History →
- 23 Feb 2009
- Research & Ideas
Creative Entrepreneurship in a Downturn
Entrepreneurs, take heart. True, the global economic malaise removes opportunities and precious resources—but also adds them in new and interesting ways, argues HBS senior lecturer Bhaskar Chakravorti. In this Q&A he identifies reasons for optimism, and shows how entrepreneurs can think differently about bad news. Key concepts include: There are three fundamental decisions facing any business in good times and bad: where to play, how to deliver, and how to win. Entrepreneurs should systematically identify "downturn needs," including necessities and affordable luxuries, substitutions for previous products and services, and products that deliver value for money. To serve these needs, look for downtime resources that might be available at relatively low cost. Think business model, says Chakravorti. Consider the unintended consequences of cost cutting, and instead focus holistically on the interconnected parts of your entire business model. Closed for comment; 0 Comments.
- 20 Nov 2008
- Working Paper Summaries
Was the Wealth of Nations Determined in 1000 B.C.?
To the extent that history is discussed at all in economic development, it is usually either the divergence associated with the Industrial Revolution or the effects of colonial regimes. Is it possible that precolonial, preindustrial history also matters significantly for today's national economic development? The authors find that technology adoption circa 1500 A.D., prior to the era of colonization and extensive European contacts, predicts approximately 50 percent of cross-country differences in both current per capita income and technology in a large cross-section of countries. When exploring the causes of this extreme persistence in technology, they find evidence in favor of the importance of the effect of current adoption on subsequent adoption as the main driver. This leaves a limited role to country-specific factors such as institutions, geography, or genes to explain the persistence of technology. Key concepts include: Precolonial, preindustrial differences have striking predictive power for the pattern of both per capita incomes and technology adoption across nations that can be observed today. Technology is very persistent both within countries and sectors. Adoption dynamics vis-à-vis country-specific factors such as institutions, geography, or genes appear to be the mechanism behind such persistence. Closed for comment; 0 Comments.
- 02 Oct 2008
- What Do You Think?
Workout vs. Bailout: Should Government Take Advantage of the Buffett Effect?
The depth of the global financial crisis is becoming clearer day by day, says HBS professor Jim Heskett. Respondents to this month's column offered creative solutions, and by and large resisted the temptation to venture into the realm of ideology. (Online forum now closed.) Closed for comment; 0 Comments.
- 25 Sep 2008
- Working Paper Summaries
The Cost of Property Rights: Establishing Institutions on the Philippine Frontier Under American Rule, 1898-1918
Economists generally agree that a system of transparent and secure property rights is beneficial for growth and development. A large literature emphasizes the role of property rights in spurring long-term investments, improving productivity, changing labor allocations, and increasing access to formal sources of credit. This paper describes U.S. attempts to implement property rights reforms in the Philippines in the early twentieth century. Iyer and Maurer document that, two decades after the arrival of the Americans, property rights in the Philippines had become unambiguously less secure, and that political and budgetary constraints played a large role in inhibiting the progress of reforms. Key concepts include: Lacking sufficient revenue and unwilling to pay certain political costs, the insular government settled for a very slow pace of progress in property rights reforms. As a result, the Philippine agricultural frontier expanded in a chaotic and unordered manner, which may have contributed to the agricultural unrest of the post-independence era. Closed for comment; 0 Comments.
- 28 Aug 2008
- Sharpening Your Skills
Sharpening Your Skills: History Matters
Business history is a rich source of knowledge and inspiration for today's executives. Do we pay enough attention to the past? Here are four Working Knowledge articles that provide lessons from history about leaders, leadership, and business organization. Closed for comment; 0 Comments.
- 14 Aug 2008
- Working Paper Summaries
The Agglomeration of U.S. Ethnic Inventors
The higher concentration of immigrants in certain cities and occupations has long been noted. There has been very little theoretical or empirical work to date, however, on the particular agglomeration of U.S. immigrant scientists and engineers. This scarcity is disappointing given the scale of these ethnic contributions and the importance of innovation to regional economic growth. William R. Kerr's study contributes to our empirical understanding of agglomeration and innovation by documenting patterns in the city-level agglomeration of ethnic inventors (e.g., Chinese, Indian) within the United States from 1975 through 2007. It is hoped that the empirical platform developed in this study provides a foothold for furthering such analyses. Key concepts include: Ethnic scientists and engineers are an important and growing contributor to U.S. technology development. The Chinese and Indian ethnicities, in particular, are now an integral part of U.S. invention in high-tech sectors. The data collected and analyzed in this research document with greater detail than previously available the powerful growth in U.S. Chinese and Indian inventors during the 1990s. These ethnic inventors also became more spatially concentrated across U.S. cities. The combination of such growth and concentration helps stop and reverse long-term declines in overall inventor agglomeration evident in the 1970s and 1980s. Closed for comment; 0 Comments.
- 13 Aug 2008
- Research & Ideas
The Inner Life of Leaders
"Even when leaders try to hide and disguise their character, their traits are recognizable to others," says HBS professor emeritus Abraham Zaleznik. His new book, Hedgehogs and Foxes: Character, Leadership, and Command in Organizations, explores the internal complexities of people in control. Plus: Book excerpt. Key concepts include: Hedgehogs know one big thing while foxes know many things. Applied to leadership, hedgehogs reduce reality to one single principle, while foxes are prepared to adapt to a complex view of the world. An individual's character is outwardly represented while it is a product of development, starting with early childhood. Closed for comment; 0 Comments.
- 07 Jul 2008
- Research & Ideas
Innovation Corrupted: How Managers Can Avoid Another Enron
The train wreck that was Enron provides key insights for improving corporate governance and financial incentives as well as organizational processes that strengthen ethical discipline, says HBS professor emeritus Malcolm S. Salter. His new book, Innovation Corrupted: The Origins and Legacy of Enron's Collapse, is a deep reflection on the present and future of business. Key concepts include: Enron's stated purpose was too general to permit disciplined and responsible decision-making in the face of difficulty. The lessons of Enron relate to strengthening board oversight, avoiding perverse financial incentives for executives, and instilling ethical discipline throughout business organizations. Directors of public companies can adapt key aspects of the private-equity governance model to ensure that they fulfill their oversight responsibilities. Incentive systems should reward accomplishments other than economic performance, and penalize failures. Companies can take steps to help senior executives avoid the two sources of leadership failure at Enron: personal opportunism and flights to utopianism. Closed for comment; 0 Comments.
- 04 Jun 2008
- Working Paper Summaries
Accountability and Inequality in Single-Party Regimes: A Comparative Analysis of Vietnam and China
While both China and Vietnam have experienced rapid annual growth over the past two decades, income inequality has risen more rapidly in China than in Vietnam during the same period. Structural and socio-cultural determinants fail to account for these divergent paths, as nearly every variable predicts higher inequality in Vietnam. This paper by Regina Abrami and colleagues focuses on differences in political institutions to explain these divergent paths. In so doing, it contributes to a growing body of literature describing variation in authoritarian regimes, but focuses on variation within one authoritarian regime type. Key concepts include: Compared with China, Vietnam's institutions empower a larger group of insiders and place far more constraints on the party leadership, both through vertical checks and through semi-competitive elections. As a result, Vietnamese economic policies must consider a larger cross section of society. Vietnam spends a far larger portion of its revenue on transfers, and has been able to engender greater equalization among provinces and individuals. It is still too early to tell whether the development paths in China and Vietnam will converge or diverge. Growing income inequality has pressured the Chinese government to shift its focus from promoting all-out economic growth to solving social tensions. Closed for comment; 0 Comments.
- 24 Apr 2008
- Working Paper Summaries
Bank Accounting Standards in Mexico: A Layman’s Guide to Changes 10 Years after the 1995 Bank Crisis
Mexico was the first emerging market compelled to reformulate the financial reporting of its banks as a result of a financial crisis. In the last decade, Mexico has undergone a process of internationalization of its banking industry. Today, more than 80 percent of the equity of Mexican banks belongs to internationally active bank corporations. This internationalization demands more transparent regulation, including standardized accounting rules and better disclosure of information. The case of Mexico can therefore serve as an example of the relevance of these changes, as well as of their scope and limitations. This paper attempts to clarify the nature and structure of the new accounting standards, and explains how they have affected financial statements and their interpretation. Key concepts include: Mexican bank accounting standards enjoyed special treatment during most of the 20th century because banking was an industry protected from foreign competition in a relatively closed economy. More transparent bank accounts and stricter accounting processes in Mexico are especially crucial today, in light of the predominantly foreign ownership of the Mexican banking system. The classification of financial operations still varies from country to country. National differences emerge despite the fact that financial instruments, products, and transactions are either very similar or the same worldwide. Legal and regulatory stipulations, accounting history, tax structure, and local business practices create differences in the way financial transactions are recorded in the financial statements. Closed for comment; 0 Comments.
- 09 Apr 2008
- Research & Ideas
The Matchmaker of the Modern Economy
In the wake of World War II, Georges Doriot helped found the world's first public venture capital firm, American Research and Development. Doriot (1899–1987) was also a professor at Harvard Business School for 40 years. Our book excerpt from Creative Capital: Georges Doriot and the Birth of Venture Capital (HBS Press) describes how ARD first came to "marry" investors and innovators. Key concepts include: A decorated brigadier general, favorite professor, and quirky personality, Georges Doriot shepherded many companies to life before launching American Research and Development (ARD) in 1946. The idea of venture capital was still so new in 1946 that ARD's founders were forced to reengineer aspects of various financial regulatory structures in order to make it viable. World War II was a watershed for entrepreneurialism. Closed for comment; 0 Comments.
- 17 Mar 2008
- Research & Ideas
The Lessons of Business History: A Handbook
Compiling a handbook on the current thinking in any area of study seems daunting enough, but the just-published Oxford Handbook of Business History carries an even larger mission: bring the lessons of business history to current research in other disciplines and to the practice of business management itself. A Q&A with coeditor Geoffrey Jones. Key concepts include: Business historians over recent decades have generated rich empirical data on firms and business systems that can confirm or challenge many of today's fashionable theories and assumptions by other disciplines. Business history has broadened its scope in the last two decades by including research on corporate governance, industrial districts, business groups, business culture, business education, skills training, accounting and information systems, design, and engineering. Historical knowledge helps us to truly understand business, but the growing ahistorical nature of much management and economics literature has seriously compromised its legitimacy. The business history literature is extremely weak in Africa, and not much better in Latin America, many Asian countries, and the Middle East. Closed for comment; 0 Comments.
- 28 Feb 2008
- Working Paper Summaries
Colonial Land Tenure, Electoral Competition and Public Goods in India
How is the impact of historical institutions felt today? This comparative analysis by Banerjee and Iyer highlights the impact of a specific historical institution on long-term development, specifically the land tenure systems instituted during British colonial rule. The paper compares the long-term development outcomes between areas where controls rights in land were historically given to a few landlords and areas where such rights were more broadly distributed. The paper also documents the impact of these differing historical institutions on political participation and electoral competition in the post-colonial period. Key concepts include: There are large differences in the development trajectories of areas that had different land tenure systems under British colonial rule. In particular, areas that were put under the control of landlords lag behind in the provision of public goods such as schools and roads compared with areas in which control rights in land were given to small cultivators. These differences are discernible even four decades after the end of colonial rule, and three decades after the landlord-based land tenure systems were officially abolished. Political participation and literacy levels are lower in landlord areas, but these differences are not sufficient to explain the differences in public goods provision. Closed for comment; 0 Comments.
- 21 Feb 2008
- Working Paper Summaries
Do Legal Origins Have Persistent Effects Over Time? A Look at Law and Finance around the World c. 1900
A significant number of recent papers find legal origins to be strongly correlated with current indices of rule of law, financial development, the regulation of entry and labor, and the concentration of ownership, among other things. Few studies, however, have explored whether correlations between institutions and economic and financial outcomes hold in the past. For this reason, we cannot be certain that the alleged persistence of the effects of these institutions passes the scrutiny of history. This paper examines specifically the relationship between legal origins and financial development by analyzing countries' legal traditions and the extent of investor protections and financial development over time. Key concepts include: Circa 1910, the protection of shareholders did not rely strongly on government or court enforcement of shareholder rights. In many countries, companies reliant on outside financing had to win investor trust by either building good reputations or writing strong protections for small shareholders into their company bylaws. The findings of this paper do not imply that legal origin cannot be a significant explanatory variable of the differences observed in financial development today. Instead, they suggest a need for more research into how shocks of the 20th century triggered a political process that led to state intervention and regulation, which ended up making legal origin matter more. Closed for comment; 0 Comments.
- 14 Feb 2008
- Working Paper Summaries
Laws vs. Contracts: Legal Origins, Shareholder Protections, and Ownership Concentration in Brazil, 1890-1950
The early development of large multidivisional corporations in Latin America required much more than capable managers, new technologies, and large markets. Behind such corporations was a market for capital in which entrepreneurs had to attract investors to buy either debt or equity. This paper examines the investor protections included in corporate bylaws that enabled corporations in Brazil to attract investors in large numbers, thus generating a relatively low concentration of ownership and control in large firms before 1910. The case of Brazil is particularly interesting because, in Latin America before World War I, it boasted the second-largest equity market and largest number of traded companies. As HBS professor Aldo Musacchio shows, the considerable variation of investor protections over time at the country level, and even at the company level, urges cautions against notions about the persistency of institutions, especially of legal traditions. Key concepts include: Many large Brazilian corporations at the turn of the 20th century induced small investors to buy equity by choosing bylaws that distributed power in a more democratic way among shareholders. Maximum vote provisions, and to a lesser degree graduated voting scales, were correlated with lower concentration of ownership and voting power. The shareholder protections in national laws that seem to have mattered most were those that facilitated the private monitoring of corporate activities by requiring corporations to publish important financial information. It is possible for companies to break with the institutional environment in which they operate. It is unlikely that the institutions relevant to the expansion of equity markets and development of large multidivisional corporations were determined hundreds of years ago, either at the time of colonization or when countries adopted their current legal systems. Closed for comment; 0 Comments.
- 25 Jun 2007
- Research & Ideas
HBS Cases: Beauty Entrepreneur Madam Walker
She may have been the first self-made African American millionaire. Born of emancipated slaves, Madam C.J. Walker traveled from the cotton fields to business fame as a purveyor of hair-care products that offered beauty and dignity. Harvard Business School's Nancy F. Koehn and Katherine Miller explain what motivated her triumph. Closed for comment; 0 Comments.
- 15 Jun 2007
- Research & Ideas
Remembering Alfred Chandler
Alfred D. Chandler Jr., who died in May, defined the field of business history and shaped the way we think about the modern corporation. Harvard Business School colleagues share their thoughts on his legacy as well as their personal reminiscences. Closed for comment; 0 Comments.
- 07 May 2007
- Research & Ideas
Rediscovering Schumpeter: The Power of Capitalism
Economist Joseph Schumpeter was perhaps the most powerful thinker ever on innovation, entrepreneurship, and capitalism. He was also one of the most unusual personalities of the 20th century, as Harvard Business School professor emeritus Thomas K. McCraw shows in a new biography. Read our interview and book excerpt. Key concepts include: Schumpeter's ideas on capitalism, entrepreneurship, and innovation still have great resonance to students and businesspeople today. Closed for comment; 0 Comments.
- 28 Feb 2007
- Research & Ideas
Capital Rules: The Tensions of Global Finance
With the start of the new decade, most global financial powers are rethinking a previously powerful trend toward liberalizing global finance. In his new book Capital Rules, Professor Rawi Abdelal charts the intellectual, legal, and political history of financial globalization, and the tensions facing today's world economy. Read an excerpt. Key concepts include: The year 1998 was the closest the world has come to establishing a consensus that capital's right to freedom applies always and everywhere. The world looks different to most financial policymakers in the twenty-first century, with many regions, and the United States in particular, adopting ad hoc measures that benefit their own interests but ignore the lessons learned from financial crises in the 1920s and 1930s. The European Commission is the only recognized international financial authority to support complete, unqualified capital mobility. Closed for comment; 0 Comments.
The Contingent Nature of Public Policy and Growth Strategies in the Early Twentieth-Century U.S. Banking Industry
The effects of public policy on organizations and economic activities have been widely observed. This line of research has contributed to organizational theory by showing the importance of state action for constructing economic systems, as well as firm structures and strategies. But there are a number of reasons why this perspective may in fact overemphasize the importance of public policy. This working paper, forthcoming as an article in the Academy of Management Journal, more fully investigates the contingent nature of the effects of policy on organizations, with the orienting premise that policy is just one of the external conditions that organizations face, and policy effects are more or less powerful to the extent that they are interactive with other elements of the environment. Specifically, the authors focus on how policy that regulated bank branching and other environmental factors affected—independently as well as interactively—the emergence and growth of large-scale firms in U.S. commercial banking from 1896 to 1978. Key concepts include: The histories of firms' external environments may be essential to an understanding of their structure and current success, with implications for organizational theory. Closed for comment; 0 Comments.