First Look

Working Papers

Digital Interactivity: Unanticipated Consequences for Markets, Marketing, and Consumers

Abstract

The digital interactive transformation in marketing is not unfolding, as many thought it would, on the model of direct marketing. That model anticipated that digital media using rich profiling data would intrude marketing messaging more deeply and more precisely into consumer lives than broadcast media had been able to do. But the technology that threatened intrusion is delivering seclusion. The transformation is unfolding on a model of consumer collaboration, in which consumers use digital media that lie beyond the control of marketers to communicate among one another, responding to marketing's intrusions by disseminating counterargument, information sharing, rebuttal, parody, reproach and, though more rarely, fandom. Globally the media of collaboration range from consumer review sites like Epinions and Trip Advisor, to collaborative networking sites like Bebo, Facebook, Orkut and Meetup, to trading sites like Craigslist and eBay, and user-generated content sites like YouTube, Cyworld, and blogs. This paper reviews five emerging paradigms governing marketing in this new media environment. It concludes that while meaning-making remains the central purpose of marketing communication, the shift from broadcasting to interaction within digital communities is moving the locus of control over meanings from marketer to consumer and rewarding more participatory, more sincere, and less directive marketing styles.

Download the paper: http://www.hbs.edu/research/pdf/08-017.pdf

The Impact of Shareholder Activism on Financial Reporting and Compensation: The Case of Employee Stock Options Expensing

Abstract

In this paper we examine the economic consequences of over 150 shareholder proposals to expense employee stock options (ESO) submitted during the proxy seasons of 2003 and 2004—the first case where the SEC has allowed an accounting matter to be subject to an advisory vote at an annual meeting. We find evidence suggesting that ESO expensing shareholder proposals affected accounting and compensation choices. With respect to accounting choices, we find that: (i) targeted firms were more likely to adopt ESO expensing relative to a control sample of S&P 500 firms, (ii) within targeted firms, the likelihood of adoption increases in the degree of voting support for the proposal; (iii) non-targeted firms were more likely to adopt ESO expensing when a peer firm was targeted by a proposal. With respect to the effect on compensation practices, we find that: (i) targeted firms where the proposal was approved experienced a decrease in the level of CEO compensation relative to the control sample of S&P 500 firms; (ii) within targeted firms, the degree of voting support for the proposal was associated with a decrease in the level of CEO compensation and a decrease in the use of ESO in CEO compensation.

Paper not available at this time.

Team Familiarity, Role Experience, and Performance: Evidence from Indian Software Services

Abstract

Much of the literature on learning views experience as a unidimensional concept captured by the cumulative production volume or number of projects completed by a team. Implicit in this approach is the assumption that teams are stable in their membership and internal organization. In practice, however, such stability is rare, as the composition and structure of teams often changes over time or between projects. In this paper, we use detailed data from an Indian software services firm to examine how such changes may affect the accumulation of experience within, and the performance of, teams. We find that the level of team familiarity (i.e., the average number of times that each team member has worked with every other member of the team) has a significant and positive effect on performance but that conventional measures of the experience of individual team members (e.g., years at the firm) do not impact performance. We do find, however, that the role experience of individuals in a team (i.e., years in a given role within a team) is associated with better team performance. We examine the impact of role experience separately for team managers and team members. We find that a manager's role experience is positively related to outcome measures that are easily observable in process but is not related to outcomes that are difficult to monitor in process. In comparison, a member's role experience is positively related to both types of outcomes. Our results offer an approach for capturing the experience held by fluid teams and highlight the need to study context-specific measures of experience, including role experience, in addition to offering further insight into how the interactions of team members may contribute to the development of broader firm capabilities.

Download the paper: http://www.hbs.edu/research/pdf/08-019.pdf

Harnessing Our Inner Angels and Demons: What We Have Learned About Want/Should Conflicts and How That Knowledge Can Help Us Reduce Short-Sighted Decision Making

Abstract

Although observers of human behavior have long been aware that people regularly struggle with internal conflict when deciding whether to behave responsibly or indulge in impulsivity, psychologists and economists did not begin to empirically investigate this type of want/should conflict until recently. In this paper, we review and synthesize the latest research on want/should conflict, focusing our attention on the findings from an empirical literature on the topic that has blossomed over the last 15 years. We then turn to a discussion of how individuals and policy makers can use what has been learned about want/should conflict to help decision makers select far-sighted options.

Download the paper: http://www.hbs.edu/research/pdf/08-020.pdf

How to Capture Value from Innovation: Shaping Intellectual Property and Industry Architecture

Abstract

In making strategic decisions about how to capture value from innovation, managers often look at two critical domains—the intellectual-property environment and the architecture of the industry—as beyond their control. Yet, the intellectual-property environment and the architecture of the industry can have profound influences on who wins (and who does not) from innovation. In this paper, we argue that under the right circumstances, these two domains can be shaped by managers in ways that favor one firm over another. By understanding these forces, managers will be in a better position to utilize the full tool kit of available mechanisms (and strategies) to capture value from innovation. Perhaps somewhat surprisingly, we show that more IP protection and building stronger barriers around innovation are not always the best path to capturing value. Paradoxically, innovators can sometimes benefit by weakening the intellectual-property environment and opening the architecture of the industry. In this article we explain why and how. We also show how management can shape the architecture of the industry in ways that have consequences for the distribution of profits amongst firms in an industry.

Paper not available at this time.