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    September 8, 2015

    First Look

    08 Sep 2015

    Knowing how (and when) to say you're sorry

    Every organization makes mistakes, but not everyone knows whether, when, or how to apologize for any given error. Maurice E. Schweitzer, Alison Wood Brooks, and Adam D. Galinsky provide a step-by-step guide in "The Organizational Apology," which appears in the September issue of Harvard Business Review.

    Protecting the firm through good citizenship

    In "The Value of Corporate Citizenship: Protection," Dylan Minor explores the relationship between corporate social responsibility and withstanding negative business shocks. "In particular, we find that firms with higher CSR investments enjoy an average of $1 billion of saved firm value upon an adverse event," Minor writes.

    Going global with a messaging app

    In a new case, Willy Shih, Howard Yu, and Fang Liu look at the history of WeChat, a platform that quickly became the most popular messaging app in China. The core question the case presents: Could the company go international with features that competitors couldn't offer? Read "WeChat: A Global Platform?"

    —Carmen Nobel
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    • in press
    • Proceedings of the National Academy of Sciences of the United States of America

    Compared to Men, Women View Professional Advancement as Equally Attainable, but Less Desirable

    By: Gino, Francesca, Caroline A. Wilmuth, and Alison Wood Brooks

    Abstract—Women are underrepresented in most high-level positions in organizations. While a great deal of research has provided evidence that bias and discrimination give rise to and perpetuate this gender disparity, in the current research, we explore another explanation: men and women view professional advancement differently, and their views impact their decisions to climb the corporate ladder (or not). In Studies 1 and 2, when asked to list their core goals in life, women listed more life goals overall than men, and a smaller proportion of their goals related to achieving power at work. In Studies 3 and 4, compared to men, women viewed high-level positions as less desirable yet equally attainable. In Studies 5–7, when faced with the possibility of receiving a promotion at their current place of employment or obtaining a high-power position after graduating from school, women and men anticipated similar levels of positive outcomes (e.g., prestige, money), but women anticipated more negative outcomes (e.g., conflict, tradeoffs). In these studies, women associated high-level positions with conflict, which explained the relationship between gender and the desirability of professional advancement. Finally, in Studies 8 and 9, men and women alike rated power as one of the main consequences of professional advancement. Our findings reveal that men and women have different perceptions of what the experience of holding a high-level position will be like, with meaningful implications for the perpetuation of the gender disparity that exists at the top of organizational hierarchies.

    Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=49601

    • forthcoming
    • Management Science

    Financing Risk and Innovation

    By: Nanda, Ramana, and Matthew Rhodes-Kropf

    Abstract—We provide a model of investment into new ventures that demonstrates why some places, times, and industries should be associated with a greater degree of experimentation by investors. Investors respond to financing risk—a forecast of limited future funding—by modifying their focus to finance less innovative firms. Potential shocks to the supply of capital create the need for increased upfront financing, but this protection lowers the real option value of the new venture. In equilibrium, financing risk disproportionately impacts innovative ventures with the greatest real option value. We propose that extremely novel technologies may need "hot" financial markets to get through the initial period of discovery or diffusion.

    Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=49551

    • September 2015
    • Harvard Business Review

    The Organizational Apology: A Step-by-Step Guide

    By: Schweitzer, Maurice E., Alison Wood Brooks, and Adam D. Galinsky

    Abstract—At some point, every company makes a mistake that requires an apology—to an individual; a group of customers, employees, or business partners; or the public at large. And more often than not, companies and their leaders fail to apologize effectively, if at all, which can severely damage their reputations and their relationships with stakeholders. Companies need clearer guidelines for determining whether a mistake merits an apology and, when it does, for crafting and delivering an effective message. In this article, the authors present their framework—the apology formula—to help companies navigate the tricky terrain. Leaders should ask themselves four questions: Was there a violation? Was it core to our promise or mission? How will the public react? Are we committed to change? As a general rule, the more central to the mission of the company the violation is and the more people it affects, the more important it is that the apology be pitch-perfect. Once a company decides that an apology is necessary, it needs to carefully consider the who, what, where, when, and how of executing it. For core violations, the "who" has to be senior leaders, the "what" has to show a tremendous commitment to change, the "where" has to be high profile, the "when" has to be fast, and the "how" must be deeply sincere and demonstrate empathy.

    Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=49586

    • September 2015
    • Harvard Business Review

    Case Study: Can You Win Back Online Shoppers?

    By: Teixeira, Thales S., and Sunil Gupta

    Abstract—This case study discusses the options that brick-and-mortar retailers can use to combat the negative consequences of “showrooming.”

    Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=49543

    Misconduct in Financial Services: Differences Across Organizations

    By: Brown, Jennifer, and Dylan Minor

    Abstract—We examine misconduct in financial services. We propose a theory in which experts extract surplus based on the value of their firm’s brand and their own skills. Using sales complaint data for insurance agents, we find that agents working exclusively for large branded firms are more likely to be the subject of justified sales complaints, relative to smaller independent experts, despite doing substantially less business. In addition, more experienced experts attract more complaints per year.

    Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=49555

    The Value of Corporate Citizenship: Protection

    By: Minor, Dylan

    Abstract—We explore the notion that corporate citizenship, as obtained through Corporate Social Responsibility (CSR), is used by managers to protect firm value, helping their firm better withstand negative business shocks. We formally explore two parallel mechanisms for such protection: one of building moral capital (CSR Contributions) and another of improving investor posteriors (CSR Investments). We find some theoretical and empirical support for both of these, but in different settings. In particular, we find that firms with higher CSR Investments enjoy an average of $1 billion of saved firm value upon an adverse event. In contrast, CSR Contribution firms lose value (on average) upon an event, possibly due to disingenuous contributions. Meanwhile, due to managerial moral hazard, firms with high levels of CSR Contributions face adverse events more often, whereas those with high levels of CSR Investments face them less often.

    Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=49554

    Competing with Complementors: An Empirical Look at Amazon.com

    By: Zhu, Feng, and Qihong Liu

    Abstract—Platform owners sometimes enter complementors' product spaces to compete against them directly. Prior studies have offered two possible explanations for such entries: platform owners may target the most successful complementors so as to appropriate value from their innovations, or they may target poor performing complementors to improve the platforms' overall quality. Using data from Amazon.com, we analyze the patterns of Amazon's entry into its third-party sellers' product spaces. We find evidence consistent with the former explanation: that the likelihood of Amazon's entry is positively correlated with the popularity and customer ratings of third-party sellers' products. We also find that Amazon's entry reduces the shipping costs of affected products and hence increases their demand. Results also show that small third-party sellers affected by Amazon's entry appear to be discouraged from growing their businesses on the platform subsequently. The results have implications for complementors participating in various platform-based markets.

    Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=48334

    • Harvard Business School Case 815-071

    The National Football League and Brain Injuries

    The National Football League (NFL) was both the most popular spectator sport in the U.S. and a major economic entity, taking in roughly $10 billion a year in revenue. However through the early twenty-first century, an increased understanding of the long-term effects of head injuries on NFL players indicated a serious threat to the long-term viability of the game. Particularly concerning was the indication that some deceased professional football players had developed chronic traumatic encephalopathy (CTE)—a neurodegenerative disease that had a strong influence on a person's mental and physical health—most likely as a result of repetitive hits sustained during their football careers and that may have contributed to their deaths. Over 4,000 retired players had jointly sued the NFL over the head injuries they had sustained during their time in the NFL and the resulting health problems they attributed to these injuries. In part, the lawsuit alleged that the NFL had not been forthcoming with players about the health risks of head injuries. The two sides had reached a tentative $765 million settlement in 2013, the bulk of which would go to compensating retired players suffering from such diseases as Alzheimer's or dementia. While this settlement compensated retired players, it was not applicable to current or future players. Could the NFL preserve the sport by making it safer through new rules or equipment changes, or was football an inherently physical game that no amount of new rules or equipment could make completely safe? Were current and future players, now knowing full well the potential long-term health implications of football, tacitly accepting the risks involved? As a team owner, is now the time to sell while franchise value and fan support are at their peaks, or will the business of the NFL be viable for years to come?

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/815071-PDF-ENG

    • Harvard Business School Case 815-104

    Winnan Metal: Fulfilling the Dream

    Neil Kashyap and Neil Lombardo (HBS '08) acquired Winnan Metal, Inc., a metal fabrication shop, after raising a search fund and embarking on an 11-month search to fulfill their dreams of becoming business owners. Two weeks after they took control of the company, Winnan's largest customer (60% of company revenues) threatened to take its business elsewhere. One year later, they had regained the respect of their customers and won the trust of their employees to promote a new culture of empowerment and respect. They wondered how to prioritize options to grow the business, as they did not want to spread themselves too thin.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/815104-PDF-ENG

    • Harvard Business School Case 116-006

    Dana Hall: Funding a Mission (E): Excerpts from a Letter from Head of School Caroline Erisman, May 2015

    No abstract available.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/116006-PDF-ENG

    • Harvard Business School Case 813-114

    Coupa

    The case describes the growth of Coupa, a software-as-a-service platform for procurement/expense management. The issues in the case revolve around how fast to grow and how to finance that growth. The case includes a detailed financial model that will help students analyze the impact of hiring additional sales people and the consequent impact on sales and profits.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/813114-PDF-ENG

    • Harvard Business School Case 615-049

    WeChat: A Global Platform?

    WeChat was developed by Tencent Holdings as a lightweight messaging platform. As it grew quickly to become the most popular messaging app in China, it added a range of products and services that sat on top that were designed to appeal to a broad range of consumers and businesses. Official accounts, WeChat payment, and online to offline features expanded its reach, but the core question was whether the company could break out from its home market and offer the rest of the world something that its competitors could not.

    Purchase this case:
    https://cb.hbsp.harvard.edu/cbmp/product/615049-PDF-ENG

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