First Look

September 5, 2006

Many companies that owe their earnings to the work of scientists and engineers are learning today what their Silicon Valley counterparts have known for years: Proprietary ideas and knowledge are not easily secured behind corporate walls. Managing innovation in the small-world, network-connected environment where inventors dwell is a competency not easily learned. In an article just published in the California Management Review, Harvard Business School's Lee Fleming and collaborator Matt Mark offer advice on how to benefit when scientists network. (See our recent interview with Fleming on this subject.) Other new publications this week include a case study of how the CEO of GMAC Insurance grappled with a strategy challenge, an examination of how race may affect the perceptions of disaster recovery volunteers, and the conclusion from a soon-to-be-published article that indicates that the increase of patent protections does not chill innovation.
— Sean Silverthorne

Working Papers

None this week


Cases & Course Materials

Creating Meaning for the Customer: The Case of GMACI

Harvard Business School Case 106-073

Excellence in exploiting customer information and leveraging its affiliation to the GM group are among the strategic options that GMAC Insurance CEO Gary Kusumi is considering. GMAC Insurance, the wholly-owned auto insurance subsidiary of General Motors, formed through the merger of two smaller insurance firms, is at a strategic cross-roads. Progressive changed the competitive landscape with its superior pricing abilities, and now Kusumi must decide whether to compete on the ability to use customer information for pricing or whether even larger rewards could be found in leveraging the connection to the GM family. However, although jointly selling auto insurance and cars is common in many countries, the ability to do so at the GM Group is called into question by several significant organizational stumbling blocks.

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Agency and Institutions: The Enabling Role of Individuals' Social Position


While early neo-institutional studies did not explicitly tackle the issue of agency, more recent studies about institutional entrepreneurship have brought it to the forefront. Institutional entrepreneurship has been presented as a promising way to account for institutional change endogenously. However, this notion faces the paradox of embedded agency. To overcome this paradox, it is necessary to explain under what conditions actors are enabled to act as institutional entrepreneurs. Some neo-institutional theorists have already addressed this issue. Their studies focus mainly on the organizational and organizational field levels of analysis. In this paper, I aim to complement their work by examining under what conditions individuals are more likely to engage in institutional entrepreneurship. By doing so, I take into account the individual level of analysis that neo-institutional theorists often tend to neglect. Relying on Bourdieu's conceptualization of fields, I propose that individuals' social position is a key variable in understanding how they are enabled to act as institutional entrepreneurs despite institutional pressures.

Aid in the Aftermath of Hurricane Katrina: Humanizing Victims Predicts Intergroup Helping


This research examines inferences about the emotional states of ingroup and outgroup victims after a natural disaster, and whether these inferences predict intergroup helping. Two weeks after Hurricane Katrina struck the southern United States, White and non-White participants were asked to infer the emotional states of Black and White victims, and reported their intentions to help such victims. Overall, participants believed that outgroup victims experienced fewer secondary, "uniquely human" emotions (e.g., anguish, mourning) than ingroup victims. The extent to which participants did infer secondary emotions about outgroup victims, however, predicted their helping intentions; in other words, those participants who did not dehumanize outgroup victims were the individuals most likely to report volunteering for hurricane relief efforts.

Internet Companies' Growth Strategies: Determinants of Investment Intensity and Long-Term Performance


To exploit first-mover advantages, pioneers may be motivated to amass customers before rivals enter the market. Likewise, when they enjoy increasing returns due to network effects, static scale economies, or learning effects, companies have incentives to invest aggressively in growth. This paper presents econometric analysis of factors that determined the intensity of Internet companies' investments in growth, and analyzes the long-term performance consequences of such investments. Results indicate that first movers spent significantly more on upfront marketing than non-pioneers. Contrary to expectations, however, firms in markets that exhibited increasing returns did not spend more on their early customer acquisition efforts than other sample companies. Although the typical sample company did not earn positive long-term returns, heavy early investments in growth were nevertheless economically rational. In most cases, reducing marketing outlays would have worsened a bad outcome, consistent with an inverted "U" relationship between long-term returns and upfront marketing spending. Thus, the typical sample company invested in marketing, ex ante, at levels close to those that would have maximized returns, observed ex post.

Managing Creativity in Small Worlds


Greater job mobility among engineers and scientists has caused the extended social networks of inventors to become increasingly connected. As a result, invention increasingly occurs within small worlds (or social networks) that straddle firm boundaries. Small worlds provide both strategic opportunity and potential threat; while they can increase creativity within a firm, they also aid in the diffusion of creative knowledge to other firms through personnel and knowledge transfer. Firms that operate within small worlds such as in Silicon Valley long ago learned to manage invention in an environment of rampant knowledge spillovers across firm boundaries. Now, however, all firms need to learn how to manage innovation in a small world environment. This article offers them advice about how to do so.

Global Integration ≠ Global Concentration


There is a widespread belief that increases in the cross-border integration of markets are associated with increases in global concentration along various dimensions. This article reviews the available evidence and presents new data indicating that increasing global integration has not been accompanied by general increases in four types of global concentration measures: industry seller concentration, cross-industry superconcentration, national/regional hegemony, and geographic concentration. The article also uses the auto industry to illustrate a bias toward believing concentration is increasing even when it isn't, and to discuss possible reasons.

What Is the Impact of Software Patent Shifts? Evidence from Lotus v. Borland


Economists have debated the extent to which strengthening patent protection spurs or detracts from technological innovation. This paper examines the reduction of software copyright protection in the Lotus vs. Borland decision. If patent and copyright protections are substitutes, weakening of one form should be associated with an increased reliance on the other. We find that the firms affected by the diminution of copyright protection disproportionately accelerated their patenting in subsequent years. But little evidence can be found for any harmful effects on firms' performance and incentive to innovate: in fact, the increased reliance on patents is correlated with growth in measures such as sales and R&D expenditures.