First Look

March 22, 2016

Creating Jibo, the first social robot

In the case study Jibo, a Social Robot for the Home, top executives at Jibo Inc. are gathered to discuss an important meeting with the board. With 4,800 preorders for the product, the team faces critical decisions. "How could the team best attract third-party developers to create Jibo Skills (apps) for this new platform that would not ship until 2016? Should the team develop a full set of Jibo Skills in-house?... How could they convince potential partners that Jibo was a worthwhile investment?" The case was written by Jeffrey J. Bussgang and Christine Snively.

Does top-down risk management stifle innovation?

In the working paper Risk Management—The Revealing Hand, Robert S. Kaplan and Anette Mikes discuss current concerns about enterprise risk management. In the paper, "we draw lessons from seven case studies about the multiple and contingent ways that a corporate risk function can foster highly interactive and intrusive dialogues to surface and prioritize risks, help to allocate resources to mitigate them, and bring clarity to the value trade-offs and moral dilemmas that lurk in those decisions."

How uncertainty impacts accounting earnings

A growing focus of academic research is on the subject of how uncertainy impacts economic outcomes. The paper Economic Uncertainty and Earnings Management, by Luke C.D.Stein and Charles C.Y. Wang, examines how economic uncertainty impacts the reporting and management of accounting earnings.

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

— Sean Silverthorne

Abstract—Emerging markets play an increasingly important role in the global economy, accounting for 31% of global GDP and more than 50% of global foreign direct investment in 2012. However, doing business in emerging markets remains subject to a high degree of "policy risk," namely the risk that a government will discriminatorily change the laws, regulations, or contracts governing an investment—or will fail to enforce them—in a way that reduces an investor's financial returns. Institutions, Institutional Change and Economic Performance in Emerging Markets brings together a series of Harvard Business School case studies on emerging markets. This book is an invaluable resource for researchers in the fields of economics and business to understand the role of specific economic and political institutions in shaping the business environment and economic growth in emerging markets. It gives answers to the following questions: When will governments define and enforce property rights? When will the division of policy authority across different government agents (e.g. federal and subnational governments, or politicians and bureaucrats) enable better policy decisions? And what are the consequences of globalization for the economic growth and stability of emerging market countries?

Publisher's link:

  • forthcoming
  • World Bank Economic Review

Productivity Gains from Foreign Direct Investment: Macro and Micro Approaches

By: Alfaro, Laura

Abstract—This paper discussed the importance of an “integrated approach” to the study of the effects of FDI on host countries. Macro-level work that examines countries at different stages of development and institutional capacity is needed to surface the role of local conditions and absorptive capacities; micro-level work, that is firm-level data in developed as well as developing nations, to understand the mechanisms that impart substance to the anticipated benefits; and theoretical work to guide the analyses. The paper summarizes likely motives for foreign direct investment and potential effects of FDI on local economies as well as recent findings from the macro literature on the role of complementarities between FDI and local policies, conditions, and institutions. It explores as well new efforts to understand the micro mechanisms and channels by which host countries can benefit from multinational activity, within and between firm productivity increases.

Publisher's link:

  • forthcoming
  • Information Systems Research

Open Content, Linus' Law, and Neutral Point of View

By: Greenstein, Shane, and Feng Zhu

Abstract—The diffusion of the Internet and digital technologies has enabled many organizations to use the open-content production model to produce and disseminate knowledge. While several prior studies have shown that the open-content production model can lead to high-quality output in the context of uncontroversial and verifiable information, it is unclear whether this production model will produce any desirable outcome when information is controversial, subjective, and unverifiable. We examine whether the open-content production model helps achieve a neutral point of view (NPOV) using data from Wikipedia's articles on U.S. politics. Our null hypothesis builds on Linus' Law, often expressed as "Given enough eyeballs, all bugs are shallow." Our findings are consistent with a narrow interpretation of Linus' Law, namely, a greater number of contributors to an article makes an article more neutral. No evidence supports a broad interpretation of Linus' Law. Moreover, several empirical facts suggest the law does not shape many articles. The majority of articles receive little attention, and most articles change only mildly from their initial slant. Our study provides the first empirical evidence on the limit of Linus' Law. While many organizations believe that they could improve their knowledge production by leveraging communities, we show that in the case of Wikipedia, there are aspects, such as NPOV, that the community does not always achieve successfully.

Publisher's link:

  • March 4, 2016
  • Harvard Business Review (website)

Startups Can’t Revolve Around Their Founders If They Want to Succeed

By: Gulati, Ranjay, and Alicia DeSantola

Abstract—No abstract available.

Publisher's link:

  • forthcoming
  • JAMA Oncology

Effects of Narrow Networks on Access to High-Quality Cancer Care

By: Schleicher, Stephen M., Samyukta Mullangi, and Thomas W. Feeley

Abstract—No abstract available.

Publisher's link:

  • forthcoming
  • Production and Operations Management

Enhancing the Practical Relevance of Research

By: Toffel, Michael W.

Abstract—This article seeks to encourage scholars to conduct research that is more relevant to the decisions faced by managers and policymakers and addresses why research relevance matters, what relevance means in terms of a journal article, and how scholars can increase the relevance of their research. I define relevant research papers as those whose research questions address problems found (or potentially found) in practice and whose hypotheses connect independent variables within the control of practitioners to outcomes they care about using logic they view as feasible. I provide several suggestions for how scholars can enhance research relevance, including engaging practitioners in on-campus encounters, at managerial conferences, and at crossover workshops; conducting site visits and practitioner interviews; working as a practitioner; and developing a practitioner advisory team. I describe several ways that scholars can convey relevant research insights to practitioners, including presenting at practitioner conferences, writing for practitioners in traditional crossover journals and in shorter pieces like op-eds and blogs, and attracting the interest of those who write columns, blogs, and articles about research for practitioners. I conclude by describing a few ways that academic institutions can encourage more relevant research, focusing on journals, professional societies, and doctoral programs.

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Abstract—Do monetary incentives encourage volunteering? Or, do they introduce a "greedy" signal and hence crowd out the motivation to volunteer? Since the strength of this greedy signal is normally unobserved, the answer is theoretically unclear, and corresponding empirical evidence is mixed. To help counter this ambiguity, this paper proposes that the strength of the greedy signal relates to an individual's volunteer reputation. Results from an online experiment support this possibility: the crowd out in response to public incentives is less likely among individuals with past histories of volunteering if this history is public rather than private.

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Observability Increases the Demand for Commitment Devices

By: Exley, Christine L., and Jeffrey K. Naecker

Abstract—Previous research often interprets the choice to restrict one's future opportunity set as evidence for sophisticated time-inconsistency. We propose an additional mechanism that may contribute to the demand for commitment technology: the desire to signal to others. We present a field experiment where participants can choose to give up money if they do not follow through with an action. When commitment choices are made public rather than kept private, we find significantly higher uptake rates.

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Risk Management—The Revealing Hand

By: Kaplan, Robert S., and Anette Mikes

Abstract—Many believe that the recent emphasis on enterprise risk management function is misguided, especially after the failure of sophisticated quantitative risk models during the global financial crisis. The concern is that top-down risk management will inhibit innovation and entrepreneurial activities. We disagree and argue that risk management should function as a Revealing Hand to identify, assess, and mitigate risks in a cost-efficient manner. Done well, the Revealing Hand of risk management adds value to firms by allowing them to take on riskier projects and strategies. But risk management must overcome severe individual and organizational biases that prevent managers and employees from thinking deeply and analytically about their risk exposure. In this paper, we draw lessons from seven case studies about the multiple and contingent ways that a corporate risk function can foster highly interactive and intrusive dialogues to surface and prioritize risks, help to allocate resources to mitigate them, and bring clarity to the value trade-offs and moral dilemmas that lurk in those decisions.

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The Globalization of Angel Investments: Evidence Across Countries

By: Lerner, Josh, Antoinette Schoar, Stanislav Sokolinski, and Karen Wilson

Abstract—This paper examines investments made by 13 angel groups across 21 countries. We compare applicants just above and below the funding cutoff and find that these angel investors have a positive impact on the growth, performance, and survival of firms as well as their follow-on fundraising. The positive impact of angel financing is independent of the level of venture activity and entrepreneur friendliness in the country. However, we find that the development stage and maturity of startups that apply for angel funding (and those that are ultimately funded) is inversely correlated with the entrepreneurship friendliness of the country, which may reflect self-censoring by very early-stage firms that do not expect to receive funding in these environments.

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Economic Uncertainty and Earnings Management

By: Stein, Luke C.D., and Charles C.Y. Wang

Abstract—We document that firms report more negative discretionary accruals when financial markets are less certain about their future prospects. Stock-price responses to earnings surprises are moderated when firm-level uncertainty is high, consistent with performance being attributed more to luck, which can create incentives to shift earnings toward lower-uncertainty periods. We show that the resulting opportunistic earnings management is concentrated in CEOs, firms, and periods where such incentives are likely to be strongest: (1) where CEO wealth is sensitive to change in the share price, (2) where announced earnings are particularly likely to be an important source of information about managerial ability and effort, and (3) before implementation of Sarbanes-Oxley made opportunistic earnings management more challenging. Our evidence highlights a novel channel through which firm-level uncertainty affects managerial decision making.

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Abstract—Public moral reasoning is shown to differ in three specific ways from what is conventionally assumed in modern optimal tax theory. Large majorities of survey respondents resist costless redistribution of arbitrarily determined unequal outcomes and prefer justifying tax progressivity based on benefit received rather than on diminishing marginal social welfare of income. These attitudes are shown to be linked to widespread moral acceptance of unequal allocations due to luck. Together, these results raise the possibility that the American public views the allocations of taxes and pre-tax outcomes as morally relevant, a judgment that is inconsistent with conventional objectives depending solely on after-tax outcomes but consistent with alternative principles such as Classical Benefit-Based Taxation.

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  • Harvard Business School Case 516-053

Lipman: Vertical Integration in Fresh Tomatoes

Lipman, the largest open field fresh tomato grower and marketer in the United States, has been successfully pursuing an aggressive strategy of acquisitions over the last several years. End-market consolidation in the retail space has driven vertical integration in the extremely competitive fresh tomato business, where farm gate prices have not changed in 30 years. The company is facing pressure from climate change, alternative uses for farmland, and a transition to the next generation of family ownership of the business.

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  • Harvard Business School Case 516-067

The Promise of Agriculture in the Republic of Cuba

This background note explains Cuba's past and current agriculture policies and provides insights into its future potential as relations with the U.S. normalize.

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  • Harvard Business School Case 916-044

Evive Health and Workplace Influenza Vaccinations

Evive Health is a company that manages communication campaigns on behalf of health insurance plans and large employers. Using big data techniques and insights from behavioral economics, Evive deploys targeted and effective messages that improve individuals' health behaviors. This case follows Prashant Srivastava, Evive's Chief Operating Officer, and Jennifer Lindner, Evive's Creative Director, as they design a messaging strategy for promoting influenza vaccination at the free workplace clinics of a large utility company.

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  • Harvard Business School Case 816-003

Jibo: A Social Robot for the Home

In January 2015, Jibo Inc. had completed a raise of $25.3 million in Series A financing after a successful 2014 crowdfunding campaign for preorders of Jibo, the first social robot for the home. Over 4,800 Jibo units were preordered, generating $2.6 million in sales. On one snowy morning in January, CEO Steve Chambers met with co-founder and Chief Scientist Dr. Cynthia Breazeal and newly hired VP of Consumer & Development Relations Lynda Smith to prepare for their first meeting with the board. The team planned to discuss Jibo's business development strategy and considered how best to engage with the developer community to expand Jibo's portfolio of capabilities. How could the team best attract third-party developers to create Jibo Skills (apps) for this new platform that would not ship until 2016? Should the team develop a full set of Jibo Skills in-house? The team also hoped to establish partnerships with large content providers. How could they convince potential partners that Jibo was a worthwhile investment?

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  • Harvard Business School Case 916-019

P&G Canada: Old Company, New Tricks

P&G Canada faces ongoing global pressure to increase productivity and reduce spending. Thom Lachman, president of P&G Canada, is seemingly out of options that will make a large enough impact without harming the business, until the idea of a radical space reduction strikes him. The case follows Lachman, working closely with Country HR Manager Jane Lewis, from idea inception to the eve of the company-wide transition to a dramatically scaled-down and reorganized office space. In particular, the case provides a basis for discussion surrounding employee motivation—specifically as it is affected by the change management process and workspaces, benefits versus perks, and sorting effects. The (B) case details the outcome of the office space transition.

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  • Harvard Business School Case 916-024

P&G Canada: Old Company, New Tricks (B)

This is the (B) case supplement to “P&G Canada: Old Company, New Tricks.” It details the outcome of the drastic reduction in office space from eight floors to three floors.

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  • Harvard Business School Case 516-077

Environmental Health

No abstract available.

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  • Harvard Business School Case 716-072

Government Policy and Distributive Justice

This note introduces the second of two main modules in the HBS elective curriculum course, The Role of Government in Market Economies (RoGME). This module is focused on policies, such as taxes, that change the distribution of economic outcomes. Like the efficiency-enhancing policies of the first module, these distribution-enhancing policies generate fierce debate. A central goal of class discussions in this module is to have students identify, understand, and engage with the sources of these controversies. Consistent with the core lesson of the overall course, a key source often turns out to be fundamental disagreement over what society ought to use government to achieve.

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