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    New Research and Ideas, March 19, 2019

    First Look

    19 Mar 2019

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

    Good relationships have meaningful rituals

    When couples have meaningful rituals—like paying for a weekly date night—they report more positive emotions and greater relationship satisfaction than couples who don’t have rituals. Michael I. Norton, Ximena Garcia-Rada, and Ovul Sezer say relationship rituals are the key to commitment in an upcoming article in the Journal of the Association for Consumer Research. Rituals and Nuptials: The Emotional and Relational Consequences of Relationship Rituals.

    Game-changing negotiation tips

    In 1993, Fox was a minor, fledgling network, yet it managed to snatch the National Football League’s programming from longtime incumbent CBS. Some say it’s all because Fox offered more money than CBS. But James K. Sebenius says money wasn’t the only reason, and in a new working paper, he offers 10 broader lessons for negotiators facing challenging situations. How Rupert Murdoch Outfoxed Larry Tisch: Ten Enduring Lessons from the Negotiations That Wrested the NFL from CBS.

    Certain manager traits encourage higher productivity

    Which managerial traits are tied to greater productivity? Jorge Tamayo and colleagues explore several factors, including attention, autonomy, and control, in a new working paper. Managerial Quality and Productivity Dynamics.

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

    —Dina Gerdeman
    LinkedIn
    Email
    • forthcoming
    • Academy of Management Discoveries

    Creativity, Artificial Intelligence, and a World of Surprises

    By: Amabile, Teresa M.

    Abstract—In recent years, progress has been made toward AI Creativity, which I define as the production of highly novel, yet appropriate, ideas, problem solutions, or other outputs by autonomous machines. I argue that organizational researchers of creativity and innovation should invest significant energy in studying artificial intelligence and computer-assisted human intelligence, the ways in which they might yield creative breakthroughs, and how those innovations might impact—and be impacted by—workers, consumers, organizations, and society.

    Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55845

    • March 2019
    • Organizational Behavior and Human Decision Processes

    Choice Architects Reveal a Bias Toward Positivity and Certainty

    By: Daniels, David P., and Julian Zlatev

    Abstract—Biases influence important decisions, but little is known about whether and how individuals try to exploit others’ biases in strategic interactions. Choice architects—that is, people who present choices to others—must often decide between presenting choice sets with positive or certain options (influencing others toward safer options) versus presenting choice sets with negative or risky options (influencing others toward riskier options). We show that choice architects’ influence strategies are distorted toward presenting choice sets with positive or certain options across thirteen studies involving diverse samples (executives, law/business/medical students, adults) and contexts (public policy, business, medicine). These distortions appear to primarily reflect decision biases rather than social preferences, and they can cause choice architects to use influence strategies that backfire.

    Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55881

    • in press
    • Journal of the Association for Consumer Research

    Rituals and Nuptials: The Emotional and Relational Consequences of Relationship Rituals

    By: Garcia-Rada, Ximena, Ovul Sezer, and Michael I. Norton

    Abstract—Four studies reveal the benefits of relationship rituals: couples with relationship rituals report more positive emotions and greater relationship satisfaction and commitment than those without them. We show that rituals are crucial for understanding consumption practices in romantic relationships. Using a sample of romantic dyads, we identify a novel moderating role of mutual agreement, such that both members of a couple must agree that they have a ritual: different couples can see the same consumption behavior (e.g., paying for a weekly date night) as either a ritual or a routine, and the benefits accrue only to those couples who jointly view it as a symbolically meaningful ritual. We contribute to the literature on rituals by empirically documenting the relationships between rituals, specific emotions, and relationship satisfaction, and by demonstrating that the same sequence of actions can have different psychological effects due to the role of mutual agreement. Finally, we contribute to research on consumers’ shared experiences by suggesting a novel mechanism for committing to such experiences: relationship rituals.

    Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55865

    • in press
    • Behavioural Public Policy

    Invisible Inequality Leads to Punishing the Poor and Rewarding the Rich

    By: Hauser, Oliver P., Gordon T. Kraft-Todd, David Rand, Martin A. Nowak, and Michael I. Norton

    Abstract—Four experiments examine how the lack of awareness of inequality affects behaviour towards the rich and poor. In Experiment 1, participants who became aware that wealthy individuals donated a smaller percentage of their income switched from rewarding the wealthy to rewarding the poor. In Experiments 2 and 3, participants who played a public goods game—and were assigned incomes reflective of the U.S. income distribution either at random or on merit—punished the poor (for small absolute contributions) and rewarded the rich (for large absolute contributions) when incomes were unknown; when incomes were revealed, participants punished the rich (for their low percentage of income contributed) and rewarded the poor (for their high percentage of income contributed). In Experiment 4, participants provided with public education contributions for five New York school districts levied additional taxes on mostly poorer school districts when incomes were unknown but targeted wealthier districts when incomes were revealed. These results shed light on how income transparency shapes preferences for equity and redistribution. We discuss implications for policy makers.

    Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55864

    • forthcoming
    • Management Science

    The Role of Taxes in the Disconnect Between Corporate Performance and Economic Growth

    By: Khan, Urooj, Suresh Nallareddy, and Ethan Rouen

    Abstract—We investigate the relation between the growth in corporate profits and the overall U.S. economy, focusing on the impact of the U.S. corporate tax regime on this relation. We document that the growth of corporate profits, on average, has outpaced the growth of the economy, and this disconnect increases as the difference between the corporate income tax rate of the U.S. and the other OECD countries increases. The underlying mechanism is fewer corporate profits being channeled into subsequent domestic investments when the U.S. tax rate is relatively higher, leading to lower economic growth. Our findings have implications for policy setters.

    Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55861

    • forthcoming
    • Accounting Review

    Rethinking Measurement of Pay Disparity and Its Relation to Firm Performance

    By: Rouen, Ethan

    Abstract—I develop measures of firm-level pay disparity and examine their relation to firm performance. Using comprehensive compensation data for a large sample of firms, I find no statistically significant relation between the ratio of CEO-to-mean employee compensation and performance. I next create empirical models that allow me to separate the components of CEO and employee compensation explained by economic factors from those that are not and use these models to estimate explained and unexplained pay disparity. After validating my estimate of unexplained pay disparity as a proxy for pay fairness, I find robust evidence of a negative (positive) relation between unexplained (explained) pay disparity and future firm performance.

    Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55860

    • in press
    • Journal of Consumer Psychology

    The Feeling of Not Knowing It All

    By: Yang, Haiyang, Ziv Carmon, Dan Ariely, and Michael I. Norton

    Abstract—How do consumers assess their mastery of knowledge they have learned? We explore this question by investigating a common knowledge consumption situation: encountering opportunities for further learning. We argue and show that such opportunities can trigger a feeling-of-not-knowing-it-all (FONKIA), which lowers consumers’ confidence in their mastery of the knowledge they already possess. Specifically, listing optional follow-up readings at the conclusion of a course lowered students’ confidence in their mastery of the course material they had already learned (Study 1). Encountering an optional learning opportunity increased the FONKIA, which mediated the decreased confidence (Studies 2 and 3). We also document two moderators consistent with our conceptualization. First, participants primed with mastery (vs. instrumental) motivation were more negatively impacted when they encountered optional learning opportunities. Second, the more related the optional opportunities were to the target topic, the lower participants’ confidence in their mastery of what they had already learned. We conclude by discussing the implications of these findings, such as encouraging further learning or harming teaching evaluations.

    Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=55850

    Managerial Quality and Productivity Dynamics

    By: Adhvaryu, Achyuta, Anant Nyshadham, and Jorge Tamayo

    Abstract—Which managerial skills, traits, and practices matter most for productivity? How does the observability of these features affect how appropriately they are priced into wages? Combining two years of daily, line-level production data from a large Indian garment firm with rich survey data on line managers, we find that several key dimensions of managerial quality, like attention, autonomy, and control, are important for learning-by-doing as well as for overall productivity but are not commensurately rewarded in pay. Counterfactual simulations of our structural model show large gains from screening potential hires via psychometric measurement and training to improve managerial practices.

    Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=55871

    Advancing Computational Biology and Bioinformatics Research Through Open Innovation Competitions

    By: Blasco, Andrea, Michael G. Endres, Rinat A. Sergeev, Anup Jonchhe, Max Macaluso, Rajiv Narayan, Ted Natoli, Jin H. Paik, Bryan Briney, Chunlei Wu, Andrew I. Su, Aravind Subramanian, and Karim R. Lakhani

    Abstract—Open data science and algorithm development competitions offer a unique avenue for rapid discovery of better computational strategies. We highlight three examples in computational biology and bioinformatics research where the use of competitions has yielded significant performance gains over established algorithms. These include studying algorithms for antibody clustering, imputing gene expression data, and querying the Connectivity Map (CMap). Performance gains are evaluated quantitatively using realistic, albeit sanitized, data sets. The solutions produced through these competitions are then examined with respect to their utility and the prospects for implementation in the field. We present the decision process and competition design considerations that lead to these successful outcomes as a model for researchers who want to use competitions and non-domain crowds as collaborators to further their research.

    Happily Ever After: Immigration, Natives' Marriage and Fertility

    By: Carlana, Michela, and Marco Tabellini

    Abstract—In this paper, we study the effects of immigration on natives’ marriage, fertility, and family formation across U.S. cities between 1910 and 1930. Instrumenting immigrants’ location decision by interacting national changes in migration flows across ethnic groups with pre-existing immigrants’ enclaves across U.S. cities, we find that immigration raised marriage rates and the probability of having children for young native men and women. We show that these effects were driven by the large and positive impact of immigration on native men’s employment and occupational standing, which increased the supply of “marriageable men.” We explore alternative mechanisms—changes in sex ratios, natives’ cultural responses, and displacement effects of immigrants on female employment—and provide evidence that none of them can account for a quantitatively relevant fraction of our results.

    Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=54796

    Formal Employment and Organized Crime: Regression Discontinuity Evidence from Colombia

    By: Khanna, Gaurav, Carlos Medina, Anant Nyshadham, and Jorge Tamayo

    Abstract—Canonical models of criminal behavior highlight the importance of economic incentives and employment opportunities in determining participation in crime (Becker, 1968). Yet, deriving causal corroborating evidence from individual-level variation in employment incentives has proven challenging. We link rich administrative micro-data on socioeconomic measures of individuals with the universe of criminal arrests in Medellin over a decade. We test whether increasing the relative costs to formal-sector employment led to more crime. We exploit exogenous variation in formal employment around a socioeconomic score cutoff, below which individuals receive generous health benefits if not formally employed. Our regression discontinuity estimates show that this popular policy induced a fall in formal-sector employment and a corresponding spike in organized crime. This relationship is stronger in neighborhoods with more opportunities for organized crime. There are no effects on less economically motivated crimes.

    Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=55870

    Compensation Consultants and the Level, Composition, and Complexity of CEO Pay

    By: Murphy, Kevin J., and Tatiana Sandino

    Abstract—We provide fresh evidence regarding the relation between compensation consultants and CEO pay. First, firms that employ consultants have higher-paid CEOs—this result is robust to firm fixed effects and matching on economic and governance variables. Second, while this relation is partly due to consultant conflicts of interest, it is largely explained by the impact consultants have on the composition and complexity of CEO pay plans; notably, this impact fully mediates the consultant-CEO pay relation. Third, firms with higher-paid CEOs and more complex pay plans are more likely to hire a consultant. Lastly, say-on-pay voting patterns suggest shareholders view positively the advice consultants provide but only when consultants do not provide other services. We also find suggestive evidence of boards “layering” new equity incentive plans over existing ones, thereby increasing the impact of composition and complexity on CEO pay beyond the premium the CEO would demand for bearing additional compensation risk.

    Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=53288

    How Rupert Murdoch Outfoxed Larry Tisch: Ten Enduring Lessons from the Negotiations That Wrested the NFL from CBS

    By: Sebenius, James K.

    Abstract—A remarkable 1993 negotiation rocked the world of American football with aftershocks that have directly shaped today’s entertainment and media landscapes and even our polarized politics. In December of that year, Rupert Murdoch’s fledgling Fox Network unexpectedly displaced longtime incumbent CBS as the host of the National Football League’s flagship programming. Fox’s negotiating success seemed most unlikely given that CBS had regularly renewed these NFL rights since 1956, enjoyed a good relationship with the NFL, sported an acclaimed broadcast unit, and had affiliates in virtually all important U.S. markets. Yet acquisition of these NFL rights directly enabled the expansion of Fox, then a minor broadcaster, into the media behemoth of today. For many observers, Fox’s NFL “heist” looked like the result of a simple move: Fox offered more money than CBS. A closer analysis, however, suggests a far more complex reality with ten broader lessons for negotiators facing challenging situations.

    Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=55878

    • Harvard Business School Case 719-007

    Angola Starts Now

    After five centuries of colonialism, four decades of civil war, an extended experiment with Marxism-Leninism, and nearly four decades of rule by a single man, José Eduardo Dos Santos, Angola finally has a chance to realize its enormous economic potential. A country blessed with enormous resources of oil, gold, and diamonds, it also has some of the most fertile remaining untilled land in Africa. However, since the end of fighting in 2002, Angola’s vast wealth has been squandered by a small elite tied to the single party that has ruled the country since independence, the Popular Movement for the Liberation of Angola (MPLA). In a country with a per capita GDP of over $4,000, the vast majority of the population subsists on less than $2 per day, and little investment has been made in infrastructure, education, and healthcare. Can the country’s—and the MPLA’s—new president, João Lourenço, implement the necessary reforms to unlock Angola’s economic potential, or will the existing power structure prevent the sort of change that is required if Angola’s people are to finally see the benefits of independence?

    Purchase this case:
    https://hbsp.harvard.edu/product/719007-PDF-ENG

    • Harvard Business School Case 318-089

    City Year at 30: Toward Long-Term Impact

    In 2018, City Year was a 30-year-old nonprofit that recruited and organized teams of young-adult “volunteers” (corps teams) to provide a year of citizen service. It had 3,100 corps members serving in 327 schools located in 28 U.S. cities. In its early decades, City Year provided a variety of services to a variety of organizations in need. Over its most recent decade, City Year had pivoted to having all corps members serve in low-income public schools to keep students on track to graduation in an effort to reduce the nation’s high school dropout rate. City Year also worked with partners to help schools transform themselves to better meet the needs of low-income students as well as with policy makers and elected officials to promote the value of national citizen service. In 2012, City Year launched a Long Term Impact strategy (LTI) aimed at making a substantial improvement in high school graduation rates. The LTI required City Year to transform itself over time to create an organization capable of delivering its ambitious impact strategy. The case explores City Year’s history and its efforts to align its organization with its strategy. In March 2018, City Year CEO Michael Brown must examine the state of his organization and its strategy to determine the next steps to achieving its LTI goals.

    Purchase this case:
    https://hbsp.harvard.edu/product/318089-PDF-ENG

    • Harvard Business School Case 119-038

    Dutch Bros Coffee: Leadership Selection

    No abstract available.

    Purchase this case:
    https://hbsp.harvard.edu/product/119038-PDF-ENG

    • Harvard Business School Case 119-049

    Accenture’s Code of Business Ethics

    Leaders of Accenture’s compliance and ethics program are seeking to design a new code of business ethics for its global workforce of over 400,000 employees. The case explores the decision-making process that went into the design process and ultimately how they created a revised code.

    Purchase this case:
    https://hbsp.harvard.edu/product/119049-PDF-ENG

    • Harvard Business School Case 119-050

    Bata versus Relaxo—Analyzing Performance

    Set in 2016, “Bata India versus Relaxo—Analyzing Performance” compares the strategies and financial performance of two Indian footwear companies. Bata India had long been the market leader in footwear in India, but its leading market position was being challenged by Relaxo, a relatively young, upstart company. The case is framed from the perspective of an emerging markets financial analyst presented with the financial statements and operational data for both companies. The analyst has to compare and contrast the performance of the two companies based on financial ratios. Students can apply the traditional DuPont decomposition framework to drill down into the business model of the two companies. The case then allows students to use the modified (also known as additive or alternate) DuPont approach with the goal of systematically understanding the differences that arise from operating performance, leverage, and the effect of large cash holdings (in Bata). In doing so, students learn the components of the traditional and modified DuPont frameworks and how to analyze financial statements to better understand how firm performance can arise from operating and financing decisions. The traditional DuPont framework provides for a methodical evaluation of performance for each business, but it has its limits: it does not separate operating assets and liabilities from financing assets and liabilities. When the financing components are separated and reclassified using the modified DuPont framework, students can clearly observe the crucial role that financing activities vis-à-vis operating activities can have in amplifying performance.

    Purchase this case:
    https://hbsp.harvard.edu/product/119050-PDF-ENG

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