Part One (pages 3-9) provides a brief history of American universities. New schools have been created by universities when societal change has revealed knowledge gaps, giving rise to new fields and/or education in new professions. There has been little change in the basic forms and offerings of universities since the 1980s, despite the emergence of new technologies in a globalizing world and questions about the relevance of universities.

Part Two (pages 10-22) describes an emergent set of societal challenges calling for new knowledge and leadership, which research universities are uniquely positioned to provide. Problems such as poverty, global health, basic education, or environmental quality are systemic in nature, have political as well as technical dimensions, and tend to require cross-sector and cross-profession collaboration. But there is a knowledge gap about how to develop and implement solutions, which should be filled by integrative research and educational innovation.

Part Three (pages 23-27) offers data about demographic change: an aging but healthier population in the developed world that includes accomplished leaders increasingly interested in service -- especially solving problems such as those outlined above. Many in this group seek meaningful contributions rather than income, but there is an absence of established pathways. The opportunity this population presents has not been addressed by higher education.

Part Four (pages 28-34) calls for bold action. In the past, American universities have tackled major challenges/opportunities not with incremental changes within existing structures but by founding whole new schools. We urge universities (including our home institution, Harvard University) to create new graduate/professional schools to educate experienced leaders who wish to tackle societal and global problems in their next phase of life. Such third-stage schools -- Schools for Advanced Institutional Leadership -- will offer more than retraining for transitions to new careers, although they could also serve that purpose. Rather, third-stage schools will set a distinctive intellectual agenda by focusing on the knowledge required to lead social institutions and address global challenges. We describe our model for this innovation.

34 pages

This paper provides a historical perspective to current debates whether large global firms are becoming "stateless." Robert Reich among others suggested that historically the nationality of multinationals was clear, while for contemporary multinationals corporate nationality is both unclear and increasingly irrelevant. However the historical evidence shows that a great deal of international business in the nineteenth century was not easily fitted into national categories. The place of registration, the nationality of shareholders, and the nationality of management often pointed in different directions. During the twentieth century such cosmopolitan capitalism was replaced by sharper national identities. The interwar disintegration of the international economy also led to the national subsidiaries of multinationals taking on strong local identities. Over the past two decades, as the pace of globalization quickened, ambiguities increased again. Yet in the early twenty first century, ownership, location and geography still mattered enormously in international business. They may matter more than in the past.
32 pages

A growing literature in economics and political science argues that natural-resource-abundant countries are more likely to be governed by corrupt governments and experience political instability. The experience of Mexico during 1880-1930 casts doubt on this hypothesis. Mexico's mining industry grew rapidly under a very corrupt dictatorship. When that dictatorship fell and the polity lapsed into civil war, the mining industry was barely affected. The Mexican case suggests that extractive industries may be remarkably insensitive to changes in economic institutions or political instability. Causality may run from corrupt government or civil disorder to an economy relatively dependent on natural resource extraction, rather than the other way around.
60 pages

We investigate inter-industry variation in the relative incidence of advertisers' utilization of in-house rather than independent advertising agencies. To account for this variability, we develop a set of hypotheses drawing. The first perspective emphasizes scale economies and "double marginalization." The second perspective is that of transactions cost economics. The hypotheses are tested using a database consisting of a cross section of 70 two digit SIC industries measured at two points in time, 1991 and 1999.

Confirming our first hypothesis, we found the tradeoff between the potential gains accompanying avoidance of double marginalization and the possible sacrifice of size-related scale economies tended to operate so as to decrease the likelihood of vertical integration as the size of advertising outlays increased. Consistent with three additional hypotheses suggested by transaction cost economics, we find that the likelihood of internalization of advertising services increases across industries as (i) advertising intensity increases and is greater for (ii) technological intensive and (iii) creative industries. The underlying rationale for (1) and (ii) emphasizes the role of human asset specificity while that for (iii) relates to transaction similarity and the opportunity to exploit scope economies. A fourth hypotheses suggested by transaction cost analysis, that predicted greater vertical integration of advertising services in the retailing due temporal specificity, was rejected.
57 pages

We develop an analytical solution to the dynamic portfolio choice problem of an investor with power utility defined over wealth at a finite horizon who faces an investment opportunity set with time-varying risk premia, real interest rates and inflation. The variation in investment opportunities is captured by a flexible vector autoregressive parameterization, which readily accommodates a large number of assets and state variables. We find that the optimal dynamic portfolio strategy is an affine function of the vector of state variables describing investment opportunities, with coefficients that are a function of the investment horizon. We apply our method to the optimal portfolio choice problem of an investor who can choose between value and growth stock portfolios, and among these equity portfolios plus bills and bonds. For equity-only investors, the optimal mean allocation of short-horizon investors is heavily tilted away from growth stocks regardless of their risk aversion. However, the mean allocation to growth stocks increases dramatically with the investment horizon, implying that growth is less risky than value at long horizons for equity-only investors. Long-horizon aggressive investors who have access to bills and bonds increase their allocation to both value stocks and growth stocks at long horizons, but they do not actively tilt their portfolios toward growth stocks. These investors increase their allocation to growth stocks as a result of their desire to optimally increase their overall allocation to equities. We also explore the welfare implications of adopting the optimal dynamic rebalancing strategy vis a vis other policies that revise portfolio weights infrequently, and find significant welfare gains from continuous rebalancing for all long-horizon investors.
62 pages

Motivated by real examples that run contrary to conventional wisdom, we examine how firms organize themselves to strategize well. Interactions among decisions make strategizing difficult. They raise the specter that a firm's strategizing efforts will get stuck in a web of conflicting constraints prematurely, before managers explore a wide enough range of possibilities. A key role of organizing is to free strategizing efforts and encourage broad search. At the same time, organizing must ensure that strategizing efforts stabilize once the firm discovers an effective set of choices. The need to balance search and stability, we argue, is a central challenge of organizing. We explore this challenge with an agent-based simulation of firms that organize to strategize in the face of interactions. The results shed light on out contrary-to-wisdom examples. They show why firms may benefit from unnecessary overlap between departments; how firms can increase firm-wide search by reining in the search efforts of individual managers; and how a change in organizational structure -- e.g., a shift from decentralization to integration -- may reflect not a reversal of early mistakes but an effective sequence of organizing. The disparate examples share an underlying logic. The unnecessary overlap, the reining-in of managers, the period of decentralization -- all can be seen as organizational mechanisms to ensure the broad, early search that a firm needs in order to cope with interactions among decisions.
37 pages

Is the involvement of "star" creative workers critical to the success of creative products? That belief is particularly apparent in the motion picture industry, where studios regularly pay multimillion-dollar fees to star actors. I shed light on the returns on this investment using an event study that considers the impact of over 1,200 casting announcements on trading behavior in a simulated and real stock market setting. I find evidence that the involvement of stars impacts movies' expected theatrical revenues, and I provide insight into the magnitude of that effect. In a cross-sectional analysis grounded in the literature on group dynamics, I also examine the determinants of the magnitude of stars' impact on expected revenues: among other things, I show that the stronger a cast already is, the greater is the impact of a newly recruited star with a track record of box office successes or with a strong artistic reputation. Finally, in an extension to the study, I do not find that the involvement of stars in movies increases the valuation of film companies that release those movies, thus providing insufficient grounds to conclude that stars add more value than they capture. I discuss implications for managers in the motion picture and other creative industries.
49 pages

How often has it been said that public education in the United States should be run more like a business? This exhortation urges American public schools to apply the same management, leadership and organizational approaches to public education that have been used to create the iconic state of global business. The idea is simple and seductive. The problem is that while public school districts have a myriad of managerial, leadership and organizational concerns, they are not businesses. In reality, their differences are greater than their similarities. Even so, our research in fifteen large urban public school districts reveals a hopeful phenomenon -- one quite familiar to business. Districts that unrelentingly focus on their core business of student performance, create and implement coherent strategies around this core, and array all the elements of the district to drive and support improved classroom instruction, out-perform their peer districts with comparable constraints.
23 pages

A critical element of a firm's technology strategy concerns the allocation of R&D resources across distinct technologies and product markets. Yet, beyond the idea of economies of scope, there is little predictive theory about how the extent and specific directions of R&D diversification may influence R&D performance. In this paper, we take an information-based approach to the problem. Following others, we view R&D as an information-processing activity geared toward technical problem-solving and R&D capabilities as residing in the firm's specific information-processing routines. We define relatedness of R&D fields in terms of similarities or differences in information processing problems faced by decision-makers in the firm. Projects with similar information processing problems are characterized as being within the same "information regime." Using project-level data from the pharmaceutical industry, we explore two questions: 1) Do firms tend to focus their R&D activities within similar information regimes? 2) Are there performance benefits of such focus? We find evidence that firms diversify their R&D projects portfolios across different information regimes. We also find that there are performance costs of such diversification.
35 pages

Savings Bonds have always served multiple objectives: funding the U. S. government, democratizing national financing, and enabling families to save. Increasingly, this last goal has been ignored. A series of efficiency measures introduced in 2003 make these bonds less attractive and less accessible to savers. Public policy should go in the opposite direction: U.S. savings bonds should be reinvigorated to help low and moderate income (LMI) families build assets. More and more, these families' saving needs are ignored by private sector asset managers and marketers. With a few relatively modest changes, the Savings Bond program can be reinvented to help these families save, while still increasing the efficiency of the program as a debt management device. Savings bonds provide market-rate returns, with no transaction costs, and are a useful commitment savings device. Our proposed changes include (a) allowing Federal taxpayers to purchase bonds with tax refunds; (b) enabling LMI families to redeem their bonds before twelve months; (c) leveraging private sector organizations to market savings bonds; and (d) contemplating a role for savings bonds in the life cycles of LMI families.
41 pages

There is a consensus among academics and policy-makers that related lending, a widespread practice in most LDCs, should be discouraged because it provides a mechanism through which bankers can loot their own banks at the expense of minority shareholders and depositors. We argue that neither looting nor credit misallocation are necessary outcomes of related lending. On the contrary, related lending often exists as a response by bankers to high information and contract enforcement costs. Whether it encourages looting crucially depends on the other institutions that support the banking system, particularly those give depositors and outside shareholders incentives and mechanisms to monitor directors, and that give directors incentives to monitor one another. We operationalize this argument by examining an LDC banking system in which there was widespread related--Mexico from 1888 to 1913. We find little evidence, during this 25-year period, of tunneling or credit misallocation--even in the midst of a major, externally caused financial crisis that occasioned a government-organized rescue. The banking system was, in fact, remarkably stable and manufacturing enterprises that received related loans performed at least as well as their competitors.
46 pages

Joseph Schumpeter believed that history was essential to the study of entrepreneurship. It is a perspective that has been lost in recent scholarship. This paper shows why this has been detrimental to the field, and explores how the current situation can be improved. We begin by surveying the development of the social scientific literature on entrepreneurship since the field first emerged as an area of academic interest in the 1940s. We show that, despite theoretical agreement on the importance of context in the study of entrepreneurship, empirical research in recent years has ignored historical setting in favor of focusing on entrepreneurial behavior and cognition. The result has been a pre-occupation with high-tech start-ups in the United States, and growing irrelevance from the major issues in the contemporary global economy. The paper outlines ways in which the rediscovery of history can facilitate entrepreneurial studies, using examples from international entrepreneurship. We conclude by arguing that these methods can stimulate the kind of exchanges between the history and theory of entrepreneurship that Schumpeter envisioned.
38 pages

Four laboratory studies show that people are more likely to accept others’ unethical behavior when ethical degradation occurs slowly rather than in one abrupt shift. In the studies, participants served in the role of watchdogs charged with catching cheating in a series of trials. The cheating they observed increased either gradually or abruptly; people were more likely to overlook cheating that increased gradually. Our studies also provide evidence as to why people accept cheating by others. Our results indicate that the effect is due at least in part to the failure to notice that unethical behavior is occurring when the change is gradual rather than abrupt.
48 pages

Families are more likely to save if they can commit to savings before funds are in-hand (and subject to spending temptations). For low- and moderate-income U.S. families, an important savings opportunity arises annually, during income tax season. We study a group of low-income individuals in Tulsa, Okalahoma, who, at the time of tax filing, were encouraged to save parts of their federal refunds. Those who agreed directed a portion of their refund to a savings account, and arranged to have the rest sent to them in the form of a check. Eligible individuals could also open low-cost savings accounts. We document the demand for these services, the characteristics of those who sought to participate, the savings goals of those who participated, the immediate savings generated by the program, and the disposition of savings a few months after receipt. This pilot study suggests that there may be demand among low-income families for a refund-splitting program that supports emergency needs as well as asset building, especially if a basic savings product is available to all at the time of tax filing.
62 pages

In this paper we propose a conceptual distinction between two actor roles, both essential but naturally in tension when companies commercialize new technologies, which we claim helps explain difficulties in business innovation. Stewards (usually managers) care most about allocating resources efficiently. Creators (usually specialized, highly capable employees) care most for the glittering vision, the higher purpose, and often see business concerns as secondary to their creative work. Our study on the history of the Internet suggests that disputes and goal disconnects between Stewards and Creators can significantly delay innovation. From data gathered in this study we derive recommendations for managers who oversee innovative work.
35 pages

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.
77 pages

This paper shows how surveys can be used to generate a measure of the amount of information and/or heterogeneity of preferences within a market. This measure can be employed as a regressor in empirical work where variance in the dependent variable (e.g., auction prices, retail price dispersion, or investment choices in stocks, R&D, or education) might be explained by uncertainty about the value of the item being sold or the returns to investment choice and/or heterogeneous preferences in the market. The effects of incomplete information and heterogeneous preferences are usually relegated to the error term, which a) confounds these effects with other drivers of the error term and b) could lead to heteroskedasticity at best or omitted variable bias at worst. Furthermore, by specifically modeling the effect of this uncertainty or dispersed taste, one can estimate policy implications such as the effect of publicly introducing information into the market or selecting the pool of agents to change the distribution of preferences. I demonstrate the validity and usefulness of my survey-based procedure by using it to measure the mean and dispersion of private information signals in eBay online auctions for personal computers. I exploit a mixture of respondents with and without experience on eBay. The use of inexperienced respondents permits the survey to be implemented more quickly and with a larger number of respondents than if it were restricted to experienced respondents. The use of experienced respondents allows me to correct for potential bias from using more noisy, inexperienced responses.
24 pages

Collaboration between corporations and nongovernmental organizations to foster societal betterment is becoming increasingly common and strategically important in the areas of environmental preservation and sustainable development. This paper examines a series of such cross-sector alliances in the Americas. The analysis will identify the motivations for partnering and explore the dynamics of the relationships in terms of patterns of evolution. It will also focus on how collaboration generates value for the partners and the larger society. Finally, the paper will focus on determinants of effective performance in such strategic alliances.
14 pages

Conventional wisdom, together with the weight of published management advice, recommends that management teams engage task conflict but avoid relationship conflict. Implicit in this advice is the premise that it is indeed possible to separate the task and relationship aspects of a business conflict. This article argues, in contrast, that this is much easier said than done, due to certain properties of human cognition. We show how substantive disagreements (the essence of task conflict) can trigger negative attributions about others' motives or abilities (a key element of relationship conflict). When this happens, most managers feel that they face two undesirable options: Express their true thoughts and alienate their peers or suppress them, avoiding genuine discussion. Most choose the latter. Yet, when interpersonal attributions are suppressed, they tend to leak into the business conversation anyway, such as in the form of implied accusations or aggravated tones of voice. These dynamics are virtually inevitable, even when managers try to avoid them. We thus introduce a new distinction -- between hot and cool conflict -- to help clarify when avoiding relationship conflict is feasible, and when it's not. Drawing from our intervention research, we argue that management teams can learn to manage hot conflicts productively, despite the heightened emotions and interpersonal tensions they trigger. We describe three practices � manage self, manage conversations, and manage relationships � that can help management teams handle hot conflicts. We conclude that management teams can build resilience through experience with these practices.
37 pages

W.E.B. DuBois's 1903 words are prophetic, as he proclaims the importance of an issue with which we are still grappling in the twenty-first century�race. As contributors to this volume, we were asked to focus on the relationship between race and mentoring. What do we learn about this important developmental relationship by examining the research on race and mentoring? Like DuBois, we believe that the analysis of race is fundamental within our society. Race continues to be a critical factor as we examine relationships in organizations, particularly if we are located in a U.S. based context. Race, is a socially embedded phenomenon that affects just about every aspect of our lives, and as such, provides a critical lens with which to examine the mentoring literature (Thomas & Alderfer, 1989).

Now, more than ever, is a timely moment in our history to examine the influence of race in the extant literature on an important topic such as mentoring. Foreman (2000:30) describes race as "America's major piece of unfinished business." Race is clearly �unfinished business� because of the plethora of conflicting emotions that are unleashed as we approach the taboo (Thomas, 1989). This tension speaks to the importance of this chapter as we explore the issue of mentoring as embedded within the social context of race within today�s dynamic and diverse organizations. First, we delineate several important reasons why it is critical to discuss mentoring and race. We explore how race has been positioned within the literature to provide a context for our review of how the mentoring literature has discussed (and omitted) race as a key factor. We ask a critical question within this review: what do we know about the intersection of mentoring and race in organizations? Finally, we explore some of the unfinished business concerning race and mentoring and present a model to drive future research in this vital area.
46 pages

Mexico signed NAFTA in 1994. NAFTA's primary importance was not in providing market access to the United States. Rather, its primary importance was in providing investor protections to foreign direct investment. NAFTA succeeded in its instrumental goal of increasing foreign direct investment. Increased FDI, however, was limited mostly to manufacturing and has had relatively little impact on the bulk of the economy. Without reforms in the finance and energy sectors, and greater security of property rights for domestic investors, Mexico will be doomed to continuing subpar economic performance.
34 pages

The Panama Canal was one of the largest public investments of its time. In the first decade of its operation, the Canal produced significant social returns for the United States. Most of these returns were due to the transportation of petroleum from California to the East Coast. Few of these returns, however, accrued to the Panamanian population or government. U.S. policy deliberately operated to minimize the effects of the Canal on the Panamanian economy. The major exception to this policy was the American anti-malarial campaign, which improved health conditions in the port cities.
40 pages

This paper embeds legal considerations in mainstream management theory and frameworks. It proposes a systems approach to law and management that explains how law affects the competitive environment, the firm's resources, and the activities in the value chain. This is a dynamic model that recognizes that firms and markets are part of a broader system of society and that managerial actions will affect the law and how it is interpreted and applied over time. The paper suggests that the ability of managers to communicate effectively with counsel and to work together to solve complex problems and leverage the resource advantages of the firm--what this paper refers to as "legal astuteness" --may in certain contexts be a dynamic capability providing competitive advantage. A key objective of the paper is to spark greater academic interest in the legal aspects of management and to provide a theoretical predicate for multi-disciplinary empirical work on the role of law and legal astuteness in the achievement and sustainability of competitive advantage.
34 pages

An enduring belief among management scholars and managers is that unleashing the low-level members of an organization to explore widely will broaden the exploration conducted by the organization as a whole. Using an agent-based simulation model, we show that in multi-level organizations increased exploration at lower levels can backfire, reducing overall exploration and thereby diminishing organizational performance in environments that require broad search. Keywords: exploration, multi-level organizations, simulation model
36 pages

Group members often reason egocentrically, believing that they deserve more than their fair share of group resources. Leading people to consider others members' perspectives can reduce these egocentric (self-centered) judgments, such that people claim that it is fair for them to take less, but it actually increases egoistic (selfish) behavior, such that people actually take more of available resources. Four experiments demonstrate this pattern in competitive contexts where considering others' perspectives activates egoistic theories of their likely behavior, leading people to counter by behaving more egoistically themselves. This reactive egoism is attenuated in cooperative contexts. Discussion focuses on the implications of reactive egoism in social interaction, and on strategies for alleviating its potentially deleterious effects.
65 pages

Our goal in this paper is to explain the location of transactions (and contracts) in a larger system of production. We first characterize the system as a network of tasks and transfers. While transfers between agents are necessary and ubiquitous, the mundane transaction costs of standardizing, counting, valuing and paying for what is transferred make it impossible for all transfers to be transactions. We go on to argue that the modular structure of the network determines its pattern of mundane transaction costs, and thus establishes where cost-effective transactions can be located.
53 pages

No abstract available.
40 pages