First Look

Abstract—Background: Routine annual influenza vaccinations are recommended for persons 6 months of age and older, but less than half of U.S. adults get vaccinated. Many employers offer employees free influenza vaccinations at workplace clinics, but even then take-up is low. Objective: To determine whether employees are significantly more likely to get vaccinated if they have a higher probability of walking by the clinic for reasons other than vaccination. Method: We obtained data from an employer with a free workplace influenza vaccination clinic. Using each employee’s building entry/exit swipe card data, we test whether functional proximity—the likelihood that the employee walks by the clinic for reasons other than vaccination—predicts whether the employee gets vaccinated at the clinic. We also test whether base proximity—the inverse of walking distance from the employee’s desk to the clinic—predicts vaccination probability. Participants: A total of 1,801 employees of a health benefits administrator that held a free workplace influenza vaccination clinic. Results: A 2 SD increase in functional proximity is associated with a 6.4 percentage point increase in the probability of vaccination (total vaccination rate at company=40%), even though the average employee’s desk is only 166 meters from the clinic. Base proximity does not predict vaccination probability. Conclusions and Relevance: Minor changes in the environment can have substantial effects on the probability of vaccination. If these results generalize, health systems should emphasize functional proximity over base proximity when locating preventive health services.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51094

Abstract—We extend the Clark–Scarf serial multi-echelon inventory model to include procuring production inputs under short-term take-or-pay contracts at one or more stages. In each period, each such stage has the option to order/process at two different cost rates; the cheaper rate applies to units up to the contract quantity selected in the previous period. We prove that in each period and at each such stage, there are three base-stock levels that characterize an optimal policy, two for the inventory policy and one for the contract quantity selection policy. The optimal cost function is additively separable in its state variables, leading to conquering the curse of dimensionality and the opportunity to manage the supply chain using independently acting managers. We develop conditions under which myopic policies are optimal and illustrate the results using numerical examples. We establish and use a generic one-period result, which generalizes an important such result in the literature. Extensions to cover variants of take-or-pay contracts are included. Limitations are discussed.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51095

Abstract—This paper investigates whether humans avert their gaze from individuals engaging in nonverbal displays of dominance. Although past studies demonstrate that both humans and nonhuman primates direct more visual attention to high-status others than low-status others, nonhuman primates avert their gaze when high-status conspecifics engage in nonverbal dominance displays (e.g., chest pounding). In two experiments, participants were eye-tracked while viewing photographs of men and women adopting either dominant, high-power (i.e., expansive and open) or submissive, low-power (i.e., contractive and closed) nonverbal postures. Results demonstrated that humans, like primates, avert their gaze from the faces and upper bodies of individuals displaying dominance compared to those displaying submissiveness. Not only did participants look less often at the faces and upper bodies of dominance-displaying individuals, they also fixated on these regions for shorter durations. Our findings ultimately suggest that nonverbal dominance displays influence humans’ visual attention in ways that are likely to shape how social interactions unfold.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51104

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.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51099

Abstract—Digital technologies for sharing creative goods create new opportunities for copyright infringement and challenge established enforcement methods. We establish several important facts about the nature of copyright infringement and efforts to settle past infringing use in the market for digital images. Infringement in this, and many other markets, is often uninformed—users may be unaware of their use infringement, and they may lack information about the price of a license. The uninformed nature of infringement implies that price may not be the primary factor in the decision to settle past use; in contrast, non-price factors may significantly affect settlement outcomes.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50749

Abstract—Higher-beta and higher-volatility equities do not earn commensurately higher returns, a pattern known as the risk anomaly. In this paper, we consider the possibility that the risk anomaly represents mispricing and develop its implications for corporate leverage. The risk anomaly generates a simple tradeoff theory: at zero leverage, the overall cost of capital falls as leverage increases equity risk, but as debt becomes riskier, the marginal benefit of increasing equity risk declines. We show that there is an interior optimum and that it is reached at lower leverage for firms with high asset risk. Empirically, the risk anomaly tradeoff theory and the traditional tradeoff theory are both consistent with the finding that firms with low-risk assets choose higher leverage. More uniquely, the risk anomaly theory helps to explain why leverage is inversely related to systematic risk, holding constant total risk; why leverage is inversely related to upside risk, not just downside risk; why numerous firms maintain low or zero leverage despite high marginal tax rates; and, why other firms maintain high leverage despite little tax benefit.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=49212

Abstract—The gradual replacement of traditional U.S. public companies by more R&D–intensive firms is key to understanding the secular trend in average cash holdings. Over the last 35 years, an increasing share of R&D–intensive firms has entered the stock market with progressively higher cash balances. This positive entry-effect dominates the negative within-firm effect post IPO. We build a firm industry model with endogenous entry to quantify the importance of two competing selection mechanisms: an increasing share of R&D–intensive firms in the overall economy and more favorable IPO conditions. Only the combination of both mechanisms successfully generates a sizable secular increase.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=51107

Abstract—We investigate the factors driving workers’ decisions to generate public goods inside an organization through a randomized solicitation of workplace improvement proposals in a medical center with 1,200 employees. We find that pecuniary incentives, such as winning a prize, generate a threefold increase in participation compared to non-pecuniary incentives alone, such as prestige or recognition. Participation is also increased by a solicitation appealing to improving the workplace. However, emphasizing the patient mission of the organization led to countervailing effects on participation. Overall, these results are consistent with workers having multiple underlying motivations to contribute to public goods inside the organization consisting of a combination of pecuniary and altruistic incentives associated with the mission of the organization.

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Abstract—Volunteers provide a large source of labor in the United States, yet volunteer effort is often unresponsive to traditional incentives. To investigate the sources of this unresponsiveness within volunteering, we appeal to a classic explanation: targeting behavior. In particular, we provide a laboratory test of effort response to changes in wages, either accrued to individuals or to a charity, in the presence of expectations-based reference points or targets. When individuals earn money for themselves, higher wages lead to higher effort with relatively muted targeting behavior. When individuals earn money for a charity, higher wages instead lead to lower effort with substantial targeting behavior. For managers contemplating the use of performance goals or targets to encourage more volunteer effort, our results suggest careful consideration about the extent to which they may render other incentives less effective.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=50189

Abstract—We test the impact of a peer group savings program on precautionary savings through two randomized field experiments among 2,687 microcredit clients. The first experiment finds that the Peer Group Treatment, which combines public goal setting, monitoring in the group, and non-financial rewards, significantly increases savings in a new savings account. The number of deposits grows 3.7-fold, and the average savings balance almost doubles. In contrast, a more classical measure, a substantially increased interest rate, has no effect for most participants and raises the savings balance only for the very top of the distribution. A second experiment, conducted a year later, tests an alternative delivery mechanism and shows that effects of similar size can be achieved through feedback text messages, without meetings, rewards, or peer pressure.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=42103

No abstract available.

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In spite of the world's move to digital photography, in 2013 Lomography continues to design and offer analog (film) cameras to a loyal following of artistic photographers. Now it must decide whether to stick to its traditional offerings, to expand into artistic lenses for both digital and analog cameras, and/or to expand into film and film developing. In the process, it has to decide what kind of company it wants to be.

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No abstract available.

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Sandoz, which made a significant investment in bio-similars as a way to differentiate itself from its generic drug industry peers, has to negotiate with its parent company and the innovative pharma division on how best to commercialize its bio-similar portfolio. What is the best way to balance the parenting advantage of Novartis with the unique demands of the generic drug industry?

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Fabrice Tourre, a mid-level trader at Goldman Sachs, seeks to understand how he was one of the only executives of any Wall Street firm held accountable in the aftermath of the financial crises. The case includes commentary from Tourre and jurors that found him guilty at his trial.

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