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. Institutional Innovation: Novel, Useful, and Legitimate

    Ryan Raffaelli and Mary Ann Glynn

    This chapter advances the theoretical construct of institutional innovation, which we define as novel, useful and legitimate change that disrupts, to varying degrees, the cognitive, normative, or regulative mainstays of an organizational field. Institutional innovation, like all innovation, is both novel and useful, but differs in that it is also legitimate, credible and appropriate. Legitimacy is hinged to four characteristics such that institutional innovation is theorized to be: 1) normative or value-laden; 2) progressing in bursts of change over time; 3) socially constructed and culturally embedded; and 4) associated with logics that shape practices. We develop a framework, outlining the definition, composition, and processual nature of institutional innovation, as well as its generative potency. Finally, implications for theory, practice, and future research are offered.

    Citation:

    Raffaelli, Ryan, and Mary Ann Glynn. "Institutional Innovation: Novel, Useful, and Legitimate." In The Oxford Handbook of Creativity, Innovation, and Entrepreneurship, edited by Christina E. Shalley, Michael A. Hitt, and Jing Zhou. Oxford University Press, 2015. View Details
  2. Strategy Rules: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs

    David B. Yoffie and Michael A. Cusumano

    The authors of the bestselling Competing on Internet Time (a Business Week top 10 book) analyze the strategies, principles, and skills of three of the most successful and influential figures in business—Bill Gates, Andy Grove, and Steve Jobs—offering lessons for all managers and entrepreneurs on leadership, strategy, and execution.
    In less than a decade, Bill Gates, Steve Jobs, and Andy Grove founded three companies that would define the world of technology and transform our lives. At their peaks, Microsoft, Apple, and Intel were collectively worth some $1.5 trillion. Strategy Rules examines these three individuals collectively for the first time—their successes and failures, commonalities, and differences—revealing the business strategies and practices they pioneered while building their firms.
    David B. Yoffie and Michael A. Cusumano have studied these three leaders and their companies for more than thirty years, while teaching business strategy, innovation, and entrepreneurship at Harvard and MIT. In this enlightening guide, they show how Gates, Grove, and Jobs approached strategy and execution in remarkably similar ways—yet markedly differently from their erstwhile competitors—keeping their focus on five strategic rules. Strategy Rules brings together the best practices in strategic management and high-tech entrepreneurship from three path-breaking entrepreneurs who emerged as CEOs of huge global companies. Their approaches to formulating strategy and building organizations offer unique insights for start-up executives as well as the heads of modern multinationals.

    Keywords: Management; Strategy; Leadership; Information Technology; Entrepreneurship; Information Technology Industry;

    Citation:

    Yoffie, David B., and Michael A. Cusumano. Strategy Rules: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs. New York: HarperBusiness, 2015. View Details
  3. Steve Jobs: Leader Strategist

    Cynthia A. Montgomery and David B. Yoffie

    Strategically, Steve Jobs got it brilliantly right some times and terribly wrong other times. This case examines Jobs' development as a leader strategist over the course of his entire career. The successes and failures of Apple, NeXT, and Pixar are used to probe the role of strategy in organizational success and to examine a leader's distinctive responsibility to set (and reset) a viable course for a business. While Jobs' greatness may make him seem inaccessible at times, a closer look shows that some of his most valuable managerial capabilities were honed slowly, painfully, over time, and that there is much others can learn from his experience.

    Keywords: strategy; leadership; strategist; Steve Jobs; competitive advantage; Apple; Leadership; Competitive Advantage; Personal Development and Career;

    Citation:

    Montgomery, Cynthia A., and David B. Yoffie. "Steve Jobs: Leader Strategist." Harvard Business School Case 715-454, April 2015. View Details
  4. Implied Materiality and Material Disclosures of Credit Ratings

    Robert G. Eccles and Tim Youmans

    This first of three papers in our series on materiality in credit ratings will examine the materiality of credit ratings from an "implied materiality" and governance disclosure perspective. In the second paper, we will explore the materiality of environmental, social, and governance (ESG) factors in credit ratings' methodologies and introduce the concept of "layered materiality." In the third paper, we will evaluate current and potential credit rating agency (CRA) business models based on our analysis in the previous papers, and introduce the concept of "institutionalized materiality." Starting with this paper, and in the rest of the series, we will also recommend how the credit rating model can be enhanced in the coming years to help build more sustainable credit markets.
    This first paper is focused on the "G" (governance) component of ESG reporting. The governance matters we identify in this paper must be addressed before turning our attention to the broader set of ESG considerations in credit ratings. Failure to put these important governance matters at the top of the credit ratings reform agenda would, in our opinion, undermine the efforts we will recommend in our second and third papers.

    Keywords: Governance; Markets; Credit;

    Citation:

    Eccles, Robert G., and Tim Youmans. "Implied Materiality and Material Disclosures of Credit Ratings." Harvard Business School Working Paper, No. 15-079, April 2015. View Details
  5. Bankruptcy in the City of Detroit

    Stuart Gilson, Kristin Mugford and Annelena Lobb

    The June, 2013 bankruptcy of the City of Detroit, Michigan was, at the time, the largest municipal bankruptcy in American history. Detroit had struggled for years with a weakening tax base, high unemployment, a heavy debt load and increasing retiree costs. These financial strains led to cuts in basic public services, declines in population, and significant urban blight. The State of Michigan appointed an Emergency Manager, Kevyn Orr, to lead the City though the restructuring process. In March, 2014 Kevin Orr and his team put forth a restructuring plan to the City's creditors that provides for needed reinvestment in City services, but low recoveries for unsecured creditors. The City's plan also proposes that the Detroit Art Collection be transferred to a trust funded by philanthropists, with the proceeds accruing solely to retirees rather than to all creditors. Kevyn Orr and his team must now find consensus on a plan that meets the needs of the City and is acceptable to its creditors.

    Keywords: Chapter 9; chapter 11; restructuring; Detroit; Financial Liquidity; Insolvency and Bankruptcy; City; Government Administration; Public Sector; Financial Crisis; Financial Management; Failure; Labor Unions; Urban Development; Public Administration Industry; Michigan;

    Citation:

    Gilson, Stuart, Kristin Mugford, and Annelena Lobb. "Bankruptcy in the City of Detroit." Harvard Business School Case 215-070, April 2015. View Details
  6. 'Be Careless with That!' Availability of Product Upgrades Increases Cavalier Behavior Toward Possessions

    Silvia Bellezza, Joshua M. Ackerman and Francesca Gino

    Consumers are often faced with the opportunity to purchase a new, enhanced product (e.g., a new phone), even though the device they currently own is still fully functional. We propose that consumers act more recklessly with their current products and are less concerned about losing or damaging them when in the presence of appealing product upgrades. Careless behaviors and cognitions toward currently owned products stem from a desire to justify the attainment of upgrades without appearing wasteful. A series of studies with actual owners of a wide array of durable goods and evidence from a real-world dataset of lost Apple iPhones demonstrate how the availability of product upgrades increases cavalier behavior toward possessions. These patterns are moderated by motivation to attain the upgrade, such that consumers who are particularly interested in upgrading will be more careless with owned products relative to individuals who are less interested in upgrading. Moreover, we demonstrate that product neglect in the presence of upgrades can occur without explicit, careless intentions. Finally, theoretical and managerial implications of these findings are discussed.

    Keywords: carelessness; product upgrade; ownership; justification; Loss; Consumer Behavior; Attitudes; Product; Ownership;

    Citation:

    Bellezza, Silvia, Joshua M. Ackerman, and Francesca Gino. "'Be Careless with That!' Availability of Product Upgrades Increases Cavalier Behavior Toward Possessions." Harvard Business School Working Paper, No. 15-077, April 2015. View Details
  7. The Impact of Intangibles on Firm Growth

    Stefano Denicolai, E. Cotta Ramusino and F. Sotti

    Persuading users to try new technologies continues to be a problem confronting organisations and technology vendors alike. To better understand the process of new technology trial and adoption, several theoretical models have been proposed, of which the Technology Acceptance Model has gained significant support. However, research concerning tangible extrinsic rewards has not been explored. The primary goal of this research is to study the impact of tangible extrinsic rewards on various aspects of an intention to engage in an initial trial of a new technology. The theoretical model was tested on 284 students as subjects in a trial of a new technology. Results suggest that such incentives may be effective in increasing the behavioural intention to try a new technology. Results also identify that when incentives are provided, perceived ease of use and usefulness are the primary drivers towards intentions to try a new technology.

    Keywords: Motivation and Incentives; Technology Adoption;

    Citation:

    Denicolai, Stefano, E. Cotta Ramusino, and F. Sotti. "The Impact of Intangibles on Firm Growth." Technology Analysis & Strategic Management 27, no. 2 (2015): 219–236. View Details
  8. Is No News (Perceived as) Bad News? An Experimental Investigation of Information Disclosure

    Ginger Jin, Michael Luca and Daniel Martin

    A central prediction of information economics is that market forces can lead businesses to voluntarily provide information about the quality of their products, yet little voluntary disclosure is observed in the field. In this paper, we demonstrate that the inconsistency between theory and reality is driven by a fundamental failure in consumer inferences when sellers withhold information. Using a series of laboratory experiments, we implement a simple disclosure game in which senders can verifiably report quality to receivers. We find that senders disclose less often than equilibrium would predict. Receivers are not sufficiently skeptical about undisclosed information - they underestimate the extent to which no news is bad news. Senders generally take advantage of receiver mistakes. We find that providing disclosure rates by quality score helps to improve receiver inferences.

    Keywords: Information; Quality; Corporate Disclosure; Consumer Behavior; Product;

    Citation:

    Jin, Ginger, Michael Luca, and Daniel Martin. "Is No News (Perceived as) Bad News? An Experimental Investigation of Information Disclosure." Harvard Business School Working Paper, No. 15-078, April 2015. View Details
  9. The Sino-Russian Rapprochement: Energy Relations in a New Era

    Rawi Abdelal, Morena Skalamera and Sogomon Tarontsi

    The United States could enhance or threaten China’s energy security but China was unsure of the U.S. intentions. China and the United States were both friends and potential foes. In the meantime, Russia’s own ambivalent relationship with the United States and its Western allies has worsened. In this context, China and Russia have grown closer. Bilateral ties in the energy trade quickly improved: Russian oil exports expanded, while disagreements on the terms of natural gas supplies have been resolved. The case describes the impact of the interplay of great power politics, domestic political considerations, and economic factors on the efforts of the Chinese and Russian energy companies to expand business ties.

    Keywords: International Relations; Energy; Trade; Conflict and Resolution; Business and Government Relations; Energy Industry; China; United States; Russia;

    Citation:

    Abdelal, Rawi, Morena Skalamera, and Sogomon Tarontsi. "The Sino-Russian Rapprochement: Energy Relations in a New Era." Harvard Business School Case 715-016, March 2015. View Details
  10. Guiding Professional Accountants to Do The Right Thing

    Paul Healy, V.G. Narayanan and Penelope Rossano

    The Ethics Advisory Committee of the Institute of Chartered Accountants in England and Wales (ICAEW) provides training and support for member Chartered Accountants to help them deal with difficult professional situations. Members can seek help through through call centers and in-person meetings with accounting experts in the field to discuss how to best handle difficult situations. In addition, the Ethics Advisory Committee meets regularly to identify new issues that raise questions for professional standards. This case examines professional standards for ICAEW Chartered Accountants and a number of challenging ethical situations that members have faced.

    Keywords: accounting; ethics; professional conduct;

    Citation:

    Healy, Paul, V.G. Narayanan, and Penelope Rossano. "Guiding Professional Accountants to Do The Right Thing." Harvard Business School Case 115-028, March 2015. View Details
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