First Look

October 16, 2012

Do Products Mirror The Organizations That Make Them?

A number of academics argue that products look like, or mirror, the organizations that produce them. A new paper finds reasons to agree with this theory in the software industry, where products made by open source, or loosely structured teams, were compared with those made by commercial developers tightly integrated with their company's goals, structure, and behavior. The result: The open-source teams created products that were much more modular and thus easier to modify. "Our results have significant managerial implications, highlighting the impact of organizational design decisions on the technical structure of the artifacts that these organizations subsequently develop," write the authors, Alan MacCormack, Carliss Baldwin, and John Rusnak. Their paper, "Exploring the Duality Between Product and Organizational Architectures: A Test of the 'Mirroring' Hypothesis," appears in the October issue of Research Policy.

Encouraging Healthy Eating

In another instance of simpler is better, research suggests that simple color-coded labeling contributes to improved food and beverage choices. Researchers Douglas E. Levy, Jason Riis, Lillian M. Sonnenberg, Susan J. Barraclough, and Anne N. Thorndike looked at strategies to address obesity, particularly among minority and low-income groups. The team conducted a field study at a Boston hospital to understand the eating habits of employees. "Food Choices of Minority and Low-Income Employees: A Cafeteria Intervention," was published in the September issue of American Journal of Preventive Medicine.

Entrepreneurship In Politically Unstable Areas

Entrepreneurship is difficult enough, but what about when it is surrounded by fighting and political instability? A new case study follows Elia Nuqul, a founder of Nuqul Brothers of Jordan. Nuqul, a Christian Palestinian, fled to that country from Israel with his family in 1948, eventually starting what would become a large diversified business group. "The case shows the challenges of building such an entrepreneurial business in a developing region with high political instability," according to the authors, Geoffrey Jones and Lana Ghanem. It also asks whether entrepreneurs have roles and responsibilities in such conflicts. Read "Elia Nuqul and the Making of a Middle Eastern Business Group (A)."

— Sean Silverthorne


Enterprise Analytics: Optimize Performance, Process, and Decisions Through Big Data


This book, an edited collection of research papers from the International Institute of Analytics, addresses a wide variety of key topics in managing business analytics and big data at the enterprise level. It includes key applications of analytics, human and organizational issues in building analytical capabilities, and case studies of the application of analytics in several industries.

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Judgment Calls: Twelve Stories of Big Decisions and the Teams That Got Them Right


This book includes twelve detailed stories of organizations that have successfully tapped their data assets, diverse perspectives, and deep knowledge to build an organizational decision-making capability. The book introduces a model that utilizes the collective judgment of an organization so that the right decisions are made, and the entire organization profits.

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From Russia with Love: The Impact of Relocated Firms on Incumbent Survival


We identify the impact of local firm concentration on incumbent performance with a quasi-natural experiment. When Germany was divided after World War II, many firms in the machine tool industry fled the Soviet occupied zone to prevent expropriation. We show that the regional location decisions of these firms upon moving to western Germany were driven by non-economic factors and heuristics rather than existing industrial conditions. Relocating firms increased the likelihood of incumbent failure in destination regions, a pattern that differs sharply from new entrants. We further provide evidence that these effects are due to increased competition for local resources.

China: The Indigenization of Insurance


The concept of insurance was introduced to China in the early nineteenth century by Westerners trading in Guangzhou and practised essentially among them. We argue that indigenization of insurance, in particular life insurance, was a slow process that stretched from the mid-nineteenth century to the mid-twentieth. The establishment of the People's Republic in 1949, with a decided turn against foreign enterprises operating in China from the 1950s, and radical communism from the late 1960s through the 1970s, led to its eradication. It was revived from the reversal of the state's policy towards private business from late 1978, and has grown rapidly since. While insurance as a concept and product has been a big success in post-reform China, the growth of the industry has created strong domestic competition with foreign insurance companies still struggling to find their place. However, changes in the industry are also due to China's economic transformation, demographic changes due to an aging population and an economic agenda shaped by the state. As our chapter demonstrates, insurance companies and the fate of multinational competition will remain part of the state-driven agenda for the foreseeable future.

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Food Choices of Minority and Low-Income Employees: A Cafeteria Intervention


Background: Effective strategies are needed to address obesity, particularly among minority and low-income individuals. Purpose: To test whether a two-phase point-of-purchase intervention improved food choices across racial, socioeconomic (job type) groups. Design: A 9-month longitudinal study from 2009 to 2010 assessing person-level changes in purchases of healthy and unhealthy foods following sequentially introduced interventions. Data were analyzed in 2011. Setting/Participants: Participants included 4,642 employees of a large hospital in Boston, MA, who were regular cafeteria patrons. Interventions: The first intervention was a traffic-light style color-coded labeling system encouraging patrons to purchase healthy items (labeled green) and avoid unhealthy items (labeled red). The second intervention manipulated "choice architecture" by physically rearranging certain cafeteria items, making green-labeled items more accessible and red-labeled items less accessible. Main Outcome Measures: Proportion of green- (or red-) labeled items purchased by an employee. Subanalyses tracked beverage purchases, including calories and price per beverage. Results: Employees self-identified as white (73%); black (10%); Latino (7%); and Asian (10%). Compared to white employees, Latino and black employees purchased a higher percentage of red items at baseline (18%, 28%, and 33%, respectively, p0.05 for interaction between race or job type and intervention). Mean calories per beverage decreased similarly over the study period for all racial groups and job types, with no increase in per-beverage spending. Conclusions: Despite baseline differences in healthy food purchases, a simple color-coded labeling and choice architecture intervention improved food and beverage choices among employees from all racial and socioeconomic backgrounds.

Exploring the Duality Between Product and Organizational Architectures: A Test of the 'Mirroring' Hypothesis


A variety of academic studies argue that a relationship exists between the structure of an organization and the design of the products that the organization produces. Specifically, products tend to "mirror" the architectures of the organizations in which they are developed. This dynamic occurs because the organization's governance structures, problem solving routines, and communication patterns constrain the space in which it searches for new solutions. Such a relationship is important, given that product architecture has been shown to be an important predictor of product performance, product variety, process flexibility, and even the path of industry evolution. We explore this relationship in the software industry. Our research takes advantage of a natural experiment, in that we observe products that fulfill the same function being developed by very different organizational forms. At one extreme are commercial software firms, in which the organizational participants are tightly coupled, with respect to their goals, structure, and behavior. At the other, are open-source software communities, in which the participants are much more loosely coupled by comparison. The mirroring hypothesis predicts that these different organizational forms will produce products with distinctly different architectures. Specifically, loosely coupled organizations will develop more modular designs than tightly coupled organizations. We test this hypothesis, using a sample of matched-pair products. We find strong evidence to support the mirroring hypothesis. In all of the pairs we examine, the product developed by the loosely coupled organization is significantly more modular than the product from the tightly coupled organization. We measure modularity by capturing the level of coupling between a product's components. The magnitude of the differences is substantial-up to a factor of six, in terms of the potential for a design change in one component to propagate to others. Our results have significant managerial implications, highlighting the impact of organizational design decisions on the technical structure of the artifacts that these organizations subsequently develop.

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A Framework for Research on Corporate Accountability Reporting


This paper provides an accounting-based conceptual framing of the phenomenon of corporate accountability reporting. Such reporting is seen as arising from a delegator's (e.g., a citizenry) demand to hold a delegate (e.g., shareholders) to account. When effective, corporate accountability reporting can internalize certain externalities into firms' resource-allocation decisions, although doing so will not always serve shareholders' interests. I leverage the positive accounting literature's current understanding of properties of financial reports to develop three hypotheses on corporate accountability reporting. I argue that an accountability reporting system is likely to be more useful to a delegator if it (1) mitigates information advantages across delegates and delegators, (2) reports both stocks and flows in the measures of account, and (3) has a mutually agreeable due process to match across periods the actions of delegates and the outcomes of those actions. I show how the successive incidence of these properties in observed corporate accountability reports can be used to determine whether and how those reports create or destroy value for shareholders and other constituencies.

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Working Papers

Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device


We test the effectiveness of self-help peer groups as a commitment device for precautionary savings, through two randomized field experiments among 2,687 micro-entrepreneurs in Chile. The first experiment finds that self-help peer groups are a powerful tool to increase savings (number of deposits grows 3.5-fold and average savings balance almost doubles). Conversely, a substantially higher interest rate has no effect on most participants. A second experiment tests an alternative delivery mechanism and shows that effects of a similar size can be achieved by holding people accountable through feedback text messages, without any meetings or peer pressure.

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Cases & Course Materials

Albert 'Jack' Stanley in Nigeria (C)

Lena G. Goldberg and Annelena Lobb
Harvard Business School Supplement 313-019

The international joint venture that successfully bid for $6 billion in contracts to build LNG trains on Nigeria's Bonny Island became entangled in a widening bribery and corruption probe triggered by an unrelated accusation against an employee of one of the JV partners. The (A) case discusses the JV's "business as usual" approach to doing business in the context of Nigeria's political culture and the involvement of Albert "Jack" Stanley, the JV's alleged manager, in structuring and implementing an elaborate bribery scheme. The (B) case relates Stanley's actions after he became the subject of multiple investigations and was terminated by Halliburton, parent of the U.S. JV partner, for taking kickbacks. The (C) case details the resolution of bribery and corruption allegations against Stanley, several of his associates and the JV partners.

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Elia Nuqul and the Making of a Middle Eastern Business Group (A)

Geoffrey Jones and Lana Ghanem
Harvard Business School Case 813-052

The case is concerned with Elia Nuqul, the founder of Jordanian-based Nuqul Brothers, a large diversified business group. It shows how Nuqul, a Christian Palestinian whose family was forced to flee to Jordan after the creation of Israel in 1948, built a business in his new home, first in trading and later in consumer products such as hygienic paper manufacturing. The case shows the challenges of building such an entrepreneurial business in a developing region with high political instability. The case is positioned within the wider context of the regional conflict in Palestine and Israel, and it provides a vehicle for exploring the role and responsibility of entrepreneurs, if any, in such conflicts.

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