More from these Authors

• Working Paper | HBS Working Paper Series | 2013

  Independent Directors' Dissent on Boards: Evidence from Listed Companies in China

  Juan Ma and Tarun Khanna

  In this paper, we examine the circumstances under which so-called "independent" directors voice their independent views on public boards in a sample of Chinese firms. First, we ask why independent directors dissent, i.e. how they justify such dissent to public investors. We find that when independent directors dissent, they tend to offer mild, subjective justifications. Overt criticism of the management team is rare. Next, we ask when an independent director is more likely to dissent and who is more likely to dissent. Controlling for firm and board characteristics, we find that independent directors' dissent is associated with breakdown of social ties between the independent director and the board chairperson, who is at the center of the board bureaucracy in China. Dissent is more likely to occur when the chairperson who appointed the independent director has left the board. Dissent also tends to occur at the end of board "games", defined as a 60-day window prior to departure of the board chairperson or departure of the independent director herself. The endgame effect is particularly strong, seeing 27% of the dissent issued at board "endgames" which represents only 4% of independent directors' average tenure. While directors with foreign experience are more likely to dissent, we do not find that academics, accountants and lawyers are significantly more active in dissenting. Lastly, we show that dissent is consequential to the director and the firm. For directors, we show that dissent is significantly associated with the likelihood of exiting the director labor market. For firms, we document an economically and statistically significant cumulative abnormal return of -0.97% around announcement of dissent. Although the literature has suggested that dissent might be reflective of diverse viewpoints, and perhaps beneficial in and of itself through reduction of firm variability, we do not find this offsetting beneficial effect to be strong.

  Keywords: corporate governance; independent directors; China; China; Asia;

  Citation:

  Ma, Juan, and Tarun Khanna. "Independent Directors' Dissent on Boards: Evidence from Listed Companies in China." Harvard Business School Working Paper, No. 13–089, April 2013. (Revised May 2013.)

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• Working Paper | HBS Working Paper Series | 2013

  Competing with Privacy

  Ramon Casadesus-Masanell and Andres Hervas-Drane

  We analyze the implications of consumer privacy for competition in the marketplace. We consider a market where firms set prices and disclosure levels for consumer information and consumers observe both before deciding which firm to patronize and how much information to provide it with. The provision and disclosure of information presents tradeoffs for all market participants. Consumers benefit from providing information to the firm, as this increases the utility they derive from the service, but they incur disutility from information disclosure. This in turn benefits the firm providing an additional source of revenue, but reduces consumer demand for the service. We characterize equilibrium information provision, disclosure levels, and prices as a function of the consumer population's valuation for the service, and show that competition has three main effects on the marketplace. First, competition drives the provision of services with a low level of disclosure. Second, competition ensures that services with a high level of disclosure subsidize consumers. And third, higher competition intensity tends to increase the volume of consumer information disclosed by firms. Our findings are particularly relevant to the business models of Internet firms and contribute to inform the regulatory debate on consumer privacy.

  Keywords: Information Acquisition; information disclosure; Online Privacy; Privacy Regulation;

  Citation:

  Casadesus-Masanell, Ramon, and Andres Hervas-Drane. "Competing with Privacy." Harvard Business School Working Paper, No. 13–085, April 2013.

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• Article | Strategic Management Journal | April, 2013

  Business Model Innovation and Competitive Imitation: The Case of Sponsor-Based Business Models

  Ramon Casadesus-Masanell and Feng Zhu

  This paper provides the first formal model of business model innovation. Our analysis focuses on sponsor-based business model innovations where a firm monetizes its product through sponsors rather than setting prices to its customer base. We analyze strategic interactions between an innovative entrant and an incumbent where the incumbent may imitate the entrant's business model innovation once it is revealed. The results suggest that an entrant needs to strategically choose whether to reveal its innovation by competing through the new business model or conceal it by adopting a traditional business model. We also show that the value of business model innovation may be so substantial that an incumbent may prefer to compete in a duopoly rather than to remain a monopolist.

  Keywords: business model innovation; imitation; sponsor-based business model; strategic revelation; strategic concealment; Business Model; Innovation and Invention; Price; Competitive Strategy; Adoption; Value; Duopoly and Oligopoly; Product; Customers; Market Entry and Exit; Monopoly;

  Citation:

  Casadesus-Masanell, Ramon, and Feng Zhu. "Business Model Innovation and Competitive Imitation: The Case of Sponsor-Based Business Models." Strategic Management Journal 34, no. 4 (April, 2013): 464–482.

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