Research Roundup: June 2022

CEOs Prepare for Uncertain Future

CEOs expect to manage crises throughout their careers, but even the most seasoned executives likely have not had to grapple with the equivalent of a recession, inflation, cyberthreats, climate change, and Russia’s invasion of Ukraine all at once. Today’s CEOs are unsure what the ultimate impact of these crises on their businesses will be, according to C-Suite Outlook Mid-Year, The Conference Board’s addition to the annual member survey it released in January.

Among 750 CEOs responding to the mid-year report, 76 percent expect a recession within the next 18 months—and 15 percent believe that a recession is already under way. And with inflation looming large, CEOs are concerned about two economic issues in particular: volatile energy prices and higher input costs.

Respondents view Russia’s invasion in Ukraine as a primary driver of inflationary pressure. In addition, 90 percent now worry that Russia will use cyberattacks to retaliate against their organizations for economic sanctions carried out in response to its invasion of Ukraine. This is compared to just 16 percent who viewed poor cybersecurity as a “high-impact threat” in the January survey.

“Before the war, few saw cybersecurity as a major issue facing their companies,” says Paul Washington, executive director of The Conference Board’s ESG Center. “Companies need to make cybersecurity a sustained, and not just episodic, priority. Cyberattacks not only imperil a company’s data, operations, and reputation, but can have far-reaching societal and environmental impacts.” 

The invasion also looms large for CEOs, who fear it could be a precursor to other similar economic conflicts involving other nations, such as China. Respondents are taking several actions to prepare their companies for such possibilities:

• 53 percent are focusing on making their supply chains more resilient to war. That number increases to 78 percent and 72 percent for companies with operations in Russia and Ukraine, respectively.
• 28 percent are accelerating their investments in renewable energy to minimize their energy dependence on other nations.
• Ÿ58 percent are prioritizing investment in digital transformation.

But even as companies seek to mitigate the negative impact of inflation on their operations, they must remain transparent with stakeholders, stresses Ivan Pollard, executive director of The Conference Board’s marketing and communications center.

“Trust in corporations has been built up through the long months of COVID-19, but that trust can be eroded if there is any sense of profiteering,” says Pollard. “Communicating the story to your customers is one to be handled carefully with honesty and transparency.”

When ‘Women Supporting Women’ Backfires

Many people believe that encouraging women investors to support women-owned startups can help close the gender gap that exists in venture capital. However, a new paper published in Organization Science suggests that the opposite is true.

Co-authors Kaisa Snellman of INSEAD in Fontainebleau and Isabelle Solal of ESSEC Business School in Cergy, both in France, looked specifically at whether women helping women would open up more opportunities for female founders. On the contrary, they found that female entrepreneurs backed by female venture capitalists are two times less likely to receive additional investments than those backed by male venture capitalists.

In one study, the researchers analyzed data related to a sample of 2,136 U.S. firms that received first-round VC financing between January 1, 2010, and April 13, 2018. Of these firms, 290 were founded by women. The pair used data from Crunchbase, a database owned by media company Tech Crunch.

Female-founded firms with at least one male investor were two times more likely to receive second-round funding than those with only female investors. Those backed by both male and female investors were 2.5 times more likely to receive second-round funding. “We find that the gender of investors makes no difference for male-founded startups,” says Solal.

When asked to evaluate pitches by both male and female founders, study participants perceived female founders with only female investors as “less competent, and consequently the business idea as less promising.”

Solal and Snellman conducted experiments that shed light on this phenomenon: When asked to evaluate pitches by both male and female founders, participants perceived female founders with only female investors as “less competent, and consequently the business idea as less promising.”

The pair notes that female entrepreneurs are already 63 percent less likely than their male peers to attract venture capital. These findings show it will require more to improve this number than to simply encourage female investors to back female entrepreneurs. Rather, entrepreneurs “might benefit more from building inclusive investment teams,” says Snellman.

“When I talk about the research with others, people often expect to hear women would do better when they are funded by women. That is the story repeated in newspapers,” she adds. “Turns out, it is not backed by evidence.”

No Eco Benefits to Hybrid Work?

Environmentalists have argued that widespread adoption of hybrid working models reduces carbon emissions. But that view does not factor in several “unintended consequences” that cancel out the environmental benefit of fewer weekly commutes, say researchers from the Science Policy Research Unit at University of Sussex Business School in the U.K.

For their study published in the journal Transportation Research Part A, Bernardo Caldarola and Steve Sorrell examined data from the English National Travel Survey. In their analysis, which involved a sample of 3.6 million trips by approximately 269,000 individuals from 2005 to 2019, the researchers discovered that remote workers in England traveled more each week, on average, than workers who commuted daily to the office.

Prior to the pandemic, people who worked from home once or twice a week took 14.9 percent fewer commute trips. But they also lived an average 7.6 miles farther away and traveled 10.9 percent farther than office-based workers. People who worked from home three or more times a week lived 4.2 miles farther from work than office-based workers.

And on days when they worked from home, remote workers took 7 percent more non-work-related trips by car each week, often to shops and cafes. Moreover, households with at least one remote worker conducted more weekly travel than those without. In other words, when people work from home, they aren’t the only ones who venture out more frequently—their family members and roommates do so as well.

These results do not mean that remote work cannot become more sustainable, emphasizes Caldarola. “The outcomes we observed are not inevitable,” he says. “Public policy can encourage more sustainable residential and travel patterns, and these in turn can enable teleworking to make a bigger contribution to reducing emissions. However, this will not happen on its own—it needs to be actively encouraged.”

The Social Value of Canceling Coal

Three researchers have quantified the net gain for society of a global transition from coal to renewable energy: nearly 77.89 trillion USD, or about 1.2 percent of annual global GDP. That equates to a net gain of about 125 USD per tonne of coal and 55 USD per tonne of avoided coal emissions, according to the authors of a new paper titled “The Great Carbon Arbitrage.”

The authors include Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department of the International Monetary Fund; Patrick Bolton, professor of finance and economics at Imperial College Business School’s Centre for Climate Finance and Investment in the U.K.; and Alissa M. Kleinnijenhuis, a research scholar at the Stanford Institute for Economic Policy Research in the U.S. and the Institute for New Economic Thinking at the University of Oxford in the U.K.

The team analyzed data from Orbis, which gathers financial information from 400 million organizations; as well as from Asset Revolution, which houses data related to companies’ historical and projected global coal production. They also used data from the International Renewable Energy Agency to calculate the costs of investing in different types of renewable energy.

A full transition to renewable energy would cost about 29 trillion USD but would generate 106.9 trillion USD, largely from reducing the effects of climate change and improving human health.

The researchers estimate a full transition to renewable energy worldwide would require an upfront investment of about 29 trillion USD. Financing this transition would not be easy, they admit. It would require wealthier nations to finance both their own efforts and those of developing countries.

But the long-term social benefits of phasing out coal would generate a return on investment of 106.9 trillion USD—returns reaped largely from reducing the effects of climate change and improving human health. “This enormous social net benefit is the gain from a cheap insurance policy,” says Bolton. “By paying a premium, one gains coverage for potentially very large damages.”

Adrian adds that, given these economic benefits, researchers and policymakers should “push harder for global agreements that unleash the potential power of capital markets.” If wealthy and developing nations entered into financial agreements based on the condition of phasing out coal, the net social gains, he adds, “would be enormous.”

The Unbearable Lightness of LARPing

Each year, thousands of people globally engage in events dedicated to live action role-playing, or LARPing. At these events, they don elaborate costumes and assume the personas of characters at intricately designed venues meant to replicate historical or fictional worlds. LARPers immerse themselves in everything from the Star Trek universe to the early 20th-century world of the U.K. television series“Downton Abbey.” But how does LARPing affect people in their real lives?

That question is explored “There and Back Again: Bleed from Extraordinary Experiences,” a paper published in the Journal of Consumer Research. Its authors include Davide C. Orazi, assistant professor of marketing at Monash University’s Monash Business School in Melbourne, Australia; and Tom van Laer, associate professor of narratology at the University of Sydney Business School.

Orazi and van Laer analyzed data related to three different LARPs and completed an ethnographic study of four more. For their ethnographic study, they took 2,496 photographs and four hours of GoPro videos, conducted 29 interviews, analyzed seven diaries, and collected 2,936 screen captures. 

They found that people's lives changed in a range of ways after LARPing. Some simply wore their costumes in the real world, while others were inspired to alter their lives dramatically. They changed how they raise their children, ended long-term relationships, or even fell in love with someone while role-playing. LARPers refer to the transference of their “extraordinary experiences” into their real lives as “bleed.”

Orazi and van Laer categorized this bleed in four ways: absent (experiencing little or no bleed), compensatory (seeking to re-create the experience via media such as novels, TV series, and video games), cathartic (becoming so involved in the LARPing experience that they must reflect on, report, and share their experiences to cope), and delayed (being so affected that it requires prolonged distancing from anything related to the experience).

Unlike watching a movie or reading a novel, which only taps into sight and sound, LARPing employs all five senses, says van Laer. People aren’t just consuming the story—they’re creating it. “It's not just in your head, it’s everywhere. There’s no border from reality,” says van Laer. One person interviewed for the study described the experience as “a bit like a collective dream.”

These findings, the co-authors note, could shed light on what the real-life impact might be of people’s growing consumption of extraordinary experiences in virtual reality, augmented reality, and the metaverse. While such experiences will help people develop new skills and expand their creativity, “bleed” could also lead to negative consequences once they return to their normal lives.

“Far from being nothing but an experiential hangover,” Orazi and van Laer write, “bleed carries existential implications for what it means to move between routinized and distant … frames and roles.” Designers, van Laer adds, have a responsibility “to realize what they might be doing and the effects they might be having.”