First Look

November 22, 2016

Among the highlights included in new research papers, case studies, articles, and books released this week by Harvard Business School faculty:

Résumé whitening

Racial minorities sometimes try to avoid discrimination from hiring officers by “whitening” their applications; that is, hiding or downplaying racial cues. Written by K.A. DeCelles and colleagues, research published in the September issue of Administrative Science Quarterly presents an unexpected paradox. When applying to institutions that present themselves as valuing diversity, applicants do less whitening—and pay a price for doing so. The article is titled Whitened Résumés: Race and Self-Presentation in the Labor Market.

Breakfast at the Paramount

What makes a restaurant popular? Sometimes it’s more than the food. A new case study of The Paramount, a small diner in Boston, focuses on “the restaurant's interesting seating policy and a recent increase in the popularity of carryout orders, which poses a threat to the service experiences of customers and the sustainability of the operation,” according to the case description. The case, Breakfast at the Paramount, was written by Ryan W. Buell.

AnswerDash looks for answers

During its startup run, customer support technology provider AnswerDash proved successful in saving website clients significant amouts of money, and attracted VC funding. But once in the market, success has been slow. The abridged case study AnswerDash "raises issues in entrepreneurship and B2B marketing such as analyzing economic value to the customer, designing optimal price metrics, aligning pricing with marketing strategy, evaluating customer lifetime value, organizational selling, and influencing innovation adoption," according to the case description. It was written by Elie Ofek and Jeffrey D. Shulman.

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

— Sean Silverthorne
 
  • November 2016
  • Quarterly Journal of Economics

Stereotypes

By: Bordalo, Pedro, Katherine Baldiga Coffman, Nicola Gennaioli, and Andrei Shleifer

Abstract—We present a model of stereotypes based on Kahneman and Tversky's representativeness heuristic. A decision maker assesses a target group by overweighting its representative types, which we formally define to be the types that occur more frequently in that group than in a baseline reference group. Stereotypes formed in this way contain a "kernel of truth": they are rooted in true differences between groups. They are also context dependent: beliefs about a group depend on the characteristics of the reference group. Because stereotypes emphasize differences, they cause belief distortions, particularly when groups are similar. In line with our predictions, beliefs in the lab about abstract groups and beliefs in the field about political groups are context dependent and distorted in the direction of representative types.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51546

  • forthcoming
  • American Indian Business

High Stakes Negotiation: Indian Gaming and Tribal/State Compacts

By: Clarkson, Gavin, and James K. Sebenius

Abstract—Although Indian tribes and the surrounding states were often bitter enemies throughout much of the history of the United States, recently tribes and states have been able to work cooperatively in a number of areas. In some instances, Congress has mandated such cooperation, and at other times the cooperative activity has arisen between the parties themselves as a matter of pragmatism. In either instance, tribes and states often find themselves at the bargaining table. The negotiation dynamics of tribal-state compacting, however, can be challenging. The parties may have experienced centuries of animosity. The “shadow of the law” relevant to the substance of the negotiation may be ill-defined or easily misunderstood. Finally, significant cultural differences may obscure common ground that could facilitate a successful negotiation. While the range of tribal-state compacts encompasses many issue areas, Indian gaming has probably generated the greatest amount of activity in recent years. In particular, the negotiations that led to the immense success of the Pequot gaming operation in Connecticut have become almost mythical in nature, with states often misunderstanding the lessons of the Foxwoods story. The true story is one of strategic negotiation and the leveraging of tribal sovereignty into economic opportunity. Using a close analysis of the Foxwoods-Connecticut negotiations as a point of departure, this chapter also discusses the sovereign nature of tribal governments and the complex regulatory environment that governs Indian gaming.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51932

  • Fall 2016
  • Manufacturing & Service Operations Management

The Impact of Supplier Inventory Service Level on Retailer Demand

By: Craig, Nathan, Nicole DeHoratius, and Ananth Raman

Abstract—To set inventory service levels, suppliers must understand how changes in inventory service level affect demand. We build on prior research, which uses analytical models and laboratory experiments to study the impact of a supplier’s service level on demand from retailers, by testing this relationship in the field. We analyze a field experiment at the supplier Hugo Boss to determine how the supplier’s inventory service level affects demand from its retailer customers. We find increases in historical fill rate to be associated with statistically significant and managerially substantial increases in current retailer orders (i.e., demand, not just sales). Specifically, a one percentage point increase in fill rate, measured over the prior year, is associated with a statistically significant 11% increase in current retailer demand, controlling for other factors that might affect retailer demand. We explore the drivers of this demand increase, including changes in retailer assortment and order frequency. We discuss features of a retail buyer’s decision context identified through our field work that may explain the magnitude of the relationship we observe.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50794

  • September 2016
  • Administrative Science Quarterly

Whitened Résumés: Race and Self-Presentation in the Labor Market

By: Kang, Sonia K., K.A. DeCelles, András Tilcsik, and Sora Jun

Abstract—Using interviews, a laboratory experiment, and a résumé audit study, we examine racial minorities’ attempts to avoid anticipated discrimination in labor markets by concealing or downplaying racial cues in job applications, a practice known as "résumé whitening." Interviews with racial minority university students reveal that while some minority job seekers reject this practice, others view it as essential and use a variety of whitening techniques. Building on the qualitative findings, we conduct a lab study to examine how racial minority job seekers change their résumés in response to different job postings. Results show that when targeting an employer that presents itself as valuing diversity, minority job applicants engage in relatively little résumé whitening and thus submit more racially transparent résumés. Yet our audit study of how employers respond to whitened and unwhitened résumés shows that organizational diversity statements are not actually associated with reduced discrimination against unwhitened résumés. Taken together, these findings suggest a paradox: minorities may be particularly likely to experience disadvantage when they apply to ostensibly pro-diversity employers. These findings illuminate the role of racial concealment and transparency in modern labor markets and point to an important interplay between the self-presentation of employers and the self-presentation of job seekers in shaping economic inequality.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51633

  • forthcoming
  • Behavioral and Brain Sciences

Vicarious Contagion Decreases Differentiation—and Comes with Costs

By: Sezer, Ovul, and Michael I. Norton

Abstract—Baumeister et al. propose that individual differentiation is a crucial determinant of group success. We apply their model to processes lying in between the individual and the group—vicarious processes. We review literature in four domains—attitudes, emotions, moral behavior, and self-regulation—showing that group identification can lead to vicarious contagion, reducing individual differentiation and inducing negative consequences.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50058

  • Fall 2016
  • Administrative & Regulatory Law News

The Integrity of Private Third-party Compliance Monitoring

By: Short, Jodi L., and Michael W. Toffel

Abstract—Government agencies are increasingly turning to private, third-party monitors to inspect and assess regulated entities’ compliance with law. The integrity of these regulatory regimes rests on the validity of the information third-party monitors provide to regulators. The challenge in designing third-party monitoring regimes is that profit-driven private monitors, typically selected and paid by the firms subject to monitoring, have incentives to downplay problems they observe in order to satisfy and retain their clients. This paper discusses the most important factors that our research and the research of many others has shown can affect the integrity of third-party monitoring and highlights some policy implications for regulators designing third-party monitoring regimes.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51917

The Search for Peer Firms: When Do Crowds Provide Wisdom?

By: Lee, Charles M.C., Paul Ma, and Charles C.Y. Wang

Abstract—In knowledge-based economies, many business enterprises defy traditional industry boundaries. In this study, we evaluate six "big data" approaches to peer firm identifications and show that some, but not all, "wisdom-of-crowd" techniques perform exceptionally well. We propose an analytical framework for understanding when crowds can be expected to provide wisdom and show, theoretically and empirically, that their efficacy is related to crowd sophistication and task complexity. Consistent with this framework, we find that a "crowd-of-crowds" approach, which combines EDGAR user co-searches and analyst co-coverage, dominates other state-of-the-art methods for identifying investment benchmarks.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=48220

Relative Performance Benchmarks: Do Boards Get It Right?

By: Ma, Paul, Jee Eun Shin, and Charles C.Y. Wang

Abstract—Standard principal-agent models predict that the board will design incentive contracts that filter out common shocks in performance to motivate costly effort from the CEO—a process that entails the judicious selection of benchmarks for relative performance evaluation (RPE). This paper evaluates the efficacy of firms' chosen RPE benchmarks and documents that, relative to a normative benchmark, index-based RPE benchmarks perform 14% worse in their time-series return-regression R2; firms choosing specific peers as RPE benchmarks only modestly underperform. Structural estimates suggest that index-based benchmarks exhibit at least 16% greater measurement error variance and imply an average performance penalty of 106 to 277 basis points in annual returns. Finally, reduced-form estimates suggest that ineffective and index-based RPE benchmarks are associated with poorer corporate governance and lower realized ROA and stock returns. Collectively, these findings provide new evidence on the explicit practice of RPE and their implications for corporate governance and firm performance.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=51919

  • Harvard Business School Case 617-011

Breakfast at the Paramount

The Paramount is a 44-seat diner on Charles Street in the Beacon Hill neighborhood of Boston. A frequent "Best of Boston" award winner, the restaurant is a perennial favorite among locals and tourists, particularly for brunch on the weekends, when lines often stretch down the street. The case focuses on the restaurant's interesting seating policy and a recent increase in the popularity of carryout orders, which poses a threat to the service experiences of customers and the sustainability of the operation.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/617011-PDF-ENG

  • Harvard Business School Case 817-020

The CRISPR-Cas9 Quarrel

In mid-2016, the Broad Institute and the University of California, Berkeley were in the middle of a contentious patent dispute over which entity controlled a breakthrough gene editing technology called CRISPR-Cas9. With CRISPR-Cas9, scientists might soon be able to cure previously incurable genetic diseases such as sickle cell anemia and cystic fibrosis, among many others. The dispute had escalated to the point where the U.S. Patent and Trademark Office (USPTO) declared a patent interference and began a process to determine the intellectual property’s (IP) rightful owner. The USPTO’s decision would not only have serious commercial implications—the technology would be immensely important to biotechnology firms looking to develop gene therapy products and was, therefore, sure to generate strong revenues for whichever entity owned the IP—but would also essentially award scientific credit for this technology and thus impact the reputations of the scientists on both sides who had worked so hard to discover the tool. This case touches upon a number of other key issues, too: the ethical implications of gene editing; the state of IP and licensing in the biotechnology industry; the impact of lawsuits on developing new technologies and companies; and who should own platform technologies built, at least in part, by the research of multiple parties and government funding.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/817020-PDF-ENG

  • Harvard Business School Case 817-029

Radial Analytics Probes Post-Acute Care

Thaddeus Fulford-Jones and Eric Weiss, founders of healthcare technology startup Radial Analytics, have been busy developing a software program designed to save hospitals money and improve patient outcomes by producing customized care plans for patients leaving the hospital. Having piloted the program at an urban hospital in Massachusetts, they’re ready to disseminate the software to other accountable care organizations and bundled-payment hospitals. The case explores the issues the two entrepreneurs consider as they pursue the funding, clients, and business strategy that will allow them to scale their company and cut waste in Medicare spending.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/817029-PDF-ENG

  • Harvard Business School Case 516-087

OPET: Precision Marketing in Uncertain Times

During Timucin Guler’s decade at OPET, a prominent fuel distributor in Turkey, he transformed the definition of marketing in the company. Under Guler’s lead, OPET, once a local player in the downstream distribution market, became the second largest fuel distributor in Turkey. As assistant general manager, Guler had paved the way for customer-oriented marketing, which helped OPET differentiate itself in the market and become fiercely competitive. However, starting from 2009, changing regulations in Turkey’s highly regulated oil and gas industry limited OPET’s marketing tools, forcing Guler to revisit his marketing strategy. He was concerned that more restrictions were on the way and that these could possibly affect OPET’s loyalty program, in which the company had invested heavily. How should Guler go about revising OPET’s marketing strategy so as to keep up with and possibly foresee further regulatory changes, while trying to stay ahead of the competition? What would be the best way for Guler to optimize the company’s investment in its customer loyalty program?

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/516087-PDF-ENG

  • Harvard Business School Case 517-020

AnswerDash (Abridged)

It is 2014 and AnswerDash, a startup backed by venture capital, has not seen the widespread adoption of their online self-service customer support solution that they were expecting based on early success in helping clients save and generate substantial amounts of money. Dr. Jacob O. Wobbrock and Dr. Andrew J. Ko are revisiting their go-to-market strategy to determine how to build a viable business out of their groundbreaking technology. The case raises issues in entrepreneurship and B2B marketing such as analyzing economic value to the customer, designing optimal price metrics, aligning pricing with marketing strategy, evaluating customer lifetime value, organizational selling, and influencing innovation adoption.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/517020-PDF-ENG

This module demonstrates how to calculate and analyze the profit generated by different business strategies. Formulas and examples are provided to calculate the profit generated by changes in market share, revenue growth, efficiency improvements, and support costs. We illustrate how this analysis provides information about both competitive effectiveness and operating efficiencies. Managers can use this information to test their profit plan assumptions and validate their business strategy. In addition, strategic profitability analysis can be used for early warning and corrective action, performance evaluation, and strategic learning. With this information in hand, managers can redesign organizational processes or change standards—even the strategy—to take advantage of changes in competitive markets and internal operations. Like all management control system tools, strategic profitability analysis allows managers to maximize their return on management. While this module is designed to be used alone, it is part of the Management Control Systems series. The series forms a complete course that focuses on the techniques for using performance measurement and control systems to implement strategy.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/117106-PDF-ENG

  • Harvard Business School Case 917-003

The Management Buyout of Dell, Inc.

No abstract available.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/917003-PDF-ENG