First Look

June 5, 2018

Of special interest among new research papers, case studies, articles, and books released this week by Harvard Business School faculty:

How immigrant workers affect the US economy

Highly skilled immigrants make up a growing share of the US workforce, especially in science and engineering jobs. A book edited by William R. Kerr and colleagues delves into how the influx of foreign workers affects trade patterns of multinational firms, innovation and productivity, and wage inequality among workers with different skills. High-Skilled Migration to the United States and Its Economic Consequences.

The value of creativity

Scientists have studied creativity for years—how it’s developed and measured, as well as how important it is to society. Now 24 eminent scholars in the field, including Harvard Business School's Teresa M. Amabile, contribute chapters in a book to explore how they define creativity and the kinds of questions their research has addressed. Creativity and the Labor of Love.

Ready for a snack?

At a time when many packaged food companies were suffering declines, Mondelēz International CEO Irene Rosenfeld, formerly the CEO for Kraft Inc., positioned the company to grow. A new case study by David Bell and colleagues looks at trends in the snack food business and also explores how this packaged foods company is managing to remain competitive in a challenging market. Mondelēz International.

A complete list of new research and publications from Harvard Business School faculty follows.

— Dina Gerdeman
  • 2018
  • Chicago, IL: University of Chicago Press

High-Skilled Migration to the United States and Its Economic Consequences

By: Hanson, Gordon H., William R. Kerr, and Sarah Turner, eds.

Abstract—Immigration policy is one of the most contentious public policy issues in the United States today. High-skilled immigrants represent an increasing share of the U.S. workforce, particularly in science and engineering fields. These immigrants affect economic growth, patterns of trade, education choices, and the earnings of workers with different types of skills. The chapters in this volume go beyond the traditional question of how the inflow of foreign workers affects native employment and earnings to explore effects on innovation and productivity, wage inequality across skill groups, the behavior of multinational firms, firm-level dynamics of entry and exit, and the nature of comparative advantage across countries.

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  • 2018
  • The Nature of Human Creativity

Creativity and the Labor of Love

By: Amabile, Teresa M.

Abstract—This book provides an overview of the approaches of leading scholars to understanding the nature of creativity, its measurement, its investigation, its development, and its importance to society. The authors are the 24 psychological scientists who are most frequently cited in the four major textbooks on creativity, and they can thus be considered among the most eminent living scholars in the field. Authors discuss how they define creativity, the kinds of questions they have addressed, theories they have proposed, and they provide a description of their research including the most interesting empirical results it has produced. The chapters represent a wide range of substantive and methodological emphases, including psychometric, cognitive, expertise-based, developmental, neuropsychological, cultural, systems, and group-difference approaches. The Nature of Human Creativity brings together an incredible diversity of viewpoints, helping students and researchers see the points of consensus as well as the differences in contemporary perspectives.

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  • May 2018
  • Negotiation and Conflict Management Research

Linda Babcock: Go-getter and Do-gooder

By: Bazerman, Max, Iris Bohnet, Hannah Riley-Bowles, and George Loewenstein

Abstract—In this tribute to the 2007 recipient of the Jeffrey Z. Rubin Theory‐To‐Practice Award from the International Association for Conflict Management (IACM), we celebrate Linda Babcock's contributions to diverse lines of research, her tireless and effective efforts to put the insights of her research into practice, and at a personal level, the impact she has had on each of our lives. Innovative ideas and novel methods have been the hallmarks of Linda's research on diverse topics: the impact of self‐serving conceptions of fairness on negotiations, the labor supply behavior of cab drivers, the impact of damage caps on settlements, the propensity of men and women to initiate negotiations, and the readiness of each gender to volunteer for, and work on “nonpromotable tasks.” Linda won this award, however, not only for her path‐breaking academic research, but also for her interest in and ability to convert it into actionable initiatives. From founding the Program for Research and Outreach on Gender Equity in Society (PROGRESS), whose mission is to develop tools to teach women and girls how to harness the power of negotiation, to her leadership of the Carnegie Mellon Leadership and Negotiation Academy for Women, Linda shows how academics can play a leading role in translating theory into practice.

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  • forthcoming
  • Econometrica

Expressive Voting and Its Cost: Evidence from Runoffs with Two or Three Candidates

By: Pons, Vincent, and Clémence Tricaud

Abstract—In French parliamentary and local elections, candidates ranked first and second in the first round automatically qualify for the second round, while a third candidate qualifies only when selected by more than 12.5% of registered citizens. Using a fuzzy RDD around this threshold, we find that the third candidate’s presence substantially increases the share of registered citizens who vote for any candidate and reduces the vote share of the top two candidates. It disproportionately harms the candidate ideologically closest to the third and causes her defeat in one-fifth of the races. Additional evidence suggests that these results are driven by voters who value voting expressively over voting strategically for the top-two candidate they dislike the least to ensure her victory as well as by third candidates who, absent party-level agreements leading to their dropping out, value the benefits associated with competing in the second round more than influencing its outcome.

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Abstract—In 1983, 14 years after the introduction of the battery-powered quartz watch, mechanical watches and the Swiss watchmakers who built them were predicted to be obsolete (Landes, 1983). Unexpectedly, however, by 2008 the Swiss mechanical watchmaking industry had rematerialized to become the world’s leading exporter (in monetary value) of watches. This study reveals the process and mechanisms associated with technology reemergence, i.e., the resurgence of substantive and sustained demand for an old (legacy) technology following the introduction of a new dominant design. Drawing on the case of mechanical watchmaking, it reveals how technology reemergence is a decidedly cognitive process, unfolding in two phases: a first phase marked by a redefinition of the meanings and values associated with the legacy technology and facilitated by mechanisms of value recombining, temporal distancing, identity marking, and conceptual bridging and a second phase marked by a redefinition of market boundaries and facilitated by mechanisms of competitive set reclaiming and enthusiast consumer mobilizing. For mechanical watchmakers, the process culminated in competitive and consumer differentiation that ushered in innovation reinvestment and a period of substantive and sustained demand growth for mechanical watches. This paper contributes to research on technology cycles, cognition, and incumbent responses to discontinuous change.

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  • May 2018
  • Harvard Business Manager

Was kostet die Zeit?

By: Thomke, Stefan H., Daniela Beyersdorfer, and Christina Kestel

Abstract—A German luxury watch manufacturer wants to offer a new collection, including a special model in a limited quantity. The competition has no comparable model. Which price should the company choose?

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Come Together: Firm Boundaries and Delegation

By: Alfaro, Laura, Nick Bloom, Paola Conconi, Harald Fadinger, Patrick Legros, Andrew F. Newman, Raffaella Sadun, and John Van Reenen

Abstract—Little is known theoretically, and even less empirically, about the relationship between firm boundaries and the allocation of decision rights within firms. We develop a model in which firms choose which suppliers to integrate and whether to delegate decisions to integrated suppliers. We test the predictions of the model using a novel dataset that combines measures of vertical integration and delegation for a large set of firms from many countries and industries. In line with the model’s predictions, we obtain three main results: (i) integration and delegation covary positively; (ii) producers are more likely to integrate suppliers in input sectors with greater productivity variation (as the option value of integration is greater); and (iii) producers are more likely to integrate suppliers of more important inputs and to delegate decisions to them.

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Expected Stock Returns Worldwide: A Log-Linear Present-Value Approach

By: Chattopadhyay, Akash, Matthew R. Lyle, and Charles C.Y. Wang

Abstract—Expected return proxies (ERP) derived from a log-linear present-value (LPV) framework—combining the book value of equity, profitability, and market prices—predict the cross section of out-of-sample returns in 26 of 29 international equity markets, with a highly significant average slope coefficient of close to 1. In contrast, ERPs based on the implied cost of equity (or factor models) fail to exhibit systematic predictive power internationally, which is due in large part to functional form, rather than earnings-forecast, errors. LPV models derived using common valuation anchors such as earnings or sales also exhibit predictive ability. LPV ERPs based on the book value of equity and sales subsume the predictive ability of all other ERPs we examine. Collectively, the LPV framework offers a parsimonious accounting-based approach for the estimation of expected returns across international markets.

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Can Staggered Boards Improve Value? Evidence from the Massachusetts Natural Experiment

By: Daines, Robert, Shelley Xin Li, and Charles C.Y. Wang

Abstract—We study the effect of staggered boards (SBs) on managers' behavior and on long-run firm value using a natural experiment: a 1990 law that imposed a SBs on all firms incorporated in Massachusetts. We find that the law led to an increase in Tobin's Q. Examining mechanisms for the change in firm value, we find that managers protected by a SB increased investment in capital expenditure and R&D spending, produced more patents, and reduced the degree of earnings management, leading to higher ROA. These effects are concentrated at innovating firms—those that are early-life-cycle or engage in R&D spending—and especially at those facing Wall Street scrutiny. Collectively, the evidence suggests that early-life-cycle firms facing high information asymmetries benefit from protections against the market for corporate control by making more valuable long-term investments and reducing myopic behavior.

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Abstract—Civilians who have fled violent conflict and settled in neighboring countries are integral to processes of civil war termination. Contingent on their attitudes, they can either back peaceful settlements or support warring groups and continued fighting. Attitudes toward peaceful settlement are expected to be especially obdurate for civilians who have been exposed to violence. In a survey of 1,120 Syrian refugees in Turkey conducted in 2016, we use experiments to examine attitudes towards two critical phases of conflict termination—a ceasefire and a peace agreement. We test the malleability of refugees' attitudes to see if subtle changes in how these processes are framed or who endorses them can render a ceasefire proposal more or less favorable, or produce attitudes that are more or less open to compromise with the incumbent regime of Assad. Our results show, first, that refugees are far more likely to agree to a cease-fire proposed by a civilian as opposed to one proposed by armed actors from either the Syrian government or the opposition. Second, we find that merely describing the refugee community's wartime experience as suffering rather than sacrifice increases willingness to compromise with the Syrian government to bring about peace. This effect remains strong among those experiencing greater violence. Together, these results show that even among a highly pro-opposition population that has experienced severe violence, attitudes toward willingness to settle and make peace are remarkably malleable, depending on factors such as who proposes a deal and how wartime losses are characterized.

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Collusion in Markets with Syndication

By: Hatfield, John William, Scott Duke Kominers, Richard Lowery, and Jordan M. Barry

Abstract—Many markets, including the markets for IPOs and debt issuances, are syndicated, in that a bidder who wins a contract will often invite competitors to join a syndicate that will fulfill the contract. We model syndicated markets as a repeated extensive form game and show that standard intuitions from industrial organization can be reversed: collusion may become easier as market concentration falls, and market entry may in fact facilitate collusion. In particular, price collusion can be sustained by a strategy in which firms refuse to join the syndicate of any firm that deviates from the collusive price, thereby raising total production costs. Our results can thus rationalize the apparently contradictory empirical facts that the market for IPO underwriting exhibits seemingly collusive pricing despite its low level of market concentration.

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Complex Disclosure

By: Jin, Ginger Zhe, Michael Luca, and Daniel Martin

Abstract—Disclosure policies have the potential to help consumers and make markets more efficient. Yet, the effectiveness of disclosure policies can be undermined if firms strategically make unfavorable information unnecessarily complicated to understand. To explore the incentives for using complexity in disclosure, we implement a game of mandatory disclosure where senders are required to report their private information truthfully but can choose how complex to make their reports. We find that senders use complex disclosure over half the time, and most of this obfuscation is profitable because receivers make systematic mistakes in assessing complex reports. Stated beliefs suggest that receivers correctly infer the strategic implications of complexity but are overconfident about their ability to assess complex reports.

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  • Harvard Business School Case 518-051

Mondelēz International

Mondelēz International is a packaged foods company competing primarily in “snacks” around the globe. The case describes how and why the Kraft Inc. CEO, and later Mondelēz CEO, Irene Rosenfeld, created Mondelēz and how she positioned it as a growth company at a time when many packaged food companies were suffering declines. The case also discusses trends in the snack food business and invites readers to suggest how the company’s new CEO should build on the foundation that Irene created.

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  • Harvard Business School Case 518-001


Alltech was a Lexington, Kentucky–based producer of supplements for animal feed, with revenues of over $2 billion (projected to reach $3 billion in 2018), sales in 120 countries, 5,000 employees, and 100 manufacturing plants worldwide. For nearly four decades, Alltech had been defined by its focus on innovation and marketing as well as the entrepreneurial spirit and vision of its founder, Dr. Pearse Lyons, who remained intimately involved in company operations and in managing relationships with key customers. This case finds Alltech in the midst of a new growth strategy—downstream integration, specifically buying up feed companies—which marked a stark departure from the company’s longtime emphasis on organic growth. The decision to buy feed companies had been controversial within Alltech: feed was a low-margin, rather traditional commodity business, while Alltech earned relatively high margins on products rooted in science and innovation. However, Lyons believed downstream integration would allow Alltech to better communicate with its end customers (farmers), increase sales of its supplements, and help protect the firm from industry dynamics such as consolidation and cost pressure. Was he right, or should Alltech take a different approach?

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This case explores the sustainability efforts at Novozymes, the world's largest and oldest producer of industrial enzymes. In 2015, the Danish company became the world’s first company known to have crafted a new corporate strategy based on the United Nations Sustainable Development Goals (SDGs). Since then, the company used the SDGs as a lens to screen products, business models, and partnerships, and it prioritized innovation decisions that could deliver extraordinary societal and business impact. This case study asks students to evaluate the success of those efforts and to outline what the company should do going forward.

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