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. Homophily in Entrepreneurial Team Formation

    Paul A. Gompers, Kevin Huang and Sophie Q. Wang

    We study the role of homophily in group formation. Using a unique dataset of MBA students, we observe homophily in ethnicity and gender increases the probability of forming teams by 25%. Homophily in education and past working experience increases the probability of forming teams by 17% and 11 % respectively. Homophily in education and working experience is stronger among males than females. Further, we examine the causal impact of homophily on team performance. Homophily in ethnicity increases team performance by lifting teams in bottom quantiles to median performance quantiles, but it does not increase the chance of being top performers. Our findings have implications for understanding the lack of diversity in entrepreneurship and venture capital industry.

    Citation:

    Gompers, Paul A., Kevin Huang, and Sophie Q. Wang. "Homophily in Entrepreneurial Team Formation." Harvard Business School Working Paper, No. 17-104, May 2017. View Details
  2. And the Children Shall Lead: Gender Diversity and Performance in Venture Capital

    Paul A. Gompers and Sophie Q. Wang

    With an overall lack of gender and ethnic diversity in the innovation sector documented in Gompers and Wang (2017), we ask the natural next question: Does increased diversity lead to better firm performances? In this paper, we attempt to answer this question using a unique dataset of the gender of venture capital partners’ children. First, we find strong evidence that parenting more daughters leads to an increased propensity to hire female partners by venture capital firms. Second, using an instrumental variable set-up, we also show that improved gender diversity, induced by parenting more daughters, improves deal and fund performances. These effects concentrate overwhelmingly on the daughters of senior partners than junior partners. Taken together, our findings have profound implications on how the capital markets could function better with improved diversity.

    Citation:

    Gompers, Paul A., and Sophie Q. Wang. "And the Children Shall Lead: Gender Diversity and Performance in Venture Capital." Harvard Business School Working Paper, No. 17-103, May 2017. View Details
  3. Seeker Beware: The Relational Costs of Ignoring Advice

    Hayley Blunden, Alison Wood Brooks, Leslie John and Francesca Gino

    Prior advice research has focused on understanding when and why people rely on (or ignore) advice and how this impacts judgment accuracy; little is known about the interpersonal consequences of the advice-seeking process. In this paper, we investigate the interpersonal consequences of seeking out—then ignoring—advice from others. Across six studies, we find that advisors interpersonally penalize those who ignore their advice. This effect stems from both harsher perceptions of the advice seeker as well as a decrease in advisors’ sense of self-worth when their advice is not followed. Advice seekers fail to anticipate this negative relational impact, exposing them to unanticipated adverse consequences when they ignore the advice they receive. Moreover, these effects are compounded by advisor expertise: expert advisors are more likely to punish seekers who ignore their advice than are non-expert advisors. These findings challenge previous recommendations for optimal advice-seeking behavior.

    Keywords: advice; advice seeking; expertise; impression management; Relationships; Perception; Interpersonal Communication; Outcome or Result;

    Citation:

    Blunden, Hayley, Alison Wood Brooks, Leslie John, and Francesca Gino. "Seeker Beware: The Relational Costs of Ignoring Advice." Harvard Business School Working Paper, No. 17-102, May 2017. View Details
  4. Fresh to Table

    Gautam Mukunda and Brooks C. Holtom

    After the contentious firing of an office manager, the leadership at Fresh to Table, a software-as-a-service provider for luxury hotels and restaurants, make an unpleasant discovery. While reviewing the office manager's internal electronic communications, company leaders discover that several key employees, including two that were recently promoted, had been spending substantial time on internal social media channels disparaging other employees, citing days when they skipped work, and referring to other instances of unprofessional behavior. This 5-page case explores issues related to electronic communications; termination and disciplinary procedures; and leadership, culture, and values. It can be used in General Management, Organizational Behavior, Human Resource Management, Management Communication, Leadership, and Employee Relations courses. The case also allows students to consider how technology affects organizational interactions and culture.

    Keywords: Behavior; Resignation and Termination; Organizational Culture; Values and Beliefs; Leadership;

    Citation:

    Mukunda, Gautam, and Brooks C. Holtom. "Fresh to Table." Harvard Business School Brief Case 917-541, May 2017. View Details
  5. Buffer.com

    Susanna Gallani, Tiffany Y. Chang, Brian J. Hall and Jee Eun Shin

    Social media company, Buffer, wanted to establish clear company values early in its growth. One of these values was a commitment to transparency in its company practices. Buffer openly shared its business strategies and fundraising decks, among lots of other information. Even when they were hacked, the company live-blogged updates to keep their users informed as the situation unfolded. Having internally released each employee's salary and equity details with no pushback, the company now contemplated sharing compensation information transparently with the general public.

    Keywords: compensation; compensation design; company values; culture; transparency; Compensation and Benefits; Organizational Culture; Values and Beliefs;

    Citation:

    Gallani, Susanna, Tiffany Y. Chang, Brian J. Hall, and Jee Eun Shin. "Buffer.com." Harvard Business School Case 917-019, May 2017. View Details
  6. Promontory, Inc.

    Frank V. Cespedes and Amy Handlin

    Promontory, Inc. is a small, privately owned firm in the promotional products (specialty advertising) industry. After starting the firm two years ago with the intention of pursuing a high-quality/high-price strategy, the CEO is seeking methods of increasing sales revenues and profitability. He is considering whether and how to increase the size of the sales force, redirect, or redeploy the company's current sales efforts, utilize alternative marketing vehicles, and maximize sales potential. To attain this goal, the firm has bought some customization equipment and attempted to find niches in which it can succeed by doing the work usually done by suppliers and manufacturers. The case raises numerous general marketing and sales management issues and provides a profile of various approaches to personal selling. At its heart is the appropriate marketing organization for this company's strategy, and especially, the details of execution in the field. This case is suitable for courses in Entrepreneurship, Marketing, Sales, Small Business Management, General Management, and Strategy.

    Keywords: Salesforce Management; Marketing Strategy; Customization and Personalization; Business Model; Sales; Advertising Industry;

    Citation:

    Cespedes, Frank V., and Amy Handlin. "Promontory, Inc." Harvard Business School Brief Case 917-535, May 2017. View Details
  7. Four Products: Predicting Diffusion (2017)

    John Gourville

    One job of product managers, marketers, strategic planners, and other corporate executives is to predict what the demand will be for a new product. This task is easier for certain classes of new products than for others. For new consumer package goods, for instance, one can look at past product rollouts, one can look at similar products currently in the marketplace, or one can do test markets—selling the product in a small section of the country to assess consumer acceptance. Quite often, for new products that represent incremental variations or improvements over existing products, marketers do a pretty good job of understanding how that product will be adopted in the marketplace. This is not to say that managers always get it right, as has been made evidently clear in the case of New Coke, dry beers, and the Edsel. However, more often than not, managers of incremental new products predict demand within the right order of magnitude.

    Keywords: marketing; Diffusion Processes; product adoption; Forecasting and Prediction; Demand and Consumers; Adoption; Product Launch; Marketing;

    Citation:

    Gourville, John. "Four Products: Predicting Diffusion (2017)." Harvard Business School Case 517-121, May 2017. View Details
  8. Hilti Fleet Management (A): Turning a Successful Business Model on Its Head

    Ramon Casadesus-Masanell, Oliver Gassmann and Roman Sauer

    This case explores the introduction of fleet management in the construction industry by the premium power tools manufacturer Hilti in 2000. Following its customers’ needs, Hilti moved from selling power tools to leasing them as a service. The introduction of the new business model contributed significantly to the success of Hilti, since it sustainably differentiated the company from its competitors. For instance, the adoption of fleet management resulted in customer loyalty levels five times higher than under the dominant business model Hilti had formerly employed, and over-proportioned profit contribution at Hilti. Hilti’s Chief Technology Officer described the importance of the innovation as follows: “Hilti developed many very innovative and successful products over the years, but they paled in comparison with the fleet management business model, which was the most important innovation in Hilti’s history.” All told, Hilti, which had about 22,000 employees and made about 4.5 billion Swiss Francs (or $4.589 billion USD) in sales in 2015, managed 1.5 million tools under fleet management contracts in 40 countries, resulting in a contract value of more than 1.2 billion Swiss Francs (approximately $1.4 billion USD).
    Case A describes the strategic decision-making process regarding the introduction of fleet management in its early planning stages. Case B (separate) tackles the implementation and scaling process of fleet management over the years and explores current challenges facing the BMI.

    Keywords: Hilti; business model innovation; BMI; fleet management; decision-making; decision making; Implementation; power tools industry; Construction; Construction industry; strategy; Europe; Switzerland; Liechtenstein; Business Model; Restructuring; Transformation; Transition; Customer Value and Value Chain; Customer Focus and Relationships; Construction; Innovation and Invention; Leasing; Strategy; Decision Making; Construction Industry; Switzerland; Liechtenstein; Germany; Austria; Europe; United States; Asia; Brazil; China; Japan; Hong Kong;

    Citation:

    Casadesus-Masanell, Ramon, Oliver Gassmann, and Roman Sauer. "Hilti Fleet Management (A): Turning a Successful Business Model on Its Head." Harvard Business School Case 717-427, May 2017. View Details
  9. Mavi: Fashioning a Path to Brand Growth

    Jill Avery and Gamze Yucaoglu

    Mavi, a leading Turkish apparel retailer, had sales of $419 million in 2015, up 20%. Growth rates like these were becoming routine at Mavi. But, the path to growth was getting more challenging, and Turkven, Mavi’s private equity partner, was planning its options after seven years of investment. There were four growth levers Mavi could pull, but each involved selecting one growth path while neglecting another. Should the company invest in growth domestically or internationally? Should they change the price positioning of the brand to move up-market or down-market? Which value proposition offered the most future promise: functional differentiation, lifestyle differentiation, or celebrity endorsement? Should the company continue to serve both men and women of all ages or were there specific consumer targets that offered the most promise? Managers realized that these choices would not only determine the company’s short term growth trajectory but also shape the longer term value of the Mavi brand.

    Keywords: marketing; marketing strategy; brands and branding; brand management; brand architecture; brand portfolio strategy; brand positioning; international expansion; Turkey; retailing; fashion; pricing; fast fashion; emerging economies; growth and development strategy; brand extension; Marketing; Marketing Strategy; Brands and Branding; Emerging Markets; Growth and Development Strategy; Expansion; Decision Choices and Conditions; Fashion Industry; Retail Industry; Turkey; Europe; Asia;

    Citation:

    Avery, Jill, and Gamze Yucaoglu. "Mavi: Fashioning a Path to Brand Growth." Harvard Business School Case 517-075, May 2017. View Details
  10. Reclaim Your Commute: Getting To and From Work Doesn't Have to be Soul Crushing

    Francesca Gino, Bradley Staats, Jon M. Jachimowicz, Julia J. Lee and Jochen I. Menges

    Every day, millions of people around the world face long commutes to work. In the United States alone, approximately 25 million workers spend more than 90 minutes each day getting to and from their jobs. And yet few people enjoy their commutes. This distaste for commuting has serious implications for well-being. Studies have found that workers with lengthy commutes feel more anxious and less happy and satisfied with life than those with shorter ones and are more likely to get divorced. They also are less likely to find their daily activities worthwhile, are more exhausted and less productive at work, and have lower job satisfaction. But it doesn’t have to be this way. Research (including studies by the authors) suggests that small tweaks to the way you conduct your commute can improve the experience, leaving you both happier and more productive. They offer five strategies that commuters can try: Use the time to shift your mindset; prepare to be productive; find your “pocket of freedom”; share the spirit; and reduce your commute.

    Keywords: Welfare or Wellbeing; Attitudes; Satisfaction; Performance Productivity;

    Citation:

    Gino, Francesca, Bradley Staats, Jon M. Jachimowicz, Julia J. Lee, and Jochen I. Menges. "Reclaim Your Commute: Getting To and From Work Doesn't Have to be Soul Crushing." Harvard Business Review 95, no. 3 (May–June 2017): 149–153. View Details
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