HBS Scholarly Articles

This paper presents a model of team learning and tests it in a multimethod field study. It introduces the construct of team psychological safety-a shared belief held by members of a team that the team is safe for interpersonal risk taking-and models the effects of team psychological safety and team efficacy together on learning and performance in organizational work teams. Results of a study of 51 work teams in a manufacturing company, measuring antecedent, process, and outcome variables, show that team psychological safety is associated with learning behavior, but team efficacy is not, when controlling for team psychological safety. As predicted, learning behavior mediates between team psychological safety and team performance. The results support an integrative perspective in which both team structures, such as context support and team leader coaching, and shared beliefs shape team outcomes.

This study examined the work environment for creativity at a large high-technology firm before, during, and after a major downsizing. Creativity and most creativity-supporting aspects of the perceived work environment declined significantly during the downsizing but: increased modestly later; the opposite pattern was observed for creativity-undermining aspects. Stimulants and obstacles to creativity in the work environment mediated the effects of downsizing. These results suggest ways in which theories of organizational creativity can be expanded and ways in which the negative effects of downsizing might be avoided or alleviated.

This qualitative field study explores how geographically dispersed teams learn and accomplish challenging work by drawing on knowledge situated in the multiple physical locales they span. We propose the construct of situated knowledge as important for understanding the learning process in dispersed teams. Data collected on seven development projects, each spanning multiple sites, reveal that situated knowledge is at the same time a valuable resource and a source of communication difficulty for dispersed teams. We find that, because their members understand and participate in locale-specific practices, dispersed teams can easily access and use unique locale-specific knowledge resources to resolve problems that arise in those same locales. However, when dispersed teams need knowledge situated at a site other than where the problem occurred, they must first recognize and adjust for locale-specific practices within which that knowledge is embedded before they can use it. The paper reports on analyses of 44 learning episodes that involved identifying and engaging situated knowledge, and draws from these data to identify implications for research and practice.

We analyze a simple stochastic environment in which policy makers can be threatened by "nasty" interest groups. In the absence of these groups, the policy maker's desire for reelection guarantees that good policies are implemented for every realization of the shock. When pressure groups can harass the policy maker, good policies will be chosen for only a subset of states of nature. Hence, honest and able leaders might implement bad policies, and needed reforms could be delayed. In order to make good policies more likely, the public will want to increase the cost of exerting pressure for "nasty groups" and provide rents to those in power. This last result can be used to explain the existence of political parties. They play a role resembling that of the supervisor in the literature on collusion in hierarchical agency. A rational public may also choose to ignore negative media reports on a politician's personal life and, in general, elect "strong" political leaders. The prevalence of coercive methods of influence helps explain why countries may get to be governed by "inept politicians."

We analyze the disclosure practices of companies as a function of their interaction with the U.S. markets for a group of 794 firms from 24 countries in Asia-Pacific and Europe. Our analysis uses the Transparency and Disclosure scores developed recently by Standard & Poor's. These scores rate the disclosure of companies from around the world using U.S. disclosure practices as an implicit benchmark. Results show a positive association between these disclosure scores and a variety of market interaction measures, including US Listing, US investment flows, export to and operations in the US. Trade with US, however, has an insignificant relationship with the disclosure scores. Our empirical analysis controls for the previously documented association between disclosure and firm size, performance, and country legal origin. Our results are broadly consistent with the hypothesis that cross-border economic interactions are associated with similarities in disclosure and governance practices.

This paper uses the neoclassical growth model to examine the extent to which a tax cut pays for itself through higher economic growth. The model yields simple expressions for the steady-state feedback effect of a tax cut. The feedback is surprisingly large: for standard parameter values, half of a capital tax cut is self-financing. The paper considers various generalizations of the basic model, including elastic labor supply departures from infinite horizons, and non-neoclassical production settings. It also examines how the steady-state results are modified when one considers the transition path to the steady state.

I use a sample of 409 companies that restated their earnings from 1997 to 2001 to examine penalties for outside directors, particularly audit committee members, when their companies experience accounting restatements. Penalties from lawsuits and Securities and Exchange Commission (SEC) actions are limited. However, directors experience significant labor market penalties. In the three years after the restatement, director turnover is 48% for firms that restate earnings downward, 33% for a performance-matched sample, 28% for firms that restate upward, and only 18% for technical restatement firms. For firms that overstate earnings, the likelihood of director departure increases in restatement severity, particularly for audit committee directors. In addition, directors of these firms are no longer present in 25% of their positions on other boards. This loss is greater for audit committee members and for more severe restatements. A matched-sample analysis confirms this result. Overall, the evidence is consistent with outside directors, especially audit committee members, bearing reputational costs for financial reporting failure.

Should the income tax system include a tax credit for short taxpayers and a tax surcharge for tall ones? This paper shows that the standard Utilitarian framework for tax policy analysis answers this question in the affirmative. Moreover, based on the empirical distribution of height and wages, the optimal height tax is substantial: a tall person earning $50,000 should pay about $4,500 more in taxes than a short person earning the same income. This result has two possible interpretations. One interpretation is that individual attributes correlated with wages, such as height, should be considered more widely for determining tax liabilities. Alternatively, if policies such as a tax on height are rejected, then the standard Utilitarian framework must in some way fail to capture our intuitive notions of distributive justice.

In this paper, we examine the economic impact of the Sarbanes-Oxley Act (SOX) by analyzing foreign listing behavior onto U.S. and U.K. stock exchanges before and after the enactment of the Act in 2002. Using a sample of all listing events onto U.S. and U.K. exchanges from 1995-2006, we develop an exchange choice model that captures firm-level, industry-level, exchange-level and country-level listing incentives, and test whether these listing preferences changed following the enactment of the Act. After controlling for firm characteristics and other economic determinants of these firms' exchange choice, we find that the listing preferences of large foreign firms choosing between U.S. exchanges and the LSE's Main Market did not change following the enactment of Sarbanes-Oxley. In contrast, we find that the likelihood of a U.S. listing among small foreign firms choosing between the Nasdaq and LSE's Alternative Investment Market decreased following the enactment of Sarbanes-Oxley. The negative effect among small firms is consistent with these marginal companies being less able to absorb the incremental costs associated with SOX compliance. The screening of smaller firms with weaker governance attributes from U.S. exchanges is consistent with the heightened governance costs imposed by the Act increasing the bonding-related benefits of a U.S. listing.

We present a model of uninformative persuasion in which individuals “think coarsely”: they group situations into categories and apply the same model of inference to all situations within a category. Coarse thinking exhibits two features that persuaders take advantage of: (i) transference, whereby individuals transfer the informational content of a given message from situations in a category where it is useful to those where it is not, and (ii) framing, whereby objectively useless information influences individuals' choice of category. The model sheds light on uninformative advertising and product branding, as well as on some otherwise anomalous evidence on mutual fund advertising.

Many markets encounter difficulty maintaining a thick marketplace because they experience transactions made at dispersed times. To address such problems, many markets try to establish norms concerning when offers can be made, accepted, and rejected. Examining such markets suggests it is difficult to establish a thick market at an efficient time if firms can make exploding offers, and workers cannot renege on early commitments. Laboratory experiments allow us to isolate the effects of exploding offers and binding acceptances. In a simple experiment, we find inefficient early contracting when firms can make exploding offers and applicants' acceptances are binding. (JEL C91, D40, D81)

The paper describes how Harvard Business School's Knowledge and Library Services (KLS) leveraged collective knowledge of its employees in formulating, implementing, and evaluating strategy. The organization was faced with major, disruptive changes in its environment and needed the diverse knowledge and a full engagement of all employees to make a series of strategic shifts. The shifts included integrating KLS products and services with the Harvard Business School research and course development process, developing global scope in information resources and expertise, and trading its role as the guardian of books and buildings for the organizer of the School's priority information assets. In order to achieve that, KLS launched the Environmental Scan Program relying on employees' insights aggregated through social tagging, trend analysis and internal prediction markets tracking emerging trends. KLS also created processes for collective assessment of strategy and a faster way of turning ideas into new products and services. The paper concludes with the assessment of the approach, pointing to a difficult balance between emergent and collective dimensions of strategy process with its formal, structured facets.

We examine who the winners are in science problem solving contests characterized by open broadcast of problem information, self-selection of external solvers to discrete problems from the laboratories of large R&D intensive companies and blind review of solution submissions. Analyzing a unique dataset of 166 science challenges involving over 12,000 scientists revealed that technical and social marginality, being a source of different perspectives and heuristics, plays an important role in explaining individual success in problem solving. The provision of a winning solution was positively related to increasing distance between the solver’s field of technical expertise and the focal field of the problem. Female solvers – known to be in the “outer circle” of the scientific establishment - performed significantly better than men in developing successful solutions. Our findings contribute to the emerging literature on open and distributed innovation by demonstrating the value of openness, at least narrowly defined by disclosing problems, in removing barriers to entry to non-obvious individuals. We also contribute to the knowledge-based theory of the firm by showing the effectiveness of a market-mechanism to draw out knowledge from diverse external sources to solve internal problems.

When powerful people cause harm, they often do so indirectly through other people. Are harmful actions carried out through others evaluated less negatively than harmful actions carried out directly? Four experiments examine the moral psychology of indirect agency. Experiments 1A, 1B, and 1C reveal effects of indirect agency under conditions favoring intuitive judgment, but not reflective judgment, using a joint/separate evaluation paradigm. Experiment 2A demonstrates that effects of indirect agency cannot be fully explained by perceived lack of foreknowledge or control on the part of the primary agent. Experiment 2B indicates that reflective moral judgment is sensitive to indirect agency, but only to the extent that indirectness signals reduced foreknowledge and/or control. Experiment 3 indicates that effects of indirect agency result from a failure to automatically consider the potentially dubious motives of agents who cause harm indirectly. Experiment 4 demonstrates an effect of indirect agency on purchase intentions.