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    First Look: November 25

    First Look

    25 Nov 2014

    A Global Look At High School Management

    A new study looks at management practices in more than 1,800 schools across eight countries. The United Kingdom receives especially high management scores, overall. India receives low scores. Read "Does Management Matter in Schools" by Nicholas Bloom, Renata Lemos, Raffaella Sadun, and John Van Reenen.

    Best Practices For Rolling Out Primary Education

    Although India scores badly in the aforementioned study, the Indian state of Himachal Pradesh has been singularly successful in rolling out universal primary education. Ashkay Mangla looks at what the state did right in the paper "Bureaucratic Norms and State Capacity in India: Implementing Primary Education in the Himalayan Region," forthcoming in the journal Asian Survey. "Bureaucratic norms are a critical component of state capacity that shape when and how public agencies implement policies effectively on behalf of marginalized citizens," he writes.

    The Workforce Reduction Dilemma

    When it's necessary to reduce your workforce, how do you decide whether to employ layoffs or furloughs? That's one of the questions addressed in the new case "Honeywell and the Great Recession" by Sandra Sucher and Susan J. Winterberg. The case looks back at 2008, when thousands of companies - including Honeywell - were facing a tough economy. —Carmen Nobel

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    Publications

    • November 2014
    • Asian Survey

    Bureaucratic Norms and State Capacity in India: Implementing Primary Education in the Himalayan Region

    By: Mangla, Akshay

    Abstract—Himachal Pradesh has surged ahead of other Indian states in implementing universal primary education. Through a combination of field research methods, this paper connects these achievements to bureaucratic norms, unwritten rules within the state that guide the behavior of public officials and structure their relations with civic agencies outside the state. Bureaucratic norms are a critical component of state capacity that shape when and how public agencies implement policies effectively on behalf of marginalized citizens.

    • November 2014
    • Antitrust Law Journal

    Are Patents Creative or Destructive?

    By: Nicholas, Tom

    Abstract—Current debate over patent aggregation has led to renewed interest in the long-standing question concerning whether patents are a creative or a destructive influence on the process of technological development. In this paper I examine the basic patent tradeoff between incentives and monopoly distortions in light of recent contributions to the literature. I outline where patents can function effectively, where they can be damaging, and where additional complementary mechanisms to spur innovation may be appropriate.

    Publisher's link: http://www.people.hbs.edu/tnicholas/patents_creative_destructive.pdf

     

    Working Papers

    Does Management Matter in Schools

    By: Bloom, Nicholas, Renata Lemos, Raffaella Sadun, and John Van Reenen

    Abstract—We collect data on operations, targets, and human resources management practices in over 1,800 schools educating 15-year-olds in eight countries. Overall, we show that higher management quality is strongly associated with better educational outcomes. The UK, Sweden, Canada, and the U.S. obtain the highest management scores closely followed by Germany, with a gap to Italy, Brazil, and then finally India. We also show that autonomous government schools (i.e., government funded but with substantial independence like UK academies and U.S. charters) have significantly higher management scores than regular government schools and private schools. Almost half of the difference between the management scores of autonomous government schools and regular government schools is accounted for by differences in leadership of the principal and better governance.

    Download working paper: http://www.nber.org/papers/w20667

    Multi-Sided Platforms

    By: Hagiu, Andrei, and Julian Wright

    Abstract—We study the economic tradeoffs that drive organizations to position themselves closer to or further away from a multi-sided platform (MSP) business model, relative to three traditional alternatives: vertically integrated firms, resellers, or input suppliers. These tradeoffs lead to a comprehensive discussion of the defining features of MSPs. The formal model we develop focuses on the MSP vs. vertical integration choice, which we interpret in the context of professional services. A key tradeoff emerges between the need to motivate observable effort by professionals (best achieved by a MSP) and the need to coordinate decisions that generate spillovers across professionals (best achieved by a vertical integrated firm). We show how this baseline tradeoff is impacted by the nature of contracts available to the vertically integrated firm and the MSP, and whether professionals hold private information.

    Download working paper: http://www.hbs.edu/faculty/Publication%20Files/15-037_4d9f8cf9-28b6-482e-9c18-0422d4553c8e.pdf

    The Search for Benchmarks: When Do Crowds Provide Wisdom?

    By: Lee, Charles M.C., Paul Ma, and Charles C.Y. Wang

    Abstract—We compare the performance of a comprehensive set of alternative peer identification schemes used in economic benchmarking. Our results show the peer firms identified from aggregation of informed agents' revealed choices in Lee, Ma, and Wang (2014) perform best, followed by peers with the highest overlap in analyst coverage, in explaining cross-sectional variations in base firms' out-of-sample (a) stock returns, (b) valuation multiples, (c) growth rates, (d) R&D expenditures, (e) leverage, and (f) profitability ratios. Conversely, peer firms identified by Google and Yahoo Finance, as well as product market competitors gleaned from 10-K disclosures, turned in consistently worse performances. We contextualize these results in a simple model that predicts when information aggregation across heterogeneously informed individuals is likely to lead to improvements in dealing with the problem of economic benchmarking.

    Download working paper: http://ssrn.com/abstract=2517496

    Scale and Innovation During Two U.S. Breakthrough Eras

    By: Nicholas, Tom

    Abstract—The effect of scale on innovation is central to traditional endogenous growth theory and to new theoretical approaches that focus on variability in innovation outcomes within the firm size distribution. Using new data on 11,514 U.S. R&D firms active during the interwar and post-WWII periods, this paper examines long-run effects. Although the level and quality of innovation scaled strongly with firm size, innovation novelty was considerably more invariant to firm size across both breakthrough eras. While there is some evidence of firm-level heterogeneity as a determinant of the scale effect, the new data highlight the importance of variability in the nature of technological discovery.

    Download working paper: http://www.hbs.edu/faculty/Publication%20Files/15-038_54e189cf-0289-4cfc-b0da-e29552016f3b.pdf

    Seesaws and Social Security Benefits Indexing

    By: Weinzierl, Matthew

    Abstract—The price indexation of Social Security benefit payments has emerged in recent years as a flashpoint of debate in the United States. I characterize the direct effects that changes in that price index would have on retirees who differ in their initial wealth at retirement and mortality rates after retirement. I propose a simple but flexible theoretical framework that converts benefits reform first into changes to retirees' consumption paths and then into a net effect on social welfare. I calibrate that framework using recently produced data on Social Security beneficiaries by lifetime income decile and both existing and new survey evidence on the normative priorities Americans have for Social Security. The results suggest that the value retirees place on protection against longevity risk is an important caveat to the widespread enthusiasm for a switch to a slower-growing price index such as the chained CPI-U.

    Download working paper: http://ssrn.com/abstract=2523601

     

    Cases & Course Materials

    • Harvard Business School Case 815-047

    Venture Capital at the Harvard Management Company in Historical Perspective

    The compromise between capital preservation and growth has always been central to the performance of the Harvard endowment. Setting an institutional structure for effectively governing this compromise became especially important when the Harvard Management Company (HMC) began operating in July of 1974. HMC's investments in venture capital, which began within a decade, created tensions around risk-return tradeoffs. HMC grappled with issues surrounding short-term versus long-term investment payoffs, the proportion of the portfolio that should be allocated to venture capital, and the most appropriate investment form-direct investing in entrepreneurial startups, later stage businesses, or outsourcing this function and investing in funds. Such decisions would matter from the perspective of generations of students and faculty who depended on HMC maximizing returns and getting the balance of the Harvard portfolio right.

    Purchase this case:
    https://hbr.org/product/venture-capital-at-the-harvard-management-company-in-historical-perspective/815047-PDF-ENG

    • Harvard Business School Case 415-021

    McKinsey & Co.-Protecting Its Reputation (A)

    On Tuesday, March 15, 2011, all 1,200 global Partners of McKinsey & Co. gathered at the Gaylord National Hotel & Convention Center near Washington, D.C., for their annual Partners' conference. The atmosphere was tense as Partners, in addition to their normal agenda, discussed the Galleon Group insider-trading trial and the recent allegations against the Firm's former Managing Director, Rajat Gupta. Three months earlier Senior Partner, Anil Kumar, pled guilty to providing confidential information about McKinsey clients he served to Galleon Group founder Raj Rajaratnam. The McKinsey Partners were shocked and dismayed by the actions of Kumar, as well as the recent allegations against Gupta and were closely monitoring the situation. Could a former Managing Director of their Firm have conspired to enable insider trading? And if so, what did that mean for the future of the Firm?

    Purchase this case:
    https://hbr.org/product/mckinsey-co-protecting-its-reputation-a/415021-PDF-ENG

    • Harvard Business School Case 315-022

    Honeywell and the Great Recession (A)

    CEO Dave Cote spent six years turning around an ailing Honeywell, and in 2008 Cote and his team face a new challenge: how to respond to the Great Recession. Cote does not want to give up the gains he made in transforming and unifying Honeywell. With a falloff in demand, Cote and the team must decide how to enact spending cuts in all parts of the business. They face choices in whether to employ layoffs or furloughs (unpaid leaves) for any needed workforce reductions, and whether to enact hiring freezes and other cost-saving changes to employee and executive compensation programs and benefits. Each of these choices is hard, and together they may derail the company's momentum if not handled carefully.

    Purchase this case:
    https://hbr.org/product/honeywell-and-the-great-recession-a/315022-PDF-ENG

    • Harvard Business School Case 515-037

    Managing Multi-Media Audiences at WHDH (Boston)

    WHDH's Channel 7 News rose to the #1 position in Boston-area news broadcasting through its embrace of an innovative format and for affiliating with NBC. Since the early 2000s, however, other news programs had copied their format, and young audiences had begun to use the Internet to get their news, dramatically cutting ratings and ad revenue. Station owner Edmund Ansin and general manager Chris Wayland faced a choice of whether to use the TV news to push viewers to the station's website and monetize online, or use an online presence to build loyalty to Channel 7 and thus drive viewers to TV.

    Purchase this case:
    https://hbr.org/product/managing-multi-media-audiences-at-whdh-boston/515037-PDF-ENG

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