First Look

September 11, 2012

Did Slave Owners Pioneer Modern Management?

According to many historians, modern management practices were born in the factories and railroads of turn-of-the-century New England. A contrary view is presented by Caitlin C. Rosenthal, a Harvard Business School Newcomen Postdoctoral Fellow, who argues that slave owners were conducting meaningful business experiments decades earlier. "Slaves became the subjects of management experiments, their labor allocated and re-allocated from crop to crop, their meals and lodging planned, and their daily productivity measured and monitored," she says. Read her essay, "Slavery's Scientific Management: Accounting for Mastery," in the book Slavery's Capitalism: A New History of American Economic Development.

Pay Employees More To Keep Them Honest

Researchers are intrigued about the effects wages have on employee productivity and loyalty. A study by Tatiana Sandino and C. X. Chen finds that workers earning higher wages are less likely to steal from the hand that feeds them than comparable employees earning lower wages. Read "Can Wages Buy Honesty? The Relationship Between Relative Wages and Employee Theft" in the Journal of Accounting Research.

Best Buy In Crisis

For a decade-and-a-half, Best Buy has been the world's leading seller of consumer electronics. But over the last the year the company has come under targeted assaults from online rival and bricks-and-mortar juggernaut Walmart—two formidable competitors. And that was before founder Dick Schulze and CEO Brian Dunn left the company. What's Best Buy to do? Test your insights by reading the new case, "Best Buy in Crisis," by John Wells and Galen Danskin.

— Sean Silverthorne


Indispensable: When Leaders Really Matter


Will your next leader be insignificant-or indispensable? The importance of leadership and the impact of individual leaders has long been the subject of debate. Are they made by history, or do they make it? In Indispensable, Harvard Business School professor Gautam Mukunda offers an enticingly fresh look at how and when individual leaders really can make a difference. By identifying and analyzing the hidden patterns of their careers, and by exploring the systems that place these leaders in positions of power, Indispensable sheds new light on how we may be able to identify the best leaders and what lessons we can learn, from both the process and the result. Profiling a mix of historic and modern figures-from Thomas Jefferson and Abraham Lincoln to Winston Churchill and Judah Folkman-and telling the stories of how they came to power and how they made the most important decisions of their lives, Indispensable reveals how, when, and where a single individual in the right place at the right time can save or destroy the organization they lead, and even change the course of history. Indispensable will also help you understand this new model so you can use it in your own life-whether you're a citizen casting a ballot, an executive choosing your next CEO, or a leader trying to make your mark.

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Unconscious Thought Reduces Intrusion Development: A Replication and Extension


Background and Objectives. Intrusive images after a traumatic event, a hallmark feature of post-traumatic stress disorder, are suggested to develop because the trauma memory is disorganized and not integrated into autobiographical memory. Unconscious Thought Theory predicts that information can be conceptually organized after a period of unconscious thought (UT), more so than after conscious thought (CT). We aimed to test the hypothesis that UT decreases intrusions and increases conceptual organization in memory. Methods. Participants were shown a stressful film and were required to perform an UT task, a CT task, or a distraction task. Intrusions of the film, intrusion qualities, and sequence memory were measured afterwards. Results. We confirmed our hypothesis that UT (versus CT or mere distraction) leads to fewer intrusions, thereby replicating earlier research. Contrary to prediction, we found no difference between the conditions on sequence memory. In addition, conscious thought appeared to increase intrusion nowness and arousal. Limitations. The analogue design and healthy participant sample prevent from generalizing results to other populations. Intrusion frequency and qualities were assessed immediately after the film thereby prohibiting us from drawing conclusions about any long-term effects. Conclusions. Engaging in unconscious thought after a stressful film can reduce intrusion frequency. This has potential implications for clinical interventions to prevent initial stress symptoms. The underlying mechanism remains unclear for now and provides an avenue for future research.

The Bedside Manner of Homo Economicus: How and Why Priming an Economic Schema Reduces Compassion


We investigate how, why and when activating economic schemas reduces the compassion that individuals extend to others in need when delivering bad news. Across three experiments, we show that unobtrusively priming economic schemas decreases the compassion that individuals express to others in need, that this effect is mediated by dampened feelings of empathy and heightened perceptions of unprofessionalism, and that it is circumscribed to bad news that has economic implications. We discuss implications for theory and research on schemas, procedural justice, emotion expression, and prosocial behavior.

Land Politics and Local State Capacities: The Political Economy of Urban Change in China


Despite common national institutions and incentives to remake urban landscapes to anchor growth, generate land-lease revenues, and display a capacious administration, Chinese urban governments exhibit varying levels of control over land. This article uses a paired comparison of Dalian and Harbin in China's Northeast to link differences in local political economies to land politics. Dalian, benefitting from early access to foreign capital, consolidated control over urban territory through the designation of a development zone, which realigned local economic interests and introduced dual pressures for enterprises to restructure and relocate. Harbin, facing capital shortages, distributed urban territory to assuage losers of reform and promote economic growth. The findings suggest that 1) growth strategies, and the territorial politics they produce, are products of the post-Mao urban hierarchy rather than of socialist legacies, and, 2) perhaps surprisingly, local governments exercise the greatest control over urban land in cities that adopted market reforms earliest.

Slavery's Scientific Management: Accounting for Mastery


The traditional story of modern management begins in the factories of England and New England, extending only much later to the American South. This paper contests this narrative, arguing that many sophisticated techniques developed first on southern and West Indian slave plantations, disseminating among planters many decades before they were adopted in northern factories. I draw on extensive new archival research to show that these advances were not just incidental to the system of chattel slavery. Rather, innovation was, in a sense, a byproduct of bondage. The immense control of planters over their slaves enabled the development of management "controls." Slaves became the subjects of management experiments, their labor allocated and re-allocated from crop to crop, their meals and lodging planned, and their daily productivity measured and monitored. These findings disrupt prevailing narratives in business history, challenging the primacy that Alfred Chandler awarded the railroad as the testing ground for modern management. Long before the rise of the railroads, plantations relied on hierarchical reporting and long-lived assets-quite literally human capital. Although innovations in plantation accounting did not necessarily cause the rise of quantitative management in the North, these discourses were connected. Historians of management need to tell a new origins story-one located far from the factory floor.

Can Wages Buy Honesty? The Relationship Between Relative Wages and Employee Theft


In this study we examine whether, for a sample of retail chains, high levels of employee compensation can deter employee theft, an increasingly common type of fraudulent behavior. Specifically, we examine the extent to which relative wages (i.e., employee wages relative to the wages paid to comparable employees in competing stores) affect employee theft as measured by inventory shrinkage and cash shortage. Using two store-level datasets from the convenience store industry, we find that relative wages are negatively associated with employee theft after we control for each store's employee characteristics, monitoring environment, and socio-economic environment. Moreover, we find that relatively higher wages also promote social norms such that coworkers are less (more) likely to collude to steal inventory from their company when relative wages are higher (lower). Our research contributes to an emerging literature in management control that explores the effect of efficiency wages on employee behavior and social norms.


Working Papers

Spatial Organization of Firms: Internal and External Agglomeration Economies and Location Choices Through the Value Chain


We explore the impact of geographically bounded intra-firm spillovers (internal agglomeration economies) and geographically bounded inter-firm spillovers (external agglomeration economies) on firms' location strategies. Using data from the Census Bureau's Longitudinal Business Database and the U.S. Cluster Mapping Project, we analyze organic expansions of biopharmaceutical firms (by both new establishments and employment increase in existing establishments) in the U.S. in 1993-2005. We consider all activities in the value chain and allow location choices to vary by R&D, manufacturing, and sales. Our findings suggest that (1) internal and external agglomeration economies have separate, positive impacts on location, with relevant differences by activity; (2) internal economies of agglomeration arise within an activity (e.g., among plants) and across activities (e.g., between manufacturing and sales); (3) the effects of internal economies across and within activities vary by activity and type of organic expansion; and (4) across-activity internal economies are asymmetric.

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Entrepreneurship in the Natural Food and Beauty Categories Before 2000: Global Visions and Local Expressions


This working paper examines the creation of the global natural food and beauty categories before 2000. This is shown to have been a lengthy process of new category creation involving the exercise of entrepreneurial imagination. Pioneering entrepreneurs faced little consumer demand for natural products, and little consumer knowledge of what they entailed. The creation of new categories involved three overlapping waves of entrepreneurship. The first involved making the ideological case for natural products. This often entailed investment in education and publishing activities. Second, entrepreneurs engaged in the creation of industry associations which could advocate, as well as give the nascent industry credibility and create standards. Finally, entrepreneurs established retail stores, supply and distribution networks, and created brands. Entrepreneurial cognition and motivation frequently lay in individual, and very local, experiences, but many of the key pioneers were also highly globalized in their world views, with strong perception of how small, local efforts related to much bigger and global pictures. A significant sub-set of the influential historical figures were articulate in expressing strong religious convictions. The paper concludes that by the 1990s it was evident that the success of entrepreneurial pioneers in building the market for green products created a new set of issues, especially related to the legitimacy of their businesses and of the concept of greenness.

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The International Politics of IFRS Harmonization


The globalization of accounting standards as seen through the proliferation of IFRS worldwide is one of the most important developments in corporate governance over the last decade. I offer an analysis of some international political dynamics of countries' IFRS harmonization decisions. The analysis is based on field studies in three jurisdictions: Canada, China, and India. Across these jurisdictions, I first describe unique elements of domestic political economies that are shaping IFRS policies. Then, I inductively isolate two principal dimensions that can be used to characterize the jurisdictions' IFRS responses: proximity to existing political powers at the IASB; and own potential political power at the IASB. Based on how countries are classified along these dimensions, I offer predictions, ceteris paribus, on countries' IFRS harmonization strategies. The analysis and framework in this paper can help broaden the understanding of accounting's globalization.

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Cases & Course Materials

Corporate Strategy

Bharat N.Anand
Harvard Business School Module Note 713-415

This note provides an overview of strategies for multi-business firms. The note describes (i) what is meant by "corporate advantage," (ii) the different approaches that multi-business firms can pursue in order to create corporate advantage, (iii) the specific corporate level choices (portfolio, ownership, and organizational choices) that firms make, (iv) certain principles that characterize effective corporate level strategy, and (v) reasons why corporate strategies can fail. In its treatment and coverage of these issues, the note emphasizes similarities between the core principles of business unit strategy and of corporate level strategy.

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ARISE: A Destination-for-a-Day Spa

Michael Beer and Lynda St. Clair
Harvard Business School Case 913-521

A new Dallas-based health and beauty spa aims to use a highly distinctive human resource system as the foundation of its competitive strategy. By encouraging employees to act as "personal wellness coaches" (PWCs) with high commitment and broad responsibilities, the leadership intended to provide a level of client service that would justify premium rates. However, the system is not working. Issues include: tips are lower than expected, reducing expected compensation; scheduling issues create bottlenecks; and the level of commitment varies among PWCs. The result is a high employee turnover rate, and departing employees take an average of 35% of their client base with them when they go. Now, with financials for the spa's second year completed, the VP of spa operations, the VP of business operations, and the CEO must evaluate what is and what isn't working.

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Foro Energy (A)

Joseph B. Lassiter, William A. Sahlman, and James McQuade
Harvard Business School Case 812-136

Foro Energy developed proprietary and patent-pending fiber-laser technologies that could disrupt existing processes and services for the exploration and production of oil and natural gas. These breakthrough laser technologies were protected by a strong intellectual property (IP) portfolio, which provided Foro with the flexibility to pursue a number of different business models. The market potential for oilfield applications was large, as global spending in the O&G E&P industry was expected to approach $600 billion in 2012.

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Mexico City Water Shortage

John D. Macomber, Regina Garcia-Cuellar, Griffin H. James, and Frederik Nellemann
Harvard Business School Case 212-044

In this case, a property company, a water privatizer, and municipal engineers explore the causes of and solutions to a severe water shortage in Mexico City, a great global capital. The protagonist is a real estate investor doing due diligence on the magnitude of the crisis, the impact on the firm's operations, and the likelihood of resolution. Due diligence includes interviews with city water officials and global-scale water privatizers. This case is an excellent introduction to city scale infrastructure issues on a global level. A related case, "Water Shortage and Property Investing in Mexico City," HBS No. 210-085, contains more real estate finance and less water infrastructure finance material than this case does.

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Vale: Global Expansion in the Challenging World of Mining (B)

Aldo Musacchio, Tarun Khanna, and Ricardo Reisen de Pinho
Harvard Business School Supplement 713-012

Supplements the (A) case.

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inge watertechnologies, GmbH

Ramana Nanda, Carin-Isabel Knoop, and Markus Mittermaier
Harvard Business School Case 812-002

Using the financing history and exit choices of a German clean-tech startup as a lens, this case explores the reasons why venture-backed entrepreneurship is much lower in Germany that the US, despite a robust SME sector and large-corporate innovation in Germany. It also shows the tight link between investor incentives and a startup's product market strategy, including differences between "pure-play" VCs and corporate venture capital investors.

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Owen's Precision Machining

Ramana Nanda and James McQuade
Harvard Business School Case 813-036

For the second time in fourteen months, Christopher Owen, the second-generation owner of Owen's Precision Machining (OPM), found himself running out of cash. Owen wondered what he was doing wrong. How much additional money would he need to raise to get OPM through the next twelve months, and what could he change now to fix his company for the long term? Owen's thoughts also turned to the conversation he had last month with two Harvard Business School alumni who were searching for a manufacturing business to acquire after spending the early part of their career in manufacturing at GE's Aircraft Engine division in Lynn, MA. Their offer of $1.1 million, or 6.9x times 2011 EBITDA of $159,292, was a pleasant surprise, but Owen was not interested in getting out of his family's business. Given the current cash flow situation, should Owen reconsider the acquisition offer?

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Friend Bank: The Time for Hope (Abridged)

Clayton Rose and Aldo Sesia
Harvard Business School Case 313-010

In 2010, Friend Bank was entering the fifth year of Hope Harris Johnson's ambitious 20-year growth plan to transform her family's one-branch community bank into an institution with a substantial presence in southeastern Alabama. Harris Johnson was pleased, so far, with the results. Strategically they had exceeded expectations in opening a second office and execution of the plan was going well. And while the financial and economic crisis that began in 2008 had affected the financial results, it also presented Friend with competitive opportunities. Nonetheless, realizing her ultimate goals for Friend would not come easily. This is a shorter version of "Friend Bank: The Time for Hope," HBS No. 310-070.

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CSN Stores

William A. Sahlman and Neil Tolaney
Harvard Business School Case 812-044

In March 2011, CSN Stores is a collection of nearly 200 Internet retail websites, including,, and Co-founders Niraj Shah and Steve Conine were considering making a major investment to build brand equity at the corporate level.

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Col. Joshua Chamberlain: Background to a Challenging Negotiation from the Civil War

James K. Sebenius
Harvard Business School Note 912-029

This note provides historical context and background for a challenging negotiation by Col. Joshua Chamberlain of the 20th Maine Regiment of the Union Army during the U.S. Civil War.

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Best Buy in Crisis

John R. Wells and Galen Danskin
Harvard Business School Case 713-403

In June 2012, Best Buy was in crisis. In 1996, Best Buy overtook Circuit City as the world's leader in consumer electronics retailing; however, 18 years later, Best Buy now found this position threatened. With $51 billion in revenues, it was still the biggest CE retailer, but sales were flat and profits had collapsed. Meanwhile, Amazon's sales in Best Buy's categories were growing at more than 50% p.a. and its total sales, at $48 billion, were approaching those of Best Buy. As Wal-Mart cherry-picked popular items for steep discounts and Amazon encouraged consumers to compare prices using smart phones, Best Buy was becoming a showroom for lower cost retail models. International expansion was struggling and domestic sales of digital televisions were cooling. Although the popularity of mobile devices suggested easy growth, many devices were sold by telephone service providers, creating increased retail competition. To add to Best Buy's problems, on April 10, 2012, CEO Brian Dunn resigned after an investigation into his personal conduct. On June 7, 2012, Dick Schulze, the firm's founder, who had navigated the company through many strategic changes since 1966, also decided to leave and "explore all available options" for his 20.1% stake in the company. Best Buy had seen off many competitive challenges in the past. Would it be able to fend off these challengers and maintain its position?

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