Friday, March 30, 2012

GREVE Henrich
Correctly Assessing the Value of Our Research to Management Education  Academy of Management Learning and Education 11, 2 (2012) 272-277

Pearce and Huang (2012) suggest that the proportion of actionable articles in management research is low and declining. This reply discusses three reasons that the proportion of actionable articles is actually higher than they claim. First, disaggregation from findings describing samples to individual actors in the sample requires consideration of whether they are different or homogeneous. Second, population and field level outcomes are produced by individual or collective action, and such action is facilitated by knowing how population and field level phenomena work. Third, authors can identify actionable consequences of articles that are difficult to see for researchers without expertise in the topic area.

Thursday, March 29, 2012

TADMOR C., GALINSKY Adam D., MADDUX William
Getting the Most Out of Living Abroad: Biculturalism and Integrative Complexity as Key Drivers of Creative and Professional Success Journal of Personality and Social Psychology 103, 3 (2012) 520-542

The current research investigated how patterns of home and host cultural identification can explain which individuals who have lived abroad achieve the most creative and professional success. We hypothesized that individuals who identified with both their home and host cultures (i.e., biculturals) would show enhanced creativity and professional success compared to individuals who identified with only a single culture (i.e., assimilated and separated individuals). Further, we expected that these effects would be driven by biculturals’ greater levels of integrative complexity, an information processing capacity that involves considering and combining multiple perspectives. Two studies demonstrated that biculturals exhibited more fluency, flexibility, and novelty on a creative uses task (Study 1) and produced more innovations at work (Study 2) than did assimilated or separated individuals. Study 3 extended these findings to general professional outcomes: bicultural professionals achieved higher promotion rates and more positive reputations compared to assimilated or separated individuals. Importantly, in all three studies, integrative complexity mediated the relationship between home/host identification and performance. Overall, the current results demonstrate who is most likely to achieve professional and creative success following experiences abroad, and why.

Wednesday, March 28, 2012

PETRIGLIERI Gianpiero, STEIN Mark
The Unwanted Self: Projective Identification in Leaders' Identity Work
INSEAD Working Paper 2012/40/OB revised version of 2010/107/OB

This paper employs a psychodynamic perspective to examine the development and maintenance of a leader‘s identity, building on the premise that such identity work involves both conscious and unconscious processes. We focus on the latter by suggesting that those in coveted leadership roles may engage in projective identification to shape and sustain an identity befitting those roles. Projective identification is the unconscious projection of unwanted aspects of one‘s self into others, leading to the bolstering of a conscious self-view concordant with one‘s role requirements. Recipients of a leader‘s projections may manage these by projecting them back into the leader or into third parties, which may lead to ongoing conflict and the creation of a toxic culture. We use examples from the Gucci family business to illustrate this process.
PETRIGLIERI Gianpiero, STEIN Mark
The Unwanted Self: Projective Identification in Leaders' Identity Work Organization Studies 33, 9 (2012) 1217-1235

This paper employs a psychodynamic perspective to examine the development and maintenance of a leader’s identity, building on the premise that such identity work involves both conscious and unconscious processes. We focus on the latter by suggesting that those in coveted leadership roles may engage in projective identification to shape and sustain an identity befitting those roles. Projective identification is the unconscious projection of unwanted aspects of one’s self into others, leading to the bolstering of a conscious self-view concordant with one’s role requirements. Recipients of a leader’s projections may manage these by projecting them back into the leader or into third parties, which may lead to ongoing conflict and the creation of a toxic culture. We use examples from the Gucci family business to illustrate this process.

Tuesday, March 27, 2012

ALNUAIMI Tufool, SINGH Jasjit, GEORGE Gerard
Not with my Own: International Collaboration Patterns and Innovative Capabilities in Foreign Subsidiaries of MNCs
INSEAD Working Paper 2012/39/ST

Prior literature has established that international collaboration on R&D is an important means for generating new and impactful ideas through cross-border integration of knowledge. In this study, we show that international collaboration has a long-term effect on the performance of foreign inventors, allowing them to generate high-impact patents and explore new technologies on their own. These positive effects are even more pronounced for inventors from emerging economy subsidiaries. However, we find that new capabilities and skills that foreign inventors are exposed to do not translate to subsidiary-level capabilities. One possible explanation is that foreign inventors with international experience do not develop extensive interpersonal ties with domestic colleagues, favoring instead to collaborate internationally on subsequent R&D projects.

Monday, March 26, 2012

BART Yakov, STEPHEN Andrew T., SARVARY Miklos
Determinants of Mobile Advertising Effectiveness: A Field Experiment
INSEADWorking Paper 2012/38/MKT

Mobile advertising is one of the fastest growing advertising formats, with U.S. spending in 2011 estimated at $1.2 billion and global spending forecasted to reach over $20 billion by 2015. Interestingly, despite the rapid penetration of sophisticated handsets a growing proportion of mobile advertising spending consists of display advertising, which is known for its limited capacity for the transfer of information. This paper examines why and under what conditions such “low-fidelity” mobile display advertising is effective in increasing consumers’ purchase intentions. We draw on consumer psychology to identify these conditions and verify our hypotheses in a field experiment involving 54 national mobile display advertising campaigns that ran between 2007 and 2010 and involved 27,753 participants. Our results indicate that low-fidelity mobile advertising campaigns are effective when they are for products that trigger further thought and consideration, which includes campaigns for high (versus low) involvement products, and for products that are seen as more utilitarian (versus more hedonic).

Wednesday, March 21, 2012

DRAKE David F., KLEINDORFER Paul R.,
VAN WASSENHOVE Luk N.
Technology Choice and Capacity Investment Under Emissions Regulation
INSEAD Working Paper 2012/37/TOM/ISIC revised version of 2010/93/TOM/ISIC

We study the impact of emissions tax and emissions cap-and-trade regulation on a firm's long-run technology choice and capacity decisions. We study the problem through a two-stage, stochastic model where the firm chooses capacities in two technologies in stage one, demand uncertainty resolves between stages (as does emissions price uncertainty under cap-and-trade), and then the firm chooses production quantities. As such, we bridge the discrete choice capacity literature in Operations Management (OM) with the emissions-related sustainability literature in OM and Economics. Among our results, we show that a firm's expected profits are greater under cap-and-trade than under an emissions tax due to the option value embedded in the firm's production decision, which contradicts popular arguments that the greater uncertainty under cap-and-trade will erode value. We also show that improvements to the emissions intensity of the \dirty" type can increase the emissions intensity of the firm's optimal capacity portfolio. Through a numerical experiment grounded in the cement industry, we find emissions to be less under cap-and-trade, with technology choice driving the vast majority of the difference.

Tuesday, March 20, 2012

PERESS Joel
The Media and the Diffusion of Information in Financial Markets: Evidence from Newspaper Strikes
INSEAD Working Paper 2012/36/FIN

This paper investigates the causal impact of the media in financial markets by exploiting exogenous media blackouts resulting from national newspaper strikes in several countries. Trading volume falls 14% on strike days. Stock volatility is also reduced, especially within the day, during which it falls by 9%. These effects are stronger for small firms. Moreover, the power of lagged stock returns for predicting current returns of small firms vanishes on media strike days, consistent with newspapers propagating news from the previous day. These findings demonstrate that the media influence the stock market by increasing the speed with which information diffuses across investors, and is impounded into stock prices.
MAHROUM Sami
Innovation Policies and Socio-economic Goals: An Analytic-diagnostic Framework
INSEAD Working Paper 2012/35/IIPI

Quite often, innovation policy is called upon to bring about innovations that could provide solutions to socio-economic problems such as low productivity, regional economic regeneration, environmental, defence or health-related matters. Around the world, governments have outlined ambitious plans to drive innovation and move towards a knowledge driven economy. These strategic plans are comprised of distinct sub-goals related to ICT, education, infrastructure and many other intermediate goals. However, there are obstacles that may prevent policy makers from achieving these goals. Thus, innovation policies are often called upon to effectively solve two “problems”, firstly broad socioeconomic challenges, such economic growth, and secondly barriers and constraints associated with achieving socio-economic goals. In effect, these constraints are ‘intermediate problems’ that prevent achievement of socio-economic goals. Once the intermediate problems are identified, standard economic analysis is often deployed to design instruments of intervention such as subsidies, tax breaks or investments. While innovation policy makers have a plethora of tools to resolve these intermediate problems, they lack tools to link these intermediate problems with broader socio-economic problems. This paper introduces an analytic-diagnostic framework to equip policymakers and analysts with a tool that helps them develop innovation policies designed around socio-economic outcomes. This framework has been coined OCRIO- Outcomes, Constraints, Rationale, Intervention and Objectives.

Friday, March 16, 2012

CALDWELL David, ANCONA Deborah, BRESMAN Henrik
Teamwork from the Inside Out in Contemporary Organizational Behavior in Action, K. Elsbach, C. Kayes, and A. Kayes (eds.), Pearson Forthcoming
HAIYANG Yang, CARMON Ziv, KAHN Barbara, MALANI Anup, SCHWARTZ Janet, VOLPP Kevin, WANSINK Brian
The Hot-Cold Decision Triangle: A Framework for Healthier Choices Marketing Letters 23, 2 (2012) 457-472



People often behave in ways that are clearly detrimental to their health. We review representative research on unhealthy behaviors within a parsimonious framework, the Hot-Cold Decision Triangle. Through this framework, we describe how when people embrace colder state reasoning—instead of risking the pitfalls of heuristics and visceral reactions—they are more likely to behave healthily. We also illustrate how some heuristics and visceral urges can be leveraged to encourage healthier choices. We conclude by discussing unexplored research directions, as well as substantive implications for individuals, marketers, and policymakers.

Thursday, March 15, 2012

MAHROUM Sami, ALSALEH Yasser
Demand-led Related Diversification: Green Construction in the GCC as a Prospective Case
INSEAD Working Paper 2012/34/IIPI

Economic diversification is high on the governmental agenda of many natural resourcebased economies. The Gulf Cooperation Council (GCC) region is a case in point, as the governments there are making substantial investments in high-tech industries such as semiconductors, the aerospace industry and clean energy technologies. Diversification towards knowledge-based economies, particularly those spurred by technological innovation, has become a prominent objective for all governments of the region. Since these sectors are at present almost absent, governmental plans have focused largely on the supply side, particularly in making the necessary investments in high-tech industries and clusters. This paper argues that little attention has been paid by the GCC governments to the role of the ‘demand side’ in driving economic diversification and industrial renewal. Most efforts have, so far, focused on creating new industries from scratch as opposed to building on existing capabilities. This paper brings together the notions of demand-led innovation and related variety to suggest a new economic diversification policy model for the GCC region, namely ‘demand-led related diversification’ (DLRD). It does that through examining the case of the burgeoning green construction industry. More specifically, the paper argues that the green construction industry presents an attractive opportunity to drive economic diversification through a DLRD policy model. Using insights from the field of innovation studies in general and demand-led innovation in particular, the paper suggests that the green construction industry has a strong potential to become the main vehicle for economic diversification and industrial renewal in the region, provided that the GCC governments adopt demand-led innovation strategies.

Wednesday, March 14, 2012

KIM Sang-Hyun, NETESSINE Serguei
Collaborative Cost Reduction and Component Procurement under Information Asymmetry
INSEAD Working Paper 2012/33/TOM revised version of 2011/107/TOM

During development of an innovative product there is often considerable uncertainty about component production cost, and it is of interest for both the manufacturer and the supplier to engage in a collaborative effort to reduce this uncertainty and lower the expected cost. Despite the obvious benefits this brings, the supplier may be reluctant to collaborate as he fears revealing his propri- etary cost information. We investigate how information asymmetry and procurement contracting strategies interact to in‡uence the supply chain parties’incentives to collaborate. We consider a number of procurement contracting strategies, and identify a simple strategy, Expected Margin Commitment (EMC), that effectively promotes collaboration. The manufacturer prefers EMC if collaboration leads to a large reduction in unit cost and/or demand variability is low. Otherwise, a screening contract based on price and quantity is preferred. We also find that, paradoxically, ex-post efforts to enhance supply chain efficiency may hinder ex-ante collaboration that precedes production.

Tuesday, March 13, 2012

KIM Sang-Hyun, NETESSINE Serguei
Collaborative Cost Reduction and Component Procurement under Information Asymmetry Management Science 59, 1 (2013) 189-206

During development of an innovative product there is often considerable uncertainty about component production cost, and it is of interest for both the manufacturer and the supplier to engage in a collaborative e¤ort to reduce this uncertainty and lower the expected cost. Despite the obvious benefits this brings, the supplier may be reluctant to collaborate as he fears revealing his propri- etary cost information. We investigate how information asymmetry and procurement contracting strategies interact to influence the supply chain parties’incentives to collaborate. We consider a number of procurement contracting strategies, and identify a simple strategy, Expected Margin Commitment (EMC), that effectively promotes collaboration. The manufacturer prefers EMC if collaboration leads to a large reduction in unit cost and/or demand variability is low. Otherwise, a screening contract based on price and quantity is preferred. We also find that, paradoxically, ex-post efforts to enhance supply chain efficiency may hinder ex-ante collaboration that precedes production.
CUI Zhijian, HASIJA Sameer
Vendor Selection, Contract Efficiency, and Performance Measurement in Service Outsourcing
INSEAD Working Paper 2012/32/TOM revised version of 2011/07/TOM

This study compares the efficacy of some commonly observed vendor selection and contracting mechanisms with respect to two key challenges in service outsourcing: vendor selection and contract efficiency. We show that competitive bidding yields good selection but contract inefficiency (positive information rent paid by the client); in this process, the winning vendor's bid constitutes the terms of the contract between client and vendor. We then show that if instead the client establishes the contract terms then the "menu" it designs yields contract efficiency but poor selection. In one particular case - namely, when the client establishes the contract terms and may work with a previously nonselected vendor if the first vendor reneges - it is possible to attain good selection and contract efficiency. We also highlight the implications of performance-based contracts in services.
BHATTACHARYA Shantanu, GABA Vibha, HASIJA Sameer
The Role of Milestone-based Contracts for Coordinating R&D Partnerships
INSEADWorking Paper 2012/31/TOM/OB revised version of 2011/95/TOM/OB

We analyze optimal contractual arrangements in a bilateral R and D partnership between a risk-averse provider that conducts early-stage research, followed by a regulatory verification stage, and a risk-neutral client that performs late-stage development activities, including production, distribution, and marketing. The problem is formulated as a sequential investment game with the client as the principal, where the investments are observable but not verifiable. The model captures the inherent incentive alignment problems of double-sided moral hazard, risk aversion and holdup. We compare the efficacy of milestone-based options contracts and buyout options contracts from the client's perspective, and identify conditions under which they attain the first-best outcome for the client. We find that attaining the first-best outcome is easier for the client when the provider has some bargaining power in renegotiation, and milestone-based options contracts attain the first-best solution in a wider range of cases than buyout options contracts.

Monday, March 12, 2012

HÄMÄLÄINEN Timo, KOSONEN Mikko, DOZ Yves L.
Strategic Agility in Public Management
INSEAD Working Paper 2012/30/ST revised version of 2011/110/ST

The current volatile environment and the sovereign debt crisis in Europe and the US call for a new policy approach. Traditional public sector bureaucracies and strategic planning and budgeting performed well in the more stable environment of the post-war decades. This paper explores how public administrations and governments can develop strategic agility in this new environment by fostering strategic sensitivity, resource reallocation fluidity and collective commitment among senior officials. Empirically, it draws on the experience of Finland, Scotland, and several other countries in making their governance more strategically agile.
CHAN Tian Heong, MIHM Jürgen, SOSA Manuel
A Structured Approach to Identifying Styles in Designs
INSEAD Working Paper 2012/29/TOM

A style is a set of designs that are visually similar to each other, yet distinctive from designs in other style sets. This paper presents a structured approach to identifying styles using cluster analysis. The basic premise of our approach is to build a similarity relationship between designs based on the idea that new designs ”cite” previous ones; they can be thought of as a recombination of past designs. Designs that draw from a common pool of previous designs are likely to be very similar. A style is formed by a set of highly similar designs. We apply a graph clustering algorithm to a dataset of 365,444 US design patents (from year 1976 to 2009) to group designs into styles. Design patents provide a good platform for our approach, in that both the visual aspects of the design as well as citation information are captured in the patent documentation. We test the output of our clusteringbased approach with two experiments using human subjects. We find that the outputs from the algorithm and the human subjects are in agreement in the sense of mismatch (i.e., if forced to group elements into a given set of clusters, humans and the algorithm make the same choices). We also found empirical support for the methods of how the clustering algorithm decides on the number of clusters. Implications for research on design theory are discussed.
WANG Tan, STING Fabian J., MIHM Jürgen
On the Effectiveness of Patenting Strategies
INSEAD Working Paper 2012/28/TOM

What patenting strategy should a company pursue? What factors should the choice of strategy depend on? Although di erent management, economics and engineering disciplines have conducted research on patents, little work has addressed normative questions around formulating appropriate patent strategies. In this paper we identify technology complexity, industry clock speed and the competitive dynamics of the industry as critical contingencies for formulating patenting strategies; we build a coherent inventory of patenting strategies and we integrate it into a common coherent framework. Through a simulation model, we identify competitive dynamics as the most crucial contingency and within our framework we characterize the optimal patenting choices. Our research makes a step towards a contingency theory of patenting strategies.

Tuesday, March 6, 2012

KINIAS Zoe, BIVOLARU Eliza
Women’s Beliefs about Men’s Identification Influence Perceptions of Sexism, Anger, and Professional Desirability
INSEAD Working Paper 2012/27/OB

This paper proposes a new theoretical model of women’s responses to strongly versus weakly identified men by drawing from theories of intergroup relations and perceptions of sexism. One content analysis and four experiments examined women’s ideas about strongly versus moderately and weakly identified men. These studies showed that women see strongly identified men as more sexist (Studies 1-5), more angering (Studies 1, 3, 4, and 5), and less professionally desirable (Studies 1, 3, 4, and 5) than moderately or weakly identified men. The proposed model was supported using three different methods (content analysis and two experimental paradigms), and potential alternative explanations were ruled out—women’s own identification (Studies 2-5), men’s masculinity (Study 4), and men’s prototypicality and entitativity (Study 5) did not explain the effects of male identification. Women’s perceptions of male identification mediated the effects of manipulated male identification on women’s perceptions of sexism (Study 5). Implications are discussed.
GABA Vibha, BHATTACHARYA Shantanu
Aspirations, Innovation, and Corporate Venture Capital: A Behavioral Perspective Strategic Entrepreneurship Journal6, 2 (2012) 178-199

Corporate venture capital (CVC) is increasingly viewed as an important mechanism for external R&D that can help fuel innovation, growth, and strategic renewal opportunities for established firms. However, despite the popularity of CVC units, the conditions prompting decision-makers to adopt and retain such units are not well understood. In this study, we examine when and why firms pursue CVC units to tap external markets for new ideas and technologies. We draw insights from the behavioral theory of the firm to argue that innovation performance relative to aspirations is a crucial driver of its decision to pursue CVC units, and we test our arguments by examining both the adoption and termination of CVC units for a sample of firms in the information technology sector during the period 1992– 2003. Results show that a firm is more likely to adopt and less likely to terminate a CVC unit when its innovation performance is closets to its aspiration levels. Furthermore, innovation performance relative to social rather than historical aspirations is a better predictor of CVC adoption and termination. This study contributes to the technology entrepreneurship literature by demonstrating that managerial aspirations for innovation-related goals are an important driver of CVC initiatives within firms.
BRIDWELL-MITCHELL Ebony N., MEZIAS Stephen J.
The Quest for Cognitive Legitimacy:Organizational Identity Crafting and Internal Stakeholder Support Journal of Change Management 12, 2 (2012)

Securing the support of internal stakeholders is a fundamental organizational pursuit, one that is especially difficult during periods of organizational change. One reason for this difficulty is that employees’ conceptions of the organization’s identity do not correspond with managers’ desired images for the future organization. Consequently, employees view new organizational endeavours as having little cognitive legitimacy. The current work presents a conceptual framework for understanding the extent to which employees’ conceptions of organizational identity can be transformed by managerial communication strategies. We argue that the transformation of employees’ conceptions of organizational identity depends on managers using communication strategies that are unique to the distinctive legitimacy management domain of gaining cognitive legitimacy from internal stakeholders. We refer to the relevant set of strategies as organizational identity crafting and explore the mechanisms through which organizational identity crafting may transform organizational identity.
DYER Jeffrey H., GREGERSEN Hal B., CHRISTENSEN Clayton M.
Best book on Innovation and Entrepreneurship at CMI Awards
The Innovator's DNA Harvard Business Review Press(2011)
CASANOVA Lourdes, KERTESZ Suzana
Brasil: Um perfil resumido, 2011 (Portuguese)
© 2011 INSEAD Case Study
Translation © 2012 INSEAD

Trata-se de um perfil conciso do Brazil, a maior economia da América Latina. Faculta informações sobre a sua história, políticas, política estrangeira, sociedade e economia. Faculta ainda alguns dados sobre o país: geografia, economia, PIB, comércio, população e sociedade bem como a qualidade de vida.

Pedagogical Objectives: Fornecer informações básicas sobre o país com vista a compreender o contexto em que as multinacionais investem no país e/ou funcionamento das empresas brasileiras.
CASANOVA Lourdes, KERTESZ Suzana
Brasil: Un perfil breve, 2011 (Spanish)
© 2011 INSEAD Case Study
Translation © 2012 INSEAD
Se trata de un breve perfil de Brasil, la mayor economía de América Latina. Proporciona información sobre su historia, política, política exterior, sociedad y economía. También ofrece algunos datos sobre el país: geografía, economía, PIB, comercio, personas y sociedad, y calidad de vida.

Pedagogical Objectives: El objetivo es proporcionar información básica sobre el país con el fin de comprender el contexto en el que tienen que operar las multinacionales que invierten en el país y/o las empresas brasileñas.
BHATTACHARYA ShantanuHASIJA Sameer, HUYBRECHT Glenn
Supply Chain Structural Change: Pharmaceutical Industry
©2012 INSEAD Case Study
Also available: Teaching Note

The case investigates the impact of the increasing trend of pharmaceutical firms to outsource core research activities to biotech firms and other contract research organizations. The fluid nature of supply chain design in evolving industries is highlighted, and robust supply chain policies to respond to this evolution are proposed.

Pedagogical Objectives: This case is intended to demonstrate the evolving nature of supply chains that include the R&D function in an industry where R&D is considered the mainstay of competitive advantage. The case illustrates how global upheaval in the life sciences industry has forced pharmaceutical firms to search for alternate innovative business models to compete in a globalized world.
BHATTACHARYA ShantanuHASIJA Sameer
The Bullwhip Phenomenon in the Management of an Oil Refinery
©2012 INSEAD Case Study
Also available: Teaching Note

The case examines the impact of variability in demand and the supply chain on the operations of an oil refinery. The impact of external financial metrics by other stakeholders in the refinery is discussed, and policy measures for the improvement of the operations of the oil refinery are proposed.

Pedagogical Objectives: The objective of the case is to describe a real life situation in the oil industry, where the financial standards the refinery is held to dictate its inventory and supply chain management policies. it analyses the impact of negotiating more meaningful measurement techniques with the agencies on the operations and the financial stability of the oil refinery. The case illustrates the importance of aligning incentives on supply chain performance in the oil industry.
BHATTACHARYA Shantanu, SWARUP Ashish
Infineon Wireless IC Division
© 2012 INSEAD Case Study
Also available: Teaching Note

The case describes the outsourcing of manufacturing services to a contract manufacturer and the subsequent focus on design of a MNC in the semiconductor industry. Challenges of execution in the outsourcing of such projects are discussed, and the need for close integration of design and manufacturing is explored.

Pedagogical Objectives: The intent of this case is to investigate the efficiency and potential of contract manufacturing as a strategic option for a firm that is oriented towards product design. The case provides a rich framework to ask questions pertaining to sustainable competitive advantage in design if manufacturing is outsourced, and looks at effective ways of managing the design-contract manufacturing interface.
AGGARWAL Vikas A., BALZE Pascale
Siraj Capital: Investing in SMEs in the Middle East
© 2012 INSEAD Case Study

In 2009, Siraj Capital is deciding whether to invest in Tower United Contracting Company, a telecom infrastructure provider based in the Kingdom of Saudi Arabia. The protagonist needs to evaluate the risks associated with the investment, as well as the value that Siraj Capital brings to the deal.

Pedagogical Objectives: To introduce students to the particular challenges associated with investing in the context of the Middle East. The case can be used in courses on venture capital and private equity, in particular sessions focused on emerging market investments.
RANGAN Subramanian, WEIDINGER Matthias
Building Cost Competitiveness at the New Philips: The Need for Collaborative Leadership
© 2012 INSEAD Case Study

This case investigates how Philips became a globally integrated enterprise - how it “de-risked” its business and internationalized its supply chain (moving most production from Europe to Asia). The objective is to highlight the factors and analysis involved in “location cost economics.” (The case is developed around the leadership of INSEAD alumna and board member Barbara Kux.)

Pedagogical Objectives: The case objective is to explore foreign sourcing and to highlight production, transaction and location cost economics in the geographic configuration of economic activities. It allows outlocating and outsourcing to be discussed in a familiar industry context (with a familiar company). It also explores key dilemmas that a vertical multinational must address: Where to locate economic activities? Which economic activities are suitable for out-locating? What about outsourcing?
CAMPOS FILHO Luiz Alberto, CASANOVA Lourdes, VEROL Marc
Weg (parts A & B)
© 2012 INSEAD Case Study
Also available: Teaching Note

The case analyses Weg's internationalization strategy and its knowledge management process following a series of acquisitions in 2010 and 2011. The company, which started out in the electric motor segment in Brazil and then aggressively internationalized, faces new challenges in industrial and commercial automation, uninterrupted power supply systems and wind power. A pressing issue is whether to maintain the existing process for acquiring and disseminating knowledge in the face of Weg’s increasingly global scope and in the new segments where it now operates. Case A presents a brief profile of the electric motor industry, Weg’s competitors and its internationalization strategy, while Case B focuses on knowledge management, a key success factor of internationalization.

Pedagogical Objectives: The case provides a unique perspective on the following issues: 1) Evaluation of an internationalization strategy . 2) Weg's model for building a global company. 3) How to survive and expand internationally in times of crisis. 4) Acquisition and management of knowledge as a key success factor of internationalization.

Monday, March 5, 2012

BHATTACHARYA Shantanu, GUPTA Alok, HASIJA Sameer
Single Sourcing versus Multisourcing: The Role of Effort Interdependence, Metric-Outcome Misalignment, and Incentive Design
INSEAD Working Paper 2012/26/TOM

We compare two strategies for outsourcing the development of information services projects: multisourcing and single-sourcing. We model these sourcing strategies when incentive contracts are based on a verifiable project metric that may or may not be aligned with the project outcome. We also model the interdependence of client and vendor efforts so that the verifiable metric may or may not be separable in these efforts. When the verifiable metric and the project outcome are aligned, single-sourcing performs better than multisourcing if the client and vendor efforts are interdependent, and as well as multisourcing if the efforts are independent. When the metric and outcome are misaligned: (i) multisourcing performs better than single-sourcing if the client effort is independent of the vendor efforts; (ii) the choice of sourcing strategy is nuanced based on the trade-off between the degree of misalignment and moral hazard if the client and vendor efforts are interdependent.