Publications
- October 2014
- Journal of International Economics
The Global Agglomeration of Multinational Firms
Abstract—The explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms in comparison to the agglomeration of domestic firms? Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of pairwise-industry agglomeration and investigate the patterns and determinants underlying the global economic geography of multinational firms. Our analysis presents new stylized facts that suggest the emerging offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including capital-good market externality and technology diffusion play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we address potential reverse causality by exploring the regional pattern and process of agglomeration.
Publisher's link: http://www.hbs.edu/faculty/Publication%20Files/10-043_4b3a99bf-8548-4001-a86a-187318dfaa4d.pdf
Abstract—To get people to be more creative and productive, managers increase transparency with open workspaces and access to real-time data. But less transparent work environments can yield more-transparent employees. Employees perform better when they can try out new ideas and approaches within certain zones of privacy. Organizations allow them to do that by drawing four types of boundaries: around teams of people (zones of attention), between feedback and evaluation (zones of judgment), between decision rights and improvement rights (zones of slack), and for set periods of experimentation (zones of time). By balancing transparency and privacy, organizations can encourage just the right amount of "deviance" to foster innovative behavior and boost productivity.
Publisher's link: http://hbr.org/2014/10/the-transparency-trap/ar/1
Abstract—Research indicates that relatively few firms execute their strategies effectively, and, on average, companies deliver just 50% to 60% of the financial performance that their strategies promise. One reason is a disconnect between strategic goals and field implementation in sales. This article focuses on four areas where companies can improve links between strategy and sales. The article also outlines how selling activities materially affect core drivers of enterprise financial value. Leaders who don't understand or who can't operationalize these links can press for better execution when they need a better strategy or change strategic direction when they should focus on sales basics.
Publisher's link: http://hbr.org/2014/10/putting-sales-at-the-center-of-strategy/ar/1
Abstract—Companies are increasingly experimenting with the use of philanthropy to enhance consumer loyalty, brand awareness, and sales. But even highly creative approaches that garner a lot of buzz often fall short of sales goals, leading many companies to conclude, prematurely, that charity doesn't pay. Our research, in contrast, suggests that charity can drive engagement-when done right.
Publisher's link: https://archive.harvardbusiness.org/cla/web/pl/product.seam?c=35420&i=35422&cs=298348738b4b914f7ac43c3ee5d01940
- October 2014
- Review of Financial Studies
Money Creation and the Shadow Banking System
Abstract—Many explanations for the rapid growth of the shadow banking system in the mid-2000s focus on money demand. This paper asks whether the short-term liabilities of the shadow banking system behave like money. We first present a simple model where households demand money services, which are supplied by three types of claims: deposits, Treasury bills, and asset-backed commercial paper (ABCP). The model provides predictions for the price and quantity dynamics of these claims, as well as the behavior of the banking system (in terms of issuance) and the monetary authority (in terms of open market operations). Consistent with the model, the empirical evidence suggests that the shadow banking system does respond to money demand. An extrapolation of our estimates would suggest that heightened money demand could explain up to approximately half the growth of ABCP in the mid-2000s.
Publisher's link: http://www.hbs.edu/faculty/Publication%20Files/money_20140929_6871f5d1-2375-4716-a7c5-8b94d7541b54.pdf
Working Papers
Government Debt Management at the Zero Lower Bound
Abstract—This paper re-examines government debt management policy in light of the U.S. experience with extraordinary fiscal and monetary policies since 2008. We first document that the Treasury's decision to lengthen the average maturity of the debt has partially offset the Federal Reserve's attempts to reduce the supply of long-term bonds held by private investors through its policy of quantitative easing. We then examine the appropriate debt management policy for the consolidated government. We argue that traditional considerations favoring longer-term debt may be overstated and suggest that there are several advantages to issuing greater quantities of short-term debt. Under current institutional arrangements, neither the Federal Reserve nor the Treasury is caused to view debt management policy on the basis of the overall national interest. We suggest revised institutional arrangements to promote greater cooperation between the Treasury and the Federal Reserve in setting debt management policy. This is particularly important when conventional monetary policy becomes constrained by the zero lower bound, leaving debt management as one of the few policy levers to support aggregate demand.
Download working paper: http://www.brookings.edu/~/media/research/files/papers/2014/09/30_government_debt_management_zlb/30_government_debt_management_zlb.pdf
Eclipsed and Confounded Identities: When High-Status Affiliations Impede Organizational Growth
Abstract—I propose that an organization's growth potential may suffer if its identity is eclipsed by or confounded with the organizations with which it collaborates and competes. Using status as a salient feature of identity, I devise two network measures to capture the degree to which organizations' identities are eclipsed and confounded. The theory is tested with data on U.S. venture capital firm syndication between 1995 and 2009. Venture capital firms with eclipsed and confounded identities are less likely to raise a new fund, and occupying a high-status position exacerbates the penalty for having an eclipsed or confounded identity. These findings highlight the previously neglected identity costs that high-status firms impose on their partners. In status-based market competition, organizations need to justify their identity claims by distinguishing themselves from the established elite.
Download working paper: http://ssrn.com/abstract=2505184
Cases & Course Materials
- Harvard Business School Case 812-113
Clarks at a Crossroads (A)
"Clarks at a Crossroads (A)" describes how this venerable British shoe company falls behind its competition and into financial trouble. The case ends with a pivotal vote by shareholders on whether to sell this family company. Clarks (B) summarizes the results of the shareholders vote described in the (A) case. And, Clarks (C) describes the turnaround of C&J Clarks Ltd., 1993-2002. It describes the roles of family chairman Roger Pedder, and CEO Timothy Parker, in this successful effort.
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http://hbr.org/product/Clarks-at-a-Crossroads--A/an/812113-PDF-ENG
- Harvard Business School Case 515-036
Beyoncé
In December 2013, music superstar Beyoncé is about to surprise her fans with the release of her self-titled album. The team at her company, Parkwood Entertainment, which general manager Lee Anne Callahan-Longo described as "a management, music, and production company that is owned and at the highest level operated by an artist," had chosen to release the entire album at once and exclusively via the Apple iTunes Store, without any prior promotion-a significant, and potentially very risky, departure from how music was traditionally released. Sony Music's label Columbia Records, with whom Parkwood partnered on recorded-music activities, shared the costs-and therefore also the risk-of the album, which had been one-and-a-half years in development and was a particularly expensive proposition because of the many videos. How would fans and music industry insiders react to the daring launch, unveiled via Beyoncé's Facebook and Instagram accounts? Would the album be able to find a large enough audience even without traditional promotional activities? And would there be any adverse reactions, for instance from traditional music retailers refusing to carry the physical album later?
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http://hbr.org/product/Beyoncé/an/515036-PDF-ENG
- Harvard Business School Case 314-052
Teach For China and the Chinese Nonprofit Sector
Teach For China was founded in 2008 with the mission of expanding educational opportunity across China. By 2013, Andrea Pasinetti's lofty dream had taken flight: over 300 graduates from top American and Chinese universities were participating in its two-year teaching fellowships in more than 87 rural Chinese schools. The organization had grown from a founding team of three in a shoebox office to an 80-person operation headquartered in Beijing with teams in six other locations across China. Teach For China adapted the model pioneered by Teach For America to meet the needs of the educationally under-resourced of rural China. Led by an American, could Teach For China reshape its international identity and become an enduring Chinese institution? Could Teach For China manage regulatory risks and challenge public and government skepticism of the still nascent and highly volatile nonprofit sector? Would Teach For China be able to sustainably scale its model to truly end educational inequality in China?
Purchase this case:
http://hbr.org/product/Teach-For-China-and-the-C/an/314052-PDF-ENG
- Harvard Business School Case 615-009
American Airlines in 2011 (A)
The "American Airlines in 2011" case set was developed to provide a setting for the comparative analysis of two very different business models in the U.S. domestic airline industry-the network carrier and the low cost carrier (LCC). These models offer very different value propositions. Firms allocate resources into distinctively different processes, and they earn returns using parallel but different profit models. Yet while most scholars view the LCC model as disruptive, the two different models have been able to coexist for over 40 years, albeit with substantial evolution. By unpacking how one of the major network carriers was able to evolve its model successfully for such a long time before industry structural changes necessitated a radical overhaul, the cases seek to give students insights into how the different business models were established, how competitive forces have driven their evolution, and the importance of constantly evolving and tuning a firm's model.
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http://hbr.org/product/American-Airlines-in-2011/an/615009-PDF-ENG
- Harvard Business School Case 615-007
Netflix in 2011
Reed Hastings founded Netflix to provide a home movie service that would do a better job satisfying customers than the traditional retail rental model. But as it encountered challenges it underwent several major strategy shifts, ultimately developing a business model and an operational strategy that were highly disruptive to retail video rental chains. The combination of a large national inventory, a recommendation system that drove viewership across a broad catalog, and a large customer base made Netflix a force to be reckoned with, especially as a distribution channel for lower-profile and independent films. Blockbuster, the nation's largest retail video rental firm, was initially slow to respond, but ultimately rolled out a hybrid retail/online response in the form of Blockbuster Online. Aggressive pricing pulled in subscribers, but at a price to both it and Netflix. But a new challenge was on the horizon-the rapid growth of the Netflix online streaming service, which had a very different business model. Hastings' efforts to separate the activity into two separate companies met with strong pushback from consumers and the press. What was the best path forward?
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http://hbr.org/product/Netflix-in-2011/an/615007-PDF-ENG