of people. We find that personal selling has a stronger effect among partisan voters, while candidates' own advertising is better received by non-partisans. We also find that personal selling accounted for the Democratic victories in the 2008 and 2012 elections and that advertising was critical only in a close election, such as the one in 2004. Interestingly, had the Democrats received more outside advertising in 2004, the election would have ended up in a 269-269 tie. Our findings generate insights on how to allocate resources across and within channels.

    Download working paper: http://www.hbs.edu/faculty/Publication%20Files/15-033_d218ec59-b694-4f4f-ba4e-0e64b54e4c34.pdf

    Financial Development and Technology Diffusion

    By: Comin, Diego, and Ramana Nanda

    Abstract—We examine the extent to which financial market development impacts the diffusion of 16 major technologies, looking across 55 countries, from 1870 to 2000. We find that greater depth in financial markets leads to faster technology diffusion for more capital-intensive technologies, but only in periods closer to the invention of the technology. In fact, we find no differential effect of financial depth on the diffusion of capital-intensive technologies in the late stages of diffusion or in late adopters. Our results are consistent with a view that local financial markets play a critical role in facilitating the process of experimentation that is required for the initial commercialization of technologies. This evidence also points to an important mechanism relating financial market development to technology diffusion and economic growth.

    Download working paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2520551

    Entrepreneurship and Business Groups: An Evolutionary Perspective on the Growth of the Koç Group in Turkey

    By: Coplan, Asli M., and Geoffrey Jones

    Abstract—This working paper examines the origins and development of the Koç Group, which grew to be the largest business group in Turkey. This enterprise was an important actor in the emergence of modern business enterprise in the new state of the Republic of Turkey from the 1920s. After World War II it diversified rapidly, forming part of a cluster of business groups that dominated the Turkish economy alongside state-owned firms. This study shows how the founder of the Group, Vehbi Koç, formulated his business model and analyzes how his firm evolved into a diversified business group. The research supports prevailing explanations of business groups, which identify the role of institutional voids, government policies, and contact capabilities, but it also builds on and extends earlier suggestions in both the management and business history literatures that entrepreneurship needs incorporating more strongly as an explanatory factor. This working paper argues that Koç acted as both a Kirznerian and Schumpeterian entrepreneur to build his business group, both in its formative stages and later in its subsequent growth into a diversified group.

    Download working paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2520237

    Optimal Aggregation of Consumer Ratings: An Application to Yelp.com

    By: Dai, Weijia, Ginger Jin, Jungmin Lee, and Michael Luca

    Abstract—Consumer review websites leverage the wisdom of the crowd, with each product being reviewed many times (some with more than 1,000 reviews). Because of this, the way in which information is aggregated is a central decision faced by consumer review websites. Given a set of reviews, what is the optimal way to construct an average rating? We offer a structural approach to answering this question, allowing for (1) reviewers to vary in stringency and accuracy, (2) reviewers to be influenced by existing reviews, and (3) product quality to change over time. Applying this approach to restaurant reviews from Yelp.com, we construct optimal ratings for all restaurants and compare them to the arithmetic averages displayed by Yelp. Depending on how we interpret the downward trend of reviews within a restaurant, we find 19.1%-41.38% of the simple average ratings are more than 0.15 stars away from optimal ratings, and 5.33%-19.1% are more than 0.25 stars away at the end of our sample period. Moreover, the deviation grows significantly as a restaurant accumulates reviews over time. This suggests that large gains could be made by implementing optimal ratings, especially as Yelp grows. Our algorithm can be flexibly applied to many different review settings.

    Download working paper: http://www.people.hbs.edu/mluca/OptimalAggregation.pdf

    International Trade, Multinational Activity, and Corporate Finance

    By: Foley, C. Fritz, and Kalina Manova

    Abstract—An emerging new literature brings unique ideas from corporate finance to the study of international trade and investment. Insights about differences in the development of financial institutions across countries, the role of financial constraints, and the use of internal capital markets are proving central in understanding international economics. The ability to access financial capital to pay fixed and variable costs affects choices firms make regarding export entry and operations, and, as a consequence, influence aggregate trade patterns. Financial frictions and the use of internal capital markets shape decisions that multinationals make regarding production locations, integration, and corporate governance. This article surveys this recent research with the goal of highlighting the main themes it explores, the key results it establishes, and the leading open questions it raises.

    Download working paper: http://www.nber.org/papers/w20634

    Financing Innovation

    By: Kerr, William R., and Ramana Nanda

    Abstract—We review the recent literature on the financing of innovation, inclusive of large companies and new startups. This research strand has been very active over the past five years, generating important new findings, questioning some long-held beliefs, and creating its own puzzles. Our review outlines the growing body of work that documents a role for debt financing related to innovation. We highlight the new literature on learning and experimentation across multi-stage innovation projects and how this impacts optimal financing design. We further highlight the strong interaction between financing choices for innovation and changing external conditions, especially reduced experimentation costs.

    Download working paper: http://ssrn.com/abstract=2519572

     

    Cases & Course Materials

    • Harvard Business School Case 415-005

    Indus Towers: From Infancy to Maturity

    Indus Towers, the world's largest telecom tower company, is a joint venture between three telecom rivals in India. These rivals-Bharti Airtel, Vodafone India, and Idea Cellular-combined their telecom towers to provide "shared telecom infrastructure" to wireless telecom operators on a nondiscriminatory basis. The CEO has transformed Indus from a struggling startup with a monopolistic mindset into a customer-centric organization. He now wants to grow Indus. To achieve this, however, he needs to reconcile conflicting objectives among Indus's shareholders. All three shareholders are also his customers; often these dual roles engender different perspectives and lead to different requirements. The CEO needs to determine how to convince the board to take a decision that keeps Indus's best interests in mind while balancing the operators' interests.

    Purchase this case:
    https://hbr.org/product/indus-towers-from-infancy-to-maturity/415005-PDF-ENG

    • Harvard Business School Case 814-031

    Homestrings, Inc.: Diaspora-Based Financing and the Crowd Funding of Development

    Homestrings is an online investment platform for overseas diasporas to link financially with their home countries. The founder believes crowd-funding can become a pillar for development, but U.S. regulatory hurdles and resources constraints are substantial. The company is considering targeting non-diaspora investors, introducing new products like insurance or banking, and related expansion strategies.

    Purchase this case:
    https://hbr.org/product/Homestrings--Inc---Diaspo/an/814031-PDF-ENG

    • Harvard Business School Case 315-026

    China's Environmental Challenge

    China faces enormous environmental challenges. This background note looks at the historical, economic, and political origins of the environmental crisis that faces the world's fastest-growing economy.

    Purchase this case:
    https://hbr.org/product/china-s-environmental-challenge/315026-PDF-ENG

    • Harvard Business School Case 615-015

    Netflix: Designing the Netflix Prize (A)

    In 2006, Reed Hastings, CEO of Netflix, was looking for a way to solve Netflix's customer churn problem. Netflix used Cinematch, its proprietary movie recommendation software, to promote individually determined best-fit movies to customers. Hastings determined that a 10% improvement to the Cinematch algorithm would decrease customer churn and increase annual revenue by up to $89 million. However, traditional options for improving the algorithm, such as hiring and training new employees, were time intensive and costly. Hastings decided to improve Netflix's software by crowdsourcing and began planning the Netflix Prize, an open contest searching for a 10% improvement on Cinematch. The case examines the dilemmas Hastings faced as he planned the contest, such as whether to use an existing crowdsourcing platform or create his own, what company information to expose, how to protect customer privacy while making internal datasets public, how to allocate IP, and how to manage the crowd.

    Purchase this case:
    https://hbr.org/product/netflix-designing-the-netflix-prize-a/615015-PDF-ENG

    • Harvard Business School Case 615-025

    Netflix: Designing the Netflix Prize (B)

    This supplemental case follows up on the Netflix Prize contest described in "Netflix: Designing the Netflix Prize (A)." In the (A) case, Netflix CEO Reed Hastings must decide how to organize a crowdsourcing contest to improve the algorithms for Netflix's movie recommendation software. The (B) case follows the contest from the building of the platform in 2006 to the awarding of the highest prize in 2009. The (B) case also considers the aftermath of the contest and the issues of successfully implementing a winning idea from a contest.

    Purchase this case:
    http://hbr.org/search/615025-PDF-ENG

    • Harvard Business School Case 715-009

    Turkcell

    This case centers around the shareholder dispute between three major shareholders of Turkcell, and how its management vied against increasing regulatory intervention and market competition in the absence of a fully functioning board. The battle for control of the Turkish telecom giant led to several years in which the company could not hold annual shareholder meetings, renew its board of directors, or pay dividends and lacked a board-approved operating budget. Nevertheless, it maintained its majority market share and was the only telecom player with positive EBITDA in the market. What were the implications of this dispute for Turkcell's broad ambitions? How would the continuing battle affect management, talent, and the company's financial performance?

    Purchase this case:
    https://hbr.org/product/Turkcell/an/715009-PDF-ENG

    • Harvard Business School Case 615-024

    Pfizer's Centers for Therapeutic Innovation (CTI)

    In 2010, Pfizer established four small research units in New York, Boston, San Francisco, and San Diego located close to several premier Academic Medical Centers (AMCs), or hospitals with adjoining medical schools. The goal of these units was to redesign collaboration with Pfizer and academic medical researchers with the purpose of developing new, innovative drug candidates for testing in patients. Project teams consisted of Pfizer scientists and academics working side-by-side to reduce the time needed to bring a therapeutic drug from the lab to a patient's bedside. This case explores the academic collaboration model developed by Pfizer. What were the strengths and challenges facing this model? How would the model evolve in the future? And how would new, similar collaboration models surfacing at other major pharmaceutical companies pose a threat to the Pfizer model?

    Purchase this case:
    https://hbr.org/product/pfizer-s-centers-for-therapeutic-innovation-cti/615024-PDF-ENG

    • Harvard Business School Case 215-027

    Barclays Bank, 2008

    In the midst of the financial crisis, Barclays (the world's fourth largest bank by assets) is forced by UK regulators to raise more capital. Should it take up the UK government's offer to invest, or take funding from investors from the Middle East? Students may price the two deals to determine which is more expensive, and must decide whether avoiding the constraints of government ownership is worth the extra cost.

    Purchase this case:
    https://hbr.org/product/Barclays-Bank--2008/an/215027-PDF-ENG

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