Human behavior and decision-making

Human behavior and decision-making is a featured research topic at Harvard Business School.
 
Ever since their origins about three decades ago, the Behavioral Science areas of economics, ethics and managerial psychology have been rapidly evolving. In the 1980's and 1990's, early work by Max Bazerman in judgment and negotiation, Matthew Rabin in behavioral economics, and James Sebenius in negotiations was instrumental in shaping research on Human Behavior & Decision-Making. Today, our research focuses on individual and interactive judgment and decision making and explores the role of personal bias, cognition and learning, time, perception, ethics and morality, and emotion.  
  1. Nokia's Bridge Program: Redesigning Layoffs (A)

    Sandra J. Sucher and Susan J. Winterberg

    “Not another Bochum.” Nokia Board Chairman Jorma Ollila was clear in the goals he set for the 2011 restructuring that Nokia’s new CEO, Stephen Elop, had decided was necessary to address the dramatically changed competitive environment the company faced in smartphones and mobile phones. The strategy shift would include transitioning Nokia’s phone operating system to Microsoft Windows, and closing phone R&D centers and factories in 13 countries, with layoffs that would eventually impact 18,000 employees. Yet with several important R&D projects still under development, and capacity needed in factories for many more months, Nokia’s board and leaders wanted to avoid the mistakes the company had made in a plant shutdown in Bochum, Germany in 2008. EVP of Corporate Relations and Responsibility Esko Aho was mandated to develop a “Nokia way” to implement the restructuring that would reflect the company’s values and allow them to maintain morale and commitment among the employees who would eventually lose their jobs. The case describes the development of Nokia’s “Bridge” program, a comprehensive approach to helping employees find new employment opportunities and to replacing jobs in communities where Nokia had been a major employer. The case challenges students to make decisions such as when and how to tell employees about a layoff, how to manage local government leaders, and what support to provide in 13 different countries, each with its own legal and regulatory environment, cultural norms, and expectations and needs of employees and local communities.

    Keywords: layoffs; Plant Closure, Outplacement; shared value; Telecommunications Industry;

    Citation:

    Sucher, Sandra J., and Susan J. Winterberg. "Nokia's Bridge Program: Redesigning Layoffs (A)." Harvard Business School Case 315-002, February 2015. View Details
  2. Entrepreneurship and the Cost of Experimentation

    Michael Ewens, Ramana Nanda and Matthew Rhodes-Kropf

    We study how technological change impacts the nature of venture-capital backed entrepreneurship in the US, through its effect on the falling cost of experimentation for startup firms. Using a theoretical model and rich data, we are able to both document and provide a framework for understanding the increased prevalence of investors who "spray and pray" - investing a little money in several startups run by teams of young and unproven entrepreneurs, with a lower probability of following-on their investments. Consistent with the model, we find that these patterns to be strongest in industry segments where technological change has led the cost of starting a business to fall most sharply in recent years.

    Keywords: innovation; venture capital; Investing; abandonment option; failure tolerance; Technological Innovation; Venture Capital; Entrepreneurship; Investment;

    Citation:

    Ewens, Michael, Ramana Nanda, and Matthew Rhodes-Kropf. "Entrepreneurship and the Cost of Experimentation." Harvard Business School Working Paper, No. 15-070, February 2015. View Details
  3. Making the Business Case for Environmental Sustainability

    Rebecca Henderson

    Can a business case be made for acting sustainably? This is a difficult question to answer precisely, largely because there is no generally accepted definition of the term “sustainability”. Is it acting sustainably to protect the human rights of the firm’s workforce? To invest in education in local communities? To switch to renewable power? All of these actions might improve social welfare, and some of them might improve profitability but they are very different, and the business case for each of them is similarly likely to look quite different. Here I begin to explore the issue by focusing on a more limited question, namely whether a business case be made for acting in an environmentally sustainable way, which I define as acting in any way that reduce a firm’s environmental footprint.

    Keywords: Corporate Social Responsibility and Impact; Decision Making; Environmental Sustainability;

    Citation:

    Henderson, Rebecca. "Making the Business Case for Environmental Sustainability." Harvard Business School Working Paper, No. 15-068, February 2015. View Details
  4. Solar Geoengineering

    Joseph B. Lassiter III and Stephanie Puzio

    Keywords: climate change; geoengineering; carbon; carbon emissions; energy; nuclear; nuclear energy; de-extinction; Chemicals; Values and Beliefs; Moral Sensibility; Global Range; Cross-Cultural and Cross-Border Issues; Technological Innovation; Innovation Strategy; Problems and Challenges; Research and Development; Environmental Sustainability; Pollution and Pollutants; Science-Based Business; Weather and Climate Change; Aerospace Industry; Biotechnology Industry; Chemical Industry; Energy Industry; Green Technology Industry; Technology Industry;

    Citation:

    Lassiter, Joseph B., III, and Stephanie Puzio. "Solar Geoengineering." Harvard Business School Case 815-081, February 2015. View Details
  5. Men as Cultural Ideals: How Culture Shapes Gender Stereotypes

    Amy Cuddy, Elizabeth Baily Wolf, Peter Glick and Michael I. Norton

    Four studies test whether cultural values moderate the content of gender stereotypes, such that male stereotypes more closely align with core cultural values (specifically, individualism vs. collectivism) than do female stereotypes. In Studies 1 and 2, using different measures, Americans rated men as less collectivistic than women, whereas Koreans rated men as more collectivistic than women. In Study 3, bi-cultural Korean Americans who completed a survey in English about American targets rated men as less collectivistic than women, whereas those who completed the survey in Korean about Korean targets did not, demonstrating how cultural frames influence gender stereotype content. Study 4 tested generalizability by reanalyzing Williams and Best's (1990) cross-national gender stereotype data across 26 nations. National-level collectivism strongly correlated with viewing collectivistic traits as more, and individualistic traits as less, stereotypically masculine. Together, the four studies show strong support for the cultural moderation hypothesis, qualifying past conclusions about the universality of the content of gender stereotypes.

    Keywords: gender; stereotypes; Gender Characteristics; United States; South Korea;

    Citation:

    Cuddy, Amy, Elizabeth Baily Wolf, Peter Glick, and Michael I. Norton. "Men as Cultural Ideals: How Culture Shapes Gender Stereotypes." Paper presented at the 15th Society for Personality and Social Psychology Annual Meeting, Austin, TX, February 15, 2014. View Details
  6. Thick as Thieves? Dishonest Behavior and Egocentric Social Networks

    Jooa Julia Lee, Dong-Kyun Im, Bidhan Parmar and Francesca Gino

    People experience a threat to their moral self-concept in the face of discrepancies between their moral values and their unethical behavior. We theorize that people's need to restore their view of themselves as moral activates thoughts of a high-density personal social network. Such thoughts also lead people to be more likely to engage in further unethical behavior. In five experiments, participants reflected on their past unethical behavior, and then completed a task designed to measure network density. Those who cheated more frequently in the past, recalled their negative moral identity, or decided to lie were more likely to activate a high-density network (Experiment 1-3). Using a mediation-by-moderation approach (Experiment 4), we confirm that this link between dishonesty and network density is explained by a threat to positive self-concept. Importantly, activating a dense network after engaging in dishonest behavior allows further dishonest behavior in a subsequent task (Experiment 5).

    Keywords: Moral Sensibility; Behavior; Social and Collaborative Networks;

    Citation:

    Lee, Jooa Julia, Dong-Kyun Im, Bidhan Parmar, and Francesca Gino. "Thick as Thieves? Dishonest Behavior and Egocentric Social Networks." Harvard Business School Working Paper, No. 15-064, February 2015. View Details
  7. BlackRock: Diversity as a Driver for Success

    Boris Groysberg and Katherine Connolly

    In July 2014, the Global Executive Committee (GEC) for BlackRock, the world’s largest asset manager, held a two-day offsite to discuss the state of talent within the firm. A year prior, in 2013, Chairman and CEO Laurence (Larry) Fink had asked Global Head of HR Jeff Smith to outline to the GEC the firm’s Diversity and Inclusion efforts, benchmarking its progress against eight practices associated with building more inclusive cultures. At the July 2014 off-site, Smith and Kara Helander, Global Head of Philanthropy and Diversity and Inclusion (D&I), provided a summary of the firm’s journey to-date and an update on its progress. The message from Fink at the July meeting was clear: The firm needed to do more. This message was also reinforced by the Board who wanted to see an increase in diversity in succession plans and leadership ranks. Smith and his team needed to work with the GEC to lead the change. They needed to decide: What needed to be done next? What were the key areas that needed the most improvement? What were the greatest challenges and opportunities facing the firm, and how could D&I initiatives help address them? What actions needed to be taken to meet the request from Fink and the Board?

    Keywords: women and leadership; diversity; human capital; general management; leadership; Change Management; Human Capital; Leading Change; Management Practices and Processes; Organizational Culture; Financial Services Industry; United States;

    Citation:

    Groysberg, Boris, and Katherine Connolly. "BlackRock: Diversity as a Driver for Success ." Harvard Business School Case 415-047, February 2015. View Details
  8. Risk, Information, and Incentives in Online Affiliate Marketing

    Benjamin Edelman and Wesley Brandi

    We examine online affiliate marketing programs in which merchants oversee thousands of affiliates they have never met. Some merchants hire outside specialists to set and enforce policies for affiliates, while other merchants ask their ordinary marketing staff to perform these functions. For clear violations of applicable rules, we find that outside specialists are most effective at excluding the responsible affiliates, which we interpret as a benefit of specialization. However, in-house staff are more successful at identifying and excluding affiliates whose practices are viewed as "borderline" (albeit still contrary to merchants' interests), foregoing the efficiencies of specialization in favor of the better incentives of a company's staff. We consider the implications for marketing of online affiliate programs and for online marketing more generally.

    Keywords: affiliate marketing; incentives; fraud; advertising; Online Technology; Marketing Communications; Ethics; Online Advertising;

    Citation:

    Edelman, Benjamin, and Wesley Brandi. "Risk, Information, and Incentives in Online Affiliate Marketing." Journal of Marketing Research (JMR) 52, no. 1 (February 2015): 1–12. (Lead Article.) View Details
  9. Do Managers Have a Role to Play in Sustaining the Institutions of Capitalism?

    Rebecca Henderson and Karthik Ramanna

    In a capitalist system based on free markets, do managers have responsibilities to the system itself? If they do, should these responsibilities shape their behavior when they engage in the political processes that structure the institutions of capitalism? The prevailing view—perhaps most eloquently argued by Milton Friedman—is that the first duty of managers is to maximize shareholder value and thus that they should take every opportunity (within the bounds of the law) to structure market institutions so as to increase profitability. We argue here that this shareholder-return view of political engagement may apply in cases where the political process is sufficiently “thick,” in that sufficiently detailed information about the issues is widely available and the public interest is well-represented. However, we draw on a series of detailed examples in the context of the determination of corporate accounting standards to argue that when the political process of determining the institutions of capitalism is “thin,” in that managers find themselves with specialized technical knowledge unavailable to outsiders and with little political resistance from the general interest, then managers have a responsibility to market institutions themselves, even if this entails acting at the expense of corporate profits. We make this argument on grounds that this behavior is both in managers’ long-run self-interest and, expanding on Friedman’s core contention, that it is managers’ moral duty.

    Keywords: Capitalism; leadership; lobbying; Leadership; Economic Systems; Managerial Roles; Business and Government Relations;

    Citation:

    Henderson, Rebecca, and Karthik Ramanna. "Do Managers Have a Role to Play in Sustaining the Institutions of Capitalism?" Governance Studies, The Initiative on 21st Century Capitalism, No. 20, Brookings Institution, February 2015. View Details
  10. Location Choices under Strategic Interactions

    Juan Alcacer, Cristian Dezso and Minyuan Zhao

    The literature on location choices has mostly emphasized the impact of location and firm characteristics. However, most industries with a significant presence of multi-location firms are oligopolistic in nature, which suggests that strategic interaction among firms plays an important role in firms' decision-making processes. This paper explores how strategic interaction among competitors affects firms' geographic expansion across time and markets. Specifically, we build a model in which two firms that differ in their capabilities enter sequentially into two markets with different potentials for profit. The model is solved using game theory under three learning scenarios that capture the ability of a firm to transfer its capabilities across markets: no learning, local learning, and global learning. Three equilibrium strategies arise: accommodate, marginalize, and collocate. We identify how these strategies emerge depending on the tradeoff between the opportunity costs of absence (giving competitors a lead in a market) and the entrenchment benefits (the cost advantage firms develop through learning-by-doing when they enter early). Both the opportunity costs of absence and the entrenchment benefits vary according to initial relative firm capabilities, relative market profitability, and learning rates. Our model offers a comprehensive approach to understanding the drivers of firm location choices by modeling not only the impact of location and firm heterogeneity, but also the strategic interaction among firms.

    Keywords: Location strategies; multinational strategy; oligopolistic competition; game theory; firm heterogeneity; Geographic Location; Multinational Firms and Management; Balance and Stability; Decision Choices and Conditions; Game Theory;

    Citation:

    Alcacer, Juan, Cristian Dezso, and Minyuan Zhao. "Location Choices under Strategic Interactions." Strategic Management Journal 36, no. 2 (February 2015): 197–215. View Details
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