George P. Baker
Senior Lecturer of Business Administration
George P. Baker is a Senior Lecturer at Harvard Business School. Until 2010, he was the Herman C. Krannert Professor of Business Administration. He has published works on management incentives, leveraged buyouts, organizational economics, and the relationship between a firm's ownership structure and its management. Baker's work focuses on the problem of managerial performance measurement, and its role in the design of incentive systems and on the structure and performance of organizations. He is also the author of a book on the firm of Kohlberg, Kravis, Roberts & Co. published by Cambridge University Press. Baker is currently working in the clean tech industry, and teaches a course on renewable energy.
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Journal Article
| Journal of the Japanese and International Economies
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Strategic Alliances: Bridges Between 'Islands of Conscious Power'
George P. Baker, Robert Gibbons and Kevin J. Murphy
Strategic alliances range from unstructured collaborations, through consortia and joint ventures that superimpose new governance structures on existing firms, to transactions that restructure firm boundaries and asset ownership. In this paper, we draw on detailed discussions with practitioners to describe and analyze a rich collection of feasible governance structures. Our model focuses on two issues emphasized by practitioners: spillover effects (as opposed to hold-ups motivated by specific investments) and contracting problems ex post (as opposed to only ex ante). By considering the allocation of assets, decision rights, and payoffs, we generate a large number of potential governance structures, including strategic divestitures, total divestitures, licensing agreements, and royalty agreements. For the broad range of parameter values and payoff functions we consider, we show that each of these possible strategic alliances could be optimal. We expect that, given institutional knowledge about a particular setting, our broad theoretical framework can be specialized to deliver testable predictions for that setting (as has occurred in some analogous work on vertical integration, for example).
Keywords: Governance;
Contracts;
Agreements and Arrangements;
Alliances;
Strategy;
Theory;
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Article
| North Carolina Law Review
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The Changing Structure of the Legal Services Industry and the Careers of Lawyers
George P. Baker and Rachel Parkin
Keywords: Change;
Law;
Employees;
Personal Development and Career;
Organizational Structure;
Legal Services Industry;
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Article
| Quarterly Journal of Economics
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Contractibility and Asset Ownership: On-Board Computers and Governance in US Trucking
George P. Baker and Thomas Hubbard
Keywords: Assets;
Ownership;
Technology;
Governance;
Contracts;
Transportation Industry;
United States;
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Article
| Journal of Labor Economics
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CEO Incentives and Firm Size
George P. Baker and Brian J. Hall
Keywords: Management;
Motivation and Incentives;
Size;
Business Ventures;
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Article
| American Economic Review
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Make v. Buy in Trucking: Asset Ownership, Job Design and Information
George P. Baker and Thomas Hubbard
Keywords: Assets;
Ownership;
Jobs and Positions;
Design;
Transportation Industry;
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Article
| Journal of Human Resources
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Distortion and Risk in Optimal Incentive Contracts
George P. Baker
Keywords: Risk and Uncertainty;
Motivation and Incentives;
Contracts;
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Article
| Journal of Law, Economics & Organization
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Survivorship and the Economic Grim Reaper
George P. Baker and Robert E. Kennedy
Keywords: Economics;
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Article
| Quarterly Journal of Economics
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Relational Contracts and the Theory of the Firm
George P. Baker, Robert Gibbons and Kevin J. Murphy
Keywords: Contracts;
Theory;
Business Ventures;
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Article
| American Economic Review
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Bringing the Market Inside the Firm?
George P. Baker, Robert Gibbons and Kevin J. Murphy
Keywords: Markets;
Business Ventures;
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Article
| American Economic Review
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Empirical Strategies in Contract Economics: Information and the Boundary of the Firm.
George P. Baker and Thomas Hubbard
Keywords: Strategy;
Economics;
Information;
Business Ventures;
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Article
| American Economic Review
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The Use of Performance Measures in Incentive Contracting
George P. Baker
Keywords: Performance;
Measurement and Metrics;
Motivation and Incentives;
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Article
| Journal of Law, Economics & Organization
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Informal Authority in Organizations
George P. Baker, Robert Gibbons and Kevin J. Murphy
Keywords: Organizations;
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Article
| Journal of Organizational Behavior
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Incentives and Cooperation: The Joint Effects of Task and Reward Interdependence on Group Performance
George P. Baker and Ruth Wageman
Keywords: Motivation and Incentives;
Cooperation;
Groups and Teams;
Performance;
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Article
| American Economic Review
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Internal Labor Markets: Too Many Theories, Too Few Facts
George P. Baker and Bengt Holmstrom
Keywords: Labor;
Markets;
Theory;
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Article
| Quarterly Journal of Economics
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The Internal Economics of the Firm: Evidence from Personnel Data
George P. Baker, Michael Gibbs and Bengt Holmstrom
Keywords: Economics;
Business Ventures;
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Article
| Quarterly Journal of Economics
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The Wage Policy of a Firm
George P. Baker, Michael Gibbs and Bengt Holmstrom
Keywords: Policy;
Business Ventures;
Wages;
Citation: Baker, George P., Michael Gibbs, and Bengt Holmstrom. " The Wage Policy of a Firm." Quarterly Journal of Economics 109 (November 1994).
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Article
| Quarterly Journal of Economics
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Subjective Performance Measures in Optimal Incentive Contracts
George P. Baker, Robert Gibbons and Kevin J. Murphy
Keywords: Performance;
Motivation and Incentives;
Measurement and Metrics;
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Article
| European Economic Review
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Hierarchies and Compensation: A Case Study
George P. Baker, Michael Gibbs and Bengt Holmstrom
Keywords: Compensation and Benefits;
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Article
| Journal of Accounting & Economics
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Growth, Corporate Policies and the Investment Opportunity Set
George P. Baker
Keywords: Growth and Development;
Policy;
Investment;
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Article
| Journal of Finance
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Beatrice: A Study in the Creation and Destruction of Value
George P. Baker
Keywords: Value;
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Article
| Journal of Political Economy
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Incentive Contracts and Performance Measurement
George P. Baker
Keywords: Contracts;
Performance;
Measurement and Metrics;
Motivation and Incentives;
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Article
| Continental Bank Journal of Applied Corporate Finance
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Lessons from a Middle-Market LBO: The Case of O.M. Scott
George P. Baker and Karen Wruck
Keywords: Learning;
Leveraged Buyouts;
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Article
| Continental Bank Journal of Applied Corporate Finance
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Pay for Performance: Causes and Consequences
George P. Baker
Keywords: Performance;
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Article
| Journal of Financial Economics
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Organizational Changes and Value Creation in Leveraged Buyouts: The Case of O.M. Scott & Sons Company
George P. Baker and Karen Wruck
Keywords: Change;
Value;
Borrowing and Debt;
Financial Instruments;
Leveraged Buyouts;
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Article
| Journal of Finance
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Compensation and Incentives: Practice vs. Theory
George P. Baker, Michael C. Jensen and Kevin J. Murphy
Keywords: Compensation and Benefits;
Motivation and Incentives;
Practice;
Theory;
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Comment
| Journal of Accounting Research
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Discussion of 'An Analysis of the Use of Accounting and Market Measures of Performance in Executive Compensation Contracts'
George P. Baker
Keywords: Accounting;
Markets;
Measurement and Metrics;
Performance;
Executive Compensation;
Contracts;
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Comment
| Policymaking Insights from Behavioral Economics
| 2009
The Behavioral Economics of the Labor Market:Central Findings and Their Policy Implications by Ernst Fehr, Lorenz Goette, and Christian Zehnder
George P. Baker
Keywords: Economics;
Behavior;
Labor;
Policy;
Government and Politics;
Citation: Baker, George P. Comment on "The Behavioral Economics of the Labor Market:Central Findings and Their Policy Implications by Ernst Fehr, Lorenz Goette, and Christian Zehnder." Policymaking Insights from Behavioral Economics, edited by Christopher L. Foote, Lorenz Goette, and Stephan Meier, 241–244. Boston, MA: Federal Reserve Bank of Boston, 2009.
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Chapter
| Private Equity and Venture Capital
| 2000
Leveraged Management Buyouts at KKR: Historical Perspectives on Patient Equity, Debt, Discipline, and LBO Governance.
George P. Baker and George Smith
Keywords: Business History;
Leveraged Buyouts;
Executive Compensation;
Equity;
Borrowing and Debt;
Citation: Baker, George P., and George Smith. "Leveraged Management Buyouts at KKR: Historical Perspectives on Patient Equity, Debt, Discipline, and LBO Governance." In Private Equity and Venture Capital, edited by Rick Lake, and Ronald Lake. London: Euromoney Books, 2000.
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Chapter
| The Intellectual Venture Capitalist: John H. McArthur and the Work of the Harvard Business School, 1980-1995
| 1999
Organizations and Markets at Harvard Business School, 1984-1996
George P. Baker, Michael C. Jensen, Carliss Y. Baldwin and Karen H. Wruck
Keywords: History;
Higher Education;
Markets;
Organizations;
Non-Governmental Organizations;
Citation: Baker, George P., Michael C. Jensen, Carliss Y. Baldwin, and Karen H. Wruck. " Organizations and Markets at Harvard Business School, 1984-1996." In The Intellectual Venture Capitalist: John H. McArthur and the Work of the Harvard Business School, 1980-1995, edited by T. K. McCraw, and J. L. Cruikshank. Boston: Harvard Business School Press, 1999.
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Chapter
| Studies in International Corporate Finance and Governance Systems: A Comparison of the U.S., Japan, and Europe
| 1997
Lessons from a Middle-Market LBO: The Case of O.M. Scott
George P. Baker and Karen H. Wruck
Keywords: Leveraged Buyouts;
Citation: Baker, George P., and Karen H. Wruck. "Lessons from a Middle-Market LBO: The Case of O.M. Scott." In Studies in International Corporate Finance and Governance Systems: A Comparison of the U.S., Japan, and Europe, edited by Donald Chew. Oxford University Press, 1997.
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Chapter
| The New Corporate Finance: Where Theory Meets Practice
| 1993
Lessons from a Middle-Market LBO: The Case of O.M. Scott
George P. Baker and Karen H. Wruck
Keywords: Leveraged Buyouts;
Citation: Baker, George P., and Karen H. Wruck. "Lessons from a Middle-Market LBO: The Case of O.M. Scott." In The New Corporate Finance: Where Theory Meets Practice, edited by D. Chew. New York: McGraw-Hill, 1993.
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Chapter
| The Challenge of Organizational Change: How Companies Experience It and Leaders Guide It
| 1992
Lessons from a Middle-Market LBO: The Case of O.M. Scott
George P. Baker and Karen H. Wruck
Keywords: Leveraged Buyouts;
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Chapter
| Performance Measurement, Evaluation and Incentives
| 1992
Organizational Changes and Value Creation in Leveraged Buyouts: The Case of O.M. Scott & Sons Company
George P. Baker and Karen H. Wruck
Keywords: Leveraged Buyouts;
Organizational Change and Adaptation;
Value Creation;
Citation: Baker, George P., and Karen H. Wruck. "Organizational Changes and Value Creation in Leveraged Buyouts: The Case of O.M. Scott & Sons Company." In Performance Measurement, Evaluation and Incentives, edited by William J. Bruns. Boston, MA: Harvard Business School Press, 1992.
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Working Paper
| HBS Working Paper Series
| 2009
Conglomerates and LBO Associations: A Comparison of Organizational Forms
George P. Baker and Cynthia A. Montgomery
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Working Paper
| 2000
Contractibility and Asset Ownership: On-Board Computers and Governance in US Trucking
George P. Baker and Thomas Hubbard
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Working Paper
| HBS Working Paper Series
| 1999
Survivorship and the Economic Grim Reaper
George P. Baker and Robert E. Kennedy
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Working Paper
| 1998
CEO Incentives and Firm Size
Brian Hall and George P. Baker
What determines CEO incentives? A confusion exists among both academics and practitioners about how to measure the strength of CEO incentives, and how to reconcile the enormous differences in pay sensitivities between executives in large and small firms. We show that while one measure of CEO incentives (the dollar change in CEO wealth per dollar change in firm value) falls by a factor of ten between firms in the smallest and largest deciles in our sample, another measure of CEO incentives (the value of CEO equity stakes) increases by roughly the same magnitude. We resolve the confusion about which of these measures better reflects CEO incentives by developing and solving a model that allows CEO productivity to differ for firms of different sizes. The crucial parameter is shown to be the elasticity of CEO productivity with respect to firm size. Our empirical results suggest that CEO marginal products rise significantly, and overall CEO incentives are roughly constant or decline slightly with firm size. We also show that the appropriate measure of incentives depends on the type of CEO activity being considered. For activities whose dollar impact is the same for large and small firms (such as the purchase of a corporate jet), the dollars-on-dollars measure is appropriate, and large firms suffer significant agency problems due to their weak incentives. For activities whose percentage impact is similar across firms of different sizes (such as a corporate reorganization) the equity stake measure is better, and the incentive problem faced by large firms is not as severe. Finally, using a multi-task model, we discuss the implication of our findings for the design of control systems.
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Working Paper
| HBS Working Paper Series
| 1998
CEO Incentives and Firm Size
George P. Baker and Brian J. Hall
Citation: Baker, George P., and Brian J. Hall. "CEO Incentives and Firm Size." Harvard Business School Working Paper, No. 99–060, November 1998.
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Case
| HBS Case Collection
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2004
(Revised from original 1990 version)
O.M. Scott & Sons Co. Leveraged Buyout
George P. Baker III and Karen Wruck
Documents the organizational changes that took place at O.M. Scott & Sons Co. in response to their leveraged buyout. Provides the opportunity for students to discuss the effects of high leverage on management decision making, and the differences between operating as a small subsidiary of a large conglomerate and as a free-standing company. Focuses on the role of the LBO sponsor in the management of the company, the role of restrictive debt covenants, and the effect of changes in the compensation system at the company.
Keywords: Leveraged Buyouts;
Capital Structure;
Borrowing and Debt;
Organizational Structure;
Organizational Change and Adaptation;
Management;
Business Conglomerates;
Cost of Capital;
Financial Services Industry;
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Case
| HBS Case Collection
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2002
(Revised from original 1994 version)
K-III: A Leveraged Build-Up
George P. Baker III, Nicola Bamford and Nicolas Greenspan
Explores the strategy, financing, and governance of a new type of organizational form, dubbed the Leveraged Build-Up by its inventor, Kohlberg, Kravis, Roberts & Co. The company makes leveraged acquisitions of small publishing companies, managing them in a very decentralized way. It has grown dramatically between 1989 and 1993. K-III's organization and governance structure combines many of the characteristics of leveraged buyouts with those of venture-backed companies. Each individual operating company is highly leveraged, achieving the discipline of debt and avoidance of free cash flow problems that otherwise plague pubishing companies. At the same time, the top management mandate is to acquire companies, requiring continual infusions of cash. Explores the tension between the debt repayment obligations and the demand for additional financing.
Keywords: Debt Securities;
Financial Management;
Leveraged Buyouts;
Cash Flow;
Organizational Structure;
Mergers and Acquisitions;
Corporate Governance;
Financial Strategy;
Corporate Finance;
Publishing Industry;
Citation: Baker, George P., III, Nicola Bamford, and Nicolas Greenspan. " K-III: A Leveraged Build-Up." Harvard Business School Case 295-067, May 2002. (Revised from original November 1994 version.)
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Teaching Note
| HBS Case Collection
|
1999
(Revised from original 1990 version)
RKO Warner Video, Inc.: Incentive Compensation Plan TN
George P. Baker III
Teaching Note for (9-190-067).
Keywords: Media;
Compensation and Benefits;
Media and Broadcasting Industry;
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Case
| HBS Case Collection
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1998
Value Creation: Abridged
George P. Baker III, Michael C. Jensen, Karen Wruck and Perry Fagan
Asks students to value a strategic plan while considering the capital investment required to complete the plan. Cummins Engine is used as an example.
Keywords: Investment;
Strategic Planning;
Valuation;
Value Creation;
Citation: Baker, George P., III, Michael C. Jensen, Karen Wruck, and Perry Fagan. " Value Creation: Abridged." Harvard Business School Case 898-185, March 1998.
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Exercise
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1997
(Revised from original version)
Employment and Social Welfare
George P. Baker III
Keywords: Welfare or Wellbeing;
Employment;
Citation: Baker, George P., III. " Employment and Social Welfare." Harvard Business School Exercise 195-128, November 1997. (Revised from original September 1994 version.)
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Case
| HBS Case Collection
|
1996
(Revised from original version)
Cambridge Technology Partners (A)
Teresa M. Amabile, George P. Baker III and Michael Beer
Cambridge Technology Partners uses a highly innovative product strategy, supported by a human resources strategy, that has been very successful. However, high growth rates jeopardize product quality while tension about relative compensation levels between sales and operations threatens the firm's culture.
Keywords: Growth Management;
Compensation and Benefits;
Organizational Culture;
Quality;
Human Resources;
Relationships;
Innovation and Invention;
Consulting Industry;
Massachusetts;
Citation: Amabile, Teresa M., George P. Baker III, and Michael Beer. " Cambridge Technology Partners (A)." Harvard Business School Case 496-005, April 1996. (Revised from original July 1995 version.)
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Supplement
| HBS Case Collection
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1996
(Revised from original version)
Cambridge Technology Partners (B)
George P. Baker III, Teresa M. Amabile and Michael Beer
Supplements the (A) case.
Keywords: Technology Industry;
Citation: Baker, George P., III, Teresa M. Amabile, and Michael Beer. " Cambridge Technology Partners (B)." Harvard Business School Supplement 496-006, April 1996. (Revised from original July 1995 version.)
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Teaching Note
| HBS Case Collection
|
1995
San Francisco Bay Consulting TN
George P. Baker III and Karin B Monsler
Teaching Note for (9-195-096).
Keywords: Consulting Industry;
Computer Industry;
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Case
| HBS Case Collection
|
1995
(Revised from original version)
San Francisco Bay Consulting
George P. Baker III and Karin B Monsler
San Francisco Bay Consulting leads the field of economic consulting and litigation support in the application of powerful computers and cutting edge software to manipulate and analyze large data sets. The transfer pricing system, used to facilitate the purchasing and payment of computer resources, is falling apart as computer prices drop and consultant demands broaden. Researchers, forbidden to go outside for their hardware or software needs, range from frustrated to furious when they can't get the software they want or when transfer prices yield charges to clients that are greater than their computer's current market price. The case presents the company as it evaluates the system and discusses possible changes in pricing and sourcing policies.
Keywords: Fair Value Accounting;
Profit;
Marketing;
Fluctuation;
Consulting Industry;
Computer Industry;
Citation: Baker, George P., III, and Karin B Monsler. " San Francisco Bay Consulting." Harvard Business School Case 195-096, April 1995. (Revised from original July 1994 version.)
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Teaching Note
| HBS Case Collection
|
1995
Visionary Design Systems: Are Incentives Enough? TN
George P. Baker III and Karin B Monsler
Teaching Note for (9-495-011).
Keywords: San Francisco;
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Case
| HBS Case Collection
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1995
(Revised from original 1994 version)
Visionary Design Systems: Are Incentives Enough?
George P. Baker III and Karin B Monsler
A compensation case about Visionary Design Systems (VDS), a small, high-tech full service systems integration firm based in Silicon Valley with eleven offices throughout the country. All employees, including engineers, administrators, and receptionists, received a significant portion of their income from commissions and bonuses, and all were shareholders. The company espoused a philosophy of empowerment, under which all employees were given substantial decision-making authority, and were expected to act in the interests of the firm. This case examines one group that, although it had both the authority and the incentives to exploit a new market opportunity, continued to wait for top management's instructions and approval before making decisions or taking action.
Keywords: Decision Making;
Cost vs Benefits;
Compensation and Benefits;
Employee Stock Ownership Plan;
San Francisco;
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Case
| HBS Case Collection
|
1993
(Revised from original version)
RKO Warner Video, Inc.: Incentive Compensation Plan
George P. Baker III
Details the design and implementation of an incentive bonus plan for video store managers. The problem for top management of the chain is to induce the store managers to "sweat the details," to keep the stores neat and well organized, and to deal courteously and efficiently with customers. The design of the bonus plan is simple: rather than try to measure the neatness of the stores or the quality of customer service directly, give the managers a fraction of the revenue from the store and let them worry about the details themselves. The case ends after a six-month experimental period with the new plan, and leaves the top managers of the chain saying that although revenues have increased, the store management has not improved in terms of managing the details.
Keywords: Acquisition;
Change;
Strategic Planning;
Performance Improvement;
Sales;
Management;
Employee Relationship Management;
Situation or Environment;
Success;
Motion Pictures and Video Industry;
Entertainment and Recreation Industry;
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Teaching Note
| HBS Case Collection
|
1991
O.M. Scott & Sons Co. Leveraged Buyout, Teaching Note
George P. Baker III and Karen Wruck
Teaching Note for (9-190-148).
Keywords: Financial Services Industry;
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Case
| HBS Case Collection
|
1990
(Revised from original version)
Charles River Co.
George P. Baker III
Citation: Baker, George P., III. " Charles River Co." Harvard Business School Case 189-179, March 1990. (Revised from original May 1989 version.)
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Teaching Note
| HBS Case Collection
|
1990
Four Star Management TN
George P. Baker III
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Case
| HBS Case Collection
|
1989
McMullen and Worby (A) (Abridged)
George P. Baker III
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Teaching Note
| HBS Case Collection
|
1989
Charles River Co., Teaching Note
George P. Baker III
Keywords: Teaching;
Information;
Citation: Baker, George P., III. "Charles River Co., Teaching Note." Harvard Business School Teaching Note 189-182, May 1989.
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Teaching Note
| HBS Case Collection
|
1988
(Revised from original version)
Wilkinson Transport (A) and (B), Teaching Note
George P. Baker III
Keywords: Transportation Industry;
Citation: Baker, George P., III. "Wilkinson Transport (A) and (B), Teaching Note." Harvard Business School Teaching Note 190-153, April 1988. (Revised from original April 1988 version.)
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Other Unpublished Work
| 2007
Wage Policies and Incentives to Invest in Firm-Specific Human Capital
George P. Baker and Cristian Voicu
Keywords: Human Capital;
Wages;
Investment;
Motivation and Incentives;
Citation: Baker, George P., and Cristian Voicu. "Wage Policies and Incentives to Invest in Firm-Specific Human Capital." January 2007.
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Other Unpublished Work
| 2003
Volatility, Noise, and Incentives
George P. Baker and Bjorn Jorgensen
Citation: Baker, George P., and Bjorn Jorgensen. "Volatility, Noise, and Incentives." March 2003.
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Other Unpublished Work
| 2002
Relational Contracts in Strategic Alliances
George P. Baker, Robert Gibbons and Kevin J. Murphy
Keywords: Contracts;
Alliances;
Citation: Baker, George P., Robert Gibbons, and Kevin J. Murphy. "Relational Contracts in Strategic Alliances." August 2002.
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Other Unpublished Work
| 2002
Make versus Buy in Trucking: Asset Ownership, Job Design and Information
George P. Baker and Thomas N. Hubbard
Keywords: Truck Transportation;
Decision Choices and Conditions;
Ownership;
Transportation Industry;
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Other Paper
| 2000
Make versus Buy in Trucking: Asset Ownership, Job Design and Information
George P. Baker and Thomas Hubbard
Citation: Baker, George P., and Thomas Hubbard. "Make versus Buy in Trucking: Asset Ownership, Job Design and Information."
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Other Paper
| 1994
Conglomerates and LBO Associations: A Comparison of Organizational Forms
George P. Baker and Cynthia Montgomery
Citation: Baker, George P., and Cynthia Montgomery. "Conglomerates and LBO Associations: A Comparison of Organizational Forms."
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