First Look

September 23, 2008

Online advertising is failing users and advertisers both. Such ads often provide the gateway for computer security problems ranging from click fraud to spyware. And "malvertisement" banner ads purport to sell anti-spyware software, but only make matters worse, says HBS professor Ben Edelman. Edelman describes the ad landscape and explains how users and advertisers can protect themselves in a working paper available for download, "Securing Online Advertising: Rustlers and Sheriffs in the New Wild West." To wit: "Online advertising remains a 'Wild West' where users are faced with ads they ought not to believe and where firms overpay for ads without getting what they were promised in return. But it doesn't have to be this way. Enforcement by public agencies is starting to remind advertisers and ad networks that long-standing consumer protection rules still apply online. And as advertisers become more sophisticated, they're less likely to tolerate opaque charges for services they can't confirm they received." Also up this week, an article on individual willingness to take drugs intended to enhance fundamental traits, and another on managing proprietary and shared platforms. Business cases describe Citigroup, the World Wildlife Fund U.S., and other organizations facing a turning point.
— Martha Lagace

Working Papers

Securing Online Advertising: Rustlers and Sheriffs in the New Wild West


Read the news of recent computer security guffaws, and it's striking how many problems stem from online advertising. Advertising is the bedrock of websites that are provided without charge to end users, so advertising is everywhere. But advertising security gaps are equally widespread: from "malvertisement" banner ads pushing rogue anti-spyware software, to click fraud, to spyware and adware, the security lapses of online advertising are striking. During the past five years, I have uncovered hundreds of online advertising scams defrauding thousands of users—not to mention all the web's top merchants. This chapter summarizes some of what I've found—and what users and advertisers can do to protect themselves. (Forthcoming in Beautiful Security, O’Reilly Media.)

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From Social Control to Financial Economics: The Linked Ecologies of Economics and Business in Twentieth Century America


As the main producers of managerial elites, business schools represent strategic research sites for understanding the formation of economic practices and representations. This article draws on historical material to analyze the changing place of economics in American business education over the course of the twentieth century. We use the Wharton School as an illustration of the earliest trends and dilemmas (c. 1900–1930), when business schools found themselves caught between their business connections and their striving for moral legitimacy in higher education. We show how several of the school's leaders were closely involved in progressive reforms and presided over the development of the empirical social sciences to address questions of labor regulation and control within manufacturing industries. Next, we look at the creation of the Carnegie Tech Graduate School of Industrial Administration after World War II. This episode illustrates the increasingly successful claims of social scientists, backed by philanthropic foundations, on business education and the growing appeal of "scientific" approaches to decision-making and management. We also show that these transformations were homologically related to changes in the prevailing mode of governance in the American economy: business schools became essential sites for the development of tools and methods for the management of the new large, diversified conglomerates (input-output approaches, linear programming, forecasting). Finally, we argue that the rise of the Chicago Business School from the 1960s onward marks the decisive ascendancy of economics, and particularly financial economics, in business education over the other behavioral disciplines, as well as the decisive ascendancy of business schools as producers of economic knowledge. By following teacher-student networks, we also document the key role of business schools in diffusing "Chicago-style" economic approaches—offering support for anti-regulatory approaches and popularizing narrowly financial understandings of the firm (Fligstein 1990, 2002), which sociologists have described as characteristic of the modern neo-liberal regime.

No PDF is available for download at this time.

Social Categories and Minimizing Joint Gains: An Ethical Dilemma?


People prefer maximizing joint gains (e.g., self gets $600 / counterpart gets $800) instead of receiving lower amounts (e.g., self and other each get $500) in their transactions (Bazerman, Loewenstein & White, 1992). The present analysis, however, shows that the perceived value of such tradeoffs—the transaction utility (Thaler, 1985; 1999)—depends on whether the allocation occurs within a particular social category line (e.g., recipients are all Americans) or across social category lines (e.g., recipients are American and French). Studies 1 and 2 predicted and found that individuals tended to maximize such joint gains only when the allocation was within social category lines but not across them. Study 3 further showed that even outside observers, who were not members of the focal social categories, also had greater difficulty maximizing profit across social category lines. Finally, Study 4 showed that the transaction utility of maximizing joint gains required additional compensation across social category lines than it did within them. The results thus broach an ethical dilemma for managers: Is it appropriate to let mere social category lines interfere with profit maximization?

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Variation in Experience and Team Familiarity: Addressing the Knowledge Acquisition-Application Problem


Prior work in organizational learning has failed to find a consistent effect of variation in experience on performance. While some studies find a positive relationship between these two variables, others find no effect or even a negative relationship. In this paper, we suggest that the differences in prior findings may be due to the failure to separate the processes of knowledge acquisition and knowledge application. While variation in experience may permit the acquisition of valuable knowledge, additional mechanisms may be necessary to enable the subsequent application of that knowledge in a team setting. We hypothesize that team familiarity—prior experience working with team members—may be such a mechanism. We use detailed project- and individual-level data from an Indian software services firm to examine the effects of team familiarity and variation in market experience on multiple measures of performance for over 1,100 software development projects. Consistent with prior work, we find mixed results for the effect of variation in experience on performance. We do, however, see evidence of a moderating effect of team familiarity on the relationship between these two variables. Our paper identifies one mechanism for uniting knowledge acquisition and knowledge application and provides insight into how the management of experience accumulation affects the development of organizational capabilities.

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Cases & Course Materials

Information Use by Managers in Decision Making: A Team Exercise

Harvard Business School Exercise 609-027

The purpose of this exercise is to explore the challenges of information collection and analysis. Students will, experientially, gain insights into how information is used and be exposed to a framework for identifying and evaluating information. In addition, the exercise will enable students to explore the processes and dynamics of teamwork in decision-making, the challenges of group decision-making, and the strategies for engaging team learning skills and attitudes to improve both the quality of and commitment to group decisions.

Purchase the exercise: b01/en/common/item_detail.jhtml?id=609027

Kmart and ESL Investments (A)

Harvard Business School Case 209-044

A major bankrupt retailer is poised to emerge from Chapter 11. Two activist hedge funds ("vulture investors") will own over 50% of reorganized Kmart's common stock, based on prior investments in Kmart's debt claims, and an infusion of new equity financing. The Chapter 11 process has generated both costs and benefits for the company. Its future profitability, and the value of the reorganized business, are both highly uncertain.

Purchase the case: b01/en/common/item_detail.jhtml?id=209044

Leading Citigroup (A)

Harvard Business School Case 308-001 

The (A) case describes a series of controversial events and alleged misdeeds that placed Citigroup in the public spotlight and launched investigations into the company's business practices by regulators in Japan and Europe in the fall of 2004. CEO Chuck Prince must decide what to do to right the company and restore its reputation.

Purchase the case: b01/en/common/item_detail.jhtml?id=308001

Leading Citigroup (B)

Harvard Business School Case Supplement 308-002

The (B) case describes the actions taken by Citigroup CEO Chuck Prince and his management team to right the company in the wake of the controversies and alleged misdeeds described in the (A) case.

Purchase the supplement: b01/en/common/item_detail.jhtml?id=308002

North Goes East

Harvard Business School Case 208-136 

In August 2006, Magnus Lofgren and Robert Provine, managing directors and co-founders of the "North Real Estate Opportunities Fund," need to decide which real estate investment the Fund should pursue as its first project. The Fund's target region, Central and Eastern Europe, was changing rapidly and returns in some of the more developed regions started to resemble those generated in Western Europe. Yet, the two partners had managed to identify several projects in different countries that promised to generate the Fund's targeted Internal Rates of Return at or above 20% annually. They now had to decide which opportunity was the best match to the Fund's investment profile and showed the highest economic promise.

Purchase the case: b01/en/common/item_detail.jhtml?id=208136

World Wildlife Fund US

Harvard Business School Case 308-035

World Wildlife Fund US is a leading international conservation nonprofit that operates within a global network of WWF organizations. This case examines WWF US's strategy to achieve its mission of protecting natural wildlife and resources. In contrast to traditional approaches in which WWF country programs operated relatively independently, the new strategy involves integrating WWF US more fully within the global WWF network, and fostering longer-term, trust-based relationships among all partner organizations toward their shared conservation goals. The case highlights the Tesso Nilo conservation project, which brought together various WWF partners to stop illegal logging in Sumatra and revive its wildlife environment to illustrate a network approach within a global multisite nonprofit.

Purchase the case: b01/en/common/item_detail.jhtml?id=308035



Warmth and Competence as Universal Dimensions of Social Perception: The Stereotype Content Model and the BIAS Map


The stereotype content model (SCM) defines two fundamental dimensions of social perception, warmth and competence, predicted respectively by perceived competition and status. Combinations of warmth and competence generate distinct emotions of admiration, contempt, envy, and pity. From these intergroup emotions and stereotypes, the behavior from intergroup affect and stereotypes (BIAS) map predicts distinct behaviors: active and passive, facilitative and harmful. After defining warmth/communion and competence/agency, the chapter integrates converging work documenting the centrality of these dimensions in interpersonal as well as intergroup perception. Structural origins of warmth and competence perceptions result from competitors judged as not warm, and allies judged as warm; high status confers competence and low status incompetence. Warmth and competence judgments support systematic patterns of cognitive, emotional, and behavioral reactions, including ambivalent prejudices. Past views of prejudice as a univalent antipathy have obscured the unique responses toward groups stereotyped as competent but not warm or warm but not competent. Finally, the chapter addresses unresolved issues and future research directions.

Stereotype Content Model across Cultures: Universal Similarities and Some Differences


The stereotype content model (SCM; Fiske, Cuddy, Glick, & Xu, 2002) proposes potentially universal principles of societal stereotypes and their relation to social structure. Here, the SCM reveals theoretically grounded, cross-cultural, cross-groups' similarities and one difference across 10 non-U.S. nations. Seven European (individualist) and three East Asian (collectivist) nations (N=1028) support three hypothesized cross-cultural similarities: (a) perceived warmth and competence reliably differentiate societal group stereotypes; (b) many outgroups receive mixed stereotypes (high on one dimension; low on the other); and (c) high-status groups stereotypically are competent, and competitive groups stereotypically lack warmth. Data uncover one consequential cross-cultural difference: (d) the more collectivist cultures do not locate reference groups (ingroups and societal prototype groups) in the most positive cluster (high-competence/high-warmth), unlike individualist data. This demonstrates outgroup derogation without obvious reference-group favoritism. SCM is a pancultural tool for predicting group stereotypes from structural relations with other groups in society and comparing across societies.

Managing Proprietary and Shared Platforms


In a platform-mediated network, users rely on a common platform, provided by one or more intermediaries, that encompasses infrastructure and rules required by users to transact with each other. A fundamental design decision for firms that aspire to develop platform-mediated networks is whether to preserve proprietary control or share their platform with rivals. A proprietary platform has a single provider that solely controls its technology, for example, Federal Express, Apple Macintosh, or Google. With a shared platform, such as Visa, DVD, or Linux, multiple firms collaborate in developing the platform's technology then compete in offering users differentiated but compatible versions of the platform. This article examines factors that favor proprietary versus shared models when designing new platforms, then explains how management challenges differ for proprietary and shared platform during network mobilization.

The Effects of Disseminating Relative Performance Feedback in Tournament and Individual Performance Compensation Plans


This study investigates the effects of relative performance feedback and incentive compensation method on performance. We examine whether the presence and the content of relative performance feedback have different effects on performance when participants are compensated via a tournament or an individual incentive scheme. Our experimental results show a disordinal interaction between incentive scheme and feedback. Specifically, providing relative performance feedback improves the mean performance of participants compensated under an individual incentive scheme regardless of the precision or specific content of the feedback. In contrast, providing relative performance feedback deteriorates the mean performance of participants compensated under a tournament incentive scheme but only if the feedback is sufficiently precise. Supplementary analysis suggests that this deterioration in performance is due to ineffective task strategies rather than reduced effort. We also find that in the absence of relative performance feedback, participants compensated under a tournament incentive scheme perform better, and their performance improves to a greater extent over time, compared to participants compensated under an individual incentive scheme. These results have implications for the design of accounting, control, and reporting systems in firms.

How Can Decision Making Be Improved?


The optimal moment to address the question of how to improve human decision-making has arrived. Thanks to 50 years of research by judgment and decision-making scholars, psychologists have developed a detailed picture of the ways in which human judgment is bounded. This paper argues that the time has come to focus attention on the search for strategies that will improve bounded judgment because decision-making errors are costly and are growing more costly, decision makers are receptive, and academic insights are sure to follow from research on improvement. In addition to calling for research on improvement strategies, this paper organizes the existing literature pertaining to improvement strategies, highlighting promising directions for future research.

The Determinants of Analyst-Firm Pairings


This paper explores the determinants of observed analyst-firm pairings. We adopt an analyst/brokerage house perspective that allows us to examine not only firm-level characteristics as in prior research but also attributes of the analyst and the analyst's brokerage house that may drive these pairings. Our empirical analyses provide two primary insights. First, analyst characteristics such as industry expertise and relative experience, and brokerage house characteristics such as continuity of coverage, are associated with the decision to follow a firm. Second, there is substantial variation in the association between firm, analyst, and brokerage house characteristics and the decision to follow a firm; this occurs across individual analysts as well as across different types of brokerage houses. Overall, our results provide further insights into the factors leading to observed analyst-firm pairings and indicate that these factors vary across analysts and their brokerage houses—suggesting richer associations than the average firm-level relationships documented by prior research.

Preferences for Enhancement Pharmaceuticals: The Reluctance to Enhance Fundamental Traits


Four studies examined the willingness of young, healthy individuals to take drugs intended to enhance their own social, emotional, and cognitive traits. We found that people were much more reluctant to enhance traits believed to be more fundamental to self-identity (e.g., social comfort) than traits considered less fundamental to self-identity (e.g., concentration ability). Moral acceptability of a trait enhancement strongly predicted people's desire to legalize the enhancement but not their willingness to take the enhancement. Ad taglines that framed enhancements as enabling rather than enhancing the fundamental self increased people's interest in a fundamental trait enhancement and eliminated the preference for less fundamental over more fundamental trait enhancements.