Loading summary
Transcript41 lines
- [00:04]
A
You're listening to Is Business Broken, A podcast from the Merotra Institute for Business, Markets and Society at Boston University Questrom School of Business. I'm Kurt Nickish. Today we're diving into a fascinating corner of self regulation, one that doesn't rely on formal rules or legal protections, but instead on norms. In industries like fashion and fine dining, there are powerful unspoken rules. Don't copy, don't steal, even when you legally can. How do informal codes of conduct shape behavior and foster innovation in creative fields? And what does it take to sustain trust and collaboration when regulation isn't there to keep everyone in line? To unpack these questions, we're joined by two experts. Giada DiStefano, a professor of strategy at Bocconi University in Milan, Italy, and Andy King, Alan and Kelly Questrom, professor in Strategy and Innovation at BU Questrom. Let's get started. Giada, thanks so much for coming on the show.
- [01:16]
B
My pleasure. Thank you so much for having me.
- [01:18]
A
And Andy, great to have you back.
- [01:20]
C
It's great to be back.
- [01:21]
A
So let's get into it, and let's start with fashion. Giada, how does self regulation play out in that industry, especially given that there aren't strong formal protections for designs. You can't copyright the design of a blouse. In fact, with fast fashion and other competitors, I mean, it seems like it's an industry of copying almost.
- [01:43]
B
Yeah. And it seems like it's an industry where people coordinate to some extent. Right. I mean, the very concept of trends suggests that at least to some extent, there is coordination on. This is where we started in terms of thinking about the phenomenon. And so what we did was we did a bunch of interviews, we looked through different materials, and we started to get a little bit of an understanding of how things were working. So there is some coordination and some knowledge sharing that happens through suppliers, for instance, we learned. But what was really interesting to us was also that there were some. We read about. Some scholars in other fields, like law, for instances, started to talk almost like of a piracy paradox, where exactly this idea that people can copy you is what accelerates trends and make sure that then your design are relevant and are actually liked by consumers because somehow all the trends tend to go in the same direction. So paradoxically, piracy can kill innovation, but on the other end contributes to selling innovation.
- [02:51]
A
In that case, you're almost sort of punished for having something that's too different and too protected.
- [02:58]
B
Yeah, I guess. I mean, the protected part, I think it's not even. Doesn't even come into the picture because it's basically kind of impossible to do it unless you're talking about very technical aspects of a design. But the idea is that there needs to be some convergence, otherwise you are too much of a voice outside of the course, I would say. So we started to look at that and we started asking around to people and designers what they were thinking about that. And in the process, we kind of realized that it was difficult to get access to many of these informants. And with Andy, we really wanted to do something that was of a larger scale where we could really represent an industry in its entirety. So this is why to some extent, we switched or we moved from fashion where we started, to gourmet cuisine, where we actually did much more research.
- [03:51]
C
One problem that we have in social science is we study something at a time and then the times may change. And so when we started work on the fashion industry, they were interested. Yeah, they were worried about fast fashion, but mostly at that point they were still thinking about having a set of collections a year and the copying between the different, the sort of main designers. Now, of course, copying has become a business model. When you have Shein basically just taking any design that's online that seems possible and generating thousands of designs a day. The whole industry has now changed. And some people actually say that the whole industry is degraded as a result. So the fashion industry is an interesting example of what can somewhat go wrong if there are no rules.
- [04:44]
A
So if restaurants are a good example, then here let's shift to restaurants. How do similar self regulatory norms show up here?
- [04:53]
B
If you think about chefs, I mean, us who are not in the industry, you would think that there's not much that they share with one another. The whole idea of like a chef calling up another and asking for a recipe is a little bit bizarre in the sense it's something that you would not immediately think of. But the reality of it is that this happens and this happens a lot. So when we started talking to chefs, we realized that they do share a lot of information. They share resources every now and then. So if they are in need for help or, you know, ingredients or something like that, they would do that. So they exchange material favors, but they also exchange recipes and knowledge related to how to cook food and how to present it, and different combinations of flavors, et cetera. Now if you think about it, when you know that you cannot protect it, why would you want to pass this information to a competitor? Yes, they are in the same industry. Yes, a restaurant is geographically located in one area instead of another. So maybe sometimes the consumers not even overlap, but still the reality of it is that you build your own reputation based on your particular cuisine, your style. So why would you want to share this info with someone who's competing in the same industry? This was really puzzling for us to the extreme. We actually talked to one informant who told us that not only they were sharing the recipes, but at some point in time, they were exchanging people in the kitchen. The sous chef was going and do sort of an internship in the kitchen of a competitor, and the sous chef of the competitor was coming to their kitchen so that not only they would know the recipes, but they would also see how the kitchen operates. So this was incredibly surprising to us.
- [06:44]
C
What John is saying is you're a high end chef, you need to change your recipes all the time. And you know, it's hard to be that creative without a flow of information. And so you need this flow of information and everybody needs it. But you don't want to have other people copying you. So you have to have a way that the information can get transferred, but it doesn't result in identical copies in the restaurants around you. So they have a variety of norms that they've set up. And it's astonishing how much the chefs will say these things about what you can and cannot do. Things where you are sharing that helps everybody, but not sharing in a way that's going to hurt everyone.
- [07:24]
B
Yeah. So they basically tended to always mention three rules of behavior. The first one would be that you cannot copy the recipe. Exactly. The second would be that if you do so, then you should cite the source by referencing the person in the menu paying homage to the original creator. And the third rule was related to the fact that you were not supposed to share this recipe with a third party without asking for permission from the original source. What we found interesting about this is that these norms were originally, I mean, some colleague of ours wrote a paper in which they were talking about this in the context of French gastronomy. And we did interviews in Italy, we did interviews in the US So also different countries with different gastronomic traditions, et cetera. And we didn't tell them about the findings of the French paper, let's say. But everyone was mentioning the same rules. So it looks like this is not something that is specific to Italian chefs or French chefs or US chefs. It's like these are kind of universal norms. If you belong to this particular segment of the industry that is fine dining.
- [08:36]
C
It was almost as if they were programmed. You would ask someone about it and boom, you'd get the same three and across three countries.
- [08:45]
A
How does that get enforced? I just wonder in these industries, like, what are the social or professional consequences when somebody does copy and, you know, or takes credit unfairly when somebody doesn't, you know, do that chef's hat tip in the menu?
- [09:01]
B
It's complicated. It's not an easy answer because you can imagine that the first thing is that you need to be able to. Or you may think about whether others will believe you in case you say someone has infringed your intellectual property in the absence of a document that testifies that this is in fact your intellectual property and not the idea of someone else. Right. So there is this problem of attribution, and it's something that they consider in thinking whether or not they should actually try and punish and sanction someone who does something wrong. So that's the first piece of info. Having said that, assuming that they decide to go for it and so they decide to do something about a violation. Also there we more or less heard variations around the same themes. That is, they would stop or try to limit the exchange of material favors with the chef that has violated the norm. This means you run out of napkins one night, or there is some ingredient that is missing in your kitchen, or you need some extra help and the neighboring restaurants will not help you with those practical and material favors. Part of it has also to do with the fact that you may stop providing the information in the future. So if the person comes to you again and asks for this, of course you don't do it again. And the third, as you can imagine, is gossiping. That is, they engage in negative gossiping around the party that has violated the norm. And also in this case, there was quite a bit of convergence across the three different countries. Again, very surprisingly, more or less, they were all bringing up exactly the same punishments for violations of the norms.
- [10:55]
C
I remember distinctly. So interesting, a chef saying we. I said, well, why wouldn't you just copy or violate these norms? I mean, it doesn't seem like. And the chef said, well, you never know when you're gonna need a busboy or a bunch of napkins at the last minute.
- [11:10]
A
This reminds me a lot of covering venture capital in Boston, because there are norms there about what founders do and how venture capital firms share information. And if somebody breaks a norm, word gets around really quickly. But that helps when everybody's in the same ecosystem. You talked about how this is common across industries, but what role does geography play in reinforcing these norms? If I'm too far away to get napkins from you. I don't care if I steal your recipe.
- [11:40]
B
Yeah, you know, I mean, in the sense of the material favors, geography definitely plays a role. And I mean, in fact, we did some work that if you look at chefs, the restaurants that are located in restaurant rows, these norms tend to be strong and the system of punishment tends to be tighter because there is more monitoring that happens among competitors. And so clearly, if you are in an area that is densely populated in terms of restaurants, the norms seem to be stronger and seem to hold better. There is, however, the aspect related to, you know, your reputation, for instance, through the gossiping part, that is going to hold independent of location. So if you are a chef, you probably care about the fact that you're considered to be innovative, that you're considered to be a person who's able to come up with these ideas on their own constantly and continuously over time. And if word gets out that in fact what you're doing is just recombining what someone else is giving you, and, you know, that's really how you come up with innovations, this is not good in terms of the reputation that you form in the group of chefs and potentially can have, then the consequence that your neighbor may end up punishing you indirectly because now they know that you may be a person that engages in this type of behavior. So there is a lot of this also what we would call third party sanctioning. That is not necessarily the person that you did something wrong to is going to be the one who administers the sanction, but it may also be a third party.
- [13:17]
C
We talked to a James Beard Award winner who described how his sous chef moved across the country, took everything in the menu, took the whole design of that restaurant, and there was nothing it could do other than send lots of angry letters. So there are cases where it gets violated, and there are limits to how much you can really sanction the person. And you're absolutely right. Geography matters.
- [13:42]
A
I'm also curious how much of this has changed in the digital world. Like, are today's chefs or designers more or less likely to follow these unwritten rules than they were, say, 20 years ago? And then Instagram or TikTok World and where you can go find copycat recipes online. Are these norms harder to enforce?
- [14:03]
C
Well, I've already mentioned, and it's definitely in fashion, right? A fashion that has gone changed. And some people say the clothes we get now are just much inferior to what we used to get because of this rapid following of the trends online in terms of restaurants, Another thing we picked up that was interesting to me is that the recipe you get in a book or is posted is not always the real recipe. So the chef is holding back some critical things so that you aren't actually perfectly able to copy it at home. They'll give you the recipe if you're one on one, an individual, but they won't always put the full thing in.
- [14:51]
A
The book like the techniques that got it. Yeah.
- [14:55]
B
One thing that maybe the digital world has also changed is that nowadays consumers play a different role in terms of information conduits, if you want. In the sense that if I go to a restaurant, I write a review, I take pictures, I post the pictures on review websites or Instagram or whatever. This also makes I think potentially some of these violations more visible to the entire community. So it's almost, almost as if this geography issue that we were talking about may become a little bit less relevant because you can potentially probably are going to look at what customers of restaurants that you're really interested in are saying about those restaurants. And so you could see whether the chef at that restaurant is doing something that somehow violates your intellectual property. So maybe it's easier to detect violations thanks to these consumers who are posting the pictures and writing about what they're eating at different places. Just a speculation. I don't know whether this is true, but it could also be the case.
- [15:59]
A
Let's zoom out a little bit. I'm curious how these dynamics apply in scientific research or innovation.
- [16:06]
C
If you think about being in a scientist and you're kind of in a race to come up with a new idea, you again always desperately need your colleagues and the people around you and the other people working on something to share and help you. But on the other hand, and you don't want them to get priority. So there are kind of norms and rules around this about how you behave.
- [16:27]
B
So we went and did this study at the European Agency for Nuclear Research, cern. Within cern, there are two experiments that were designed to be in competition with one another in the sense that they attempt to answer exactly the same questions. And what they basically do is that they check on one another. They are able to replicate the results that the other experiment gets so that we can be sure when there is a scientific discovery that the discovery is actually there and it's not something that is just the result of what a group of researcher is observing. So what was interesting for us to understand was to try and see whether these two organizations, since they are two organizations, maybe have different cultures and different Norms, traits that make the norms stronger or weaker. And whether you would see that scientists within one or the other were behaving differently. And in fact this is what we find in the sense that we noticed that one of these groups where there was a lot of competition among employees, it was what we would call a performance oriented climate. In that group, the scientists were really in a race with their colleagues. And so they would rather get information and pass information outside of the experiment to their, their competitors from the other experiment rather than share the information inside. And this is clearly against the rules that they have there where you should keep the information inside the experiment. So to make sure not to compromise the validity of the all scientific method where you are trying to not to talk to one another so that one can check on the other. And then in the other group, what we saw is that the people were really identified with the organization and this made them behave much more in line with the rules were explicitly stated by the organization not to share the knowledge outside. So there was a lot of knowledge sharing inside, but little sharing outside. So this was also interesting to us because, you know, you could really see how the, you know, the different features, different traits, organization make people stick to.
- [18:43]
A
The norm more or less does that further innovation? I just wonder if some of those norms encourage risk taking. Is there any danger of some of these norms leading to creative stagnation? How does you know? What's the effect?
- [18:58]
B
Yeah, I mean, on the one hand you can think that they are going to potentially compromise the integrity of the process. On the other end, maybe they speed up the innovation process because they enable people to get access to information faster. Now the problem here is that of course there is an incentive for the individual to try and get a piece of info so that that somehow they can be the ones who have the intuition that is outside of the box compared to their colleagues. But the problem is that if you have designed the organization so that there is this separation between the units so that this doesn't happen, you don't want this to happen. So there is a little bit of a trade off here or a tension, if you want, between the goal of the organization that doesn't want to receive this knowledge from the outside so that they can really be sure that they are not seeing things because others suggest them. But it's really because this is what is coming out of the data versus the incentive of the individual who wants to maybe find ways to cut corners.
- [20:01]
A
We talked about this a little bit in the previous episodes, but are there cases where powerful players Use informal norms to exclude or control others in the industry.
- [20:12]
C
That's always been the fear that there's this idea of raising rivals costs that you. In fact, this is the main argument against things like responsible care or these large industry structures is the leaders can do it. They have the capital available, they have whatever the skills. And what they're really doing is they're driving out the smaller competitors. And there is some evidence that that does happen. One of the difficulties with industry self regulation, which you can hear, is that sometimes it seems to work sort of universally, the chefs maybe, but sometimes it's incredibly dependent on the local conditions. And so you can't easily make a statement like industry self regulation works or it doesn't. It works sometimes under certain conditions and not always under others. And I think what we mostly know is if the rules are pretty clear and you can observe the violations of the rules and there's sanctioning available, they tend to work better. And when those are not the case, they tend to break down or they become kind of empty. They exist, but they're not really doing anything.
- [21:24]
A
You looked at all these various industries, which is fascinating. Are there specific lessons that you saw in the restaurant industry or fashion industry that could apply to CERN or to other fields like AI or biotechnology or the other way around? Did you see things that happen at CERN where you said, wow, that really reminds me, or they should be doing that in the restaurant industry.
- [21:48]
C
I think one thing is if you're going to have sanctions which are necessary to maintain norms, rules, even formal industry structures, the sanctions have to be graduated. You can't have a sanction that's so severe that it will never be used. I'm doing work now on another area of norms and behavior like this, which is the reliability and replicability and trustworthiness of scientific research. What we really need there is a way of sanctioning small violations, but all we really have are big effects. Like you take the job away from the actual, and as a result, things don't get used.
- [22:31]
A
So for me, you need to withhold the napkins first.
- [22:33]
C
You need to withhold them. Thank you. That's perfect. You need to withhold the napkins first and then maybe the busboys, and then eventually you go to the extreme form and you need graduated sanctions. So that's mine.
- [22:46]
B
To me, maybe the thing that was common across these two contexts was this idea that the organization as a whole has these powerful norms. They can be stronger or weaker, but ultimately, when people feel that they belong where they feel like they are part of a community, they tend to stick to the norms much more. So, for instance, I told you before, the restaurant throws, right? So you are part of a community of neighboring restaurants. You feel like the norms are stronger. Same goes with the physicists. So we noticed that when people were actually located in the headquarters and so were actually able to interact with their colleagues on a daily basis, then the norms were much stronger compared to people who were affiliated with CERN but were working at more distant locations. So there is this sense of the community that makes really people stick together and adhere to these rules of behavior so much more.
- [23:47]
A
John and Andy, this has been really interesting. We've heard about how some of these most creative industries that we associate with innovation and originality, they're also built on this surprisingly fragile foundation of trust and norms and shared values. And just because there aren't formal rules doesn't mean there's chaos. It can mean collaboration. Giada and Andy, thanks so much for sharing your research with us.
- [24:14]
C
Thanks for having us.
- [24:16]
B
Thank you so much. It has been my pleasure.
- [24:22]
A
That's Professors Giada DiStefano and Andy King. Stay tuned for our next episode, and until then, please follow the show on Apple Podcasts, Spotify or wherever you listen. Thank you for listening to Is Business Broken? I'm Kurt Nick.
- [24:42]
C
It.