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    First Look: September 22

    First Look

    22 Sep 2009
    As health-care reform is debated in the U.S. Congress, a quieter transformation is already under way in hospitals and clinics as the structure of payment goes under the microscope: "[O]rganizations that have long been paid for transactions, such as visits or procedures, are beginning—at least in some markets—to be paid instead for producing outcomes," write HBS senior lecturer Richard M.J. Bohmer, MD, and Thomas H. Lee, MD, in the New England Journal of Medicine. Consequently, the skills of general management and a team approach to improve processes are ever more necessary and valuable. Their article, "The Shifting Mission of Health Care Delivery Organizations," suggests that major assets for hospitals and clinics will be less individual clinical knowledge on the part of physicians but more how the knowledge is shared and acted upon for the betterment of patients. And responsibilities will change along the way: "A shift in organizational mission from a service to an outcome orientation will necessitate fundamental change at all levels in health care delivery organizations, including the roles of clinicians and boards of trustees, the organization's internal structure, and the design of its patient care operations," write Bohmer and Lee. This week also brings papers and articles on topics ranging from business model reconfiguration to the financing of R&D and innovation. Cases tackle corporate social responsibility, best practices in team leadership, and more! —Martha Lagace
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    Working Papers

    Mixed Source

    Authors:Ramon Casadesus-Masanell and Gastón Llanes
    Abstract

    We study competitive interaction between profit-maximizing firms that sell software and complementary goods or services. In addition to tactical price competition, we allow firms to compete through business model reconfigurations. We consider three business models: the proprietary model (where all software modules offered by the firm are proprietary), the open source model (where all modules are open source), and the mixed source model (where a few modules are open). When a firm opens one of its modules, users can access and improve the source code. At the same time, however, opening a module sets up an open source (free) competitor. This hampers the firm's ability to capture value. We analyze three competitive situations: monopoly, commercial firm vs. non-profit open source project, and duopoly. We show that (i) firms may become "more closed" in response to competition from an outside open source project; (ii) firms are more likely to open substitute, rather than complementary, modules to existing open source projects; (iii) when the products of two competing firms are similar in quality, firms differentiate through choosing different business models; and (iv) low-quality firms are generally more prone to opening some of their technologies than firms with high-quality products.

    Download the paper: http://www.hbs.edu/research/pdf/10-022.pdf

    'I Read Playboy for the Articles': Justifying and Rationalizing Questionable Preferences

    Authors:Zoë Chance and Michael I. Norton

    An abstract is unavailable at this time.

    Download the paper: http://www.hbs.edu/research/pdf/10-018.pdf

    The Financing of R&D and Innovation

    Authors:Bronwyn H. Hall and Josh Lerner
    NBER Working Paper Series, No. 15325, September 2009
    Abstract

    Evidence on the "funding gap" for investment innovation is surveyed. The focus is on financial market reasons for underinvestment that exist even when externality-induced underinvestment is absent. We conclude that while small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital, the evidence for high costs of R&D capital for large firms is mixed. Nevertheless, large established firms do appear to prefer internal funds for financing such investments and they manage their cash flow to ensure this. Evidence shows that there are limits to venture capital as a solution to the funding gap, especially in countries where public equity markets for venture capital exit are not highly developed. We conclude by suggesting areas for further research.

    Download the paper from SSRN ($5): http://papers.nber.org/papers/w15325

     

    Publications

    How Actors Change Institutions: Towards a Theory of Institutional Entrepreneurship

    Authors:Julie Battilana, Bernard Leca, and Eva Boxenbaum
    Publication:The Academy of Management Annals 3 (June 2009): 65-107
    Abstract

    As well as review the literature on the notion of institutional entrepreneurship introduced by Paul DiMaggio in 1988, we propose a model of the process of institutional entrepreneurship. We first present theoretical and definitional issues associated with the concept and propose a conceptual account of institutional entrepreneurship that helps to accommodate them. We then present the different phases of the process of institutional entrepreneurship from the emergence of institutional entrepreneurs to their implementation of change. Finally, we highlight future directions for research on institutional entrepreneurship and conclude with a discussion of its role in strengthening institutional theory as well as, more broadly, the field of organization studies.

    Purchase the article ($15): http://www.informaworld.com/smpp/content~db=all~content=a913246271

    The Shifting Mission of Health Care Delivery Organizations

    Authors:Richard M.J. Bohmer and Thomas H. Lee
    Publication:New England Journal of Medicine 361, no. 6 (August 5, 2009)

    An abstract is unavailable at this time.

    Read the article: http://healthcarereform.nejm.org/?p=1347

    Dividend Taxes and International Portfolio Choice

    Authors:Mihir Desai and Dhammika Dharmapala
    Publication:The Review of Economics and Statistics (forthcoming)
    Abstract

    This paper investigates how dividend taxes influence portfolio choices, using the response to the distinctive treatment of a subset of foreign dividends in the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003. An open-economy after-tax capital asset pricing model is used to derive the hypothesis that JGTRRA should lead to a portfolio reallocation by U.S. investors towards equities in tax-favored countries. A difference-in-difference analysis that compares U.S. equity holdings in affected and unaffected countries finds a substantial portfolio reallocation towards the former. This effect cannot be explained by several potential alternative hypotheses, including differential changes to the preferences of American investors, differential changes in investment opportunities, differential time trends in investment, changed tax evasion behavior, or changes in stock prices associated (or contemporaneous) with JGTRRA.

    Download the paper from SSRN ($5): http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1000680

    Geography, Poverty and Conflict in Nepal

    Authors:Quy-Toan Do and Lakshmi Iyer
    Publication:Journal of Peace Research (forthcoming)
    Abstract

    This paper conducts an empirical analysis of the geographic, economic, and social factors that contributed to the spread of civil war in Nepal over the period 1996-2006. This within-country analysis complements existing cross-country studies on the same subject. Using a detailed dataset to track civil war casualties across space and over time, several patterns are documented. Conflict-related deaths are significantly higher in poorer districts and in geographical locations that favor insurgents, such as mountains and forests; a 10-percentage point increase in poverty is associated with 25-27 additional conflict-related deaths. This result is similar to that documented in cross-country studies. In addition, the relationship with poverty and geography is similar for deaths caused by the insurgents and deaths caused by the state. Furthermore, poorer districts are likely to be drawn into the insurgency earlier, consistent with the theory that a lower cost of recruiting rebels is an important factor in starting conflict. On the other hand, geographic factors are not significantly associated with such onset, suggesting that they instead contribute to the intensity of violence once conflict has started. Finally, in contrast with some cross-country analyses, ethnic and caste polarization, land inequality, and political participation are not significantly associated with violence.

    Clusters of Entrepreneurship

    Authors:Edward L. Glaeser, William R. Kerr, and Giacomo A.M. Ponzetto
    Publication:Journal of Urban Economics (forthcoming)
    Abstract

    Employment growth is strongly predicted by smaller average establishment size, both across cities and across industries within cities, but there is little consensus on why this relationship exists. Traditional economic explanations emphasize factors that reduce entry costs or raise entrepreneurial returns, thereby increasing net returns and attracting entrepreneurs. A second class of theories hypothesizes that some places are endowed with a greater supply of entrepreneurship. Evidence on sales per worker does not support the higher returns for entrepreneurship rationale. Our evidence suggests that entrepreneurship is higher when fixed costs are lower and when there are more entrepreneurial people.

    Download the paper: http://www.hbs.edu/research/pdf/10-019.pdf

    Breakthrough Inventions and Migrating Clusters of Innovation

    Author:William R. Kerr
    Publication:Journal of Urban Economics (forthcoming)
    Abstract

    We investigate the speed at which clusters of invention for a technology migrate spatially following breakthrough inventions. We identify breakthrough inventions as the top one percent of U.S. inventions for a technology during 1975-1984 in terms of subsequent citations. Patenting growth is significantly higher in cities and technologies where breakthrough inventions occur after 1984 relative to peer locations that do not experience breakthrough inventions. This growth differential in turn depends on the mobility of the technology's labor force, which we model through the extent that technologies depend upon immigrant scientists and engineers. Spatial adjustments are faster for technologies that depend heavily on immigrant inventors. The results qualitatively confirm the mechanism of industry migration proposed in models like Duranton (2007).

    Shaping Online Consumer Choice by Partitioning the Web

    Authors:Jolie M. Martin and Michael I. Norton
    Publication:Psychology and Marketing 26, no. 10 (October 2009): 908-926
    Abstract

    This research explores how partitioning attributes in online search interfaces changes the valuations of those attributes—and impacts subsequent choice—such that attributes that are displayed as separate categories tend to receive greater decision weight than attributes grouped under umbrella categories. Across several choice domains—cars, dates, and hotels—we show that different attribute partitions impact the importance assigned to attributes (Studies 1 and 2), as well as consumer choices (Studies 3 and 4). We argue that these effects are due in part to users' willingness to use the implicit recommendations of interface designers to determine the importance of attributes, a willingness that extends to following explicit recommendations of online agents based on those attributes (Study 5).

     

    Cases & Course Materials

    Genzyme's CSR Dilemma: How to Play Its HAND

    Harvard Business School Case 910-407

    Genzyme, a global biotechnology company, launches a program to develop therapies for neglected diseases (e.g., malaria, TB), giving away the intellectual property. This case focuses on the decision of which diseases, which partnerships, and which markets should management decide to fund. But the bigger issue is how this program, developed under the umbrella role Genzyme's corporate social responsibility, fits into its global competitive strategy.

    Purchase this case:
    http://cb.hbsp.harvard.edu/cb/product/910407-PDF-ENG

    Leading Teams Note

    Harvard Business School Module Note 410-051

    This note, which describes the architecture and processes that characterize effective teams, begins by detailing the steps involved in designing a team, from diagnosing the complexity, interdependence, and objectives of the task to harnessing the key resources teams need from their environment. It describes the qualities to search for when selecting team members, including finding the right number of people, individual skills along both technical and interpersonal dimensions, and a mix of skills appropriate for the task. Once the team is designed, team leaders and members need to shape and monitor team processes, starting with the team launch. Describes how to diagnose emergent team processes such as information exchange, collaboration, decision making, impression formation, and underlying identity dynamics. Includes steps managers can take to improve dysfunctional team processes such as restructuring and shaping the social forces within the team. Ends with a discussion of bridging differences in teams across both geographic and cultural divides.

    Purchase this note:
    http://cb.hbsp.harvard.edu/cb/product/410051-PDF-ENG

    Radiant Cosmetics: What's in a Pout?

    Harvard Business School Case 310-003

    In 2006, Radiant Cosmetics president and CEO, Margaret Clark, was contemplating the launch of a new, lip-plumping product called "Four Carat Pout." Clark faced many decisions concerning the launch: marketing the product as a luxury brand or a retail item; how to position the product as a possible starting point for an expanded anti-aging line; and how to market and distribute the product internationally, particularly in France. Issues of intellectual property were also essential to the launch—in the past, Radiant had faced problems with cosmetic counterfeits. With the launch of the new product, Four Carat Pout, Clark needed to decide whether to pursue patents, copyrights, and/or trademarks for various aspects of the new product. The case focuses on the interplay between marketing strategies and intellectual property issues in international fashion products.

    Purchase this case:
    http://cb.hbsp.harvard.edu/cb/product/310003-PDF-ENG

    SK Telecom: Pursuing Happiness through Corporate Social Responsibility

    Harvard Business School Case 410-042

    Since 2006, SK Telecom has worked to develop strategic corporate social responsibility (CSR) programs that are aligned with its business operations and corporate mission. The case tracks the original assessment process the company went through and successive organizational design efforts to align its CSR strategy and implementation architecture. In 2009, the company is going through reorganization, and the protagonist is considering how well the existing structure of SK Telecom's CSR efforts supports its strategy. The key dilemma he is faced with is whether to change the design of the CSR organization, or perhaps revise the CSR strategy to better match the existing organizational architecture.

    Purchase this case:
    http://cb.hbsp.harvard.edu/cb/product/410042-PDF-ENG

    Steel Street

    Harvard Business School Case 210-010

    The case involves repositioning an old 6-story warehouse in Pittsburgh and many of the issues of rehabilitation and selecting and managing the development team especially in a world of capital market uncertainty. The case also demonstrates the alignment of interests of the players, the construction process, and the various methods available to contract with the general contractor including lump sum, cost-plus, and guaranteed maximum price.

    Purchase this case:
    http://cb.hbsp.harvard.edu/cb/product/210010-PDF-ENG

    What Are Business Models, and How Are They Built?

    Harvard Business School Note 610-019

    An abstract is unavailable at this time.

    Purchase this note:
    http://cb.hbsp.harvard.edu/cb/product/610019-PDF-ENG

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