Annual Report 2011

Internationalization to build global knowledge.

Increasing Faculty Exposure to Critical Regions

As part of an ongoing commitment to faculty development, in 2011 HBS undertook the first of a series of intensive educational and cultural immersions—part of a plan to send faculty members to critical regions of the world, guided by peers with expert knowledge of each area. Warren McFarlan led the initial immersion—to China— in June: over 10 days, a dozen faculty visited 7 cities (see sidebar) and met with more than 100 business leaders, government officials, and fellow academics. Industries represented spanned banking and financial services, textiles and garment manufacturing, software, energy, transportation, beverages, and industrial products.

Combining meetings, tours, and panel and roundtable discussions with social events, the immersion offered faculty a comprehensive learning experience designed to inspire new interests and research. Faculty immersions are planned for China and Israel in 2012.

Faculty Immersion Itinerary

Hong Kong (2 days)
Shenzhen (1 day)
Gaoming (1 day)
Beijing (2 days)
Suzhou (1 day)
Shanghai and Changzhou (3 days)

Companies & Organizations Visited

Beijing-Shanghai High-Speed Railway Co.
China Entrepreneur Club
China Merchants Bank
China Securities Regulatory Commission
China Shenhua Energy
Clear Suppliers Co.
Coca-Cola Beverages Ltd.
Esquel Group and Esquel factory
Harvard Club of Beijing
HBS Association of Hong Kong
HBS Club of Shanghai
Li & Fung Ltd.
Sealed Air
Suzhou Industrial Park Administrative Commission
Suzhou Logistics Center
The People's Bank of China
Tsinghua University School of Economics and Management

Additionally, the group toured the Great Wall and Forbidden City in Beijing and the Humble Administrator's Garden in Suzhou and attended dinners hosted by HBS alumni William Fung (MBA '72), group managing director of Li & Fung, and Margie Yang (MBA '76), chairman of Esquel Group.

Developing International Cases

Backed by the School's network of global research centers and augmented research support, the HBS faculty is focusing more closely on international questions—with remarkable effect. In 2011, for the first time, more than 40 percent of all research and more than 50 percent of all new cases dealt with global issues and settings. Two cases published during the fiscal year illustrate the breadth and scope of this research.

Chile's Copper Surplus: The Road Not Taken (A)

Laura Alfaro and Dante Roscini (with former research associate Renee Kim) investigated Chile's fiscal policy in 2008, when Finance Minister Andrés Velasco was under mounting criticism. Chile, the world's largest copper producer, had benefited from the recent tripling of copper prices, and the country's largest copper producer was a state-owned enterprise. Velasco had chosen to save the bulk of the revenues in two stabilization funds, which together exceeded 20 percent of Chile's GDP by August 2008. With one of the most unequal wealth distributions in the world, Chile was experiencing stagnant productivity and a long-term slowdown in economic growth. Against this backdrop, some critics wanted to use the funds to ameliorate social and economic conditions. What should Velasco do?

Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships

Benjamin Esty and Albert Sheen studied the dramatic crash of the global shipping industry in late 2008. Ship charter rates plummeted by as much as 90 percent, causing prices for used ships to fall by as much as 80 percent. In response to the crisis, VHSS, the German shipbrokers' association, proposed that ships be valued using discounted cash flow analysis—to determine a long-term asset value—rather than market prices from comparable transactions. How could VHSS convince ship owners, appraisers, and bankers to adopt this new valuation methodology, and banker regulators and auditing firms to approve its use?