Working Papers
Intra-Industry Foreign Direct Investment
| Authors: | Laura Alfaro and Andrew Charlton |
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Abstract
We use a new firm-level data set that establishes the location, ownership, and activity of 650,000 multinational subsidiaries—close to a comprehensive picture of global multinational activity. A number of patterns emerge from the data. Most foreign direct investment (FDI) occurs between rich countries. The share of vertical FDI (subsidiaries which provide inputs to their parent firms) is larger than commonly thought, even within developed countries. More than half of all vertical subsidiaries are only observable at the four-digit level because the inputs they are supplying are so proximate to their parent firms' final good that they appear identical at the two-digit level. We call these proximate subsidiaries 'intra-industry' vertical FDI and find that their location and activity are significantly different to the inter-industry vertical FDI visible at the two-digit level. These subsidiaries are not readily explained by the comparative advantage considerations in traditional models, where firms locate their low skill production stages abroad in low skill countries to take advantage of factor cost differences. We find that overwhelmingly, multinationals tend to own the stages of production proximate to their final production giving rise to a class of high-skill intra-industry vertical FDI.
Download the paper: http://www.hbs.edu/research/pdf/08-018.pdf
A Taste for Obscurity: An Individual-Level Examination of 'Long Tail' Consumption
| Author: | Anita Elberse |
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Abstract
The idea that online channels facilitate the distribution of a vast assortment of products is undisputed, but what consequence the increased supply will have on consumer demand is heavily debated. Proponents of the "long tail" principle argue that lower transaction and search costs will lead to a shift away from hit content and cause more fragmentation in consumers' choices. This perspective is in sharp contrast with the more established theory of superstars, which predicts that those forces will in fact homogenize consumption patterns, and a few superstar products will emerge as winners in the market place. In this study, using two large customer transactions data sets obtained from an online music service and an online DVD rental business, which together cover over a million products and over 20 million individual transactions, I examine consumption patterns for obscure and hit products. Specifically, I study whether the interest in popular "hit" and unpopular "niche" titles is equally distributed among the customer base, investigate how customers' choice for popular or unpopular titles relates to their appreciation of those titles, and assess the characteristics of customers in the "head" and "tail" of the distribution of choices across titles. I find that a large share of consumers, particularly those who consume with a higher frequency and concentrate on a narrow selection of genres, regularly opt for obscure products likely not available in bricks-and-mortar stores. Casting doubt on the "democratizing" nature of online channels, however, I also show that even for consumers who regularly choose the most obscure products, hit products typically constitute the lion's share of their choices. Moreover, reminiscent of the "double jeopardy" concept, consumers of obscure products generally appreciate those products less than the more popular products. I discuss managerial implications.
No paper available for download.
Fair (and Not So Fair) Division
| Author: | John W. Pratt |
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Abstract
Drawbacks of existing procedures are illustrated and a method of efficient fair division is proposed that avoids them. Given additive participants' utilities, each item is priced at the geometric mean (or some other function) of its two highest valuations. The utilities are scaled so that the market clears with the participants' purchases proportional to their entitlements. The method is generalized to arbitrary bargaining sets and existence is proved. For two or three participants, the expected utilities are unique. For more, under additivity, the geometric mean separates the prices where uniqueness holds and where it fails; it holds for the geometric mean except in one case where refinement is needed.
Download the paper: http://www.hbs.edu/research/pdf/08-016.pdf
Front-line Staff Perspectives on Opportunities for Improving the Safety and Efficiency of Hospital Work Systems
| Authors: | Anita L. Tucker, Sara J. Singer, Jennifer E. Hayes, and Alyson Falwell |
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Abstract
Objective. To link safety-related concerns raised by frontline staff about hospital work systems (operational failures) to the safety and efficiency of hospitals, and to contrast these concerns with national patient safety initiatives.
Data Sources. Primary data include semi-structured interviews with frontline staff and 1732 staff identified operational failures at 20 U.S. hospitals from 2004-2006.
Study Design. Senior-level managers observed frontline staff work with particular attention to patient safety issues and facilitated open-discussion meetings with employees about their safety related concerns.
Data Collection. Hospitals submitted data on the operational failures they identified through their interactions with frontline workers. Data were analyzed for type of failure and frequency of occurrence. Interviews were conducted with frontline staff.
Principal Findings. The two most frequent categories of operational failures, equipment/supplies and facility issues, posed safety risks and diminished staff efficiency, but have not been priorities in national initiatives.
Conclusions. Our study suggests an underutilized strategy for improving patient safety and staff efficiency: leveraging frontline staff experiences with work systems to identify and remove operational failures. In contrast to the perceived tradeoff between safety and efficiency, fixing operational failures can yield benefits for both. Thus, prioritizing improvement of work systems in general, rather than focusing more narrowly on specific clinical conditions, can increase safety and efficiency of hospitals.
No paper available for download.
Cases & Course Materials
Austin, Blakeley, & Cambridge, LLC
Harvard Business School Case 207-098
The founding partners of ABC, LLC, one of the leading private equity firms in the world, are trying to understand why some of the other top firms in the business, such as KKR and Apollo, have been tapping the public equity markets for their own funds, and whether they should do the same. They are also pondering how to monetize their own stake in the firm, and whether taking the firm itself public may be a viable option.
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Baker & McKenzie (A): A New Framework for Talent Management
Harvard Business School Case 408-008
Describes the process by which the largest law firm in the world developed a unique framework for personnel management. In 2004, John Conroy is about to take the reigns as the leader of Baker & McKenzie, the largest law firm in the world by employees, with offices in 38 different countries. Facing an intensifying war for talent and associate retention concerns in some offices, Conroy has spearheaded the development of a framework for guiding the hiring, development, and retention of employees. As he is getting ready to introduce his framework at the firm's annual meeting, however, he faces many questions about its implementation. Could a single framework effectively apply to lawyers across so many different regions and cultures? Had this framework properly identified the attributes needed to succeed at Baker & McKenzie? How would the firm's hundreds of partners react? Offers the industry- and firm-specific content necessary for students to explore these questions and more.
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Baker & McKenzie (B): A New Framework for Talent Management
Harvard Business School Supplement 408-009
No abstract available.
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Codelco Copper Mines
Harvard Business School Case 608-053
Codelco was a Chilean copper-mining company, widely considered to be one of the most professionally managed firms in South America in spite of the fact that it was 100% government-owned. A $10.5 billion company in 2005, Codelco faced the challenge of incorporating information technology into its production processes, which had historically been very manual in nature. CEO Juan Villarzu's initial turnaround attempts introduced a customer-centric corporate culture to his ranks, but he was still challenged by how to create an outsourcing strategy given his location and the traditionally low IT-to-total-spending ratio in the mining industry. Villarzu envisioned moving to a robust IT architecture, enhancing the solutions that were available, identifying further needs in the company and deciding how to fix them, and working together with Codelco's business processes to assess, plan, and build new IT projects.
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Dell Computers (B): The Transition
Harvard Business School Supplement 607-081
The case presents the outcome of the (A) case and explores challenges in the PC industry up to early 2007. Michael Dell's return as CEO is also discussed.
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Dollar General Going Private
Harvard Business School Case 108-015
Intended to improve students' understanding and encourage their use of financial statement analysis. The context is Dollar General Corporation's acquisition by private equity sponsor KKR, which took the company private in 2007. Although the proposed merger generated a 30% premium over the stock price at the time, and the enterprise value to EBITDA multiple was significantly higher than comparable transaction multiples in the retail industry, some shareholders claimed that the price was "grossly inadequate," making the decision whether to approve the transaction a difficult one for shareholders generally.
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Ernesto Tornquist: Making a Fortune on the Pampas
Harvard Business School Case 807-155
Examines the career of Ernesto Tornquist, a cosmopolitan financier considered to be the most significant entrepreneur in Argentina at the end of the 19th century. Tornquist created a diversified business group, linked to the political elite, which integrated Argentina into the trading and financial networks of the first global economy. Provides an opportunity to understand why Argentina was such a successful economy at this time, and to debate whether its very success laid the basis for the country's subsequent poor economic performance.
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Gome Electronics: Evolving the Business Model
Harvard Business School Case 308-026
After 20 years of expansion, Gome Electronics has become China's largest consumer electronics retailer. It has opened stores in almost every province in China, acquired some of its competitors, and went public in Hong Kong. However, it has begun to experience a slowdown in growth as sales per-square-meter have declined. The company is now being challenged to develop new ideas for growth, including experimenting with its product mix, renegotiating its relationships with suppliers, and developing new business models to maximize profitability.
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IBM's Decade of Transformation: Uniting Vision and Values
Harvard Business School Supplement 807-030
No abstract available.
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Lightspeed Venture Partners—International Expansion
Harvard Business School Case 108-010
Looks at various international expansion models for a venture capital firm based in Silicon Valley. Lightspeed Venture Partners believed that India had tremendous potential for venture capital returns—the question was how best to tap into that potential while also growing the firm's presence in the U.S., Israel, and China. The venture firm had recently hired partners in Israel and China, and subsequently opened offices in both countries. The firm was contemplating hiring a third international partner in India and potentially opening a third foreign office. This model seemed to be working in the other two countries, but other U.S. venture firms were entering India in a more aggressive manner. Some venture firms were purchasing local firms and raising money for dedicated India funds. Others were hiring a team of two or three local investors at one time. Lightspeed partners wondered which was the best long-term solution for their firm.
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Manila Water Company
Harvard Business School Case 508-004
In 1997, the Philippines government privatized its water utility in the metropolitan Manila area. The East Zone concession was won by Manila Water Company and the West Zone concession by Maynilad Water Services. Over the next decade, Manila Water turned in an impressive and profitable performance, while Maynilad failed. Describes the management actions of Manila Water and poses the question of whether, and how much, they should bid for the vacated West Zone concession.
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Pinnacle Ventures
Harvard Business School Case 808-048
Describes a prospective "venture-debt" loan to a new venture from the perspective of Patrick Lee, a principal at Pinnacle Ventures. Forces students to grapple with the nature of financial risk in the start-up firm and assess the prospective risks and returns to a lender to such a firm. To reach a perspective on these issues, students need to assess the existing pro-forma cash flows of the venture-backed firm, overlay the cash-flow implications of a venture debt loan, and assess how much additional "runway" (months till cash runs out) the venture debt will provide. Students must also look at the prospective returns to the venture debt firm from the warrants and the option to invest in follow-on financings that is provided to Pinnacle as part of the loan. Thus, they must look at risk and return from the prospective of both parties. Also provides information on the returns to venture capital, venture debt, and other forms of private equity, and asks students to address the issue of what the risk and return in these various private-equity asset classes has been and is likely to be.
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The Politics and Economics of Accounting for Goodwill at Cisco Systems
Harvard Business School Case 108-021
Studies the role of Cisco in setting current U.S. accounting standards for acquisitions and goodwill. Explores two Cisco acquisitions, one under pooling-of-interests accounting, the other under purchase method accounting.
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Saskatchewan Wheat Pool 2005
Harvard Business School Case 906-402
CEO Mayo Schmidt had just guided his firm through five difficult years. Survival had come with the difficult decision to change the 80-year-old agricultural cooperative into a Canadian business corporation. The Saskatchewan Wheat Pool (SWP) now faced the future with a new financial structure, world-class assets, a proven management team, a sound balance sheet, and access to capital for stability and expansion. In the face of increasing global grain demand and new technology-based product possibilities, Schmidt was convinced that, as a producer, Canada would have a long-term advantage because of its history of high-quality grain production. Further, he believed that SWP, with its deep farmer relationships and state-of-the-art infrastructure, was ideally positioned to lead the development of identity-preserved value chains. How should Schmidt build on the SWP's unique strengths to create a company that would flourish and prosper for the next 80 years?
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Secom: Managing Information Security in a Risky World
Harvard Business School Case 308-015
Examines the type of security that is appropriate for an Internet company to have on its site. Focuses on a 20-person electronic e-commerce company trying to decide what parts of the information security product line they should acquire from the largest security service company in Japan, Secom. The services include everything from server hosting, advanced housing, firewall intrusion detection, etc. Introduces the wide range of products that can be used to ensure secure operations.
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Publications
Managing Network Resources: Alliances, Affiliations, and Other Relational Assets
| Author: | Ranjay Gulati |
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| Publication: | Oxford University Press, 2007 |
Abstract
Today's firms are increasingly embedded in networks of alliances and other ties that influence their behavior and performance. In this, his first book on the subject, Ranjay Gulati examines the 'network resources' that arise from these ties, how successful firms manage these, and how they influence strategy, access to material resources, and perceptions of a firm's legitimacy held by key external parties such as investors and banks.
The book synthesizes Gulati's influential work on network dynamics from the last fifteen years, and presents the key findings from this extensive body of research. Gulati's insights are important for scholars, students, and practitioners interested in the behavior of firms in an increasingly networked economy.
Billions of Entrepreneurs: How China and India Are Reshaping Their Futures and Yours
| Author: | Tarun Khanna |
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| Publication: | Harvard Business School Press, forthcoming |
Abstract
China and India, occupied by a third of the world's population, are undergoing social and economic revolutions that are capturing the best minds and money of Western business. This book presents a new view of development, centered around entrepreneurial behavior by both public and private sectors. The author charts China's and India's trajectories of development—where they overlap and complement each other, and where they diverge and compete with one another. There are opportunities for Western companies to participate in this development. This book should serve as an excellent beginning of that participation. Through a series of intriguing comparisons, Khanna probes the salient, practical differences between China and India in such areas as information and transparency, the roles of capital and talent, public and private property rights, social constraints on market forces, attitudes toward expatriates abroad and foreigners at home, entrepreneurial and corporate opportunities, and the importance of urban and rural communities. The differences suggest how these two countries will develop further, how their paths will cross and diverge, what they can learn from and contribute to each other, and, ultimately, how they will reshape the world around them in terms of business, politics, and society at large.
Initiating Divergent Organizational Change: The Enabling Role of Actors' Social Position
| Author: | Julie Battilana |
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| Periodical: | Best Paper Proceedings of the Academy of Management (2007) |
Abstract
This study addresses the paradox of embedded human agency, or the contradiction between actors' agency and institutional determinism. It helps to resolve this paradox by considering the enabling role of actors' social position. Adopting a relational view of human agency, I model the impact of their social position on the likelihood that actors will initiate changes that diverge from the existing institutions. I test this model using data from 93 change projects conducted by clinical managers at the National Health Service in the United Kingdom. My findings suggest that social position is an important enabling condition for divergent organizational change, and is a determinant as well of the type of divergent organizational change an actor may undertake.
Entrepreneurial Theory and the History of Globalization
| Authors: | G. Jones and R. Daniel Wadhwani |
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| Periodical: | Journal of Industry, Competition and Trade 7, nos. 3-4 (December 2007): 143-323 |
Abstract
Does U.S. government policy purposefully benefit particular industries or is industrial policy absent in the USA? Based on a review of recent U.S. policies this paper argues that the USA applies many policies with an industry-specific impact. But these policies do not differ significantly from those in other countries and the process in which U.S. industrial policies emerge severely limits their consistency. What differentiates the USA is a microeconomic business environment that enables a high degree of regional specialization, benefits especially knowledge-driven industries, and raises the impact of innovation and entrepreneurship policies.
Convictions, Conventions and the Operational Risk Maze—The Cases of Three Financial Services Institutions
| Author: | Anette Mikes |
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| Periodical: | International Journal of Risk Assessment and Management (in press): 1027-1056 |
Abstract
Making sense of operational risk practices in the financial services sector is a challenge. There is a temptation to explain the wide variety of approaches as a characteristic of the early stage of development in which the genre resides.
Based on the evidence of three case studies, this paper explores the mechanisms that guide firms in their choice of operational risk methodologies. First, introducing the notion of calculative cultures, we propose that senior risk officers develop 'personal philosophies' about the 'manageability' of risks. Second, we emphasize the role of institutionalized rules and conventions (Meyer and Rowan, 1977) in the selection and use of operational risk practices. The paper explicates a number of conventions that are being institutionalized in the operational risk area. The case studies draw attention to the conflicts between the demands of these multiple conventions, and how organizations struggle to resolve them.
Why We Aren't as Ethical as We Think We Are: A Temporal Explanation
| Authors: | A.E. Tenbrunsel, K.A. Diekmann, K.A. Wade-Benzoni, and M.H. Bazerman |
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| Publication: | In Research in Organizational Behavior, edited by B. M. Staw and Arthur P. Brief, in press |
Abstract
This paper explores the biased perceptions that people hold of their own ethicality. We argue that the temporal trichotomy of prediction, action and evaluation is central to these misperceptions: People predict that they will behave more ethically than they actually do, and when evaluating past (un)ethical behavior, they believe they behaved more ethically than they actually did. We use the want/should theoretical framework to explain the bounded ethicality that arises from these temporal inconsistencies, positing that the "should" self dominates during the prediction and evaluation phases but that the "want" self is dominant during the critical action phase. We draw on the research on behavioral forecasting, ethical fading, and cognitive distortions to gain insight into the forces driving these faulty perceptions and, noting how these misperceptions can lead to continued unethical behavior, we provide recommendations for how to reduce them.