First Look

September 3, 2013

Eight Best Practices For Making Diversity Work

Based on interviews with two dozen CEOs, a new article in Harvard Business Review proposes effective organizational practices to encourage (and benefit from) diversity. The practices include empowering a chief diversity officer, supporting flexible work arrangements, and a CEO who walks the talk. Boris Groysberg and Katherine Connolly wrote the piece, "Great Leaders Who Make the Mix Work."

Does Ad Revenue Motivate What Bloggers Write?

In short, yes, according to new research by Monic Sun and Feng Zhu (HBS). The researchers find that bloggers in China, when participating in ad revenue generated by their content, write more about topics of popular interest, in particular the stock market, salacious content, and celebrities. "Ad Revenue and Content Commercialization: Evidence from Blogs" is to be published in a forthcoming issue of Management Science.

Pricing Pile Driver Pads

The new case ''Singapore Metals Limited'' reviews the thinking of two executives charged with developing a strategy and price for a new product, curled metal pile driver pads. "The case raises issues of analyzing market potential, aligning price with business strategy, and determining the implications of price on the development and execution of integrated strategic options," according to the case description. It was written by John Gourville.

— Sean Silverthorne


  • August 2013
  • The Accounting Review (forthcoming)

Do Analysts Follow Managers Who Switch Companies? An Analysis of Relationships in the Capital Markets

By: Brochet, Francois, Gregory S. Miller, and Suraj Srinivasan

Abstract—We examine the importance of professional relationships developed between analysts and managers by investigating analyst coverage decisions in the context of CEO and CFO moves between publicly listed firms. We find that top executive moves from an origin firm to a destination firm trigger analysts following the origin firm to initiate coverage of the destination firm in 10% of our sample, which is significantly higher than in a matched sample. Analyst-manager "co-migration" is significantly stronger when both firms are within the same industry. Analysts who move with managers to the destination firm exhibit more intense and accurate coverage of the origin firm than they do in other firms and compared to other analysts covering the origin firm. The advantage no longer holds after the executive's departure, and most of the analysts' advantage does not carry over to the destination firm. However, the analysts do increase the overall market capitalization of firms in their coverage portfolio. Our results hold after Regulation Fair Disclosure, suggesting that these relationships are not based on selective disclosure. Overall, the evidence shows both the importance and limitations of professional relations in capital markets.

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  • August 2013
  • Institutional Logics in Action. Vol. 39B, Research in the Sociology of Organizations Series, edited by Michael Lounsbury and Eva Boxenbaum, 175-198. Emerald Group Publishing, 2013

Logic Pluralism in Practice

By: Glynn, Mary Ann, and Ryan Raffaelli

Abstract—The institutional logics perspective highlights how organizations are embedded within broader systems of meaning and how this embeddedness activates salient institutional logics in organizations that can enable or constrain organizational decisions, practices, and actions. We investigate a core premise of the institutional logics perspective, that of the alignment of institutional logics and organizational practices and design, in the organizational adoption of CSR practices. We hypothesize that, in the adoption of practices, organizations will house those practices in structural units that align with the logic emphasized by the practice: when adopting practices reflecting a market logic, organizations will locate them in mainline business units, such as marketing; conversely, when adopting practices reflecting a community logic, organizations will locate them in non-mainline business units, such as corporate or philanthropic foundations. Using survey and archival data from 161 Fortune 500 firms, we find support for our hypotheses. Our findings reveal how institutional logics serve as underlying lynchpins, connecting organizational practices to organizational design so as to reinforce and enable each other.

  • August 2013
  • Harvard Business Review 91, no. 9 (September 2013): 68-76

Great Leaders Who Make the Mix Work

By: Groysberg, Boris, and Katherine Connolly

Abstract—Business leaders send a powerful message when they make a commitment to diversity that goes beyond rhetoric. But what motivates them to do so, and how do they actually create inclusive cultures? To find out, the authors interviewed 24 CEOs whose firms were known for embracing people of all backgrounds. These executives saw diversity as a strategic and moral imperative and made promoting it a personal mission. Many had experienced what it was like to be an outsider, which gave them a deeper understanding of the barriers that women, in particular, face at work. The CEOs resoundingly agreed that an inclusive environment was one in which employees contributed to success as their authentic selves, and the organization respected and leveraged their talents and provided a sense of connectedness. Eight best organizational practices for instilling such a culture emerged from their interviews: 1. Measure diversity and inclusion. 2. Hold managers accountable. 3. Support flexible arrangements. 4. Recruit and promote from diverse pools of candidates. 5. Provide leadership education. 6. Sponsor employee resource groups and mentoring programs. 7. Offer quality role models. 8. Make the chief diversity officer position count. It's also key for CEOs to dedicate time to work personally on diversity initiatives. That sets the tone for everyone and helps ensure that organizations attract and develop the best talent.

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  • August 2013
  • Review of Accounting Studies (forthcoming)

Market Competition, Government Efficiency, and Profitability Around the World

By: Healy, Paul M., George Serafeim, Suraj Srinivasan, and Gwen Yu

Abstract—We examine how cross-country differences in product, capital, and labor market competition, and government efficiency affect the rate of mean reversion of corporate profitability. Using a sample of 42,337 unique firms from 49 countries, we find that corporate profitability mean reverts faster in countries where product and capital markets are more competitive. Moreover, holding constant product, capital, and labor market competition we find that profitability mean reverts faster in countries with less efficient governments. The findings suggest that country-level factors have an economically significant impact on the rate of corporate profitability mean reversion. The study has implications for forecasting profitability and equity valuation in a global context.

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  • August 2013
  • Business Ethics. 2d ed., edited by Michael Boylan. Hoboken, N.J.: John Wiley & Sons, 2013

Multinational Enterprises and Incomplete Institutions: The Demandingness of Minimum Moral Standards

By: Hsieh, Nien-hê

Abstract—Multinational enterprises (MNEs) operate across countries that vary widely in their legal, political, and regulatory institutions. One question that arises is whether there are certain minimum standards that ought to guide managers in their decision making independently of local institutional requirements, especially when institutional arrangements are incomplete. This chapter examines what follows if managers recognize two kinds of duties of forbearance in their decision making that are commonly held to be among the most minimal of moral duties: the duty not to harm and the duty not to violate the liberty of others. The chapter concludes that the standards for MNEs may be more demanding than what the minimalist nature of duties of forbearance initially would suggest.

  • August 2013
  • Harvard Business Review 91, no. 9 (September 2013): 61-66

Women Rising: The Unseen Barriers

By: Ibarra, Herminia, Robin Ely, and Deborah Kolb

Abstract—Even when CEOs make gender diversity a priority-by setting aspirational goals for the proportion of women in leadership roles, insisting on diverse slates of candidates for senior positions, and developing mentoring and training programs-they are often frustrated by a lack of results. That's because they haven't addressed the fundamental identity shift involved in coming to see oneself, and to be seen by others, as a leader. Research shows, the authors write, that the subtle "second generation" gender bias still present in organizations and in society disrupts the learning cycle at the heart of becoming a leader. Women must establish credibility in a culture that is deeply conflicted about whether, when, and how they should exercise authority. Practices that equate leadership with behaviors considered more common in men suggest that women are simply not cut out to be leaders. Furthermore, the human tendency to gravitate to people who are like oneself leads powerful men to sponsor and advocate for other men when leadership opportunities arise. The authors suggest three actions to support and advance gender diversity: educate women and men about second-generation gender bias, create safe "identity workspaces" to support transitions to bigger roles, and anchor women's development efforts in their sense of leadership purpose rather than in how they are perceived.

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  • August 2013
  • Management Science (forthcoming)

Responses to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers

By: Seamans, Robert, and Feng Zhu

Abstract—How do firms respond to entry in multi-sided markets? We address this question by studying the impact of Craigslist, a website providing classified-advertising services, on local U.S. newspapers. We exploit temporal and geographical variation in Craigslist's entry to show that newspapers with greater reliance on classified-ad revenue experience a larger drop in classified-ad rates after Craigslist's entry. The impact of Craigslist's entry on the classified-ad side appears to propagate to other sides of the newspapers' market. On the subscriber side, these newspapers experience an increase in subscription prices, a decrease in circulation, and an increase in differentiation from each other. On the display-ad side, affected newspapers experience a decrease in display-ad rates. We also find evidence that affected newspapers are less likely to make their content available online. Finally, we estimate that Craigslist's entry leads to $5 billion in year 2000 dollars in savings to classified-ad buyers during 2000-2007.

  • August 2013
  • Management Science (forthcoming)

Ad Revenue and Content Commercialization: Evidence from Blogs

By: Sun, Monic, and Feng Zhu

Abstract—Many scholars argue that when incentivized by ad revenue, content providers are more likely to tailor their content to attract "eyeballs," and as a result, popular content may be excessively supplied. We empirically test this prediction by taking advantage of the launch of an ad-revenue-sharing program initiated by a major Chinese portal site in September 2007. Participating bloggers allow the site to run ads on their blogs and receive 50% of the revenue generated by these ads. After analyzing 4.4 million blog posts, we find that, relative to nonparticipants, popular content increases by about 13 percentage points on participants' blogs after the program takes effect. About 50% of this increase can be attributed to topics shifting toward three domains: the stock market, salacious content, and celebrities. Meanwhile, relative to nonparticipants, participants' content quality increases after the program takes effect. We also find that the program effects are more pronounced for participants with moderately popular blogs and seem to persist after participants enroll in the program.


Working Papers

Abstract—We examine how unfavorable social comparisons differentially spur employees of varying hierarchical levels to engage in deception. Drawing on literatures in social psychology and workplace self-esteem, we theorize that negative comparisons with peers could cause either junior or senior employees to seek to improve reported relative performance measures via deception. In a first study, we use deceptive self-downloads on SSRN, the leading working paper repository in the social sciences, to show that employees higher in a hierarchy are more likely to engage in deception, particularly when the employee has enjoyed a high level of past success. In a second study, we confirm this finding in two scenario-based experiments. Our results suggest that longer-tenured and more successful employees face a greater loss of self-esteem from negative social comparisons and are more likely to engage in deception in response to reported performance that is lower than that of peers.

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The Disintermediation of Financial Markets: Direct Investing in Private Equity

By: Fang, Lily, Victoria Ivashina, and Josh Lerner

Abstract—One of the important issues in corporate finance is the rationale for and role of financial intermediaries. In the private equity setting, institutional investors are increasingly eschewing intermediaries in favor of direct investments. To understand the trade-offs in this setting, we compile a proprietary dataset of direct investments from seven large institutional investors. We find that solo investments by institutions outperform co-investments and a wide range of benchmarks for traditional private equity partnership investments. The outperformance is driven by deals where informational problems are not too severe, such as more proximate transactions to the investor and later-stage deals, and by an ability to avoid the deleterious effects on returns often seen in periods with large inflows into the private equity market. The poor performance of co-investments, on the other hand, appears to result from fund managers' selective offering of large deals to institutions for co-investing.

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Cases & Course Materials

  • Harvard Business School Case 712-459

Netflix: Competitive Dynamics in the Consumer Video Market

The case examines, first, the competitive interaction between Netflix and Blockbuster in the DVD rental market and, later, Netflix's subsequent growth (and strategic challenges) in video streaming. The case is set in September 2011, after Netflix announced the unbundling of its DVD rental and streaming pricing, and after the deal with Starz fell through.

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By the late 2000s, the law firm Duane Morris had transformed itself from a growing U.S. law firm to a significant global player. The firm's uniquely collaborative organizational culture, which featured a transparent, data-driven compensation system, practice-group integration across multiple offices, and rewards for attorneys who shared responsibility, had contributed to the firm's success as it had expanded into new U.S. and international offices. Yet, amid a shaky world economy and an increasingly cutthroat legal profession, Duane Morris' attorneys began to wonder-could collaboration survive as a firm value? Would the firm's culture help it continue to grow in the years ahead and bring in more sophisticated legal work, or would its lawyers inevitably start to keep work to themselves as the firm navigated an ever-more competitive environment?

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  • Harvard Business School Case 513-097

Singapore Metals Limited

Singapore Metals Limited (SML) has declining sales but has developed a new product (curled metal pile driver pads) that, in field tests, delivers customer benefits that are many times SML's manufacturing costs. Jonathan Lee and Alex Tan of SML's Engineered Products Division are responsible for formulating a strategy for the new product. A key issue is the price to charge for the pads. The case raises issues of analyzing market potential, aligning price with business strategy, and determining the implications of price on the development and execution of integrated strategic options.

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  • Harvard Business School Case 713-536

Jamba Juice (A)

James White, the new CEO of Jamba Juice, has successfully averted bankruptcy and must now decide the future path for Jamba Juice, the leader in the smoothie and fresh bar industry. This two-part case presents the various strategic options White is considering. It then asks participants to determine the best strategic path and how this path should be specifically implemented.

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  • Harvard Business School Case 713-537

Jamba Juice (B)

Supplements the (A) case, describing what White actually did, and presents the results.

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  • Harvard Business School Case 814-014

Sample6: Innovating to Make Food Safer

Tim Curran, CEO of Sample6, a start-up biotechnology company developing a novel food safety diagnostics platform, must decide how to partner with food industry players. How can he best convince leaders in this mature industry to adopt a new technology and improve food safety? Additionally, he faces a number of questions related to product development, marketing, regulatory compliance, and dynamic industry trends. This case provides an overview of food safety in the United States and focuses on the strategic goal of transforming food safety from a "necessary evil" to a brand-enhancing differentiator.

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This case examines a distinctive leadership development program within the World Economic Forum. The program, born out of the conviction that the complexity of global challenges at the beginning of the 21st century required a new generation of global leaders, recruited a small number of "high potential" young leaders from around the world as "Global Leadership Fellows" each year. During the three-year program, Fellows combined a position at the Forum with formal classroom training modules, one-on-one coaching, peer mentoring, and extensive assessment. The case explores the Forum's understanding of its role in the world, the vision of leadership that animates the program, and the structure and content of the program. It asks how successful the program has been in providing the kind of transformational experience it envisions and whether it could or should be replicated by other organizations.

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  • Harvard Business School Case 713-049

Germany's Green Energy Revolution

No abstract available.

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  • Harvard Business School Case 713-462

The New Carolina Initiative

"The New Carolina Initiative" explores the process of fostering competitiveness in the subnational region, South Carolina, one of the poorest states in the United States. The case has been developed primarily for use in the course "Microeconomics of Competitiveness," developing the concept of organizations for competitiveness in a subnational region and the elements of constructing an economic strategy. The case also outlines the adopted cluster vision of development for the state and the various task forces created to upgrade the business environment of the state. South Carolina's Council on Competitiveness, New Carolina, is an organization with significant capacity to mobilize regional actors in various task forces and cluster initiatives. Showcasing the complexity and organizational challenges of building a competitiveness initiative, the case emphasizes the importance of engagement from both private- and public-sector representatives. The case also provides an opportunity to discuss the competitive position of the South Carolina economy in 2011.

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Bristol Myers Squibb, a multi-national pharmaceutical company, is seeking to globalize its R&D strategy while managing costs. It has formed a joint venture with an Indian company, which has worked well, but now faces a strategic decision on how and whether to continue.

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