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Henderson, Rebecca

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Henderson

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Rebecca

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Henderson, Rebecca
Author's Publications: search.filters.isAuthorOfPublication.836a8913-60a5-462e-b00f-ee4695a0dbc7

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    Management Practices, Relational Contracts and the Decline of General Motors
    (2014-04-24) Helper, Susan; Henderson, Rebecca
    General Motors was once regarded as one of the best managed and most successful firms in the world, but between 1980 and 2009 its share of the US market fell from 62.6 to 19.8 percent, and in 2009 the firm went bankrupt. In this paper we argue that the conventional explanation for this decline – namely high legacy labor and health care costs – is seriously incomplete, and that GM’s share collapsed for many of the same reasons that many of the other highly successful American firms of the 50s, 60s and 70s were forced from the market, including a failure to understand the nature of the competition they faced and an inability to respond effectively once they did. We focus particularly on the problems GM encountered in developing the relational contracts essential to modern design and manufacturing. We discuss a number of possible causes for these difficulties: including GM’s historical practice of treating both its suppliers and its blue collar workforce as homogeneous, interchangeable entities, and its view that expertise could be partitioned so that there was minimal overlap of knowledge amongst functions or levels in the organizational hierarchy and decisions could be made using well-defined financial criteria. We suggest that this dynamic may have important implications for our understanding of the role of management in the modern, knowledge based firm, and for the potential revival of manufacturing in the United States.
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    Making the Numbers? "Short Termism" & the Puzzle of Only Occasional Disaster
    (2014-11-06) Rahmandad, Hazhir; Repenning, Nelson P; Henderson, Rebecca
    Much recent work in strategy and popular discussion suggests that an excessive focus on “managing the numbers” ―delivering quarterly earnings at the expense of longer term investments―makes it difficult for firms to make the investments necessary to build competitive advantage. “Short termism” has been blamed for everything from the decline of the US automobile industry to the low penetration of techniques such as TQM and continuous improvement. Yet a vigorous tradition in the accounting literature establishes that firms routinely sacrifice long-term investment to manage earnings and are rewarded for doing so. This paper presents a model that reconciles these apparently contradictory perspectives. We show that if the source of long-term advantage is modeled as a stock of capability that accumulates over time, a firm’s proclivity to manage short-term earnings at the expense of long-term investment can have very different consequences depending on whether the firm’s capability is close to a critical “tipping threshold”. When the firm operates above this threshold, managing earnings smoothes revenue and cash flow with few long-term consequences. Below it, managing earnings can tip the firm into a vicious cycle of accelerating decline. Our results have important implications for understanding managerial incentives and the internal processes that create sustained advantage.
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    Making the Business Case for Environmental Sustainability
    (2015-04-06) Henderson, Rebecca
    Can a business case be made for acting sustainably? This is a difficult question to answer precisely, largely because there is no generally accepted definition of the term “sustainability”. Is it acting sustainably to protect the human rights of the firm’s workforce? To invest in education in local communities? To switch to renewable power? All of these actions might improve social welfare, and some of them might improve profitability but they are very different, and the business case for each of them is similarly likely to look quite different. Here I begin to explore the issue by focusing on a more limited question, namely whether a business case be made for acting in an environmentally sustainable way, which I define as acting in any way that reduce a firm’s environmental footprint.
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    Why Do Firms Have “Purpose”? The Firm's Role as a Carrier of Identity and Reputation
    (American Economic Association, 2015) Henderson, Rebecca; Steen, Eric Van den
    Why do so many firms publicly espouse a "purpose" beyond simple profit maximization? And why do so many managers and employees appear to care deeply about this purpose and to believe that it is critically important? In this paper we argue that the conventional answers to this question fail to account for the fact that employees usually care whether the pursuit of purpose is authentic and that the embrace of purpose often affects even employees whose own work is remote from the activities that put the purpose into action. In this paper we propose instead that firms may adopt a socially driven purpose because of how it affects—through the visibility of firm membership and through the visibility of the firm's actions—employee identity and reputation, where we define "identity" as our own beliefs about ourselves and "reputation" as others' beliefs about ourselves.
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    The Real Effects of Relational Contracts
    (American Economic Association, 2015-05) Blader, Steven; Gartenberg, Claudine; Henderson, Rebecca; Prat, Andrea