First Look

October 15, 2013

Is Science Sexy?

Living Science, a company focused on using great science to improve beauty products, has a difficult marketing challenge: explain to consumers why its science matters. The case "Living Proof: Are We a Technology Company or a Beauty Company?," written by Willy Shih, explores the company's dual role as biotech firm and marketing upstart.

Michael Bloomberg's Strategy For New York

In the recently updated case "New York City: Bloomberg's Strategy for Economic Development," the authors review the history of the Big Apple's economic development starting in the 17th century, and end by highlighting decisions facing Mayor Bloomberg in 2012. The case was written by Michael E. Porter, Christian H.M. Ketels, and Jorge Ramirez-Vallejo.

Does Economic Distress Hamper Innovation?

Professors Ramana Nanda and Tom Nicholas are studying relationships between economic downturns and innovation, specifically by looking at technological innovation during America's Great Depression. In their paper "Did Bank Distress Stifle Innovation During the Great Depression?," forthcoming in the Journal of Financial Economics, the authors find that "Although Depression era bank distress was associated with the stifling of innovation, our results also help to explain why technological development was still robust following one of the largest shocks in the history of the U.S. banking system."

— Sean Silverthorne


  • August 2013
  • Economic Development and Cultural Change

The Costs of Favoritism: Is Politically-Driven Aid Less Effective?"

By: Dreher, Axel, Stephan Klasen, James Raymond Vreeland, and Eric Werker

Abstract—As is now well documented, aid is given for both political as well as economic reasons. The conventional wisdom is that politically motivated aid is less effective in promoting developmental objectives. We examine the ex-post performance ratings of World Bank projects and generally find that projects that are potentially politically motivated-such as those granted to governments holding a non-permanent seat on the United Nations Security Council or an Executive Directorship at the World Bank-are no more likely, on average, to get a negative quality rating than other projects. When aid is given to Security Council members with higher short-term debt, however, a negative quality rating is more likely. So we find evidence that World Bank project quality suffers as a consequence of political influence only when the recipient country is economically vulnerable in the first place.

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  • August 2013
  • California Management Review

Retail Inventory: Managing the Canary in the Coal Mine!

By: Gaur, Vishal, Saravanan Kesavan, and Ananth Raman

Abstract—Retail inventory is a statistic that is closely watched by retailers as well as their investors, lenders, and suppliers. Retailers not only benefit from inventory, but also bear the cost of excess inventory. Investors, lenders, and suppliers interpret this statistic for signs of the retailer's health, future sales prospects, and impending costs. While prior research on inventory has typically focused primarily on the retailer's profit and cash flow, this paper synthesizes the perspectives of investors, lenders, and suppliers and shows that inventory turns, a commonly used metric to identify excess inventory, has limitations that reduce its utility for all these stakeholders. This paper presents a new metric, adjusted inventory turns, which overcomes the drawbacks of inventory turns and can be uniformly utilized by all stakeholders to assess whether a retailer is carrying too much or too little inventory. We explain applications of the metric with examples and lay out prescriptions for retailers.

  • August 2013
  • Review of Financial Studies

Bond Supply and Excess Bond Returns

By: Greenwood, Robin, and Dimitri Vayanos

Abstract—We examine empirically how the maturity structure of government debt affects bond yields and excess returns. Our analysis is based on a theoretical model of preferred habitat in which clienteles with strong preferences for specific maturities trade with arbitrageurs. Consistent with the model, we find that (i) the supply of long- relative to short-term bonds is positively related to the term spread, (ii) supply predicts positively long-term bonds' excess returns even after controlling for the term spread and the Cochrane-Piazzesi factor, (iii) the effects of supply are stronger for longer maturities, and (iv) following periods when arbitrageurs have lost money, both supply and the term spread are stronger predictors of excess returns.

  • August 2013
  • Journal of Financial Economics

Did Bank Distress Stifle Innovation During the Great Depression?

By: Nanda, Ramana, and Tom Nicholas

Abstract—We find a negative relationship between bank distress and the level, quality, and trajectory of firm-level innovation during the Great Depression, particularly for R&D firms operating in capital intensive industries. However, we also show that because a sufficient number of R&D intensive firms were located in counties with lower levels of bank distress, or were operating in less capital intensive industries, the negative effects were mitigated in aggregate. Although Depression era bank distress was associated with the stifling of innovation, our results also help to explain why technological development was still robust following one of the largest shocks in the history of the U.S. banking system.

Working Papers

Team Scaffolds: How Minimal Team Structures Enable Role-Based Coordination

By: Valentine, Melissa A., and Amy C. Edmondson

Abstract—In this paper, we examine whether and how traditional team structures can be adapted to accommodate fluid personnel and to what benefit. Previous research has shown that team membership stability fosters familiarity, trust, and transactive memory, which in turn enable effective coordination. Yet some work settings operate with fluid personnel, making stable team structures with ongoing relationships infeasible. We study the adaption of team structures for fluid work settings in a hospital emergency department (ED). Qualitative analysis revealed that the adapted team design embodied the logic of both role and team structures: a set of roles (rather than specific individuals, as in a team) was bounded and given collective responsibility for a whole task. We labeled this structure a team scaffold. The team scaffolds were minimal in the way that Tajfel's minimal in-groups were minimal: they had arbitrary and extremely short-lived membership. Even so, the team scaffolds provided clear benefits to those working within them. They gave fluid groups a shared focus, allowing them to prioritize their mutual efforts as a group, and gave rise to felt-accountability that encouraged even relative strangers to hold each other accountable for progress. Thus the team scaffolds enabled the construction of group coordination processes among fluid groups. Quantitative analysis showed that performance improved when people worked within team scaffolds, in part because of clearly designated partners within the larger fluid department. Our multi-method study reveals the design and benefit of minimal team structures (team scaffolds) in fluid work settings.

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Cases & Course Materials

  • Harvard Business School Case 414-024

Talent Recruitment at frog design Shanghai (B)

Supplements 411-040.

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Traces the economic development of New York City from its founding in the 17th century through 2012. Focuses on the decisions made by New York City officials, past and present, highlighting the challenges of economic development at the city level. Enables deep examination of the interdependence and interrelation of economic policies at the city, state, and federal level and explores the role of economic and cluster performance. Detailed historical economic and social data allow for an evaluation of policy results. The case finishes highlighting the main economic challenges the city was facing in 2012.

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  • Harvard Business School Case 213-050

Hotel Ivory

Cheick Sanankoua is an MBA student who believes that he has found the perfect investment property, a small, independently owned hotel on the Ivory Coast. However, he has had trouble raising money for the investment beyond friends and family. Through contacts in the private equity industry, he has one last opportunity to pitch the deal to Asdar Capital. If unsuccessful, the time on Sanankoua's exclusivity agreement with the owners will run out.

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Jon Flint came up with the idea of a science-based beauty company while talking with his hairdresser about the problems with typical hair and skin care products. Together with a small team that included Professor Robert Langer of MIT, he committed to assemble a team of scientists from outside the beauty industry to challenge the conventional wisdom. Their company, Living Proof, wanted to offer women "proof in a bottle" rather than "hope in a bottle." As the firm came to market with its first products, it focused on explaining its science to consumers. It found it increasingly necessary to direct more of its resources towards marketing, including a major investment in Jennifer Aniston as its celebrity spokesperson. Were they becoming less of a biotech company and more like a traditional beauty company? How did they reconcile the desire for continued high spending on R&D with the need to ramp up marketing?

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