First Look

September 21, 2010

Although much empirical research is devoted to exploring how information communication technologies affect firm organization, much is to be learned by separating information from communication, according to new research. Better information access pushes decisions down, while better communication pushes decisions up, report the researchers: Nicholas Bloom of Stanford, Raffaella Sadun of Harvard Business School, and Luis Garicano and John Van Reenen of the London School of Economics. "This difference matters not just for firms' organization and productivity, but also in the labor market, as information access and communication technology changes can be expected to affect the wage distribution in opposite directions." Their paper: The Distinct Effects of Information Technology and Communication Technology on Firm Organization . As popular as Blue Man Group is, even Chris Wink, Matt Goldman, and Phil Stanton can't escape the consequences of a severe economic downturn. The new case, Blue Man Group: Creativity, Life and Surviving an Economic Meltdown , looks at how the group evolved and its response to hard times. The new edited volume A History of Irish Economic Thought is the first systematic study of Irish political economy. Experts consider the contributions of major historical figures in Irish political economy and analyze the various schools of thought. Edited by Renee Prendergast, Queen's University Belfast; Thomas Boylan, National University of Ireland, Galway; and John D. Turner, a visiting scholar at Harvard Business School.
— Sean Silverthorne


A History of Irish Economic Thought


For a country that can boast a distinguished tradition of political economy from Sir William Petty through Swift, Berkeley, Hutcheson, Burke, and Cantillon through to that of Longfield, Cairnes, Bastable, Edgeworth, Geary, and Gorman, it is surprising that no systematic study of Irish political economy has been undertaken. In this book the contributors redress this glaring omission in the history of political economy, for the first time providing an overview of developments in Irish political economy from the seventeenth to the twentieth century. Logistically this is achieved through the provision of individual contributions from a group of recognized experts, both Irish and international, who address the contribution of major historical figures in Irish political economy along the analysis of major thematic issues, schools of thought, and major policy debates within the Irish context over this extended period.

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Trust and Collaboration in the Aftermath of Conflict: The Effects of Contract Structure


Leveraging a longitudinal dataset concerning 102 inter-firm disputes, we evaluate the effects of contract structure on trust and on the likelihood of continued collaboration. We theoretically refine and empirically extend prior research by (a) distinguishing between control and coordination functions of contracts, (b) separating goodwill-based and competence-based trust, and (c) evaluating the effects of contract structure on relational outcomes in the context of disputes. We find that control provisions increase competence-based trust, but reduce goodwill-based trust, resulting in a net decrease in the likelihood of continued collaboration. Coordination provisions increase competence-based trust, leading to an increased likelihood of continued collaboration.

Building a Better America—One Wealth Quintile at a Time


Disagreements about the optimal level of wealth inequality underlie policy debates ranging from taxation to welfare. We attempt to insert the desires of "regular" Americans into these debates by asking a nationally representative online panel to estimate the current distribution of wealth in the United States and to "build a better America" by constructing distributions with their ideal level of inequality. First, respondents dramatically underestimated the current level of wealth inequality. Second, respondents constructed ideal wealth distributions that were far more equitable than even their erroneously low estimates of the actual distribution. Most important from a policy perspective, we observed a surprising level of consensus: all demographic groups—even those not usually associated with wealth redistribution such as Republicans and the wealthy—desired a more equal distribution of wealth than the status quo.

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Working Papers

The Distinct Effects of Information Technology and Communication Technology on Firm Organization


Empirical studies on information communication technologies (ICT) typically aggregate the "information" and "communication" components together. We show theoretically and empirically that this is problematic. Information and communication technologies have very different effects on the decisions taken at each level of an organization. Better information access pushes decisions down, as it allows for superior decentralized decision making without an undue cognitive burden on those lower in the hierarchy. Better communication pushes decisions up, as it allows employees to rely on those above them in the hierarchy to make decisions. Using an original dataset of firms from the U.S. and seven European countries we study the impact of ICT on worker autonomy, plant manager autonomy, and span of control. Consistent with the theory we find that better information technologies (Enterprise Resource Planning, ERP, for plant managers and CAD/CAM for production workers) are associated with more autonomy and a wider span of control. By contrast, communication technologies (like data networks) decrease autonomy for both workers and plant managers. Treating technology as endogenous using instrumental variables (distance from the birthplace of ERP and heterogeneous telecommunication costs arising from different regulatory regimes) strengthens our results.

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Employee Selection as a Control System


Theories from the economics, management control, and organizational behavior literatures predict that when it is difficult to align incentives by contracting on output, aligning preferences via employee selection may provide a useful alternative. This study investigates this idea empirically using personnel and lending data from a financial services organization that implemented a highly decentralized business model. I exploit variation in this organization in whether or not employees are selected via channels that are likely to sort on the alignment of their preferences with organizational objectives. I find that employees selected through such channels are more likely to use decision-making authority in the granting and structuring of consumer loans than those who are not. Conditional on using decision-making authority, their decisions are also less risky ex post. These findings demonstrate employee selection as an important, but understudied, element of organizational control systems.

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Cases & Course Materials

Blue Man Group: Creativity, Life and Surviving an Economic Meltdown

Bhaskar Chakravorti and Shirley M. Spence
Harvard Business School Case 810-108

In 2008, Blue Man Group's three co-founders are facing the prospect of losing not just a business but a way of life they have built together. The case follows the story of Chris Wink, Matt Goldman, and Phil Stanton as they pursue their creative passion and build the Blue Man Group from street performers to a performance arts empire with a global brand. The story has a personal as well as professional dimension to it, including the launch of the Blue School (with their spouses), to provide children with the kind of education they wish they'd had. The immediate challenge is to find a way to survive a major economic downturn. The case is complemented by a video (HBS No. 810-704) with co-founder commentary and extensive live footage of Blue Man performances and the Blue School.

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Remedies for Patent Infringement under U.S. Law

Lena G. Goldberg and Chad M. Carr
Harvard Business School Note 311-020

Under the U.S. Patent Act, a patent owner has a statutory right to exclude others from engaging in the unauthorized production, use, sale, or importation of a patented invention. This note examines how that right is enforced and what remedies a patent owner has when that right is violated.

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Introduction to Mutual Funds

Robert C. Pozen
Harvard Business School Note 310-117

This note is an excerpt from my book The Mutual Fund Business and is an introduction to mutual funds, contrasted with commercial banks.

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