The Tragedy of Modern Economic Growth

3404903571_07e490e4fd_z.jpgH. Thomas Johnson, a long standing accounting historian, reflects on how current business practices, which predominantly utilise accounting as their language, are hastening the planet’s decline. His latest article, “The tragedy of modern economic growth: A call to business to radically change its purpose and practices,” is recently published in Accounting History, and is currently free to read.

Johnson argues that modern growth-oriented economies consume resources at a rate faster than the Earth’s ecosystems can presently regenerate, threatening the sustainability of all life. Johnson elucidates how fundamentally new thinking is required to change business practices in ways that protect the Earth. As a solution, this article proposes that the tangible ecological principles that underpin Earth’s life-restorative natural ecosystems provide a more suitable language for materialising a sustainable human economy than the abstract language drawn from accounting and finance.

Click here to access the article. 

Hope/economy photo attributed to Simon King (CC).

How to turn a Cinderella product into a market queen

[The following post is re-blogged from the London School of Economics and Political Science Business Review. Click here to view the article from LSE. It is based on a paper recently published in Administrative Science Quarterly titled “How Cinderella Became a Queen: Theorizing Radical Status Change.“From LSE:]

The case of Italian grappa shows that more than marketing is needed to raise a product’s market status, write Giuseppe Delmestri and Royston Greenwood

Quality, we know, is often necessary, but it’s far from a sufficient condition for market status. Better technologies lose format wars — as Betamax did against the inferior VHS videotape in the 1980s, and as artisanal bakeries did to industrial mass producers.

Losing status, however, is much easier than gaining it. Ask law firms, accounting firms, even universities how they might break into the elite status group within their industry, and there is typically no response. Turning low into high status is profoundly difficult — irrespective of quality, and especially if the starting point is from the base of the market status pyramid.

In the case we discuss below — Italian grappa — several attempts by entrepreneurs to improve the status of grappa and of their artisanal production methods resulted in failures and even bankruptcy — even though the quality of the product was superb. But Italian grappa did achieve the dramatic status move from the bottom to the top of the status ladder. It rose from a plebeian underdog of whisky and cognac to become a lifestyle product served at eminent social gatherings and offered by starred restaurants. How did this happen?

Until the 1970s, Italian grappa was considered a cheap, almost stigmatized beverage consumed at the margin of society and as being only appropriate for workers, peasants and alpine soldiers. It was associated with stigmatized artisanal and even clandestine production in hidden shacks. At the time, artisanal family firms were considered primitive — paradoxical in a country that would later give rise to the Slow Food Movement that praised such organizations. It is intriguing, therefore, that it was a young lady, Giannola Nonino — the wife of Benito, an exceptional distiller but marginal entrepreneur in the North Italian Friulian province — who turned the savoury spirit from a social no go to an hedonic must of Italian after-dinner tasting.

Giannola and her family, thanks to their Grappa di Picolit, created a beachhead into the expensive high status category occupied by foreign spirits; other artisanal producers followed and, eventually, the whole meaning of grappa in Italian society turned on its head. Grappa became “lo spirito nazionale,” at equal level with whisky and cognac (see figure below).

Figure 1. Category positions in the superordinate class of spirits in the Italian marketfigure-1-grappa-nonino

What can we learn from this story on how to elevate the status of a whole market category? We discovered that turning a weak low status position into a strong high status one is possible thanks to theorization by allusion — in other words, by performing a sort of cultural judo, never attacking directly the powerful market incumbents while relying on a perfect understanding of the cultural context of the market and of the own distinctive strengths.

Fundamentally, the strategy of allusion is based on three interconnected tactics:

  1. Detach yourself from the category in which customers put you. You should first confuse your customers and stakeholder. Giannola designed the bottle and presented herself in a way that contradicted restaurateurs’ and critics’ expectations on what grappa is and should be. When looking at the design and shape of the tiny minimalist bottle (see picture below) they wondered: ‘Is this grappa?’ When confronted with a young passionate lady dressed in Armani fashion, sommelier in restaurants were puzzled, but listened. Moreover, although the Noninos initially gave their precious bottles as gifts to prominent Italians, afterwards the price of Grappa di Picolit was set at an ‘astronomical’ level — again, as a way of distancing themselves from the low status traditional ‘grappa’ category. Finally they avoided any direct cooperation with grappa producers. They sought to avoid any risk of stigma by association. In the first stage of status elevation you should avoid bad company. All these tactics detached the product form the grappa category. But, puzzling your customers and stakeholders is not enough—you need a second tactic…small-grappa-nonino

    1. Emulate a proximate high status category. In other words, in addition to confusing potential clients and consumers you should provide a key by which to answer the confusion. The Noninos, supported by the anarchist maverick food and wine critic Luigi Veronelli, did so by adopting the vocabulary and practices of high status French wine (single grape, appellation of origin, cru). They also networked and convinced distinguished wine sales agent to distribute their grappa. And they directly addressed sommeliers in reputed restaurants. Doing so gave these stakeholders a language for talking about grappa in distinguished terms. Importantly, emulation is not the same as directly competing with high status members of the category in which you are located – the Noninos did not try and emulate and thus directly challenge premium cognac nor whisky.
    2. Engage in storytelling that connects tradition and cultural innovation. All of the previous tactics and efforts will be useless if you fail to engage in appropriate storytelling. It is necessary to embed and engage your product in stories beyond your immediate market, stories that resonate with wider cultural debates. Such cultural engagement is pivotal. Otherwise, why should a sommelier or a wine critic believe in the analogy between grappa and French wine? The Noninos used a kind of tightrope storytelling. On the one hand they reinterpreted and praised fading cultural traditions and national institutions: they fought for the preservation of traditional Friulian grapes, boldly presented themselves as a family business, promoted artisanal methods as authentic, and linked their bottles to traditional Venetian glass manufacturing. On the other hand, they connected grappa to the emerging Milanese art design and fashion movements and launched a Literary Award to anchor their story to an upward wave of national identity affirmation that resonated with the values of the Italian emerging elites.

    It is unlikely that the push for radical status elevation could be delegated to a PR agency. What we learned from this case is that unusual success only occurs when authentic messages are conveyed by authentic messengers that put their face and themselves at stake. And status dynamics of market categories are not important for consumer products only! Consider that institutional entrepreneurs are much needed in our organizations if we want to address the grand challenges of our times. Take these two examples: How to elevate the status of vegetarian meals in order to favour the reduction of carbon-intensive meat and dairy consumption? Or how to reduce the status of private in comparison to public transportation for the same aim?

    Notes:

    • This blog post is based on the authors’ paper How Cinderella Became a Queen Theorizing Radical Status Change published in Administrative Science Quarterly, December 2016.

    • The post gives the views of its authors, not the position of LSE Business Review or the London School of Economics.

    • Featured image credit: Nonino grappa distillery, by Riccardo Cattapan, ©Nonino 

    • Before commenting, please read our Comment Policy.

Quattrone (2015). Governing Social Orders, Unfolding Rationality, and Jesuit Accounting Practices: A Procedural Approach to Institutional Logics

Republished with permission. The original post was published on the ASQ Blog.

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Authors:
Paolo Quattrone – University of Edinburgh Business School

Interviewers:
Federica Foce Massa Saluzzo – Universita´di Bologna
Daniela Iubatti – IESE Business School

Article link: http://asq.sagepub.com/content/60/3/411

Question 1. An eye-opening element of your paper is the discussion on the procedural approach to logics in which you suggest that scholars should develop methodologies that allow them to explain what “cannot be framed”. In the case of the Jesuits what cannot be framed is God, or more generally social order. What would the “unframed” be in the modern corporation and who are the agents enacting the practices of the progressively updating logic?

Many things are unframed in the modern and corporate world; a ‘value’ to begin ASQ_v60n3_Sept2015_cover.inddwith. It is increasingly clear that we live in dissonant orders of worth (I refer to the work of David Stark, Boltanki and Thévenot and some work I am doing with Roger Friedland) and a ‘value’ cannot be reduced to shareholder’s values anymore. Enlarging the realms of the measurable (for example, from the ‘economic’ to the ‘environmental’ and the ‘social’) is not the solution in my view. Interrogating what cannot be framed, values in this case, and mediate amongst views, which are impossible to align anyhow, is a possible way forward to regain sanity in the financial word. Other ‘unframable’ categories are uncertainty, risk, volatility, complexity; but those are more immediate and obvious, although the approach to those tends to presuppose that these categories can be framed and do not overflow (as Michel Callon would say). I am currently doing some work on managing major programs (such as mega infrastructure projects). They are interesting sites to explore this impossibility of framing: the risks, the unknowns are everywhere and cannot be reduced.

You also ask about the agents of the updating logics. They are many as well. Technology, if we give agency to material objects, as Bruno Latour and Wanda Orlikowski would do, is surely one of these agents. As much as a medieval book, technologies of representation are increasingly affecting the way in which we imagine the future, our identities and rituals of interaction and social order. Nothing new here, but what is new is to think of technologies as procedures themselves which create spaces of engagement, exploration and mediation which constitute the fabric of institutional logics change.

Question 2. Your work provides alternative lenses to look at the relationship between rationality and techniques of representation, in the specific case of accounting. In the paper you suggest that today, accounting requires less reflection and inventio, having become a taken-for-granted institution. If you were to study rationality through contemporary accounting what would you expect to observe?

If I were to observe rationality through the narrow lenses of what accounting has become (at least in some mainstream departments of accounting of a university completely detached from the world of practice), I would see very little. Contemporary accounting glasses promise transparency but their lenses are opaque. The result is that a search for transparency makes us blind to what being ‘rational’ may mean in different spatial-temporal contexts. There is lot to be done in order to transform these lenses in prisms that are able to show multifaceted worlds. And, interestingly enough, in organization studies, very little attention is given to systems of representation, not to mention to accounting, although accounting is one of the most pervasive technology of calculation of the modern corporate world.

Question 3. Many studies test their theories on contemporary empirical contexts, while few do so analyzing specific contexts from the past. How did you choose this empirical context and how would you generalize your study in different contexts? What would you advice to students willing to follow your example and analyze historical data?

An articulated question that I’ll try to answer in sequence. How did I choose? It happened by chance, of course! Often one becomes interested in research sites and topics because of serendipitous encounters. My case was not different. It dates back to my PhD (a long time ago) in Palermo, my hometown in Italy. My supervisor, who loves history, asked me to look at the accounting books kept at the State Archive of Palermo. I naively thought this was going to be one of the most boring things on earth. It was instead the beginning of a very exciting journey of discovering, which is still ongoing. The paper in ASQ is just the last stop of this journey.

You ask me about generalization. I am not a historian (by no means I can claim I am) and therefore my primary interest in the evidence is theoretical not empirical. So I aim try to generalize in every work I do (also because being Italian we love abstraction and we tend to think, wrongly, that the empirical world cannot surprise us). How can we generalize from particular and unfamiliar cases? By linking them to general and familiar theoretical debates to de-familiarize us from them. This is, I think, what the paper does in relation to institutional logics. I think it always more difficult to look at the normal in a different way than to look at what differs from the norm. Accounting is a very ‘normal’ (and normalized) practice. It becomes interesting only if we look at it in a different way. History, in that sense, helps, as it is a form of ethnography that leads us not only to a different space (the Jesuit Order in my case) but also a different time.

Now the advice. Not sure I am the right person to give advice on whether historical work is worth exploring. I am too biased towards a yes! But think of how relatively ‘easy’ access is when doing historical works: the sources are there waiting to be discovered. They do not escape! But here is also where the easy part ends. Historical work, as much and possibly more than field studies, requires a long process of familiarization with these sources, especially if we go back a long time (I still remember the difficulties I had in understanding handwriting, abbreviations, notations, old Sicilian texts, archaic forms of accounting records, just to name but a few of these difficulties). The issue is also that the sources always change meaning. For me this happened often when I went back to them in the various iterations of the research process. Every time I knew something more about religious, cultural and economic contexts and practices and this made me see in the apparently ‘out there’ archival sources something new. This is possibly the most fascinating aspect I recall from the research, the moment of establishing a connection, for example, between ratio, rationality, accounting and late medieval practices of rhetoric and art of memory is something that has changed not only the way in which I looked at those sources but also how I now conceive of accounting as a contemporary practice. The rewards are huge if one is prepared to link, connect and explore primary and secondary sources in ways that are novel. Another aspect of going to the archive that is worth mentioning? One of the most relaxing things I have done in my life! Archives are interesting and relaxing spaces.

Question 4. The procedural nature of the Jesuits’ logics suggests a drastically different approach to institutional logics. Nevertheless Jesuits are a closed community that diligently and profoundly applies the procedures demanded within the college. In contemporary firms, community spirit and self-reflection are generally considered as less fundamental. How do you think that this contemporary lack of reflection relates to scholars’ understanding of institutional logics? More specifically, do you think that the common lack of reflection in the typical contemporary organization has brought scholars to observe the more substantialist rather than the procedural side of logics?

Are you sure the Jesuits were closed and the contemporary lack a community spirit (I would agree on the lack of reflection)? Let me respond with an anecdote. Once, when I was at Christ Church at Oxford, I organized a series of meetings on religion, institutions and practices. Participants disagreed on many things but we all agreed that nowadays there is more religion in business schools than in the Church and more business in the Church than in business schools! This is also what Michel Antebi suggests with his ethnography of Harvard Business School: the not said points towards the mystery of manufacturing morals and the belief in to a common spirit at Harvard.

This point also relates to the other things you ask. Some of the current literature on institutional logics takes such logics almost for granted: logics are not mysterious anymore. One can observe them in hospitals, markets, in the profession. The risk is to make them less interesting and powerful as heuristic devices. And once one has lost the mystery, what is left is only the material. Imagination, vision, feelings, emotions, and symbols are gone. This is possibly also why capitalism is so material: if one believes that everything can be reduced to a number, to a transaction, to money then the material is the only think one can think of. This applies to researchers as well; especially those who seek to operationalize statistically variables that cannot be reduced to a statistical issue. In Hebrew, the word ‘God’ cannot even be pronounced, otherwise mystery is lost. Uttering ‘God’ would be the “end of the world” (to quote Alessandro Baricco or to refer to Giorgio Agamben’s The Kingdom and the Glory).

Question 5. The search for what cannot be categorically framed, “the unsaid”, is fundamental for scholars wishing to understand the dynamics involving institutional logics. Yet, for the logic update to occur a certain disposition is crucial. What do you think is the role of disposition of the agents both in your paper and more broadly in the debate on institutional logics?

This is a difficult question to answer, as my reply could smell of ‘ontological gerrymandering’. The first reaction would be: Of course dispositions matters! But would not that be a substantive answer? A possible way out is that if we interpret a disposition as a way of looking at the world (and thus in procedural terms) there is hope for not falling back into the trap of a positivist view of this disposition. In other words, I could be disposed towards the ‘other’ and what differs or not. The latter is dangerous and would make research a technical exercise of finding what we already know in a supposedly out there world; the former makes of research a journey of exploration into unchartered territory. So my question to you and the readers is: are you technicians or explorers? Both are useful but the latter is much more fun!

Martin Mende on Coproduction of Transformative Services

business-graphics-1428634-m[We’re pleased to welcome Martin Mende of Florida State University. Dr. Mende recently collaborated with Jenny van Doorn of the University of Groningen on their article “Coproduction of Transformative Services as a Pathway to Improved Consumer Well-Being: Findings from a Longitudinal Study on Financial Counseling” from Journal of Service Research.]

  • What inspired you to be interested in this topic?

This paper is inspired by the novel paradigm of Transformative Service Research which is concerned with uplifting changes and improvements in consumer well-being. Clearly, credit counseling is a core area of TSR, because it is a service designed to (re)establish consumers’ financial well-being (e.g., by increasing their credit scores and decreasing their perceived financial stress). The relevance of financial counseling has sharply risen in the past decade, reflecting the financial strain that many households have been experiencing, especially related to the recession. Indeed, each year millions of consumers seek help in managing their debt from counseling agencies. We found it surprising that the effectiveness of credit counseling remains somewhat nebulous, and that the exact mechanisms through which counseling helps improve consumer well-being needed more research. Because the success of financial counseling depends heavily on the collaborative behavior of customers, we propose customer coproduction, defined as a customer’s participation in creating the service, as a pathway to financial well-being. Indeed, we find that customer coproduction can positively affect consumers’ objective financial well-being (i.e., an increase in their credit score) and their subjective financial well-being (i.e., reduce their perceived financial stress).

  • Were there findings that were surprising to you?

The findings were probably more inspiring to us than they were surprising. Our research was guided by a theoretical framework that predicted certain outcomes, but it was inspiring and rewarding to see the positive effects of coproduction on consumer well-being (i.e., their increased credit score and reduced financial stress) emerge. The results show that success in credit counseling is truly about the collaboration between advisors and clients; clients (by getting engaged as coproducers) have considerable control about their financial strain. We feel this is a positive and encouraging finding, because many families may feel that they have lost control over their financial situation.

  • How do you see this study influencing future research and/or practice?

We hope it helps financial service providers (e.g., credit counselors), public policy makers, and – of course – even consumers in credit counseling.

Our research offers implications for service providers with regard to (1) 02JSR13_Covers.inddmeasuring customer profiles, (2) segmenting the customer portfolio and designing service delivery for specific segments, and (3) training and empowering employees. First, service providers who survey clients on their service literacy, involvement, and attachment style will be able to better understand and predict the collaborative relationship with their clients. Second, segmenting clients on the basis of these variables allows for customized service provision, which is a more promising pathway to coproduction and consumer well-being (e.g., clients could participate in segment-specific workshops that address their specific motivational needs and/or profiles). In parallel, our results show that segmentation criteria should also include some of our covariates (age, gender, or cohabitation). For example, credit counselors should be cognizant of our finding that the segment of female clients who live with a partner is likely to perceive considerably higher levels of financial stress than the segment of male clients who live alone. Third, employees who provide transformative services should be trained to understand the fundamental effects of coproduction on well-being, as well as the antecedents of coproduction. Furthermore, employees need to be empowered (or even incentivized) to treat client segments with different profiles in a tailored manner.

From a public policy perspective, our findings support the idea of improving consumers’ objective and subjective financial literacy because both constructs drive customer coproduction. Continuing the efforts on public financial education (e.g., educational offers in schools or community centers) is necessary. In addition, public policy makers should engage in efforts designed to increase consumer involvement. To do so, they can leverage traditional marketing tools. One example of such a policy effort is the “Questions Are the Answer” campaign, launched by the U.S. Agency for Healthcare Research and Quality to motivate patients to become more engaged when meeting with their doctors (e.g., by preparing questions before their appointment). This campaign integrated traditional advertising (e.g., television, radio, print) with an interactive website. Similar campaigns, albeit on a potentially smaller scale or targeted at specific consumer segments, can be designed to increase consumer involvement in other well-being settings (including financial counseling). Such campaigns would go beyond current approaches of merely providing self-educational tools (e.g., nfcc.org) and would train clients on how they can collaborate with service providers most effectively. In rolling out such campaigns, policy makers should collaborate with community-level entities (e.g., schools, employers, community centers, nonprofit organizations) to raise awareness of the positive impact well-being programs can have on consumers’ (financial) well-being if clients are involved. In line with this idea, our work has an important, final implication for consumers in credit counseling. Consumers who act as coproducers benefit in terms of their own objective and subjective well-being, a conclusion that is most inspiring.

You can read “Coproduction of Transformative Services as a Pathway to Improved Consumer Well-Being: Findings from a Longitudinal Study on Financial Counseling” from Journal of Service Research for free by clicking here. Want to get notified when Journal of Service Research releases new research? Click here to sign up for e-alerts!

Martin-Mende_smallMartin Mende is an assistant professor of marketing at Florida State University. His research focuses on service science, relationship marketing, transformative service research, and marketing strategy. His research has appeared in the Journal of Marketing Research, Journal of Service Research, and Journal of Business Research.

doornJvanJenny van Doorn is an associate professor of marketing at the Faculty of Business and Economics at the University of Groningen, the Netherlands. The main focus of her research is on customer relationships, customer engagement and sustainability. Her work has appeared in Journal of Marketing, Journal of Service Research, International Journal of Research in Marketing, and Harvard Business Review.

Congratulations to SAGE Editor Bharat Sarath!

victory-1146459-mWe’re pleased to congratulate Journal of Accounting, Auditing and Finance Editor Bharat Sarath of Rutgers University who was a winner of the prestigious 2013 Abacus Best Manuscript Award! Bharat Sarath and co-author Joshua Ronen of New York University received the award for their paper entitled JAAF_72ppiRGB_powerpoint“Financial Statements Insurance.” The paper appeared in the Accounting Foundation owned journal Abacus.

The award was formally announced at the American Accounting Association meeting held on August 3rd at the Hilton Atlanta.

In honor of the award, the current issue of Journal of Accounting, Auditing and Finance can be read online for free for the next 30 days! Click here to access the Table of Contents!

Want all the latest research from Journal of Accounting, Auditing and Finance sent directly to your inbox? Click here to sign up for e-alerts!

Do Home Foreclosures Affect Some Neighborhoods More than Others?

house-for-sale-3-1150734-mAccording to a December 2010 report from the United States Bureau of Labor Statistics’ Monthly Labor Review report, the U.S. housing bubble peaked in 2006 and burst in 2008. Residential-construction-employment fell to levels lower than those in 1993 and foreclosure signs quickly became a common sight in neighborhoods across the country. But were some neighborhoods affected more than others? Why? This is what authors Keith Ihlanfeldt and Tom Mayock explored in their article “The Variance in Foreclosure Spillovers across Neighborhood Types” from Public Finance Review.

The abstract:

The estimation of foreclosure spillover effects has been the subject of a number of studies PFR_72ppiRGB_powerpointfollowing the most recent housing market crash. An important issue largely overlooked by these studies is the extent to which these spillovers vary across neighborhoods. In this article, we use data from the South Florida metropolitan area to study the variance in these foreclosure spillovers across neighborhoods with different income levels and racial concentrations. We find that the largest foreclosure spillovers occur in higher-income neighborhoods. In low-income, minority neighborhoods, we find no evidence of spillover effects. The results have important implications for local governments.

Clickhere to read “The Variance in Foreclosure Spillovers across Neighborhood Types” from Public Finance Review for free! Don’t forget to click here to sign up for e-alerts and keep up to date on all the latest news and research from Public Finance Review!

How Much is the Organizational Power Structure to Blame for Corrupt Behavior?

Is ittake-the-buck-1-1096837-m easier for someone to be corrupt at different levels within an organization? Does corruption depend on the resources available? Authors István Jávor and David Jancsics discuss this topic in their article from Administration and Society  entitled “The Role of Power in Organizational Corruption: An Empirical Study,” winner of the 2014 Best Article Award from the Public and Nonprofit Division of Academy of Management!

The abstract:

This article concerns the extent to which corrupt behavior is dependent on the organizational power structure and the resources available for illegal exchange. This A&S_72ppiRGB_powerpointqualitative study is based on 42 in-depth interviews with organizational actors in different organizations in Hungary. Four core themes emerged from the analysis of the interviews: (a) isolated corruption at the bottom, (b) the middle level’s own corruption, (c) “technicization” when middle-level professionals and expert groups are used to legalize the corruption of the dominant coalition, and (d) “turning-off controls” when organizational elites intentionally deactivate internal and external controls to avoid detection.

Click here to read “The Role of Power in Organizational Corruption: An Empirical Study from Administration and Society for free! Make sure to sign up for e-alerts and stay up to date on all the latest news and research from Administration and Society!