First Look

Abstract—This book provides practice multiple choice questions on introductory accounting topics. It can be used to prepare for quizzes and exams.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51680

Abstract—We develop real-time proxies of retail corporate sales from multiple sources, including approximately 50 million mobile devices. These measures contain information from both the earnings quarter (within quarter) and the period between that quarter's end and the earnings announcement date (post quarter). Our within-quarter measure is powerful in explaining quarterly sales growth, revenue surprises, and earnings surprises, generating average excess returns at announcement of 3.4%. However, surprisingly, our post-quarter measure is related negatively to announcement returns and positively to post-announcement returns. When post-quarter private information is directionally strong, managers, at announcement, provide guidance and use language that points statistically in the opposite direction. This effect is more pronounced when, post-announcement, management insiders trade. We conclude managers do not fully disclose their private information and instead message to shareholders and analysts something of opposite sign. The data suggest they may be motivated in part by subsequent personal stock-trading opportunities.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51696

Abstract—Objective: To estimate the national cost savings resulting from reductions in higher-order multiple (HOM) live births (defined as three or more fetuses), following the initial publication of the Society for Assisted Reproductive Technology (SART) guidelines on ET in 1998. Design: Descriptive use and cost analysis. Main Outcome Measure(s): Estimates of the total number of HOM deliveries prevented (from 1998 to 2012) following the publication of SART guidelines; the associated healthcare savings (2014 U.S. dollars). Result(s): A singleton live birth was estimated to cost $17,100–$24,200. A twin live birth was estimated at $66,000–$117,500. A triplet live birth was estimated at $190,800–$456,300. The percentage of HOM gestations among all ART pregnancies decreased from 11.4% in 1997 to 2.0% in 2012, with the sharpest year-over-year decline of 20.3% occurring in the year following the publication of the guidelines. The number of prevented HOM deliveries from 1998 through 2012 was estimated to be between 13,500 and 16,300, corresponding to cost savings of $6.02B (billion) (range, $2.35B–$7.03B, 2014 U.S. dollars). Conclusion(s): Iatrogenic HOM gestations represent a substantial economic burden to our healthcare system. The introduction of guidelines for ET in 1998 coincided with a dramatic decrease in the HOM rate in subsequent years and an associated cumulative cost savings of more than $6B. Further reductions in HOM gestations could save up to an additional $2B annually.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51706

Abstract—Paltering is the active use of truthful statements to convey a misleading impression. Across two pilot studies and six experiments, we identify paltering as a distinct form of deception. Paltering differs from lying by omission (the passive omission of relevant information) and lying by commission (the active use of false statements). Our findings reveal that paltering is common in negotiations and that many negotiators prefer to palter than to lie by commission. Paltering, however, may promote conflict fueled by self-serving interpretations; palterers focus on the veracity of their statements (“I told the truth”), whereas targets focus on the misleading impression palters convey (“I was misled”). We also find that targets perceive palters to be especially unethical when palters are used in response to direct questions as opposed to when they are unprompted. Taken together, we show that paltering is a common, but risky negotiation tactic. Compared to negotiators who tell the truth, negotiators who palter are likely to claim additional value but increase the likelihood of impasse and harm to their reputations.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=51679

Abstract—We build a tractable growth model where multi-product incumbents invest in internal innovations to improve their existing products, while new entrants and incumbents invest in external innovations to acquire new product lines. External and internal innovations generate heterogeneous innovation qualities, and firm size affects innovation incentives. This framework allows us to analyze how different types of innovation contribute to economic growth and how the firm size distribution can have important consequences for the types of innovations realized. Our model aligns with many observed empirical regularities, and we quantify our framework by matching Census Bureau operating data with patent data for U.S. firms. We observe that internal innovation scales moderately faster with firm size than external innovation.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=43743

Abstract—Despite massive large-scale asset purchases (LSAPs) by central banks around the world since the global financial crisis, there is a lack of empirical evidence on whether and how these programs affect the real economy. Using rich borrower-linked mortgage-market data, we document that there is a “flypaper effect” of LSAPs, where the transmission of unconventional monetary policy to interest rates and (more importantly) origination volumes crucially depends on the assets purchased and the degree of segmentation in the market. For example, QE1, which involved significant purchases of GSE-guaranteed mortgages, increased GSE-eligible mortgage originations significantly more than the origination of GSE-ineligible mortgages. In contrast, QE2's focus on purchasing Treasuries did not have such differential effects. We find that the Fed's purchase of MBS (rather than exclusively Treasuries) during QE1 resulted in an additional $600 billion of refinancing, substantially reduced interest payments for refinancing households, led to a boom in equity extraction, and increased refinancing mortgagors’ consumption by an additional $76 billion. This de facto allocation of credit across mortgage market segments, combined with sharp bunching around GSE eligibility cutoffs, establishes an important complementarity between monetary policy and macroprudential housing policy. Our counterfactual simulations estimate that relaxing GSE eligibility requirements would have significantly increased refinancing activity in response to QE1, including a 20% increase in equity extraction by households. Overall, our results imply that central banks could most effectively provide unconventional monetary stimulus by supporting the origination of debt that would not be originated otherwise.

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Abstract—Though fundamental to innovation and essential to many industries and occupations, the creative act has received limited attention as an economic behavior and has historically proven difficult to study. This paper studies the incentive effects of competition on individuals' creative production. Using a sample of commercial logo design competitions, and a novel, content-based measure of originality, I find that intensifying competition induces agents to explore novel, untested ideas over tweaking their earlier work, but heavy competition drives them to stop investing altogether. The results yield lessons for the management of creative workers and for the implementation of competitive procurement mechanisms for innovation.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=49445

Abstract—I propose and formalize an argument for why economists working in the welfarist normative tradition should include nonwelfarist principles in how they judge economic policy. The key idea behind this argument is that the world is too complex, and our ability to model it too limited, for us to fully trace a policy’s effects on welfare. Nonwelfarist principles can be valuable to a welfarist facing this limitation if they act as informational proxies, carrying accumulated knowledge about the effects of policy that otherwise cannot be considered. This argument can be seen both as extending a familiar logic for rule utilitarianism beyond the realm of individual ethics and as a specific version of a broader argument made for centuries by theorists from Hume to Hayek. I also provide evidence of an example in which real-world policy judgments are consistent with this theoretical argument. Results from a novel U.S. opinion survey show that approximately half of respondents reject redistribution driven by envy even though it generates direct utilitarian gains. That share rises as the role of envy is made more salient, consistent with respondents using nonwelfarist principles to encode concerns about the unobservable consequences of policy.

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No abstract available.

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In January 2011, Mohamed Azab, founder and CEO of health care investment firm Seha Capital, made his first health care investment in Hassab Labs, a diagnostic lab in Alexandria, Egypt. Weeks later, a revolution erupted across the country as the Arab Spring swept through the region, and Azab spent the following years active in both the protests and in restructuring and expanding Hassab Labs. From 2011 to 2014, he opened 25 new branches, quadrupled staff, and more than doubled net income. By the end of the revolution in 2014, Hassab Labs was among the top five chains in the country. In October 2014, Seha partially exited Hassab Labs in a sale to an African conglomerate, SAHAM Group. At the same time, Azab learned that foreign investors in a small private hospital in Egypt were looking to exit the market. While Seha's mission was to build diagnostic, hospital, and pharmacy chains in Egypt, Azab had not been planning to enter the hospital market until he further expanded the diagnostic labs. In late 2014, Azab must decide if he should focus on expanding Hassab Labs, either in Egypt or across Africa, or invest in the hospital.

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This case explores the role of Tom Kalil as Deputy Director for Technology & Innovation at the White House Office of Science and Technology Policy. With the end of President Obama's Administration drawing near, Kalil and his team of "policy entrepreneurs" must work to build an ecosystem of individuals and organizations both inside and outside the Federal government, if they hope to see their science & technology initiatives continue into the next Administration. The case allows for discussion of the following: leading innovation ecosystems, building public-private and public-public collaborations, leading system innovation, talent management and development, and public sector innovation.

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This case describes Hewlett Packard Enterprise’s “Dandelion Program," which has developed a new service offering for the company’s clients by drawing on the special talents of people with autism. The company has deployed “pods” organized around 8 or 9 employees with autism, to function as high-performance mini-ecosystems, which have turned out to be 30% more effective than average service teams (in some areas). The case centers on questions of how to adapt this successful model to new demands in a different service domain, specifically, cybersecurity and defense-related areas. The case also explores how the company is innovating and refining its assessment and training processes in support of the program.

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No abstract available.

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Tolaram is a Singaporean company that began operations selling textiles in Nigeria in the 1970s. Executives and brothers, Haresh and Sajesh Aswani, however, saw an opportunity to create an instant noodle market in the country. In 1988, they began importing Indomie noodles. But in order to truly target the local market, Tolaram decided to build manufacturing and distribution capabilities in Nigeria at a time when conventional wisdom advised against it. After a very difficult journey, Tolaram has grown to almost $1 billion in turnover, built and operates 13 manufacturing plants in Nigeria, and runs a 1,000+ plus truck logistics company. This case gives an overview of how Tolaram, a company that is a prime example of market-creating innovation in a developing economy, built Indomie noodles from obscurity to become one of the most recognized brands in Nigeria.

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