Publications
Did Increased Competition Affect Credit Ratings?
| Authors: | Bo Becker and Todd Milbourn |
|---|---|
| Publication: | Journal of Financial Economics (forthcoming) |
Abstract
The credit rating industry has historically been dominated by just two agencies, Moody's and S&P, leading to longstanding legislative and regulatory calls for increased competition. The material entry of a third rating agency (Fitch) to the competitive landscape offers a unique experiment to empirically examine how, in fact, increased competition affects the credit ratings market. Increased competition from Fitch coincides with lower quality ratings from the incumbents: rating levels went up, the correlation between ratings and market-implied yields fell, and the ability of ratings to predict default deteriorated. We offer several possible explanations for these findings that are linked to existing theories.
Which of These People Is Your Future CEO?
| Authors: | Boris Groysberg, Andrew Hill, and Toby Johnson |
|---|---|
| Publication: | Business Review 88, no. 11 (November 2010) |
Abstract
Americans have long believed that U.S. military officers—trained for high-stakes positions, resilience, and mental agility—make excellent CEOs. That belief is sound, but the authors' analysis of the performance of 45 companies led by CEOs with military experience revealed differences in how the branches (Army, Navy, Air Force, Marine Corps) prepare leaders for business. Those differences reflect the trade-off between flexibility and process that each branch of the armed services must make. Army and Marine Corps officers operate in an inherently uncertain environment. They define the mission but then give subordinates the flexibility to adjust to realities on the ground. This leadership experience tends to turn out business executives who excel in small firms, where they can set a goal and then empower others to work toward it. Navy and Air Force officers, who operate expensive, complex systems, such as submarines and aircraft carriers, are trained to follow processes to the letter, because even small deviations can have large consequences. In corporations, these leaders excel in regulated industries and in firms that take a process approach to innovation. The larger lesson that the military can offer the business world is that fit matters. Different circumstances demand different leadership skills. Hire the person who fits the job.
Read the paper: http://hbr.org/2010/11/which-of-these-people-is-your-future-ceo/ar/1
Are Lagging Regions Catching Up with Leading Regions?
| Authors: | Lakshmi Iyer, Ejaz Ghani, and Saurabh Mishra |
|---|---|
| Publication: | In The Poor Half Billion in South Asia, edited by Ejaz Ghani. Oxford University Press, 2010 |
An abstract is unavailable at this time.
Purchase the book: http://www.oup.co.in/search_detail.php?id=145499
Is Decentralization Helping the Lagging Regions?
| Authors: | Lakshmi Iyer, Ejaz Ghani, and Saurabh Mishra |
|---|---|
| Publication: | In The Poor Half Billion in South Asia, edited by Ejaz Ghani. Oxford University Press, 2010 |
An abstract is unavailable at this time.
Purchase the book: http://www.oup.co.in/search_detail.php?id=145499
Capitalizing on the Underdog Effect
| Authors: | Anat Keinan, Jill Avery, and Neeru Paharia |
|---|---|
| Publication: | Harvard Business Review 88, no. 11 (November 2010) |
Abstract
This article presents the results of a study that investigated the use of the underdog effect in marketing. The idea of triumphing over disadvantages by impassioned determination is said to be a powerfully positive image, which can lead consumers to choose a brand over its larger rivals. The results of research on this effect are presented, and exceptions to the rule are noted.
Read the paper: http://hbr.org/2010/11/capitalizing-on-the-underdog-effect/ar/1
Wealth and Jobs: The Broken Link
| Author: | Nitin Nohria |
|---|---|
| Publication: | Harvard Business Review 88, no. 11 (November 2010) |
Abstract
This article discusses the weakening connections between business growth and job creation. The industrial economy of the 20th century ensured that growing firms would need to add workers, but the increasingly globalized and information-based economy of the early 21st century makes it possible for businesses to increase profits without adding significant numbers of employees.
Read the paper: http://hbr.org/2010/11/column-wealth-and-jobs-the-broken-link/ar/1
Stress-Test Your Strategy: The 7 Questions to Ask
| Author: | Robert Simons |
|---|---|
| Publication: | Harvard Business Review 88, no. 11 (November 2010) |
Abstract
An economic downturn can quickly expose the shortcomings of your business strategy. But can you identify its weak points in good times as well? And can you focus on those weak points that really matter? I identify seven questions all executives should ask in order to ensure their strategies' success. Have you identified your primary customer? Decided whether shareholders, employees, or customers come first? Narrowed down which performance variables to track? Have you set creative boundaries? Are you generating creative tension? Are you promoting cooperation among your employees? And at the end of the day (and in the middle of the night), are you thinking about the right issues as you ponder how the future will change your business? The answers to these questions can be tough, and their full implications are not always immediately clear. I provide a real-world guide to the various alternatives and their risks, illustrating my points with examples from companies including Home Depot, McDonald's, Merck, and Pfizer. There is no magic bullet that can target the pitfalls of your business strategy, but you must engage in ongoing, face-to-face dialogue with those around you concerning emerging data, unspoken assumptions, difficult choices, and, ultimately, action plans. You and they must be able to give clear, consistent answers to the seven questions if you want to be sure that your strategy is firmly on track.
Read the paper: http://hbr.org/2010/11/stress-test-your-strategy-the-7-questions-to-ask/ar/1
A New Era for Raiders
| Author: | Guhan Subramanian |
|---|---|
| Publication: | Harvard Business Review 88, no. 11 (November 2010) |
Abstract
The article presents information on corporate methods of preventing hostile takeovers by corporate raiders, such as the poison pill strategy. It is noted that some of these techniques have become less popular and effective. An argument is presented that Section 203 of the corporate code of Delaware, which has been in force since 1988, could be overturned, which would further reduce antitakeover protections for the majority of U.S. firms.
Read the paper: http://hbr.org/2010/11/a-new-era-for-raiders/ar/1
Working Papers
The Profits of Power: Commercial Realpolitik in Europe and Eurasia
| Author: | Rawi Abdelal |
|---|
Abstract
Old-style realpolitik—bilateral, sentiment-free, and organized by great powers—has returned to Europe, thereby wreaking havoc on traditions of solidarism and multilateralism in the European Union. The renaissance of the Russian state and the rise of Gazprom, Russia's natural gas monopoly, have produced patterns of international politics that seemed almost inconceivable just a few years ago. Three of Europe's major powers—France, Germany, and Italy-have cultivated bilateral energy relations with Russia at the expense of a common stance on the continent's dependence on Russian gas, and much to dismay of other EU members. This pattern of international relations carries profound implications for theory and practice. I argue that the obvious theoretical conclusion and conventional practical understanding of these politics are both wrong. The roots of this realpolitik cannot be found in realist theory. Europe's realpolitik has, instead, fundamentally commercial and ideational origins. Firms have literally conducted this realpolitik. The empirical puzzles presented in this paper imply a theoretical challenge for international political economy, which has, as a field, failed to understand deeply how firms work and what kinds of roles they have come to play in contemporary international relations. In this paper I propose some theoretical foundations for a better understanding of commercial realpolitik: great-power politics based on the profit motives and shared ideas of firms.
Download the paper: http://www.hbs.edu/research/pdf/11-028.pdf
The New Face of Chinese Industrial Policy: Making Sense of Anti-Dumping Cases in the Petrochemical and Steel Industries
| Authors: | Regina Abrami and Yu Zheng |
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Abstract
Why have China's petrochemical and steel industries behaved so differently in seeking trade protection through antidumping measures? We argue that the patterning of antidumping actions is best explained in terms of the political economy of economic restructuring in pillar industries and its effect on industry structures. In the petrochemical industry, the shift toward greater horizontal consolidation and vertical integration reduces the collective action problems associated with antidumping petitions among upstream companies. It also weakens downstream companies lobbying in favor of the general protection of highly integrated conglomerates. In the steel industry, by contrast, national industrial policy in the absence of exogenous economic shocks fails to weaken local state interests sufficiently. Fragmented upstream and downstream channels instead persist, with strong odds against upstream suppliers waging a successful defense of material interests.
Download the paper: http://www.hbs.edu/research/pdf/11-042.pdf
Growth through Heterogeneous Innovations
| Authors: | Ufuk Akcigit and William R. Kerr |
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Abstract
We study how exploration versus exploitation innovations impact economic growth through a tractable endogenous growth framework that contains multiple innovation sizes, multi-product firms, and entry/exit. Firms invest in exploration R&D to acquire new product lines and exploitation R&D to improve their existing product lines. We model and show empirically that exploration R&D does not scale as strongly with firm size as exploitation R&D. The resulting framework conforms to many regularities regarding innovation and growth differences across the firm size distribution. We also incorporate patent citations into our theoretical framework. The framework generates a simple test using patent citations that indicates that entrants and small firms have relatively higher growth spillover effects.
Download the paper: http://www.hbs.edu/research/pdf/11-044.pdf
Creating Leaders: An Ontological Model
| Authors: | Werner Erhard, Michael C. Jensen, and Kari L. Granger |
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Abstract
The sole objective of our ontological approach to creating leaders is to leave students actually being leaders and exercising leadership effectively as their natural self-expression. By "natural self-expression" we mean a way of being and acting in any leadership situation that is a spontaneous and intuitive effective response to what one is dealing with. In creating leaders we employ the ontological discipline (from the Latin ontologia "science of being," see Heidegger, 1927). The ontological model of leader and leadership opens up and reveals the actual nature of being when one is being a leader and opens up and reveals the source of one's actions when exercising leadership. And ontology's associated phenomenological methodology provides actionable access to what has been opened up. The being of being a leader and the actions of the effective exercise of leadership can be accessed, researched, and taught either: 1) as being and action are observed and commented on "from the stands," specifically as these are observed by someone, and then described, interpreted, and explained (third-person theory of) or 2) as being and action are actually experienced "on the court," specifically as these are actually lived (real-time first-person experience of). As a formal discipline, the "on the court" method of accessing being and action (that is, as being and action are actually lived) is named phenomenology. In short, an epistemological mastery of a subject leaves one knowing. An ontological mastery of a subject leaves one being. Of course the students themselves do not need to study ontology; they only require the access to being and the source of action that is provided by the ontological perspective. And, they don't need to study phenomenology; they only need to be provided with the actionable pathway to the being of being a leader and the actions of effective leadership made available by the phenomenological methodology.
Download the paper: http://ssrn.com/abstract=1681682
CREATING LEADERS WORKSHOP: Mastering the Principles and Effective Delivery of 'The Ontological Leadership Course' (PDF File of PowerPoint Slides)
| Authors: | Werner Erhard, Michael C. Jensen, Kari L. Granger, and Joseph J. DiMaggio |
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Abstract
This workshop is designed to support participants in gaining mastery in the delivery of our new course: "Being A Leader and the Effective Exercise of Leadership: An Ontological Model." The workshop was delivered at the U.S. Air Force Academy (July 13-16, 2010) and was sponsored by the Kauffman Foundation, the Gruter Foundation, the U.S. Air Force Academy, and the instructors. The workshop is for scholars who are graduates of our course, "Being a Leader and the Effective Exercise of Leadership: An Ontological Model," who are now interested in teaching the course at their respective institutions.
Workshop objectives:
1. Provide participants access to the principles underlying the Ontological Leadership Course.
2. Empower and enable participants to expand their capacity to effectively deliver the Ontological Leadership Course.
3. Provide participants the opportunity to ongoingly collaborate in their delivery of the Ontological Leadership Course.
4. Provide participants an opportunity to create a community of scholars, educators, and practitioners to advance the Ontological Leadership Project.
5. Inquire into the next research frontier for the science of leadership.
The workshop aims to equip and engage scholars and educators to deliver a high-impact transformative leadership course creating leaders ready to meet the global demands of the 21st century. Workshop participants included 41 scholars and administrators from North America and Europe from various academic institutions, including the U.S. Air Force Academy, business schools, medical schools, law schools, military institutions, and research centers. This workshop is intended to serve as a catalyst for global leadership development at the highest levels of international policy, business, academy, governance, development, and security.
Download the paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1638429
Accounting Scholarship That Advances Professional Knowledge and Practice
| Author: | Robert S. Kaplan |
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Abstract
Recent accounting scholarship has used statistical analysis on asset prices, financial reports and disclosures, laboratory experiments, and surveys of practice. The research has studied the interface among accounting information, capital markets, standard setters, and financial analysts and how managers make accounting choices. But as accounting scholars have focused on understanding how markets and users process accounting data, they have distanced themselves from the accounting process itself. Accounting scholarship has failed to address important measurement and valuation issues that have arisen in the past 40 years of practice. This gap is illustrated with missed opportunities in risk measurement and management and the estimation of the fair value of complex financial securities. The paper encourages accounting scholars to devote more resources in order to obtain a fundamental understanding of contemporary and future practice and how analytic tools and contemporary advances in accounting and related disciplines can be deployed to improve the professional practice of accounting.
Download the paper: http://www.hbs.edu/research/pdf/11-043.pdf
Cases & Course Materials
Household Goods for the U.S. Base of the Pyramid
Michael Chu and Charles Smithgall
Harvard Business School Case 311-047
With $2.5 billion system-wide revenues, Aaron's, a major rent-to-own supplier to the U.S. base of the pyramid, continues to grow in the recession, but CEO R.C. Loudermilk, Jr. wonders how long the company can sustain the fast growth rate of its past. Founded in 1955, and publicly listed since 1982, Aaron's success has paralleled the emergence of the rent-to-own industry as a major channel for the lower income U.S. population to access durable household goods. In this space, Aaron has only one other large national rival, Rent-A-Center. As he faces Aaron's future growth, Loudermilk must consider continuing with the basic business model, follow his competitor into expanding the product line, or tap into underserved foreign markets. At the same time, the entire rent-to-own industry in the U.S. is coming under attack by consumer advocates and politicians as the nation continues to battle a deep economic crisis.
Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/311047-PDF-ENG
Taj Hotels, Resorts and Palaces
Rohit Deshpandé and Mona Srivastava
Harvard Business School Case 511-039
The Taj Hotels, Palaces, and Resorts introduced a new brand architecture to counter lack of differentiation and confused positioning of its mixed bag of brands. After launching an economy and an upscale brand, it dithered over the launch of its upper upscale and luxury brands. The case illustrates the marketing and organizational challenges of a hybrid brand extension strategy that lies in between a "house of brands" and a "branded house."
Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/511039-PDF-ENG
Note on International Trade Finance
C. Fritz Foley, Matthew Johnson, and David Lane
Harvard Business School Note 211-007
This note provides an introduction to the financing terms and payment arrangements that support international trade. It describes the principal instruments of trade finance, the limited evidence on their relative use, and the international trade dispute resolution mechanisms that form the backdrop against which traders select financing terms.
Purchase this note:
http://cb.hbsp.harvard.edu/cb/product/211007-PDF-ENG
Salud Digna: Dignified Health for Everyone
Allen Grossman and Regina Garcia-Cuellar
Harvard Business School Case 311-051
Hugo Moreno, CEO of Salud Digna, was considering his growth options for the next three years. Would becoming a for-profit with access to greater capital be the best strategy or would this cause the organization to lose its social mission? Salud Digna provided diagnostic medical tests to the poor, had experienced rapid growth, and was financially self-sufficient. Moreno was determined that the organization be as well managed as any company in Mexico.
Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/311051-PDF-ENG
Capital for Enterprise UK: Bridging the SME Early-Stage Finance Gap
Josh Lerner, Eli Talmor, Ananth Vyas Bhimavarapu, and Thibaud Simphal
Harvard Business School Case 811-027
The CEO of the company set up to manage a British government effort to promote the venture capital industry considers the progress made to date, as well as how the program can be adjusted.
Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/811027-PDF-ENG
Better World Books
Michael I. Norton, Fiona Wilson, Jill Avery, and Thomas J. Steenburgh
Harvard Business School Case 511-057
Better World Books, a young start-up, provides a socially conscious alternative to Amazon, collecting and selling used books to keep them out of the waste stream, while donating a portion of their profits to support global literacy efforts. The case presents an emerging new business model: the for-profit "B corporation" designed to combine profits and mission. Founder Xavier Helgesen struggles with how to price his products to capture the value of their social good; how to manage multiple channels of distribution, including selling direct to consumers; and managing the social impact of negative public perceptions on the business once the company turns profitable.
Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/511057-PDF-ENG
Crisis and Reform in Japan's Banking System (A)
Thierry Porte, Rawi E. Abdelal, Laura Alfaro, and Jonathan Schlefer
Harvard Business School Case 710-036
In 1997, amidst Japan's ongoing financial problems, Prime Minister Ryutaro Hashimoto sought to restructure the financial sector to make it more transparent and globally competitive. He hoped that this effort, dubbed the "Big Bang" after the British financial restructuring a decade earlier, would prove as successful. But the financial problems, which seemed to have abated, looked as if they might be worsening. Thus, Hashimoto had to weigh priorities. Should he focus on long-term restructuring, immediate financial rescue, or both? Might an over-emphasis on long-term restructuring increase the chances that major banks could collapse? And what were the best economic and political strategies in these arenas? As a major developed economy, Japan offers an analog to the problems that faced the United States in its 2008-2009 financial crisis.
Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/710036-PDF-ENG
Purchase this supplement (B):
http://cb.hbsp.harvard.edu/cb/product/710037-PDF-ENG