Executive Education
in Asia-Pacific

Driving Corporate Performance - China

May 2016
(Harvard Center Shanghai)

Created for Chinese companies and multinationals, this new program shows you how to develop and implement winning competitive strategies. You will learn how to build stronger strategies through identification of your company's true competitive advantage and how to align your organization for strategy execution. The program is offered by HBS and Guanghua School of Management, Peking University.

Global CEO Program for China

March 28 - April 2, 2016 - Module 1 (CEIBS, Shanghai, China);
May 22-27, 2016 - Module 2 (IESE, Barcelona, Spain);
July 24-30, 2016 - Module 3 (HBS, Boston, MA, USA)

Enhancing leadership skills and strategic vision, this program prepares Chinese CEOs to build world-class enterprises in a global environment. Jointly developed by Harvard Business School, China Europe International Business School, and IESE Business School, the curriculum explores factors influencing business performance and examines the CEO's role as it relates to strategic, governmental, investor, market, societal, and trade union issues.

Reinventing and Executing Strategy-China

June 2016 (Harvard Center Shanghai)
Created for Chinese companies and multinationals, this new program shows you how to develop and implement winning competitive strategies. You will learn how to build stronger strategies through identification of your company's true competitive advantage and how to align your organization for strategy execution. The program is offered by HBS and Guanghua School of Management, Peking University.

Growing and Leading a Professional Service Firm — China

July 2016
(Harvard Center Shanghai)

To take advantage of opportunities in China, professional service firms must navigate many obstacles in a complex and unfamiliar environment. Offered jointly by the Harvard Business School and the School of Management, Fudan University in Shanghai, this program explores the difficult balancing act required for company leaders who must consistently maintain fiscal discipline while exceeding client expectations, motivating staff, and formulating and executing long-term strategy.

Marketing Strategies for Profitable Growth-China

16-19 August , 2015 (Harvard Center Shanghai)
In this program, you will explore if and how new digital technologies are impacting your industry and your company-and whether it's time to evolve your marketing strategy. You will improve your ability to design and implement more effective marketing strategies key to acquiring and retaining the right customers, building brand equity, and establishing competitive advantage.

Senior Executive Program for China

16-22 August, 2015
Module 1 (Tsinghua-SEM, Beijing, China);
18-24 October, 2015
Module 2 (CEIBS, Shanghai, China);
6-18 December, 2015
Module 3 (HBS, Boston, MA, USA)

Offering the latest thinking on China and the global marketplace, this leadership development program helps you build competitive advantage. Jointly developed by Harvard Business School; the School of Economics and Management, Tsinghua University; and China Europe International Business School, the program helps executives renew their perspectives, rethink their role, and manage more effectively.

All Global Executive Education Programs



Codifying Prior Art and Patenting: Natural Experiment of Herbal Patent Prior Art Adoption at the EPO and USPTO

Choudhury, Prithwiraj, and Tarun Khanna
March 2014

In the patenting literature, economists and legal scholars have focused on the question of improving the quality of prior art available to patent examiners and mitigating the filing and granting of patents where prior art exists in common knowledge. In this paper, we create a unique dataset of Chinese and Indian herbal patents filed on the USPTO and EPO between 1977 and 2010 and exploit a natural experiment where the USPTO and EPO adopted a codified database of traditional herbal prior art at different points in time. This initiative was titled the Traditional Knowledge Depository Library (TKDL) and was pioneered by Indian state-owned R&D labs and provided the EPO and USPTO with systematic evidence of prior art on herbal patents based on a translation of ancient Indian texts. We conduct additional analyses to establish that the time lag of the USPTO adopting the TKDL agreement compared to the EPO was related to idiosyncratic differences in how the agreements were structure and negotiated, not differences in policy towards herbal patents at the EPO and USPTO. We also find that the adoption of TKDL appears to shift patenting in the West from pure herbal remedies that can be contested in court to new applications involving herbals and synthetics, which are less contestable. Further, we study the ethnic origins of the inventors of herbal patents filed on the USPTO. For this analysis, we use ethnic name matching for all patentees of herbal patents. We also exploit an exogenous reduction in H1B (visa) quotas and find that herbal patents filed by western firms based in the U.S. are driven by scientists of ethnic Indian and Chinese origin.

Harvard Business School Working Paper, No. 14-079, February 2014

Why China Can't Innovate

Abrami, Regina M., William C. Kirby, and F. Warren McFarlan
February 2014

A look at how innovation is happening in China-from the top down, from the bottom up, through acquisition, and through education. Sheds light on the complexities of the issue, highlighting the promise and the problems China faces in its quest to become the world's innovation leader.

Harvard Business Review 92, no. 3 (March 2014): 107-111

Stepping Stone, Stopping Point, or Slippery Slope? Negotiating the Next Iran Deal

Sebenius, James K.
February 2014

The November 2013 "interim" nuclear deal between Iran and the "P5+1"-the United States, Russia, China, Britain, France, and Germany-raises challenging questions. Will the initial deal function as a stepping stone toward a more comprehensive deal? Or will it drift into becoming a stopping point that leaves Iran dangerously close to nuclear weapons capability with the sanctions regime in decline? Or will it devolve to a slippery slope that would end up requiring a painful choice for key players between either acquiescing to a nuclear-capable Iran or attacking Iran's nuclear facilities? With Iran and the P5+1 each splintered into contending factions, a successful stepping stone strategy requires converting enough "persuadable skeptics" on each side to forge a "winning coalition" on behalf of the next nuclear deal. This supportive group must be strong enough to overcome the potent "blocking coalition" that will oppose virtually any larger, next-stage agreement. The best chance for the interim accord to become a stepping stone to a more valuable deal calls for a two-prong negotiating strategy with both value-enhancing and cost-imposing elements. The first prong of this strategy should strive to craft the most valuable possible next deal that credibly offers Iran a range of benefits, not limited to sanctions relief, that are greater and much more salient than those available from the interim agreement. The second prong should significantly worsen the consequences of failing to reach the next nuclear deal by automatically imposing enhanced sanctions if negotiations toward an acceptable, but relatively narrow, nuclear agreement do not succeed by a reasonable but firm deadline.

Harvard Business School Working Paper, No. 14-061, January 2014

Building a Game-Changing Talent Strategy

Ready, Douglas A., Linda A. Hill, and Robert J. Thomas
January 2014

When most of the world's financial services giants were stumbling and retrenching in the aftermath of the 2008 recession, the asset management firm BlackRock was busy charting a course for growth. Its revenues, profits, and stock price all performed consistently through this tumultuous period. The authors looked at BlackRock and other game-changing companies-the Mumbai-based global conglomerate Tata Group and Envision, an entrepreneurial alternative energy company based in China-and found significant commonalities. These three companies demonstrate the essential attributes of a game-changing organization: they are driven by purpose, oriented toward performance, and guided by principles. In the process of conducting interviews with these companies, the authors discovered a fourth thread that weaves them even more tightly together: each is supported by a game-changing talent strategy. But, they write, the path to such a strategy seems rife with complexity and ambiguity. How can both strategy and execution be consistently superior? How can they support a collective culture yet enable high potentials to thrive as individuals? How can the strategy be global and local at the same time? And how can its policies endure yet be agile and constantly open to revitalization? BlackRock's approach provides the answers.

Harvard Business Review 92, nos. 1-2 (January-February 2014): 62-68

Tommy Koh: Background and Major Accomplishments of the 'Great Negotiator, 2014

Sebenius, James K., and Laurence A. Green
January 2014

Significant negotiation-related achievements from the career of Ambassador Tommy Koh of Singapore are highlighted in brief form along with elements of his background and career. In light of these accomplishments, Koh was selected as the recipient of the 2014 Great Negotiator Award, presented by the Program on Negotiation, an interuniversity consortium of Harvard, MIT, and Tufts that is based at the Harvard Law School. Summaries of several of Koh's negotiations are presented in order to stimulate further research and analysis. Among numerous other activities, the episodes described include his leadership in forging the United States-Singapore Free Trade Agreement (USSFTA), the development and ratification of a charter for the Association of Southeast Asian Nations (ASEAN), the resolution of territorial and humanitarian disputes in the Baltics and Asia, and successful chairmanship of two unprecedented global megaconferences: the Third U.N. Conference on the Law of the Sea and the U.N. Conference on the Environment and Development, also known as the Earth Summit.

Harvard Business School Working Paper, No. 14-049, December 2013


Economic Transition and Private-Sector Labor Demand: Evidence from Urban China

Iyer, Lakshmi, Xin Meng, Nancy Qian, and Xiaoxue Zhao
December 2013

This paper studies the policy determinants of economic transition and estimates the demand for labor in the infant private sector in urban China. We show that a reform that untied access to housing in urban areas from working for the state sector accounts for more than a quarter of the overall increase in labor supply to the private sector during 1986-2005. Using the reform to instrument for private-sector labor supply, we find that private-sector labor demand is very elastic. We provide suggestive evidence that the reform equalized wages across sectors and reduced private-sector rents.

Harvard Business School Working Paper, No. 14-047, December 2013

The Organization of Enterprise in Japan

Nicholas, Tom
November 2013

Recent research indicates that the joint stock corporation was not a superior form of business organization in many countries during the nineteenth and twentieth centuries. In Japan, by contrast, it appears to have played a more prominent role. When the Civil Code was adopted in 1896, around 5,000 registered enterprises existed, but by 1939, there were over 88,000. Approximately half were joint stock firms, and these outperformed limited and unlimited partnerships on a return on equity basis, while also accounting for most of the aggregate profits. When the private limited liability company was introduced in 1938, it became immediately popular, but it did not displace the joint stock form.

Harvard Business School Working Paper, No. 14-037, November 2013

How Major League Baseball Clubs Have Commercialized Their Investment in Japanese Top Stars

Okada, Isao, and Stephen A. Greyser
October 2013

When a Major League Baseball club signs a Japanese star player, it obviously tries to commercialize its investment in the player. The initial focus is on home attendance (ticket sales) and television audiences, plus merchandise sales. These elements are similar to those considered for any high-performing players. However, for Japanese stars, there is also the potential to attract significant fandom from the local Japanese community. This represents an opportunity for truly incremental local revenue for the team. In addition, teams try to attract revenue from Japan-such as obtaining corporate sponsors, advertising signage at the home field, and visiting Japanese fans traveling to the U.S. to see these stars perform. In addition to treating team efforts at growing local Japanese community support, this paper examines seven factors for success in attracting revenues from Japanese companies and fans: pitcher or position player, player's popularity, non-stop flights from Japan, distance from Japan, non-sport tourist attractions in a city, size of Japanese community in the city, and player's and team's performance. The most important factor, however, is the player's talent and popularity in terms of performance in both Japan and the U.S. and his media exposure in Japan including endorsement contracts. In addition, if a MLB club signs a Japanese position star player and is based in a city that is endowed with a variety of non-baseball tourist attractions, this would have a further advantage for the team. The field-based research reported here is derived largely from analysis of team experiences with five principal Japanese baseball stars-Hideo Nomo, Ichiro Suzuki, Hideki Matsui, Daisuke Matsuzaka, and Kosuke Fukudome. The paper's "2013 Reflections" (pp. 15-17) includes analysis of Yu Darvish of the Texas Rangers.

Harvard Business School Working Paper, No. 14-029, September 2013.

U.S. High-Skilled Immigration, Innovation, and Entrepreneurship: Empirical Approaches and Evidence

Kerr, William R.
August 2013

High-skilled immigrants are a very important component of U.S. innovation and entrepreneurship. Immigrants account for roughly a quarter of U.S. workers in these fields, and they have a similar contribution in terms of output measures like patents or firm starts. This contribution has been rapidly growing over the last three decades. In terms of quality, the average skilled immigrant appears to be better trained to work in these fields, but conditional on educational attainment of comparable quality to natives. The exception to this is that immigrants have a disproportionate impact among the very highest achievers (e.g., Nobel Prize winners). Studies regarding the impact of immigrants on natives tend to find limited consequences in the short-run, while the results in the long-run are more varied and much less certain. Immigrants in the United States aid business and technology exchanges with their home countries, but the overall effect that the migration has on the home country remains unclear. We know very little about return migration of workers engaged in innovation and entrepreneurship, except that it is rapidly growing in importance.

Harvard Business School Working Paper, No. 14-017, August 2013

Ad Revenue and Content Commercialization: Evidence from Blogs

Sun, Monic and Feng Zhu
August 2013

Many scholars argue that when incentivized by ad revenue, content providers are more likely to tailor their content to attract "eyeballs," and as a result, popular content may be excessively supplied. We empirically test this prediction by taking advantage of the launch of an ad-revenue-sharing program initiated by a major Chinese portal site in September 2007. Participating bloggers allow the site to run ads on their blogs and receive 50% of the revenue generated by these ads. After analyzing 4.4 million blog posts, we find that, relative to nonparticipants, popular content increases by about 13 percentage points on participants' blogs after the program takes effect. About 50% of this increase can be attributed to topics shifting toward three domains: the stock market, salacious content, and celebrities. Meanwhile, relative to nonparticipants, participants' content quality increases after the program takes effect. We also find that the program effects are more pronounced for participants with moderately popular blogs and seem to persist after participants enroll in the program.

Management Science

The Disintermediation of Financial Markets: Direct Investing in Private Equity

Fang, Lily, Victoria Ivashina , and Josh Lerner
August 2013

One of the important issues in corporate finance is the rationale for and role of financial intermediaries. In the private equity setting, institutional investors are increasingly eschewing intermediaries in favor of direct investments. To understand the trade-offs in this setting, we compile a proprietary dataset of direct investments from seven large institutional investors. We find that solo investments by institutions outperform co-investments and a wide range of benchmarks for traditional private equity partnership investments. The outperformance is driven by deals where informational problems are not too severe, such as more proximate transactions to the investor and later-stage deals, and by an ability to avoid the deleterious effects on returns often seen in periods with large inflows into the private equity market. The poor performance of co-investments, on the other hand, appears to result from fund managers' selective offering of large deals to institutions for co-investing.

NBER Working Paper Series, No. 19299, August 2013

Competition and Social Identity in the Workplace: Evidence from a Chinese Textile Firm

Kato, Takao and Shu, Pian
August 2013

We study the impact of social identity on worker competition by exploiting the exogenous variations in workers' origins and the well-documented social divide between urban resident workers and rural migrant workers in large urban Chinese firms. We collect data on weekly output, individual characteristics, and co-worker composition for all weavers in an urban Chinese textile firm between April 2003 and March 2004. The firm's relative performance incentive scheme rewards a worker for outperforming her co-workers. We find that a worker does not act on the monetary incentives to outperform co-workers who share the same social identity, but does aggressively compete against co-workers with a different social identity. Our results highlight the important role of social identity in overcoming self-interest and enhancing inter-group competitions.

Harvard Business School Working Paper, No. 14-011, July 2013

Debating the Responsibility of Capitalism in Historical and Global Perspective

Jones, Geoffrey
July 2013

This working paper examines the evolution of concepts of the responsibility of business in a historical and global perspective. It shows that from the nineteenth century American, European, Japanese, Indian, and other business leaders discussed the responsibilities of business beyond making profits, although until recently such views have not been mainstream. There was also a wide variation concerning the nature of this responsibility. This paper argues that four factors drove such beliefs: spirituality, self-interest, fear of government intervention, and the belief that governments were incapable of addressing major social issues.

Harvard Business School Working Paper, No. 14-004, July 2013

Infrastructure for Ore: Benefits and Costs of a Not-So-Original Idea

Wells, Louis T., Jr.
July 2013

No abstract available

Columbia FDI Perspectives

Board Games: Timing of Independent Directors' Dissent in China

Ma, Juan, and Khanna, Tarun
May 2013

This paper examines the circumstances under which so-called "independent" directors voice their independent views on public boards in a sample of Chinese firms. Controlling for firm and board characteristics, we find that independent directors' dissent is associated with breakdown of social ties between the independent director and the board chairperson, who locates at the center of the board bureaucracy in China. In particular, independent directors tend to "time" their dissent into a restricted set of socially appropriate circumstances. Dissent is more likely to occur when the chairperson who appointed the independent director has left the board. Dissent also tends to occur at the end of board "games," defined as a 60-day window prior to departure of the board chairperson or departure of the independent director herself. The endgame effect is particularly strong, seeing 27% of the dissent issued at board "endgames," which represents only 4% of independent directors' average tenure. While directors with foreign experience are more likely to dissent, we do not find that academics, accounting, and law professionals are significantly more active in dissenting. We also show that dissent is consequential, to the director and the firm. For directors, dissent significantly increases the likelihood for a director to exit the director labor market. For firms, around announcement of dissent, firms suffer an economically and statistically significant cumulative abnormal return of -0.97%. Although literature has suggested that dissent might be reflective of diverse viewpoints, and perhaps beneficial in and of itself through reduction of firm variability, we do not find this offsetting beneficial effect to be strong.

Harvard Business School Working Paper, No. 13-089, April 2013

China's Quest to Adopt Electric Vehicles

Marquis, Christopher, and Hongyu Zhang, and Lixuan Zhou
March 2013

The Chinese government's effort to create an electric vehicle industry is a bold experiment in local and system-level innovation. It also provides a window into understanding the promise and peril of economic development policies, both for China and for the rest of the world.

Stanford Social Innovation Review 11, no. 2 (Spring 2013): 52-57

Achievement Motivation, Strategic Orientations and Business Performance in Entrepreneurial Firms: How Different Are Japanese and American Founders

Deshpande, Rohit Amir Grinstein, Elie Ofek, and Sang-Hoon Kim
March 2013

There is lack of research on the link between the personal disposition of an entrepreneurial firm's founder, the firm's strategic orientation, and its performance outcomes. Also, there is lack of cross-national research on entrepreneurial firms' strategic orientations. This paper addresses these gaps by exploring the differences in strategic orientation choices and their performance outcomes for American and Japanese entrepreneurial firms, focusing on founders' achievement motivation as a key personal disposition. Design/methodology/approach: A survey was conducted among 397 Japanese founders and 189 American ones. Findings: Our key counterintuitive finding is that Japanese and American founders of entrepreneurial firms are more similar than is often suggested. We first find that in both Japan and the U.S., achievement motivation is positively related to customer orientation and cost orientation while not related to technological orientation. Second, we find that the adoption of customer orientation is positively related to the profitability of both Japanese and American entrepreneurial firms, although the effect is stronger in the U.S. We also find that the adoption of technology orientation is negatively related to the profitability of both Japanese and American firms, although the effect is less negative in Japan. We finally find that the adoption of cost orientation does not have an impact on the profitability of both Japanese and American firms.

International Marketing Review

Entrepreneurs, Firms and Global Wealth since 1850

Jones, Geoff
March 2013

This working paper integrates the role of entrepreneurship and firms into debates on why Asia, Latin America, and Africa were slow to catch up with the West following the Industrial Revolution and the advent of modern economic growth. It argues that the currently dominant explanations, which focus on deficient institutions, poor human capital development, geography, and culture are important but not sufficient. This is partly because recent research in business history has shown that several of the arguments are not empirically proved, but especially because the impact of these factors on the creation and performance of innovative business enterprises is not clearly specified. Modern economic growth diffused from its origins in the North Sea region to elsewhere in western and northern Europe, across the Atlantic, and later to Japan, but struggled to get traction elsewhere. The societal and cultural embeddedness of the new technologies posed significant entrepreneurial challenges. The best equipped to overcome these challenges were often entrepreneurs based in minorities who held significant advantages in capital-raising and trust levels. By the interwar years, productive modern business enterprise was emerging across the non-Western world. Often local and Western managerial practices were combined to produce hybrid forms of business enterprise. After 1945 many governmental policies designed to facilitate catch-up ended up crippling these emergent business enterprises without putting effective alternatives in place. The second global economy has provided more opportunities for catch up from the Rest and has seen the rapid growth of globally competitive businesses in Asia, Latin America, and Africa. This is explained not only by institutional reforms, but also by new ways for business in the Rest to access knowledge and capital, including returning diaspora, business schools, and management consultancies. Smarter state capitalism was also a greater source of international competitive advantage than the state intervention often seen in the past.

Harvard Business School Working Paper, No. 13-076, March 2013

China's 'New Regionalism': Subnational Analysis in Chinese Political Economy

Rithmire, Meg
March 2013

The study of Chinese political economy has undergone a sea change since the late 1990s; instead of debating the origins and direction of national reform, scholars have turned to examining the origins of local economic variation. This essay reviews recent work in regional political economy of contemporary China. In keeping with a movement in comparative politics toward analyzing subnational politics, the "new regionalists" seek to identify and explain meaningful heterogeneity in the Chinese polity and economy. Yet they go further than simply using subnational cases to generate or test theories about Chinese politics; instead, they propose that subnational political economies in China are a function of endogenous change rather than a reaction to national priorities. After identifying differences between "new regionalism" and previous studies of decentralization in China, I discuss this work according to the theoretical approaches (institutional, ideational, and socio-historical) used to explain the origins of regional differences. I conclude by examining the limitations of the new regionalist agenda in comparative and historical context and suggesting that scholars move past unconditional acceptance of the causal power of "socialist legacies" and instead attend to the importance of changes in the post-Mao administrative hierarchy.

World Politics (forthcoming)

E-Commerce in Asia: Challenges and Opportunities

Gupta, Sunil, and Tanya Bijlani
February 2013

Asia is becoming increasingly attractive to businesses, especially to e-commerce firms that thrive on global and scalable business models. Yet, most global e-commerce players, with a few exceptions, have failed to achieve significant success in Asia. This article describes five major challenges that e-commerce firms face in emerging Asian markets.

Asia Business Insights

Corporate Social Responsibility Reporting in China: Symbol or Substance

Marquis, Christopher, and Cuili Qian
February 2013

This study focuses on how and why firms strategically respond to government signals regarding appropriate corporate activity. We integrate institutional theory and research on corporate political strategy to develop a political dependence model that explains (a) how different types of dependency on the government lead firms to issue corporate social responsibility (CSR) reports and (b) how the risk of governmental monitoring affects the extent to which CSR reports are symbolic or substantive. First, we examine how firm characteristics reflecting dependence on the government-including private versus state ownership, executives serving on political councils, political legacy, and financial resources-affect the likelihood of firms issuing CSR reports. Second, we focus on the symbolic nature of CSR reporting and how variance in the risk of government monitoring through channels such as bureaucratic embeddedness and local government institutional development influences the extent to which CSR communications are symbolically decoupled from substantive CSR activities. Our database includes all CSR reports issued by the approximately 1,600 publicly listed Chinese firms between 2006 and 2009. Our hypotheses are generally supported. The political perspective we develop contributes to organizational theory by showing (a) the importance of government signaling as a mechanism of political influence, (b) how different types of dependency on the government expose firms to different types of legitimacy pressures, and (c) that firms face a decoupling risk that leads them to be more likely to enact substantive actions in situations where they are likely to be monitored.

Organization Science

Hybrid Innovation in Meiji Japan

Nicholas, Tom
January 2013

Japan's hybrid innovation system during the Meiji era of technological modernization provides a useful laboratory for examining the effectiveness of complementary mechanisms to patents. Patents were introduced in 1885, and by 1911, 1.2 million mostly non-pecuniary prizes were awarded at 8,503 competitions. Prizes provided a strong boost to patent outcomes, especially in less developed prefectures, and they also induced large spillovers of technical knowledge in prefectures adjacent to those with prizes, relative to distant control prefectures without prizes. Linking competition expenditures with the expected market value of patents induced by the prizes permits a cost-benefit assessment of the prize competitions to be made.

International Economic Review

Intermediary Functions and the Market for Innovation in Meiji and Taishō Japan

Nicholas, Tom and Hiroshi Shimizu
January 2013

Japan experienced a transformational phase of technological development during the late nineteenth and early twentieth centuries. We argue that an important, but so far neglected, factor was a developing market for innovation and a patent attorney system that was conducive to rapid technical change. We support our hypothesis using patent data, and we also present a detailed case study on Tomogorō Ono, a key developer of salt production technology who used attorneys in connection with his patenting work at a time when Japan was still in the process of formally institutionalizing its patent attorney system. In accordance with Lamoreaux and Sokoloff's influential study of trade in invention in the United States, our quantitative and qualitative evidence highlights how inventors and intermediaries in Japan interacted to create a market for new ideas.

Business History Review

When the Crowd Fights Corruption

Healy, Paul M., and Karthik Ramanna
January 2013

No abstract available

Harvard Business Review 91, nos. 1/2 (January-February 2013): 122-129


The International Politics of IFRS Harmonization

Ramanna, Karthik
October 2012

The globalization of accounting standards as seen through the proliferation of IFRS worldwide is one of the most important developments in corporate governance over the last decade. I offer an analysis of some international political dynamics of countries' IFRS harmonization decisions. The analysis is based on field studies in three jurisdictions: Canada, China, and India. Across these jurisdictions, I first describe unique elements of domestic political economies that are shaping IFRS policies. Then, I inductively isolate two principal dimensions that can be used to characterize the jurisdictions' IFRS responses: proximity to existing political powers at the IASB and own potential political power at the IASB. Based on how countries are classified along these dimensions, I offer predictions, ceteris paribus, on countries' IFRS harmonization strategies. The analysis and framework in this paper can help broaden the understanding of accounting's globalization.

Accounting, Economics & Law

Land Politics and Local State Capacities:The Political Economy of Urban Change in China

Rithmire, Meg
September 2012

Despite common national institutions and incentives to remake urban landscapes to anchor growth, generate land-lease revenues, and display a capacious administration, Chinese urban governments exhibit varying levels of control over land. This article uses a paired comparison of Dalian and Harbin in China's Northeast to link differences in local political economies to land politics. Dalian, benefitting from early access to foreign capital, consolidated control over urban territory through the designation of a development zone, which realigned local economic interests and introduced dual pressures for enterprises to restructure and relocate. Harbin, facing capital shortages, distributed urban territory to assuage losers of reform and promote economic growth. The findings suggest that 1) growth strategies, and the territorial politics they produce, are products of the post-Mao urban hierarchy rather than of socialist legacies, and, 2) perhaps surprisingly, local governments exercise the greatest control over urban land in cities that adopted market reforms earliest.

China Quarterly

Corporate Social Responsibility and Access to Finance

George Serafeim, Cheng, Beiting, and Ioannis Ioannou
September 2012

In this paper, we investigate whether superior performance on corporate social responsibility (CSR) strategies leads to better access to finance. We hypothesize that better access to finance can be attributed to a) reduced agency costs due to enhanced stakeholder engagement and b) reduced informational asymmetry due to increased transparency. Using a large cross-section of firms, we find that firms with better CSR performance face significantly lower capital constraints. Moreover, we provide evidence that both of the hypothesized mechanisms, better stakeholder engagement and transparency around CSR performance, are important in reducing capital constraints. The results are further confirmed using an instrumental variables and a simultaneous equations approach. Finally, we show that the relation is driven by both the social and the environmental dimension of CSR.

Strategic Management Journal

Channels of Influence

Cohen, Lauren, Umit G. Gurun, and Christopher J. Malloy
August 2012

We demonstrate that simply by using the ethnic makeup surrounding a firm's location, we can predict, on average, which trade links are valuable for firms. Using customs and port authority data on the international shipments of all U.S. publicly-traded firms, we show that firms are significantly more likely to trade with countries that have a strong resident population near their firm headquarters. We use the formation of World War II Japanese Internment Camps to isolate exogenous shocks to local ethnic populations, and identify a causal link between local networks and firm trade links. Firms that exploit their local networks (strategic traders) see significant increases in future sales growth and profitability, and outperform other importers and exporters by 5%-7% per year in risk-adjusted stock returns. In sum, our results document a surprisingly large impact of immigrants' economic role as conduits of information for firms in their new countries.

Harvard Business School Working Paper, No. 13-013, August 2012

Rainmakers: Why Bad Weather Means Good Productivity

Lee, Jooa Julia, Francesca Gino, and Bradley R. Staats
July 2012

People believe that weather conditions influence their everyday work life, but to date, little is known about how weather affects individual productivity. Most people believe that bad weather conditions reduce productivity. In this research, we predict and find just the opposite. Drawing on cognitive psychology research, we propose that bad weather increases individual productivity by eliminating potential cognitive distractions resulting from good weather. When the weather is bad, individuals may focus more on their work rather than thinking about activities they could engage in outside of work. We tested our hypotheses using both field and lab data. First, we use field data on employees' productivity from a mid-size bank in Japan, which we then match with daily weather data to investigate the effect of bad weather conditions (in terms of precipitation, visibility, and temperature) on productivity. Second, we use a laboratory experiment to examine the psychological mechanism explaining the relationship between bad weather and increased productivity. Our findings support our proposed model and suggest that worker productivity is higher on bad rather than good weather days. We discuss the implications of our findings for workers and managers.

Harvard Business School Working Paper, No. 13-005, July 2012

Building Effective Business Relationships in China

Chua, Roy Y.J.
July 2012

No abstract available

MIT Sloan Management Review 53, no. 4 (2012)

Audit Quality and Auditor Reputation: Evidence from Japan

Skinner, Douglas J., and Suraj Srinivasan
May 2012

We study events surrounding ChuoAoyama's failed audit of Kanebo, a large Japanese cosmetics company whose management engaged in a massive accounting fraud. ChuoAoyama was PwC's Japanese affiliate and one of Japan's largest audit firms. In May 2006, the Japanese Financial Services Agency (FSA) suspended ChuoAoyama for two months for its role in the Kanebo fraud. This unprecedented action followed a series of events that seriously damaged ChuoAoyama's reputation. We use these events to provide evidence on the importance of auditors' reputation for quality in a setting where litigation plays essentially no role. Around one quarter of ChuoAoyama's clients defected from the firm after its suspension, consistent with the importance of reputation. Larger firms and those with greater growth options were more likely to leave, also consistent with the reputation argument.

The Accounting Review (forthcoming). (September 2012)

Teamwork on the Fly

Edmondson, Amy C.
April 2012

In a fast-paced and ever-changing business environment, traditional teams aren't always practical. Instead, companies increasingly employ teaming: gathering experts in temporary groups to solve problems they may be encountering for the first and only time. This flexible approach was essential to the completion of the Water Cube, the building that hosted swimming and diving events during the Beijing 2008 Olympic Games, and to the 2010 rescue of 33 Chilean miners. More and more people in nearly every industry now work on teams that vary in duration and have constantly shifting membership. Teaming presents technical and interpersonal challenges: people must get up to speed quickly on new topics and learn to work with others from different functions, divisions, and cultures. Several project management principles-scoping out the challenge, structuring the boundaries, and sorting tasks for execution-help leaders facilitate effective teaming. Leaders can also foster cross-boundary collaboration by emphasizing purpose, building psychological safety, and embracing failure and conflict. Individuals who learn to team well acquire knowledge, skills, and networks. Organizations learn to solve complex, cross-disciplinary problems, build stronger and more unified cultures, deliver a wide variety of products and services, and anticipate and manage unexpected events. Teaming helps companies and individuals execute and learn at the same time.

Harvard Business Review 90, no. 4 (April 2012)

The Organization of Firms Across Countries

Bloom, Nicholas, Raffaella Sadun, and John Van Reenen
March 2012

We argue that social capital as proxied by trust increases aggregate productivity by affecting the organization of firms. To do this we collect new data on the decentralization of investment, hiring, production, and sales decisions from corporate headquarters to local plant managers in almost 4,000 firms in the United States, Europe, and Asia. We find that firms headquartered in high trust regions are more likely to decentralize, with trust accounting for about half of the variation in decentralization in our data. To help identify causal effects, we look within multinational firms and show that higher levels of bilateral trust between the multinational's country of origin and subsidiary's country of location increases decentralization, even after instrumenting trust using religious and ethnic similarities between the countries. Trust raises aggregate productivity through two channels: (1) trust facilitates reallocation between firms by allowing more efficient firms to grow as CEOs can decentralize more decisions and (2) trust complements the adoption of new technologies, thereby increasing productivity within firms during times of rapid technological change.

A 'Core Periphery' Framework to Navigate Emerging Market Governments-Qualitative Evidence from a Biotechnology Multinational

Choudhury, Prithwiraj, James Geraghty, and Tarun Khanna
March 2012

We build on the emerging literature of influence-based models to study how multinational firms can navigate host governments. Our 'core-periphery' framework posits that the actions that an MNC takes with actors in what we call the 'periphery'-comprised of state, quasi-state, and civil society actors-can lead to positive or negative influence with interconnected state actors in a 'core'. There are two mechanisms by which this can happen: engaging the periphery may either change the information set of the core or help align incentives of multiple core actors. Engaging the periphery might be particularly relevant in settings where the institutional framework is still emerging. We build a case study of a multinational firm in the biotechnology sector to illustrate how the core-periphery framework works in multiple emerging markets across institutional differences. The analysis is based on 32 interviews conducted with the CEO and other executives of Genzyme at the corporate headquarters in Cambridge, Massachusetts, and in subsidiaries in Brazil, China, Costa Rica, France, India, and the United States.

Global Strategy Journal 2, no. 1 (February 2012): 71-87

China's Growing IT Services and Software Industry: Challenges and Implications

McFarlan, F. Warren, Ning Jia, and Justin Wong
March 2012

The Chinese management software and IT services industry has grown dramatically over the past two decades and today is about the size of the Indian industry a decade ago. The objective of this article is to help CIOs in firms outside of China better understand the current and future potential of this industry. Based on recent in-depth case findings of two large and fast-growing suppliers-UFIDA and Kingdee-as well as other vendors and client firms in China, we share what we see as the challenges facing the firms in the Chinese management software and IT services industry as players seek to develop their capabilities for their growing domestic market. We describe the implications of our findings for CIOs in developed countries. Our main prediction is that the challenges of serving the domestic market will mean that Chinese management software and IT service firms will likely have an inward focus over the next five years and will, therefore, only slowly emerge onto the global market.

MIS Quarterly Executive 11, no. 1 (March 2012)

Brides for Sale: Cross-Border Marriages and Female Immigration

Kawaguchi, Daiji, and Soohyung Lee
March 2012

Every year, a large number of women migrate as brides from developing countries to developed countries in East Asia. This phenomenon virtually did not exist in the early 1990s, but foreign brides currently comprise 4% to 35% of newlyweds in these developed Asian countries. This paper argues that two factors account for this rapid increase in "bride importation": the rapid growth of women's educational attainment and a cultural norm that leads to low net surplus of marriage for educated women. We provide empirical evidence supporting our theoretical model and its implications, using datasets from Japan, Korea, Taiwan, and Singapore.

Harvard Business School Working Paper, No. 12-082, March 2012

Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China

Chaudhary, Latika, Aldo Musacchio, Steven Nafziger, and Se Yan
February 2012

Our paper provides a comparative perspective on the development of public primary education in four of the largest developing economies circa 1910: Brazil, Russia, India, and China (BRIC). These four countries encompassed more than 50% of the world's population in 1910, but remarkably few of their citizens attended any school by the early 20th century. We present new, comparable data on school inputs and outputs for BRIC drawn from contemporary surveys and government documents. Recent studies emphasize the importance of political decentralization and relatively broad political voice for the early spread of public primary education in developed economies. We identify the former and the lack of the latter to be important in the context of BRIC, but we also outline how other factors such as factor endowments, colonialism, serfdom, and, especially, the characteristics of the political and economic elite help explain the low achievement levels of these four countries and the incredible amount of heterogeneity within each of them.

Explorations in Economic History

Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China.

Chaudhary, Latika, Aldo Musacchio, Steven Nafziger, and Se Yan
February 2012

Our paper provides a comparative perspective on the development of public primary education in four of the largest developing economies circa 1910: Brazil, Russia, India and China (BRIC). These four countries encompassed more than 50% of the world's population in 1910, but remarkably few of their citizens attended any school by the early 20th century. We present new, comparable data on school inputs and outputs for BRIC drawn from contemporary surveys and government documents. Recent studies emphasize the importance of political decentralization and relatively broad political voice for the early spread of public primary education in developed economies. We identify the former and the lack of the latter to be important in the context of BRIC, but we also outline how other factors such as factor endowments, colonialism, serfdom, and, especially, the characteristics of the political and economic elite help explain the low achievement levels of these four countries and the incredible amount of heterogeneity within each of them.

NBER Working Paper Working Paper Series, No. 17852, February 2012

Management Practices across Firms and Countries

Bloom, Nicholas, Christos Genakos, Raffaella Sadun, and John Van Reenen
February 2012

For the last decade we have been using double-blind survey techniques and randomized sampling to construct management data on over 10,000 organizations across 20 countries. On average, we find that in manufacturing American, Japanese, and German firms are the best managed. Firms in developing countries, such as Brazil, China, and India tend to be poorly managed. American retail firms and hospitals are also well managed by international standards, although American schools are more poorly managed than those in several other developed countries. We also find substantial variation in management practices across organizations in every country and every sector, mirroring the heterogeneity in the spread of performance in these sectors. One factor linked to this variation is ownership. Government, family, and founder owned firms are usually poorly managed, while multinational, dispersed shareholder, and private-equity owned firms are typically well managed. Stronger product market competition and higher worker skills are associated with better management practices. Less regulated labor markets are associated with improvements in incentive management practices such as performance-based promotion.

Academy of Management Perspectives 26, no. 1 (February 2012)

Exemplary Contribution: Transforming Mental Models on Emerging Markets.

Dhanaraj, Charles, and Khanna, Tarun
January 2012

Economic growth in the Western world increasingly depends on meaningful engagement with emerging markets such as Brazil, China, India, South Africa, and Turkey. Business schools are responding with increased attention to these markets in their research and curricula. However, in order to understand and leverage these opportunities for teaching and learning, it is apparent that students and executives may require a major transformation of their mental models, not just incremental adjustments or extensions. Institutional economics can help prospective and established managers recognize the role of formal and informal institutions and enable them to work around the "institutional voids" in emerging markets (Khanna & Palepu, 2010). We draw on this framework to identify critical shifts in mental models required for managing effectively in emerging markets and suggest core elements of the management learning process required to accomplish such a change.

Journal of Organizational Behavior


The Role of Finance and Private Investment in Developing Sustainable Cities

Macomber, John D.
November 2011

Three trends will drive urban investment, development, and entrepreneurship in the next two decades. This article provides tools to identify the situations and circumstances that will be most favorable for private sector involvement in consideration of these trends. The first trend is urbanization. Over the next twenty years, the number of people living in cities will double, with three billion additional urban dwellers. Second, shared resources like clean water, clean air, energy, and places to put solid waste are already scarce and constrained. Urbanization will only exacerbate these pressures. Third, almost no local or national government can mobilize both the capital and the political consensus to make investments in the infrastructure that will lead to more effective use of these resources. There is a largely unrecognized opportunity for the private sector to engage in selective investments that consider these trends. Investors and entrepreneurs can make money by extending these "common good" kinds of items, which use resources more productively. In the winning situations, this makes these cities more economically competitive at the same time. This article further argues for investments grounded in the basics of smart physical configuration. Examples are the compact arrangement of buildings, efficient use of water and power, and deployment of transit that reduces congestion. Investment and urban planning in three Asian cities are profiled as illustrations. Two sample proformas featuring multiple classes of securities illustrate the concepts.

Bias in Search Results?: Diagnosis and Response

Edelman, Benjamin
November 2011

I explore allegations of search engine bias, including understanding a search engine's incentives to bias results, identifying possible forms of bias, and evaluating methods of verifying whether bias in fact occurs. I then consider possible legal and policy responses, and I assess search engines' likely defenses. I conclude that regulatory intervention is justified in light of the importance of search engines in referring users to all manner of other sites, and in light of striking market concentration among search engines.

Specialization and Variety in Repetitive Tasks: Evidence from a Japanese Bank

Staats, B., and Francesca Gino
October 2011

Sustaining operational productivity in the completion of repetitive tasks is critical to many organizations' success. Yet research points to two different work-design-related strategies for accomplishing this goal: specialization to capture the benefits of repetition and variety (i.e., working on different tasks) to keep workers motivated and provide them opportunities to learn. In this paper, we investigate how these two strategies may bring different productivity benefits over time. For our empirical analyses, we use two-and-a-half years of transaction data from a Japanese bank's home loan application-processing line. We find that over the course of a single day, specialization, as compared to variety, is related to improved worker productivity. However, when we examine workers' experience across a number of days, we find that variety helps improve worker productivity. Additionally, we show that part of this benefit results from workers' cumulative experience with changeovers. Our results highlight the need for organizations to transform specialization and variety into mutually reinforcing strategies rather than treating them as mutually exclusive. Overall, our paper identifies new ways to improve operational performance through the effective allocation of work.

KFC's Radical Approach to China

Bell, David E., and Mary L. Shelman
October 2011

No abstract available

The New Face of Chinese Industrial Policy: Making Sense of Anti-Dumping Cases in the Petrochemical and Steel Industries.

Abrami, Regina M.
September 2011

Why have China's petrochemical and steel industries behaved so differently in seeking trade protection through anti-dumping measures, especially given that both industries face the full force of the global economy? We argue that the patterning of anti-dumping actions is best explained in terms of industrial structures, inclusive of degrees of horizontal concentration and vertical integration. These structures determine a firm's motivation to seek protection, as well as its capacity to overcome collective action problems within its industry. In the petrochemical industry, the shift toward greater horizontal consolidation and vertical integration reduces the collective action problems associated with anti-dumping petitions among upstream companies. It also weakens downstream companies lobbying in favor of the general protection of highly integrated conglomerates. In the steel industry, by contrast, national industrial policy fails to weaken local state interests sufficiently. Fragmented upstream and downstream channels instead persist, with strong odds against upstream suppliers waging a successful defense of material interests. Such distinctive industrial structures, we show, were a direct result of whether the central government could restructure these designated priority industries in its preferred direction. We find that exogenous price shocks proved particularly helpful in this regard.

Journal of East Asian Studies

Regulatory Uncertainty and Corporate Response: How China's Environmental Enforcement Is Catching Up to Regulation and How Business Can Keep Up.

Marquis, Christopher, Jianjun Zhang, and Yanhua Zhou
September 2011

We develop a framework to analyze the closing gap between regulation and enforcement of environmental protection in China and present a number of resulting implications for doing business there. We identify three major dimensions that characterize change in regulatory systems generally: priorities and incentives, bureaucratic alignment, and transparency and monitoring. Using these dimensions, we first unpack the mechanisms that characterized China's prior period, during which enforcement of environmental protection was decoupled from regulation. These mechanisms include (a) the intense emphasis on economic growth leading to misaligned incentives and regulatory competition across regions, (b) fragmented bureaucratic organization, and (c) lack of transparency and monitoring, all of which undermined enforcement. Then we show how, in each of these dimensions, regulation and enforcement are becoming realigned or recoupled over time. We show how this results from (a) a change in national development strategy to focus more on sustainable development and a harmonious society, (b) reorganization of the bureaucracy, and (c) an increase in monitoring by both the government and the general public. Correspondingly, we advance managerial implications that stem from these recent changes, illustrated by recent MNC and Chinese domestic firm successes. To address changes in policies and incentives, firms should align with governmental signals and embrace environmental innovation. Regarding bureaucratic alignment, firms should avoid regulatory shopping and integrate local and global standards. Finally, to address transparency and monitoring issues, firms should be transparent and compete on reputation. We conclude with a more general discussion of the contributions of our framework to understanding managerial practice in emerging-market regulatory contexts.

California Management Review

The Organization of Firms Across Countries

Bloom, Nicholas, Raffaella Sadun, and John Van Reenen
August 2011

We argue that social capital as proxied by trust increases aggregate productivity by affecting the organization of firms. To do this we collect new data on the decentralization of investment, hiring, production, and sales decisions from Corporate Headquarters to local plant managers in almost 4,000 firms in the United States, Europe, and Asia. We find that firms headquartered in high trust regions are more likely to decentralize, with trust accounting for about half of the variation in decentralization in our data. To help identify causal effects, we look within multinational firms, and show that higher levels of bilateral trust between the multinational's country of origin and subsidiary's country of location increases decentralization, even after instrumenting trust using religious and ethnic similarities between the countries. Trust raises aggregate productivity through two channels: (1) trust facilitates reallocation between firms by allowing more efficient firms to grow as CEOs can decentralize more decisions and (2) trust complements the adoption of new technologies, thereby increasing productivity within firms during times of rapid technological change.

Harvard Business School Working Paper, No. 12-005, August 2011

The International Politics of IFRS Harmonization

Ramanna, Karthik
July 2011

The globalization of accounting standards as seen through the proliferation of IFRS worldwide is one of the most important developments in corporate governance over the last decade. I offer an analysis of the international political dynamics of countries' IFRS harmonization decisions. The analysis is based on a field study of three jurisdictions in particular: Canada, China, and India. Across these jurisdictions, I first describe unique elements of domestic political economies that are shaping IFRS policies. Then, I inductively isolate two principal dimensions that can be used to characterize these jurisdictions' IFRS responses: proximity to existing political powers at the IASB; and own potential political power at the IASB. Based on how countries are classified along these dimensions, I offer predictions, ceteris paribus, on countries' IFRS harmonization strategies. The analysis and framework in this paper can help broaden the understanding of accounting's globalization.

Harvard Business School Working Paper, No. 11-132, June 2011

Effects of Cultural Ethnicity, Firm Size, and Firm Age on Senior Executives' Trust in Their Overseas Business Partners: Evidence from China

Jiang, Crystal X., Roy Y.J. Chua, Masaaki Kotabe, and Janet Y. Murray
July 2011

We investigate trust relationships between senior business executives and their overseas partners. Drawing on the similarity-attraction paradigm, social-categorization theory, and the distinction between cognition- and affect-based trust, we argue that executives trust their overseas partners differently depending on the partners' cultural ethnicity. In a field survey of 108 Chinese senior executives, we found that these executives have higher affect-based trust in overseas partners of the same cultural ethnicity as themselves; cognition-based trust is associated with affect-based trust differently when overseas partners are of the same or different cultural ethnicity. We also examine the role of relative firm size and age in shaping intra- and inter-cultural trust. Relative firm size has a stronger negative effect on executives' cognition-based trust if their partners were of a different cultural ethnicity. Although firm age does not have a negative effect on executives' affect-based trust as hypothesized, we found firm age to be positively associated with affect-based trust for partners of the same cultural ethnicity. We discuss theoretical and practical implications of this pattern of inter- and intra-cultural trust on international business and networking (guanxi) dynamics in China.

Journal of International Business Studies

The Paradox of Samsung's Rise

Khanna, Tarun, Jaeyong Song, and Kyungmook Lee
July 2011

Twenty years ago, few people would have predicted that Samsung could transform itself from a low-cost original equipment manufacturer to a world leader in R&D, marketing, and design, with a brand more valuable than Pepsi, Nike, or American Express. Fewer still would have predicted the success of the path it has taken. For two decades now, Samsung has been grafting Western business practices onto its essentially Japanese system, combining its traditional low-cost manufacturing prowess with an ability to bring high-quality, high-margin branded products swiftly to market. Like Samsung, today's emerging giants-Haier in China, Infosys in India, and Koç in Turkey, for instance-face a paradox: their continued success requires turning away from what made them successful. The tightly integrated business systems that have worked in their home markets are unlikely to secure their future in global markets. Samsung has steadily navigated this paradox to transcend its initial success in its home markets and move onto the world stage. It is a story that holds many important lessons for the current generation of emerging giants seeking to do the same.

Harvard Business Review 89, nos. 7-8 (July-August 2011): 142-147

The End of Chimerica

Ferguson, Niall, and Moritz Schularick
June 2011

For the better part of the past decade, the world economy has been marked by an economic order that combined Chinese export-led development with U.S. over-consumption. The financial crisis of 2007-09 likely marks the beginning of the end of the Chimerican relationship. In this paper, we look at this era as economic historians, trying to set events in a longer-term perspective. In some ways, China's economic model in the decade 1998-2007 was similar to the one adopted by West Germany and Japan after World War II. Trade surpluses with the United States played a major role in propelling growth. But there were two key differences. First, the scale of Chinese currency intervention was without precedent, as were the resulting distortions of the world economy. Second, the Chinese have so far resisted the kind of currency appreciation to which West Germany and Japan consented. We conclude that Chimerica cannot persist for much longer in its present form. As in the 1970s, sizeable changes in exchange rates are needed to rebalance the world economy. The token adjustment proposed recently by Beijing is unlikely to suffice.

International Finance 14, no. 1 (2011): 1-26

Historical Trajectories and Corporate Competences in Wind Energy

Jones, Geoffrey, and Loubna Bouamane
May 2011

This working paper surveys the business history of the global wind energy turbine industry between the late nineteenth century and the present day. It examines the long-term prominence of firms headquartered in Denmark, the more fluctuating role of U.S.-based firms, and the more recent growth of German, Spanish, Indian, and Chinese firms. While natural resource endowment in wind has not been very significant in explaining the country of origin of leading firms, the existence of rural areas not supplied by grid electricity was an important motivation for early movers in both the U.S. and Denmark. Public policy was the problem rather than the opportunity for wind entrepreneurs before 1980, but beginning with feed-in tariffs and other policy measures taken in California, policy mattered a great deal. However, Danish firms, building on inherited technological capabilities and benefitting from a small-scale and decentralized industrial structure, benefitted more from Californian public policies. The more recent growth of German, Spanish, and Chinese firms reflected both home country subsidies for wind energy and strong local content policies, while successful firms pursued successful strategies to acquire technologies and develop their own capabilities.

Harvard Business School Working Paper, No. 11-112, May 2011

Female Empowerment: Impact of a Commitment Savings Product in the Philippines

Ashraf, Nava, Dean Karlan, and Wesley Yin
May 2011

Female "empowerment" has increasingly become a policy goal, both as an end to itself and as a means to achieving other development goals. Microfinance in particular has often been argued, but not without controversy, to be a tool for empowering women. Here, using a randomized controlled trial, we examine whether access to and marketing of an individually held commitment savings product lead to an increase in female decision-making power within the household. We find positive impacts, particularly for women who have below median decision-making power in the baseline, and we find this leads to a shift toward female-oriented durable goods purchased in the household.

Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China, 1880-1930

Chaudhary, Latika, Aldo Musacchio, Steven Nafziger, and Se Yan
February 2011

Our paper provides a comparative perspective on the development of public primary education in four of the largest developing economies circa 1910, BRIC-Brazil, Russia, India, and China. These four countries encompassed almost 50% of the world's population in 1910, but remarkably few of their citizens attended any school in the early 20th century. We present new, comparable data on school inputs and outputs for BRIC that are drawn from a variety of archival and published sources. Similar to recent studies that emphasize the importance of income, political decentralization, and the level of political voice to the spread of primary education in developed economies, we also find these factors to be important in the context of BRIC. We also outline other factors such as local ethnic and religious heterogeneity, the institutional legacies of colonialism and serfdom, and, especially, the characteristics of the political and economic elite that help explain the low achievement levels of these countries and the incredible amount of heterogeneity within each BRIC.

Harvard Business School Working Paper, No. 11-083, February 2011

Bashing Beijing Will Not Help Our Trade Deficit

Pozen, Robert
January 2011

No abstract available

The Wall Street Journal, August 20, 2010

Why You Aren't Buying Venezuelan Chocolate

Deshpandé, Rohit
January 2011

The article discusses the "provenance paradox," wherein consumers are unwilling to buy high-quality products from regions not commonly associated with excellence in certain product categories. Venezuelan chocolate maker Chocolates El Rey does little international business because consumers associate premium chocolate more with Belgium or Switzerland than with Venezuela. Companies in this position have difficulty charging prices sufficient to fuel international expansion. The author presents advice on overcoming the paradox but warns it can be a lengthy process.

Harvard Business Review 88, no. 12 (December 2010).


Vietnam Competitiveness Report 2010

Ketels, Christian, Nguyen Dinh Cung, Nguyen Thi Tue Anh, and Do Hong Hanh
December 2010

The 2010 Vietnam Competitiveness Report contains a broad assessment of Vietnam's current competitiveness, an analysis of the key challenges and opportunities ahead, and a proposal for an economic strategy to enable Vietnam to reach a higher level of sustainable growth. The Report has been developed by Vietnam's Central Institute for Economic Management and the Singapore-based Asia Competitiveness Institute upon the request of Deputy Prime Minister Hoang Trung Hai.

Central Institute for Economic Management/Asia Competitiveness Institute

The New Face of Chinese Industrial Policy: Making Sense of Anti-Dumping Cases in the Petrochemical and Steel Industries

Abrami, Regina, and Yu Zheng
November 2010

Why have China's petrochemical and steel industries behaved so differently in seeking trade protection through antidumping measures? We argue that the patterning of antidumping actions is best explained in terms of the political economy of economic restructuring in pillar industries and its effect on industry structures. In the petrochemical industry, the shift toward greater horizontal consolidation and vertical integration reduces the collective action problems associated with antidumping petitions among upstream companies. It also weakens downstream companies lobbying in favor of the general protection of highly integrated conglomerates. In the steel industry, by contrast, national industrial policy in the absence of exogenous economic shocks fails to weaken local state interests sufficiently. Fragmented upstream and downstream channels instead persist, with strong odds against upstream suppliers waging a successful defense of material interests.

Harvard Business School Working Paper, No. 11-042, October 2010

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

Prices or Knowledge? What Drives Demand for Financial Services in Emerging Markets?

Cole, Shawn A., Thomas Sampson, and Bilal Zia
October 2010

Financial development is critical for growth, but its micro-determinants are not well understood. We test leading theories of low demand for financial services in emerging markets, combining novel survey evidence from Indonesia and India with a field experiment. We find a strong correlation between financial literacy and behavior. However, a financial education program has modest effects, increasing demand for bank accounts only for those with low levels of education or financial literacy. In contrast, small subsidies greatly increase demand. A follow-up survey confirms these findings, demonstrating that the newly opened accounts remain open and in use two years after the intervention.

Journal of Finance (forthcoming).

Does Ethnicity Pay

Yasheng Huang, Li Jin, and Yi Qian
September 2010

One of the most important and one of the most heavily studied ethnic networks in the world is overseas Chinese. However, almost all of the analysis on the economic dimensions of the overseas Chinese network has been about the effects of ethnic ties on the aggregate volume of trade or the effects of ethnic ties on foreign direct investment (FDI) at the country level. In this paper, we add to the large and important collection of literature on the subject by studying the profitability of foreign direct investments made by overseas Chinese in China. Our paper takes advantage of a large dataset-over 50,000 firms over a period of eight years-that is comprised of two types of foreign firms with investments in China-those owned by ethnic Chinese and those owned by non-ethnic Chinese. Against common perceptions, we find that ethnically Chinese firms in China do not outperform non-ethnically Chinese firms by a set of conventional profitability measures. We also find that the performance of ethnically Chinese firms deteriorates over time. One hypothesis explaining this result is that ethnically Chinese firms tend to under-invest in those firm attributes that may enhance long-term performance, such as human capital and technology (proxied by intangible assets in our paper). Indeed we do find evidence that ethnically Chinese firms invest far less in intangible assets and human capital as compared with non-ethnically Chinese firms of similar size, age, and other characteristics. In addition, within strata of matched firms based on their intangible assets and human capital, ethnically Chinese firms no longer display significant dynamic disadvantage relative to non-ethnic firms after controlling for other firm characteristics and fixed effects.

NBER Working Paper Series, No. 16294, August 2010

Law and Finance c. 1900

Musacchio, Aldo
September 2010

How persistent are the effects of legal institutions adopted or inherited in the distant past? A substantial literature argues that legal origins have persistent effects that explain clear differences in investor protections and financial development around the world today (La Porta et al., 1998, 1999 and passim). This paper examines the persistence of the effects of legal origins by examining new estimates of different indicators of financial development in more than 20 countries in 1900 and 1913. The evidence presented does not yield robust results that can sustain the hypothesis of persistence effects of legal origin, but it is not powerful enough to reject it either. Then the paper examines whether there were systematic differences in the extent of investor protections across countries, since that is the main channel through which legal origin affects financial development, and shows that all the evidence supports the idea of relative convergence in corporate governance practices across legal families circa 1900. The paper concludes that, if the evidence presented is representative, the variation observed in financial development around the world today is likely a product of events of the twentieth century rather than a consequence of long-term (and persistent) differences occasioned by legal traditions.

NBER Working Paper Series, No. 16216, July 2010

Recent Advances in the Empirics of Organizational Economics

Bloom, Nicholas, Raffaella Sadun, and John Van Reenen
September 2010

We present a survey of recent contributions in empirical organizational economics, focusing on management practices and decentralization. Productivity dispersion between firms and countries has motivated the improved measurement of firm organization across industries and countries. There appears to be substantial variation in management practices and decentralization not only between countries, but also especially within countries. Much of the poorer average management quality in countries like Brazil and India seems to result from a long tail of poorly managed firms, which barely exist in the United States. Some stylized facts include the following: (1) competition seems to foster improved management and decentralization; (2) larger firms, skill-intensive plants, and foreign multinationals appear better managed and are more decentralized; (3) firms that are both family owned and managed appear to have worse management and are more centralized; and (4) firms facing an environment of lighter labor market regulations and more human capital specialize relatively more in people management. There is evidence for complementarities between information and communication technology, decentralization, and management, but the relationship is complex, and identification of the productivity effects of organizational practices remains a challenge for future research.

Annual Review of Economics Vol. 2 (2010)

Technology Diffusion and Postwar Growth

Diego Comin, Bart Hobijn
September 2010

In the aftermath of World War II, the world's economies exhibited very different rates of economic recovery. We provide evidence that those countries that caught up the most with the U.S. in the postwar period are those that saw an acceleration in the speed of adopting new technologies. This acceleration is correlated with the incidence of U.S. economic aid and technical assistance in the same period. We interpret this as supportive of the interpretation that technology transfers from the U.S. to Western European countries and Japan were an important factor in driving growth in these recipient countries during the postwar decades.

NBER Macroeconomics Annual

Multinational Firms, Labor Market Discrimination, and the Capture of Competitive Advantage by Exploiting the Social Divide

Siegel, Jordan, Lynn Pyun, and B.Y. Cheon
August 2010

The organizational theory of the multinational firm states that foreignness is a liability to be overcome, in particular that being a foreigner "unembedded" in host-country social networks is a source of competitive disadvantage, whereas a distant literature on labor market discrimination suggests that exploiting the bigotry of others might be a source of competitive advantage. We seek to turn the first literature somewhat on its head by building on insights from the second literature. Specifically, multinationals hold a particularly significant competitive weapon as outsiders going into distant markets, by being able as outsiders to see the major social schisms common in host labor markets and potentially exploit the social divide for their own competitive advantage. Using two unique data sets from South Korea, we show that multinationals in the 2000s have derived significant advantage in the form of improved profitability by aggressively hiring the excluded group, namely women, in the local managerial labor market. Our results are economically meaningful and realistic in size, in addition to being robust to the inclusion of firm fixed effects. Multinationals, even those from home markets that discriminate heavily against women, often show evidence of having seen the strategic opportunity. It is not that multinationals alone have derived such advantage, as firms, foreign and domestic, that exploit the opportunity saw a significant profit benefit. Yet foreign multinationals have been significantly more likely than domestic firms to employ women in positions of managerial responsibility. Also, while the market is moving towards a new equilibrium "freer" of discrimination, that movement has been relatively slow, thus presenting a long-lasting competitive opportunity for multinationals.

The Task and Temporal Microstructure of Productivity: Evidence from Japanese Financial Services

Staats, Bradley R., and Francesca Gino
August 2010

Sustaining workers' productivity is critical to organizations' operational success. Yet, comparatively little attention has been given to how managers can effectively allocate work across tasks and time to improve workers' performance. In this paper, we use the learning curve framework to investigate how productivity varies within task and within time (i.e., over the course of a day) in contexts where work is repetitive in nature. We introduce the concept of a restart effect-task and temporal disruptions that stimulate worker productivity-as a means of addressing challenges of repetitive work. For our empirical analyses, we use two and a half years of transaction data from a Japanese bank's home loan application processing line, totaling nearly 600,000 observations of individuals completing work at a given step in the process. We find that productivity on the current task is most impacted by experience on the same day, but the benefits of such experience decrease with time. Additionally, we find evidence for beneficial effects of both task change and start-of-day restarts on worker productivity. Together, these results offer insight into the underlying structure of productivity and suggest new ways to improve performance through the effective allocation of work.

Assess, Don't Assume, Part II: Negotiating Implications of Cross-Border Differences in Decision Making, Governance, and Political Economy

Sebenius, James K.
January 2010

When facing a negotiation that crosses national borders and/or cultures, the standard preparatory assessments-of the parties, their interests, their no-deal options, opportunities for and barriers to creating and claiming value, the most promising sequence and process design, etc.-should be informed and modified by potentially relevant factors. Drawing on considerable literature in cross-border and cross-cultural negotiation, a two-paper series develops a four-level prescriptive framework for effectively carrying out such assessments. The first paper in this series ("Etiquette and National Culture in Negotiation") described 1) common expectations for surface behavior, and 2) some implications of deeper cultural characteristics for the negotiation process itself, as well as cross-border caveats such as stereotyping and overemphasizing national culture to the exclusion of other factors. The current paper carries this analysis further by systematically analyzing a third and fourth class of factors that often prove critical in cross-border dealmaking: 3. The decision-making and governance processes that are the targets of influence efforts. While negotiations take place with individuals, those individuals are typically enmeshed in organizational processes and cultures. Thus, a key assessment focuses on the organization's decision-making and governance processes. Several questions guide this analysis: Who has what decision rights? Is it a one-person authoritarian process? A simple consensus? A multi-stage consensus process? A key subgroup? How does the formal decision-making and governance process differ from the informal one? 4. The broader economic and political context for negotiation as well as salient "comparable" deals. Several questions guide this analysis: Is there a formal or informal government policy toward the kind of arrangements under negotiation such as the requirement that the majority of a joint venture be owned by a local partner? Are high-tech deals particularly sought after by the state? What recent deals by others, successful or not, will be salient in the minds of your local hosts and authorities when they contemplate yours? Does the political ethos favor state control or privatization? Does a wrenching political transition foster managerial uncertainty and decision paralysis? And so on.

Harvard Business School Working Paper, No. 10-050, December 2009

Does Product Market Competition Lead Firms to Decentralize?

Bloom, Nicholas, Raffaella Sadun, and John Van Reenen
January 2010

There is a widespread sense that over the last two decades firms have been decentralizing decisions to employees further down the managerial hierarchy. Economists have developed a range of theories to account for delegation, but there is less empirical evidence, especially across countries. This has limited the ability to understand the phenomenon of decentralization. To address the empirical lacuna we have developed a research program to measure the internal organization of firms-including their decentralization decisions-across a large range of industries and countries. In this paper we investigate whether greater product market competition increases decentralization. For example, tougher competition may make local manager's information more valuable, as delays to decisions become more costly. Since globalization and liberalization have increased the competitiveness of product markets, one explanation for the trend towards decentralization could be increased competition. Of course there are a range of other factors that may also be at play, including human capital, information and communication technology, culture, and industrial composition. To tackle these issues we collected detailed information on the internal organization of firms across nations. The few datasets that exist are either from a single industry or (at best) across many firms in a single country. We analyze data on almost 4,000 firms across 12 countries in Europe, North America, and Asia. We find that competition does indeed seem to foster greater decentralization.

Harvard Business School Working Paper, No. 10-052, January 2010.


Pioneering Entrepreneur Yoshiko Shinohara on Turning Temporary Work into Big Business in Japan

Mayo, Anthony J., and Mayuka Yamazaki.
October 2009

At age 74, Yoshiko Shinohara is a towering figure in Japanese business. She has created a wealth of job opportunities, including many for women, by founding the temporary-staffing agency Tempstaff and lobbying to strike down laws that stifled the temp industry. Tempstaff now has approximately 3,300 employees and is a public company. For the past nine years, Shinohara has been on Fortune's list of the 50 most powerful women in global business. It all started, she told Harvard Business School's Anthony J. Mayo and Mayuka Yamazaki, with a personal choice she made when she was young.

Financial Literacy, Financial Decisions, and the Demand for Financial Services: Evidence from India and Indonesia

Cole, Shawn, Thomas Sampson, and Bilal Zia
April 2009

Why is demand for formal financial services low in emerging markets? One view argues that limited cognitive ability and financial literacy stifle demand. A second view argues that demand is rationally low, because formal financial services are expensive and of relatively low value to the poor. This paper uses original surveys and a field experiment to distinguish between two competing answers to this question. Using original survey data from India and Indonesia, we first show that financial literacy is a powerful predictor of demand for financial services. To test the relative importance of literacy and price, we implement a field experiment, offering randomly selected unbanked households financial literacy education, crossed with small incentive (ranging from U.S. $3 to $14) to open a bank savings account. We find that the financial literacy program has no effect on the likelihood of opening a bank savings account in the full sample but do find modest effects for uneducated and financially illiterate households. In contrast, small subsidy payments have a large effect on the likelihood of opening a savings account. These payments are more than two times more cost-effective than the financial literacy training, though this calculation does not take into account any ancillary benefits of financial education.

The Review of Economics and Statistics (forthcoming)

Regional Trade Integration and Multinational Firm Strategies

Antrás, Pol, and C. Fritz Foley
April 2009

This paper analyzes the effects of the formation of a regional trade agreement on the level and nature of multinational firm activity. We examine aggregate data that captures the response of U.S. multinational firms to the formation of the ASEAN free trade agreement. Observed patterns guide the development of a model in which heterogeneous firms from a source country decide how to serve two foreign markets. Following a reduction in tariffs on trade between the two foreign countries, the model predicts growth in the number of source-country firms engaging in foreign direct investment, growth in the size of affiliates that are active in reforming countries both before and after the tariff reduction, and an increase in the extent to which the sales of affiliates in reforming countries are directed towards other reforming countries. Analysis of firm-level responses to the creation of the ASEAN free trade agreement yields results that are consistent with these predictions.

Journal of Macromarketing 29, no. 3 (2009).

Capitalizing On Innovation: The Case of Japan

Dujarric, Robert, and Andrei Hagiu
April 2009

Japan's industrial landscape is characterized by hierarchical forms of industry organization, which are increasingly inadequate in modern sectors, where innovation relies on platforms and horizontal ecosystems of firms producing complementary products. Using three case studies-software, animation, and mobile telephony-we illustrate two key sources of inefficiencies that this mismatch can create. First, hierarchical industry organizations can "lock out" certain types of innovation indefinitely by perpetuating established business practices. Second, even when the vertical hierarchies produce highly innovative sectors in the domestic market, the exclusively domestic orientation of the "hierarchical industry leaders" can entail large missed opportunities for other members of the ecosystem, who are unable to fully exploit their potential in global markets. We argue that Japan has to adopt several key legislative measures in order to address these inefficiencies and capitalize on its innovation: strengthening antitrust and intellectual property rights enforcement; improving the legal infrastructure (e.g., producing more business law attorneys); lowering barriers to entry for foreign investment; and facilitating the development of the venture capital sector

Harvard Business School Working Paper, No. 09-118, April 2009

Female Empowerment: Impact of a Commitment Savings Product in the Philippines (pdf)

Ashraf, Nava, Dean Karlan, Wesley Yin
March 2009

Female 'empowerment' has increasingly become a policy goal, both as an end to itself and as a means to achieving other development goals. Microfinance in particular has often been argued, but not without controversy, to be a tool for empowering women. Here, using a randomized controlled trial, we examine whether access to, and marketing of, an individually held commitment savings product leads to an increase in female decision-making power within the household. We find positive impacts, particularly for women who have below-median decision-making power in the baseline, and we find this leads to a shift towards female-oriented durables goods purchased in the household.

Harvard Business School Working Paper, No. 09-100, March 2009

When Dreaming Is Believing: The (Motivated) Interpretation of Dreams

Morewedge, Carey K., and Michael I. Norton
February 2009

This research investigated laypeople's interpretation of their dreams. Participants from both Eastern and Western cultures believed that dreams contain hidden truths (Study 1) and considered dreams to provide more meaningful information about the world than similar waking thoughts (Studies 2 and 3). The meaningfulness attributed to specific dreams, however, was moderated by the extent to which the content of those dreams accorded with participants' preexisting beliefs-from the theories they endorsed to attitudes toward acquaintances, relationships with friends, and faith in God (Studies 3-6). Finally, dream content influenced judgment: Participants reported greater affection for a friend after considering a dream in which a friend protected rather than betrayed them (Study 5) and were equally reluctant to fly after dreaming or learning of a plane crash (Studies 2 and 3). Together, these results suggest that people engage in motivated interpretation of their dreams and that these interpretations impact their everyday lives.

Journal of Personality and Social Psychology

Spousal Control and Intra-Household Decision Making: An Experimental Study in the Philippines (pdf)

Ashraf, Nava
January 2009

Using an experimental design I elicit causal effects of spousal observability and communication on financial choices of married individuals in the Philippines. Making choices public moves men from putting money into their own account to consumption; communication with their spouse drives men to put income in their wives' account. The strong effect on men but not women of information and communication appears to be driven not as much by gender as by control: men whose wives control household savings are much more likely to exhibit this treatment effect, and women whose husbands control savings exhibit the same pattern as men. These results suggest that existing household models and policies are incomplete without taking into account the bargaining process and, in particular, the way in which this process interacts with underlying control structures in the household.

American Economic Review

From Regional Star to Global Leader

Nohria, Nitin
January 2009

Yang Jianguo was recently promoted from country manager for China to global head of product development at a staid French perfume maker. He was chosen for his technical smarts and his knowledge of emerging markets-a critical avenue for growth, given that sales in the company's core markets have stalled. Eager to succeed in his new role in Paris, Jianguo has lots of fresh ideas, but they seem to be falling on deaf ears. Members of the executive team, for their part, find Jianguo to be largely indifferent to their input. Can Jianguo adjust to this new culture? And can he succeed without sacrificing his identity? Three experts comment on this fictional case study in R0901A and R0901Z. Katherine Tsang, the CEO of Standard Chartered Bank in Shanghai, explains the cultural differences between China and France and recommends that Jianguo push his thinking beyond the Chinese market. She also suggests that the company give all its executive team members multicultural training so they have the tools to understand one another and work together effectively. Mansour Javidan, the dean of research and a professor at Thunderbird School of Global Management, acknowledges that Jianguo's transition would be easier if he had the full support of the CEO, Alain Deronde. But since that isn't forthcoming, he advises Jianguo to work with Alain to develop targets for growth in emerging and traditional markets and a plan for building an infrastructure to achieve those goals. James Champy, the chairman of consulting for Perot Systems, is surprised that a family business would choose an "outsider" for this important post, but he recognizes it as a wise strategic move. He says that Jianguo needs a coach and should focus on learning the home market first, before trying to make inroads further afield.

Harvard Business Review 87, no. 1, January 2009

When Does Domestic Saving Matter for Economic Growth? (pdf)

Comin, Diego, Philippe Aghion, Peter Howitt, and Isabel Tecu
January 2009

Can a country grow faster by saving more? We address this question both theoretically and empirically. In our theoretical model, growth results from innovations that allow local sectors to catch up with frontier technology. In poor countries, catching up requires the cooperation of a foreign investor who is familiar with the frontier technology and a domestic entrepreneur who is familiar with local conditions. In such a country, domestic saving matters for innovation, and therefore growth, because it enables the local entrepreneur to put equity into this cooperative venture, which mitigates an agency problem that would otherwise deter the foreign investor from participating. In rich countries, domestic entrepreneurs are already familiar with frontier technology and therefore do not need to attract foreign investment to innovate, so domestic saving does not matter for growth. A cross-country regression shows that lagged savings is positively associated with productivity growth in poor countries but not in rich countries. The same result is found when the regression is run on data generated by a calibrated version of our theoretical model.

Harvard Business School Working Paper, No. 09-080, January 2009

Cultural Notes on Chinese Negotiating Behavior (pdf)

Sebenius, James K., and Cheng (Jason) Qian
January 2009

Western businesses negotiating with Chinese firms face many challenges, from initiating and smoothing communication to establishing long-lasting relationships and mutual trust, and from bargaining and drafting agreements to securing their implementation. Chinese negotiators can be at once warm hosts and friends and tough bargainers. Unique Chinese cultural elements such as complicated local etiquette, obscured decision-making processes, and heavy reliance on interpersonal relationships instead of legal instruments all add to the complexities of Sino-foreign business negotiations and can make the process tiresome and protracted. Besides talking past each other, Chinese and western negotiators often harbor mutually unfavorable perceptions. Many westerners find Chinese negotiators to be inefficient, indirect, and even dishonest; Chinese negotiators frequently perceive their western counterparts to be aggressive, impersonal, and insincere. The way to decipher the Chinese negotiating style and bring about mutually beneficial results is to better understand the key elements of Chinese culture to which Chinese negotiators attune their business mentality and manners.

Harvard Business School Working Paper, No. 09-076, December 2008

Etiquette and Process Puzzles of Negotiating Business in China: A Questionnaire (pdf)

Sebenius, James K., and Cheng (Jason) Qian
January 2009

Cultural differences can affect negotiations in many ways, from influencing the basic motivations and perceptions of the players to guiding the surface aspects, such as etiquette, protocol, and process, of business interactions. Navigating the challenges of these surface behavioral issues is useful to plumb some of the deeper cultural factors and differences in governance and decision-making of cross-border business negotiation. As suggested by an iceberg analogy, though etiquette, protocol, and deportment comprise the visible tip, they might be linked to more deeply rooted, less obvious forces that are fully capable of sinking the ship. This working paper, through a questionnaire format-intended as an instrument to collect data from a range of people with varying China-related negotiating experience-presents a series of situations of a typical Sino-foreign business negotiation to address both the surface and the root cultural factors. This questionnaire will serve not only to evaluate subjects' appreciation for Chinese culture as it bears on negotiation, but also to better understanding of the process aspects of cross-border negotiation in general.

Harvard Business School Working Paper, No. 09-077, December 2008

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The Supply Side of Innovation: H-1B Visa Reforms and U.S. Ethnic Invention

Kerr, William R., and William F. Lincoln
December 2008

This study evaluates the impact of high-skilled immigrants on U.S. technology formation. Specifically, we use reduced-form specifications that exploit large changes in the H-1B visa program. Fluctuations in H-1B admissions levels significantly influence the rate of Indian and Chinese patenting in cities and firms dependent upon the program relative to their peers. Most specifications find weak crowding-in effects or no effect at all for native patenting. Total invention increases with higher admission levels primarily through the direct contributions of ethnic inventors.

Harvard Business School Working Paper, No. 09-005, December 2008

An Exploration of the Japanese Slowdown during the 1990s (pdf)

Comin, Diego A.
November 2008

No summary available.

Harvard Business School Working Paper, No. 09-065, November 2008

Wellsprings of Creation: Perturbation and the Paradox of the Highly Disciplined Organization (pdf)

Brunner, David James, Bradley R. Staats, David M. Upton, Michael L. Tushman and David M. Upton
July 2008

Organizations face simultaneous imperatives to exploit and explore. Paradoxically, exploitation tends to drive out exploration, rendering organizations rigid and vulnerable to environmental change. Drawing on the Carnegie School, we propose a model where perturbation moderates the relationship between exploitation and exploration. We posit that highly disciplined organizations can sustain virtuous cycles of exploitation and exploration by deliberately perturbing their own processes. We provide illustrations from Toyota and formulate testable hypotheses about the mechanisms of perturbation.

Harvard Business School Working Paper, No. 09-011, July 2008

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

America the Difficult

Desai, Mihir
June 2008

The American (May - June 2008)

Accountability and Inequality in Single-Party Regimes: A Comparative Analysis of Vietnam and China (pdf)

Abrami, Regina, Edmund Malesky, and Yu Zheng
May 2008

Over the past two decades, no two economies have averaged more rapid economic growth than China and Vietnam. But while China's income inequality has risen rapidly over that same time frame, Vietnam's has only grown moderately. Structural and socio-cultural determinants fail to account for these divergent pathways. Existing political variables are also unhelpful. China and Vietnam are coded in exactly the same way, even in the path-breaking work on authoritarian regimes. In this paper, we take a deeper look at political institutions in the two countries, demonstrating that profound differences between the polities directly impact distributional choices. In particular, we find that Vietnamese elite institutions require construction of broader coalitions of policymakers, place more constraints on executive decision making, and have more competitive selection processes. As a result, there are stronger political motivations for Vietnamese leaders to provide equalizing transfers that limit inequality growth.

Harvard Business School Working Paper, No. 08-099, May 2008

Excess Comovement of Stock Returns: Evidence from Cross-sectional Variation in Nikkei 225 Weights

Greenwood, Robin
February 2008

Relative to their weights in a value-weighted index, a number of stocks in Japan's Nikkei 225 stock index are overweighted by a factor of 10 or more. I document a strong positive relation between overweighting and the comovement of a stock with other stocks in the Nikkei index, and a negative relationship between index overweighting and comovement with stocks outside of the index. The cross-sectional approach resolves endogeneity problems associated with event study demonstrations of excess comovement. A trading strategy that bets on the reversion of stock prices of overweighted stocks generates economic profits, confirming that the observed comovement patterns are excessive, and providing further evidence that comovement of stock returns can be a consequence of commonality in trading behavior.

Review of Financial Studies (forthcoming)

'Chimerica' and Global Asset Markets

Ferguson, Niall, and Moritz Schularick
February 2008

In this essay we present a potential explanation for the persistent and, to some eyes, puzzling buoyancy of global asset markets in recent years. We argue that the current world economic conjuncture is the product of a large and unusual divergence or "wedge" between the returns on capital and the cost of capital. Globalization-in particular the integration of the massive Asian labor force into the world economy-has significantly increased the returns on capital. However, contrary to what economic theory might lead us to expect, the cost of capital as measured by long-term real interest rates has not increased, but actually fallen. We call this phenomenon "Chimerica" because it is a consequence of the symbiotic economic relationship that has developed between the People's Republic of China and the United States of America. The entry of Chinese labor into the world economy has significantly boosted the returns on capital relative to the returns on labor. At the same time, by accumulating large currency reserves and channeling them (until very recently) almost exclusively into U.S.government securities, China has kept nominal and real long-term interest rates artificially low. In our view, it is this wedge between returns on capital and the cost of capital, rather than excess liquidity or a shortage of financial assets, that explains the boom in global asset markets as well as the recent upsurge of leveraged buy-out activity.

International Finance 10, no. 3 (winter 2007): 215-239

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China + India: The Power of Two

Khanna, Tarun
December 2007

China and India are burying the hatchet after four-plus decades of hostility. A few companies from both nations have been quick to gain competitive advantages by viewing the two as symbiotic. If Western corporations fail to do the same, they will lose their competitive edge-and not just in China and India but globally. The trouble is, most companies and consultants refuse to believe that the planet's most populous nations can mend fences. Not only do the neighbors annoy each other with their foreign policies, but they're also vying to dominate Asia. Moreover, the world's fastest-growing economies are archrivals for raw materials, technologies, capital, and overseas markets. Still, China and India are learning to cooperate, for three reasons. First, these ancient civilizations may have been at odds since 1962, but for 2,000 years before that, they enjoyed close economic, cultural, and religious ties. Second, neighbors trade more than non-neighbors do, research suggests. Third, China and India have evolved in very different ways since their economies opened up, reducing the competitiveness between them and enhancing the complementarities. Some companies have already developed strategies that make use of both countries' capabilities. India's Mahindra & Mahindra developed a tractor domestically but manufactures it in China. China's Huawei has recruited 1,500 engineers in India to develop software for its telecommunications products. Even the countries' state-owned oil companies, including Sinopec and ONGC, have teamed up to hunt for oil together. Multinational companies usually find that tapping synergies across countries is difficult. At least two American corporations, GE and Microsoft, have effectively combined their China and India strategies, allowing them to stay ahead of global rivals.

Harvard Business Review 85, no. 12 (December 2007)

Facts and Fallacies about U.S. FDI in China

Branstetter, Lee, and Foley, C. Fritz
October 2007

Despite the rapid expansion of U.S.-China trade ties, the increase in U.S. FDI in China, and the expanding amount of economic research exploring these developments, a number of misconceptions distort the popular understanding of U.S. multinationals in China. In this paper, we seek to correct four common misunderstandings by providing a statistical portrait of several aspects of U.S. affiliate activity in the country and placing this activity in its appropriate economic context.

NBER Working Paper Series, No. 13470, October 2007

Private Power in Indonesia

Wells, Louis T.
July 2007

The Asian Currency Crisis led to the collapse of agreements Indonesia had negotiated for private electric power only a few years earlier. The ensuing struggle meant bad publicity and several hundred million dollars in costs for Indonesia. As Indonesia in 2007 was designing a new law that would pass the constitutional test and encourage private investors in electric power, it was not clear that officials had fully understood the lessons of the recent disputes. Problems lay less in the legal framework than in lack of information about deals elsewhere, the institutional structure for negotiations and renegotiations, and the personal interests of highly placed individuals. The resulting power purchase agreements had led to high prices for electricity, imbalances of risks and rewards, and an unwillingness of officials to use the most effective defenses when disputes arose. Learning from the past should help officials not to make similar mistakes in the future.

Bulletin of Indonesian Economic Studies, December 2007

Land Titling and Rural Transition in Vietnam

Iyer, Lakshmi, and Quy-Toan Do
June 2007

We examine the impact of the 1993 Land Law of Vietnam which gave households the power to exchange, transfer, lease, inherit and mortgage their land-use rights. We use household surveys before and after the law was passed, together with the considerable variation across provinces in the speed of implementation of the reform to identify the impact of the law. We find that the additional land rights led to statistically significant increases in the share of total area devoted to long-term crops and in labor devoted to non-farm activities. However, these changes are not large in magnitude and appear to be driven mainly by the increased security of tenure provided by the law, rather than by increased access to credit markets or greater land market participation.

Economic Development and Cultural Change

Trading Patterns and Excess Comovement of Stock Returns

Greenwood, Robin, and Nathan Sosner
June 2007

We study the effects of index-linked trading on the excess comovement of stock returns. In April 2000, 30 stocks were replaced in the Nikkei 225 index in Japan. We document a large increase in the correlation of trading volume of stocks added to the index with the volume of stocks that remain in the index, with opposite results for the deletions. After replacement, daily index return betas of the additions rose by an average of 0.45, while the index return beta of the deleted stocks fell by an average of 0.63. We predict changes in autocorrelations and cross-serial correlations of returns, both confirmed with our data. The results are consistent with the idea that trading patterns are associated with short-run excess comovement of stock returns. Our findings suggest that multi-factor risk models could be enhanced by adding factors capturing correlated demand.

Financial Analysts Journal (forthcoming)

Trading Restrictions and Stock Prices

Greenwood, Robin
May 2007

Firms can manipulate their stock price by limiting the ability of their investors to sell. I examine a series of corporate events in Japan in which firms actively reduced their float--the fraction of shares available to trade--for periods of one to three months, locking investors into their long positions. Theory predicts that the greater the restrictions, the greater the impact of trading on price. Particularly severe restrictions are associated with returns of over 30 percent, most of which are reversed when the restrictions are removed. Firms are more likely to issue equity or redeem convertible debt during the restricted period, suggesting strong incentives for manipulation.

Review of Financial Studies (forthcoming)

Contingent Political Capital and International Alliances: Evidence from South Korea

Siegel, Jordan I.
April 2007

Prior research has suggested that a company's ties to political networks carries only two values, positive and zero, while the results of this study suggest that political network ties can also be a significant liability for companies. Analyzing South Korea as a representative emerging economy, I find that being tied through elite sociopolitical networks to the regime in power significantly increased the rate at which South Korean companies formed cross-border strategic alliances, but also that being tied through elite sociopolitical networks to the political enemies of the regime in power significantly decreased that rate. The present study sheds further light on the so-called dark side of embeddedness by focusing on who is negatively targeted by having the "wrong friends" at the wrong time.

Administrative Science Quarterly (forthcoming)

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Bit Player or Powerhouse? China and Stem-Cell Research

Spar, Debora, and Fiona Murray
September 2006

New England Journal of Medicine 355, no. 12 (September 21, 2006): 1191-1194

Recovery in Aceh: Towards A Strategy of Emergence

Daniel Curran, Leonard, Herman B.
June 2006

Harvard Business School Working Paper No. 05-082, 2005 (Revised May 2006)

Political Relationships, Global Financing and Corporate Transparency: Evidence from Indonesia

Christian Leuz, Oberholzer-Gee, Felix
February 2006

Journal of Financial Economics 81, no. 3 (September 2006): 411-439

Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines

Ashraf, Nava, Dean S. Karlan, and Wesley Yin
September 2005

We designed a commitment savings product for a Philippine bank and implemented it using a randomized control methodology. The savings product was intended for individuals who want to commit now to restrict access to their savings, and who were sophisticated enough to engage in such a mechanism. We conducted a baseline survey on 1777 existing or former clients of a bank. One month later, we offered the commitment product to a randomly chosen subset of 710 clients; 202 (28.4 percent) accepted the offer and opened the account. In the baseline survey, we asked hypothetical time discounting questions. Women who exhibited a lower discount rate for future relative to current trade-offs, and hence potentially have a preference for commitment, were indeed significantly more likely to open the commitment savings account. After twelve months, average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group. We conclude that the savings response represents a lasting change in savings, and not merely a short-term response to a new product.

Quarterly Journal of Economics

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