First Look

May 15, 2018

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

Big business is poised to make a giant leap in space

Space is currently an undeveloped blank slate for companies, but that could change. Amazon CEO Jeff Bezos says he hopes his firm Blue Origin has “millions of people living and working in space,” and Tesla CEO Elon Musk, who founded SpaceX, is creating plans to build a city of a million people on Mars within the next century. While skeptics question whether the prospect of a developed space economy could become a reality, in a Journal of Economic Perspectives article, Matthew C. Weinzierl explores whether the idea should be written off as science fiction. Space, the Final Economic Frontier.

Why you should cherish time over money

Both time and money are resources that can feel scarce. But as it turns out, choosing time over money has emotional benefits that can enhance a person’s well-being. Ashley V. Whillans and Alice Lee-Yoon examine the value people place on their time, plus they take a look at the emotional costs of treating the value of time just like money in a paper scheduled to be published in the Current Opinion in Psychology. Making Seconds Count: When Valuing Time Promotes Subjective Well-being.

How the rich and poor move further apart

Wealthy people—those who earn $200,000 or more annually—shift their income to reduce their tax burden, while those lower on the earnings scale do not. That’s one of the reasons that cutting state corporate tax rates leads to increases in income inequality, explain Ethan Rouen and colleagues in a recent working paper. Corporate Tax Cuts Increase Income Inequality.

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

— Dina Gerdeman
 
  • May–June 2018
  • Harvard Business Review

The Surprising Power of Questions

By: Brooks, Alison Wood, and Leslie K. John

Abstract—Much of an executive’s workday is spent asking others for information—requesting status updates from a team leader, for example, or questioning a counterpart in a tense negotiation. Yet unlike professionals such as litigators, journalists, and doctors, who are taught how to ask questions as an essential part of their training, few executives think of questioning as a skill that can be honed—or consider how their own answers to questions could make conversations more productive. That’s a missed opportunity. Questioning is a powerful tool for unlocking value in companies: It spurs learning and the exchange of ideas, it fuels innovation and better performance, and it builds trust among team members. And it can mitigate business risk by uncovering unforeseen pitfalls and hazards. Several techniques can enhance the power and efficacy of queries: Favor follow-up questions, know when to keep questions open ended, get the sequence right, use the right tone, and pay attention to group dynamics.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54500

  • forthcoming
  • American Economic Review: Papers and Proceedings

Using Online Prices for Measuring Real Consumption Across Countries

By: Cavallo, Alberto, Erwin Diewert, Robert C. Feenstra, Robert Inklaar, and Marcel P. Timmer

Abstract—We show that online prices can be used to construct quarterly purchasing power parities (PPPs) with a closely matched set of goods and identical methodologies in a variety of developed and developing countries. Our results are close to those reported by the International Comparisons Program (ICP) in 2011 and the OECD in 2014 and can be used to obtain more up-to-date estimates of real consumption across countries without the need for consumer price index extrapolations. We discuss advantages and limitations associated with the use of online prices for PPPs, including issues of representativeness and limited coverage of product categories and countries.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54490

Abstract—Most leaders view employee freedoms and operational controls as antagonists in a tug-of-war. They tend to focus on regulating workers’ behavior, often putting a damper on commitment, innovation, and performance without realizing it. But freedom and control aren’t zero sum, argues the author. By giving people a clear sense of their organization’s purpose, priorities, and principles—that is, by providing freedom within a galvanizing framework—leaders can equip employees to make on-the-ground decisions that are in the company’s best interests. Gulati uses businesses as diverse as Netflix, Alaska Airlines, and Warby Parker to show how freedom can function in different settings. A coherent framework helps employees develop a deeper understanding of the business, which can lead to improved engagement, creativity, efficiency, and customer service.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54501

  • March 2018
  • Keiei ronshū? [Meiji Business Review]

Global Business over Time

By: Jones, G.

Abstract—This article explores how business enterprises have been powerful actors in the spread of global capitalism between 1840 and the present day. It also shows how global firms, emerging out of industrialized Western economies, created and co-created markets and ecosystems through their ability to transfer a package of financial, organizational, and cultural assets, skills, and ideologies across national borders. It argues such firms have been shapers of, as well as responders to, globalization waves over the last two centuries. Global firms are also shown to be actors in periodic deglobalization waves. This was because their function was to reinforce the gaps in wealth and income rather than disrupt them. Business enterprises proved disappointing institutions for knowledge and technology transfer. During the first global economy, multinational resource and related investments were highly enclavist and embedded in the institutional arrangements of Western imperialism and autocratic dictators. Western firms reinforced rather than disrupted institutional and societal norms, which restricted growth in many countries outside the West. They often functioned, as a result, as part of the problem, rather than part of the solution. In the more recent globalization era, the strategies of Western corporations have moved beyond the practices of the colonial past, but linkages and spillovers to local economies have often been disappointedly low. Their ability, and motivation, to locate value-added activities in the most attractive locations means that they strengthen clustering rather than encourage dispersion of knowledge.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54471

  • May–June 2018
  • Harvard Business Review

Layoffs That Don't Break Your Company: Better Approaches to Workforce Transition

By: Sucher, Sandra J., and Shalene Gupta

Abstract—Today layoffs have become companies’ default response to the challenges created by advances in technology and global competition. Yet research shows that job cuts rarely help senior leaders achieve their goals. Too often, they’re done for short-term gain, but the cost savings are overshadowed by bad publicity, loss of knowledge, weakened engagement, higher voluntary turnover, and lower innovation, which hurt profits in the long run. This article looks at better ways to handle changing workforce needs that make sparing use of staff reductions and ensure that if they do happen, the process feels fair and the affected parties have a soft landing. Most successful approaches begin with a philosophy that spells out a firm’s commitments and priorities, establish methods for exploring layoff alternatives (such as furloughs, retraining, and reassignments), and determine options for three scenarios: a healthy present, short-term volatility, and an uncertain future. As firms like AT&T, Michelin, Honeywell, and Nokia have learned, thoughtful planning helps organizations address workforce transitions and cope with a shifting economic landscape far better than layoffs do.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54502

  • May–June 2018
  • Harvard Business Review

What Most People Get Wrong about Men and Women: Research Shows the Sexes Aren't So Different

By: Tinsley, Catherine H., and Robin J. Ely

Abstract—Why have women failed to achieve parity with men in the workplace? Contrary to popular belief, it’s not because women prioritize their families over their careers, negotiate poorly, lack confidence, or are too risk averse. Meta-analyses of published studies show that those ideas are myths—men and women actually have similar inclinations, attitudes, and skills. What does differ is the way they are treated on the job: Women have less access to vital information, get less feedback from supervisors, and face other obstacles to advancement. To ensure gender equity, the authors recommend that managers (1) question the stereotypes behind their practices, (2) consider other factors that might explain the achievement gap, (3) change workplace conditions accordingly, and (4) keep challenging assumptions and sharing learning to create a culture in which all employees can reach their full potential.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54503

  • Spring 2018
  • Journal of Economic Perspectives

Space, the Final Economic Frontier

By: Weinzierl, Matthew C.

Abstract—After decades of centralized control of economic activity in space, NASA and U.S. policymakers have begun to cede the direction of human activities in space to commercial companies. NASA garnered more than 0.7% of GDP in the mid-1960s but is only around 0.1% of GDP today. Meanwhile, space has become big business, with $300 billion in annual revenue. The shift from public to private priorities in space is especially significant because a widely shared goal among commercial space's leaders is the achievement of a large-scale, mainly self-sufficient, developed space economy. Jeff Bezos has stated that the mission of his firm Blue Origin is "millions of people living and working in space." Elon Musk, founder of SpaceX, has laid out plans to build a city of a million people on Mars within the next century. Both Neil deGrasse Tyson and Peter Diamandis have been given credit for stating that Earth's first trillionaire will be an asteroid miner. Such visions are clearly not going to become reality in the near future. But detailed roadmaps to them are being produced, and recent progress in the required technologies has been dramatic. If such space-economy visions are even partially realized, the implications for society will be enormous. Though economists should treat the prospect of a developed space economy with healthy skepticism, it would be irresponsible to treat it as science fiction. In this article, I provide an analytical framework—based on classic economic analysis of the role of government in market economies—for understanding and managing the development of the space economy.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54487

  • in press
  • Current Opinion in Psychology

Making Seconds Count: When Valuing Time Promotes Subjective Well-being

By: Whillans, A.V., and Alice Lee-Yoon

Abstract—Time is a finite and precious resource, and the way that we value our time can critically shape happiness. In this article, we present a conceptual framework to explain when valuing time can enhance vs. undermine well-being. Specifically, we review the emotional benefits of valuing time more than money and discuss the emotional costs of valuing time like money. Lastly, we suggest directions for future research examining the causes and consequences of the value that people place on their time.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54475

Corporate Tax Cuts Increase Income Inequality

By: Nallareddy, Suresh, Ethan Rouen, and Juan Carlos Suárez Serrato

Abstract—This paper studies the effects of corporate tax changes on income inequality. Using state corporate tax rate changes as a setting, we show that cutting state corporate tax rates leads to increases in income inequality. This result is robust to using regression and matching approaches, and to controlling for a host of potential confounders. Contrary to the effects of tax cuts, we find no effects of tax increases on income inequality at the state level. We then use data from the IRS Statistics of Income to explore the mechanism behind the rise in income inequality. We find tax cuts lead to higher reported capital income and a decrease in wage and salary income. These effects are concentrated among top earners, and we find no effects for those reporting less than $200,000 in income. This result provides evidence that one mechanism for the relation between tax cuts and inequality is that wealthy individuals shift their income to reduce taxes while others do not. Finally, we explore the effects of corporate tax cuts on capital investment using data from the Annual Survey of Manufactures. We find that tax cuts lead to an increase in real investment, suggesting a trade-off between investment and inequality at the state level. This paper studies the effects of corporate tax changes on income inequality. Using state corporate tax rate changes as a setting, we show that cutting state corporate tax rates leads to increases in income inequality. This result is robust to using regression and matching approaches, and to controlling for a host of potential confounders. Contrary to the effects of tax cuts, we find no effects of tax increases on income inequality at the state level. We then use data from the IRS Statistics of Income to explore the mechanism behind the rise in income inequality. We find tax cuts lead to higher reported capital income and a decrease in wage and salary income. These effects are concentrated among top earners, and we find no effects for those reporting less than $200,000 in income. This result provides evidence that one mechanism for the relation between tax cuts and inequality is that wealthy individuals shift their income to reduce taxes while others do not. Finally, we explore the effects of corporate tax cuts on capital investment using data from the Annual Survey of Manufactures. We find that tax cuts lead to an increase in real investment, suggesting a trade-off between investment and inequality at the state level.

Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=54496

  • Harvard Business School Case 818-004

Giving Birth to Ovia Health

In late 2016, Paris Wallace, the CEO of Ovia Health, and the rest of the company’s co-founders faced a difficult decision about the best way to grow Ovia Health’s revenue. Founded in 2012, Ovia Health specialized in mobile and web applications in the women’s health space. After building a strong user base with its original app (Ovia Fertility, which helped women conceive by tracking ovulation and other factors), the young company launched a second app, Ovia Pregnancy, which helped women have a healthy pregnancy by tracking various health metrics. Ovia Health’s apps were free to use, and most of the company’s revenue came from charging advertisers to host ads on its native advertising platform. Wallace believed that the family benefits market was a promising growth area, but he was not sure of the best way to enter the market. Recently, a top health benefits provider had offered Ovia Health a multi-million-dollar contract, but Wallace wondered whether Ovia Health could create a better family benefits solution by turning down the contract and selling directly to employers’ HR departments. Participants will need to examine how Ovia Health evolved its strategy over time and decide which growth opportunity was the better choice.

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No abstract available.

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Manish Goel was the CEO of TrustSphere, a seven-year-old company in the data analytics industry that focused squarely on relationship analytics, a space in which TrustSphere was pioneering a unique technology and solutions in the areas of sales, risk, and people analytics. Essentially, TrustSphere's technology allowed its customers to view the patterns of digital communication captured on the organization’s communication infrastructure among internal and external players. With this information, TrustSphere could help customers infer where relationships existed and the strength of those relationships, information that could be leveraged to address a number of business challenges and opportunities. Based in Singapore but operating globally, TrustSphere was trying to get its footing and establish its technology and solutions as a "must-have" for prospective customers, all the while trying to navigate the relatively unchartered waters of relationship analytics.

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No abstract available.

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  • Harvard Business School Case 618-020

Under Armour

After 20 years of growth unprecedented in the sports apparel industry, Under Armour finds itself with a new record to beat: making the leap from $5 to $10 billion in sales—a feat only accomplished to date by competitors Nike and Adidas. At the heart of this challenge is how Under Armour can maintain its brand’s authenticity while adding new products that fuel future growth. The case traces the evolution of Under Armour’s brand and describes how the company chose to extend or not extend its brand into adjacent categories and markets in the past. Now Under Armour needs to decide on their next steps. Should the company focus on its core markets? Should it stretch the brand into more adjacencies? Or should it consider something more radical, like app-related sales through subscriptions and wearable technologies?

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  • Harvard Business School Case 618-028

Chicago Chemicals, Inc.

No abstract available.

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Managers make predictions all the time: How fast will my markets grow? How much inventory do I need? How intensively should I monitor my suppliers? Which potential customers will be most responsive to a particular marketing campaign? Which job candidates should I employ? Machine learning, data science, big data, and predictive analytics all use statistical techniques to predict an outcome. This case enables students to begin using data to make predictions and teaches the core metrics to evaluate how accurate predictions are. It helps students understand how to choose among alternative model specifications and introduces the concepts of overfitting and in-sample versus out-of-sample prediction. The case discussion also promotes an understanding of factors beyond prediction accuracy—such as transparency and perceived fairness—that managers need to consider when deciding which predictive algorithm to deploy. The class discussion also helps students appreciate the differences between prediction, correlation, and causation. The case protagonist recently joined a new data science team at the U.S. Occupational Safety and Health Administration (OSHA), a government agency, and needs to evaluate and recommend one of several alternative approaches that OSHA should use to improve how it targets its government inspections of workplaces to better assure safe working conditions. The case includes a dataset and exercise.

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Supplements the (A) case.

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