Global Reach. Global Knowledge.

2011

The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance

Eccles, Robert G., Ioannis Ioannou, and George Serafeim
November 2011

We investigate the effect of a corporate culture of sustainability on multiple facets of corporate behavior and performance outcomes. Using a matched sample of 180 companies, we find that corporations that voluntarily adopted environmental and social policies many years ago-termed "high sustainability" companies-exhibit fundamentally different characteristics from a matched sample of firms that adopted almost none of these policies- termed "low sustainability" companies. In particular, we find that the boards of directors of these companies are more likely to be responsible for sustainability, and top executive incentives are more likely to be a function of sustainability metrics. Moreover, they are more likely to have organized procedures for stakeholder engagement, to be more long-term oriented, and to exhibit better measurement and disclosure of nonfinancial information. Finally, we provide evidence that high sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.

No Margin, No Mission? A Field Experiment on Incentives for Pro-Social Tasks

Ashraf, Nava, Oriana Bandiera, and Kelsey Jack
September 2011

A substantial body of research investigates the design of incentives in firms, yet less is known about incentives in organizations that hire individuals to perform tasks with positive social spillovers. We conduct a field experiment in which agents hired by a public health organization are randomly allocated to four groups. Agents in the control group receive a standard volunteer contract often offered for this type of task, whereas agents in the three treatment groups receive small financial rewards, large financial rewards, and non-financial rewards, respectively. The analysis yields three main findings. First, non-financial rewards are more effective at eliciting effort than either financial rewards or the volunteer contract. The effect of financial rewards, both large and small, is orders of magnitude smaller and not significantly different from zero. Second, non-financial rewards elicit effort both by leveraging intrinsic motivation for the cause and by facilitating social comparison among agents. Third, contrary to existing laboratory evidence, financial incentives do not crowd out intrinsic motivation in this setting.

Harvard Business School Working Paper, No. 12-008, August 2011

Segmenting the Base of the Pyramid

Rangan, V. Kasturi, Michael Chu, and Djorjiji Petkoski
June 2011

The bottom of the economic pyramid is a risky place for business, but decent profits can be made there if companies link their financial success with their constituencies' well-being. To do that effectively, you must understand the nuances of people's daily lives, say Rangan and Chu of Harvard Business School and Petkoski of the World Bank. Start by dividing the base of the pyramid into three segments according to people's earnings and related personal needs: 1) Low income: 1.4 billion people, $3 to $5 a day; 2) Subsistence: 1.6 billion people, $1 to $3 a day; and 3) Extreme poverty: 1 billion people, less than $1 a day. Next, consider the roles of various groups in the value-creation relationship: consumers, coproducers, and clients. Specific strategies work best with people in certain roles and at particular income levels. Success requires appreciating the diversity at the base of the pyramid and the importance of scale in undertaking ventures there. Witness Manila Water's success in the Philippines and Hindustan Unilever's in South Asia. Failure to appreciate those elements can foil base-of-the-pyramid ventures, as Microsoft and Procter & Gamble each discovered.

Harvard Business Review 89, no. 6 (June 2011).

2010

Preferring Balanced vs. Advantageous Peace Agreements: A Study of Israeli Attitudes Towards a Two-State Solution

Malhotra, Deepak, and Jeremy Ginges
October 2010

The paper extends research on fixed-pie perceptions by suggesting that disputants may prefer proposals that are perceived to be equally attractive to both parties (i.e., balanced) rather than one-sided, because balanced agreements are seen as more likely to be successfully implemented. We test our predictions using data on Israeli support for the Geneva Accords, an agreement for a two-state solution negotiated by unofficial delegations of Israel and the Palestinian Authority in 2003. The results demonstrate that Israelis are more likely to support agreements that are seen favorably by other Israelis, but-contrary to fixed-pie predictions-Israeli support for the accords does not diminish simply because a majority of Palestinians favors (rather than opposes) the accords. We show that implementation concerns create a demand among Israelis for balance in the degree to which each side favors (or opposes) the agreement. The effect of balance is noteworthy in that it creates considerable support for proposals even when survey respondents are told that a majority of Israelis and Palestinians oppose the deal.

Judgment and Decision Making

Prosocial Spending and Well-Being: Cross-Cultural Evidence for a Psychological Universal

Aknin, Lara B., Christopher P. Barrington-Leigh, Elizabeth W. Dunn, John F. Helliwell, Robert Biswas-Diener, Imelda Kemeza, Paul Nyende, Claire Ashton-James, Michael I. Norton
October 2010

This research provides the first support for a possible psychological universal: human beings around the world derive emotional benefits from using their financial resources to help others (prosocial spending). Analyzing survey data from 136 countries, we show that prosocial spending is consistently associated with greater happiness. To test for causality, we conduct experiments within two very different countries (Canada and Uganda) and show that spending money on others has a consistent, causal impact on happiness. In contrast to traditional economic thought-which places self-interest as the guiding principle of human motivation-our findings suggest that the reward experienced from helping others may be deeply ingrained in human nature, emerging in diverse cultural and economic contexts.

Harvard Business School Working Paper, No. 11-038, September 2010

Negotiating the Path of Abraham

Leary, Kimberlyn, James K. Sebenius and Joshua Weiss
January 2010

In the face of daunting barriers, the Abraham Path Initiative envisions uncovering and revitalizing a route of cultural tourism that follows the path of Abraham and his family some 4,000 years ago across the Middle East. It begins in the ancient ruins of Harran, in modern-day Turkey, where Abraham first heard the call to "go forth." It passes through some of the world's most revered cultural, historical, and holy sites, ending in the city of Hebron/Al-Khalil at the tomb of Abraham. With Abraham as a venerated patriarchal figure for Islam, Judaism, and Christianity-monotheistic religions whose adherents have so often clashed-the potential unifying power of this conception has attracted a remarkable range of supporters from around the world. From a notion crystallized at Harvard in 2004, this idea has been carefully negotiated into a concrete reality with supporting country organizations in Syria, Turkey, Jordan, Palestine, and Israel. If completed, it would eventually extend to encompass Abraham's travels to and from Egypt, Iraq, and Saudi Arabia. With the endorsement of the U.N.'s Alliance of Civilizations, over 300 kilometers of the Path have now been opened to a fast-growing number of travelers ranging from student study groups to Syrian President al-Assad walking a stretch of the path with former U.S. President Jimmy Carter. As it takes fuller shape, the Path variously serves as a catalyst for sustainable tourism and economic development, a platform for the energy and idealism of young people, a beacon for pilgrims and peace-builders, as well as a focus for seemingly endless media inquiries from reporters, documentary filmmakers, and writers keen on telling its story to audiences worldwide. This paper provides background on the Path in terms of strategic negotiation, social entrepreneurship, sustainable tourism, and economic development.
Harvard Business School Working Paper, No. 10-049, December 2009.

2009

Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia

Ashraf, Nava, James Berry, and Jesse M. Shapiro
October 2009

The controversy over whether and how much to charge for health products in the developing world rests, in part, on whether higher prices can increase use, either by targeting distribution to high-use households (a screening effect), or by stimulating use psychologically through a sunk-cost effect. We develop a methodology for separating these two effects. We implement the methodology in a field experiment in Zambia using door-to-door marketing of a home water purification solution. We find that higher prices screen out those who use the product less. By contrast, we find no consistent evidence of sunk-cost effects.

Harvard Business Review 84, no. 10 (October 2009): 30

Sovereign Wealth in Abu Dhabi

Rawi, Abdelai
May 2009

By the turn of the century, oil had already made the tiny emirate of Abu Dhabi rich beyond anyone's wildest dreams. A sovereign wealth fund, the Abu Dhabi Investment Authority (ADIA), has invested extra oil revenues abroad for more than thirty years and amassed a still-growing portfolio worth approximately $750-900 billion. ADIA is widely believed to be the world's largest sovereign wealth fund-indeed the world's largest institutional investor. But Abu Dhabi is not yet a "developed" economy. So, in 2002, the Mubadala Development Company was established as a government-owned investment vehicle. Unlike ADIA's mandate to build and manage a financial portfolio, Mubadala's charge was to develop Abu Dhabi. According to some observers, ADIA was a "sovereign savings fund," while Mubadala was a government-owned investment firm. Mubadala is supposed to invest the wealth of the emirate in activities that would diversify the economy away from energy and into industry and services. Although each Mubadala investment is supposed to earn large returns, the strategy balances financial against "strategic" returns. ADIA and Mubadala are the institutional architecture to manage the wealth of the Abu Dhabi sovereign.

Geopolitics 14, no. 2 (April 2009): 317-327

Putting Patients First: Social Marketing Strategies for Treating HIV in Developing Nations

Chance, Zoe, and Rohit Deshpandé
April 2009

It is more than mere coincidence that the highest rates of HIV occur in the world's poorest countries. Of the over 40 million people currently living with HIV, 95 percent are in the developing world. The first part of this paper explores the economics of HIV and treatment from a social marketing perspective. The second part of the paper uses three specific case histories of successful social marketing organizations in Africa, Asia, and South America to inductively generate a consumer (patient)-centric marketing model. The focal organizations are unique in that they all identify patient needs first, then work backwards to develop economically viable solutions. These solutions are not without flaws, and the future of these programs remains uncertain, but we hope that illuminating these particular cases within the consumer-centric marketing paradigm will shed light on ways in which other organizations may be able to serve the poor profitably.

Natural Experiments in History, edited by Jared Diamond and James Robinson. Harvard University Press, forthcoming

Finding Missing Markets (and a Disturbing Epilogue): Evidence from an Export Crop Adoption and Marketing Intervention in Kenya

Ashraf, Nava, Xavier Gine, Dean Karlan
March 2009

Farmers may grow crops for local consumption despite more profitable export options. DrumNet, a Kenyan NGO that helps small farmers adopt and market export crops, conducted a randomized trial to evaluate its impact. DrumNet services increased production of export crops and lowered marketing costs, leading to a 32% income gain for new adopters. The services collapsed one year later when the exporter stopped buying from DrumNet because farmers could not meet new EU production requirements. Farmers sold to other middlemen and defaulted on their loans from DrumNet. Such experiences may explain why farmers are less likely to adopt export crops.

American Journal of Agricultural Economics (forthcoming)

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2008

Where Oil-Rich Nations Are Placing Their Global Bets

Abdelal, Rawi, Ayesha Khan, and Tarun Khanna

September 2008

The combination of the gigantic American trade deficit and the price of oil at more than $130 per barrel (at press time) have created an inevitable pool of financial liquidity among oil exporters in the Arabian Gulf. But this era of petrodollar surpluses is markedly different from the last one. In the 1970s, the member states of the Gulf Cooperation Council-Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates-outsourced the management of their petrodollars to American and U.K. bankers. This time around, they have adopted active investment and development strategies: They are investing heavily in large Western organizations as well as in emerging markets in Africa and India. They are spending lavishly at home to establish institutional infrastructures, create free-trade zones for manufacturing and services, and build recreational facilities that will attract businesses, skilled knowledge workers, and tourists. All of this is destined to have long-run effects not just on their local economies but also on regional and international trading, argue the authors. In fact, the authors say, the actions of the GCC states are pulling the Gulf closer than it has ever been to the center of the international financial system. In this article, the authors consider how the economic landscape in the West will be affected by oil exporters' new investment strategies and interests over the next decades, how proximate emerging markets will be reshaped, and finally, how the GCC home environment itself will be dramatically reconfigured.

Harvard Business Review 86, no. 9, September 2008: 119-128.

The Agglomeration of U.S. Ethnic Inventors

Kerr, William R.,
July 2008

The ethnic composition of U.S. inventors is undergoing a significant transformation-with deep impacts for the overall agglomeration of U.S. innovation. This study applies an ethnic-name database to individual U.S. patent records to explore these trends with greater detail. The contributions of Chinese and Indian scientists and engineers to U.S. technology formation increase dramatically in the 1990s. At the same time, these ethnic inventors became more spatially concentrated across U.S. cities. The combination of these two factors helps stop and reverse long-term declines in overall inventor agglomeration evident in the 1970s and 1980s. The heightened ethnic agglomeration is particularly evident in industry patents for high-tech sectors, and similar trends are not found in institutions constrained from agglomerating (e.g., universities, government).

Harvard Business School Working Paper, No. 09-003, July 2008

Heart of Darkness: Business Tokens of the Congo (Part 1)

Wells, Louis T.
July 2008

Few numismatic fields are as unexplored as the tokens of what was once the Belgian Congo. Although the head (and "extra-wife") tokens have been thoroughly cataloged, I have found only one very early and incomplete attempt, by Mahieu in the 1920s, to report other tokens from this vast territory. Most of the tokens in this article that have not been previously listed were obtained in markets in Kinshasa between 2000 and 2005. Given the poor communications and regional violence, tokens from the eastern and even central part of the Congo were unlikely to appear in this western-located city. Probably many more tokens were issued in association with the Congo's important mines and plantations. This "Part I" article should serve as a start for the development of a "Part II" with a more complete list and history of issuing companies. Until then, the tokens of the former Belgian Congo and its independent successor states remain largely in darkness.

TAMS Journal 48, April 2008: 36-42.

A Better Approach to Foreign Aid

Muzinich, Justin and Eric Werker
June 2008

Frustration with U.S. foreign aid is widespread. At the same time, flows of private development finance-including foreign direct investment and remittances-have begun to dwarf official aid. We suggest a new approach that harnesses the power of private development finance to direct it towards developmental and foreign policy goals. Specifically, we argue that tax credits for companies, and tax breaks for individuals, can be used to incentivize productive investments while being a positive force for meaningful reform in the developing world.

Policy Review 149, June/July 2008

Learning Processes in Environmental Policy Making and Implementation

Ebrahim, Alnoor S.
February 2008

This paper explores how "learning" occurs in the context of environmental policy formulation and implementation. Rather than viewing policy learning as a rational and technocratic process, the emphasis here is on the political and institutional contexts within which opportunities for policy learning emerge. In particular, opportunities for policy learning are examined with respect to (a) agenda or priority-setting on environmental issues, (b) stakeholder access and representation in policy formulation, and (c) accountability in implementation. Examples are drawn from the experiences of South Africa and Brazil. Several preliminary factors are identified that may enhance policy learning, while acknowledging the constraints of bounded rationality and relationships of power.

Harvard Business School Working Paper, No. 08-071, February 2008

Finding Missing Markets (and a disturbing epilogue): Evidence from an Export Crop Adoption and Marketing Intervention in Kenya (pdf)

Ashraf, Nava, Xavier Gine, and Dean Karlan
February 2008

In much of the developing world, many farmers grow crops for local or personal consumption despite export options which appear to be more profitable. Thus many conjecture that one or several markets are missing. We report here on a randomized controlled trial conducted by DrumNet in Kenya that attempts to help farmers adopt and market export crops. DrumNet provides smallholder farmers with information about how to switch to export crops, makes in-kind loans for the purchase of the agricultural inputs, and provides marketing services by facilitating the transaction with exporters. The experimental evaluation design randomly assigns pre-existing farmer self-help groups to one of three groups: (1) a treatment group that receives all DrumNet services, (2) a treatment group that receives all DrumNet services except credit, or (3) a control group. After one year, DrumNet services led to an increase in production of export-oriented crops and lower marketing costs; this translated into household income gains for new adopters. However, one year after the study ended, the exporter refused to continue buying the cash crops from the farmers because the conditions of the farms did not satisfy European export requirements. DrumNet collapsed in this region as farmers were forced to sell to middlemen and defaulted on their loans. The risk of such events may explain, at least partly, why many seemingly more profitable export crops are not adopted.

Harvard Business School Working Paper, No. 08-065, February 2008

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2007

Leverage Time to Your Advantage

Malhotra, Deepak

June 2007

The article focuses on how to build agreements that last by leveraging some interesting insights offered by Ambassador Lakhdar Brahimi during his visit to Harvard Business School. As a United Nations special envoy to Afghanistan, Ambassador Brahimi was widely credited with helping to stabilize the nation in the aftermath of Taliban rule. Brahimi's perspective considers the role that time can play in maximizing value and strengthening relationships. Brahimi advises working constantly to establish and strengthen relationships and to learn as much as possible about contexts where one might some day need to negotiate.

Negotiation 10, no. 6

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