Executive Education
in Europe

Intellectual Property Strategy

June 1-4, 2014
(London, England)

To succeed in a highly competitive global economy, companies must be able to safeguard and maximize their intellectual property. By examining recent trends in European and international IP law, this program provides a blueprint for integrating IP management with corporate strategy. You will gain the legal and strategic perspectives to manage, protect, and increase the value of your firm's IP assets.

Leading High-Performance Healthcare Organizations

June 23-27, 2014
(Paris, France)

With a focus on strategy, this program helps healthcare executives around the world enhance leadership skills while improving operations and clinical outcomes. You will examine best practices for optimizing medical advances and information technology, implementing new models of care delivery, and enhancing processes and budgetary controls. Cross-industry insight helps you overcome barriers to innovation and improve the performance of your organization.

Leading With Impact

June 30-July 4, 2014
(London, England)

Emphasizing introspection and personal discovery, this program enables you to fulfill and expand your emerging leadership potential. Through self-assessment tools and experiential learning, you examine your strengths and weaknesses while exploring best practices of extraordinary leaders. Delivering proven techniques and greater confidence, the program helps you manage your team more effectively and lead in the midst of adversity and change.

All Global Executive Education Programs

Europe

2014

Frictions in Shadow Banking: Evidence from the Lending Behavior of Money Market Funds

Chernenko, Sergey, and Adi Sunderam
February 2014

We document the consequences of money market fund risk taking during the European sovereign debt crisis. Using a novel data set of security-level holdings of prime money market funds, we show that funds with large exposures to risky Eurozone banks suffered significant outflows between June and August 2011. Due to credit market frictions, these outflows have significant spillover effects on other firms: non-European issuers that typically rely on these funds raised less financing in this period. The results are not driven by issuers' riskiness or exposure to Europe: for the same issuer, money market funds with greater exposure to Eurozone banks decrease their holdings more than other funds. We show that relationships are important in short-term credit markets so that these spillover effects cannot be seamlessly offset, even though issuers are large, highly rated firms. Our results illustrate that instabilities associated with money market funds persist despite recent changes to the regulations governing them.

Review of Financial Studies

The Distinct Effects of Information Technology and Communication Technology on Firm Organization

Bloom, Nicholas, Luis Garicano, Raffaella Sadun, and John Van Reenen
January 2014

Empirical studies on information communication technologies (ICT) typically aggregate the "information" and "communication" components together. We show theoretically and empirically that this is problematic. Information and communication technologies have very different effects on the decisions taken at each level of an organization. Better information access pushes decisions down, as it allows for superior decentralized decision making without an undue cognitive burden on those lower in the hierarchy. Better communication pushes decisions up, as it allows employees to rely on those above them in the hierarchy to make decisions. Using an original dataset of firms from the U.S. and seven European countries we study the impact of ICT on worker autonomy, plant manager autonomy, and span of control. Consistent with the theory, we find that better information technologies (Enterprise Resource Planning, ERP, for plant managers and CAD/CAM for production workers) are associated with more autonomy and a wider span of control. By contrast, communication technologies (like data networks) decrease autonomy for both workers and plant managers. Treating technology as endogenous using instrumental variables (distance from the birthplace of ERP and heterogeneous telecommunication costs arising from different regulatory regimes) strengthens our results.

Management Science

2013

Network Effects in Countries' Adoption of IFRS

Ramanna, Karthik, and Ewa Sletten
December 2013

If the differences in accounting standards across countries reflect relatively stable institutional differences (e.g., auditing technology, the rule of law, etc.), why did several countries rapidly, albeit in a staggered manner, adopt IFRS over local standards in the 2003-2008 period? We test the hypothesis that perceived network benefits from the extant worldwide adoption of IFRS can explain part of countries' shift away from local accounting standards. That is, as more jurisdictions with economic ties to a given country adopt IFRS, perceived benefits from lowering transactions costs to foreign financial-statement users increase and contribute significantly towards the country's decision to adopt IFRS. We find that perceived network benefits increase the degree of IFRS harmonization among countries, and that smaller countries have a differentially higher response to these benefits. Further, economic ties with the European Union are a particularly important source of network effects. The results, robust to numerous alternative hypotheses and specifications, suggest IFRS adoption was self-reinforcing during the sample period, which, in turn, has implications for the consequences of IFRS adoption.

The Accounting Review (forthcoming). (July 2014.)

Rainmakers: Why Bad Weather Means Good Productivity

Lee, Jooa Julia, Francesca Gino, and Bradley R. Staats
December 2013

People believe that weather conditions influence their everyday work life, but to date, little is known about how weather affects individual productivity. Contrary to conventional wisdom, we predict and find that bad weather increases individual productivity and that it does so by eliminating potential cognitive distractions resulting from good weather. When the weather is bad, individuals appear to focus more on their work than on alternate outdoor activities. We investigate the proposed relationship between worse weather and higher productivity through four studies: (1) field data on employees' productivity from a bank in Japan, (2) two studies from an online labor market in the United States, and (3) a laboratory experiment. Our findings suggest that worker productivity is higher on bad rather than good weather days and that cognitive distractions associated with good weather may explain the relationship. We discuss the theoretical and practical implications of our research.

Journal of Applied Psychology (forthcoming)

Medium Term Business Cycles in Developing Countries

Comin, Diego A., Norman Loayza, Farooq Pasha, and Luis Serven
December 2013

Business cycle fluctuations in developed economies (N) tend to have large and persistent effects on developing countries (S). We study the transmission of business cycle fluctuations for developed to developing economies with a two-country asymmetric DSGE model with two features: (i) endogenous and slow diffusion of technologies from the developed to the developing country and (ii) adjustment costs to investment flows. Consistent with the model, we observe that the flow of technologies from N to S co-moves positively with output in both N and S. After calibrating the model to Mexico and the U.S., it can explain the following stylized facts: (i) shocks to N have a large effect on S, (ii) business cycles in N lead over medium-term fluctuations in S, (iii) the outputs in S and N co-move more than their consumption, and (iv) interest rates in S are counter-cyclical.

American Economic Journal: Macroeconomics

Location Choices under Strategic Interactions

Alcácer, Juan, Minyuan Zhao, and Cristian Dezso
December 2013

No abstract available

Strategic Management Journal

Mechanisms of Technology Re-Emergence and Identity Change in a Mature Field: Swiss Watchmaking, 1970-2008

Raffaelli, Ryan
December 2013

I examine the processes and mechanisms whereby market demand for a "dying" technology re-emerges at a later date. In 1983, fourteen years after the introduction of the first quartz watch, mechanical watches, along with the Swiss Jura community of watchmakers who built them, were thought to be "dead" (Landes, 1983). Unexpectedly, however, by 2008 the Swiss mechanical watchmaking industry had re-emerged as the world's leading exporter (in monetary value) of watches. Using qualitative and quantitative analysis, which I apply to a wealth of data, I show how changes in product, organizational, and community identities associated with a legacy technology can be reconstituted to reconfigure a field. My findings highlight that three mechanisms-identity claims, leadership, and framing (i.e., temporal, linguistic, value)-are core to explaining field re-emergence. Although new or discontinuous technologies tend to displace older ones, legacy technologies that are seemingly "dead" can re-emerge, thrive, and even co-exist with newer technologies. Building on these results, I draw out theoretical and empirical implications that focus on the interface between technological shifts and identity change at multiple levels.

Harvard Business School Working Paper, No. 14-048, December 2013

Project Complexity and Systems Integration: Constructing the London 2012 Olympics and Paralympics Games

Davies, Andrew, and Ian Mackenzie
December 2013

Our study of the London Olympics 2012 construction programme showed that systems integration is one of the major challenges involved in delivery of a complex "system of systems"-or array-project. Organizations cope with complexity by decomposing a project into different levels of systems integration with clearly defined interfaces and buffers between levels and individual component subsystems. At the "meta systems integration" level, an organization has to be established with the capabilities to understand the total system of systems, manage external interfaces with the multiple stakeholders, and coordinate the integration of its component parts. At the "systems integration" level, efforts are made to manage each individual system as a loosely coupled, relatively self-contained subsystem with defined interfaces to coordinate interdependencies with other parts of the overall array. Establishing processes to maintain stability whilst responding dynamically to uncertain and changing conditions is one of the most challenging aspects of systems integration.

International Journal of Project Management

Lessons from England's Health Care Workforce Redesign: No Quick Fixes

Bohmer, Richard, and Candance Imison
November 2013

In 2000 the English National Health Service (NHS) began a series of workforce redesign initiatives that increased the number of doctors and nurses serving patients, expanded existing staff roles and developed new ones, redistributed health care work, and invested in teamwork. The English workforce redesign experience offers important lessons for U.S. policy makers. Redesigning the health care workforce is not a quick fix to control costs or improve the quality of care. A poorly planned redesign can even result in increased costs and decreased quality. Changes in skill mix and role definitions should be preceded by a detailed analysis and redesign of the work performed by health care professionals. New roles and responsibilities must be clearly defined in advance, and teamwork models that include factors common in successful redesigns such as leadership, shared objectives, and training should be promoted. The focus should be on retraining current staff instead of hiring new workers. Finally, any workforce redesign must overcome opposition from professional bodies, individual practitioners, and regulators. England's experience suggests that progress is possible if workforce redesigns are planned carefully and implemented with skill.

Health Affairs 32, no. 11 (November 2013): 2025-2031

Prosocial Bonuses Increase Employee Satisfaction and Team Performance

Anik, Lalin, Lara B. Aknin, Elizabeth W. Dunn, Michael I. Norton, and Jordi Quoidbach
October 2013

In three field studies, we explore the impact of providing employees and teammates with prosocial bonuses, a novel type of bonus spent on others rather than on oneself. In Experiment 1, we show that prosocial bonuses in the form of donations to charity lead to happier and more satisfied employees at an Australian bank. In Experiments 2a and 2b, we show that prosocial bonuses in the form of expenditures on teammates lead to better performance in both sports teams in Canada and pharmaceutical sales teams in Belgium. These results suggest that a minor adjustment to employee bonuses-shifting the focus from the self to others-can produce measurable benefits for employees and organizations.

PLoS ONE 8, no. 9 (September 18, 2013): 1-8.

Ferguson's Formula

Elberse, Anita, and Sir Alex Ferguson
September 2013

When Alex Ferguson took over as manager of the English football team Manchester United, the club was in dire straits: it hadn't won a league title in nearly 20 years and faced a very real threat of being relegated to a lower division. In 26 seasons under Ferguson, United won 38 domestic and international trophies-giving him nearly twice as many as any other English club manager-and became one of the valuable franchises in sports. In 2012, during Ferguson's final season before retiring, Harvard Business School professor Anita Elberse had the unique opportunity to observe Ferguson's management style in a series of visits and in-depth interviews. In this collaborative explication, she details eight parts of Ferguson's "formula" as she observed them and gives the manager his say. The lessons described range from the necessity of maintaining control over high-performing team members to the importance of observation and the inevitability of change. The approach that brought Ferguson's team such success and staying power is applicable well beyond football-to business and to life.

Harvard Business Review 91, no. 10 (October 2013): 116-125

NBC and the 2012 London Olympics: Unexpected Success

Greyser, Stephen A., and Vadim Kogan
September 2013

"The 2010 Vancouver Winter Games lost $223 million, astonishing for a 17-day event. Next year's London Summer Games, which cost a record Olympic rights fee of $1.18 billion, are expected to lose at least as much..." wrote Richard Sandomir in The New York Times. "NBC Could Lose $100 Million On London Olympics; Ratings Not Expected To Beat Beijing," chimed in John Clarke with Forbes. Sandomir and Clarke were not alone in their damning prediction. Analysts and media put forth similar commentary following NBC's embarrassing loss in Vancouver. The media had prepared a grave for NBC as the 2012 London Olympics approached. Indeed, critics created #NBCFail to characterize their expectations. Yet, as the Games wound down, it was NBC that was smiling. Their forecast had paid off. They found that not only were the Games profitable that year, they had achieved record viewership. How could they have gone from one extreme of failure to another extreme of success so quickly? The network began analyzing factors that helped-as well as decisions that had received much criticism-so that it could begin its planning of the 2014 Winter Olympics in Sochi, Russia, and 2016 Summer Olympics in Rio de Janeiro, Brazil.

Harvard Business School Working Paper, No. 14-028, September 2013

A Tale of Two Stories: Sustainability and the Quarterly Earnings Call

Eccles, Robert G. and George Serafeim
September 2013

One of the challenges companies claim to face in making sustainability a core part of their strategy and operations is that the market does not care about sustainability, either in general or because the time frames in which it matters are too long. The response of investors who say they care about sustainability-and their numbers are large and growing-is that companies do a poor job in providing them with the information they need to take sustainability into account in their investment decisions. Whatever the merits of each view, the fact remains that an effective conversation about sustainability requires the participation of both sides of the market. There are two main mechanisms for companies to communicate to the market as a way of starting this conversation: mandated reporting and quarterly conference calls. In this paper, the authors argue that neither companies nor investors can be seen as taking sustainability seriously unless it is integrated into the quarterly earnings call. Until that happens, the core business and sustainability are two separate worlds, each of which has its own narrator telling a different story to a different audience. The authors illustrate their argument using the case of SAP, the German software company. SAP was the first company to host an "ESG Briefing," a conference call for analysts and investors held on July 30, 2013 in which the company discussed both its sustainability performance and how its sustainability initiatives were contributing to its financial performance. The narrative of this call was very similar to the narrative of the company's first "integrated report," which was issued in 2012 and presented the company's sustainability initiatives in the context of its operating and financial performance. However, the contents of the "ESG Briefing" and those of its traditional quarterly earnings conference calls were very different-and so were the audiences. Whereas the quarterly call was attended mainly by sell side analysts-and the words "sustainability" or "sustainable" failed to receive a single mention-the ESG briefing was delivered to an investor audience made up exclusively of the "buy side."

Journal of Applied Corporate Finance 25, no. 3 (Summer 2013): 66-77

What Do We Know About Corporate Headquarters? A Review, Integration, and Research Agenda

Menz, Markus, Sven Kunisch, and David J. Collis
August 2013

During the past five decades, scholars have studied the corporate headquarters (CHQ)-the multidivisional firm's central organizational unit. The purpose of this article is to review the diverse and fragmented literature on the CHQ and to identify the variables of interest, the dominant relationships, and the contributions. We integrate, for the first time, the existing knowledge of the CHQ into an organizing framework. Based on a synthesis of the literature, we identify major shortcomings and gaps and present an agenda for future research that contributes to our understanding of the CHQ and the multidivisional firm.

Harvard Business School Working Paper, No. 14-016, August 2013

Historical Origins of Environmental Sustainability in the German Chemical Industry, 1950s-1980s

Jones, Geoffrey G., and Christina Lubinski
August 2013

This working paper examines the growth of corporate environmentalism in the West German chemical industry between the 1950s and the 1980s. German business has been regarded as pioneering corporate environmentalism after World War II. In contrast, this study reveals major commonalities between the sustainability strategies of leading German and American firms until the 1970s. However during that decade the German firms diverged from their American counterparts in using public relations strategies not only to contain fallout from criticism of their pollution impact, but also to create opportunities for changes in corporate culture to encourage sustainability. While the U.S. chemical industry remained defensive and focused on legal compliance, there was a greater proactivity among the German firms. This paper stresses the importance of regional embeddedness of leading firms in the state of North Rhine-Westphalia, which made their reputations especially vulnerable to criticism. The research supports organizational sociology theory, which has identified the importance of visibility in corporate green strategies. The German chemical firms were pioneers in understanding that investing in environmental sustainability could provide an opportunity to create value for the firm by delivering both commercial and reputational benefits.

Harvard Business School Working Paper, No. 14-018, August 2013

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

NHS and Social Care Workforce: Meeting Our Needs Now and in the Future?

Imison, Candace and, Richard Bohmer
August 2013

No abstract available

The King's Fund, London, England, July 2013

From Green Users to Green Voters

Comin, Diego and Johannes Rode
August 2013

We estimate the effect of the diffusion of photovoltaic (PV) systems on the fraction of votes obtained by the German Green Party. The logistic diffusion of PV systems offers a new identification strategy. We take first differences and instrument adoption rates (i.e., the first difference in the diffusion level) by lagged diffusion levels. The existing rationales for non-linearities in diffusion and the ubiquity of logistic curves ensure that our instrument is orthogonal to variables that directly affect voting patterns. We find that the diffusion of domestic PV systems caused 25% of the increment in green votes between 1998 and 2009.

NBER Working Paper Series, No. 19219, 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

The Network Secrets of Great Change Agents

Battilana, Julie, and Tiziana Casciaro
July 2013

Change is hard, especially in a large organization. Yet some leaders succeed-often spectacularly-at transforming their workplaces. What makes them able to exert this sort of influence when the vast majority can't? The authors tracked 68 change initiatives in the UK's National Health Service, an organization whose size, complexity, and tradition can make reform difficult. They discovered several predictors of change agents' success-all of which emphasize the importance of networks of personal relationships: 1) Change agents who were central in the organization's informal network had a clear advantage, regardless of their position in the formal hierarchy. 2) People who bridged disconnected groups or individuals were more effective at implementing dramatic reforms. The resisters in their networks did not necessarily know one another and so were unlikely to form a coalition. Change agents with cohesive networks, in which all individuals were connected, were better at instituting minor changes. Their contacts rallied around the initiative and helped convince others of its importance. 3) Being close to people who were ambivalent about a change was always beneficial. In the end, fence-sitters were reluctant to disappoint a friend. But close relationships with resisters were a double-edged sword: such ties helped push through minor initiatives but were a hindrance when attempting major change.

Harvard Business Review 91, nos. 7/8 (July-August 2013): 62-68

Clusters and the New Growth Path for Europe

Ketels, Christian, and Sergiy Protsiv
July 2013

This paper outlines elements of a conceptual framework that clarifies the role that clusters play relative to government policies and actions of individual companies in supporting the emergence of "High Road" strategies that lead to better New Growth Path-related outcomes. It then focuses on creating a new set of data that can start shedding light on the empirical relevance of this framework. The first main section of the paper draws on a new set of employment and wage data across European clusters. The data is used to analyze whether cluster presence is significantly correlated with higher wages, which, as an indicator of higher productivity, are likely to signal the presence of "High Road" strategies. We then take a closer look at the scale of the relationship relative to location-specific and other effects. We find cluster presence to be significantly related to higher wages, with the effect being moderate but meaningful. This suggests that cluster presence enhances the ability of economic activities to deliver high performance but is unlikely to be able to substitute weak business environment conditions. The second section then deploys a wide range of regional performance data collected for the European Competitiveness Index and the European Cluster Observatory. We create indicators for New Growth Path performance and its main dimensions and classify European regions by their performance patterns. This provides critical insights into the compatibility of the different economic, social, and ecological objectives pursued. We then relate these outcomes to the presence of strong cluster portfolios and strong business environment conditions. Both are most strongly associated with stronger economic outcomes, with lower impact on other dimensions of the New Growth Path. The third section creates a new dataset of cluster initiative intensity at the regional and cluster category level. It also classifies close to 1,000 cluster initiatives in Europe by their engagement in New Growth Path-related activities. We then deploy this data to test the impact of cluster initiatives on regional New Growth Path performance. Overall, we find evidence consistent with clusters playing a role in making "High Road" strategies more likely to emerge. We also find evidence that European regions differ in their strategies towards these goals, with some being able to pursue all three dimensions in parallel. Cluster initiatives widely engage in New Growth Path-related activities, indicating their potential as a tool in mobilizing joint action in these areas.

WWW for Europe Working Paper Series, No. 14, July 2013

How Experts Gain Influence

Mikes, Anette, Matthew Hall, and Yuval Millo
July 2013

In theory, the risk management groups of two British banks-Saxon and Anglo-had the same influence in their organizations. But in practice, they did not: Saxon's was engaged in critical work throughout the bank, while Anglo's had little visibility outside its areas of expertise. In their study of these two financial institutions, the authors identified four competencies-trailblazing, toolmaking, teamwork, and translation-that help functional leaders or groups compete for top management's limited attention and increase their impact. Anglo's risk managers were strong in only some of the competencies, but Saxon's were strong in all four. They consistently scanned the internal and external environment for important issues to which they could apply a risk management perspective (trailblazing) and then developed tools-such as quarterly risk reports-that spread their expertise (toolmaking). While controlling the tools' design and implementation, the risk managers incorporated business managers' insights (teamwork) and made sure everyone could understand the findings (translation). Ultimately, experts' roles must fit the organization's strategy and structural needs. In some situations, functional experts can raise their profile by cultivating just two of the competencies. But those who are strong in all four are likely to be the most influential.

Harvard Business Review 91, nos. 7/8 (July-August 2013): 70-74.

Matching Firms, Managers, and Incentives

Bandiera, Oriana, Luigi Guiso, Andrea Prat, and Raffaella Sadun
June 2013

We exploit a unique combination of administrative sources and survey data to study the match between firms and managers. The data include manager characteristics, such as risk aversion and talent; firm characteristics, such as ownership; detailed measures of managerial practices relative to incentives, dismissals, and promotions; and measurable outcomes, for the firm and for the manager. A parsimonious model of matching and incentive provision generates an array of implications that can be tested with our data. Our contribution is twofold. We disentangle the role of risk aversion and talent in determining how firms select and motivate managers. In particular, risk-averse managers are matched with firms that offer low-powered contracts. We also show that empirical findings linking governance, incentives, and performance, which are typically observed in isolation, can instead be interpreted within a simple unified matching framework.

Journal of Labor Economics

Dysfunction in the Boardroom: Understanding the Persistent Gender Gap at the Highest Levels

Groysberg, Boris, and Deborah Bell
June 2013

The article examines the gender gap that is present in boardrooms in U.S. corporations and internationally in 2013 as more women attempt to reach executive-level positions. Countries in the European Union are attempting to institute laws regarding the minimum percentage of women on a company's board, while research suggests that women enter executive positions earlier and work harder than male counterparts. Other topics include a discussion of a female director's strengths in fields like board experience, leadership, and organization, why men believe women are more emotionally intelligent, and the challenges female directors of corporations face in interacting with their male counterparts.

Harvard Business Review 91, no. 6 (June 2013): 88-97

Unlocking Innovation Through Business Experimentation

Thomke, Stefan
June 2013

No abstract available.

European Business Review (March-April 2013): 55-58

Non-Standard Matches and Charitable Giving

Sanders, Michael, Sarah Smith, and Michael I. Norton
April 2013

Many organizations, including corporations and governments, wish to encourage charitable giving, and offer incentives for their employees, customers, and citizens to do so. The most common of these incentives is a match rate, where the organization agrees to pay, for example, $1 for every $1 donated. However, these incentives may not be efficient. In this short article we suggest alternative ways of matching that existing theory and data suggest might be more effective at encouraging donations. These include non-linear matching, social (and team) matching, and lottery matching-each of which novel schemes could be tested empirically against a standard match incentive.

Harvard Business School Working Paper, No. 13-094, May 2013

Prosocial Bonuses Increase Employee Satisfaction and Team Performance

Anik, Lalin, Lara B. Aknin, Michael I. Norton Elizabeth W. Dunn, and Jordi Quoidbach
April 2013

In two field studies, we explore the impact of providing employees and teammates with prosocial bonuses, a novel type of bonus spent on others rather than on oneself. In Experiment 1, we show that prosocial bonuses in the form of donations to charity lead to happier and more satisfied employees at an Australian bank. In Experiment 2, we show that prosocial bonuses in the form of expenditures on teammates lead to better performance in both pharmaceutical sales teams in Belgium and sports teams in Canada. These results suggest that a minor adjustment to employee bonuses-shifting the focus from the self to others-can produce measurable benefits for employees and organizations.

Harvard Business School Working Paper, No. 13-095, May 2013

Overcoming Resistance to Organizational Change: Strong Ties and Affective Cooptation

Battilana, Julie, and Tiziana Casciaro
April 2013

We propose a relational theory of how change agents in organizations use the strength of ties in their network to overcome resistance to change. We argue that strong ties to potentially influential organization members who are ambivalent about a change (fence-sitters) provide the change agent with an affective basis to coopt them. This cooptation increases the probability that the organization will adopt the change. By contrast, strong ties to potentially influential organization members who disapprove of a change outright (resistors) are an effective means of affective cooptation only when a change diverges little from institutionalized practices. With more divergent changes, the advantages of strong ties to resistors accruing to the change agent are weaker, and may turn into liabilities that reduce the likelihood of change adoption. Analyses of longitudinal data from 68 multi-method case studies of organizational change initiatives conducted at the National Health Service in the United Kingdom support these predictions and advance a relational view of organizational change in which social networks operate as tools of political influence through affective mechanisms.

Management Science 59, no. 4 (April 2013): 819-836

In Strange Company: The Puzzle of Private Investment in State-Controlled Firms

Pargendler, Mariana, Aldo Musacchio, and Sergio G. Lazzarini
March 2013

A large legal and economic literature describes how state-owned enterprises (SOEs) suffer from a variety of agency and political problems. Less theory and evidence, however, have been generated about the reasons why state-owned enterprises listed in stock markets manage to attract investors to buy their shares (and bonds). In this article, we examine this apparent puzzle and develop a theory of how legal and extralegal constraints allow mixed enterprises to solve some of these problems. We then use three detailed case studies of state-owned oil companies-Brazil's Petrobras, Norway's Statoil, and Mexico's Pemex-to examine how our theory fares in practice. Overall, we show how mixed enterprises have made progress to solve some of their agency problems, even as government intervention persists as the biggest threat to private minority shareholders in these firms.

Cornell International Law Review (forthcoming).

Labor Regulations and European Venture Capital

Bozkaya, Ant, and William R. Kerr
February 2013

European nations substitute between employment protection regulations and labor market expenditures (e.g., unemployment insurance benefits) for providing worker insurance. Employment regulations more directly tax firms making frequent labor adjustments than other labor market insurance mechanisms. Venture capital investors are especially sensitive to these labor adjustment costs. Nations favoring labor market expenditures as the mechanism for providing worker insurance developed stronger venture capital markets over 1990-2008, especially in high volatility sectors. In this context, policy mechanisms are more important than the overall level of worker insurance.

Journal of Economics & Management Strategy

The Future of Boards: Meeting the Governance Challenges of the 21st Century

Lorsch, Jay W.
February 2013

Predicting the challenges boards will face in the years ahead requires an understanding of how they and the governance they have provided has evolved in past years, as well as the challenges they face in the years ahead. Since I have been serving on and doing research about public company boards over the past twenty-five years, I believe I have a clear sense of the state of corporate governance in the United States and in much of Western Europe. Not surprisingly, my crystal ball for predicting future developments and demands on boards cannot be so clear.

European Financial Review (August-September 2012): 2-4

In Strange Company: The Puzzle of Private Investment in State-Controlled Firms

Pargendler, Mariana, Aldo Musacchio, and Sergio G. Lazzarini
February 2013

A large legal and economic literature describes how state-owned enterprises (SOEs) suffer from a variety of agency and political problems. Less theory and evidence, however, have been generated about the reasons why state-owned enterprises listed in stock markets manage to attract investors to buy their shares (and bonds). In this article, we examine this apparent puzzle and develop a theory of how legal and extralegal constraints allow mixed enterprises to solve some of these problems. We then use three detailed case studies of state-owned oil companies-Brazil's Petrobras, Norway's Statoil, and Mexico's Pemex-to examine how our theory fares in practice. Overall, we show how mixed enterprises have made progress to solve some of their agency problems, even as government intervention persists as the biggest threat to private minority shareholders in these firms.

Harvard Business School Working Paper, No. 13-071

Luxembourg: A Sustainable Society Starts Here

Eccles Robert G., and George Serafeim
February 2013

No abstract available

CSR Report 2013

Open Innovation and Firm Boundaries: Task Decomposition, Knowledge Distribution and the Locus of Innovation

Lakhani, Karim, Hila Lifshitz-Assaf, and Michael Tushman
January 2013

This paper contrasts traditional, organization-centered models of innovation with more recent work on open innovation. These fundamentally different and inconsistent innovation logics are associated with contrasting organizational boundaries and organizational designs. We suggest that when critical tasks can be modularized and when problem-solving knowledge is widely distributed and available, open innovation complements traditional innovation logics. We induce these ideas from the literature and with extended examples from Apple, NASA, and LEGO. We suggest that task decomposition and problem-solving knowledge distribution are not deterministic but are strategic choices. If dynamic capabilities are associated with innovation streams, and if different innovation types are rooted in contrasting innovation logics, there are important implications for firm boundaries, design, and identity.

Handbook of Economic Organization

Fostering Translational Research: Using Public-Private Partnerships to Improve Firm Survival, Employment Growth, and Innovative Performance

Chai, Sen, and Willy C. Shih
January 2013

Scientific research and its translation into commercialized technology is a driver of wealth creation and economic growth. Partnerships between public research organizations, such as universities and hospitals, and private firms are an established policy tool around the world for the delivery of social or public services, and their use as a tool to foster the translation of basic science into commercial applications that spur economic growth and increased employment has attracted increased interest. Yet questions about efficacy and the efficiency with which funds are used is a subject of frequent debate. This paper examines empirical data from the Danish National Advanced Technology Foundation (DNATF or Højteknologifonden in Danish), an agency that funds partnerships between universities and private companies to develop technologies important to Danish industry. We assess the effect of a particular "mediated funding" scheme that combines project grants with active facilitation and conflict management on firm performance-survival, employment, and growth-and firm innovative performance-quantity, quality, and nature of patents and papers-by comparing funded and unfunded firms. To address endogeneity around selection bias, we use a qualitatively similar subsample of small and medium enterprises just above and just below the funding cutoff threshold and find convincing evidence that DNATF's mediated funding model has a compelling effect on firm performance and overall innovative performance three to four years after receipt of funds. Selection of a firm to participate helps it to stay financially viable and significantly decreases the likelihood of bankruptcy by up to 2.7 times (270%) four years after funding application. Selection also increases the average level of employment by 9.8 to 14.2 more employees for chosen firms, respectively two and three years after application. For innovative performance, selection of a firm for participation meant an increase in filed patents by up to 520%, granted patents by up to 430% and peer-reviewed publications 370%, but the effect of selection was mainly felt in quality of the innovations. Peer-reviewed citations for selected firms were 1,370% greater than those firms that did not make the cut-off. Finally, this public-private partnership model increased the level of collaboration among academic research scientists and those in private firms-participating firms collaborated 3.1 times more with colleagues in academia. This is a dramatic increase in collaboration and co-authoring across institutions, providing strong evidence for the benefits of breaking down the boundaries between institutions and enabling teams of individuals from both sides in public-private partnerships to work together alongside one another.

Harvard Business School Working Paper, No. 13-058, January 2013

Dollar Funding and the Lending Behavior of Global Banks

Ivashina, Victoria, David S. Scharfstein, and Jeremy C. Stein
January 2013

A large share of dollar-denominated lending is done by non-U.S. banks, particularly European banks. We present a model in which such banks cut dollar lending more than euro lending in response to a shock to their credit quality. Because these banks rely on wholesale dollar funding, while raising more of their euro funding through insured retail deposits, the shock leads to a greater withdrawal of dollar funding. Banks can borrow in euros and swap into dollars to make up for the dollar shortfall, but this may lead to violations of covered interest parity (CIP) when there is limited capital to take the other side of the swap trade. In this case, synthetic dollar borrowing becomes expensive, which causes cuts in dollar lending. We test the model in the context of the Eurozone sovereign crisis, which escalated in the second half of 2011 and resulted in U.S. money-market funds sharply reducing the funding provided to European banks. Coincident with the contraction in dollar funding, there were significant violations of euro-dollar CIP. Moreover, dollar lending by Eurozone banks fell relative to their euro lending in both the U.S. and Europe; this was not the case for U.S. global banks. Finally, European banks that were more reliant on money funds experienced bigger declines in dollar lending.

Harvard Business School Working Paper, No. 13-059, October 2012

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

2012

Vulnerable Banks

Greenwood, Robin, Augustin Landier, and David Thesmar
December 2012

When a bank experiences a negative shock to its equity, one way to return to target leverage is to sell assets. If asset sales occur at depressed prices, then one bank's sales may impact other banks with common exposures, resulting in contagion. We propose a simple framework that accounts for how this effect adds up across the banking sector. Our framework explains how the distribution of bank leverage and risk exposures contributes to a form of systemic risk. We compute bank exposures to system-wide deleveraging, as well as the spillover of a single bank's deleveraging onto other banks. We show how our model can be used to evaluate a variety of crisis interventions, such as mergers of good and bad banks and equity injections. We apply the framework to European banks vulnerable to sovereign risk in 2010 and 2011.

NBER Working Paper Series, No. 18537, November 2012

Level Two Negotiations: Helping the Other Side Meet Its 'Behind the Table' Challenges

Sebenius, James K.
November 2012

A long analytic tradition has explored the challenge of productively synchronizing "internal" with "external" negotiations, with a special focus on how each side can best manage internal opposition to agreements negotiated "at the table." Implicit in much of this work has been the view that each side's leadership is best positioned to manage its own internal conflicts, often by pressing for deal terms that will overcome internal objections and by effectively "selling" the agreement to key constituencies. Far less frequently have analysts considered how each side-to further its own goals-can help the other side with the other's "behind-the-table" barriers to successful agreement. Following Robert Putnam's (1988) two-level games schema, I characterize such "behind the table," or "Level Two," barriers more broadly, offer several innovative private and public sector examples of how each side can help the other overcome them, and develop more general advice on doing so most effectively. As a fuller illustration of a Level Two negotiator helping the other side with its formidable behind-the-table challenges, I pay special attention to the end-of-Cold-War negotiations over German reunification in which former United States Secretary of State James Baker played a key role.

Negotiation Journal 29, no. 1 (forthcoming): 7-21. (January 2013)

Which U.S. Market Interactions Affect CEO Pay? Evidence from UK Companies

Gerakos, Joseph, Joseph Piotroski, and Suraj Srinivasan
November 2012

This paper examines how different types of interactions with U.S. markets by non-U.S. firms are associated with higher level of CEO pay, greater emphasis on incentive-based compensation, and smaller pay gap with U.S. firms. Using a sample of CEOs of UK firms and using both broad cross-sectional and narrow event-window tests, we find that capital market relationship in the form of an U.S. exchange listing is related to higher UK CEO pay; however, the effect is similar when UK firms have a listing in any foreign country implying a foreign listing effect not unique to the U.S. Product market relationships measured by the extent of sales in the U.S. by UK companies are associated with higher pay, greater use of U.S.-style pay arrangements, and a reduction in the U.S.-UK pay gap. The product market effect is incremental to the effect of a U.S. exchange listing, the extent of the firm's non-U.S. foreign market interactions, and the characteristics of the executive. The U.S-UK CEO pay gap reduces in UK firms that make U.S. acquisitions. Further, the firm's use of a U.S. compensation consultant increases the sensitivity of UK pay practices to U.S. product market relationships.

Management Science

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

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

Technology, Innovation and Economic Growth in Britain Since 1870

Nicholas, Tom
September 2012

This chapter examines technological change in Britain over the last 140 years. It analyzes the effects of patent laws and innovation prizes that were designed to promote technical progress. It explores the challenge associated with the changing organizational structure of innovation and the shift from independent invention to R&D activity taking place inside the boundaries of firms. And it also studies the development of British industrial science in universities and efforts to promote innovation through the formation of industry clusters. Overall, the evidence supports the traditional story of British failure in generating large payoffs from technological development. Although from the early 1970s Britain experienced a revival in the quality of innovation and improved productivity growth, structural weaknesses in the commercialization environment still remain.

Harvard Business School Working Paper, No. 13-032, September 2012

The Size and Composition of Corporate Headquarters in Multinational Companies: Empirical Evidence

Collis, David J., David Young, and Michael Goold
August 2012

Based on a six-country survey of nearly 250 multinationals (MNCs), this paper is the first empirical analysis to describe the size and composition of MNC headquarters and to account for differences among them. Findings are as follows: MNC corporate headquarters are more involved in "obligatory" and value creating and control functions than in operational activities; there are no systematic differences in the determinants of the size and composition of corporate headquarters between MNCs and purely domestic companies; and as the geographic scope of an MNC increases, two offsetting phenomena occur-headquarters decrease their influence over operational units that, ceteris paribus, reduces the size of headquarters, but the relative size of obligatory functions at headquarters increases with increased country heterogeneity. The net effect is that the size of corporate headquarters expands as MNC geographic scope increases. The notion of "administrative heritage" is validated as MNCs from different countries have substantially different corporate headquarters-U.S. headquarters are large (255 median staff for a 20,000 FTE MNC) and European headquarters smaller (124). Implications are drawn that countries will lose activities if domestic firms are acquired by foreign MNCs, and that MNCs need to allow more subsidiary autonomy as their geographic scope increases.

Journal of International Management 18, no. 3

Mandatory IFRS Adoption and Financial Statement Comparability

Brochet, Francois, Alan Jagolinzer, and Edward J. Riedl
August 2012

This study examines whether mandatory adoption of International Financial Reporting Standards (IFRS) leads to capital market benefits through enhanced financial statement comparability. UK domestic standards are considered very similar to IFRS (Bae et al., 2008), suggesting any capital market benefits observed for UK-domiciled firms are more likely attributable to improvements in comparability (i.e., better precision of across-firm information) than to changes in information quality specific to the firm (i.e., core information quality). If IFRS adoption improves financial statement comparability, we predict this should reduce insiders' ability to benefit from private information. Consistent with these expectations, we find that abnormal returns to insider purchases-used to proxy for private information-are reduced following IFRS adoption. Similar results are derived across numerous subsamples and proxies used to isolate IFRS effects attributable to comparability. Together, the findings are consistent with mandatory IFRS adoption improving comparability and thus leading to capital market benefits by reducing insiders' ability to exploit private information.

Contemporary Accounting Research

Accounting, Risk Management and the Selection of Interactive Controls: Which, When, and Why?

Mikes, Anette
July 2012

Taking a multiple-control perspective, I investigate a control debacle and its aftermath at a financial services company (MultiBank), focusing on an insurance division (EurInsurance) that suffered large losses in the European insurance crisis of 2002-2003. The study tracks the promotion and use of a set of accounting and risk controls put in place to control the troubled insurance division and discusses how and why particular management control systems shift in and out of top managerial focus. The study investigates Simons' (1990, 1991) argument that it is top management's view of a firm's key strategic uncertainties that motivates their choice of control systems to be used interactively. Combining the process perspective of a longitudinal field study with the institutional logics perspective, I argue that top management's control choice is motivated by both the logic of functionalism (relevance) and the logic of appropriateness (legitimacy) of particular controls-and that both of these are socially constructed by proponents. First, behind the various control systems there are active controller groups who, in competition for executive level visibility, further their solutions for organizational control problems and engage in 'credentializing' (Power, 1992) to support their claims. At MultiBank, accountants drew on the institutional logic of accounting as a legalistic, rules-based practice, while risk controllers relied on the cultural authority of financial economics and the "full fair value" logic. Second, top management's interactive use of a particular control system sends a signal to external stakeholders about the firm's internal control style and management priorities. Therefore, the control choice is motivated both by the relevance and the institutional appropriateness of particular controls. As external requirements change and the definition of institutional appropriateness shifts, different organizational control groups get the opportunity to become implicated in interactive control and agenda setting. In the special case of mutually incompatible control systems, when top managers must trade off relevance for appropriateness (or the other way round), their choice of interactive control will be driven by what they perceive to be the stronger requirement. At MultiBank, institutional appropriateness was the stronger requirement; the lack of it prevented an otherwise informationally relevant risk control system from prevailing as an interactive control system.

Harvard Business School Working Paper, No. 12-115, June 2012

When Supply-Chain Disruptions Matter

Schmidt, William, and Ananth Raman
July 2012

Supply-chain disruptions have a material effect on company value, but this impact can vary considerably. Thus, it is important for managers and investors to recognize the types of disruptions and the organizational factors that lead to the worst outcomes. Prior research remains unsettled as to whether improvements to firm operational efficiency aggravate or alleviate the impact of disruptions. Improved operational efficiency may leave firms more exposed when a disruption occurs, or it may improve firms' agility and allow them to respond more effectively to a disruption. We hypothesize that the impact of improved operational efficiency depends on whether the disruption is due to factors that are internal versus external to the firm and its supply chain. We use a sample of over 500 disruptions collected from company press releases and find empirical evidence that a higher rate of improvement in operating performance aggravates the impact of internal disruptions but not external disruptions. By taking advantage of an exogenous policy shock regarding corporate disclosure rules, we also find that managers show systematic bias in the disruptions they choose to announce, and we control for this effect in our model specifications.

Harvard Business School Working Paper, No. 13-006, July 2012

Level II Negotiations: Helping the Other Side Meet Its 'Behind the Table' Challenges

Sebenius, James K.
July 2012

A long analytic tradition explores the challenge of productively synchronizing "internal" with "external" negotiations, especially focusing on how each side can best manage internal opposition to agreements negotiated "at the table." Implicit in much of this work is the view that each side's leadership is best positioned to manage its own internal conflicts, often 1) by pressing for deal terms that will meet internal objections and 2) by effectively "selling" the agreement to key constituencies. Far less familiar territory involves how each side can help the other side with the other's "behind-the-table" barriers to successful agreement. Following Robert Putnam's (1988) two-level games schema, I characterize such "behind the table," or "Level II," barriers more broadly, offer several innovative examples of how each side can help the other overcome them, and develop more general advice on doing so most effectively. As a fuller illustration of a Level II negotiator helping the other side with its formidable behind-the-table challenges, I pay special attention to the end-of-Cold-War negotiations over German reunification in which former U.S. Secretary of State James Baker played a key role.

Harvard Business School Working Paper, No. 13-004, July 2012

Pricing to Create Shared Value

Bertini, Marco, and John T. Gourville
June 2012

Many companies are in competition with their customers to extract as much value as possible from every transaction. Pricing is their weapon of choice, and consumers fight back by rooting out and disseminating pricing policies that seem unfair. The problem is that companies generally think of value as a pie that is rightfully theirs. But value is not fixed, and it neither originates with nor belongs solely to the firm. Without a willing customer, there is no value. Instead of using pricing in a way that turns customers into adversaries, companies can use it to enlarge the pie. That means viewing customers as partners in value creation-a collaboration that increases customers' engagement and taps their insights about the value they seek and how firms could deliver it. The result can be new revenue, increased customer satisfaction and loyalty, positive word of mouth, and cost savings. The multiyear process to price the 8 million tickets to the upcoming London 2012 Olympic Games suggests five principles for using pricing to create shared value: focus on relationships, not on transactions, by using pricing to communicate that you value customers as people; set prices proactively to discourage detrimental behavior and to encourage behavior that is beneficial to both your firm and your customers; allow prices to change in response to shifting customer needs; promote transparency by providing the rationale for your pricing; and make sure that prices and the processes by which they are set meet consumers' expectations about what is fair.

Harvard Business Review 90, no. 6 (June 2012)

In Search of the Hybrid Ideal

Battilana, Julie, Matthew Lee, John Walker, and Cheryl Dorsey
May 2012

No abstract available

Stanford Social Innovation Review, Summer 2012

Credit Access and Social Welfare: The Rise of Consumer Lending in the United States and France

Trumbull, Gunnar
March 2012

Research into the causes of the 2008 financial crisis has drawn attention to a link between growing income inequality in the United States and high household indebtedness. Most accounts trace the U.S. idea of credit-as-welfare to the period of wage stagnation and welfare retrenchment that began in the early 1970s. Using France as a comparison case, I argue that the link between credit and welfare was not unique to the United States. Indeed, U.S. charitable lending institutions that emerged at the beginning of the twentieth century were modeled in part on older French financial institutions. Three historical factors drove U.S. lenders and policymakers to push for expanded credit access for the working class. First, welfare reformers in the interwar period embraced private credit as an alternative to an expansive welfare state. Second, U.S. organized labor in the wake of World War II embraced credit access as a means to sustain industrial employment and finance strike actions. Third, commercial banks in the 1950s began offering revolving credit accounts as a means to attract new depositors at a time when banking regulation restricted the interest they could offer on deposits.

Politics and Society 40, no. 1 (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)

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

The Profits of Power: Commerce and Realpolitik in Eurasia

Abdelal, Rawi February 2012

Although the energy trade is the single most important element of nearly all European countries' relations with Russia, Europe has been divided by both worldview and practice. Why, in the face of the common challenge of dependence on imported Russian gas, have national reactions to such vulnerability varied so dramatically across the continent? And why have a handful of French, German, and Italian corporations somehow taken responsibility for formulating the energy strategy-and thus the Russia policy-for essentially all of Europe? The resolutions of these two puzzles are, I show, interlinked; they also demand theoretical innovation. With several case studies-of Gazprom's decision making during the 2006 and 2009 gas crises and of the response of western and central Europe to their gas dependence-I find that firms are driving these political outcomes; those firms are motivated by profits but employ sociological conventions along their ways; and firms generally seek the necessary inter-firm, cross-border cooperation that will deliver corporate performance. Finally, I conclude that the field will ultimately require a framework that puts firms at its center.

Review of International Political Economy

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

Ambidextrous Leadership: Emerging Challenges for Business and HR Leaders

Probst, Gilbert, Sebastian Raisch, and Michael Tushman
January 2012

Dynamic capabilities have been proposed as a useful way to understand how organizations are able to adapt to changes in technology and markets. Organizational ambidexterity, the ability of senior managers to seize opportunities through the orchestration and integration of existing assets to overcome inertia and path dependence, is a core dynamic capability. While promising, research on dynamic capabilities and ambidexterity has not yet been able to specify the specific mechanisms through which senior managers are actually able to reallocate resources and reconfigure assets to simultaneously explore and exploit. Using interviews and qualitative case studies from thirteen organizations, this article explores the actions senior managers took to implement ambidextrous designs and identify which ones helped or hindered them in their attempts. A set of interrelated choices of organization design and senior team process determines which attempts to build ambidextrous organizations are successful.

California Management Review 53, no. 4 (summer 2011): 5-21.

Wider dem sauren Mund. Beiersdorfs U.S.-Geschaeft mit der Zahnpastamarke Pebeco

Jones, G., and Christina Lubinski
January 2012

This article examines the growth and ultimate demise of the toothpaste brand Pebeco, which was created by the German personal care company Beiersdorf in 1903. The brand was an enormous international success, becoming for a time the largest toothpaste brand in the United States. During the interwar years, however, the brand suffered a precipitate decline and fell into oblivion. This article explores the rise and fall of the Pebeco brand. It shows the challenges faced by German-based multinationals in the United States (and elsewhere) during and after World War I, as well as demonstrating the rapidly changing market for dental hygiene in the interwar period. New marketing strategies based on psychological science and consumer protection agencies changed the rules of the game and left Pebeco unable to compete against firms such as Colgate.

Hamburger Wirtschafts-Chronik 9 (2012): 141-165

Language Matters: Status Loss & Achieved Status Distinctions in Global Organizations

Neeley, T.B.
January 2012

How workers experience and express status loss in organizations has received little scholarly attention. I conducted a qualitative study of a French high-tech company that had instituted English as a lingua franca, or common language, as a context for examining this question. Results indicate that nonnative English-speaking employees experienced status loss regardless of their English fluency level. Yet variability in their self-assessed fluency-an achieved status marker-was associated with differences in language performance anxiety and job insecurity in a non-linear fashion: those who believed they had medium level fluency were the most anxious compared to their low and high fluency co-workers. In almost all cases where they differed, self-assessed rather than objective fluency determined how speakers explained their feelings and actions. Although nonnative speakers shared a common attitude of resentment and distrust toward their native English-speaking co-workers, their behavioral responses-assertion, inhibition, or learning-to encounters with native speakers differed based on their self-perceived fluencies. No status differences materialized among nonnative speakers as a function of diverse linguistic and national backgrounds. I discuss the theoretical and practical implications of these findings for status, achieved characteristics, and language in organizations.

Organization Science

Open Innovation and Organizational Boundaries: The Impact of Task Decomposition and Knowledge Distribution on the Locus of Innovation

Lakhani, Karim R., and Michael L. Tushman
January 2012

This paper contrasts traditional, internal organization-centered models of innovation with more recent work on open innovation. These fundamentally different and inconsistent innovation logics are associated with contrasting organizational boundaries and organizational designs. We suggest that when critical tasks can be modularized and when problem-solving knowledge is widely distributed and available, open innovation complements traditional innovation logics. We induce these ideas from the literature and with extended examples from Apple, NASA, and LEGO. We suggest that task decomposition and problem-solving knowledge distribution are not deterministic but are strategic choices. If dynamic capabilities are associated with innovation streams, and if innovation types are rooted in contrasting innovation logics, there are important implications for the firm, and its boundaries, design, and identity.

EurAmerica 41, no. 4 (December 2011): 885-916

2011

Inducement Prizes and Innovation

Brunt, Liam, Josh Lerner, and Tom Nicholas
December 2011

We examine the effect of prizes on innovation using data on awards for technological development offered by the Royal Agricultural Society of England at annual competitions between 1839 and 1939. We find that the effects of prizes on competitive entry are large, and we also detect an impact of the prizes on the quality of contemporaneous patents, especially when prize categories were set by a strict rotation scheme, thereby mitigating the potentially confounding effect that they targeted only "hot" technology sectors. Prizes encouraged competition and medals were more important than monetary awards. The boost to innovation we observe cannot be explained by the redirection of existing inventive activity.

Journal of Industrial Economics

Does Planning Regulation Protect Independent Retailers?

Sadun, Raffaella
December 2011

Entry regulations against big-boxes have been introduced in many countries to protect independent retailers. Analyzing a planning reform launched in the U.K. in the 1990s, I show that entry regulations may in fact accelerate the decline of independents by increasing the attractiveness of smaller in-town store formats for retail chains. The causal impact of planning regulation is estimated using variation in local political control across the U.K., which exogenously affects the ease of entry for big-boxes in this specific institutional framework. The analysis shows that up to 17% of the independents' employment decline between 1998 and 2004 can be attributed to the regulatory reform.

Harvard Business School Working Paper, No. 12-044, December 2011

Resources or Power? Implications of Social Networks on Compensation and Firm Performance

Horton, Joanne, Yuval Millo, and George Serafeim
November 2011

Using a sample of 4,278 listed U.K. firms, we construct a social network of directorship-interlocks that comprises 31,495 directors. We use social capital theory and techniques developed in social network analysis to measure a director's connectedness and investigate whether this connectedness is associated with their compensation level and their firm's overall performance. We find connectedness is positively associated with compensation and with the firm's future performance. The results do not support the view that executive and outside directors use their connections to extract rents. Rather the company compensates these individuals for the resources these better connections provide to the firm.

State of the Region Report 2011: The Top of Europe's Quest for Resilience-A Competitive Region Facing a Fragile Global Economy

Ketels, Christian H.M.
November 2011

The State of the Region Reports provide an annual discussion of competitiveness and collaboration across the Baltic Sea Region, covering the Nordic countries, the Baltic countries, Northern Germany, Northern Poland, and Northwestern Russia. The 2011 edition, the 8th in this series, documents in its first part how this region has been able to recover more strongly after the crisis than many of its peers. It provides updated information about underlying competitiveness as well as key policy initiatives. A special section is devoted to Poland. The second part then discusses the level of collaboration in the region, covering the activities of the many cross-regional institutions and networks. It looks in particular at the progress made in the context of the EU Baltic Sea Region Strategy, the European Union's first macroregional strategy. The third section then provides a discussion of entrepreneurship across the region.

Free to Punish? The American Dream and the Harsh Treatment of Criminals

Di Tella, Rafael, and Juan Dubra
October 2011

We describe the evolution of selective aspects of punishment in the U.S. over the period 1980-2004. We note that imprisonment increased around 1980, a period that coincides with the "Reagan revolution" in economic matters. We build an economic model where beliefs about economic opportunities and beliefs about punishment are correlated. We present three pieces of evidence (across countries, within the U.S., and an experimental exercise) that are consistent with the model.

NBER Working Paper Series, No. 17309, August 2011

Carbon Tariffs: Impacts on Technology Choice, Regional Competitiveness, and Global Emissions

Drake, David F.
October 2011

Carbon regulation is intended to reduce global emissions, but there is growing concern that such regulation may simply shift production to unregulated regions, potentially increasing overall carbon emissions in the process. Carbon tariffs have emerged as a possible mechanism to address this concern by imposing carbon costs on imports at the regulated region's border. Advocates claim that such a mechanism would level the playing field, whereas opponents argue that such a tariff is anti-competitive. This paper analyzes how carbon tariffs affect technology choice, regional competitiveness, and global emissions through a model of imperfect competition between "domestic" (i.e., carbon-regulated) firms and "foreign" (i.e., unregulated) firms, where domestic firms have the option to offshore production and the number of foreign entrants is endogenous. Under a carbon tariff, results indicate that foreign firms would adopt clean technology at a lower emissions price than domestic producers, with the number of foreign entrants increasing in emissions price only over intervals where foreign firms hold this technology advantage. Further, domestic firms would only offshore production under a carbon tariff to adopt technology strictly cleaner than technology utilized domestically. As a consequence, under a carbon tariff, foreign market share is non-monotonic in emissions price, and global emissions conditionally decrease. Without a carbon tariff, foreign share monotonically increases in emissions price, and a shift to offshore production results in a strict increase in global emissions.

Harvard Business School Working Paper, No. 12-029, October 2011

The Enabling Role of Social Position in Diverging from the Institutional Status Quo: Evidence from the U.K. National Health Service

Battilana, Julie
September 2011

This study examines the relationship between social position, both within the field and within the organization, and the likelihood of individual actors initiating organizational changes that diverge from the institutional status quo. I explore this relationship using data from 93 change projects conducted by clinical managers at the National Health Service in the United Kingdom. The results show social position, both within the field and within the organization, influences actors' likelihood to initiate two types of organizational change that diverge from the institutional status quo, namely, (1) changes that diverge from the institutionalized template of role division among organizations and (2) changes that diverge from the institutionalized template of role division among professional groups in a field. The findings indicate that these two types of divergent organizational change are likely to be undertaken by individual actors with different profiles in terms of social position within the field and the organization.
Organization Science 22, no. 4 (July-August 2011): 817-834

Economic Impacts of Immigration: A Survey

Pekkala Kerr, Sari, and William R. Kerr
August 2011

This paper surveys recent empirical studies on the economic impacts of immigration. The survey first examines the magnitude of immigration as an economic phenomenon in various host countries. The second part deals with the assimilation of immigrant workers into host-country labor markets and concomitant effects for natives. The paper then turns to immigration's impact for the public finances of host countries. The final section considers emerging topics in the study of immigration. The survey particularly emphasizes the recent experiences of Northern Europe and Scandinavia and relevant lessons from traditional destination countries like the U.S.

Finnish Economics Papers 24, no. 1 (spring 2011)

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

Managing Political Risk in Global Business: Beiersdorf 1914-1990

Jones, Geoffrey, and Christina Lubinski
July 2011

This working paper examines corporate strategies of political risk management during the twentieth century. It focuses especially on Beiersdorf, a German-based pharmaceutical and skin care company. During World War I the expropriation of its brands and trademarks revealed its vulnerability to political risk. Following the advent of the Nazi regime in 1933, the largely Jewish owned and managed company faced a uniquely challenging combination of home and host country political risk. The paper reviews the firm's responses to these adverse circumstances, challenging the prevailing literature which interprets so-called "cloaking" activities as one element of businesses' cooperation with the Nazis. The paper departs from previous literature in assessing the outcomes of the company's strategies after 1945. It examines the challenges and costs faced by the company in recovering the ownership of its brands. While the management of distance became much easier over the course of the twentieth century because of communications improvements, this working paper shows that the costs faced by multinational corporations in managing governments and political risk grew sharply.

Harvard Business School Working Paper, No. 12-003, July 2011

What Do CEOs Do?

Bandiera, Oriana, Luigi Guiso, Andrea Prat, and Raffaella Sadun
March 2011

We develop a methodology to collect and analyze data on CEOs' time use. The idea-sketched out in a simple theoretical set-up-is that CEO time is a scarce resource and its allocation can help us identify the firm's priorities as well as the presence of governance issues. We follow 94 CEOs of 600 top Italian firms over a pre-specified week and record the time devoted each day to different work activities. We focus on the distinction between time spent with insiders (employees of the firm) and outsiders (people not employed by the firm). Individual CEOs differ systematically in how much time they spend at work and in how much time they devote to insiders vs. outsiders. We analyze the correlation between time use, managerial effort, quality of governance, and firm performance and interpret the empirical findings within two versions of our model, one with effective and one with imperfect corporate governance. The patterns we observe are consistent with the hypothesis that time spent with outsiders is on average less beneficial to the firm and more beneficial to the CEO and that the CEO spends more time with outsiders when governance is poor.

Harvard Business School Working Paper, No. 11-081, February 2011

Do Not Trash the Incentive! Monetary Incentives and Waste Sorting

Bucciol, Alessandro, Natalia Montinari, and Marco Piovesan
March 2011

This paper examines whether monetary incentives are an effective tool for increasing domestic waste sorting. We exploit the exogenous variation in the pricing systems experienced during the 1999-2008 decade by the 95 municipalities in the district of Treviso (Italy). We estimate with a panel analysis that pay-as-you-throw (PAYT) incentive-based schemes increase by 12.2% the ratio of sorted to total waste. This increase reflects a change in the behavior of households, which keep unaltered the production of total waste but sort it to a larger extent. In addition, we show that several factors that may discourage local administrators from adopting PAYT-illegal dumping and higher cost of management-are not important at the aggregate level. Hence, our results support the use of PAYT as an effective tool to increase waste sorting.

Harvard Business School Working Paper, No. 11-093, March 2011

An Empirical Decomposition of Risk and Liquidity in Nominal and Inflation-Indexed Government Bonds

Pflueger, Carolin E., and Luis M. Viceira
March 2011

This paper decomposes the excess return predictability in inflation-indexed and nominal government bonds into effects from liquidity, market segmentation, real interest rate risk, and inflation risk. We estimate a large and variable liquidity premium in U.S. Treasury Inflation Protected Securities (TIPS) from the co-movement of breakeven inflation with liquidity proxies. The liquidity premium is around 70 basis points in normal times, but much larger during the early years of TIPS issuance and during the height of the financial crisis in 2008-2009. The liquidity premium explains the high excess returns on TIPS as compared to nominal Treasuries over the period 1999-2009. Liquidity-adjusted breakeven inflation appears stable, suggesting stable inflation expectations over our sample period. We find predictability in both inflation-indexed bond excess returns and in the spread between nominal and inflation-indexed bond excess returns even after adjusting for liquidity, providing evidence for both time-varying real interest rate risk premia and time-varying inflation risk premia. Liquidity appears uncorrelated with real interest rate and inflation risk premia. We test whether bond return predictability is due to segmentation between nominal and inflation-indexed bond markets but find no evidence in either the U.S. or in the U.K.

Harvard Business School Working Paper, No. 11-094, March 2011

Inflation-Indexed Bonds and the Expectations Hypothesis

Pflueger, Carolin E., and Luis M. Viceira
March 2011

This paper empirically analyzes the Expectations Hypothesis (EH) in inflation-indexed (or real) bonds and in nominal bonds in the U.S. and in the U.K. We strongly reject the EH in inflation-indexed bonds and also confirm and update the existing evidence rejecting the EH in nominal bonds. This rejection implies that the risk premium on both real and nominal bonds varies predictably over time. We also find strong evidence that the spread between the nominal and the real bond risk premium, or the breakeven inflation risk premium, also varies over time. We argue that the time variation in real bond risk premia most likely reflects both a changing real interest rate risk premium and a changing liquidity risk premium, and that the variability in the nominal bond risk premia reflects a changing inflation risk premium. We estimate significant time series variability in the magnitude and sign of bond risk premia.

Harvard Business School Working Paper, No. 11-095, March 2011

Sustainability and Capital Markets: How Firms Can Manage the Crucial Link

Ioannou, Ioannis, and George Serafeim
March 2011

No abstract available

European Business Review

Do U.S. Market Interactions Affect CEO Pay? Evidence from U.K. Companies

Gerakos, Joseph J., Joseph D. Piotroski, and Suraj Srinivasan
February 2011

This paper examines the extent that interactions with U.S. markets impact the compensation practices of non-U.S. firms. Using a sample of large U.K. companies, we find that the total compensation of U.K. CEOs is positively related to the extent of the firm's interactions with U.S. markets, as captured by the percentage of total sales generated in the U.S., the presence of prior U.S. acquisition activity, the presence of a U.S. exchange listing, and CEO and director-level U.S. board experience. More importantly, we find that exposure to U.S. product markets is associated with the adoption of U.S.-style compensation arrangements (i.e., incentive-based pay packages). In contrast, we find no such association with exposures to other (non-U.S.) foreign product markets. Together, our evidence is consistent with U.S. market interactions impacting U.K. compensation practices through two mechanisms: 1) to alleviate internal and external pay disparities arising from the presence of U.S. operations and businesses (proxied by the percent U.S. sales and prior U.S. acquisitions) and 2) to compensate CEOs for bearing the additional risk and responsibility associated with exposure to foreign securities laws and legal environments (proxied by both U.S. and non-U.S. exchange listings).

Harvard Business School Working Paper, No. 11-075, January 2011

Happiness Adaptation to Income and to Status in an Individual Panel

Di Tella, Rafael, and Robert MacCulloch
February 2011

We study adaptation to income and to status using individual panel data on the happiness of 7,812 people living in Germany from 1984 to 2000. Specifically, we estimate a "happiness equation" defined over several lags of income and status and compare the long-run effects. We can (cannot) reject the hypothesis of no adaptation to income (status) during the four years following an income (status) change. In the short run (current year) a one standard deviation increase in status and 52% of one standard deviation in income are associated with similar increases in happiness. In the long run (five-year average) a one standard deviation increase in status has a similar effect to an increase of 285% of a standard deviation in income. We also present different estimates of adaptation across subgroups. For example, we find that those on the right (left) of the political spectrum adapt to status (income) but not to income (status). We can reject equal relative adaptation (to income versus status) for these two subgroups.

Journal of Economic Behavior and Organization

An Angel Investor with an Agenda

Herzlinger, Regina E., and Beatriz Muñoz-Seca
February 2011

No abstract available

Harvard Business Review 89, no. 3 (March 2011)

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

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).

The Euro as a Reserve Currency for Global Investors

Viceira, Luis M., and Ricardo Gimeno
January 2011

This article explores the demand for the euro for risk management purposes and the evidence of stock market integration in the euro area. We define a reserve currency as one that investors demand either because it helps them hedge real interest risk and inflation risk, or because it helps them reduce the volatility of their portfolio of stocks and bonds because its return is negatively correlated with the returns on those assets. This article re-examines the role of the euro as a reserve currency in the sense of Campbell, Viceira, and White (2003), updating their evidence, and reviews the evidence of Campbell, Serfaty-de Medeiros, and Viceira (2010) in detail. Consistent with the intuition that an integrated capital market is one in which there is a common discount factor pricing securities, we also investigate whether stocks in the euro area have moved from a regime in which national stock markets were priced with discount rates that were predominantly country specific, to a regime in which national stock markets are predominantly priced by a euro area-wide common discount rate. We adopt the beta decomposition approach of Campbell and Vuolteenaho (2004) and Campbell, Polk, and Vuolteenaho (2010) to test for capital market integration and find robust evidence of increased capital market integration in the euro zone and, consequently, improved risk sharing among euro zone economies.

What Makes the Bonding Stick? A Natural Experiment Involving the Supreme Court and Cross-Listed Firms

Licht, Amir N., Xi Li, and Jordan I. Siegel
January 2011

Using a natural experiment to overcome the empirical challenges facing the debate over the bonding hypothesis, we analyze markets' reaction to a sudden radical change in the world of U.S.-listed foreign firms. In March 2010, the U.S. Supreme Court signaled its intention to geographically limit the reach of the U.S. antifraud regime. The Court thus excluded the overwhelming majority of investors in U.S.-listed foreign firms from the protection of the U.S. civil liability regime and cast at least partial limitations on the SEC's regulatory authority. This event nonetheless was met with positive abnormal returns of U.S.-listed foreign firms all over the world. These abnormal returns are actually higher the greater the percentage of a firm's capital listed on non-U.S. exchanges. We find no evidence that markets' reaction to this event related to the corporate governance and legal environment in foreign issuers' home country. These results challenge the legal bonding hypothesis while suggesting that the U.S. regime of civil liability as currently designed may not have been seen as a source of economic value for outside investors.

Harvard Business School Working Paper, No. 11-072, January 2011

Disaster Politics: International Politics and Relief Efforts

Werker, Eric
January 2011

No abstract available

Harvard International Review

2010

Competitiveness: Business Model Reconfiguration for Innovation and Internationalization

Casadesus-Masanell, Ramon, and Joan E. Ricart
December 2010

The purpose of this paper is to reflect on competitiveness by using the business model concept and to understand the need to adapt business models to changes in the environment.

Management Research 8, no. 2 (2010): 123-149

Between Family Heritage and Global Market. Changes in Ownership and Management of Large West German Family Firms (1960-2008)

Lubinski, Christina
December 2010

Large family firms fall between two theoretical accounts. They neither follow the development path described by Alfred D. Chandler nor do they resemble small- and medium-sized Mittelstand firms, which Gary Herrigel highlighted as a successful alternative. That is why so far there has been little research about them beyond individual case studies. This article focuses on large family firms in Germany during the second half of the twentieth century. Based on a regionally focused sample of 310 businesses, the article offers insights into their ownership and management in 1960 and asks how the firms developed until 2008. The majority of large family firms had surprisingly homogenous characteristics, such as concentrated long-term family ownership, few shareholders, and family management. This structure was successful within the historical context of the 1960s but came under attack during the crisis-ridden decades that followed. By tracing these changes, the paper simultaneously shows that the theoretical dichotomy of family and managerial firms is misleading. Instead of interpreting the family firm as a static organization, the focus should shift to the family influence, which evolves with time and with the evolution of business's macroeconomic and political environments.

Zeitschrift für Unternehmensgeschichte

A Note on Fairness and Redistribution

Di Tella, Rafael, and Juan Dubra
December 2010

We note some problems in Alesina and Angeletos (2005) and suggest a way to maintain the key insight of that paper, which is that a demand for fairness could lead to different economic systems such as those observed in France versus the U.S. (multiple equilibria).

Harvard Business School Working Paper, No. 11-059, December 2010

Regulating for Legitimacy: Consumer Credit Access in France and America

Trumbull, Gunnar
November 2010

Theories of legitimate regulation have emphasized the role of governments either in fixing market failures to promote greater efficiency or in restricting the efficient functioning of markets in order to pursue public welfare goals. In either case, features of markets serve to justify regulatory intervention. I argue that this causal logic must sometimes be reversed. For certain areas of regulation, its function must be understood as making markets legitimate. Based on a comparative historical analysis of consumer lending in the United States and France, I argue that national differences in the regulation of consumer credit had their roots in the historical conditions by which the small loan sector came to be legitimized. Americans have supported a liberal regulation of credit because they have been taught that access to credit is welfare promoting. This perception emerged from a historical coalition between commercial banks and NGOs that promoted credit as the solution to a range of social ills. The French regulate credit tightly because they came to see credit as both economically risky and a source of reduced purchasing power. This attitude has its roots in the early postwar lending environment, in which loans were seen to be beneficial only if they were accompanied by strong government protections. These cases suggest that national differences in regulation may trace to historically contingent conditions under which markets are constructed as legitimate.

Harvard Business School Working Paper, No. 11-047, November 2010.

Americans Do I.T. Better: U.S. Multinationals and the Productivity Miracle

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

The U.S. has experienced a sustained increase in productivity growth since the mid-1990s, particularly in sectors that intensively use information technologies (IT). This has not occurred in Europe. If the U.S. "productivity miracle" is due to a natural advantage of being located in the U.S., then we would not expect to see any evidence of it for U.S. establishments located abroad. This paper shows in fact that U.S. multinationals operating in the U.K. do have higher productivity than non-U.S. multinationals in the U.K., and this is primarily due to the higher productivity of their IT. Furthermore, establishments that are taken over by U.S. multinationals increase the productivity of their IT, whereas observationally identical establishments taken over by non-U.S. multinationals do not. One explanation for these patterns is that U.S. firms are organized in a way that allows them to use new technologies more efficiently. A model of endogenously chosen organizational form and IT is developed to explain these new micro and macro findings.

American Economic Review (forthcoming).

Investor Behaviour in a Nascent Capital Market: Scottish Bank Shareholders in the Nineteenth Century

Acheson, Graeme, and John D. Turner
September 2010

This article uses the records of nineteenth-century Scottish banks in an attempt to understand investor behaviour in the early British capital market. It presents four main findings, some of which do not conform to the basic assumptions of standard asset pricing theories. First, in an era when efficient portfolio diversification was not possible, the intrinsic risk of an equity security was an important input into investor decision making. Second, our evidence suggests that businesspeople initially regarded bank stock as a consumption good, as being a stockholder gave them privileged access to bank finance. When bank lending practices changed in the middle of the century, this access-to-credit advantage associated with owning bank stock largely disappeared. Third, investors typically exhibited a bias towards banks that conducted business in the areas where they resided. Fourth, a sizeable proportion of investors were stockholders in more than one bank.

Economic History Review

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)

Protecting Outside Investors in a Laissez-faire Legal Environment: Corporate Governance and Dividends in Victorian Britain

Campbell, Gareth, and John D. Turner
September 2010

Companies in Victorian Britain operated in a laissez-faire legal environment from the perspective of outside investors, implying that such investors were not protected by the legal system. This article seeks to identify the alternative mechanisms that outside shareholders used to protect themselves by examining the dividend policy and governance of over 800 publicly traded companies at the beginning of the 1880s. We assess the importance of these mechanisms by estimating their impact on Tobin's Q. Our evidence suggests that dividends and well-structured and incentivized boards of directors may have played a role in protecting the interests of outside investors.

Economic History Review

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

Wealth Inequality in the European Periphery, Ireland, 1858-2001

Turner, John D.
September 2010

Using annual will indexes, a series of wealth concentration is constructed for the north of Ireland on a decennial basis for the period 1858 to 2001. Wealth was highly concentrated at the beginning of the sample period, but inequality falls towards the end of the nineteenth century and continues to fall until the 1970s. However, there does not appear to be a Kuznets-type process at work. Instead, using data on socio-occupational status, it is suggested that the fall in wealth concentration appears to be associated with the demise of the titled classes. Interestingly, similar to the findings of other studies, wealth has become more concentrated since the 1970s.

Oxford Economic Papers 62, no. 4 (October 2010)

The Profits of Power: Commercial Realpolitik in Europe and Eurasia.

Rawi Abdelal
September 2010

No abstract available

Harvard Business School Working Paper, No. 11-028, September 2010

Inducement Prizes and Innovation

Brunt, Liam, Josh Lerner, and Tom Nicholas
May 2011

We examine the effect of prizes on innovation using data on awards for technological development offered by the Royal Agricultural Society of England at annual competitions between 1839 and 1939. We find large effects of the prizes on competitive entry and the quality of contemporaneous patents, especially when prize categories were set by a strict rotation scheme, thereby mitigating the potentially confounding effect that they targeted only "hot" technology sectors. The prizes encouraged competition and medals were particularly effective. The boost to innovation we observe can only be partly explained by the re-direction of existing inventive activity.

Harvard Business School Working Paper, No. 11-118, May 2011

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

Mandatory IFRS Adoption and Financial Statement Comparability

Brochet, Francois, Alan Jagolinzer, and Edward J. Riedl
May 2011

This study examines the effect of mandatory International Financial Reporting Standards (IFRS) adoption on financial statement comparability. To isolate the effects of changes in comparability, we examine changes to information asymmetry for firms domiciled in the U.K. Domestic standards in the U.K. that preceded IFRS adoption are considered very similar to IFRS (Bae et al., 2008); accordingly, we use the U.K. as a setting to isolate changes to the information environment relating to IFRS adoption that is more likely to reflect changes in comparability versus information quality. If IFRS adoption improves financial statement comparability across firms, we predict this should reduce private information benefits. Empirical results confirm these predictions. Specifically, abnormal returns to two proxies for private information (insider purchases and analyst recommendation upgrades) are reduced following IFRS adoption. Similar results are obtained for subsamples that further isolate the reduction in private information as attributable to increases in comparability: firms having low amounts of reconciling items between U.K. GAAP and IFRS, and firms having ex ante high quality information environments. Together, the results are consistent with mandatory IFRS adoption leading to enhanced comparability.

Harvard Business School Working Paper, No. 11-109, April 2011

The Impact of Forward-Looking Metrics on Employee Decision Making

Casas-Arce, Pablo, F. Asís Martínez-Jerez, and V.G. Narayanan
April 2011

This paper analyzes the effects of providing forward-looking metrics on employee decision making. We use data from a southern European bank that, in April 2002, started providing its branch managers with customer lifetime value (CLV) information about mortgage applicants. The data allow us to gauge the effects of enriching the information set of these employees in an environment where incentives and the allocation of decision rights remained unchanged. We find that CLV availability resulted in a significant shift in attention towards the more profitable client segments (the weight of the top segment in the portfolio of customers increases from 26% to 34%), but we do not find evidence of improved cross-selling (except for an increase in the sale of insurance products). Moreover, the use of CLV information did not have a negative impact on pricing, as some of the literature suggests, nor on default risk, indicating that managers increased sales to more profitable customers by providing better customer service.

Harvard Business School Working Paper, No. 11-106, April 2011

2010

The Effect of Financial Development on the Investment Cash Flow Relationship: Cross-Country Evidence from Europe

Becker, Bo, and Jagadeesh Sivadasan
March 2010

We investigate financing constraints in a large cross-country data set covering most of the European economy. Firm-level investment sensitivity to cash flow is used to identify financing constraints. We find that the sensitivities are significantly positive, on average, controlling for country and industry fixed effects, as well as firm-level controls. Most importantly, the cash flow sensitivity of investment is lower in countries with better-developed financial markets. This suggests that financial development may mitigate financial constraints. This effect is weaker in conglomerate subsidiaries, which are likely to have access to internal capital markets and depend less on the outside financial environment, and possibly for firms in industries with highly liquid assets as well. This result sheds light on the link between financial and economic development.

B.E. Journal of Economic Analysis & Policy (forthcoming).

Labor Regulations and European Private Equity

Bozkaya, Ant, and William R. Kerr
January 2010

European nations substitute between employment protection regulations and labor market expenditures (e.g., unemployment insurance benefits) for providing worker insurance. Employment regulations more directly tax firms making frequent labor adjustments than other labor insurance mechanisms. Venture capital and private equity investors are especially sensitive to these labor adjustment costs. Nations favoring labor expenditures as the mechanism for providing worker insurance developed stronger private equity markets in high volatility sectors over 1990-2004. These patterns are further evident in U.S. investments into Europe. In this context, policy mechanisms are more important than the overall insurance level provided.
Harvard Business School Working Paper, No. 08-043, December 2009

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

Price Pressure in the Government Bond Market

Greenwood, Robin, and Dimitri Vayanos
January 2010

American Economic Review Papers and Proceedings

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.

2009

Siegmund Warburg, the City of London and the Financial Roots of European Integration

Ferguson, Niall
September 2009

The process of European economic integration slackened in the 1960s. National markets for goods, most services, and labor were not being integrated because they were not really being liberalized. The exception to this rule was financial services, one of which-the sale of long-term corporate and public sector bonds to relatively wealthy investors-became integrated in a quite novel way in the course of the 1960s. The rise of the so-called 'Eurobond' market was a major breakthrough in the history of European integration, but it was a largely spontaneous result of innovation by private sector actors, led by Siegmund Warburg. In some measure, no doubt, the bankers' primary motive was the profit motive. Yet there is also compelling evidence that Warburg and his associates also had a political agenda. They regarded it not only as a way of making money but also as a potent device for advancing Europe's political integration. In particular, they appreciated that European capital market integration could reinforce the case for British membership of the EEC. The resurrection of London as Europe's principal financial center, even at a time of economic and exchange rate weakness, was a major achievement in its own right. But it was also crucial for the resumption of European integration in the 1970s.

Business History 51, no. 3 (May 2009)

What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns (pdf)

Kerr, William R., Glenn D. Ellison, and Edward L. Glaeser
May 2009

Why do firms cluster near one another? We test Marshall's (1920) theories of industrial agglomeration by examining which industries locate near one another, or coagglomerate. We construct pairwise coagglomeration indices for U.S. manufacturing industries from the Economic Census. We then relate coagglomeration levels to the degree to which industry pairs share goods, labor, or ideas. To reduce reverse causality, where co-location drives input-output linkages or hiring patterns, we use data from U.K. industries and from U.S. areas where the two industries are not co-located. All three of Marshall's theories of agglomeration are supported, with input-output linkages particularly important.

The American Economic Review (forthcoming)

Measuring the Financial Sophistication of Households

Campbell, John Y., Laurent Calvet, and Paolo Sodini
May 2009

This paper constructs an index of financial sophistication that, in comprehensive data on Swedish households, best explains a set of three investment mistakes: underdiversification, risky share inertia, and the tendency to sell winning stocks and hold losing stocks (the disposition effect). The index of financial sophistication increases strongly with financial wealth and household size, and to a lesser extent with education and proxies for financial experience. The index is strongly positively correlated with the share of risky assets held by a household.

Market Reaction to the Adoption of IFRS in Europe

Riedl, Edward J., Christopher S. Armstrong, Alan D. Jagolinzer and Mary E. Barth
May 2009

This study examines European stock market reactions to 16 events associated with the adoption of International Financial Reporting Standards (IFRS) in Europe. European IFRS adoption represented a major milestone towards financial reporting convergence yet spurred controversy reaching the highest levels of government. We find an incrementally positive reaction for firms with lower quality pre-adoption information, which is more pronounced in banks, and with higher pre-adoption information asymmetry, consistent with investors expecting net information quality benefits from IFRS adoption. We find an incrementally negative reaction for firms domiciled in code law countries, consistent with investors' concerns over enforcement of IFRS in those countries. Finally, we find a positive reaction to IFRS adoption events for firms with high-quality pre-adoption information, consistent with investors expecting net convergence benefits from IFRS adoption.

The Accounting Review (forthcoming).

Explicit Relative Performance Evaluation in Performance-vested Equity Grants

Ferri, Fabrizio
April 2009

Carter, Ittner, and Zechman (2009) examine the use of explicit relative performance evaluation (RPE) conditions in performance-vested equity plans in a sample of United Kingdom firms in 2002. They find that factors suggested by economic theories (for example, removal of common shocks and tournament theory) are more closely associated with specific features of the plan than with the firm-level decision to use an RPE equity plan. My discussion focuses on the interpretation of these findings and the opportunities and implications for future research. I also summarize the views of five U.K. directors who were involved in the design and use of performance-vested equity plans.

NBER Working Paper Series, No. 14891, April 2009

Leadership Competencies for Implementing Planned Organizational Change Leadership

Battilana, Julie, M.J. Gilmartin, A.-C., Pache, M. Sengul, and J. Alexander
February 2009

This paper bridges the leadership and organizational change literatures by exploring the relationship between managers' leadership competencies (namely, their effectiveness at person-oriented and task-oriented behaviors) and the likelihood that they will emphasize the different activities involved in planned organizational change implementation (namely, communicating the need for change, mobilizing others to support the change, and evaluating the change implementation). We examine this relationship using data from 89 clinical managers at the United Kingdom National Health Service who implemented change projects between 2003 and 2004. Our results lend overall support to the proposed theory. This finding suggests that treating planned organizational change as a generic phenomenon might mask important idiosyncrasies associated both with the different activities involved in the change implementation process and with the unique functions that leadership competencies might play in the execution of these activities.

Leadership Quarterly

Global Currency Hedging

Campbell, John Y., Karine Serfaty-de Medeiros, and Luis M. Viceira
February 2009

Over the period 1975 to 2005, the U.S. dollar (particularly in relation to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) have moved against world equity markets. Thus these currencies should be attractive to risk-minimizing global equity investors despite their low average returns. The risk-minimizing currency strategy for a global bond investor is close to a full currency hedge, with a modest long position in the U.S. dollar. There is little evidence that risk-minimizing investors should adjust their currency positions in response to movements in interest differentials.

Harvard Business School Working Paper, No. 09-089, January 2009

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

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2008

Happiness Adaptation to Income beyond 'Basic Needs'

Di Tella, Rafael, and Robert MacCulloch
December 2008

We test for whether, once "basic needs" are satisfied, there is happiness adaptation to further gains in income using three data sets. Individual German Panel Data from 1985 to 2000, and data on the well-being of over 600,000 people in a panel of European countries from 1975 to 2002, shows different patterns of adaptation to income across the rich and poor. We find evidence that for wealthy Germans, and for the rich half of European nations, higher levels of per capita income don't buy greater happiness. The reason appears to be adaptation. However even for the rich half of European nations such habituation may take more than five years so the happiness gains that they experience, whilst not permanent, can still be relatively long-lasting. Finally we study a cross section of nations in 2005 from the World Gallup Poll and find that the past 45 years of economic growth (from 1960 to 2005) in the rich half of nations has not brought happiness gains above those that were already in place once the 1960s' standard of living had been achieved. However in the poorest half of nations we cannot reject the null hypothesis that the happiness gains they have experienced from the past 45 years of growth have been the same as the gains that they experienced from growth prior to the 1960s.

NBER Working Paper Series, No. 14539, December 2009

Responding to Public and Private Politics: Corporate Disclosure of Climate Change Strategies (pdf)

Reid, Erin M., and Michael W. Toffel
August 2008

The challenges associated with climate change will require governments, citizens, and corporations to work collaboratively to reduce greenhouse gas emissions, a task that requires information on companies' emissions levels, risks, and reduction opportunities. This paper explores the conditions under which firms respond to shareholders' requests for this information. Building on previous theories of how social activists inspire field-level change, we hypothesize that shareholder actions and regulatory threats are likely to prime firms to cooperate with shareholder requests for information disclosure. Using a unique dataset, we find evidence of both direct and spillover effects. In the domain of private politics, shareholder resolutions filed against a firm, and against others in its industry, increase its propensity to acquiesce to these shareholder requests. Similarly, in the realm of public politics, the threat of state regulations that target a firm's industry-as well as those that target other industries-increases the likelihood that the firm will acquiesce to shareholder requests to disclose related information. These findings extend existing theory by showing how organizational change can be sparked by both activist groups and government policymakers and that challenges mounted against a single firm (and industry) can inspire field-level (and state-level) changes.

Harvard Business School Working Paper, No. 09-019, August 2008

Economic Impacts of Immigration: A Survey

Pekkala Kerr, Sari, and William R. Kerr
August 2008

This paper surveys recent empirical studies on the economic impacts of immigration. Particular emphasis is given to the experiences of Northern Europe and Scandinavia. The survey first examines the magnitude of immigration as an economic phenomenon in various host countries. The second part deals with the assimilation of immigrant workers in host-country labor markets and the use of social benefits by immigrants. The survey then considers the effect of immigration on the labor market outcomes of natives. The paper concludes with studies of immigration's impact for the public sector of host countries.

Harvard Business School Working Paper, No. 09-013, July 2008

Fight or Flight? Portfolio Rebalancing by Individual Investors

Calvet, Laurent E., John Y. Campbell, and Paolo Sodini
July 2008

This paper investigates the dynamics of individual portfolios in a unique dataset containing the disaggregated wealth of all households in Sweden. Between 1999 and 2002, we observe little aggregate rebalancing in the financial portfolio of participants. These patterns conceal strong household-level evidence of active rebalancing, which on average offsets about one half of idiosyncratic passive variations in the risky asset share. Wealthy, educated investors with better diversified portfolios tend to rebalance more actively. We find some evidence that households rebalance towards a higher risky share as they become richer. We also study the decisions to trade individual assets. Households are more likely to fully sell directly held stocks if those stocks have performed well and more likely to exit direct stockholding if their stock portfolios have performed well; but these relationships are much weaker for mutual funds, a pattern which is consistent with previous research on the disposition effect among direct stockholders and performance sensitivity among mutual fund investors. When households continue to hold individual assets, however, they rebalance both stocks and mutual funds to offset about one sixth of the passive variations in individual asset shares. Households rebalance primarily by adjusting purchases of risky assets if their risky portfolios have performed poorly and by adjusting both fund purchases and full sales of stocks if their risky portfolios have performed well. Finally, the tendency for households to fully sell winning stocks is weaker for wealthy investors with diversified portfolios of individual stocks.

NBER Working Paper Series, No. 14177, July 2008.

Industrial Specialization and Regional Clusters in the Ten New EU Member States (Special Issue on Macro and Micro Level Competitiveness)

Solvell, Orjan, Christian H.M. Ketels, and Goran Lindqvist
June 2008

The purpose of this paper is to provide an analysis of regional concentration patterns within ten new European Union (EU) member states, EU10, and make comparisons with EU15 and the U.S. economy

Competitiveness Review: An International Business Journal Incorporating Journal of Global Competitiveness 18, nos. 1/2 (2008): 104-130.

Industrial Specialization and Regional Clusters in the Ten New EU Member States

Solvell, Orjan, Christian H.M. Ketels, and Goran Lindqvist
June 2008

The purpose of this paper is to provide an analysis of regional concentration patterns within ten new European Union (EU) member states, EU10, and make comparisons with EU15 and the U.S. economy.

Competitiveness Review: An International Business Journal Incorporating Journal of Global Competitiveness 18, nos. 1/2 (2008): 104-130

America the Difficult

Desai, Mihir
June 2008


The American (May - June 2008)

Review of Stig Tenold's Tankers in Trouble

Ketels, Christian H.M.
May 2008

In Tankers in Trouble, Stig Tenold looks at the experience of the Norwegian shipping industry during the 1970s and 1980s, specifically of those companies active in the tanker business. The review discusses some complementary insights that can be gained from applying Michael Porter's cluster framework to the analysis of Norwegian shipping and the crisis of the 1970s and 1980s. It shows how the cluster perspective contributes to the understanding of why Norwegian shipping was so strong in the first place, it helps to distinguish whether the Norwegian crisis of the 1970s and 1980s was mainly demand or supply driven, and it can explain the drivers of the resurgence of Norwegian shipping in the 1990s and 2000s.

International Journal of Maritime History 21, no. 2 (December 2007): 407-411

Learning to Live with Governments: Unilever in India and Turkey, 1950-1980

Jones, Geoffrey G.
March 2008

A noteworthy characteristic of the contemporary global economy is the uneven distribution of world foreign direct investment (FDI). In 2007 three-quarters of world FDI was located in developed countries. The residual was concentrated in a small number of emerging countries. Large countries with little inward FDI included India and Turkey. This is puzzling, given that both countries have greatly liberalized their regulations on inward FDI. After 1945 many developing governments pursued policies which restricted foreign-owned firms. India and Turkey were among the countries with particularly difficult policy environments. This paper explores why Unilever, the Anglo-Dutch consumer products company, was able to sustain large businesses in developing countries such as India and Turkey. The paper argues that the explanation is multi-causal. Unilever held first-mover advantages, but was also prepared to accept low dividend remittances for years. It pursued flexible business strategies beyond its "core" business, even distributing condoms. It maintained a high standard of corporate ethics. It was effective at building contacts with local business and government elites, primarily through localization of management.

Entreprises et Histoire 49 (December 2007)

Embracing Commitment and Performance: CEOs and Practices Used to Manage Paradox(pdf)

Fredberg, Tobias, Michael Beer, Russell Eisenstat, Nathaniel Foote, and Flemming Norrgren.
January 2008

We tend to assume that great leaders must make difficult choices between two or more conflicting outcomes. In an interview study with 26 CEOs of top American and European companies (including IKEA, Campbell Soups, Nokia, H&M), we find that instead of choosing between conflicting outcomes such as long-term strategy or short-term performance drivers, top-tier managers argue that their role is to embrace such paradoxes to make both things happen simultaneously. The study identifies five groups of practices that make this possible. Together, they reveal a systematic approach to managerial work at the top, which is seldom found in the literature. By building on the engagement of many in the development of the organization, the practices are important for our understanding of how a CEO facilitates the partaking of many in strategy making. The paper contributes to theory by relating the current findings to the literature on the connection between commitment and performance and on the strategic management literature that focuses on the proliferation of strategy and strategy as practice.

Harvard Business School Working Paper, No. 08-052, 2008

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2007

Identity Incentives As an Engaging Form of Control: Revisiting Leniencies in an Aeronautic Plant

Anteby, Michel J.
November 2007

Research has long shown that organizations shape members' identities. However, the possibility that these identities might also be desired and that members might benefit from this process has only recently been explored. In a qualitative study of a French aeronautic plant, I demonstrate how an implicitly negotiated leniency between management and workers around the use of company materials and tools, on company time, to produce artifacts for personal use, enhances workers' identities. This leniency applies to a select subset of workers and enhances their desired occupational identity. This practice produces an engaging form of control that relies on management's selective allocation of identity incentives. These findings document a previously overlooked type of control: one reliant on desired identities that engage rather than constrain. Desired identities, specifically previously enacted ones, constitute potent incentives for inducing efforts or actions.

Organization Science (forthcoming)

Pharmaceutical Regulation in the United States and Europe

Daemmrich, Arthur
November 2007

The Division for Public Education of the American Bar Association. Focus on Law Studies 23, no. 1 (fall 2007): 8-11

Design, Meanings, and Radical Innovation: A Meta-model and a Research Agenda

Verganti, Roberto
November 2007

Recent studies on design management have helped us to better comprehend how companies can apply design to get closer to users and better understand their needs; an approach usually referred to as "user-centered design". Yet, analysis of design-intensive manufacturers such as Alessi, Artemide and other leading Italian firms, show that their innovation process hardly starts from a close observation of user needs and requirements. Rather, they follow a different strategy that we call "design-driven innovation". This strategy aims at radically changing the emotional and symbolic content of products, i.e., their meanings and languages, through a deep understanding of broader changes in society, culture and technology. Rather than being pulled by user requirements, design-driven innovation is pushed by a firm's vision about possible new product meanings and languages that could diffuse in society. Design-driven innovation, that plays such a crucial role in the innovation strategy of design-intensive firms, has still remained largely unexplored. This article aims at providing a possible direction to fill this empty spot in innovation management literature. In particular, first we propose a meta-model for investigation of design-driven innovation. In this meta-model a manufacturer's ability to understand, anticipate and influence emergence of new product meanings is built by leveraging on external interpreters (designers, firms in other industries, suppliers, schools, artists, the media, etc) who share its same problem: to understand the evolution of socio-cultural models, and propose new visions and meanings. Managing design-driven innovation therefore implies to manage the interaction with these interpreters, in order to access, share and internalize knowledge on product languages and influence shifts in socio-cultural models. Second, we propose a possible direction to scientifically investigate the management of this networked and collective research process. In particular we show that the process of creating breakthrough innovations of meanings partially mirrors the process of creating breakthrough technological innovations. Studies of design-driven innovation may therefore benefit significantly from the existing body of theories in the field of technology management. The analysis of the analogies between these two types of radical innovations (of meanings and technologies) allow to set a research agenda for exploration of design-driven innovation, a relevant as well as underinvestigated phenomenon.

Journal of Product Innovation Management (forthcoming)

Mondialisation: la French Touch

Abdelal, Rawi, and Sophie Meunier
October 2007

Telos, October 2007

Streaming Knowledge - A Hidden History of Codetermination: The Schmalenbach Society and the Dinkelbach School of German Management (pdf)

Fear, Jeffrey
April 2007

This article uncovers a virtuous circular network of people and ideas, between the theories of the Schmalenbach Society and the management practices of the so-called Dinkelbach School that created one of the most influential impulses for post-1945 German political economy and business management. This group remained exceptional for their time, but broke the ice and, over time, paved the way for postwar consensus regarding codetermination (labor representation on supervisory boards). Codetermination has become one of the most important, unique aspects of German political economy and corporate governance. On one hand, this network of people formed an autonomous German management tradition, which introduced allegedly American methods into German business prior to Americanization after 1945. On the other hand, this network of people begins the hidden history of employer acceptance of codetermination in the heart of the reactionary Ruhr. Although most recent literature demonstrates a profound continuity of bourgeois figures and values with the prewar period, the shattering of the war experience also opened a path for a new, non-bourgeois, and Catholic group of individuals dedicated to reinventing German business. As such, the article examines the software of German capitalism rather than its hardware.

Harvard Business School Working Paper No. 06-042, April 2006

Initiating Divergent Organizational Change: The Enabling Role Of Actors' Social Position(pdf)

Battilana, Julie
March 2007

This study addresses the paradox of embedded human agency, or the contradiction between actors' agency and institutional determinism. It helps to resolve this paradox by considering the enabling role of actors' social position. Adopting a relational view of human agency, I model the impact of their social position on the likelihood that actors will initiate changes that diverge from the existing institutions. I test this model using data from 93 change projects conducted by clinical managers at the National Health Service in the United Kingdom. My findings suggest that social position is an important enabling condition for divergent organizational change, and is a determinant as well of the type of divergent organizational change an actor may undertake.

Harvard Business School Working Paper, No. 07-053, 2007

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2006

Le Consensus de Paris: la France et les Règles de la Finance Mondiale (pdf)

Abdelal, Rawi
March 2006

Critique Internationale, no. 28, July/September 2005: 87-115

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2005

Functional Change and Bank Strategy in German Corporate Governance

Crane, Dwight B., and Ulrike Schaede
December 2005

International Review of Law and Economics

How to Evaluate Clusters. Special Issue "Pôles de Compétitivité"

Keels, Christian H.M.
October 2005

La Revue Parlementaire, July 2005

Competitiveness Assessment of Stockholm and the Mälardalen-Region

Ketels, Christian H.M.
October 2005

Background Paper for OECD Territorial Analysis Unit Series, Paris, 2005

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