Gilles Lafforgue has been appointed member of the Commission on the Economy of Sustainable Development (CEDD) of the French Ministry of Ecological Transition. The title of qualified personality for his economic expertise was awarded to him in this context. Very involved in the research sphere in terms of sustainable development and recognized for his economic expertise, this professor-researcher at TBS Education had participated in the French Carbon Commission from 2017 to 2019. His involvement and the recognition of his high skills are confirmed with this new appointment.

The role of the Commission on Sustainable Development Economics

The CEDD was created on November 10, 2020 at the initiative of the French Prime Minister and the French Minister of Ecological Transition. It succeeds the Economic Council for Sustainable Development. The CEDD provides assistance to French public decision-making on sustainable development from an economic perspective.

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The mission of this consultative commission is to provide insight into the fields of the environment, energy and climate, transportation and housing. To do this, it relies on the analysis of statistical data and the comparison of economic analyses, the development and evaluation of public policies in these areas.

The objective of the “Environment” group

The professor-researcher will participate more specifically in the work of the “Environment” group, whose objective is to examine and discuss the economic accounts of the environment (monetary and physical flows relating to natural environments, natural resources, the circular economy, or the reduction of emissions and consumption).

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[su_pullquote align=”right”]By Ingrid Molderez and Kim Ceulemans [/su_pullquote]
Will our future business managers be able to tackle sustainability challenges? Can art contribute to acquiring sustainability competencies in management education? Our study explored the power of art to foster systems thinking, one of the key competencies of sustainability, and to help business students think more creatively about divergent views on sustainability.

Thirty years after the Brundtland Commission popularized the concept of sustainable development, the issue has become more urgent than ever. Global challenges such as climate change, loss of biodiversity, poverty and migration are omnipresent and are affecting everybody in spite of place and time. There are no easy or instant solutions, but education plays an important role in raising awareness on sustainability and in how to respond to these challenges.

Paul Shrivastava, an influential management and sustainability scholar, argues that education for sustainability requires more than just cognitive understanding. We need alternative ways of teaching that incorporate physical and emotional engagement (Shrivastava, 2010). However, pedagogical approaches that combine head, heart and hand are rare in management education. Management students are used to studying topics that immediately impact the knowledge and skills that they will need in a business context. Spiritual and/or creative ways of teaching are nearly absent. Yet, this is what we focused on in our research. We used art as a pedagogical way to enrich the whole person, to encourage critical and creative thinking around sustainability and we explored how management students react to this.

The concept of sustainability brings the importance of interconnections between human beings and nature back to the surface. The boundaries that have been created as splitting forces between humans and their environment have to be perceived as binding again, so that we can see ourselves again as functioning in togetherness. Changing towards sustainability generates intense emotions and at the same time, intense emotions are needed to be able to make a change towards sustainability. Art generates and encourages emotions, triggers our criticism and challenges our comfort. In relation to systems thinking and sustainability, art can help us to regain focus on the connections and interdependences of our systems.

In our study, we exposed management students to paintings during their Master’s level corporate social responsibility course. We did not especially focus on artists that use their art to criticise the negative environmental impacts human beings have. We opted for painters who are not known for their ecological engagement, but whose artwork makes us reflect upon the role human beings have in society. René Magritte’s painting Les Jours Gigantesques was a source of inspiration and reflection to help them think about and discuss boundaries as connecting and disconnecting forces in a sustainability context.

After class, we surveyed the participating students to study their receptiveness towards art in a management course. We explored whether they found art relevant to study three aspects of systems thinking, i.e., the system/environment relationship, thinking in patterns and relationships, and understanding the interactions between system and environment. For each of these aspects, the majority of the surveyed students agreed that art can be very relevant to discuss such issues. The students noted that using art was helpful for showing different points of view, that it facilitated understanding the topic from another perspective, and that it helped them to see the importance of connections within sustainability.

In this study, the majority of the students were receptive for using art because it acts as an eye opener and makes them think differently about sustainability. Nevertheless, some students were also very critical, because they had a fixed idea about art, i.e. only being relevant for an exhibition about sustainability rather than in a more abstract way to understand or discuss sustainability. They thought that showing pictures about what is really happening in the world would be more effective. However, it has to be underlined that art cannot be used in a functional way, as this goes counter to the core concepts of what art is about. Hence, we were not looking for a causal relationship between using art and effectively learning about sustainability, but we intended to explore ways to connect head, hand and heart in management education.

What can we learn from this research?

While management education is known for its functionalist approach, we should remember that business students can be receptive to alternative learning methods. Using paintings can be a relevant method for explaining sustainability topics, encouraging critical thinking, and adopting a holistic approach by triggering their creativity. Art can help students to think critically about sustainability concepts addressed in class, and shows them that there is space for different approaches and interpretations of such complex concepts.

Higher education has an important role to play in sensitising students towards sustainable development, and in helping them to develop competencies for addressing sustainability issues. Art and artists have a gift to make people think in a critical way, to go beyond boundaries, to initiate emotions which are all very relevant if we want to change our mindset on a topic (such as sustainability). Higher education could consider no longer reserving art for students in art-related disciplines, but to surpass the strict boundaries between disciplines. Art can be inspirational for every discipline and is worthy of a place in every study programme, including disciplines that are perceived as less receptive, such as management, engineering, law among many others.

[su_spoiler title=”Methodology”] This article was originally published at Economists Talk Art, based on: Molderez, I. & Ceulemans, K. (2018). The power of art to foster systems thinking, one of the key competencies of education for sustainable development. Journal of Cleaner Production, 186, 758-770. [/su_spoiler]

[su_pullquote align=”right”]By Sylvie BORAU[/su_pullquote]
The negative effects of exposure to advertising female models on women’s self-esteem and body satisfaction are now well known. But a new negative effect of advertising female models has been uncovered: they can be perceived as real sexual competitors by female consumers and trigger indirect aggression.

Female advertising models are highly physically attractive as well as ultra-thin, digitally-edited, and portrayed in a sexually provocative manner (for example, with pouting lips and arching hips). As a result, they represent formidable competitors. Of course, women know that they are very unlikely to meet these unreal threatening competitors in real life. But this knowledge does not stop them from considering these virtual models like real sexual competitors. Recent research I conducted with Jean-François Bonnefon from Toulouse School of Economics, investigated the consequences of this imaginary competition.

In a first series of studies, we asked 452 female respondents to answer online questionnaires. Female respondents were first exposed to the picture of either an ideal model (highly physically attractive, very thin, and adopting a sexually provocative attitude) or a non-ideal model (moderately attractive, average size, and with a non-provocative attitude). Then respondents answered some questions related to their reactions to the model. Results showed that women exposed to the ideal model expressed more mate-guarding jealousy (e.g., they were worried that their mate would leave them for a woman like this model), they expressed more derogatory comments (such as bullying, fat-shaming, or slut-shaming), and they expressed more social exclusion of their imaginary rival (e.g., they wouldn’t be friends with a woman like this model). In sum, female viewers engage in an imaginary intrasexual competition against ideal advertising models, targeting them with the same aggressive strategies they would use toward real-life rivals.

We then ran an additional study to identify which physical characteristic triggers indirect aggression. Does the provocative attitude of the models or their thin body size activate these aggressive strategies? To answer that question, we cross-manipulated the body size of the model and her provocative attitude. That is, female respondents were either exposed to a thin and provocative, a thin and non-provocative, an average size and provocative, or an average size and non-provocative female model. We found that the provocative attitude of the models, and not their thin body size, was the characteristic that triggered viewers to engage in indirect aggression. This is an important result, given the attention that the media put on the models’ body size, rather than on her provocative posture.

But why is the provocative posture of the models more likely to trigger intrasexual competition and indirect aggression than their thin body size? This is surprising considering the current obsession of women and the media for thinness. Further analyses suggested that female viewers engage in these aggressive strategies because the provocative attitude of the model – and not her thin body size – communicates an intention to seduce men, an intention to elicit men’s sexual desire, and, potentially, an intention to poach men. As in daily life, a sexually provocative attitude communicates confidence about one’s sex appeal, as well as flirtatiousness, sexual availability, and promiscuity. No wonder women feel threatened by provocative female models: they represent a menace to their current or prospective romantic relationships.

In daily life, when facing a menace to their romantic relationships, women usually experience jealousy. Jealousy is an emotion that warns the individual that an action must be taken to protect their current or prospective mate from a potential rival. And indirect aggression is women’s main action against female rivals and mate poachers. It involves the use of derogation and social exclusion. Our research shows indeed that women engage in indirect aggression when they are exposed to provocative female models, and do so regardless of the body size of the model displaying the attitude.

So, when advertisers feature a sexually provocative female model in their advertisements, they insidiously promote a culture of female bullying based on slut-shaming and social exclusion. Indeed, we have seen that the mere exposure to a sexually charged and provocative model is enough to activate Intrasexual competition and indirect aggression, as if female viewers were exposed to real-life rivals. We can imagine then that repeated media exposure to such imaginary rivals surely reinforces patterns of indirect aggression way beyond what would be expected from daily interactions with actual women, for at least two reasons: First, the use of sexually provocative models in advertising is pervasive. Second, the level of sexual provocativeness of models in advertising far exceeds the level of flirtatiousness performed by women in daily life.

To sum up, our research suggests that the use of sexually provocative models needlessly reinforces and fosters a culture of indirect aggression among women, fueling the alarming trends of Intrasexual bullying and slut shaming. Considering the unrealistic number of sexually provocative models in the media, women might be frequently subjected to these bouts of Intrasexual competition.

To curb the detrimental impact of sexual provocativeness in advertising, it would be wise to contain its pervasiveness and to avoid the most vulnerable consumers to be overly exposed to such ads. Because exposure is inevitable though, we recommend educating young audiences about these unintended effects – as young audiences are both more targeted by sexual appeals and more vulnerable. We do not recommend eradicating sexual provocativeness from advertising though, as banning these advertisements would be tantamount to giving a politically correct and archaic representation of women. However, consumer-advocate organizations, media watchdogs, and concerned citizens have a large role to play, both for raising public awareness and for incentivizing companies to maintain responsible practices.

This article was originally published in Brand Quarterly Magazine (January 2018).

[su_pullquote align=”right”]By Jean-Marc Décaudin and Denis Lacoste[/su_pullquote]
Selling services requires a very different approach to selling products. Services are intangible, and they are often produced and consumed simultaneously. Services cannot be stocked. It’s very difficult to maintain consistent quality and the customer is involved in the production of the service, which isn’t the case for tangible goods.

Marketing specialists started to consider these differences in the 1980s. Two French researchers, Pierre Eiglier and Eric Langeard, created the concept of “Servuction”, a neologism created from the words Service and Production, and which underlines the need for a specific approach to managing non-material goods. Since then, much work has been done in the field of services marketing, echoing their growing role in wealth- and job-creation. The goal of the research is to help managers in the banking, air transport, rental, health and wellbeing and other sectors, to consider the specifics of consumption and production that are driven by the characteristics of the different services.

Research focussed in particular on the field of advertising communications. There are many questions to be put to marketers, the main one being: how do you communicate something that can’t be seen, touched, smelled, heard, or tasted? Advertisers also had to work out how to communicate an experience which is perceived differently by different customers and whose quality can’t be guaranteed to be identical in all places and at all times. Coming up with communication axes which rest on objective technical characteristics – for cars, computers, TVs – is relatively easy. It’s a lot harder to communicate the type of experience on offer in an amusement park, on a dating site, or even in a university.

So the issue facing advertisers is how to successfully express what a service is, to represent it to a potential client in a manner powerful enough to make him or her notice the brand, become interested, and want to try out the service. Specialists have identified five key strategies. Businesses are advised to communicate:
• About the consumer benefits (price and performance)
• About the customer (testimonies drawn from customer reviews)
• About the customer-facing staff (focus on skills, the quality of customer relations)
• About the hardware associated with the service (the quality of the planes for air transport, equipment and supplies for a diving club or a ski resort)
• About its corporate image with a focus on the company’s values and commitments

How well the strategies work has been very little investigated, and most studies have focussed on only one communication strategy, so their usefulness to advertisers is limited.

That’s why our research aimed to test the effectiveness of each of the various communication axes by exposing customers to a series of adverts, each using a different axis. The results show that the effectiveness of the advert is hugely dependent on the dominant axis.
In the two sectors under study (banking and tourism), the most effective adverts are those that emphasise the customer. It could be a laughing child riding the Mine Train in Disneyland, a family eating out together at McDonald’s or a happy couple moving into their first home thanks to a mortgage agreement. The presence of a customer in the advertising reassures the consumer because it causes them to identify with someone who appreciates the service. We know that customer reassurance is fundamental in the service sectors, where risk is perceived as being high. In both the sectors, emphasising the physical dimension of the service also seems to be a very effective strategy (although a little less so than the first). The three other advertising axes under study are of far more limited effect, either on one of the two sectors, or on a single effectiveness variable.

The results of this research are useful for businesses in the service sector as well as to advertisers, because they give them specific elements with which to create new campaigns. Care is nonetheless called for because the results could be different in a different cultural context, in a different advertising format, or in other sectors.

[su_spoiler title=”Methodology”]The study looked at 50 press adverts in two markedly different sectors: banking (25 adverts) and tourism (25 adverts). Each ad chosen uses one of the communication axes (competitive advantage, contact staff, customers, physical dimension, brand image). In each of the two sectors, 5 different adverts using the same axis were used in order to limit the influence of creativity on the interviewees’ assessment of the product. The sample was made up of 249 respondents who were questioned online. Each respondent evaluated 25 adverts. 1245 evaluations are therefore available: 620 for banking and 625 for tourism. For each advert, a series of 22 questions were asked to measure attention level, how interesting the ad was, understanding the message, the level of curiosity sparked, attitude to the advert and the brand, and finally the impact of the ad on purchasing intentions.[/su_spoiler]

This research was published in the Journal of Marketing communications (2016) under the title “Services advertising: Showcase the Customer!” ».

[su_pullquote align=”right”]By Pierre-André Buigues[/su_pullquote]

Despite significant state aid, the French meat sector is losing ground against other European countries which are also in the Eurozone. Indeed, it’s the European market which has caused the deterioration of France’s position, and not globalisation, China, or other emerging economies.

No matter which sector we look at – poultry, pork or cattle – French meat farmers are in difficulties compared with their European competitors.
The French pork market : Production is markedly down, from 25.5 million pigs a year in 2000 to 21 million in 2016. Over the same period, it went up in several other European countries. In 2000, France and Spain were producing pigs at the same rate, whereas today Spain is producing 46 million pigs a year. France is now a net importer of pork products. The sector’s competitiveness has been eroded due to high costs and lack of investment.
The French cattle industry : France was the biggest European producer of beef in 2015: 1.49 million tons compared with Germany’s 1.12 tons and the UK’s 0.9 tons. 79% of the meat consumed in France was also produced there. Imports are essentially European. However, the average income of cattle farmers is among the lowest in the farming sector and is projected to decline steeply. In 2014, a typical cattle farmer’s earnings after tax were 22% below the average over an extended period (2000-2013).
The French poultry sector has also seen a drop in production over the last decade. France used to be the second biggest exporter of poultry in the world, but today it imports 40% of the poultry it consumes. The country has a trade deficit with other European countries in terms of both volume and value, and this deficit continues to deepen. The majority of French imports come from other European countries, with far less coming from non-European countries like Brazil or the USA.

Why are we seeing such a serious deterioration in the French meat sector?
We will look at the two main factors behind the decline: Le refus français d’une industrialisation de la filière viande, d’où des économies d’échelle insuffisantes.
France’s resistance to the industrialisation of its meat sector, and hence insufficient economies of scale: France has always supported family farms but the international meat markets are high-volume markets where price is the determining factor. Unlike the French domestic market where quality is highlighted by labels (red label – farm quality) and constitutes a competitive advantage, on the international market, price is key. While Germany has positioned itself as a producer of cheap and standardised meat products with an “industrial” image, France has a “gourmet” image and premium products. Unfortunately, at this stage in its development, the international meat market, whose growth is being powered by emerging countries, has little interest in quality. Cost is therefore the strategic variable for success on the international markets, so the French sector is paying the price for high costs and an absence of economies of scale.

In the pork production sector, the average size of a pig farm in France is between 1,000 and 2,000 pigs, as against Denmark and Holland, whose farms average 2,000 to 5,000 pigs. Moreover, between 2000 and 2010, the average size of a pig farm has grown by 98% in Denmark, by 37% in the Netherlands, by 29% in Spain and by only 16% in France. Finally, German abattoirs often exceed 50,000 pigs slaughtered annually. In France, what is needed is far fewer abattoirs and comprehensive modernisation.

In the beef and lamb sector, France is likewise suffering from the small size of its farms. The lawsuit taken against the only French farm with 1,000 cows (ultra-modern farm with a giant facility to produce energy from cattle waste via a methanizer and fitted with solar panels), shows how hostile French public opinion is towards industrialised farming.

In poultry production, French farms are far more numerous and also far smaller than German ones: German, Dutch and British poultry farms are the biggest in Europe, with an average volume above 60,000. In France, more than half of all poultry farms have a capacity of between 1,000 and 10,000, because of the importance of quality and origin labels (Red Label, organic, Appellation d’Origine Contrôlée), whose product specifications limit the size of buildings.

With farm sizes which don’t allow for economies of scale, and with labour costs well above some of its European competitors, the French animal agriculture sector is in great difficulty and is losing market share.

An avalanche of costly production standards and over-regulation compared with European norms

Stringent regulation is an indisputable factor in the economic difficulties facing the French meat sector. (2)
Often complicated and sometimes incomprehensible, these regulations place a very heavy administrative burden on farmers. A Senate report estimated that an average farmer spends 15 hours a week on office work. There are two main reasons for the relatively high cost of these production standards in France.

First and foremost, farms in France are, as we have seen, smaller than in European competitor countries. They therefore don’t possess the human or financial means to assimilate and implement these standards. Second, regulations often change in this sector, environmental standards are more and more exacting and require significant investment.

What does the future hold for French meat farming?

European farming is no longer just a sector regulated by the Common Agricultural Policy, but a competitive sector. In order to develop French meat farming, there are two possible strategies:
Strategic development of a quality-oriented farming sector : How can we find enough outlets for a high-end product with strong export branding to allow small farms to survive with high costs? There is a model in the French wine sector where prices are, on average, twice as high as the competition, and yet which still hold their own. This “high-end” strategy could save French farming. However, it will involve considerable investment in marketing and the international distribution chain.
Strategic development of intensive, low-cost farming : How can production costs be reduced? By heavy restructuring, and the elimination of uncompetitive “small farms”. Massive investment would also be needed to create ultra-modern farms, with state agencies fostering fully automated mega-farms – a far cry from today’s situation.
Is there a middle way? Xavier Beulin, former president of the FNSEA (the French farmers’ union) has estimated that investment to the tune of 6 billion Euros will be needed “to develop a third way between industrial farming and diversity, high-tech and diversified farming, organic and robotic farming”.

[su_spoiler title=”Methodology”]References: Elie Cohen et Pierre-André Buigues « Le décrochage industriel », Fayard, 2014; and Pierre-André Buigues, « Refonder l’agriculture française » Journée de l’économie, Jeco , Lyon, Novembre 2016 [/su_spoiler]

[su_pullquote align=”right”]Par Yuliya Snihur[/su_pullquote]

In the construction of a corporate identity for their business, creators of innovative start-ups have to simultaneously highlight their distinctiveness and also show that they belong to a pre-existing category of similar businesses. The objective is to reach “optimal distinction” which means finding a balance between an identity which is distinct from other businesses, and a “group” identity where they can show they belong to well-established business category. This balance is important if starts-ups are to grow their reputation and legitimacy.

To be unique but not too unique, that is the dilemma. A business’s first few years of existence are critical for the construction of its identity. It’s a period when creators make strategic choices which they must implement rapidly so that the business project survives and develops, but whose consequences are difficult to modify over the long term. The aim is to highlight the distinctiveness of the business while reassuring potential customers and partners about its normality. This balance is what’s known as “optimum distinction”. To succeed, a midway point has to be found between being unique, which contributes to the reputation of the firm, and the need to be like the others, to belong to a pre-existing and recognised group or category, which delivers legitimacy.

In search of optimum distinction

The challenge of building a corporate identity is something all new businesses have to face, but it’s even more intense for innovating companies with new business models, ie, a way of running their business which breaks away from existing practices in their sector. By definition, start-ups have no history or track record and are unknown to the general public, who have no frame of reference or benchmarks to rely on when it comes to trust.

What this study seeks to identify is the means by which innovating start-up companies build their reputation and legitimacy in the eyes of the public. To answer this question, we have analysed the way in which four young businesses built their identity. All four had introduced new business models, but each belonged to a different market sector: health, restaurants, digital services and the hotel sector. The results reveal four specific actions that were present in every case: these are storytelling, the use of analogy, seeking accreditation or reviews, and the establishment of alliances or partnerships. On the basis of these results, we have come up with a theoretical model which shows the link between each action taken and its consequences for the business’s corporate identity as perceived by the public, each action tending to influence both the reputation and the legitimacy of the firm.

Self-affirmation and external recognition

The first two actions are the sole responsibility of the creator and are linked to the way the business proclaims or declares itself from the start. Storytelling describes the genesis of the enterprise and gives it meaning. If it highlights individual experience or the personality of the creator, it will have an influence the reputation of the firm; if it highlights a social issue, like sustainable development, it will be more likely to establish its legitimacy. Analogies, on the other hand, allow the firm to explain its contribution by comparing it to other players in other sectors, close to or distant from the firm’s own activity. When the players are from the same sector, we speak of a local analogy whose aim is to build up the firm’s legitimacy. If they are from different sectors, this more distant analogy will result in a strengthening of its reputation.

The two other types of action involve a broader cross-section of collaborators. These actions need to be taken later on because they require more time to put in place and call for a more objective assessment of the firm’s competency compared with other businesses or organisations. A third-party evaluation can take multiple forms, from rankings and prizes to processes of certification or accreditation. In the first instance, the evaluation should grow its reputation, in the second, it will impact on its legitimacy. And finally, establishing partnerships, with the regular meetings that entails, leads to stronger relationships with third parties. This leads also to image enhancement through association, which fosters the firm’s reputation or justifies its membership of a group or a category and thus confers legitimacy.

Consequences to be confirmed in new research phase

The size of our sample and the short period over which the study was undertaken do not allow us to draw any general conclusions about the effects of these four actions. Nonetheless, the replication of similar results in a sample of four businesses belonging to four different sectors does make it possible to offer hypotheses that make a fresh contribution to the theory of business identity, especially in the particular instance of businesses operating an innovative business model in their sector. These hypotheses could be tested in future studies on a larger sample and at a more advanced stage in the development of the business. On a practical note, new businesses engaged in innovation could use them to find pointers on the timing and the actions to implement to construct their firm’s corporate identity.

[su_spoiler title=”Méthodologie”]The approach chosen for this qualitative study draws on the field of multiple case-by-case studies. Yuliya Shilhur selected the four most innovative businesses in terms of their business models in four different sectors, from a representative line-up of 165 firms chosen at the start. The results were obtained by studying 620 pages of documentary sources (both internal and external) supplied by the firms and 29 interviews with inside sources (founders, employees) and external ones (investors, clients). The study was published in February 2016 in the review, Entrepreneurship and Regional Development, under the title “Developing optimal distinctiveness: organizational identity processes in new ventures engaged in business model innovation.” [/su_spoiler]

[su_pullquote align=”right”]By David Stolin[/su_pullquote]

On March 31, 2005, Lehman Brothers chairman and CEO Dick Fuld was re-elected to the company’s board with 87.3% investor support. Four years later Mr. Fuld was ranked as “the worst CEO of all time” by Portfolio magazine, and widely described as having professional and personal qualities that contributed to Lehman’s collapse – and, due to Lehman’s position at the heart of the financial sector, to the international financial crisis.

We do not know how every Lehman shareholder voted in that election, much less the reasons for how they voted. We do know that around two-thirds of Lehman’s stock was held by other prominent financial institutions, the top ten being Citigroup, State Street, Barclays, Morgan Stanley Dean Witter, Vanguard, AXA, Fisher Investments, MFS, Mellon Bank, and Merrill Lynch. Most of these firms and their managers would be expected to have repeated dealings with Lehman and its management. As a result, we would expect these firms to be particularly well-informed about Mr. Fuld’s shortcomings and to have voiced concerns about his ongoing concentration of power.
On the other hand, the combination of Mr. Fuld’s shortcomings and his power made him a formidable enemy. He is on record as saying “I want to reach in, rip out their heart, and eat it, before they die” about his professional adversaries.

It is a stimulating thought exercise to visualize Mr. Fuld’s reaction upon learning that, say, Citigroup or Merrill Lynch had voted against his re-election to Lehman’s board. We note that at Lehman, like at the vast majority of U.S. firms, voting was not confidential. This means that Lehman’s management could find out how each of the company’s shareholders voted. And this would raise a problem for Lehman’s institutional investors: even if they disagree with the management, is it worth incurring the management’s wrath by voting against it?



Of course, it is natural for managers to be unhappy with shareholders who vote against them. But for at least three reasons, such feelings matter more when the investee company is in the financial sector.

• The first reason is the “old boys’ network”. Decision-makers at the investing firm are especially likely to be connected to their counterparts at the investee if both have finance backgrounds: they are more likely to have received the same education, to be active in the same professional organizations, to have worked at the same companies in their past careers, and to expect to do so in the future. This increases the potential for retaliation (or reciprocation) at the individual level.

• The second reason is firm-level interaction. Financial firms are more likely to have competitor or supplier/client relationships with their investors than do non-financial firms. This means that retaliation and reciprocation can be channeled through such relationships as well.

• The third reason is cross-holdings of shares. A financial firm may hold shares in its own institutional shareholder, which gives the firm another potential means of retaliating for any anti-management votes by that shareholder, namely, voting against the shareholder’s own management. Conversely, investor and investee may reciprocate by supporting each other through voting.

How can we examine if our suspicions are founded? The only group of institutions systematically required to disclose their votes is U.S. mutual funds, and accordingly we focus our study on mutual fund companies. Our empirical tests suggest that all three types of conflicts of interest listed above do matter. Social ties between the voting and target firms increase the voting firm’s support for the target’s management. In addition, voting appears to be influenced by the fear of retaliation, both in the form of being voted against in the future and of being aggressively competed against in the future. Our results suggest that there is “clubbiness” in the way fund companies vote on each other. We then go on to examine the implications of this clubbiness. We show that directors elected in fund companies with greater own-industry support, monitor senior management significantly less.

To generalize our findings, we then use aggregate voting outcomes to assess whether financial companies as a group vote more favorably when it comes to their financial sector peers and we find that this is the case as well.

In short, the financial sector’s inevitable and extensive investment in itself has a deleterious effect on its governance. What can be done about it? We believe that our work has at least two important policy implications.

First, the notion of conflicts of interest which institutional investors address in their voting policies should be explicitly defined to include not only client/supplier relationships, but also conflicts of interest through product market competition and reciprocal investments. Such recognition would help take voting out of the hands of individuals most inclined to vote in a conflicted manner, or at least constrain these individuals’ discretion.

Second, proxy voting should be required to be confidential at firms in the financial sector; i.e. investee firms should not be able to discover how different shareholders voted. This would mitigate a key reason for conflicted voting, which is potential retaliation/reciprocation by the investee’s management.

It would be naïve to think that decision-making in business can ever be rid of conflicts of interest. But in the case of proxy voting in financial firms, the problem is important enough to deserve a close look from regulators.

[su_spoiler title=”Méthodologie”]Afin d’enquêter sur les conflits d’intérêts entre les gestionnaires d’actifs, les auteurs ont étudié la procuration de votes des fonds communs de placement sur des propositions de gestion d’actifs. L’étude couvre la période 2004-2013 et les variables explicatives étaient les fonds, la société et la relation fonds-société. Ils ont également analysé les résultats des votes rattachés. L’étude a été publié en Mars 2017 en la version papier du Management Science Journal.[/su_spoiler]

[su_pullquote align=”right”]By Sylvie Borau and Jean-François Bonnefon[/su_pullquote]

The new mayor of London is planning to ban commercials that depict female models who are too thin or whose bodies are not realistic, but the question of how effective “natural” models are in advertising remains open. Even though an increasing number of publicity campaigns show models with fuller, more realistic figures, these remain few and far between. Why would this be the case?

While commercials for cosmetic products intended for women traditionally feature models with ideal beauty, some brands, like Dove for instance, have started to adjust their communication strategy by presenting more realistic women with fuller figures and less artificial editing of the image.

Choosing a model for a commercial: an ethical and economic issue

Presenting models, whether ideal or natural, poses two significant problems: the first is ethical and the second economic. On the one hand, idealized images of female beauty impose an unreachable standard and can have negative effects on the psychological wellbeing of women, for example in terms of body image anxiety. On the other, selecting an ideal model or a natural one also poses the question of the commercial’s economic impact.

From the perspective of the advertiser, like the creative agency, the choice of relying less on stereotypical, edited images, or even abandoning them completely, will be based mainly on commercial effectiveness criteria and probably less on issues surrounding social responsibility. As a result, it is essential to evaluate more precisely how women react to these natural models and their commercial effectiveness. While many studies have looked into the ability of an idealized model to generate anxiety, less attention has been paid to the ability of a natural model to also trigger negative emotions. However, if the reference point for female consumers is models representing ideal beauty, natural-looking models may be considered out-of-place in the media environment and thus elicit repulsion, unpleasant surprise, or even disgust.

Body anxiety and repulsion

The aim of this study was to compare the reactions of women to magazine advertisements containing either an ideal model or a natural model, both in terms of affective reactions, such as body anxiety and repulsion, and in terms of commercial impact, including their impressions of the advertisement, attitude to the brand, and interest in buying. Half of the sample subjects were shown the traditional ideal model used in commercials for cosmetic products, while the other half was presented with a natural model: a woman with a more realistic body, non-stereotypical physical traits, and no editing of the image.
By focusing more specifically on two negative emotions, anxiety regarding the appearance of one’s body and the repulsion generated by the models, we put forward two hypotheses: first, that natural models reduce body anxiety among readers, particularly those with a high body mass index (BMI), and that this has a positive effect on the commercial’s impact, and second that natural models increase the feeling of repulsion that women feel, with a negative effect on the campaign’s effectiveness.

Surprising results

Concerning the effect of exposure to different models in terms of negative emotions, it was found that the natural model did not decrease body anxiety among the women. This result could be explained by the fact that the respondents already reported a very high level of anxiety; it would be difficult for this level to be affected further by exposure to the images. However, the natural model generated repulsion, even more so among the women with high BMIs. These women who are very unsatisfied with their appearance probably project the feeling of repulsion that they feel towards their own body onto the natural model.
Concerning the effect of these negative emotions, the results showed that body anxiety increased the effectiveness of the commercial; in other words, the more a woman is anxious about her appearance, the more she will tend to like the advertisement and the brand, and the more likely she will be to want to buy the product. This positive effect of anxiety on the commercial’s impact is rather counter-intuitive, since negative emotions generally have a negative effect on advertising performance. The other result is more logical, showing that repulsion had a negative outcome on effectiveness.

Reconciling ethics and commercial impact

In short, these results are not too encouraging if we consider the divide that exists between public policies that aim to encourage the use of natural models and advertising professionals who are more concerned with the economic effectiveness of this type of strategy, and who are therefore interested in advertising with ideal models.
What would we need to do to counter this contradiction and reconcile ethical considerations with economics? If the aim is both to be effective and not generate negative emotions that may either increase effectiveness through anxiety, or decrease effectiveness through repulsion, an alternative could be to dispense with model images, whether idealized or natural. A number of brands have adopted this third approach, particularly in the area of drugstore products. This type of strategy, which is more respectful of the consumer’s wellbeing, requires the development of advertising discourse that is more informative, shifting the message from emotion more to rationale.
Further studies could help to refine these conclusions, for example by looking at categories of products other than cosmetics, by presenting other types of models, or by calling on other reactions rather than emotions, such as the credibility that the readers assign to the model and to the advertisement.

[su_spoiler title=”Methodology”]A survey was carried out including 400 French women aged between 18 and 35 years, representative of the population of France in terms of BMI, education level, socio-professional category, and marital status. The responders were asked to look at a women’s magazine online, in which there was an advertisement for a cosmetic product illustrated either with an ideal model or a natural model. They were then asked to complete a questionnaire.[/su_spoiler]

[su_note note_color=”#f8f8f8″]Sylvie Borau has been a professor in marketing at Toulouse Business School since 2013. Before that, she worked for 8 years in various research institutes, particularly in Canada. Her thesis, as part of her doctorate obtained from the IAE of Toulouse in 2013, led her to win the 2014 Sphinx thesis award and to be a finalist for the AFM-FNEGE prize of the French National Marketing Association and the Foundation for Management Education. Her research work focuses on consumer behavior and more specifically on physical attractiveness in advertising. In 2016, she published an article in the International Journal of Advertising, entitled: “The advertising performance of non-ideal female models as a function of viewers’ body mass index: a moderated mediation analysis of two competing affective pathways” in collaboration with Jean-François Bonnefon, CNRS Director of Research at the Toulouse School of Economics.[/su_note]

sirius_logo_RVB[su_pullquote align=”right”]By Victor Dos Santos Paulino [/su_pullquote]

Any company faced with a radical innovation in its sector of activity will hesitate between indifference and reaction, because of the impossibility of foreseeing whether the innovation is a radical breakthrough or a product that is doomed to fail. To resolve this dilemma, the solution might be to identify potentially disruptive innovations and assess their risk for established stakeholders, as illustrated by the case of the satellite industry.

The miniaturisation of satellites has affected space industry markets over the last 20 years. On the offer side, new manufacturers have emerged, marketing small satellites at a lower cost; on the demand side, there are new clients that see this innovation as an opportunity. Quite logically, the well-established manufacturers, positioned in the segment of traditional large-size satellites, are wondering whether they should consider these radically new technological choices as a threat?

Disruptive innovation is difficult to observe until it’s happened

Our research, conducted in the framework of the Sirius chair (, aims to answer this question, which first involves clarifying the concept of ‘disruptive innovation’. This is necessary because the expression, which is widely used and sometimes mistakenly, makes established players in the sector anxious, while fascinating and intriguing them, without it being entirely clear what exactly we are talking about.
A disruptive innovation is a particular case of radical innovation which modifies the structure of an industrial sector and whose effects may lead to existing companies being replaced by new competitors. The difficulty is that it is only possible to be certain that it is a disruptive innovation in the long run, a posteriori, once it has staked out its place or even driven out the oldest technologies and the companies that marketed them. In the short term it appears rather to be a less efficient product or service, aimed at a marginal clientele, an immature technology proposed by small companies with limited resources, less know-how and less knowledge of the market.
Because of these characteristics, it is very difficult to distinguish between a real disruptive innovation which has just been introduced and so requires that existing companies react, and an innovation destined to fail, that they can comfortably ignore. This creates uncertainty about what they should do, which is known as the innovator’s dilemma, since existing companies should promptly assess the danger and possibly invest in the new market while the disruptive innovation is not yet a threat, if they are to limit the consequences. If they wait too long, it might be too late.

A classification for anticipating the threat

What matters to company executives is to be able to anticipate trends and thus, if possible, to be able to use forecasting tools. Since it is not possible to affirm at an early stage that an innovation is disruptive, the solution is to try and determine in the short term whether it has the typical characteristics, in other words whether it is a potentially disruptive innovation and if so what type of threat it is likely to pose to well established stakeholders.

Not all disruptive innovations have the same consequences: some lead to complete substitution of the old technology by the new one and thus pose an extreme threat, the typical case being that of silver-based, emulsion film photography wiped out by digital photography; other innovations do not entirely replace the initial products. This is the case in air transport, for which low-cost companies have captured only some of the clientele of traditional companies, and in telephony, where landline technology continues to coexist with mobile technology. These examples are characteristic of three types of disruptive innovation for which only the first is associated with a high risk of the pre-existing market disappearing. In the two other cases, the threat appears to be lower for established companies.

Small satellites, a limited threat

What then is the situation for the space industry? Given this conceptual framework, how should well established stakeholders react to the development of small satellites? According to the parameters chosen for our theoretical model, small satellites have most of the characteristics of potentially disruptive innovation: lower technological performance with respect to the requirements of the traditional main customers; they are less complex; they either cost less or on the contrary cost much more, for instance in the case of constellations of small satellites; they offer the perspective of introducing new performance criteria such as the possibility of designing, building and launching a new satellite in a very short time or again the improvements offered by constellations in low Earth orbit.

However, an analysis of the demand for these new satellites shows that they are intended mainly for new customers, which means that we can exclude the hypothesis of a disruptive innovation affecting an existing market, which is really the main risk case for manufacturers. Those who buy them can be divided into institutional customers from emerging countries, which do not have sufficient resources to launch conventional satellites, and private top-of-the-market customers with new needs for low orbit constellations, which conventional satellites do not meet.

Thus, small satellites are indeed a potentially disruptive innovation but they only pose a slight threat to well established stakeholders. Despite the structural changes they might lead to for this industry, there is not much risk that they will entirely replace conventional satellites. This in no way determines either their ultimate success or failure.

[su_spoiler title=”Methodology”]This study was conducted by Victor dos Santos Paulino (TBS) and Gaël Le Hir (TBS) in the framework of the Sirius chair, on a topic proposed by the chair’s industrial partners. For the theoretical part, the authors reviewed the existing literature on the theory of disruptive innovation, which enabled them to draw up a table classifying the characteristics of potentially disruptive innovations. They then applied this model to the satellite industry while referring to several sources of information (information published by manufacturers, sectoral information, interviews with experts, databases). The study was published in the Journal of Innovation Economics & Management in February 2016 under the title “Industry structure and disruptive innovations: the satellite industry”.[/su_spoiler]

[su_pullquote align=”right”]By Servane Delanoë-Gueguen[/su_pullquote]

When looking at business creation, people tend to take more interest in the project than in the entrepreneur behind it. However, starting a business has strong personal implications. Assessments of personalized support programs would be more relevant if they paid greater attention to gauging how entrepreneurs feel about their ability to see their project through to completion, particularly as regards the strategic and financial aspects.

What drives someone to want to start a company? Obviously there is the initial project, which may or may not result in the creation of a start-up, but above all there is the individual behind the project, the budding entrepreneur, who will end up transformed by the experience, whatever the result. The process is a form of apprenticeship, during which the business creator acquires new skills, develops new ways of looking at things, and builds networks. If the individuals manage to create their business, this personal transformation will provide them with valuable skills for the company’s development. If not, they will be able to draw on these newly-acquired skills to prepare an entrepreneurial project later in life, or to use their new knowledge working for someone else.

Taking greater interest in the perceived abilities rather than the number of creations

People with new business projects do not have to go through the process alone. They are even encouraged to participate in support programs, which may have a profound impact on the project as well as the person behind it. Unfortunately, when assessing such programs, this personal dimension is rarely taken into account: to evaluate their effectiveness, we tend to focus on the participants’ satisfaction with the program or the fact that they managed to create their business, but not on the effects that the programs have had on the budding entrepreneurs. Our study looked at people participating in a support program set up by Brittany Chambers of Commerce and Industry (CCI). The aim of the study was specifically to analyze this personal impact. Rather than focusing on the project leader’s actual skills, we studied their perceived entrepreneurial self-efficacy , i.e. how the individuals perceived their ability to create a business.

This perceived entrepreneurial self-efficacy – originally developed in the field of psychology – is a key determining factor in the process of creating a company, because not feeling capable can be a major obstacle. If properly evaluated, it can even foster the entrepreneur’s tenacity in the face of difficulties. However, this remains a perceived ability, which is not necessarily representative of the actual ability; indeed, certain individuals have a tendency to underestimate their abilities whereas others overestimate them. Finally, the perception can change, according to four major influences: personal experience, observation of others, verbal persuasion by third parties and emotional state.

The shock of reality

The study sought to measure the change in the perceived self-efficacy of budding entrepreneurs who took part in a support program by interviewing them at the beginning of the project, and then a year later. While we might expect participation in a personalized support program to have a positive effect on entrepreneurial self-efficacy (that is to say, the project leaders feel more capable of creating their company), the results of the study actually show an overall decrease in self-efficacy. If we look in more detail, the only positive impact was on entrepreneurial administrative self-efficacy – concerning the planning of the project and formalities – whereas perceptions related to strategy and finance tended to deteriorate.

These results can be explained by what we could term a “reality check”. At the start of the process, many budding entrepreneurs think that the administrative side is highly complex and focus on this aspect; then they realize that this is not actually the most complicated aspect, particularly since a number of measures have simplified business-start-up procedures over recent years. At the same time, they start to realize how difficult it is to find customers and funding, that there are competitors in the market, and that they never have enough time to do everything. All these aspects are often under-estimated when they build their project.
However surprising it may be, this result shows the value of having an objective assessment of start-up support programs, by focusing on the personal impacts: the aim of support programs is to help people with start-up projects set up viable businesses and understand the realities of the market, not to simply ensure that the majority of the individuals actually start their businesses. With this in mind, it is not necessarily a bad thing for prospective business creators to feel less capable at the end of the process than at the beginning. Participants who ultimately decide not to start their business, after appreciating the importance of having a customer base and a network, have the opportunity to ask themselves the right questions, to readjust their perceived ability, and sometimes realize they are simply not made to be entrepreneurs. They will be better equipped for the next project, or at least thy will have more realistic perceptions.

A practical tool for improving programs

This evaluation method is a valuable tool for improving support programs, with practical uses that can be taken advantage of almost immediately. For example, it may be interesting to adopt a differentiated approach depending on whether the people at the start of the program underestimate or overestimate their ability to create a company, in order to help them reach a more realistic self-perception. In relation to the case analyzed in this study, the support programs could focus more on strategic issues and funding.
These results are a step towards achieving an objective assessment of support mechanisms for budding entrepreneurs. Now, it would be useful to fine-tune the results with a more representative sample group of budding entrepreneurs and extend the research to different types of support initiatives.

[su_note note_color=”#f8f8f8″]Servane Delanoë-Gueguen is a research professor in entrepreneurship and business strategy in Toulouse Business School. She is responsible for the TBSeeds incubator and is joint Head of the “entrepreneur” vocational option. She has a PhD in emerging entrepreneurship from the Open University (UK). Her research focuses on budding entrepreneurs, entrepreneurial ecosystems, business-creation support programs, entrepreneurial desire and business incubation. This publication is a summary of the article “Aide à la création d’entreprise et auto-efficacité entrepreneuriale” (Support for business creation and entrepreneurial self-efficacy”) published in 2015 in theRevue de l’entrepreneuriat.[/su_note]

[su_spoiler title=”Methodology”]Within the framework of her research, Servane Delanoë-Gueguen conducted a longitudinal study. Based on a literature review, she developed a theoretical model with 3 research hypotheses concerning the evolution of entrepreneurial self-efficacy over the course of one year concerning individuals with business start-up projects involved in a support program, who had ultimately created their business or not, with gender differentiation. The model was then tested with a group of budding entrepreneurs. In the first year, a total of 506 people answered a questionnaire to assess their perception of their entrepreneurial abilities. The following year, she managed to re-contact 394 of the people concerned, of whom 325 had a genuine start-up project in progress. Out of this group, 193 people answered the questionnaire again. [/su_spoiler]