Raphael Amit - Faculty Research in Knowledge@Wharton

Facebook's Future on the Open Market

Wed, 25 May 2011 16:03:17 EST

Within the next year, Facebook is expected to follow LinkedIn's lead and become a public company. Beyond speculation about what LinkedIn's recent successful IPO means for Facebook or other social media companies like Zynga, Groupon and Twitter, experts wonder whether going public will require a level of transparency from Facebook that could expose its weaknesses.

Israeli Venture Capital: Between a Rock and a Hard Place

Tue, 11 Jan 2011 15:59:29 EST

The VC industry, once lauded in Israel for its ability to launch a rich stream of high-tech start-ups, has been hurt on two fronts of late: Firms in the sector cannot raise money for new funds and they also can't easily exit from existing investments via IPOs. The question is whether this painful squeeze is merely part of a cyclical slump or representative of something more far-reaching. The doomsday scenario, according to some industry experts, is that future high-tech start-ups will not need the VC industry as much as before.

The Herd Mentality: Uncertain Returns Raise Questions About the Payback for Cleantech Investment

Wed, 27 Oct 2010 13:14:17 EST

Using tax credits, low-interest loans and grants, the Obama Administration reportedly plans to invest more than $50 billion in electric vehicles, renewable energy and a host of other clean technology -- or "cleantech" -- ventures by the end of next year. But to what extent is today's fast-paced investment in cleantech a victim of irrational exuberance and the herd mentality often associated with venture capitalism? Quite a lot, say experts at Wharton and in the larger investment community.

In Search of Capital: The Outlook for Start-ups in 2010

Wed, 29 Sep 2010 15:30:23 EST

On the face of it, 2010 looks like a bad time to start a new business. Early stage capital, whether it is venture funds, angel investors or bank loans, remains tight. And while technically the recession has passed, consumers and businesses are still keeping a tight hand on their wallets. Despite the obstacles, however, start-up formation has increased recently, possibly due to laid-off workers deciding to pursue their entrepreneurial dreams. For those who can find creative solutions to the financing challenge, starting a new business now may turn out to be perfect timing.

'A Major Transformation': The Pros and Cons of the Dodd-Frank Act

Tue, 11 Jan 2011 15:59:19 EST

According to Wharton experts, the Dodd-Frank Wall Street Reform and Consumer Protection Act is a good start toward future financial stability, but they warn that significant concerns remain unaddressed, and stress that the details of implementation must be handled carefully to avoid creating new problems. "I don't think there's a full appreciation of the major transformation of the financial structure that is upon us," one faculty member says.

Mid-life Crisis? Venture Capital Acts Its Age

Wed, 21 Jul 2010 15:16:28 EST

The venture capital community is showing signs of middle age -- moving more slowly and cautiously than before, and hitting fewer home runs than it did in younger, leaner days. As a result, experts say, the sector is having trouble producing the robust performance long associated with it. This means investors need to look at venture capital, and its impact on their portfolios, in a new way.

Private Equity: 'Is the Golden Age Behind Us?'

Wed, 14 Jul 2010 14:25:25 EST

Before introducing the panelists taking part in a session during the recent Wharton Global Alumni Forum in Madrid called "Relaunching Private Equity," moderator Raffi Amit summarized the challenges that both venture capital and private equity face at a time when investors have become more conservative, returns are down, and transactions have declined in both volume and value. Panelists offered their views on the new investment climate, and suggested strategies for coping with today's tough economic environment.

Saying Goodbye: New Exit Strategies for Today's Venture Capitalists

Wed, 03 Mar 2010 15:50:03 EST

Venture capitalism is not what it used to be. The bountiful returns of the dotcom years are long gone and venture capital (VC) firms are now struggling to exit their investments via initial public offerings or mergers and acquisitions. Also, a new regulatory landscape is threatening to hinder rather than help the industry's recovery, and the companies that VCs invest in require watertight strategies for major growth. VC experts highlighted these issues and others during a recent panel discussion titled, "Business Exits in the Current Economic Environment," which took place at Wharton's campus in San Francisco. The industry has had "pretty big body blows," one panelist noted. But, the speakers agreed, it's time to move on.

Starved for Financing: Is There Relief in Sight for U.S. Small Businesses?

Wed, 28 Oct 2009 17:19:29 EST

President Obama's recent move to funnel more credit to small businesses comes at a time when a fragile recovery appears to be underway in that sector. If Congress approves Obama's plan, the measures would enable community banks to borrow at low rates from the Treasury Department's Troubled Asset Relief Program, so long as the banks show they are increasing lending to small enterprises. Still, most small businesses continue to hunker down: Last month, a survey by the National Federation of Independent Business found that expansion plans for small businesses were at a 35-year low. How quickly will conditions improve for a sector that generates two-thirds of all new jobs in the U.S.?

SFOs in Action: How the Richest Families Manage Their Wealth

Wed, 14 May 2008 17:05:58 EST

For many of the world's richest families, SFOs -- Single Family Offices -- play an essential role in their investment strategy. SFOs manage the family financial portfolio and often provide other services, such as handling children's college applications or managing the family fleet of jets. Up until now, however, little has been known about these powerful entities. Yet new Wharton research shows that they play an important role in managing major investment portfolios, guiding significant philanthropic endeavors and maintaining a core set of values across generations of extremely wealthy families.

For New CEO John Donahoe, 'It's eBay's Game to Lose'

Wed, 06 Feb 2008 15:51:11 EST

On January 29, online auctioneer eBay unveiled plans to revamp the fees it charges sellers, reduce fraud and increase the volume of transactions. It's the first move by CEO-elect John Donahoe, who will take over the reins of eBay on March 31 in the wake of long-time CEO Meg Whitman's announcement that she plans to step down. Donahoe's mission is to reinvigorate a company that remains dominant in online auctions, but is vulnerable to increased competition from both large and small rivals. Wharton faculty and others offer Donahoe a game plan for moving forward.

In Global Entrepreneurship, One Small Initiative Can Make One Huge Difference

Wed, 31 Oct 2007 13:49:19 EST

Entrepreneurs love to grumble about the roadblocks and delays created by bureaucrats. Government officials, they say, are slow, bumbling and concerned only about sticking to the rules and clocking out at 4:55 p.m. But in a study of global entrepreneurship, Raffi Amit and Mauro Guillen, both Wharton management professors, have found that a simple, if smart, bureaucratic initiative mattered critically in determining a country's level of entrepreneurship.

Venture Capital Firms Set Their Sights on New Ideas -- Not New Technologies

Wed, 08 Aug 2007 15:43:21 EST

Fast-growing social networking site Facebook and mobile messaging service Twitter didn't introduce break-through technologies, but they have become phenomenal success stories nonetheless. Increasingly, "web 2.0" companies like these are altering the traditional venture capital formula, which used to count technology differentiation as a key requirement when evaluating new targets. In many cases, technology has become a commodity, but a big idea can go a long way provided there's a rapidly growing audience. As VC firms look for new investments, several questions come into play: How should companies be evaluated when they rely on technology that is easily replicated? How much value does a big audience carry? What is the preferred exit strategy? Wharton faculty and VC experts weigh in on these and other questions.

Playing Favorites -- Romantic or Otherwise -- Is a Messy Game in the Workplace

Wed, 08 Aug 2007 15:43:21 EST

This spring, World Bank president Paul Wolfowitz was forced out after being accused of arranging a big raise and promotion for a woman with whom he was having a relationship. As anyone who works in an office knows, though, favoritism isn't confined to love and sex: Family relationships and close friendships can upset co-workers' sense of fairness, too, and end up undermining an organization's performance. What's the solution? There's no one answer, according to Wharton faculty and other experts, but companies would be well-advised to keep their rewards systems transparent and to have clear policies regarding conflicts of interest.

Many Family Firms Rely on a Largely Invisible CEO -- Chief Emotional Officer

Wed, 27 Jun 2007 13:13:32 EST

When your family business involves an extended network of 52 family shareholders, as it does for Bukit Kiara Properties, a Malaysian real estate development firm, simply pulling everyone together for family dinner can be hard work. But N.K. Tong, who co-founded Bukit Kiara with his father, says there's just one person to call: "My auntie." Tong's aunt plays a role some scholars describe as "chief emotional officer," an informal position usually filled by a family member or close advisor. But the topic is not as warm and fuzzy as it sounds: Not only can the job be stressful, it can fall by the wayside as businesses are passed on to succeeding generations.

Private Equity Is on a Roll, but Are Investors in for a Let-down?

Wed, 10 Jan 2007 15:27:02 EST

With private equity investors of all types flush with cash -- from venture capitalists and hedge funds to large leveraged buyout (LBO) firms such as The Blackstone Group and The Carlyle Group -- private financing hit record levels in 2006 and is likely to remain strong in the new year, according to Wharton faculty and industry analysts. Nearly a third of the dollar value of all U.S. acquisitions last year involved private equity firms, up from 3% five years ago. But just how long can this boom continue, and what changes may be in store for private equity models?

Indian Companies Are on an Acquisition Spree: Their Target? U.S. Firms

Wed, 13 Dec 2006 15:19:43 EST

Reliance Gateway Net, VSNL, Scandent and GHCL aren't exactly household names in the U.S., but they may be signs of bigger things to come. These are only a few of the growing number of Indian businesses that have acquired U.S. firms in the past few years. And the U.S. merger-and-acquisition activity is just part of a bigger picture. Indian companies -- usually quietly, but sometimes with media fanfare -- have been on a buying spree in continental Europe, Great Britain and Asia in attempts to become key players in global markets.

Dos and Don'ts for Entrepreneurs, from Those Who Have Actually Done It

Wed, 13 Dec 2006 15:19:43 EST

Fortune 500 companies claim to be "entrepreneurial," as do charities and government agencies. Members of many Washington think tanks dub themselves "policy entrepreneurs." Even children who mow lawns and run lemonade stands get the "entrepreneur" label. But as the term has come into wide use, its meaning has gradually eroded, leaving open the question of who entrepreneurs really are and what distinguishes their ventures from conventional ones. The recent 2006 Wharton Entrepreneurship Conference invited a group of, well, entrepreneurs to debate the issue.

Our Annual Challenge: Pick the Winner Out of 'Eight Great' Business Plans

Wed, 03 May 2006 15:07:25 EST

The 2006 Venture Finals of Wharton's Business Plan Competition offered participants, judges and the audience an opportunity to peer into the future by surveying potential startups. It was a chance to see what aspiring, ambitious entrepreneurs believe will be the next hot discovery. At this year's competition, healthcare companies -- ranging from medical-device makers to a creator of artificial muscles -- grabbed five of the eight finalist slots. The other three finalists included a virtual call center, an online mortgage broker and a company that would replace credit cards with fingerprints. Read on, and see if you have a nose for the next "new new thing."

Why Is Microsoft Afraid of Google?

Wed, 19 Oct 2005 16:43:39 EST

In the few short years of its existence, Google has come a long way, simultaneously striking fear in the hearts of major players in the computer industry and also arousing their curiosity. While the company is keeping all competitors on their toes, it poses a special threat to one particular company -- Microsoft. Why? Because Google's existing and potential products -- as well as those of other firms -- raise the specter that Microsoft may witness an erosion of its control over the platform for the next generation of software application development, according to Wharton faculty members who follow the technology sector. Just how serious is this threat and what is Microsoft doing to combat it?

After Months of Acrimony, an Outbreak of Brotherly Love at Reliance

Wed, 13 Jul 2005 15:36:49 EST

Last week peace returned to Reliance, India's largest business group with $23 billion in annual revenues, after a settlement was hammered out between Mukesh and Anil Ambani, the two warring brothers at its helm. As part of a deal blessed by their mother, Kokilaben Ambani, Mukesh will control the group's oil, petrochemicals and natural gas businesses, while Anil takes over the telecommunications, power and financial services companies. The settlement enormously relieved millions of Reliance shareholders -- and stocks in India rose to record highs. As the reorganization process gets underway, the Ambani brothers have announced aggressive plans for growth. Experts point out, however, that the Ambani saga offers important lessons on the need for family-owned businesses to set up effective processes for communication, conflict management and resolution.

Investors in the Middle East Will Find that Reforms, While Slow, Are Coming

Wed, 01 Jun 2005 16:46:18 EST

The Middle East region can, in several respects, claim a number of advantages over other areas. It has substantial financial assets, a strong resource base, 300 million people who share a common language and tradition, a history of entrepreneurship that goes back thousands of years, and a strategic location between the East and West, according to Wharton finance professor Richard Herring. "But it also has substantial problems," added Herring, who was the moderator of a panel session entitled "Regional Capital Markets and Investment Opportunities" at the recent Wharton Global Family Alliance conference in Dubai. Herring and conference participants discussed recent developments in the Middle East.

Family Business: Why Firms Do Well When Founders Are at the Helm

Wed, 03 Nov 2004 15:18:15 EST

Despite the lack of independent directors on their boards and voting power for minority shareholders, family-run companies are still the better bet for all stakeholders as long as the firm's founder is involved as chief executive officer or chairman. If the descendent of a founder runs the company, value is lost. Those are some of the conclusions of a paper by Wharton Professor Raphael (Raffi) Amit and Harvard Business School Professor Belen Villalonga. The paper, titled "How Do Family Ownership, Control and Management Affect Firm Value?" also looks at corporate governance. Among its findings: While family companies often lack independent directors and give insiders more voting power, they still manage to score higher on corporate governance than non-family companies.

Is the Latest Corporate Bankruptcy Strategy a Death Knell for Pensions?

Wed, 06 Oct 2004 15:59:56 EST

Chapter 11 filings by US Airways and United Airlines, and the possibility of other airlines following them into court, bring new attention to bankruptcy reorganization as a management strategy. For example, is bankruptcy a last-ditch effort to salvage a firm passing through a temporary rough patch, or is it a way to get rid of long-standing pension obligations to employees? Wharton professors and bankruptcy experts look at this issue and others, including the dangers that companies face during bankruptcy, and recent economic conditions that may push a growing number of firms into bankruptcy court.

Lessons from Google's IPO

Wed, 20 Oct 2004 15:04:30 EST

Google's initial public offering, on the surface, seems to be a success. The company did raise $1.67 billion by going public at $85 a share, and the stock went up 15% on the first day of trading. Experts at Wharton and elsewhere say, however, that it's too early to issue a verdict. They add that Google's IPOs offers useful lessons to company executives and investors alike.

A Growing Corporate Club: The Founding Felon

Wed, 25 Aug 2004 14:35:51 EST

Along with Martha Stewart, some of the biggest names in the current wave of corporate criminal cases are company founders – Kenneth Lay of Enron, Bernie Ebbers of WorldCom, John Rigas of Adelphia Communications, Steve Madden, founder of the shoe company that bears his name, and Sam Waksal of Imclone Systems. While most founders are never even summoned to court, they have a deep connection to their companies, making those firms especially vulnerable if their founders turn out to be felons, according to Wharton faculty and other experts.

What's Behind the Overseas Forays of U.S. Online Giants?

Wed, 28 Jul 2004 12:53:59 EST

EBay has taken over Baazee.com in India. Yahoo has launched Yisou, a search engine, in China. Google has acquired a stake in Baidu, a Chinese search engine. What's driving the international expansion plans of these Internet companies? More importantly, will the business models of these U.S. companies lend themselves to being exported and transplanted overseas? Experts at Wharton and elsewhere note that localizing a global business can be a daunting challenge - but if handled right, the payoff can be huge.

SAP, Microsoft and the Coming Consolidation in Software

Wed, 14 Jul 2004 17:19:54 EST

Even the most jaded journalists ‑ who scorn press releases ‑ knew there was a hot story in the separate handouts issued June 7 by Microsoft and SAP. Microsoft, the world’s largest maker of software for personal computers, last year had approached Germany’s SAP, a leading enterprise software company, about a potential merger, but the preliminary talks were discontinued this spring, said the dry-as-dust announcements. The news sparked a buzz throughout the technology world, and for good reason. Wharton faculty members and other academics say that it was as good an indication as any that the software industry is ripe for consolidation. They differ, however, on whether SAP needs to link up with a major partner in order to thrive. And some suggest that a SAP-Microsoft merger may not be a dead issue.

The Buzz on Google's IPO

Wed, 19 May 2004 14:34:20 EST

By any measure, there is much to admire about Google - its business model, its laser-like customer-focus, its ability to generate revenues and profit. And yet, with the company’s recently announced plans to go public, Google-watchers also see some formidable obstacles ahead, such as increased competitive challenges from Microsoft, Yahoo! and others. Even the act of going public, observers say, is not without possible drawbacks: a relinquishment of some managerial control, for example, and the need to devise ways to generate more revenue without alienating legions of loyal users. In short, the hottest show in Silicon Valley is ready to roll, and its long-term future is anybody’s guess.

Becoming the Best: What You Can Learn from the 25 Most Influential Leaders of Our Times

Wed, 11 Feb 2004 15:44:09 EST

To celebrate the 25th anniversary of Nightly Business Report, the most watched daily business program on

U.S.

television, Wharton and NBR this month announced their list of the 25 most influential business leaders of the past 25 years. Andy Grove, co-founder of Intel, won the No. 1 position, but the list also included Bill Gates, Warren Buffett, John Bogle, Jeff Bezos, Jack Welch and Oprah Winfrey, among others. Can these leaders' attributes help you become a better business leader in your own organization?

Silicon Valley's Resurgence: Is It for Real?

Wed, 11 Feb 2004 15:44:09 EST

A string of Silicon Valley technology companies recently reported better than expected fourth-quarter earnings. Many tech shares are trading at 52-week highs. Venture capitalists are reading business plans. And the highly anticipated initial public offering of search-engine Google is raising hopes that riches will once more rush into Northern California . How deep is the recovery and what would it take to derail it?

In Asia, the Venture Capital Business Has Two Sides

Thu, 22 Jan 2004 11:18:06 EST

While Asian entrepreneurs are eager for venture-capital investments from firms in the

United States

and Western Europe, and Western investors are ready to enter the booming Asian economies, for now the two sides often circle each other warily or, at best, proceed awkwardly. The reasons for that, according to members of a panel on venture capital and entrepreneurship at last month’s Wharton Asia Business Conference, range from cultural differences to lack of available deals to lack of trust.

What Is Google Worth?

Wed, 03 Dec 2003 14:56:54 EST

The prospect of uber-search engine firm Google Inc.'s considering an initial public offering seems to have Wall Street salivating. But how sound is Google's business model in the face of partners-turned-possible-competitors? Can Google emerge as a viable company with sustainable long-term revenues? Experts at Wharton weigh in on whether Google's strengths -- its technology and brand -- can offset economic and financial risks.

Does Sun, Burned by Competition, Need a New Business Model?

Wed, 22 Oct 2003 13:48:09 EST

The clouds over Sun Microsystems are thickening as the company continues to struggle against competition from cheap, open systems offered by Dell, and from IBM and Hewlett-Packard in high-end business systems. While many tech companies have felt the pain of the drought in information technology spending, Sun � a manufacturer of servers and proprietary networking software based in Santa Clara, Cal. � seems to be suffering more than most. What should Sun do, and is CEO Scott McNealy the one to do it?

Family Ties: Succession Seen Through a Successor's Eyes

Wed, 27 Aug 2003 00:00:00 EST

All around the world, family-owned firms dominate business. Like monarchies, one of the thorniest problems they face is succession: Less than 15% of family firms survive under family control after the third generation. How can such companies manage the succession process more smoothly? While most consultants approach this question from the founders' perspective, Knowledge@Wharton examines the successor's eye-view of the issues.

The Post-War Future of Iraq and Its Abundant Oil Reserves

Wed, 09 Apr 2003 00:00:00 EST

Now that the U.S. and its allies have fought their way to Baghdad, what are the prospects for Iraq�s economy? About the surest prediction one can make is that the journey from economic basket case to a free-market-style system will be long, tough and uncertain, according to interviews with Wharton faculty and others. Oil revenues in recent years have fallen far short of their potential, the country has no capital markets or impartial judicial system, and its debt burden is staggering, thanks to the war with Iran and the invasion of Kuwait. Yet a healthy Iraq is crucial. As one observer notes, �the more stable the region, the less terrorism we will see,� not just in the U.S., but also in the Middle East.

Middle East: When Peace Comes, Revival and Reconstruction Will Follow

Wed, 26 Mar 2003 00:00:00 EST

The assault on Iraq by the U.S. and its allies is curtailing economic activity throughout the Middle East as tourism and business travel plummet, consumer spending is put on hold and investment uncertainty deepens. But when the war ends, the reconstruction in Iraq will lead to billions of dollars of spending on infrastructure as well as opportunities for entrepreneurs in the region. Indeed, the Middle East could become more attractive to foreign capital -- but only if the Israeli-Palestinian conflict is resolved and the region grows more stable and democratic.

U.S.: A Drawn-Out Conflict Will Pound the Economy, Prolong the Slump

Wed, 26 Mar 2003 00:00:00 EST

Initial expectations that the war in Iraq would end quickly drove U.S. stocks up by more than 8% and sparked hopes that the three-year bear market was over. But after a weekend of discouraging news, U.S. stocks have plunged and the dollar had its biggest drop against the euro in eight months. Wharton professor Jeremy Siegel predicts that if the war ends in three or four weeks, as the markets seem to expect it will, stocks could go up by 10%. If not, watch out for more economic troubles, predict Siegel and other Wharton professors.

Is It Time for Companies to Go Private?

Wed, 14 Aug 2002 00:00:00 EST

The stock market is deep in the dumps, but the silver lining in today�s weak economy is low interest rates. Shouldn�t that make it more attractive for companies, unable to raise money in the equity market, to go private or to stay that way? Experts at Wharton point out that while going � or remaining � private does offer some benefits, entrepreneurs shouldn�t overlook the costs.

How Soon Will the IT Spending Slump End?

Wed, 31 Jul 2002 00:00:00 EST

Much of corporate America is slamming on the brakes when it comes to information technology spending. And the forecast for the rest of 2002 isn�t very upbeat. Reasons include a surplus of software and hardware from past purchases, disappointment with earlier-generation IT systems and an uncertain economy. Problem is, by reducing IT expenditures too much, firms can end up also reducing their ability to stay competitive.

Lessons from Softbank�s Hard Knocks

Wed, 10 Apr 2002 00:00:00 EST

The misfortunes of Tokyo-based Softbank and its CEO Masayoshi Son mirror those of the whole venture capital industry, which threw money into money-losing startups when the tech sector sparkled with glamour. Since the mid-1990s, Softbank invested in some 600 tech firms. But the decline of Softbank is not just an object lesson in bubble investing. It may also offer pointers to the way out.

More on Microsoft: A Window on the AOL/Microsoft Rivalry

Wed, 04 Jul 2001 00:00:00 EST

A federal appeals court ruling on June 28 halting the breakup of Microsoft only underscores the difficulties that companies face in trying to compete with the omnipresent software giant. In our story below, we focus on why and how the rocky five-year AOL/Microsoft partnership finally unraveled on June 16.

Unemployed Dot-commers: Desirable Execs or Damaged Goods?

Wed, 09 May 2001 00:00:00 EST

In today�s tough economy, people who once worked for dot-coms now find themselves pounding real pavements in search of work. How difficult will it be for these people, especially those in top management positions, to find new jobs? Will their dot-com experience count for them or against them? If they previously worked for traditional companies, will old-economy employers be willing to hire them back? Wharton management professors and executives in the recruitment and outplacement industries offer their opinions.

Wharton Faculty Wish-list for George W. Bush

Wed, 17 Jan 2001 15:21:20 EST

There is little doubt that President-elect George W. Bush will have to hit the ground running once he is sworn into office on Jan. 20. A convergence of factors � ranging from leftover election rancor to a divided Congress to a newly sluggish economy - means Bush will have an unusually short honeymoon. Knowledge@Wharton asked Wharton faculty members to identify the most important issues � related to their own fields of expertise � that the new administration should address.

Creating Value Through E-Commerce Business Models

Thu, 28 Sep 2000 08:46:52 EST

As businesses strive to implement innovative web-based initiatives, they increasingly will have to pay attention to e-commerce business models. What exactly is a business model, how does it differ from a revenue model, and why is it so important? Raffi Amit, co-director of the Wharton e-Business Initiative, and Christoph Zott, his co-author from INSEAD, answer these questions and more in a new paper called �Value Drivers of E-Commerce Business Models.� They also develop a framework to analyze how effectively e-commerce business models help create value.