ISSN 1828-6313BOCCONI UNIVERSITY, KNOWLEDGE THATMATTERS Issue 1-2 / January-February 2020

TheageofAI

� Alessandro Profumo’stake onmanaging

by innovating

� Interpreting the worldthanks to grant-winning

Bocconi research

� Get to knowAlumnithrough the FerdinandoBocconi Questionnaire

Artificial Intelligence will not outclass humanityUnderstanding it is key to unleashing its potential

@unibocconiSocial

Be

For two years in a row, the Nobel Prize for Economicshas been awarded to scholars that make us aware ofthe complexity of the issues facing modern societies.

William Nordhaus has been acknowledged for his positivecontribution to world climate change, Abhijit Banerjee,Esther Duflo and Michael Kremer for their seminal workon the fight against poverty.At the same time, the advent of artificial intelligenceamounts to one of the main challenges for economics andthe social sciences taken as a whole, both from thetheoretical point of view and from that of policymakersand managers. The prejudice impeding the diffusion of thedigital transformation and, with it, of artificial intelligenceis rooted in the fear of job losses, skepticism towardsincreasingly invasive technology, with the related impactson privacy, and the alienation of whole generations.In the face of the change that technological evolution,climate change and inequality are imposing, Universitiesmust break from the tradition that would keep disciplinaryareas closed in on themselves, and instead take the routeof integrating different knowledge, developing the skillsfor continuous learning and critical thinking. That drive isthe only force truly capable of overcoming theobsolescence of skills in a world travelling at the speed oflight; that route is all the more decisive in a realitydominated by big data and information overload. Only bymaking new managers and citizens literate in the newlanguages (digital, artificial intelligence) and in the new

needs (those to which the company purposeaims to respond) will we be able toovercome the challenges we face.The challenge of knowledgeintegration will be won byopening up to complexity,absorbing its influence andknocking down barriers.At Bocconi, following themotto we coined: “Knowledgethat matters” – which becamea work of contemporary art byartist Lorenzo Petrantonioutside the Rontgen building inOctober – our ambition is tocontribute to these changes

and these cultural,

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HOMEPAGEScience makes sense of complexity

VIDEOThenewBocconi campuswas inaugurated inNovember in thepresenceof thePresidentof the ItalianRepublic SergioMattarella.Thebuildings, characterizedby transparencies thatenhance theconceptofopenness,weredesignedbyKazuyoSejima andRyue Nishizawa'sSANAAarchitecture firm.

VIDEOTheBocconi Knowledgeplaylist on YouTubedisplays Bocconischolars higlighting themainpoints of their cutting-edgeresearch, in plain language andwith the aid of infographics.Follow the latest developments in economics,management,law, social sciences anddata science.

methodological and application-related innovations in orderto provide viable answers for the future of students,researchers and citizens.We can take on this challenge to be a driving force forchange, relying on a solid tradition and the results thatBocconi has achieved in all its areas of expertise in terms ofresearch production, quality of teaching and impact on theworld of work. In this regard, I mention only threeindicators: international rankings, where we are fourth inEurope and sixteenth worldwide in Social Sciences andManagement according to QS; the ability to attract researchfunding in which we rank first in Italy with 37 ERC grantshosted; and the employment rate of our graduates, 95.2% ofwhom are employed one year after graduation, with 27.5%employed abroad.

Gianmario Verona, Rector

VIEWPOINTSby Paolo Tonato

Open to the city: the new

The buildings are transparent,with smooth lines, and are equippedwith the most advanced technologiesfor sustainability and teaching

Bocconi campus

VIEWPOINTS

In color or blackandwhA selection of the best Bocconi imagery, as published in the 2019 issues of viaSarfatti25. Icon

March

July-August September

April

hite, oneyearwithusnic places, small details, sport, people and cultural events that marked the last 12 months

October November

May June

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CONTENTSISSN 1828-6313

BOCCONI UNIVERSITY, KNOWLEDGE THATMATTERS Issue 1-2 / January-February 2020

TheageofAI

� Alessandro Profumo’stake onmanaging

by innovating

� Interpreting the worldthanks to grant-winning

Bocconi research

� Get to knowAlumnithrough the FerdinandoBocconi Questionnaire

Artificial Intelligence will not outclass humanityUnderstanding it is key to unleashing its potential

Issue 1-2January-February2020Publisher:EgeaVia Sarfatti, 25Milano

Editor-in-ChiefBarbaraOrlando(barbara.orlando@unibocconi.it)

SeniorEditorFabio Todesco(fabio.todesco@unibocconi.it)

EditorialOfficeAndreaCelauro(andrea.celauro@unibocconi.it)Benedetta Ciotto(benedetta.ciotto@unibocconi.it)SusannaDellaVedova(susanna.dellavedova@unibocconi.it)TomasoEridani(tomaso.eridani@unibocconi.it)DavideRipamonti(davide.ripamonti@unibocconi.it)

ContributorsPaolo Tonato (photographer),Emanuele Elli,Claudio TodescoJenniferClark

Secretariat and iconographic research:NicolettaMastromauroTel. 02/58362328(nicoletta.mastromauro@unibocconi.it)

Layoutproject:LucaMafechi(mafechi@dgtprint.it)

Production:LucaMafechi

Registred atMilano’s Courtnumber 844, 31/10/05

HOMEPAGEScience makes sense of complexityby Gianmario Verona

VIEWPOINTSOpen to the city: the new Bocconi campusIn color or black and white, one year with us

by Paolo Tonato

KNOWLEDGEMeet the new faculty: Catherine De Vries, Luca Trevisan,Tracy Anderson, Christoph Feinauer, Mattia Fochesato,Luisa Gagliardi, Marlene Jugl, SungkyunMoon,Sandeep Pillai, Giuseppe Primerano, Josef Sigurdsson,XiaoxiWu, Giacomo Zanella by Fabio TodescoERCGrants: Arnstein Aassve, Guido Alfani, Francesco Billari,Simone Cerreia-Vioglio, Giacinto Della Cananea,Catherine De Vries, Nicola Gennaioli, Anne-Marie Jeannet,Eliana La Ferrara, Thomas Le Barbanchon,MassimoMarinacci, MassimoMorelli, Tommaso Nannicini,Salvatore Nunnari, Gianmarco Ottaviano, Paolo Pinotti,Guido Tabellini, Luca Trevisan, Tamás Vonyó by Fabio Todesco

COVERSTORYAmulti-disiplinary approach to is key to unleashing AI

Riccardo Zecchina interviewd by Fabio TodescoTraining the creators of the future by Fabio Todesco

Quantitative disciplines meet at Bocconi’sArtificial Intelligence Lab by Ezio Renda

The AI Team: Carlo Baldassi, Pierpaolo Battigalli, EmanueleBorgonovo, Nicolas Brunel, Simone Cerreia-Vioglio, DanieleDurante, Christoph Feinauer, Antonio Lijoi, Carlo Lucibello,Fabio Maccheroni, MassimoMarinacci, Simone Padoan,

Sonia Petrone, Igor Pruenster, Luca Trevisan, Giacomo Zanellaby Fabio Todesco

DEVELOPMENTHer future? It depends on the price of gold by Selim Gulesci

FINANCIALCOMMUNICATIONNot even a superstar can be rude to financial markets

by Xiaoxi Wu

WELL-BEINGThe challenge of trying to measure welfareby Francesco DaveriStories: Nicoletta Balbo, Simone Ghislandi,Letizia Mencarini, Gabriella Bagnato by Claudio Todesco

DEMOGRAPHICSThe challenges faced by climate change babies

by Soheil Shayegh

MEDICINEmHealth is more popular with doctors than with patientsby Rosanna Tarricone

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FINTECHThe challenges of open banking by Anna OmariniPasquale Orlando interviewed by Emanuele Elli

LEADERSHIPLeading with a sense of purpose byMassimoMagni

Stories: Tatiana Balushkina, Fabrizio Castellucci, PaoloGuenzi, MyriamMariani and Luisa Gagliardi, Emilia Paolino,

Naila Shofia, Paola Profeta and EleanorWoodhouse,Giovanni Strampelli by Claudio Todesco

Executive Chats videoseries: 19 top managersinterviewed by Rector Gianmario Verona

HUMANRESOURCESJob changes also impact those who stay behindby Tracy Anderson

FORECASTINGWhowill predict thenext financial crisis? by Carlo Favero

Stories: Daniele Durante, MarianoMax Croce,Marcello Gaboardi, Francesco Perrini

by Claudio Todesco

ANTITRUSTAlgorithm can offset online ad grip of tech oligopoliesby Francesco Decarolis

ENTREPRENEURSHIPBetter a unicorn for a day than a startup for five years

byMarkus VenzinStories: Amicomed, Buzzmyvideos, Easywelfare, Loanxchain,Moneyfarm, MotorK, Musement, Velasca, YOOXNet-A-Porter

by Emanuele and Francesco ElliBocconi for Innovation supports startups through each phase

by Andrea Celauro and Claudio Todesco

CHILDRENParental satisfaction can vary with income and educationby Letizia Mencarini

HERITAGECultural patrimony laws can achieve much by Roger O’Keefe

TECHNOLOGIESSME digitization calls for a district-based approachby Gianluca SalviottiIlaria Tiezzi interviewed by Emanuele Elli

HISTORYStudying the past to comprehend the present by Guido AlfaniStories: Giuseppe Berta, Maristella Botticini, Andrea Colli,Manuela Geranio, Beatrice Manzoni, Elisabetta Merlo,

Mara Squicciarini, Guido Tabellini, Tamás Vonyóby Claudio Todesco

Ricordi and its music. The value of memoryPierluigi Ledda interviewed by Ilaria De Bartolomeis

30BOCCONI PEOPLEAlessandro Profumo(CEO, Leonardo)

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CONTENTSSOCIALMEDIAMARKETING

Firm generated content can have impact if tone is rightby Anatoli Colicev

POLICYGlobalization requires a global approach to health problemsby EduardoMissoniAlumni’s field experiencesby IbrahimDadari and Cecilia Capello

RISKMANAGEMENTBuilding better tools to understand risk

byMassimoMarinacciStories: Massimo Amato, Sergio Beretta, Emanuele Borgonovo,Valentina Bosetti, MarianoMax Croce, Kerim Can Kavakli,

Alessandro Nova, Andrea Resti, Rosanna Tarriconeby Claudio Todesco

MANAGEMENTThe three stars that rule everywhereby Giada Di Stefano

MIGRATIONBraindrain not necessarily an economic loss

by Stefano Breschi

PROFESSIONSDo accountants still seem dull? Taking a new lookby Ariela Caglio andMara Cameran

WARInternational organizations should usemediation in conflict

byMassimoMorelli

EUTwenty colors for Europeby Gianmarco OttavianoStories: Carlo Altomonte, Franco Amatori, Maria Bianchi,Guido Bichisao, Leonardo Borlini, Brunella Bruno,Elena Carletti, Italo Colantone, Francesco Decarolis, AndreaEnria, Guido Fara, Chiara Landolfo, AlessandroMalchiodi,Paola Mariani, Mario Nava, Angela Pettinicchio,Oreste Pollicino, Paola Profeta, Andrea Resti, GraziellaRomeo, Tom Schmitz by Andrea Celauro,Davide Ripamonti,Claudio and Fabio Todesco

GENDERGAPWomen are still underrepresented in politics.Why?

by Alessandra Casarico

FAMILYBUSINESSMarried couples make a winning team as managers toobyMario Daniele Amore

FINANCEDiversity leaves analysts and funds unimpressed

by Alberto Manconi

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Urbano Cairo,(Chairman,

RCS MediaGroup)

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POLITICSMafia attacks on politicians more likely at election timeby Gianmarco Daniele

AUSTERITYWhen fiscal policy is bad for your health

by Veronica Toffolutti

IRRATIONALITYExposing the myth of rational decision-makingby Nicola GennaioliStories: Arnstein Aassve, Massimo Anelli, Pierpaolo Battigalli,Paolo Belardinelli, Giada Di Stefano, ValentinaMele,Chiara Spina, JoachimVosgerau, Guido Tabelliniby Claudio Todesco

FINANCECentral banks should move quickly to pop credit bubbles

by Stefano Rossi

GOVERNANCEWhen the minority shareholder takes controlby Gaia Balp

BANKSDo bankmergerscreatecompetition?

by Barbara Chizzolini

CONTEMPORARYHISTORYBerlinWall and more: the decisive year of 1989by Andrea ColliStories: Carlo Altomonte, Roger O’Keefe,Gianmarco Ottaviano, Eleanor Spaventaby Claudio Todesco

MARKETSHigher bond spreads did force banks to reduce lending

by Filippo DeMarco

MANAGEMENTOne size does not always fit allby Dovev Lavie

ACCOUNTINGTo achieve an effective audit, select a mixed team

by Angelo Ditillo and Angela Pettinicchio

ENERGYRenewable energy sources still need a handbyMatteo Di CastelnuovoThe time is ripe for energy startupsCarlo MariaMagni interviewed by Emanuele Elli

CULTUREINDUSTRYDigital music opens up pop charts

by Andrea Ordanini

CORPORATELAWSuperpowers for loyal shareholders no longer a noveltyby ChiaraMosca

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Alumni Leadersanswer

Ferdinando’sQuestionnaire

Catherine De Vries, aFull Professor whojoined Bocconi

Department of Social andPolitical Sciences on January 1,calls herself “a sort of Brexitrefugee.” A native of theNetherlands, she worked foralmost ten years in theUK(University of Oxford andUniversity of Essex) beforeleaving the country in 2018 for

Vrije Universitieit Amsterdam.“I decided tomove to Bocconiin search of a university inContinental Europe with a trulyinternational reach,” she says.A prominent political scientistwith a vibrant presence inmajorinternational media, herresearch interests stem from herPhD dissertation at Vrije (butwith a supervisor fromUniversity of North Carolina atChapelHill, who introducedher to theAmerican academicenvironment). Her work focuseson protest and skepticismtowards the EU. “I haveprogressively added layers tothe same interest,” she says. “Inthe aftermath of the financialcrisis, for instance, anti-corruption sentiment played abig role in the fall of someEuropean governments and Istarted studying public opinion

from awider angle.My studieson remittances also come fromthe observation of what happenswith immigrants in EUcountries.”Her work on remittances,published in theAmericanPolitical ScienceReview, showsthat when people fleeauthoritarian regimes and sendremittances to their families,they produce the unintendedconsequence of empowering thevery same regimes they arerunning away from: whenremittances increase, peopleattribute their wellbeing to theregime, andwhen they shrink,people blame it.As for political corruption, Prof.DeVries wants to understandwhy it so often goesunpunished. “We find that, inorder to be punished,corruptionmust display a strong

deviation fromwhat voters thinkto be the norm andmust becoupled with amajor event, likethe sinking of the ferry in SouthKorea in 2014,” she says.In a successful andmuch-discussed book published in2018, Prof. DeVriessummarized her thinking onEuroskepticism. InMay 2020she will publish a book onpolitical entrepreneurs. “Weborrow Schumpeter’s theory oninnovation and apply it topolitical change,” she says. Theanalysis shows that successfulpolitical challengers jointlyadopt two strategies. First, theychoose amobilizing issue thatdrives a wedge in the traditionalleft-right divide. Second, theyprevent imitation coming fromdominant parties or new rivalsby destroying their competencein the eyes of the public.

Two new professors burnish BocconKNOWLEDGEby Fabio Todesco

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Mattia Fochesato, a scholar ofeconomic history and inequality,did his doctorate at theUniversityof Siena.He thenwent toSciencesPo as aResearch Fellow,andwas aPost Doctoral AssociateatNewYorkUniversity AbuDhabi.He joinedBocconi’s Departmentof Social andPolitical Sciencesfrom theUniversity of Basel,where hewas anAssistantProfessor.

Luisa Gagliardi has returned toBocconi,where she graduated,from theUniversity ofGeneva,where shewas anAssistantProfessor.With a PhDat IMT inLucca, shehas joinedBocconi’sdepartment ofManagement andTechnology. Her studies look at theintersectionof economicgeography, innovation strategiesand international business.

Marlene Jugl, German, hasjoinedBocconi after a PhDat theHertie School ofGovernance inBerlin. Shewill carry outcomparative studies onpoliticsandpublic administration at theDepartment of Social andPoliticalSciences.

SungkyunMoon,a Koreanwith a PhDfromSingaporeManagementUniversity, has beenconducting researchat theDepartmentofMarketingfor severalmonths.Moon studiesthe financialimplicationsofmarketingcampaigns, andofthedisclosure ofmarketing costs.

CATHERINE DE VRIES SHEDDING LIGHT ON EUROSKEPTICISMCompletely different areas, one common decision. De Vries and Trevisan discuss why the Uni

Cristoph Feinauer joinedBocconi in February, as AssistantProfessor at theDepartment ofDecision Sciences.Germanwith adoctorate fromPolitecnicodiTorino, before joiningBocconi heworked atUniversité Pierre etMarie Curie Paris andat aGerman company, as a researcherofmachine learning, his area ofinterest also at Bocconi.[GIG ECONOMY, INEQUALITY, MACHINE LEARNING, FINANCIAL MARKETING:

Tracy Anderson, from theUK,graduated from the LondonSchoolof Economics in 1999 andworkedfor several years in non-academicresearch institutions beforereturning to university for a PhDatWharton. She conducts research incollaboration,workermobility, andcareers at theDepartment ofManagement and Technology.

Catherine De Vries

of algorithms capable ofapproximating a solution.In 2012, Luca Trevisancelebrated in an original way,on his blog in theory, thecentennial of the birth of AlanTuring, a brilliant forerunner ofcomputer science,cryptography andAI, and anopenly gayman. “He lived in atime when it took courage onthe edge of recklessness,” hesays. “So, I invited a number ofgay and lesbian colleagues towrite posts talking about howthings have (or have not)changed since then.”

Awidespread stereotypeportrays academics aspeople who deal with

theories that work fine onpaper, but not in practice.LucaTrevisan, a computer scientistand a Full Professor at theDepartment of DecisionSciences from September 2019,does the opposite: he looks for atheoretical explanation formathematical techniques usedin computer science that workwell for reasons that nobodyunderstands.After his degree and doctoratein computer science in Rome,Prof. Trevisan has had anenviable, twenty-year academiccareer in the United States atMIT, Columbia, Berkeley andStanford. Now he has returnedto Italy with an ERC grant. “AtBocconi, there is a convincingSTEMdevelopment project

with a long-term vision andsubstantial resources, making itthemost attractive place inItaly for a computer scientistworking in the US, and one ofthe very best in Europe,” hesays.When he was a postdocresearcher at MIT, LucaTrevisanmade a vitalcontribution to understandingrandomness extractors, whichare important for creatingcryptographic keys.Years later, during his time atStanford, he addressed theissue of network analysisthrough linear algebra. In avery important work, hedemonstrated howmethodsbased on linear algebra coulddetect subsets of nodes withparticularly dense (frequent)connections - an importantthing to detect, because

connections density is caused,in all probability, by acommonality of interests, bysome affinity.Another strand of Trevisan'sresearch looks at the problemsfor which there are noalgorithms that provide asolution, or at least not within areasonable time. “This is apositive feature when applied tocryptography,” says Prof.Trevisan, “but negative if wewant to solve the problem.Knowing that there is nosolution can, then, help us getaround the problem somehow,perhaps by looking foralgorithms that approximate thesolution, without giving anexact one.” Prof. Trevisan hasmade an important contributionto the development oftechniques that candemonstrate the non-existence

ni’s international appeal

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Sandeep Pillai is from Indiaandhas conductedhis highereducation studies in Canada andtheUnited States,with a PhD fromtheUniversity ofMaryland.Hecombinesmanagement andhistory,with studies on theevolutionof the automotiveindustry andbusiness strategy.He’s an Assistant Professor at theDepartment ofManagement andTechnology.

Giuseppe Primerano, anadministrative law scholarwith aPhDat Tor VergataUniversity, hasbecomeanAssistant Professor attheDepartment of Legal Studies.

Josef Sigurdsson is a recentrecruit at theDepartment ofEconomics. He studied in hishome country Iceland andat theUniversity ofWarwick beforereceiving a PhD in Economics atStockholmUniversity. Hismainresearch focus is on laboreconomics.

XiaoxiWu is fromChina, with aPhDat LancasterUniversity. Shehas becomeanAssistantProfessor at theDepartment ofAccounting. Her area of research isthe effects of financialcommunication, using tools thatallowher to analyze the languageand thepersonality of the actorsinvolved.

Giacomo ZanellahasbeenAssistant Professor at theDepartment of Decision Sciencessince last September. A Bayesianstatistician, Prof. Zanella has a PhDin Statistics fromWarwickUniversity andwas apost-DoctoralResearcher at Bocconi.

LUCA TREVISAN IN ITALY WITH ERC GRANTiversity offers them the right environment to continue their research

]ASSISTANT PROFESSORS FROM AROUND THE WORLD BRING DIVERSE EXPERTISE

Luca Trevisan

Grants are awarded on thesole criterion ofscientific excellence by

the European ResearchCouncil. In 2007, when theEuropean Commissionestablished the EuropeanResearch Council, Bocconi wasin the middle of an ambitioustransformation plan to becomea modern university; aninstitution that, in addition to

In the last 10 years, Europe has seen seismic electoral shiftswithout a clear, common trend. If the rise of populist parties andthe intensification of ideological conflict and polarization are the

most striking features, in some cases right-wing movements emergeas winners, in other cases left-wing ones, while in countries heavilyaffected by the Great Recession, such as Ireland and Portugal,populism didn’t take root at all. Salvatore Nunnari, an AssistantProfessor at Bocconi’s Department of Economics, obtained a ERCStarting Grant for POPULIZATION (Behavioral Foundations ofPopulism and Polarization), a research project using behavioralpolitical economics, with a mixed methodology that includes boththeoretical models and an original dataset.“I want to study, on the one hand, how people’s preferences andcognitive abilities affect their electoral choices and, on the other, howpoliticians react to voters’ behavioral factors and unstablepreferences,” Prof. Nunnari says.In order to reach the first goal, he will set up a European Preferencesand Cognition Dataset (EPCD) surveying around 20,000 people fromItaly, France, Germany, Poland, Spain, and the UK. “I will collect

behavioral data about people’s preferences over time – upto now, this has always been done in laboratory settings,often among university students. This will allow me tofollow the same individuals over an extended period of

time, thus drawing a dynamic picture, trying to understandwhether heterogeneity in behavioral factors correlates with

political behavior and whether major public eventsand personal history affect behavioral factors.”The second part of the project will studypoliticians’ behavior. “In times of low-cost bigdata, representatives and candidates couldeasily collect data on their voters,” Prof.Nunnari explains. “I want to understandwhether they are able to leverage voters’behavioral characteristics to reach their ownelectoral goals, not necessarily aligned withgeneral welfare.”

Paolo Pinotti, the holder of Bocconi's Endowed AssociateProfessorship in Economic Analysis of Crime, has beenawarded an ERC Consolidator Grant of about €1.8 million for

the research project CLEAN (Clean Evidence on Dirty Deeds). TheERC-funded project has four parts.The first part analyzes data on infiltration in public procurement forroad works in Italy, provided anonymously by intelligence services.It seeks to discover the most effective procurement mechanisms,balancing the advantages of discretionary procedures with thedisadvantages of arising from politicians’ opportunistic behavior.A similar logic shapes the second part, which uses changes in 1999to an Italian program of public investment subsidies to private firmsin less developed regions (Law 488/92) with a large presence oforganized crime. The funding, aimed to create new jobs, wasallocated for two years according to objective criteria. For thefollowing years, local politicians were allowed to add regionalpriority criteria. “It will be interesting to observe whether theadditional criteria improved or worsened the effects of the law,” hesays. “That is, whether the positive effect of politicians' knowledgeof local needs or the negative effect of the temptation tofavor colluded parties prevailed.”With the third project we move abroad, to theNetherlands, to study the relations between local andforeign organized crime groups, thanks to theexistence of a very detailed dataset.The fourth study, historical in nature, investigates theeffects of supply and demand of criminal skillsin the development of the Mafia in some citiesof the United States since Prohibition in the1920s. “Outlawing alcohol created thedemand for people able to manage an illicittraffic, while the emigration to the UnitedStates of numerous members of the SicilianMafia, in the years in which the repressiveactivity of the Fascist regime was moreaggressive, created supply.”

teaching, was a center for thedevelopment of innovativethought in its areas of expertisethrough continuous research bythe teaching faculty. TheEuropean Commission aimed topromote basic research all overthe continent. Since then, thetwo institutions have come along way together. ERCmorphed from a project into alarge organization, which has

financed the best Europeanresearch with billions of eurosand has influenced the way inwhich many member statesorganize their research grantprograms. For Bocconi, theERC is an authoritativeorganization that hascontributed to the University’slegitimization as a top player inEurope by funding many of itsprojects. Bocconi is now able to

select and attract the besttalents, its researchers regularlypublish in leading scientificjournals, its graduates attendthe most prestigious PhDprograms and its PhDs cancomplete research at leadinginstitutions. Since the ERC’sinception, Bocconi has beenawarded 37 grants; in thesepages, we highlight the 20ongoing awarded projects.

A Look at 20 ERC Study GrantsKNOWLEDGE

SALVATORE NUNNARI TRACKINGHOW 20,000 DECIDE ON POLITICS

PAOLO PINOTTI HOW LAWS CANINFLUENCE ORGANIZED CRIME

Bocconi and the European Research Council have come a long way together since 2007

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ATTRACTING THE BEST TALENTS WITH EU FUNDS FOR RESEARCH PROJECTSSTARTING GRANTS

With REPCOR, The Role of Reputation and Corruption in Procurement,Francesco Decarolis studies themechanisms of public procurement,collecting evidence as to howdifferent awardingmethods aresusceptible to corruption, and how contractors’ past reputation shouldbe used to award new tenders.Simone Cerreia-Vioglio aims to develop amodel of where arandom choice ismade not due to amistake or a change in utility, butbecause of a conscious decision to randomize. In another strand of hisSDDM-TEA project, he intends to study ambiguity in dynamic contexts,whereas it has been studied so far in atemporal contexts.Literature on search strategies of job seekers and recruiters in thelabor market is rich in theoretical contributions but short inempirical evidence. That’s the gap Thomas Le Barbanchon isgoing to fill with ESEARCH, the research project that has earned himan ERC Starting Grant, the funding reserved for scholars at an early

stage of their careers.Deindustrialization comeswith a price tag.Multiple price tags, in fact. Itisn’t only a question of GDP and it doesn’t affect only the lives of thosewho lose their jobs. It affects individuals, families, and communities.Anne-Marie Jeannet is researching the topic in her DESPO researchproject.The disintegration of the Habsburg Empire has long been blamedfor the economic troubles of the nation states that emerged from itsruins, but this effect has never really been examined and was notcarefully distinguished from the direct outcomes of the war. This isthe gap that Tamás Vonyówants to fill with his SpoilsofWAR

research project.

CONSOLIDATOR GRANTSEconomic inequalitymay have different effects on social systemswithdifferent levels of socialmobility. The long-term tendencies of the latterwill be explored in SocialMobility and Inequality across Italy andEurope: 1300-1800 (SMITE), by the economic historianGuido Alfani.The project will assess the connection between inequality on one hand

andopenness of the elites, economic and occupationalmobility on the other hand.Tommaso Nannicini focuses on politicians and voters. With hisPOLITICALMIND, Explaining Politicians' and Voters' Behavior, he islooking at the role of political parties as organizational structures,and also at how the social preferences, personality traits, andcognitive biases shape the beliefs and the choices of politicians and

voters.Nicola Gennaioli with his SalThApp, Psychology and EconomicBehavior: Theory, Tests and Applications, wants to better understandinvestors’ risk perceptions in financialmarkets, asset price behavior,salient policy issues, consumer attention, product design, andcompetition among firms by using a fundamental cognitive principle:

our opinions are overly influenced by selective attention on irregular occurrences.While aggregate level evidence suggests that financial crises generallycoincidewith increased support for far-right parties, we do notunderstandwhy this happens. Building on insights frompoliticalscience, sociology, social psychology andbehavioral economics, theLOSS project, byCatherine De Vries, contends that experiences of

economic hardship translate into specific narratives of loss that, in turn, trigger support forconservative political agendas.

ADVANCED GRANTSEliana La Ferrara, with her ASNODEV: Aspirations Social Norms andDevelopment, notes that too often poor people (both in developing anddeveloped countries) struggle to escape their condition due toaspiration failures. The project aims to raise their aspirations throughinformation policies and the use of themedia (in the past she studied

the social effects of Brazilian soap operas).With his DisCont (Discontinuities in Household and Family Formation)project, Francesco Billari studies discontinuities (an event such as theGreat Recession that radically transforms people’s lives). The project willdiscoverwhether the effects can linger over time either for thepopulation as awhole or for specific cohorts.Uncertainty is pervasive in our society – just think of financial crises,natural disasters, terrorist attacks. It differs from risk, which implies thatone can estimate the probability that an eventwill occur.MassimoMarinacci’sproject Individual Decisions andMacroeconomicRobustness (INDIMACRO) intends to design sophisticatedmodels for

the study of uncertainty, with applicationsmainly inMacroeconomics and Finance.Arnstein Aassve, with his project IFAMID: Institutional FamilyDemography, aims to explainwhy different countries respond indifferentways to common global trends. The increase in femaleeducation is a global trend, but the demographic outcomes, in terms offertility rates, differ across countries. The hypothesis is that the

interaction between local culture and institutional quality plays a part.With his European Integration and Populism (EUROPOPULISM),GuidoTabellini addresses the difficulty of achieving further politicalintegration amongst European countries. The hypothesis is that theprimary obstacles to integration are national identities and otherfeatures associatedwith populism such as protectionismand aversion

tomigration and globalization.Gianmarco Ottaviano’sMIMAT research project observes that, evenif traditional international trademodels postulate that firms arehomogeneous, the truth is that they are not all the same, and integratingthis heterogeneity into themodels should change theway economistsandpolicymakers understand the patterns, the sources and thewelfare

effects of international trade, aswell as the impact and the optimal design of tradepolicies.

Giacinto Della Cananea’sCommonCore of EuropeanAdministrative Law (CoCEAL) project aims to ascertainwhether, despitemany differences between European systems of administrative law,there are some connecting elements, or a “common core,” and, if so,whether such “connecting elements” can be formulated in legal terms,

as opposed to generic idealities.InMassimoMorelli’s The Political Economy of Power Relations(PolEc) project, the latter part should read as “relations betweendifferent types of powers.” At the heart ofMorelli’s theoretical andempirical analysis is the idea that power ismultidimensional and hencepolitical economy can benefit from the study of interactions and

mismatches between the different types of power.How canwediscover structure in noisy data?Howcanwe constructcompact representations of large networks,while retainingmost of theinformation about their link structure?What can and cannot be achievedbynetworks of agentswith limited computational and communicationpower?Luca Trevisan’sSO-ReCoDi approaches these seemingly

unrelatedquestions bydeveloping their commonmathematical foundations.

Amulti-disciplinary approa

Artificial Intelligence can become a useful tool to supporthuman activity. Its further development will requiredifferent scientific sectors to work together

COVERSTORY

14141-2/20

ch is key to unleashing AI

For most of us, 2012 was simply the year when theworld didn’t end, despite the Mayan prophecy.Some may also recall the first observation of the

Higgs boson at Geneva’s CERN that year, or whenFelix Baumgarten, the Austrian who free-fallparachuted from 39,000 meters, became the first manto exceed the speed of sound. On the other hand, thereare only a few signs of the turning point that started therevolution, at first silent and then increasinglythunderous, of Artificial Intelligence (AI). “In 2012,”explains Riccardo Zecchina, a theoretical physicist andDirector of Bocconi’s new Bachelor of Science inMathematical and Computing Sciences for ArtificialIntelligence, “a neural network drastically improvedthe accuracy with which a machine can recognize anobject located in a dense picture field, duringImageNet’s annual Large Scale Visual RecognitionChallenge.”� It sounds like Where’s Waldo? Is it really such aremarkable achievement?Absolutely. To put it simply, there are two approachesin artificial intelligence. On the one hand, there is theclassic one, now called Artificial General Intelligence,which dates back to the ‘60s and is based on logic anddeductive methods. On the other hand, there ismachine learning, or automatic learning, which usesmethods that start from data. By 2012, the algorithmicresults on ImageNet surprised everyone when in therecognition exercise the error rate had settled to 26%,compared to the average 5% of humans: Machinelearning (in particular the so-called Deep Learning thatmakes use of artificial neural networks) or Data-DrivenAI, had entered the spotlight. Using the new approach,all of a sudden (even if preparations for the neuralnetwork had been long and demanding) the error ratedropped to 16%. A totally unforeseen event. We’rereally talking about yesterday, but that’s when theworld realized the potential of artificial intelligence.Myriad applications followed and, in the meantime, theerror rate in that particular exercise has fallen to 2%.Machines are now more accurate than humans in somespecific visual recognition exercises, and can performthem at an incomparably faster rate.�But what can machine learning do?Machine learning includes many different methods,used in different situations. All of them extractinformation from data. In the case of ImageNet, andmore generally in the most recent advances, themethod that is producing the most innovative and

Riccardo Zecchina interviewed by Fabio Todesco @

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surprising results is Deep Learning, which is based onmodels of neural networks that recall, in a very stylizedway, the workings of the human visual system. Anetwork of nodes capable of processing information iscreated, arranged in numerous layers and withnumerous links between nodes and it is “trained” withan iterative learning process: if I submit the image of acat and the system does not recognize it, I modify theconformation of the network until it does so and then Isubmit another image, and so on. It is a very differentlogic from traditional artificial intelligence, and in factit has developed in laboratories isolated from themainstream and involving different disciplines,because it poses issues of a multidisciplinary nature,regarding conceptualization, optimization andmodeling.� It is clear to everyone how AI impactstechnology, but why does the revolution alsoinvolve social sciences?Artificial intelligence is changing the way both naturaland social sciences work, when data must beprocessed. In the meantime, it has made tasks possiblethat we would not even have dreamed of before, suchas speech recognition, an acceptable machinetranslation, climate change modeling or programs thatdescribe the content of an image to the blind. In othercases, such as search engines on the Internet or in theInternet of Things, artificial intelligence has drasticallyimproved the results. In management, companies askto use data to improve their processes. In healthcare,machine learning enables the implementation of large-scale automated diagnoses and personalized medicine.Finance also relies on quantitative methods. Ingeneral, machine learning can become an extremelyuseful tool for monitoring and optimizing alldevelopment processes that need to become climate-change proof.� The very concept of artificial intelligence alsoraises some concerns. Is there any reason forthis?In order not to move from science to fiction, one thingmust be clear: Artificial intelligence does notreplace our ability to make decisions. Itextracts information, it builds models, it is anextra support, like having a co-processor,but we must continue to take decisions.What we expect in the next few years isnot the singularity - artificial intelligencetaking power - but a series of challengingdecisions that establish whether wewant to modify certain social andpolitical systems in order to be able toexploit the potential of the new tools.Increasingly accurate mass screening,for example, will only be possible ifhealthcare systems are willing tocollect and make available large amounts

of standardized data. The real challenge is to convincethe actors to cooperate.� And what about the scientific challenges?First of all, we must arrive at a rigorous understandingof how the most modern methods, such as machinelearning, work. Applications are outpacing theoreticalunderstanding and there is a lot of work to be done.Then, there are problems to be solved. The first is thetransition from supervised to unsupervised recognition.In the case of the Large Scale Visual RecognitionChallenge, recognition is supervised because theobjects have been classified by humans before askingthe machine for recognition, but the vast majority ofdata is not supervised. Self-supervised learning isreached when machines can infer a model from data,act according to the model and analyze how theenvironment will respond to their actions, modifyingthe model if these do not match expectations. Thesecond problem is the Holy Grail of machine learningresearch: teaching machines to infer causal patternsfrom data. In general, machine learning is being usedin all scientific disciplines, including social ones. Itsapplications are broad-spectrum and I believe that theywill contribute significantly to scientific progress in thecoming years. The development of AI and itsapplications will require unprecedentedmultidisciplinary collaboration inscience, at 360 degrees. �

COVERSTORY

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RICCARDO ZECCHINAA theoretical physicist,

Riccardo Zecchina holdsthe Vodafone Chair inMachine Learning and

Data Science at Bocconi.He’s the Scientific Director

of Bocconi’s ArtificialIntelligence Laboratory

(ArtLab) and the Directorof the new Bachelor of

Science in Mathematicaland Computing Sciencesfor Artificial Intelligence,a three-year degree inEnglish that will start in

September 2020

A new three-year English-languagedegree program will give the nextgeneration the professional skills itneeds to understand how and whythe best AI tools work

Training the creators of the future

With the explosion of the amount of dataavailable to scholars and professionals,modern artificial intelligence (which,

through sophisticated algorithms, extracts complexinformation from large amounts of data), pervades everyscientific discipline and many professional fields usingtools that evolve, progress and change at high speed.Bocconi therefore intends to train a new type ofgraduate with a rigorous, innovative and methodological

background free from the restraints of traditionalacademic fields. These scholars will be able to

understand how and why the best artificialintelligence tools work, and create newones. That’s why it is launching theBachelor of Science in Mathematicaland Computing Sciences forArtificial Intelligence, a three-year degree in English that willstart in September 2020.“The program meets theincreasingly urgent need fornew job skills coming fromthe professional world, andfrom academia andresearch. On the one hand,they require a mastery ofthe most sophisticatedmathematical,computational andmodeling methodologies,and on the other hand theymust understand thealgorithms of modern artificialintelligence,” said BocconiRector Gianmario Verona.The course is structured on three

pillars: mathematical tools(analysis, geometry, probability,

statistics, numerical calculation);modeling (physics and economics, in their

most advanced expressions, such as quantum

physics on the one hand and game theory andbehavioral modeling on the other); and computation(theoretical computer science, algorithms,programming). They are studied on parallel trackswithin a unitary framework. The faculty exchangeobjectives and languages so that the connections areclear to students, until they converge in increasinglysophisticated simulations and data-driven artificialintelligence courses, to integrate and put the knowledgeacquired into practice. The optional courses, whichcover a wide range of disciplines, help students tounderstand which path to follow after graduation.“Ours is not a program ‘in’ artificial intelligence, it is aprogram ‘for’ artificial intelligence,” explains theProgram Director, Riccardo Zecchina, a theoreticalphysicist who has worked at Bocconi since 2017. Healso directs Bocconi’s Artificial Intelligence Lab. “Itaims to provide the basics of mathematics, modelingand computational theory necessary to understandartificial intelligence and produce innovation.”Graduates will be positioned to continue their studies,in Italy or abroad, with advanced programs in artificialintelligence, applied mathematics, computer science,data science, physics, economics, finance andmanagement. Or they can exploit their depth andflexibility in the job market, as methodological expertsin the mathematical, computational, modeling andartificial intelligence fields.“We have created something highly challenging andcompletely different from any other program,”concludes Prof. Zecchina. “To the students who want toreally stand out, we are undoubtedly asking them toclimb a mountain, because it is a demanding program.But it is a mountain that, once climbed, confers greatintellectual strength.” �

by Fabio Todesco @

171-2/20

VIDEOLearn more about the Bocconi BSc in Mathematical and Com-puting Sciences for Artificial Intelligence

COVERSTORY

18181-2/20

Adrawingbyphysicist TullioReggewelcomesvisitors to thehomepageofBocconi’sArtificial IntelligenceLab (ArtLab)website. Since the1980’s, Reggehasbeenbringingtogethermathematics, computer scienceandartbyadding textures to the curvesobtainedbysolvingadvancedequations. Similarly, theArtLabdirectedbyRiccardoZecchina,astudentofRegge’s,wants tobeameetingpointandacross-fertilizationvehicle fordifferentdisciplines -althoughall in thequantitative field - suchas computer science, appliedmathematics, statistical physics, computational statistics andoptimization todeveloprigorousmethodsandalgorithms forartificial intelligence.“Our researchunitdoesmainlybasic researchofamultidisciplinarynature,” explainsProf.Zecchina. “In recentyears, STEMdisciplineshavemadean increasing contribution to theeconomic field, andwedealwith frontier issues suchasautomatic learning. It isnotentirelyclearhowthese toolswill influenceeconomic theory,but it is clear that theywill!Applicationsarenowpresent inall scientific disciplineswheredataplaysakey role.”The learningalgorithms thatArtLab isdeveloping canbeapplied, forexample, to theidentificationof important features inmassivedata. “Inaddition tomethodological studies,weareexperimentingwith themin thebiological field,”explainsProf. Zecchina, “becausedataonprotein sequences isparticularly cleanandallows rigorousvalidationofourmethods.”ArtLab,which ishostedby theBocconi Institute forDataScienceandAnalytics, countson theparticipationofabout fifteenacademics, almostall of themfromBocconi (theexception isNicolasBrunel, a computationalneuroscientist fromDukeUniversity) andsometendoctoralandpost-doc studentsdedicated to theoretical research. “But in the comingmonthsweplantodevelopa third circleof researchersdedicated to themost innovativeapplications,” saysZecchina.

EzioRenda

Quantitative disciplines meetat Bocconi’s Artificial Intelligence Lab

CARLO BALDASSIAssistant Professor of ComputerScience. His research interests

focus on the application ofStatistical Mechanics to machine

learning and computationalneuroscience

EMANUELE BORGONOVOProfessor of Operations Research atthe Department of Decision Sciencesand Director of theManagementScience Laboratory of SDA BocconiBusiness School. He’s Director of theBachelor program in Economics,Management and Computer Science(BEMACS)

NICOLAS BRUNELProfessor of Neurobiology

and Physics at Duke University,Affiliate in the Center for Cognitive

Neuroscience, Faculty Network.Member of Duke Institute for

Brain Sciences

DANIELE DURANTEAssistant Professor of Statisticsand Research Affiliate at theBocconi Institute for Data Science(BIDSA). His research is at theintersection of Bayesianmethodology, modernapplications, and statisticalmachine learning

ANTONIO LIJOIProfessor of Statistics. He is Fellowof the Institute of MathematicsStatistics and of the InternationalSociety of Bayesian Analysis.He is also Fellow of the BocconiInstitute of Data Scienceand Analytics (BIDSA)

CHRISTOPH FEINAUERAssistant Professor of ComputerScience. He works in machinelearning and high performancecomputing applications, e.g. onbiological problems, medical

research, and natural languageprocessing

CARLO LUCIBELLOAssistant Professor of ComputerScience. His research focus is onthe theoretical investigation ofproblems in signal processing,

discrete optimization and machinelearning, along with the design of

related algorithms

SIMONE CERREIA-VIOGLIOAssociate Professor in theDepartment of Decision

Sciences.His research interests areEconomic Theory, Finance, and

Applied Mathematics. In 2015, hewas awarded a European Research

Council (ERC) starting grant

SONIA PETRONEProfessor of Statistics.

Her research areas includeBayesian Statistics - foundations,methods, applications, Bayesian

nonparametrics, mixturesand latent variable models,methods and models for

prediction, state space models

MASSIMO MARINACCIAXA-Bocconi Chair in Risk.

His research areas are economictheory and applied mathematics

GIACOMO ZANELLAAssistant Professor of Statistics

and Machine Learning.His research interests include

Statistics, Data Scienceand Applied Probability,with a particular focus

on Bayesian Computation

PIERPAOLO BATTIGALLIProfessor of Microeconomics andGame Theory, and current Head ofthe Department of DecisionSciences. He is a Fellow of theEconometric Society and afounding member of the GameTheory Society

IGOR PRUENSTERProfessor of Statistics and Directorof the Bocconi Institute of DataScience & Analytics (BIDSA)

LUCA TREVISANProfessor of Computer Sciences atBocconi University and a seniorscientist at the Simons Institutefor the Theory of Computing

SIMONE PADOANAssistant Professor of Statistics.His research interests focus onApplied Probability StatisticalTheory and ComputationalStatistics. His main research areais the Extreme-Value Theory

FABIO MACCHERONIProfessor of Decision Sciences.He works on Decision Theory,Game Theory, and MathematicalFinance. More recently, he startedworking on topicsin Computational Neuroeconomicsand Discrete Choice Analysis

THEAITEAM

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Dowry, the transfer of parental assets at themoment of a daughter’s marriage, descendsfrom an ancient tradition dating back to at least

200 BC. Although dowry has virtually disappearedwith modernization in most of the world, it persists incontemporary India and is becoming increasinglycommon in Bangladesh, Pakistan, and Sri Lanka.While the original dowry payments acted as a pre-mortem bequest to daughters that afforded thempost-marital financial protection, property rightsover dowry are now usually appropriated by thegroom and his family rather than being retained bythe bride. Dowry acts as a considerable levy on theyoung women’s original families: a range of 4 to 8times the household’s annual income, according toestimates. Thus, households often start saving fordowry as soon as a girl is born.Previous research has argued that dowry costscontribute to the phenomenon of Indian parents’preference for male over female offspring, but thereis as yet no systematic evidence of this effect and itsimport. Due to dowry having been prohibited in Indiasince 1961, official time-series data on dowry are notavailable, and this makes it hard to analyze itsimportance. Even if we had data on actual dowrytransactions, it could be hard to isolate the influenceof changes in the cost of dowry from the effect offamily preferences or attributes.In a joint study, Sonia Bhalotra (University of Essex),Abhishek Chakravarty (Manchester University) and Ihave looked at the variation in the financial burden ofdowry as dictated by variation in world gold prices.Gold, typically under the form of jewellery, is anintegral part of Indian dowries, and since Indiaimports more than 90%of its gold from the rest ofthe world, fluctuations in international market pricestranslate into variations in the cost of dowry.We combinedmonthly data on international goldprices for 1972–2005 with monthly data on birthcohorts, which include indicators on the survivalafter birth of male and female infants. Using this largedata set with more than 100,000 observations, wefound that in months of gold price inflation, thelikelihood that a baby girl survived through theneonatal period (i.e., was alive a month afterbirth) was significantly lower. Importantly,they were statistically significantlydifferent from the likelihood ofsurvival of baby boys. In fact,gold price inflation appears to

improve the survival chances of male babies. We alsofound that girls born in months of rising gold priceshad lower chances to make it through to adulthood.This is correlated with parents deliberately deprivinggirls nutritionally, as it is well known from priorresearch that nutritional deprivation in earlychildhood results in lower height in adulthood.We broke down the results for children born after1985, since ultrasound technology became widelyavailable across India after the mid-1980s andprevious research has shown that parents made theshift from neglecting baby girls after birth, toaborting unwanted girls before birth. For thesecohorts, we found that increases in the price of goldduring pregnancy are correlated with a decline in theprobability that a girl rather than a boy was born.Thus, by onemeans or the other, parents seem toreact to gold price increases by acting to reduce thechances of survival of their female progeny.Weconducted various tests on the stability of theseresults, and our interpretation is that they are afunction of dowry costs.Overall, our research constitutes the firstevidence that the financial burden ofdowry contributes to a reduction inthe share of females in thepopulation stemming fromfoeticide or neonatalneglect.�

SELIM GULESCIAssistant Professor

Department ofEconomics

Bocconi University

DEVELOPMENT

20201-2/20

THE PAPERThe Price of Gold: Dowry and Death in India,Sonia Bhalotra, Abhishek Chakravarty and Selim Gulesci studiedthe effect of gold prices on female birth rates in India.

by Selim Gulesci @

In India, a daughter’s dowry can cost4-8 times a household’s annual

income, even though the pratice isprohibited by law. Our research

shows parents react to increasesin gold prices by reducing the

survival chances of their femaleoffspring

Her future?It depends on the

price of gold

211-2/20

Not even a super star can beFINANCIAL COMMUNICATION

Elon Musk and Tesla have become case studies on how to avoid errors in financialcommunication, which is more than “just” numbers and now includes social media

rude to financial analysts

When we talk about firms disclosing financialinformation, what usually pops up inpeople’s minds? Most likely numbers - how

big corporations give accounting numbers about theirprofits, cash flows, cost controls and other financialtopics to help investors make investment decisions.In fact, it is more than just numbers. Financialcommunication is a multidimensional concept: thesentiment of firms’ narrative disclosures, executives’voice pitch in earnings calls and facial expressions inTV interviews – those subtle details are importantelements of financial communication and can containinformation about a firm’s current situation andfuture outlook.Tesla’s Elon Musk is a gold mine for financialcommunication case studies. As the founder andCEO of Tesla and SpaceX, he is an inventor, anengineer with vision, as well as a celebrity bad boywho dated the Canadian singer Grimes. However,when it comes to financial communication skills as aCEO, he learned it the hard way. Let’s rewind to 2018and look at Musk’s three ‘astonishing’ moments (or asthe media calls it: bizarre Muskian performance).Tesla’s 2018 first-quarter earnings call on May 2,2018 has been rated as "arguably the most unusual"earnings call by Morgan Stanley’s star analyst AdamJonas because of how Musk treated analysts’questions during the call. The CEO rejected aquestion about Tesla’s capital requirements bysaying: “Excuse me. Next. Boring boneheadquestions are not cool.” He also rejected a questionabout Model 3 because “these questions are so dry.They're killing me.” While it’s typical for CEOs to bereluctant to provide sensitive or negativeinformation, the stock market was shocked by Musk’simpolite and unprofessional attitude towardsanalysts. Tesla’s share price plummeted 7% that day,and almost 6% the day after. To repair therelationship with analysts and investors, Musk had toapologize to the analysts in public during Tesla’s2018 second-quarter earnings call.Shortly afterwards, on August 7, Musk tweeted: “Amconsidering taking Tesla private at $420. FundingSecured.” Those nine words caused panic amongshareholders and employees. Some were questioning

the truthfulness and accuracy of the information,whereas some suffered great losses in the stockmarket because of the tweet - short sellers lost anestimated $1.3 billion. Later, it turned out no finaldecision regarding privatization was actually made.Musk just tweeted, carelessly. Both Musk himselfand Tesla were punished by the regulator, includingforcing Musk out as chairman, $20 million fines toboth Musk and the firm, and barring Musk fromtweeting without approval from Tesla’s in-housecounsel.Social media is an inseparable part of financialcommunication and is being closely monitored byregulators to protect investors’ interests. While notan official component of corporate disclosure,executives’ personal social media accounts aredefinitely on investors’ and regulators’ radar. InMusk’s case, we see how it can potentially causedamages for shareholders and the firm.Nonetheless, if used properly, top managers’ socialmedia communication can be beneficial. Forexample, researchers at University of Illinois atUrbana–Champaign and University of Washingtonshow that CEOs can use a personal twitter account tofoster shareholders’ trust.Back to Musk. In September 2018, Musk took a puffof cannabis on a podcast. Tesla’s share priceimmediately plunged 9%. This is a classic exampleof how share price is moved not only by financialinformation, but also top managers’ public image. ACEO’s behavior, both professionally and personally,is a mirror that reflects the firm’s financialconditions, corporate culture and internal control.Accounting and corporate finance researchers referto this as ‘the tone at the top.’ Investors hold publiccompany CEOs to a high level of professionalism.When a CEO’s behavior appears inconsistent withexpectations, the CEO’s capability to manage thefirm effectively might be questioned. Share price cansuffer. In this information era, managers’ behaviorcan be observed by shareholders instantaneously andis monitored under the microscope.Every little detail might be interpreted as a signaland potentially cause tornado effects in the financialmarket. �

by Xiaoxi Wu @

XIAOXI WUAssistant Professor

Department of AccountingBocconi University

231-2/20

After a decade spent mired in crisis, Italyunderstands welfare under the traditionalrubrics of income, work, and poverty very well.

And this should come as no surprise. On the eve ofthe recession that hit in the second half of 2018, percapita gross domestic product after inflation – themost commonly used measure to assess a country’saverage well-being – was at the same level as it wasin 1999, and 9% below the 2007 peak.The job market is patchy: a recent report by nationalstatistics agency ISTAT indicates that, thanks to the2014-2018 recovery, there are now about 23.3million people who are employed in Italy, 58% of theworking-age population. But the unemployment rate– the share of people actively seeking employmentbut who cannot find it – remains stubbornly above10%: four points above early-2008 levels. And

available employment is not “very intensive” andalso driven by temporary work.Italy’s low employment intensity can be measured bylooking at total hours worked, which is 5% lower thanthe 2008 high. This shows that the 23 million peoplewho have jobs work less intensively than before.Meanwhile, job insecurity driven by globalization(more than from legislation) has risen and thereforehas increased the number of involuntary part-timers– people who work part-time because they cannotfind a full-time job – to 1.5 million people.Last, but certainly not least, households in absolutepoverty, i.e. which cannot afford a standard of livingabove a minimum threshold depending ongeographical area and socio-economic status (€1,300for a family of two parents and one kid in the North,and €1,000 for the same kind of family in the South),

by Francesco Daveri @Stories by Claudio Todesco

From GDP to BILS to the new HumanLife Indicator, there are different waysto quantify our wellbeing at home,at work and in our country. But in goingbeyond the economic dimensionwe must not obscure the effectsof public policies

The challenge of tryingtomeasurewelfare

FRANCESCO DAVERIDirector MBASDA Bocconi

School of Management

WELL-BEING

241-2/20

251-2/20

WELL-BEING

26261-2/20

had reached 1.8 million, or 6.9% of total households.Considering these families represent five millionpeople, 9% of the Italian population is poor.Faced with such stark data, the public debate aboutsocial welfare should not only focus on the growth ofincomes and GDP, but go beyond to consider variousaspects of societal well-being.To achieve this goal, a special committee was set upby the 2016 budget law to study the problem indepth. It includes senior officials of the Ministry ofEconomy, ISTAT, and Bank of Italy, as well as twoexperts with proven scientific reputation.It is tasked with proposing a set of indicatorsmeasuring “fair and sustainable welfare” (BenessereEquo e Sostenibile – BES, in Italian) to be includedin official budget documents presented toParliament.Thus since 2018, the DEF - the economic andfinancial document that forms the basis to draft theannual government budget in Italy - includes anadditional section aimed at formulating objectivesand monitoring results in terms of fair andsustainable welfare.Due to this small accounting revolution, from now onItalian governments will have to assess expectedpolicy results not only in terms of public accountsand traditional macroeconomic variables (GDP,consumption, investment, export, inflation, andunemployment), but also according to a new set of 12social indicators.These include disposable income after governmentassistance (therefore net of taxes, but including thevalue of services provided by public institutions andNGOs), the share of people languishing in absolutepoverty, and the ratio between the share of totalincome going to the richest 20% and the share ofincome received by the poorest 20% of thepopulation (the latter clearly being an indicator ofinequality).But the focus also extends to more social variablessuch as life expectancy at birth, the proportion ofoverweight or obese adults, and the share of NEETs(young adults who have stopped studying too early,but are not working since they don’t haveprofessional qualifications).Finally, there are indicators on personal security,access to civil justice, CO2 emissions, air pollution,and illegal construction (whose introduction is anovelty).It was about time, some would say.Provided that the large number of indicators to beconsidered does not end up producing the undesiredeffect of giving a confused picture of what is going onin the economy, thus obscuring - rather thanclarifying - the perception of the country's ability togenerate well-being along the dimensionstraditionally measured by economics.�

Literature on extended families is a fast spreading strand ofsociological studies of the family. Questions traditionally posed inlooking at families are now applied to a new context: does a newbornchild contribute to the family’s happiness? What is the division ofhousehold labor? Research has focused so far on measuring the well-being of children in stepfamilies, i.e. children from a previous unionliving in a new household where partners have a common offspring.Nicoletta Balbo (Bocconi) and Katya Ivanova (University ofAmsterdam) took a different path and studied the relationshipbetween having a common child in stepfamilies and partners’relationship satisfaction. The authors of “Cementing the Stepfamily?Biological and Stepparents’ Relationship Satisfaction after the Birth ofa Common Child in Stepfamilies” based their analysis on the PanelAnalysis of Intimate Relationships and Family Dynamics, a survey ofthe German population which was launched in 2008. A sample ofrandomly selected persons of three birth cohorts (1991-93, 1981-83,and 1971-73) filled out a survey on a yearly basis.“According to data from 512 families, having a common child is linkedto higher satisfaction over time,” Professor Balbo says. Theresearchers also looked at the differences between the two partners.“For those whose common child is between one and three years old,

that is, when the caring load is heavier, there isa temporarily lower relationship

satisfaction for the biological parent of allchildren in the union.” The explanationlies in the unequal division of householdlabor. The biological parent of allchildren is very often female, and she

handles most of the homemaking tasks andfamily responsibilities.

NICOLETTA BALBOMeasuring happiness in stepfamilies

VIDEOHappy fathers, fatiguedmothers. How a child affects yourlife by Nicoletta Balbo.

NICOLETTA BALBOAssistant Professor

Departmentof Social and Political

SciencesBocconi University

271-2/20

Since its introduction in 1990, the UN’s Human DevelopmentIndex (HDI) has contributed to shifting our understanding ofdevelopment away from a purely economic view, toward amore diverse one, combining data on health, schooling andeconomics. HDI, though, has its flaws, according to a newstudy co-authored by Simone Ghislandi, an AssociateProfessor at Bocconi University’s Department of Social andPolitical Sciences, and it could be more usefully replaced witha new and simpler Human Life Indicator (HLI).The new index takes into account only the inequality-adjusted lifeexpectancy at birth: at life expectancy parity, i.e., a country with manydisadvantaged people dying young and many rich people dying old isconsidered worse-off than a country with all the population livingabout the same age. Even if the two indexes are highly correlated(0.93), HLI also measures the progress toward reducing inequality inhuman development.“Replacing a set of indicators with a single one makes sense becausethe components of the HDI are correlated and picking one doesn’timply a major loss of information,” Prof. Ghislandi says.

Furthermore, life expectancy is the right choice because it’s the mostreliable among the HDI’s components. Lastly, the HDI implicitlyassumes that life has a different value in different countries. “As thesame HDI score can be reached with different combinations of lifeexpectancy and GDP per capita, tinkering with data you can observedifferent economic values for one year of life in different countries,”Prof. Ghislandi continues.The new indicator produces an earthquake in the development ranking.Compared to the HDI revision in 2018, in the HLI in certain rich butunequal countries drops (the US drops from 13th to 32nd, Australiafrom 3rd to 10th, and Germany from 5th to 25th); the more equal onesgain ( Japan jumps from 19th to 2nd, Spain from 26th to 5th, and Italyfrom 28th to 6th).

SIMONE GHISLANDI Human Life Indicator turns development ranking upside down

LetiziaMencarini is examining the relationship between subjective well-being and fertility across time and geography in a five-year project funded by theEuropean Research Council and hosted by the Carlo F. Dondena Centre forResearch on Social Dynamics at Bocconi University.“Unfortunately, there is a lack of longitudinal data in Italy,” she says. Thecollection of soft measures such as information on attitudes and feelings postedon social media can be an interesting starting point. For this reason, ProfessorMencarini has analyzed millions of tweets with the collaboration of computerscientists, linguists and demographers of the universities of Turin, Florence andValencia. They used hashtags and keywords to filter 260 million Italian tweetsposted in 2014. They ended up with nearly 4 million tweets about parenthood.A random sample of 6,000 tweets was submitted to an annotation process onthe CrowdFlower platform in order to detect sentiments and sub-topics.This subset of tweets was used to feed a supervised machine-learningexperiment that has extracted soft measures on parenthood andfertility. The whole process is best described in “Happy Parents’Tweets. An Exploration of Italian Twitter Data with SentimentAnalysis,” forthcoming on Demographic Research.“According to our data, parents express a generally positive attitude

about being and becoming parents and negative aboutpolitics,” Letizia Mencarini says. “They have quite negative

sentiments also about their children’s future and parentalbehavior.” There is a significant correlation between the

prevalence of positive sentiments about parenthood andmacro-regional indicators for fertility and life satisfactionlevels, an interesting subject for further exploration. “Ourdataset is non-representative of the Italian population

as a whole,” Professor Mencarini says, warning againstany form of generalization. “The sentiment analysis

can nonetheless spark further research usingmore traditional techniques.”

LETIZIAMENCARINIUsing tweets to study parent feelings

THE PAPERASimpleMeasure of Human Development: The HumanLife Indicator, by Simone Ghislandi, Warren C. Sanderson, SergeiScherbov.

THE PAPERHappy Parents’ Tweets: An Exploration of Italian TwitterData Using Sentiment Analysis by Mencarini, Hernandez Farias,Lai, Patti, Sulis, Vignoli.

SIMONE GHISLANDIAssociate Professor

Department of SocialSciences Bocconi University

LETIZIA MENCARINIAssociate ProfessorDepartmentof Managementand TechnologyBocconi University

GABRIELLA BAGNATOFaculty DeputyLeadershipOrganization & HRSDA Bocconi School ofManagement

WELL-BEING

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When the air pressure falls on an airplane, adults should put on theirown oxygen masks before helping their children. Something similarshould happen at work. Leaders are constantly in the spotlight. They areevaluated on results for which they are not the only ones responsible.They are forced to multitask and are consequently subjected to a veryhigh risk of over-stress. Just like on a plane, they should take care of theirown well-being before caring about their employees.The consequences can be serious: if they do not look after their ownwell-being, leaders reduce their chance of generating collaborativerelationships, performing analyses, and making sustainable decisions(beneficial in the medium to long term). Well-being is at the core of theconcept of positive leadership. In today’s organizations, this leadershipstyle is more effective than the traditional leadership driven by thecommand-and-control logic.Gabriella Bagnato, Laura Baruffaldi and Vincenzo Perrone,

professors at SDA Bocconi BusinessSchool, are investigating the

dynamics of positiveleadership to strengthen theempirical evidence on itsvalidity and disprove some ofthe misconceptionssurrounding it. They are

currently collecting data from two different surveys conducted a fewmonths apart on pairs of managers and employees.“The leader that generates well-being and therefore economic value isone that promotes collaboration, builds trust and mutual respect,recognizes the value and the potential in his or her subordinates,”Professor Bagnato says. The leader generates well-being when he or sheis able to recognize skills and to help in acquiring new ones. This iscrucial in a world where single companies are no longer able to developcareer paths for their employees.Communication skills also matter: leaders should be able to make senseof the additional efforts that are increasingly required today. “Positiveleadership can generate positive deviance,” she says. “It happens whenemployees exceed expectations by generating value that goes beyondmere execution, producing ideas, innovation, collaboration and apositive organizational climate.”

GABRIELLA BAGNATO Well-being is the foundation for positive leadership

Enhancing employee well-being in public health organizations could improvethe latter’s functioning and economic performance. The results of the CERGASSDA Bocconi research in the book byCarlo De Pietro,Guglielmo Pacileo,Agnese PirazzoliandMarco Sartirana “Le inidoneità e le limitazionilavorative del personale SSN. Dimensioni del fenomeno e proposte” (Egea)show how important this issue is. Almost 12% of the employees of the ItalianNational Health Service have total or partial limitations at work, peaking at 20%in some professional categories and especially in the most advanced agegroups.“There is a wide range of physical and mental impairments. They go from theinability to lift patients to the ‘burn-out’ that occurs in stressful situations,” saysProfessor Sartirana, research fellow at CERGAS. These constraints haverepercussions on workers’ health, organizational functioning, public spending,and health care quality. Public health organizations should identify and managethem before they get out of control. They could implement an informationsystem to monitor the phenomenon, identify critical areas and discussprevention strategies; make investments in technology, such as patient lifts, thatcan help workers in the most difficult tasks; create help desks; build teams thatintegrate all professionals involved (occupational doctors, preventionmanagers, directorates, etc.). “The problem is closely linked to the aging of NHSstaff,” he says. “Organizations must therefore learn how to implement agemanagement through new HR management processes and flexible working

hours for senior employees. Theyshould reshape activities such asreducing night shifts, relocate agingemployees in positions with alighter workload, give value to

experience and skills.” The researchproject has now entered its second

stage. It aims to identifyhealth care policiesthat Italian regionscan implement tosupport local healthcenters and

authorities.

MASSIMOMAGNIAssociate Professor

Departmentof Managementand Technology

Bocconi University

MARCO SARTIRANAResearch FellowCERGASSDA Bocconi

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They call it, euphemistically, Organizational Citizenship Behavior. OCB is aperson’s voluntary commitment at work that is not part of his or hercontractual tasks: unpaid overtime hours, replying to email outside workhours, voluntary help to colleagues, etc. “This should be a discretionaryeffort, but such behavior is so common today that organizations expect it,”saysMassimoMagni, Professor of Organization and Human ResourcesManagement. He has studied the effects of OCB with Ekaterina Netchaeva(Bocconi) and Remus Ilies (National University of Singapore).“OCB has a positive impact on organizational performance, but it can alsohave a negative outcome on individual well-being, in particular on work-lifebalance,” he says. In the summer of 2018, the researchers observed thebehavior of 70 managers and their partners for 10 working days throughsurveys and fitness bracelets that track sleep and lifestyle. The study showedthat, over time, OCB causes mental fatigue which in turn causes physicalsymptoms (malaise, headache, nausea) and has repercussions on the familyunit, with potential long-term work relapses. These negative effects aremitigated by the improvement of sleep quality and the partner’s support in

coping with fatigue.Based on the same study, an article on the effects of the

use of mobile devices for work purposes outside officehours was presented at the end of May at the congress

of the European Association of Work and OrganizationalPsychology. This habit, an aspect of OCB,

compromises sleep quality, causes adecrease in concentration at work and

an increase of stress at home, thustriggering a negative work-familyinteraction. “The best way to breakout of this vicious circle is todetach from all interruptions

connected to work after officehours and regenerate emotional

and cognitive energies through apositive relationship with family

members, “ he says.

MASSIMOMAGNI Going offline afterwork helpsmanager performance

MARCO SARTIRANAHowhospitalscan identify andmanage staff care

THE BOOKThe topic of hospital workers andwell-being is examined in “Le inidoneitàe le limitazioni lavorative del personale SSN”byCarlo De Pietro, Guglielmo Pacileo, MarcoSartirana, Agnese Pirazzoli (Egea, 2017, 162pages, €22). The book, in Italian, is the resultof a CERGAS study along with several sectorleaders.

When management means

BOCCONI PEOPLE

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When management means

Alessandro Profumo, CEOof Leonardo and Bocconi alumnus,has had one constant in his career: delivering change. His take on management?Make sure you listen, and never think you know everything

implementing change

Alessandro Profumo, CEOof Leonardo, graduated“late” fromBocconi at age 30with a degree and 10years of work experience under his belt. Hewas

quick out of the gate, and by 38wasDirector General ofCredito Italiano. In fifteen years he created one of Europe’slargest banks. And nowhe is shaking upLeonardo.�When you joined Banco Lariano in 1977 at age20, did you aim to become amanager?Sincerely, what I wantedwas a salary to supportmyself andmy family. Onmy first day at the bank, they satme down infront of a huge pile of promissory notes. I had never seenone before inmy life! I started as a teller. But it was anexcellent bank and a great place to learn.�Why did you leave the bank forMcKinsey?To learn something new.After a year, a group of people Iadmired –Giovanni Cagnoli and others – decided to leaveMcKinsey and create BainCuneo. And I left too. And afterthree years I realized that being a consultant wasn’tmypassion, and I wanted to be amanager.�How did you start at Credito Italiano?I was very lucky because a person I hadmet as a clientcalledme saying “I will be namedCEOofRAS, do youwant to comeworkwithme?” Then in 1994Credito Italianowas looking for someonewithmy profile. I joined as amanager inDecember 1994, when I was 37. And in July1995 I was namedDirectorGeneral. I was 38 years old, andthe adventure started.�Did Credito Italiano call you to implement aconsolidation strategy?Theywanted someonewho couldmanage an importantchange path at the bank. I had an amazing board ofdirectors. The chairman, LucioRondelli, was fantastic.Herepresented the legacy of the bank, but hewas open tochange. For example, wewere the first bank that created acentralized structure for assetmanagement. Rondelliwasn’t too convinced about it. He said, “Alessandro, thinkabout it for a week.”And I came back and told him, “Ithought about it, I analyzed it, and I think it is the rightchange tomake.”He never stoppedme. It was a dual effort.�How did you adapt your managerial skills whenyoumoved to an industrial group?Sometimeswhen a person comes from a differentbackground it can be an advantage. Clearly I need to havehighly technically competent people aroundme, and Imust

be able to choose the right people and to respect them. Thisis fundamental. It wasn’t that different when I was inbanking.When I chose Sergio Ermotti (currently UBSCEO, ed.) for Corporate Investment Banking at UniCreditin 2005, he knew a thousand timesmore than I did aboutthat area. It wasn’t like I was omniscient in banking. Theissue is to have a clear idea of how to structure a decision-making process.�What are themost important qualities a mangerneeds to have?You need ability based on training, of course. And to beable to listen. You need to be able tomake a decision basedon an information set that is as complete as possible, butmay not always be. If wewait to have 100%of all theinformation, wemay never decide. The fundamental role ofamanager is to decide. The capacity to listen enriches thedecision-making quality.�How do you stay informed on technology?I have aChief TechnologyOfficer, and others whowork onstrategy. I try to listen to clients very closely. Above all, youmust never think you know everything.�You wrote a book in 2003 on corporateresponsibility.Why is it important for business?Each company’smain goal is to generate value, forshareholders and for stakeholders. I am convinced that ifyou don’t generate value for stakeholders, you aren’tgenerating it for shareholders either. And to generate valuefor stakeholders you need sustainability. Therefore, to thinkabout people, about technology. Suppliers, thecommunities where wework. It’s pretty clear. If I havepeople who are not happy about working forme, how can Igenerate value? There always has to be a positiveexchange.�What are youmost proud of in your career?To have created something new. LikeUniCredit. And atLeonardo, the company is growing andwe are creating newjobs.We are transforming the group’s industrial structure.It’s interesting because people could say, “a banker isoverhauling an industrial process.” But that’s what ishappening. The other thing I ampretty proud of is thatalthough I believe Imade several errors inmy life, I amsure Imade them in good faith. I am absolutely certain all ofmy choices have been based on ethics. I stress, though, Ihavemade somemistakes.�

by Jennifer Clark @

ALESSANDRO PROFUMOProfumo, 62, enrolled inBocconi at age 20 withthe goal of becoming aprofessor. Instead, hebecame a father, andgraduated at 30.

“Getting my degree inBusiness Economics whileworking and raising a

child was no picnic, and Iam not sure I would

suggest it. I finished withhonors.” Professor

Roberto Ruozi helped himfinish his thesis on

medium- and long-termlending institutions atoffice visits at 7:30am.“He would give me backmy pages, corrected, with

his suggestions.”How did Bocconi helpyour managerial career?

“Apart from what Ilearned…It’s a very highlydiverse environment,which is a huge

advantage.” Advice fortoday’s Bocconi students?“Maximize your curiosity!Take advantage of the

opportunities it gives you.Don’t ever get too

comfortable! Anyone whogoes to Bocconi shouldsee themselves as lucky.”

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implementing change

Climate change will form ageneration shattered byenvironmental disasters. But agreater challenge may be howthey deal with a growing dividebetween haves and have-notsexacerbated by global warming

What should we call the generation that willbe born after 2020? Generations are oftenmarked by their preceding socioeconomic

events: baby boomers, generations X, Y (ormillennials), and Z have been affected by drasticchanges in our social, economic, and technologicalsystems. World War II, rapid economic growth, andwidespread use of internet and social media haveshaped trends in fertility and human development inthe last few decades. However, the next generationwill be marked by something rather different.Unprecedented changes in the environment and theloss of biodiversity on planet Earth have beenattributed to climate change and will be the drivingforces behind fertility decisions in the decades tocome. First, climate change causes a rise in averagetemperatures and will therefore change the way plantsand food crops grow in arable areas across the globe.Some cold regions like Canada, Russia, and northernEurope will benefit from rising temperatures, while

most developing countries around the Equator willface increasing pressure on their agricultural yield.At the same time, other economic sectors may adoptvarious adaptive measures to counter the negativeimpacts of climate change. As a result, climatechange will hurt some regions and sectors while itwill help other regions and sectors with newopportunities. Second, different climate impacts willtranslate into wage differences between low-skilledand high-skilled labor. While most people working inthe agricultural sector are low-skilled, climate-induced reduction in agricultural productivity indeveloping countries increases food prices and,consequently, the wages of this group of labor force.This can be seen as an incentive for parents in thesecountries to have more low-skilled children. Whilethe opposite holds for developed countries, where anincrease in agricultural productivity as a result ofclimate change can reduce food prices and wages oflow-skilled labor working in this sector. Parents in

by Soheil Shayegh @

SOHEIL SHAYEGHResearcher

Department of EconomicsBocconi University

DEMOGRAPHICS

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The challenges faced by cli

THE PAPERThe Impact of Climate Change on Fertility by Gregory Casey,Soheil Shayegh, Juan Moreno-Cruz, Martin Bunzl, Oded Galorand Ken Caldeira.

these countries, in contrast to their counterparts inthe South, will be inclined to have fewer low-skilledchildren. Finally, the last piece of the climate-fertilitypuzzle lies in the fact that acquiring skills is costly.Therefore, facing a limited budget, parents canchoose either to have more low-skilled children orfewer high-skilled ones. This phenomenon issometimes called quantity-quality tradeoff and can betraced back to our daily decisions about how wespend our money on different goods and services.Parents in developing countries are therefore moreinclined to take advantage of rising wages in the

agricultural sector and have more children with lowereducation while parents in developed countries, incontrast, will have fewer children but will providethem with higher education. As a result, “climatebabies” will form a generation deeply divided andinherently unequal in terms of skills and humandevelopment pathways: large number of low-skilledpeople in the South against relatively smaller numberof high-skilled people in the North. Climate babieswill be born in a world shattered by environmentaldisasters and unprecedented biodiversity losses. Buta greater challenge for them might be how they willdeal with growing divide between developed countriesin the North and developing countries in the South.These challenges are indeed centuries old. However,our generation’s epic failure in addressing theproblem of climate change has worsened them to ascale that will require all the ingenuity and sacrificesthat the generation of climate babies will be able tomuster. �

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mate change babies

Health is more popular witMEDICINE

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THE PAPERMobile Health Divide Between Clinicians and Patients... byRosanna Tarricone,Maria Cucciniello, Patrizio Armeni, FrancescoPetracca, Kevin C. Desouza, Leslie K. Hall, Dorothy Keefe.

h doctors than with patients

We are all connected online. More than 4.5billion people in the world use a mobilephone and by 2025 everyone will. In

2017, there were 325,000 health apps availableonline, up 30% from 2016. Heartbeats and bloodpressure, step count, weight control, caloriesconsumed, consumption of medical drugs, adverseevents, psychological moods, and healthparameters measured by apps are an infinitesimalpart of the data collected every day around theworld that can be used to improve our health,redesign the process of providing health serviceswhile increasing efficiency and reducinginequality. Mobile health (mHealth) meansproviding health services and programs throughthe use of mobile devices and is an extraordinarytechnological innovation in the health sector.Quality clinical evidence and the huge amount ofdata collected make a huge contribution to thedevelopment of new health technologies,improvement of treatment protocols, increase intherapeutic adherence, effective management ofchronic diseases, and patient empowerment. Arandom clinical trial of patients with metastatictumors showed adding an app for monitoringchemotherapy effects to standard treatmentincreases survival by 5 months on average.The ubiquity of connectivity greatly reduces theneed for the patient to go to the doctor, withsavings in health expenditure that can be re-allocated towards maximizing productivity. Accessto health services in remote, disadvantaged and/ordeprived areas becomes easier with mobiletechnology. Think of the benefits that would begained by providing mobile health in Sub-SaharanAfrica, where access to basic health provision islimited, life expectancy is among the lowest in theworld, but the number of smartphones connectedto the Internet has quadrupled over the lastdecade, so that now 10% of the world populationonline lives in Africa.

However, the great hopes for mHealth sometimesremain only hopes, especially for those medicalapps that help with monitoring, controlling, and, ifnecessary, altering health treatments. Most usersstop using these apps after a few weeks. What isgoing wrong?A survey conducted by Bocconi University on over1,000 patients and 1,000 doctors in fiveEuropean countries and in the US investigated thefactors that favor or hinder the use of mHealth.The analysis found an important digital dividebetween doctors and patients: almost 77% ofdoctors use mHealth while only 28% of patientsdo and, considering doctors, only a third use appsfor monitoring their patients. Administrative usesprevail and they rarely directly involve the patient.This is because apps are not co-developed with endusers, with the result that most of them areconsidered to be of low quality, and doctors do notrecommend them to patients.Most apps are neither supported by empiricalevidence nor subject to any evaluation process.Efficient regulation of apps is necessary toincrease their quality and effectiveness and thusconfidence in their use. In 2017, in the field ofmanagement of chronic diseases, 860 clinicalstudies were conducted compared to 126,000apps launched in the same year. 99.3% of medicalapps have gone to market on the basis of noclinical evidence.mHealth is a disruptive technological innovationthat will modify the processes of production anddelivery of health services, and exponentiallyincrease the effectiveness of health programs whilerequiring few additional economic resources. Itwill contribute to forming a generation of "expertpatients," and will replace, at least in part, longand expensive clinical trials with a vastly greateramount of evidence available in a vastly shorteramount of time. But technological innovations inhealthcare must be governed by appropriateassessment processes and development modelsconsistent with the needs and expectations ofpatients, which do not necessarily coincide withthe population that uses fitness apps. Also,incentives and other nudges can viably encouragetheir use and dissemination, helping to achievehuge savings that mHealth can bring.�

by Rosanna Tarricone @

ROSANNA TARRICONEAssociate Professor

Department of Socialand Political Sciences

Bocconi University

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Medical apps are slow to take off, despite potential benefits. Patients ignore thembecause they are not designed with end users in mind. Doctors like them for paperwork

Starting on September 14, PSD2 (PaymentServices Directive 2) requires Europeanbanks to share certain customer data.

These rules, issued in January 2018, werecreated to guarantee better protection foronline customers, promote innovation on theinternet and mobile payments through onlinebanking, as well as to improve cross-borderpayments within the EU.What impact will it have? Some traditional areasof banking may no longer remain the exclusiveprerogative of banks. As is already the case, thesector will be open to new players who aredeveloping increasingly user-friendly solutions,which today mainly concern the last mile of atransaction.All this will redesign more than just theEuropean payment market and landscape. It willalso introduce a break with the past, favoringthe development of a new way of doing so-calledopen banking, which will be accessible, easy andinitially based on the centrality of the userexperience for individuals and businesses. Thiswill lead to a competitive landscapecharacterized by new rules of the game. Themain drivers will be openness and value, whichmust be interpreted beyond mere PSD2regulatory compliance.In an initail phase, we expect open banking willmainly attract banks that will target therequirement in order to progressively seize

business opportunities and deal with any threatsthat may result from it. These threats, inparticular, result from the possiblemarginalization of banks when managing certainmonetary and financial activities for theircustomers. It is therefore essential that everybank be aware of these challenges. Governance,in particular, will be an important tool to leadbanks into the future, as well as to be aware ofthe trajectories of market change. Today, it isnot clear how all possible scenarios and roles inthe new market environments will play out.Technology will certainly enable banks tochange their strategy and organization, becauseit improves standardization, security and

by Anna Omarini @

The EU PSD2 data-sharing directive creates newchallenges for banks, from strategyto governance: here’s how they need to changeto avoid becoming a commodity

The challengesof openbanking

ANNA OMARINIResearcher

Department of FinanceBocconi University

FINTECH

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Open banking will create an evolution in data analytics,alumnus and founder of DeusTechnology. And we will

Robo-advisor, an inv

by Emanuele Elli @

enables the introduction of more effectivemechanisms for exchanging and transferringinformation. However, it would be a mistake toconsider all this as predominant, because openbanking will evolve and involve all businessfunctions where strategic vision, organization,risk management, marketing and compliancejointly drive change. The real challenge will bestrategic and, within this challenge, particularfocus should be placed on risk management.New competitors will therefore characterize thefuture of banking. Individual banks willincreasingly have to consciously choose the rolethat they intend to play in the differentshort/medium- and long-term horizons in acontext where production is no longer linear butcircular and where the focus is on being presentor not, and on how to be present in one or moreintegration or exchange platforms.In fact, open banking introduces network logics,where banks are understood as part of a morewide-ranging, dynamic and interconnectedecosystem. I believe that new business modelswill be born, and a growing integration betweenoperators and different business sectors willcharacterize new scenarios for the bankingmarket. This hybridization of cultures, however,must not leave room to think that we will findourselves in a completely new environment. Ibelieve, in fact, banks will continue to play arole even in markets where cost and productmodels will evolve.The mistake to be avoided is to turnbanking into a commodity. Thechange under way must take placewhile respecting banking’s roots, withregard to the function of financialintermediation and paymentmanagement.Much will depend on who takes the lead,starting with the role of regulators inmonitoring the evolution ofthe market and, wherenecessary, to intervene toprotect the currency,thereby safeguardingsavings and investors. �

Convergence of digital media, investmentin portfolio analytics, data sharing,absence of front end. Although the

expression ‘open banking’ was not currentthen, its key principles were already part ofPasquale Orlando’s vision when in 2010, aftera degree in corporate finance at Bocconi andseveral experiences in strategic marketing forwealth management, he started DeusTechnology.The company today is one of Italian fintech’sfirst movers, one of the main advocates ofrobo-advisors and ready to take advantage ofmarket opportunities created when theEuropean directive on digital payments(PSD2) took effect, heralding a new era ofopen banking.➜ What are the scenarios for banks with thecoming into force of PSD2?In the short term I believe that open bankingwill remain circumscribed to banks andinvestment funds. Today banks' investmentsare concentrated on organizational issues andexploiting internal resources, as well asdigitization of processes for the benefit of assetmanagers through “robo-advisors.”Italian banks have deposits of about €1.4trillion, but banks currently have no strategyto help small investors to access investment

instruments. If things do not change, oneof PSD2’s first effects could be a flight ofthese customers, who can aggregatetheir assets and move towards otherfinancial marketplaces.➜ What happens when fintech canaccess the data of banks’ clients andvice versa?The IT infrastructures we havetoday allow various systems toseamlessly communicate with eachother. However, the issue is cultural

rather than a technical one. Banksfeel violated by this legislation;

exposing customer data is contrary totheir DNA and at the moment they do notsee it as an opportunity but as a problem.

FINTECH

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PASQUALEORLANDOBocconigraduate in2000withadegree inBusiness

AdministrationheiscurrentlyHeadofStrategicMarketingatDeusTechnology. Afterathesis incorporate finance,hewasamongthepioneers

indeveloping newtechnologies forselecting

investment fundsandPortfolioanalytics. “In2010Irealizedthat theworldwas

movingontomobileplatforms but therewasnoservice for invesmtentadviceaccessibleby smartphone.That’showwestartedDeus

Technology,withnofrontend, withaneyetoopen

banking.Nowweareentering thefieldof

robo-advisory.”

explains Pasquale Orlando, Bocconilearn to trust it. Even a robo-advisor

vestor’s best friend

Most of them do not even see the risksinvolved. However, the cultural issue alsoaffects customers. We have already witnessedsomething similar with ETFs (Exchange-Traded Funds), products that I always consideradvisable because they are inexpensive,diversified, transparent; after they startedspreading, Italian banks turned their backs onETFs, and the sector’s growth started to flagcompared with traditional equity funds.In the same way, I expect that when a clientasks about open banking, especially about itssecurity, he or she is likely to be discouragedfrom sharing data with third parties. Fintechswill try to counter this perception withawareness campaigning but, in the end manysavers will opt not to try.➜ Therefore, open banking will initially beaddressed to a high-end target, private andwealth management, where, however, thepersonal relationship between client andfinancial consultant remains central?In wealth management, this relationship willalways remain fundamental; the technologywill offer new operational support and act asfacilitator for new relationships. On the otherhand, open banking is likely to have its largesteffect precisely on those millions of people towhom no investment service is offered today.With a minimum of financial education,everyone will have a clear understanding of therisk-to-return ratio and will be able to haveaccess to new forms of investment which willbe suggested automatically.➜ So should we trust a robot?Certainly. The premise is that all these systemsare based on the original work of experiencedpeople, so they offer the highest quality withthe costs being reduced by economies of scale.Furthermore, the robo-advisor, by analyzingthe situation, assets and habits of a person, isnot only able to propose the most suitablesolutions for a given profile, but will keep theposition monitored over time, updating thesaver on the moves to be made.Today all Italian financial consultants want to

sell you a BTP, a multi-yearItalian treasury bond, but howmany of them keep an eye on theproduct and call the customer totell him or her to sell at peak or buyback at trough? A robot can.And with open banking, dataanalytics will evolve further, so that atsome point expert systems will be ableto understand how old an investor is,and suggest the most appropriateinvestment strategy. Eventuallythe robot will know the clientmore closely than anyconsultant can. �

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Leadership skills are changing as the world grows more complex. It’s nolonger enough to conduct the orchestra; leaders must now convey itspurpose too. We look at what this means for tomorrow’s leaders

Leading with a sense oLEADERSHIP

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Technological evolution is radically changingemployment paradigms.The Future of Jobs report, published by the

World Economic Forum (2018), highlights howartificial intelligence and automation arechallenging the balance between workers andtechnology. According to this report,technological evolution will lead to theobsolescence of 42% of currently existing skillsby 2022 to make room for the demand forskills more oriented towards critical thinking,active listening and the capacity for continuouslearning.

by Massimo Magni @ Stories by Claudio Todesco

MASSIMOMAGNIAssociate Professor

Departmentof Managementand TechnologyBocconi University

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f purpose

LEADERSHIP

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Technological evolution makes it necessary toinnovate and deal with increasingly complexproblems by leveraging the ability to share differentexperiences and skills.Take for example the case of EpiBone, a company inthe field of biomedical engineering that focuses on thecomplex and high-impact problem of bonereconstruction.The CEO of EpiBone, Nina Tandon, explained howthe company operates at the frontier of bonereconstruction: “We take only two things from thepatient: a three-dimensional scan of the bone and asample of cells. We then use these cells to build aliving bone and model it based on the findings fromthe three-dimensional scan. After three weeks wehave a bone that can be implanted in the patient'sbody.”To reach this demanding level of innovation,EpiBone employs highly differentiated teams, madeup of scientists, engineers, doctors andentrepreneurs who are all able to share knowledge toreach a common goal.EpiBone is just one example, but it is now clear thatwhen faced with the need to evolve skills, we cannotignore the need to rethink the role of leaders and theability to lead a team.In situations where complex problems need to bemanaged that require high innovative potential,leaders must shift their center of gravity fromcoordinating and harmonizing relationships to actionsmore focused on highlighting the “why it matters” andthe purpose of team activity appealing.Leaders are no longer conductors, but rather havethe ability to convey the importance of an orchestrato arouse the passion of the listeners.I encourage you to watch the TED Talk by BenjaminZander, Director of the Boston PhilharmonicOrchestra. In 20 minutes, he demonstrates thepower of change that can be inherent in classicalmusic, without citing statistics and playing only afew notes. The question is no longer how we do it butwhy we do it.The need for a shift in perspective is also corroborated

by data from a study that was recently conducted incollaboration with Georgia State University.It showed that the ability of leaders to provide a senseof purpose stimulates a more experimentation-oriented and less execution-oriented attitude, thusactivating a drive for innovation.Leaders who work on communicating and sharing theimpact and purpose of their teams’ activities helptheir employees energize and develop the desire to gothe extra mile, to give that extra effort that makes thedifference.The story of Sammie, employed by a courier companyin Florida, is a good example.Sammie's phone rang on a Sunday morning, when shewas home for the weekend, and she was asked toredirect a package to be delivered to the hospital inTampa for Monday delivery.The package contained material for a particularlydelicate surgical operation that would take place onMonday. It would have sufficed for Sammie to redirectthe package, but knowing the importance of thecontents, she got in her car and set off.After a full day driving around Florida (withoutgetting into the details), she delivered the packagedirectly to the nurses.After delivery, Sammie returned home. It was late bythen, and the weekend was pretty much over.We cannot be sure, but we can imagine that Sammiecame home tired, but satisfied with what she haddone: she had gone above and beyond her jobdescription for a greater purpose.However, there is a boundary that leaders must notcross when encouraging this type of behavior, whichis that of responsibility towards the people theymanage. Developing a vision oriented to the purposeof their activities and stimulating the desire to goabove and beyond are sources of satisfaction for themembers of a team, but at the same time, they requirepeople to invest considerable cognitive and emotionalenergy. Leaders must not ignore this expenditure andshould be balanced in making sure these efforts donot become situations of undue stress and discomfortfor the people they coordinate.�

THE BOOKWhenaleaderknowshowtopickagoal,assigntasks,convincepeopletheir fate is intheirownhandsandshowthemtheway,heorshecanreachanygoalandmaybeevenmore.This isSergioMarchionne. Il coraggiodicambiare(EditedinItalianbyA.Grando,Egea/Rizzoli,2019,120pages,€10).PrefacebyMarioMonti.

THE BOOKA new look at femininity, anaptitude and a wayof thinking, in a multidisplinaryperspective.Essere leader al femminileby SimonaCuomo and Martina Raffaglio (SDA Bocconi,2017, 208 pages, €22.10) demonstrates howfemininity can be translated into leadershipwhile still protecting identity.

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From Elon Musk to Donald Trump, narcissistic leaders abound in business,entertainment, education, and politics. Even though research has discussedtheir behavior, the psychological mechanisms and even the distribution ofnarcissistic leaders throughout different generations,evidence about how they affect the individual performanceof their followers is still lacking.“We already know what happens at the organizational andgroup levels. Now, we are trying to investigate what happensat the individual level,” saysTatiana Balushkina, PhDstudent at the Department of Management and Technology.“Narcissistic individuals emphasize their own achievements,they have good social skills, they are highly visibile, and,therefore, can be perceived as role models. Our hypothesisis that, the level of leaders’ narcissism has a positive effect onthe individual performance of their followers. However, wepropose that this effect exists only in the short term, as theworst characteristics of narcissists, such as aggression andthe inability to establish long term relationships, ultimatelyappear and harm the followers’ performance in the long run.”Balushkina tested the hypothesis in the domain of losing weight, using datafrom seventeen seasons of The Biggest Loser, an American reality TV show wherecontestants are tutored by a trainer and compete to lose weight. The level ofthe trainers’ narcissism was measured by examining their Instagram profiles.“We found two results. First, contestants working with a highly narcissisticleader are more likely to lose more weight at weekly weigh-ins (short termeffect), but not to win the show or to be among the finalists (long term effect).Second, narcissism has many dimensions, such as authority andexhibitionism. We conducted a robustness check in order to confirm that theeffect comes from narcissism in general rather than from one of itsdimensions.” Tatiana Balushkina is currently working on validating themeasure of narcissism and analyzing The Biggest Loser data from othercountries like England, Australia, Russia, and Portugal in order to transform thisstudy into a cross-country research.

TATIANA BALUSHKINANarcissistic leaders and their effects

TATIANA BALUSHKINAPhD candidateDepartmentof Managementand TechnologyBocconi University

������Digital transformation,a sense of purpose, engagingGeneration Z, leadershipskills in different industries:Bocconi RectorGianmario Verona talksto today’s business leadersin these video interviewsto find out more aboutwhat tomorrow's will be like

EXECUTIVE CHATS,LEADERS SHARE THEIREXPERIENCES

THE PAPERNarcissistic Leaders and Individual Performance of TheirFollowers: Empirical Evidence from The Biggest Loser USbyTatiana Balushkina, dissertation chapter

MARCO BIZZARRIGucci Presidentand CEO

FRANCESCA BELLETTINIPresident and CEOof Saint Laurent

LEADERSHIP

We all know a leader when we see one. What is much harder is to pindown what leadership exactly means. Yet the literature on leadershiphas evolved immensely over the last century. In the beginning, the theoryfocused on identifying personality traits such as intelligence oreloquence, says Fabrizio Castellucci, who looked at the subject in hisbook “Essere leader” (Il Management, 2018).“The adopters of this approach were not able to identify the universaland distinctive features of leadership, yet this theory is still favored byauthors and publishers who claim that individual traits andcharacteristics can predict the success of entrepreneurs such as SteveJobs or Elon Musk,” he says.The literature has since evolved to incorporate significant new aspects:

the forms of leader behavior, hence thetheories on leadership styles; the peopleoriented vs. goal oriented approach; thecontext; the characteristics of the leader’scollaborators.Among the emerging approaches, Castelluccisays, the one focusing on authenticity seemsparticularly promising. According to this theory,a leader with high levels of self-awareness whoacts consistently with his own value system canmotivate employees and gets results.“No pre-packaged model can describe thecomplexity of leadership,” he says. “We need touse our critical thinking skills to reject over-simplified theories that bear little resemblanceto reality. Leaders’ interests may differ fromthose of their firms. Leaders may lack therequired experience and knowledge.Sometimes leaders fail and create toxicworkplaces.”

FABRIZIO CASTELLUCCISelf-awareness helps to lead teams

FABRIZIO CASTELLUCCIAssociate ProfessorDepartmentof Managementand TechnologyBocconi University

������GIOVANNI CAFORIOBristol-MyersSquibb Chairmanand CEO

GIOVANNI CISERANIFormer Group PresidentP&G Global Fabric & HomeCare, Bocconi Alumnus

GIUSEPPE SALAMayor of Milan

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Salespeople are not like other workers. They act moreautonomously and therefore they are harder to supervise.Because they negotiate with customers, they have an immediateimpact on the firm’s performance. In order to maximize theirhighly variable compensation, they may may grant discounts tooeasily. An additional average discount of 1% decreases acompany’s profit by 11%. Because of that, the influence ofleadership on salespeople’s price defense behavior is of criticalimportance.“Yet the role of leadership in price defense is barelyunderstood,” saysPaolo Guenzi, Associate Professor at theDepartment of Marketing at Bocconi and Official Professor in the Executive MBAand in the Executive Master in Marketing at SDA Bocconi School ofManagement. There are many levers to push salespeople to defend firms’ pricelevels in price negotiations with customers. Some, such as economic incentives,are expensive. Others, such as leadership action, are free. “The influence ofleadership and the adoption of a transformational leadership style areimportant and can be amplified by the combination of three variables:salespeople’s learning motivation; negotiation efficacy; and perceivedcustomer lenience,” Professor Guenzi says.Results of a model using 264 salesperson-customer interactions in a car dealerconfirm these predictions. Not only that, price defense does not inducecustomers to refrain from purchasing products they would have purchasedotherwise. “These findings have some theoretical and managerial implications.Leaders need to be aware that their own negotiation behavior style influencestheir salespeople’s price defense behavior,” he says. “They should adopt atransformational leadership style. They should aim at influencing theirsalespeople’s learning motivation and negotiation efficacy.”

PAOLO GUENZIRole of leaders impacts sales discounts

PAOLO GUENZIAssociate Professorof MarketingBocconi University

MYRIAM MARIANIFull Profressor

Department of Socialand Political Sciences

Bocconi University

LUISA GAGLIARDIAssistant Professor

Departmentof Managementand Technology

Bocconi University

THE PAPERThe role of leadership in salespeople’s price negotiationbehaviorby Sascha Alavi, Johannes Habel, Paolo Guenziand Jan Wieseke

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Leadership skills are not entirely based on natural talent. They can belearned. Myriam Mariani and Luisa Gagliardi, both professors atBocconi, used an original testing method: they analyzed data on militaryservice. “When it comes to leadership skills, there is a self-selection effect.People with a knack for it tend to enroll in programs that teach leadership.This makes very difficult to understand how much leadership depends on anatural talent and how much on training,” professor Mariani says.The authors used data on military service in order to isolate the effect oftraining.“Literature says that during military service people are directly exposed toexamples of hierarchical leadership,” she explains. “There is also anindirect effect: the draft led people to keep studying in order to postponetheir service or to have access to better assignments.”The authors employed a difference-in-difference research design using the policydiscontinuity in the US, which abandoned thecompulsory draft in 1972, and a sample fromcountries that kept compulsory draft in thesame timespan. Because it is compulsory,military service cancels out the effects of self-selection. Then they analyzed data from 7,000research and development projects, for whichthere has been a great demand forleadership in the last 20 years.“The end of the compulsory draft reduced thelikelihood of assuming leadership roles inresearch and development projects by 5.7%,”she says. “In other words, leadership skillscan be learned. At the same time, the end ofconscription realigned the gender odds ofbeing in leadership positions and produced atransition from a more hierarchicalleadership style to a less autocratic and morecreative style, which is more likely to lead toinventions.”

MARIANI E GAGLIARDILeadership skills can also be learned

SILVIA CANDIANICountry GeneralManager Microsoft ItaliaBocconi Alumna

VITTORIO COLAOUnilever and Verizonboard member,Bocconi Alumnus

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LEADERSHIP

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1-2/20

PHILIPPE DONNETGenerali Group CEOLUCA DE MEO

Renault CEO(from July 1st) andBocconi Alumnus

FABIO DE’ LONGHICEO at De’ Longhi,Bocconi Alumnus

46

EMILIA PAOLINOAcademic FellowDepartmentof Managementand TechnologyBocconi University

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Emotions count. They also count for leaders who have to managetension and stress and find the energy to lead their team. They have toreduce the risk of overexertion and behave in accordance with thestrategy of the organization, which may consider some emotions asinappropriate. A study conducted by SDA Bocconi on the emotionalstrategies adopted in the workplace by 1101 participants in the school’sexecutive courses showed that the proper management of emotions bythe leader has a positive impact on the performance of his team.“A leader shapes the emotional climate of the working team,” saysEmilia Paolino, SDA fellow. “There are positive repercussions on thebehavior of team members when the leader shows appropriateemotions.”Leaders’ behavior creates a learning climate that favors the developmentof innovative processes and the management of unexpected events.They are both essential for organizations facing the pressing challengesof the market.The effort to control emotions, though, enables them to effectively leadthe team in the short and medium term. But it may create problems inthe long run. The leader must internalize emotion control.

Otherwise, it may lead to excessivestress or even to burnout. “Theseresults can be a starting point forany organization to achieve goodteam and organizationalperformances by following therules of emotional management,”she says.“Firms should engage in buildingan organizational culture thatrespects the well-being of itsmembers, supports individuals’identities, improves workplaceharmony.”

EMILIA PAOLINOControlling emotions shapes team

FEDERICO MARCHETTIFounder and CEO of YOOXNET-A-PORTER GROUPBocconi Alumnus

ALLEN BLUECo-Founder and VPProduct Managementat LinkedIn

JOHN HERLIHYLinkedIn Vice PresidentEMEA and LATAM

PAOLA PROFETAAssociate Professor

Department of Socialand Political Sciences

Bocconi University

According to the Inter-Parliamentary Union database,121 countries out of 193 have less than 25% femalerepresentation. The under-representation of womenon the political stage has been addressed in theliterature. Paola Profeta and EleanorWoodhouse (Department of Social and PoliticalSciences) did it in a novel way, focusing on the role ofelectoral systems.In majority or “winner take all” systems, the personalexposure of the candidate is more relevant than inproportional systems. The majority systems require astronger will to compete, to which women tend to bemore adverse than men. It means that proportional

electoral rules favor the election of women with respect to majorityones. At the same time, the majority system enhances the quality ofelected politicians. “We wondered if there is a quantity-quality trade-off associated with electoral systems and female representation.”To provide an answer, the authors collected data on the range ofItalian politicians from all levels of government over the period 1987-2013. The 2005 Italian reform changed the electoral system fornational elections from majority to proportional. This change allowedthe researchers to test the effects of electoral systems on therepresentation of women and the quality of politicians measured bytheir educational level and subnational experience.“We found that the proportional electoral rule promoted women’srepresentation without a reduction of the quality of politicians,”Paola Profeta says. “We also found evidence of a negative selectioneffect under proportional rules: the elected women were not thebest candidates. This was particularly the case in the Southern Italianregions that are more gender traditional. The overall quality ofelected politicians could have increased if the best femalecandidates had been selected.”

PROFETA ANDWOODHOUSEElectoral systems impact gendermix

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THE PAPERGender and the Politics of Death: Female Representation,Political and Developmental Context, and PopulationHealth in a Cross-National Panelby Macmillan, Shofia and Sigle

parliament should the press and NGOs fail to voice the need.”The percentage of women in parliaments across the worldincreased from 6.2% in 1975 to 20.4% in 2015, quotas are inplace in countries such as Rwanda, and 42 countries havealready reached the 30% threshold recommended by the UN.In order to understand whether descriptive representation (afair share of women in parliament) translates into substantiverepresentation (a better representation of women’s interests),the scholars analyze parliamentary representation andmaternal and child mortality rates in 155 countries spanningfrom 1990 to 2014.Women’s political representation turns out to be associatedwith significant decreases in mortality for women and children,with the strongest effects in contexts of low extent ofdemocracy and low economic and social development, whenwomen hold at least 30% of the parliamentary seats. “Thethreshold is important,” Naila Shofia says, “because a lowshare of female MPs risks not only being ineffective but also tobeing abused, by using female MPs as a token of legitimationfor the policies chosen by the vast majority of male MPs.”

LEADERSHIP

PAOLO MERLONIAriston ThermoExecutive Chairman,Bocconi Alumnus

MARCO ALVERÀCEO of SNAM

NAILA SHOFIAPhD CandidateDepartment of Socialand Political SciencesBocconi University

Women in parliament can save scores of women’s andchildren’s lives, especially in lesser developed and weakdemocratic countries, finds a paper published by Demographyand authored by Bocconi University, University of Limerick andLSE scholars. In these countries, when the share of women inParliament goes from less than 10% to more than 30% (athreshold advocated by the United Nation Equal OpportunitiesCommissions), child mortality is cut by half, from 60 to 30 per1,000, and maternal mortality is reduced by 80% from 250 to50 per 100,000.Given that women prioritize maternal and child well-being,expectation is that more women in parliament translates into alower maternal and child mortality.“According to our results,” says Naila Shofia, a doctoralcandidate at Bocconi University and co-author of the study,“gender quotas make sense especially where it’s less expected.Common sense would suggest that, in developed anddemocratic countries, established channels facilitate thetransmission of women-backed policies. However, indeveloped countries welfare systems protecting women andchildren are already in place, with free press and NGOs actingas watchdogs should these systems falter. As a result, femaleMPs, in this context, can make only a marginal difference.In developing countries, on the contrary, they can contribute toestablishing such welfare systems by raising the issue in

NAILA SHOFIAWomenMPs can have social impact

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BILL MCDERMOTTSAP CEO

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GIOVANNI STRAMPELLIFull ProfessorDepartmentof Legal StudiesBocconi University

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Independent directors are responsible for monitoring managementopportunism and protecting shareholders’ interests, yet their role is stillwidely debated. “We need to ask ourselves how to make their roleeffective in majority shareholder-controlled companies,” says GiovanniStrampelli, associate professor of Business Law. To takefinancial and family ties between directors and controllingshareholders into account is not enough. A director mayhave an incentive to overlook his own duty because ofnon-material relationships.Professor Strampelli therefore proposes that the UnitedStates should also adoption the Italian legal regime whereminority shareholders can elect a certain number ofindependent directors. In Italy, minority shareholders areusually institutional investors acting under the guidanceof Assogestioni, the Italian Investment ManagementAssociation that plays a central role in selecting candidatesusing the services of headhunters and observingenhanced independence requirements.“We must take the human element into account, too,” he says. “Over time,directors inevitably create social links which can weaken theirindependence. So, they must be subjected to stricter term limits. They areoften professionals who do not have specific skills compared to those ofthe executive directors. In order to enhance their authority, they mustreceive full information from the executive directors and be given thepower to monitor transactions that are influenced by controllingshareholders.”Finally, public disclosure of advice provided may strengthen the linkbetween a director’s individual vote and his/her reputation, and thusfurther promote his/her independence.

GIOVANNI STRAMPELLIImproving effectiveness of directors

������THE PAPERHow to Enhance Directors’ Independence at ControlledCompanies by Giovanni Strampelli

CRISTINA SCOCCHIAKiko CEO,Bocconi Alumna

ANDREA ZAPPIAChief ExecutiveContinental Europeat SkyLUCA MIGNINI

Campbell Soup CompanyChief Operating Officer,Bocconi Alumnus

People change jobs more frequently in today’s workplace.What is the impact of a departure on the future careersof colleagues who remain? Disruption, but also moreopportunities to gain knowledge and create new relationshipsby Tracy Anderson @

HUMANRESOURCES

50501-2/20

An employee's decision to leave a companynot only affects that employee's owncareer, but may also have a meaningful

impact on the future of others who remain atthe company.In the past, having a successful career ofteninvolved working your way up through ahierarchy of jobs within a single company.Today, however, careers typically spanorganizations. Individuals now entering thelabor market expect to move betweenemployers over the course of their careers, likemany of those before them.Employees move between organizations formany reasons. Some move for personal reasonsthat are not work-related. Others are seekingcareer opportunities and rewards that are notavailable – or, at least not easily accessible –

within their current organization. A new jobwith a new employer may offer fresh challengesand opportunities for learning anddevelopment. At least to start, however, thosewho make such moves may struggle to performat their previous levels. They lack both theknowledge of their current setting and theestablished relationships with colleagues thatcan aid performance. Yet in spite of this,moving between employers can be a route tosecuring greater pay.Plenty of research has considered and providedevidence of these consequences for theindividuals who move, but what about those whoare left behind? What are the implications ofmobility for the careers of the employees whoremain in the organization after others havemoved on? Early work on this topic highlightedhow such movement can create vacant jobpositions and reduce the numbers competing forfuture job opportunities. Where this is the case,

employee mobility may increase the opportunityfor promotion among those on the sameorganizational career ladder who stay.The creation of traditional job vacancies may beless common and less relevant than it once was,as organizations become less hierarchical andwork becomes more project-based. This is notto say that the careers of employees who remainare now less affected by others leaving, however– in fact, there is reason to believe that therepercussions of employee mobility may be feltmore widely today.Employee mobility disrupts the social networkwithin an organization. Colleagues whopreviously relied upon those who have now leftfor help, expertise, advice, and support in theworkplace may suffer. They may struggle tomaintain their level of job performance, which

may hinder their progression. They may feelless supported and therefore less committed tothe organization, potentially promptingthoughts about leaving themselves.The increasingly collaborative nature of theworkplace means that these disruptiveconsequences of employee mobility may be feltacross the organization – not just by those onthe same career ladder. Many employers aretrying to break down organizational barriersand encouraging their workforce to developcollaborative relationships that spandepartmental, functional, and geographicdivisions. This is done in the hopes of enhancingknowledge sharing, creativity, and innovationbut, as a result, the effects of employee mobilityare no longer confined inside these divisions.It is not all bad news though. While employeemobility has negative consequences for thosewho stay, there are positive consequences too.The disruption of the social network can havean upside. It can prompt those left behind toseek out and forge new relationships with othersin the organization. This can stimulate learningand knowledge recombination that may nothave otherwise taken place. And that can bebeneficial both for the employees who are leftand for their employer. �

TRACY ANDERSONAssistant Professor

Departmentof Managementand Technology

Bocconi University

511-2/20

Job changes also impactthosewho stay behind

THE PAPERMy colleague just left! How the mobility of co-workersaffects job performance by Tracy Anderson and Martine Haas

by Carlo Favero - Stories by Claudio Todesco @

Answer: it may be amachine. Testsshow that today’s onlinemachinelearning could have predictedthe 2008 financial crisis. Couldcomputers be effective in the future,given that the causes cannot beknown? The challenge awaits

Whowill prFORECASTING

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During a visit to the London School of Economicsat the peak of the 2008 financial crisis, whenresearchers from one of the most prestigious

schools in the world explained to her how terrible thesituation was, the Queen of England asked directly,“Why did nobody notice it?”Several months after this question was asked, theEconomics section of the British Academy wrote athree-page letter addressed to Her Majesty, admittingthat the failure to predict such a serious crisis wasattributable to “the failure of the collectiveimagination of many bright people.”This summarizes the fact that predictive models,based on theory and applied to data by estimating asmall number of parameters, are simplified versionsof economic reality. Models are validated byguaranteeing that they are able to explain past

fluctuations in the economy. By their nature, they getinto trouble when they omit aspects of reality that arenot significant in the historical period used tocalculate the model, but which acquire relevancyduring a period different from the past, such as thecrisis.The lack of collective imagination refers to modelsthat did not include aspects that later proved to bevery important, such as the real estate mortgagemarket and their securitization prior to the subprimecrisis, or the weight of public debt securities in banks'financial statements in the case of the European debtcrisis.Furthermore, each forecaster typically uses a uniquemodel that reflects his or her theoretical positions andstrategies for identifying relevant parameters todescribe the dynamics of the economy.

redict thenext financial crisis?

CARLO FAVERODeutsche Bank

ChairQualitative Financeand Asset PricingBocconi University

A computer has no imagination, but can use data tooptimally combine a large number of predictionsbased on different models, with weights that vary overtime. Combining a large number of forecastsminimizes the probability of omitting importantaspects of reality from the information set used forforecasting.An online machine learning system allows you tooptimally combine forecasts. Given a sequence ofperiods in which forecasts based on different modelsare available at any moment in time, the forecasterreceives the information, combines it to make aforecast, and takes a loss that is a function of theforecasting error. The algorithm chooses the weight tobe given to each forecast at “time T” on the basis ofthe difference between the actual loss and theminimum possible loss using the information setavailable in all observable periods before “time T”(minimal regret principle).In this way, optimal forecasts can be built startingwith a large number of crisis indicators (which can bemacroeconomic, credit, interest rate, real estatemarket or financial market indicators) and variousmodels that use these indicators differently. Theresult is the selection of optimal weights attributed tothe different models in different periods over time.Combined models that give optimal forecasts inperiods of calm are very different from models thatgive optimal forecasts in periods of crisis. It appearsthat the use of online machine learning would havepredicted the crisis, with a low probability ofproducing a false alarm.It would therefore seem that computational capabilitycan make up for a lack of collective imagination. Onlyseemingly, though, because the tests carried outshowed an ability to predict crises that have alreadyoccurred. The crucial test of the new approach will beits ability to predict future crises, since data aboutthem does not yet exist. �

FORECASTING

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THE BOOKAusterity canbeeffective if governmentsdonotcompensate fiscalexpansionduringacrisiswithcorrrectionsduringgrowth,explainAlbertoAlesina,Carlo FaveroandFrancescoGiavazzi inAusterity.WhenItWorksandWhenItDoesn't (ItalianeditionbyRizzoli)byanalyzinghundredsofausterityprogramsstarting fromthe1970s.

“A crisis is an extraordinary event. It can not be tackled using ordinarytools. Corporate, financial and legal expertise must all be integrated. It isalso fundamental to react quickly: the new Italian law on business crisisand insolvency provides for warning mechanisms aimed at promptlyresolving the crisis.”

Francesco Perrini, Full Professor of CorporateDistress and TurnaroundManagement, isresearching the many dimensions of businessrestructuring. “The literature on corporate crisesyielded non-univocal results on the effectiveness ofbusiness restructuring,” he says. In order to assessthe best strategies to be applied to tackle a businesscrisis, Professor Perrini has analyzed the histories ofsome 700 listed manufacturing companies in Italy,France, Germany, United States and England from2002 to 2010.The research is ongoing, but he can provide somepreliminary results. “First, the larger and moreindebted the company, the greater the likelihood of

surviving the crisis. This is the effect of steps taken by the stakeholdersinvolved who want the company to survive. Secondly, the legislativecontext influences crisis duration. In the US, restructuring lasts onaverage just over a year, in Italy more than three years. Lastly,restructuring is four times more likely to be successful when the CEO isquickly replaced.”There are also somemanagerial implications. “A multidisciplinaryapproach that takes into account all the categories of restructuring –managerial, operational, portfolio, and financial – should be adopted,”he says. “This approach is present in 88% of all successful restructurings.”

FRANCESCO PERRINIMultidiscplinarymethodworks best

FRANCESCO PERRINIFull ProfessorDepartment

of Managementand Technology

Bocconi University

551-2/20

There are two sides of the public debate on austerity after the 2008crisis. One argues that pro-growth fiscal interventions should beadopted at the expense of the debt-to-output ratio reduction. Thesecond one highlights the importance of debt stabilization, asestablished by the European Stability and Growth Pact. The debatedoes not take into account the long-term prospects of the economy,saysMariano Massimiliano Croce, Full Professor of Financewhose research focuses on general equilibrium models in which thereis uncertainty about the long horizon perspectives of the economy.“Fiscal interventions that are supposed to be pro-growth may come at

the cost of dimmer long-term growth,”he says. “Increasing the debt-to-outputratio to deal with transitory crisescreates uncertainty about how thegovernment will pay the debt and thusabout the future fiscal burden. Thisuncertainty discourages investments ininnovation that contribute to long-termgrowth.”Mariano Croce and his co-authors haveempirically tested this model usingdata from fifteen developed countries,including Italy. They have found that,when the government is slow inadjusting debt-to-GDP ratio,

production and consumption worsen, while long-run uncertainty andlong-run downside risk increase.“There is a trade-off between short-run stabilization and long-termgrowth,” he says. “We must therefore be cautious in using fiscalinterventions that are supposed to be pro-growth. A rapid reduction ofthe debt-to-GDP ratio, on the other hand, can enhance the values ofinnovation and aggregate wealth.”

MARIANOMAX CROCEBe cautiouswith pro-growth policies

MARIANOMAX CROCEFull ProfessorDepartment of FinanceBocconi University

THE PAPERPersistent Government Debt and Aggregate RiskDistribution byMarianoMassimiliano Croce, Thien TungNguyen,and Steve Raymond

MARCELLO GABOARDIAssistant ProfessorDepartment of Legal

StudiesBocconi University

DANIELE DURANTEAssistant ProfessorDepartment of Decision SciencesBocconi University

FORECASTING

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A new extension of an algorithm that helped put a man on the Mooncan help us to predict the advent of a crisis and other binary variablesthat evolve over time. The algorithm is called the Kalman Filter. In 1969,the on-board computer that guided the Moon landing had one. Itevaluated information coming from the module and filteredmeasurement errors and random components in order to estimate theactual position and to predict the future position.Fifty years later, two academics (Daniele Durante and SoniaPetrone) and two PhD students (Augusto Fasano and GiovanniRebaudo) in the Department of Decision Sciences at BocconiUniversity have developed a method that efficiently extends the KalmanFilter to non-continuous binary variables that indicate the occurrence ornot of an event over time.“Until now, any application of the Kalman Filter to binary variables wasonly approximate,” Daniele Durante says. “Now, we can predictwhether the stock market will open up or down based on theoccurrence of certain conditions in the past, or who will win the next

boat race betweenCambridge and Oxford basedon past competitions.”The method makes use ofonline updating: knowledgeabout the occurrence of agiven event is updatedsequentially with each newobservation. The broad rangeof applications goes fromweather events to cyberattacks.“Our formula applies to 0/1variables. We intend to

extend it to non-continuous variables with more than two values, forinstance the occurrence of a strong, medium or weak crisis,” he says-

DANIELE DURANTE TheMoon landingalgorithm that can predict the future

Goodbye, “bankruptcy.” In2019, the term was replacedin the Italian law by “judicialliquidation.” This is just one ofthe innovations introduced bythe new law on business crisisand insolvency. There are alsoa number of substantial newnorms aimed at makinginsolvency prevention moreeffective. “Addressing thecrisis before it is irreparableand ensuring businesscontinuity increases thechances of finding win-win solutions for all actors involved,” saysMarcello Gaboardi, Assistant Professor of Civil Procedure Law andBankruptcy Law.Qualified public creditors such as tax agencies and social securityagencies have new reporting obligations. If they do not report a potentialstate of distress, they risk losing their status as privileged creditors. Thelaw also establishes a crisis settlement body which, rather like in civildisputes mediation, is aimed at helping the distressed company return tosolvency through agreements with creditors. Gaboardi is skeptical aboutits effectiveness. “Crisis settlement bodies have little impact,” he notes.“They lack knowledge of the principles and the techniques of mediation.Not to mention the cases in which there are hundreds if not thousands ofcreditors and the settlement is difficult, to say the least.”In addition to introducing a single channel for all procedures, whether itbe judicial restructuring or liquidation, the new law reflects evolution inthe characteristics of debtors. When the bankruptcy law was first written,in 1942, the debtor was in most cases an individual entrepreneur. Thereform strengthens the discipline of corporate bankruptcy and introducesa new set of rules for the management of the insolvency of groups ofcompanies, giving a central role to liability actions brought by creditors ofa subsidiary against its parent company.

MARCELLO GABOARDI New law aimsto improve insolvency prevention

THE PAPERSpunti sulla legge delega per la riforma organica delleprocedure concorsuali: profili processuali byMarcelloGaboardi, Rivista delle società, Year LXIII Vol. 1, 2018

THE PAPERAClosed-Form Filter for Binary Time Series by AugustoFasano, Giovanni Rebaudo, Daniele Durante, Sonia Petrone.Workingpaper

In the auction-based onlineadvertising market,algorithms can be moreeffective tools than finesand regulatory bans to curbthe power of FAANGs

Algorithms can offset onlineby Francesco Decarolis @

ANTITRUST

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THE PAPERFrom Mad Men to Maths Men: Concentration and BuyerPower in Online Advertising by Francesco Decarolis and GabrieleRovigatti

e ad grip of tech oligopolies

In recent months, antitrust authorities aroundthe world have focused their attention ontechnology oligopolies. However digital

markets are evolving rapidly and it is not easy toknow whether public intervention can redressmarket failures. For the so-called FAANGs(Facebook, Amazon, Apple, Netflix andGoogle), the sale of online ads is the main sourceof revenue. Google's situation is emblematic: in2018, advertising accounted for 85% of annualturnover, amounting to $136.22 billion.However, this vast sum is made by aggregatingmillions of small or minuscule transactions: thesearch engine assigns part of the available spaceon the web page to advertising slots anddetermines the cost for advertisers throughauctions conducted in real time (sponsoredsearch auctions).The value of these auctions is given both by thehuge flow of online traffic (about 63,000searches per second occur on Google), and adtargeting (by selecting specific keywords on thesearch engine and details of the offer such astime of the day/week and type of device wherethe ad is to be displayed).New players have entered this rich market inrecent years. Specialized intermediaries - thedigital equivalent of marketing agencies - haveemerged to support and direct advertisers.These intermediaries can assist the advertiser indevising the content of the advertising messageand in the choice of social media, but above allthey perform a technical function.With dozens of different platforms and billionsof connected users, choosing how to allocate anadvertising budget requires real-time decisionsand fast and sophisticated digital algorithmspowered by big data.

This explains why the world of online advertisingis moving from the hands of creatives to peoplewho code algorithms. And it is precisely in thealgorithms where one of the potentially mostdisruptive aspects lurks to threaten theoverwhelming power of Google and otherplatforms: when the same intermediarysimultaneously represents several advertisers inthe same auction, the concentration ofpurchasing power offsets the bargaining powerof the seller and, by coordinating bids for lowerprices, it prevents the search engine fromseizing the entire consumer surplus.In a study with Goldmanis and Penta comingsoon in Management Science, we treat theproblem from a theoretical point of view,explaining also why the specific auctionmechanism recently adopted by Facebook is lessvulnerable to price coordination than the oneadopted by Google.But is this phenomenon of coordinated buyers’decisions a simple theoretical curiosity or is itsomething that really influences online auctions?In a new study with Rovigatti, through theanalysis of almost 40 million Google auctions inthe US market between 2014 and 2017, we findan increase in the market concentration ofintermediaries equal to 200 points of theHerfindahl-Hirschman Index (HHI) - theindicator typically used to identify whichmergers antitrust authorities should keep an eyeon - which leads to an 8.04% decrease inGoogle’s revenues, due primarily to a decline inthe price of target keywords.These results suggest a third way in thecompetition policy between the two polarextremes of doing nothing and activelyintervening to fine and even break up thetechnology giants. The alternative is based on adetailed understanding of the functioning ofcomplex markets, with the aim of monitoringand possibly blocking specific actions that actorslike Google are undertaking to limit the abilityof advertising intermediaries to lower prices. �

FRANCESCO DECAROLISAvvocato Giovanni Agnelli

Associate Professorin Economics,

Bocconi University

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by Markus Venzin - Company stories by Emanuele and Francesco Elli @

Italy’s startups rarelyfail, but are not veryinnovative. For betterrewards, they needto take more risksin advanced sectors,and learn to exploitthe experience thatcomes from failure

Better a unicorn for a day th

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MARKUS VENZINDean for InnovationBocconi University

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Around 90% of Italian startups survive the first5 years! On the face of it, this statistic suggestswe are doing something right – but are we? Or

is it actually disguising the reality that we areinsufficiently innovative?

� THEGLOBALFIELDOFPLAYWe all know that there is a clear link between thelevel of innovation and the profitability of firms – inevery industry. This link has become even strongerin recent times as new technologies change the wayfirms operate. Ubiquitous data and digitaltransformation are the lingua franca of the 21stcentury, and technology effects all processes in allfirms. Yet, our great European tradition of being atthe cutting edge of technology has been eclipsed byChina and the US, and by their drive to develop andcommercialize new technologies.Europe is lagging behind. Across the continent, thestartup playing field is also uneven, with different

countries racing ahead while others are limpingbehind. Indeed, the 2019 scale-up ranking placesItaly at 11th in Europe; suggesting that the gapbetween Italy and the top 3 ecosystems of the UK,Germany, and France is now so wide that the trioseem to be playing in a different league to the rest ofEurope. For example, the UK counts 9 times morescale-ups, raising 20 times more capital, than Italy.So before we cheer our 90% survival success rate,we should take a step back and reflect on what thismeans. Such a high success rate actually indicatesthat we are not sufficiently aggressive in pursuingnew and disruptive ideas, and ‘failing fast’ thenpivoting. Instead, Italian startups prefer to ‘dieslowly’ pursuing incremental ideas and innovation.These invariably result in slower overall growth. Thisis the danger for Italy and Europe -- particularly ifEurope wants to have a meaningful role in globalinnovation and entrepreneurship. Despite beingbehind, Italy isn’t standing still, however. It is taking

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steps to catch up - in terms of capital raised, numberof hubs, incubators, and events – but more structureand energy for the ecosystem is required if we are topick up the pace.What we need to do is to create the conditions forentrepreneurial success – an ecosystem where ideasare nurtured in order to flourish and grow. Whereindividuals are encouraged to dream big and achievethose dreams. We need to create an environmentwhere it’s ok to fail as long as failing is fast, learningtakes place, and we quickly move on to morepromising ideas and innovations benefitting from thisexperience. This means creating a space for tryingthings out, for experts to support entrepreneurs’ideas, and where resources are provided to take thebest ideas and fast-track them through launch andscaling. It means partnerships and cooperation,where different players come together and mutuallybenefit. Growth will only come from dreaming big.Growth will only come from bringing togetherdifferent people and organizations.

�BRINGINGTOGETHERTECH&BUSINESSBusiness schools have to contribute substantially tosupport Italian firms in their attempt to catch up andtake their place on both the European and globalstage. They need to do so by teaming up with techinstitutions - Tech needs business and business needsTech. A symbiotic relationship that can delivergreater value beyond the two sides.Consider, for example, an IoT application to make acable drum intelligent. By adding a device to thedrum that is equipped with a GSM module andseveral sensors, customers such as utilities that wantto manage their assets can now know where thedrum is, how much cable is on the drum, andwhether the drum has been mishandled. With thesmart drum, they can now improve their logistics,warehousing, and many other processes, as well asbenefitting the environment by collecting ‘lost’drums.This example - as with most IoT applications – iscomposed of 4 basic elements: hardware, cloud-based storage of data, artificial intelligence totransform data into information, and the businessmodel.The strength of business schools is to support anddevelop the latter two elements. To gain traction onthe former two elements they need to work withother partners to leverage their expertise andcomplement their own. This is a very positivedynamic that can help broaden their perspectives.Collaborating with different partners - whether theyare universities, businesses, financial institutions,startups or not-for-profits, as well as governments -will forge links between currently disparate playersin the overall ecosystem. There are typically threephases in start-up/scale up.

� THEPRE-ACCELERATIONPHASEThe pre-acceleration phase supports foundersthrough early ideation to creating a minimum viableproduct. This would typically involve building skillsand knowledge in diverse topics such as designthinking, lean startup, sales, digital marketing, webdesign & analytics, agile project management,financial modelling, pitching, and go-to-marketstrategies. It is important to ensure thatentrepreneurs are confident in their abilities to selltheir idea to others and get their buy-in. At the end ofthis phase, the entrepreneur should have a prototypeto support his or her storytelling.

� THEACCELERATIONPHASEWith a prototype in hand, this phase focuses onentrepreneurs developing their product andengaging potential customers. During acceleration,the goal is to create the company, facilitatenetworking, build inspiration, and generate marketopportunities. The entrepreneur should be furtherdeveloping the prototype based on inputs receivedfrom potential customers and others in theecosystem. They also need to think about recruitingother talent to support them in building theircompany and product as it is unlikely that theentrepreneur will possess all the needed skills, muchless the time to do everything that is needed tosuccessfully accelerate.

�SCALE-UPScale-up relies on partnering with venture capitalistsand other investor types, as well as getting supportfrom individuals and organizations who are expertsin scaling companies. Building customer segments,thinking about expanding beyond the home country,and developing their products and valuepropositions are the key criteria for success here.This is not easy, but if entrepreneurs can crack thisphase, they will find themselves on a strongtrajectory towards growth and performance. Whileit is true that not every company is able tosuccessfully scale, to realize the dream of a strongEuropean ecosystem of entrepreneurship andinnovation, scale-up is vital if Europe is to becomethe third power on the playing field.Bocconi, as Italy’s leading business school, is bestplaced to orchestrate this ecosystem to create valueand growth. Building it will be our contribution toensuring that home-grown talented entrepreneursget the opportunity to build their ideas and scalethem first on the European and then the globalstage. �

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Giangiacomo Rocco di Torrepadula is a startup veteran. Hegraduated with a degree in Economics from the Universityof Naples, then he earned an MBA from SDA Bocconi andlanded a job at McKinsey. He has always been very muchfocused on companies: “I lived the experience at McKinseyas a school of entrepreneurship,” he says. So, when theright business idea came, he seized the chance and,together with four other friends, launched Pharmaidea, amulti-channel selling platform that links pharmacies topharmaceutical companies. Pharmaidea was an enormoussuccess, but it did not quench Giangiamoco’s

entrepreneurial thirst. After13 years, left his first creationto throw himself headlong ina new startup: “The idea,”says the Bocconi alumnus,“came from a meeting I hadwith cardiologist DomenicoCianflone of the San RaffaeleHospital in Milan, where hepointed out that over a billion

people suffer from hypertension in the world and, eventhough there are many medicines available in the market,50% of patients continue to have high blood pressure.”Hence Amicomed, a digital platform to manage bloodpressure based on lifestyle choices. Not just an app, but awhole information system that provides a sophisticatedanalysis of personal data by integrating and enhancing therelationship between doctor and patient. “We devotedour first 4-5 years to product development, both from amedical and a technological point of view. Furthermore,when you launch a startup in a regulated environment,you need to be aware that you are going to interact withorganizations that have reaction times that lag far behindthose of a company.” This is a useful reminder for thosestartuppers who expect answers in a few months. “Youneed patience,” Giangiacomo argues. “And you must beaware that for the first three years of astart-up there are no holidays,weekends, sleep... You have to dedicateyourself fully to the project.” Becausethe initial idea counts, but it’sdedication that makes the difference.

AMICOMEDA medical startup that took years

Shortly after getting his Bocconi MSc in Finance, MattiaD'Alessandra was a young man who had worked abroad(more precisely in Chicago) and held a job with excellentprospects at Deutsche Bank. Many would have held on fordear life, but he left to build his own startup. “I just felt Ihad to do it,” he explains now. “It is like you have toanswer this call: you see the opportunity and not thehurdles.” The “call” appeared in the guise of a digitalplatform based on blockchain technology, hence the namefor his start-up: LoanXchain, the first multilateralmarketplace dedicated to the secondary market for loans.It is a system connecting European credit institutions(both traditional players and digital lenders) andinstitutional investors (primarily private debt funds) in adirect and digital way. Finance on the one hand,therefore, and technology on the other. “The rightintuition was to bet on blockchain technology, study itand contribute to improve it, to the point that when wewent to the World Blockchain Convention in London wediscovered that we all knew each other.” A good injectionof confidence, especially for a company that envisaged alengthy development phase: “The first year was aboutteam building, fundraising and creating the network ofpartners and subject-matter experts in order to improveon the business idea. The subsequent year was devoted toprogramming and extending the network. Now we are atthe start of the commercial phase.” But Mattia'sambitions go beyond LoanXchain. “Since I’m a youngperson, I would like to help change and revive my country.I'm not thinking of grand gestures, but simply to give mybest in what I do and convince others to do the same.” Angoal which can be an example for many. “May I give apiece of advice?” asks Mattia, and answers his ownquestion. “Study how to launch a startup and the stepsyou need to follow. And give yourself at least a two-yeartime horizon to understand whether the business ideamakes sense or not. Then you have to fight. And if itdoesn’t work this time… it will the next!.”

LOANXCHAINThe right idea at the right time

GiangiacomoRocco di Torrepadula

Mattia D’Alessandra

STAR

TUP

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“We started out without a cent, knowing nothing abouteither shoes or technology, but we were persuaded bydirect experience that Made-in-Italy quality products soldat affordable prices abroad were missing from themarket.” Enrico Casati, born in 1987 and Bocconi Class of2011 in International Management, recalls how he andbusiness partner Jacopo Sebastio (also a Bocconian) got theidea for Velasca, which sells handmade shoes both onlineand through a network of directly managed brick-and-mortar stores. “Our start-up phase has been quite long, wehave grown slowly and also many mistakes.Understanding what to focus on, analyzing marketmechanisms and making the right moves is what’s hard.However, now that we are officially a scale-up we canbuild on this experience to make the most of externalcapital inflows.”The latest capital infusion of €4.5 million will support thecompany’s international expansion and the opening ofnew shops.“Velasca was born in 2013 to sell only online,” Enricoexplains. “By 2014, however, we discovered through ourfirst experience with a temporary store that we could get alot of satisfaction from the physical retail channel. Todayour plan is to open 20 new stores, of which 16 abroad,starting with Paris and London -- both just opened -- andNew York, where we will open in January.” In-personselling brings new opportunities and new challenges. “Tosupport the channel, you need to have a lot of circulatingproduct, move pre-emptively with suppliers, and have thecapital to support the investment. For this, we analyze e-commerce data a lot.”

VELASCAMade in Italy has the world at its feet

For those who upload videocontent on YouTube,BuzzMyVideos has become a go-to tool. Paola Marinone got theidea while she worked forGoogle and YouTube, developedit into a start-up and thenquickly evolved it into a scale-up. From its HQ in London, thecompany has the mission ofproviding technology andservices to promote audiencegrowth and monetization ofonline content. “There is still much room for growth,”says the young entrepreneur, who holds a degree in PublicManagement from Bocconi with a thesis on non-profits in2003. “Online video is an increasingly viral form ofcommunication. In fact, at this stage we have opened anew line of business, which brings our technology directlyto companies, publishers, creative agencies and marketingdirectors.” Approaching this new market has broadenedthe horizons of BuzzMyVideos and projected the companyinto a more complex stage of evolution. “At the moment,the priority is to rapidly grow in a highly competitivemarket, and work on the internal organization of thecompany, because it is a question of combining the newB2B model with the B2C one we have been working with,”says Paola. For this reason, after a phase when thecontribution of venture capital was very significant, themanagement of BuzzMyVideos has preferred not to takeon external investors. “The new business line has beendeveloped by creating partnerships because we no longerhave to scale up to create corporate value. Now it is timeto optimize operations and maximize profits,” the alumnaexplains. “It's like being in a second start-up phase. Iremember that when I joined a tech company afterworking for four years in the non-profit sector, I noticedthat the two environments had a mindset in common:namely the desire to change the world.”

THE BOOK“Restartup” (Egea 2019; 208 pagg.; 26euro) by Andrea Arrigo Panato focuses onSMEs that are at a turning point and wantto backtrack to think like a startup again.They may want to redraw their company orsector, or want to enhance their own storyand tradition or that of their founding fa-mily.

Enrico Casati

Paola Marinone

SCAL

E-UP

BUZZMYVIDEOSNow expanding into B2B market

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For a long time, Moneyfarm was considered the Italianscale-up par excellence. Now it has outgrown thatdefnition and is a fully-fledged digital asset managementcompany.Moneyfarm was founded in 2011 by Paolo Galvani andGiovanni Daprà. The latest rounds of financing have raised€115 million in equity capital, making it one of the best-funded digital companies in Italy and in Europe. "A greatsuccess, but also a great responsibility," says Daprà, whogot his undergraduate degree in finance from Bocconi in2005."The more we grow, the more attention we must pay toresults and the complexity of the organization.Furthermore, the transition to an international dimensionis a veritable quantum leap which forces us to be evenmore rigorous in management and business processes."Having set up offices in Milan, Cagliari, London andFrankfurt, Moneyfarm employs a team of over 120professionals managing €830 million worth of assets onbehalf of over 40,000 small investors.The company has been posting double-digit growth.“There are some constants that have accompanied us inour evolution: the creation of a solid corporate culture andan excellent professional team, which is the first variabledetermining success,” Daprà explains. “Another successfactor was the choice of using a single platform for all thethree countries where we are present. This choice was notonly dictated by technological reasons, but also by astrategy that brings the best of each country into the othertwo and doesn’t lead to an overtly nationalcharacterization.”

MONEYFARMGrowing from local to international

“In the equity round three years ago, searching forinvestors was really tough. The Italian market, whereMotorK was already a player, counted for little andinternational investors were not interested. The future Bseries round should be easier, because today we are onmany investors’ radar. We therefore have a list of peoplewe can contact and this time it will be us doing thechoosing.” Marco Marlia, 40 years old with a Bocconidegree in finance, is founder and CEO of MotorK, whichowns DriveK, the online car price comparison platform anddigital consultancy for dealers and manufacturers wantingto make the most of the web’s potential. “When westarted out, the automotive industry was still verytraditional: a large presence in the real-world economy buta small one in the digital economy; the threshold formarket entry was therefore low, so that companieswithout large starting capital could enter,” the executiverecalls. The entrepreneurial project, the business plan andthe right strategies have quicklybrought MotorK to the top of thedomestic market, attracting €10million in investments and layingthe foundations for expandingbeyond national borders. “Todayour biggest challenge isinternational expansion,” saysMarlia. “In Italy we have reachedthe maturity stage and now weare trying to extend and adapt ourmodel to key foreign markets. Wehave opened simultaneously inseveral markets because the car industry works on anEMEA (Europe, the Middle East and Africa) geographicperspective; we are facilitated by the fact we areexpanding into a fairly homogeneous industry, whererelations between car manufacturers, dealers andconsumers do not change much from country to country.”The new phase requires fresh capital and MotorK is revvingits engines for a new round. “It's a delicate step becausewe need to look for smart money,” the CEO argues. “Theright partners bring added value, if only because they forceyou to be rigorous and disciplined - to do your homework,in short.”

MOTORKWe can now pick our own investors

Marco Marlia

Giovanni Daprà

ESTA

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“When referring to startups, the word ‘exit’ is misleading,”argues Alessandro Petazzi. He is co-founder and CEO ofMusement, a platform that offers 50,000 travelexperiences and attractions that can be booked in 80countries around the world. This adventure began in 2013when four entrepreneurs with a variety of backgroundsjoined forces. After graduating from Bocconi with a degreein Business Economics, Alessandro in particular was a partof Fastweb's startup, where he gained key experience hewould then apply to the Musement business adventure.“Formally, exits occur when the shares of the company aresold,” he says. “But this does not mean that the companycloses. The founders of Musement, for example, sold to Tui(a German multinational with €20 billion in annual sales),but we are continuing to do what we did before.” The realissue, stresses Petazzi, is scale: ”With our own efforts, wewould have only been able to grow in small steps. Theright synergy was needed to get to the next level.” Thesynergy with Tui has provided Musement with a huge andconsolidated customer base, giving Tui in exchangetechnology and skills that it did not have. The numbershave proved that this was a winning choice. “Before theacquisition we had 130 employees and a turnover of €35million. A year after the agreement, there are 220employees, with a turnover of almost €100 million.”Solidity, continuity and an excellent outlook: with theseresults, Musement's was not so much an exit but ratherthe perfect marriage. This is another important

consideration foranyone dreaming oflaunching a startup.“Enthusiasm for anidea is not enough,”says Alessandro. “Youalso need anawareness of whatyou’re getting into.Because once the ideagrows it becomessomething real, whichimplies responsibilitytowards the peopleinvolved.” And there isno "exit" from trueresponsibility.

MUSEMENTWhen an exit is actually a partnership

Exiting a start-up can beimposed rather than sought.Just ask Federico Isenburg, whowas born in Genoa in 1978 butlived in Milan from elementaryschool up to a degree inBusiness Administration atBocconi with a specialization infinance. In fact, he would neverhave sold his startupEasywelfare had it not been forparticular circumstances. “Iwas trying to replace financialpartners,” he says. “Thecompany was doing well and I was convinced it still hadgreat potential for development, but obviously I didn'tmake it attractive enough for investment funds.” That’swhen Edenred (a French multinational in welfaresolutions and corporate mobility) stepped in: “Theyshowed that they really wanted to make the acquisition,they provided prospects for development, guarantees...and they won the battle.” For Federico, it wasundoubtedly a success, because Easywelfare, created fromnothing in 2007, is the company that de facto reorganizedthe world of flexible benefits, which are benefitscompanies give employees as incentives and alternativeremuneration. Turnover had risen to 11 million euros in 12years, with over 700 corporate customers and 600,000beneficiaries. “But in terms of entrepreneurship, for me,selling was not the ideal solution. Today I see more andmore people opening a company, qualifying it as a startupand then running towards the exit, as if the only goal wasenough wild growth to finalize a sale. For me, starting acompany means... starting a company. When you are anentrepreneur you also have a social function: developing abusiness, hiring people, creating jobs...” That's why, at40, Federico can't wait to throw himself back into thefray.

EASYWELFAREExiting with an eye to getting back in

Federico Isenburg

Alessandro Petazzi

EXIT

YOOX NET-A-PORTERThe first Italian unicorn

Federico Marchetti,Bocconi Alumnus of the Year for 2014,

is Chairman and CEO of YOOX Net-A-Porter Group.Founder of YOOX, Marchetti now manages what is still

considered to be Italy’s first unicorn,or startup valued at over €1 billion.

The e-commerce fashion giant is now part of Richemont.UN

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Aplatform of services and support forentrepreneurial activities, acting as pre-accelerator, accelerator and a place for

the development of corporateentrepreneurship. This is Bocconi forInnovation (B4i), Bocconi University’s newhub, which already has partnerships with CitiFoundation, HenkelX, the Italian Institute ofTechnology, Politecnico di Milano andUniversità degli Studi di Milano.Bocconi for Innovation will work on severalfronts: as a pre-accelerator, it will welcomebusiness ideas to support them up to aminimum viable product (MVP). At the sametime, it will provide services and support forthe acceleration of companies that are alreadyin the startup phase to lead them towards theiractual business.Startups will be selected within the three areasof the accelerator’s focus: digital-tech(entrepreneurial ideas with particularlypromising innovations and technologies),coordinated by Massimo Della Ragione; Madein Italy (manufacturing, fashion, food andvarious other ramifications), coordinated byGabriella Lojacono; and sustainability,coordinated by Stefano Pogutz. Theacceleration phase, lasting four months (withtwo sessions per year), will host up to 30startups. They will be offered mentorships,assistance in forming contacts with investors,support in the various stages of developmentand funding of €30,000 for each startup.Lastly, corporate entrepreneurship: on thisfront, the endeavor is to help companiesinnovate and develop their business byencouraging the creation of bridgesbetween companies and startups.“Our goal is to create a hub whereentrepreneurship can develop, growand take flight,” explains Bocconi forInnovation Operating Director, NicoValenti Gatto. “We want to create aplatform that provides services andsupport and whose work alsocontributes to halting the drain oftalent away from Italy.”

Bocconi for Innovation supportsstartups through each phase

DIGITAL-TECH“Foreign investors areattracted to firms with adigital-oriented businessmodel. Yet this is notenough to attract capital.Investors are seduced bythe certainty that newtechnologies will translateinto products and servicesthat eventually garnersignificant revenues.” Massimo Della Ragione knows allabout it. Professor of Practice at Bocconi and co-head ofGoldman Sachs Italy, he is in charge of D-Tech, the hub ofBocconi for Innovation dedicated to advanced technologieswith industrial applications: science computing, robotics,artificial intelligence, cyber security, blockchain, andvirtual reality. “D-Tech will not accelerate startupcompanies whose technologies simply improve a process,such as an app that allows you to book restaurants. We areinterested in technologies proposed by teams that featureat least one Bocconi alumnus, or an alumnus of a Bocconipartner, and that combine significant social impact andhigh commercial potential. Our goal is to ensure that thesetechnologies are translated into successful businessactivities and to prepare teams to meet investors.” To doso, the program will focus on the most important stage ofa startup: the acceleration. If we compare theentrepreneurial ideas in technology to the major stages ofhuman life, D-Tech will take care of their adolescence andaccompany them until adulthood. “In this crucial stage wecan provide management training and nurtureentrepreneurial spirit,” he says. “We want to create avirtuous circle in which technological advances improvepeople’s lives, create jobs and fuel innovation. We givediscipline to entrepreneurial ideas. Is there a better placethan Bocconi to do it?”

NICO VALENTI GATTOBocconi for InnovationOperating Director

MASSIMO DELLA RAGIONEProfessor of Practice

Department of FinanceBocconi Universityand Co-head at

Goldman Sachs Italy

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MADE IN ITALYThe emergence of competitors from new countries and theunstable international regulatory framework is clouding thefuture prospects of Made in Italy manufacturing companies.Until 2003, for example, Italy was the main exporting countryin the furniture sector. According to UN Comtrade data, in2017 Italy ended up behind China and Germany and couldsoon be overtaken by Poland. “Our companies often fail toidentify effective distribution channels and have trouble inunderstanding the trends in the market,” says GabriellaLojacono, Associate Professor of International Management,Director of the Executive Master in Luxury Management at SDABocconi and head of the Made in Italy hub of Bocconi forInnovation. “A healthy economic system has to be powered byongoing innovation of products and business models. Evencompanies that today represent Made in Italy in the worldmay be at risk. Feeding the system with new and dynamicideas favors renewal and innovation. It is our duty to feed thislong-term turnover by identifying promising business areasand ideas. In this ever changing scenario, B4i will help createnew global champions.” The idea is to create niche companiesthat will eventually grow. The Made in Italy brand evokesfashion, food and B2C. The accelerator will also deal with B2B(mechanics and cosmetics) as well as sectors that are often notmentioned such as pharmaceuticals and eyewear. “Made inItaly means passion, know-how, connection to the territory,culture of beauty, desire to dominate unexplored niches. As aprofessor, I see students with brilliant ideas and the will to putthem into practice. This year, for instance, they have explorednew formats in the food sector. Their wealth of ideas gives mehope for the future. B4i must scout for excellence and put theBocconi expertise and network at their service.”

SUSTAINABILITYHundreds of thousands of people took to the streets ofEuropean cities recently in large climate changedemonstrations. The German government has announced aGreen New Deal. Christine Lagarde called climate change apressing challenge for the European Central Bank. We areliving the transition to a greener and more sustainableeconomy that requires the development of new solutions,technologies and business models. TheSustainability hub of Bocconi forInnovation, led by Stefano Pogutz,Professor of Green Management andCorporate Sustainability, will work inthis context. The hub will work in twomain areas: green economy and socialentrepreneurship. “Using, transportingand storing new energy sources will becrucial,” Professor Pogutz says.“Supply networks will be rethought todeal with intermittent renewableenergy sources. Car batteries will store energy and theneventually return it to the grid.” New opportunities willarise from sharing mobility, such as low impact material; orfrom new solutions for the circular economy especially inindustrial waste processing and recycling. “Innovativestartups will facilitate the transition to more informedpurchasing decisions through reward systems and supplychain traceability,” he says. The hub is also interested insocial entrepreneurship in health, inclusion and education.Even finance is moving towards responsible investmentsand impact investing. “Our hub will help entrepreneursgain new skills,” says Pogutz. “It will support them inproduct analysis tailored to market specifics andsustainability metrics. It will help in the recruitment of newemployees and facilitate access to sustainability-orientedinvestors.”

GABRIELLA LOJACONOAssociate ProfessorDepartmentof Managementand Technology andDirector Executive Masterin Luxury Managementat SDA Bocconi

STEFANO POGUTZResearcherDepartment

of Managementand Technology

Bocconi University

by Letizia Mencarini @

The direct and indirectcosts of raising childrencan impact the decisionto become a parentin advanced economies.In Germany, a studyshows that higher-income parents were lesssatisfied

Parental satisfactioncanvaryCHILDREN

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THE PAPERDoes income moderate the satisfaction of becoming aparent? In Germany it does and depends on education byMarco LeMoglie, LetiziaMencarini and Chiara Rapallini

In developed countries having a child is usuallya conscious decision. While in the past,especially in agricultural societies, having a

child could carry net economic benefits due tothe low cost of care and the child’s earlycontribution as an additional worker, in post-industrial societies the cost of having children ishigh and children remain financially dependent.Economic transfers are always made towards thechild, while the benefits she or he represents forparents are usually only sentimental. So do thepeople who have more economic resources havea larger number of children? The relation is notso clear. Alongside the direct costs of having achild, there are also indirect costs, i.e. theopportunity costs of lost earnings and stuntedcareers for parents, especially for mothers. Theoverall income effect (the overall wealth effect isharder to measure) on the propensity to have achild is positive, if direct costs prevail, orconversely negative, if the indirect costs ofbecoming a parent are comparatively higher. Thedebate is both theoretical and empirical.According to the theory of the seconddemographic transition (Lesthaeghe and Van deKaa, 1986), in developed countries the familyhas become less central in a shift to focus onpersonal fulfillment, so individuals with highereducation and income levels want smaller or nofamilies. In Becker's theoretical approachaccording to the so-called new home economics(Becker, 1981), the increase in women’s (andmen’s) incomes can be ambiguous: it increases

disposable income but also the opportunity cost ofhaving children. The empirical evidence isunclear, too. On a macro level, given that alldeveloped countries are characterized by lowfertility rates below replacement level, thesubstitution effect would seem to prevail.However this does not seem to be the case inmore advanced countries among developedcountries, such as Scandinavia, where instead thepositive income effect offsets the negativesubstitution effect. For this group of countries,the positive relationship also holds at theindividual level, that is, women with higherincomes tend to have greater fertility. But inGermany the relationship seems to stay negative.In a recent study, we analyzed the trajectories ofindividual wellbeing of German parents beforeand after a child’s birth, using income as amoderation factor. Although at different levels(more significant for fathers than for mothers),after the birth of the first child, the level ofwellbeing is much lower than before conception,this negative effect is significant only for very highincomes. The effect is higher in the case of richand educated parents. For less educated parents,the negative effects of having a child are not onlysmaller, but do not vary with income levels. Thebirth of a child is certainly a dramatic event in thelife of individuals involving material andemotional changes, which can be satisfying due toour innate sense of altruism and continuation ofthe human species, but very often also carriespsychological costs, such as dissatisfaction withthe ensuing life of the couple. All this should bereflected in a level of individual wellbeing thatstays constant across levels of income andeducation. And financial costs should be moreburdensome for the less affluent parents anyway.The fact that the opposite seems to be true can beexplained by the fact that the wealthier and moreeducated parents have sources of individualsatisfaction linked to other life domains, forexample their careers, so that having a child is onaverage less important for their personalfulfillment. Moreover, at least in the early years ofthe child, balancing work and family life is reallydifficult, particularly in a country like Germanywhere the welfare state hasn’t been particularlygenerous with parents until recently. This cannotbut increase the opportunity costs of having achild, especially for mothers. �

LETIZIA MENCARINIAssociate Professor

Population Dynamicsand Economics

Bocconi University

711-2/20

with incomeandeducation

THE BOOKItalian society is undergoingmany rapidchanges, but the demographic question isnot at the center of political debate. InGenitori cercasi (Ube, 2018, in Italian, 160pages, 16 euro),Mencarini and Vignoli takea close look at Italy’s lowpopulation growth.

People can be skeptical when they discoverthat rules of international law protectcultural sites and objects in times of war. If

these rules did any good, why were Palmyra,Nimrud and Timbuktu devastated? What aboutthe widespread pillage of antiquities incontemporary war zones?Evaluating the effectiveness of international lawon the protection of cultural property in armedconflict requires an appreciation of the mediumin which we are working and the tools at ourdisposal. Law can only do so much to restrainconduct. No rules will ever stop those whosemalice, greed, ideology or arrogance breedscontempt for the very idea of law. There arepenal codes the world over, but twisted peoplestill do twisted things. The same goes for the lawsprotecting cultural property during wars. Lawalso depends on ability in order to be effective.The best rules and will in the world are uselesswithout the human and material resources toback them up.Manpower, training, and administrative andtechnical systems all cost money, call forexpertise, and cannot be mobilized overnight.Some state and non-state parties to armedconflicts simply lack the wherewithal to carry outtheir legal obligations, at least insofar aspreventing the looting of large numbers of

archaeological sites by the local populace ororganized criminals. The good news, however, isthat the great majority of states and even non-state armed groups place a premium on theinternational law for the protection of culturalproperty in armed conflict.Moreover, this law promotes and createsmechanisms for international cooperation andassistance, including capacity-building, tofacilitate its implementation. Nor are the rulesjust about restraining the bad guys. They alsooblige the good guys to take all feasibleprecautions in armed conflict to keep culturalproperty out of harm’s way or to cushion theblow. Transporting to safety the contents ofmuseums at risk and insulating artistic andarchitectural treasures with sandbags andscaffolding, as envisaged by international law,have saved countless cultural sites and objects inwar, from Leonardo’s Last Supper to ancientmosaics and manuscripts in Syria, Iraq and Mali.Additionally, where international law cannotprevent damage, it can at least punish andcompel reparation. Deliberate destruction andtheft of cultural property in armed conflict arewar crimes that are triable in both internationaland national courts, as leading German Nazis,political and military figures from across theformer Yugoslavia, and Islamic extremists in the

by Roger O’Keefe @

International laws protect cultural sitesand objects in times of war. But placeslike Palmyra and Nimrud still getdevastated. What is lacking areeconomic resources and the necessaryskills to make people respect the rules

Cultural patrimony laws can a

ROGER O’KEEFEFull Professor

Department of LegalStudies

Bocconi University

HERITAGE

72721-2/20

Sahel have all found to their cost. The same actsalso constitute international legal wrongs forwhich responsible states, from Italy to Ethiopia,have been obliged by treaties of peace orinternational tribunals to compensate or, wherepossible, to accord restitution by handing back aplundered cultural object.In the end, the rules of international law for theprotection of cultural property in armed conflictare not perfect, just as no human institution isperfect. They do no more than they can. Butwhat they can achieve and do achieve is morethan people may think. �

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chieve much

THE BOOKThe Protection of Cultural Propertyin Armed Conflict by RogerO’Keefe(CambridgeUniversity Press). A detailedlook at the evolution of art protection rules,sorting through the often overlappingprovisions at a timewhen the topic is ofincreasing interest to the academicworldandbeyond.

Not including micro-firms, in 2017 theapproximately 150,000 Italian enterpriseswith a turnover of €50 million and less than

250 employees reported a growth in revenues andemployment that recovered significantly comparedto previous years. This long-awaited recovery hasnow seemed to slow down again, raising substantialconcerns. Figures, for example, for the first half of2018 show the growth in the birth rate of new firmsfell sharply, dropping from +8.2% in 2017 to+1.3% in the first six months of the last year. Onthe qualitative front, the first nine months of 2018showed a drop in the number of registrations in theItalian Register of innovative SMEs. So fewer smalland medium firms and a lesser number ofinnovative SMEs? That would be a big problem,especially considering that the SME-innovationcombination is the common denominator of Italy’sbest-performing SMEs in EU markets, according toa recent ranking released by the Financial Times.There is a lot of Made in Italy in this ranking (onefifth of the 1000 companies in the ranking wereItalian), lots of entrepreneurship and, as we weresaying, lots of innovation. In most cases thisinnovation comes in the form of the mostinteresting but also the most complex ingredientadded to the business recipe, especially in the SME

segment: digital transformation. The benefits ofdigitization have been widely demonstrated by now:more efficient management of production,operations and collaborations; stronger growth ininternational markets; and innovation of supply andbusiness models. SMEs, however, still experiencesignificant difficulties in reaping the advantages ofdigital technology. This is a problem that has deepand well-known roots, starting from intrinsic limitsto the resources, skills and functional rolesavailable for managing digital transformation. Addto this several factors such as organizational inertiaand resistance to change, along with a lack of trustand reluctance to invest in digital technologies,given an unclear perception of potential returns.Without forgetting the role played by the industrialdistrict or manufacturing sector, in particular whenconditions are lacking for a transformation “en

by Gianluca Salviotti @

The digital transformation of Italy’sSMEs is a work in progress. We needto reorient policy away fromsubsidizing technology purchasestowards a networked model

SME digitization calls for a

GIANLUCA SALVIOTTICo-ordinatorDEVO Lab

SDA BocconiSchool of Management

TECHNOLOGIES

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masse” of all the companies operating in the sameindustry: lack of inter-company cooperation, lackof support from leading firms, or lack ofinternational development. Central and local publicinstitutions have tried to develop policiessupporting digitization to overcome the problems

that characterize this segment of firms. Mostinitiatives have concentrated on supportinginvestments in technology and infrastructure (e.g.hardware, software, networks), mainly through taxincentives or subsidized loans, and occasionally onIT training support. Although these policies havebeen effective in driving the first phase of the digitaltransition, essentially confined to technologicalinfrastructure, the results have so far been limited.If the digitalization of SMEs to date is still anunfinished work, it is necessary to rethink policy byabandoning the traditional logic based onsubsidizing technology purchases, to pursue anetworked digitization model oriented towards thedigital transformation of shared economic relationsand processes. As shown by the results of a researchprogram launched by the SDA Bocconi School ofManagement as early as 2016, policies should focuson the design and dissemination of technologicalplatforms for whole districts and sectors, eithergoverned by public agencies or developed by newforms of private entrepreneurship, in order toenable SMEs to interact more effectively andefficiently with customers, suppliers and partners,by improving industrial collaboration, jobspecialization, information sharing, and speed ofmarket response.�

district-based approach

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THE BOOKCompanies must change their wayof doing business, it’s no longer enough“just” to have good products. They also needto imagine how they are used.Trasformazione digitale (Egea, 2017, 208pages, in Italian, €28) explains how thebusiness impacts of digitisation are stilldeveloping, even after 20 years.

E-commerce isnow a must

Until as recently as a few oyears ago, the digitalworld was still perceived by Italian SMEs as athreat. Todaymost of Italy’smidsize firms tend to

consider it an opportunity, and evenmore, an obligatorystep. In this transformation, the role of e-commerceprofessionals who know how to drive the development offamily companies inmanufacturing and elsewhere (i.e.most of Italian small andmedium firms) has becomeincreasingly strategic.This is why theBrandonGroup, which helps small andmedium-sized Italian andEuropean companies sell onlinethrough their platform, has recently chosen to strengthenits executive teamby appointing Ilaria Tiezzi as its newCEO.A young executive who has already demonstratedthat she is capable of combining business developmentwith themanagement of innovation processes,Ms Tiezzi isa class of 2004Bocconi graduate inArts andCultureManagement, where she also taught as a lecturer. Tiezzi’smission at Brandon is to further internationalize theplatform, expand its geographical reach as well as theproduct categoriesmanaged, and diversify the range ofplatforms throughwhich it sells its customers’products.➜You worked in the past for Mediaset and SkyItalia, but also for emerging startups.What isthe most obvious difference betweeninnovating in a large corporation and doing itin a small firm?In large companies, themost significant advantageis having senior figures who, even in the face ofnovel events, can contribute useful experiencesand take on a leading role. However, decision-making is often slowed down by the hierarchyand a resistance to change that can derive fromestablished practices which havewell served thecompany in the past. Conversely, in start-ups,the need to quickly seize the opportunities

connected to change is felt more urgently and thismakesinnovation immediatelymore efficient. I believe that theideal size in this historical juncture is the scale-up, like theone I findmyself managing today, because we are not ahuge company, but we have a criticalmass of resources thatenables taking onmore risk in investment compared to atraditional startup.➜What propensity for digitization do SMEs have inItaly today?I have personally witnessed how companies are lessdistrusting about e-commerce now, and indeedmany havenow realized that it is an inevitable step. Until a few yearsago, growth rates of physical retail channels were stillsignificant and this permitted companies to postpone thedecision. But today the economic crisis and the rapidchange in consumer habitsmake online sales theindispensable channel.Moreover, over time a greaterunderstanding of themanagement complexity raised by e-commerce has emerged and, consequently, fewer and fewerpeople think they can go it alone. Valid products alwaysfind away to reach online shoppers, and companies knowthis well; it is better therefore to put oneself in the positionof activelymanaging the flow rather than being a passiverecipient.➜What is the space for further e-commerce growthfor SMEs?There are still hugemargins, if we think that about 90%ofItalian companies are SMEs and that only 2 years ago nomore than 6%of themwere active in online sales. Thepotential of the internationalmarket forMade in Italycompanies, in particular, is extraordinary. At Brandon, forexample, 75%of the customer base is Italian, but if we lookat the outletmarkets, only 35%of sales are in Italy, the restgoes abroad.➜Which of the technologies related to e-commercedo you think is the most strategic to implementtoday?Themost significant investment for us right now is thecreation of a data lake and the analysis of BigData. Sincewe sell on dozens of platforms and in different countries ofthe world, every daywe collect an enormous amount ofvarious data on categories, products, themost sought afterbrands. So we garner a unique knowledge of themarketthat wewant to transfer to our customers.Moreover, ourknowledge of themarket is all themore strategic as it offersus the opportunity to observe sales trends well inadvance. In Italy, for example, the orders of typicalChristmas products aremade inApril.We aretherefore investing to increasingly refine ourforecasting capabilities and develop a distinctiveskill to help our customers select the products withthe greatest sales potential and develop ad hoccommercial strategies for online sales platformsand by country. Our goal is to be increasingly astrategic partner, able to direct production and,last but not least, to optimize return on salesthrough increasingly sophisticateddynamic pricing.�

by Emanuele Elli @

Bocconi alumna Ilaria Tiezzi,CEOof Brandon Group, saysItalian SMEs still have huge

margins for e-commerce

ILARIA TIEZZIFrom Tuscany, age 37,Ilaria graduated from

Bocconi in 2004 at CLEACCnot only with honors butas one of the top 100graduates of her class.

With such a strongstarting point, Ilaria was

snapped up by topcompanies includingMediaset, The Boston

Consulting Group and SkyItalia. “At that point Ibecame fascinated byditigal technology and Idecided to accept the

professional challenge ofjoining V-Nova, a Britishstartup. At the time itwas unknown, but it

ended up becoming theleader in video

compression technology.”Now back in Italy after

the birth of her first child,Ilaria Tiezzi joined theboard of directors atCellularline during its

market listing, and fromOctober 2018 has beenthe CEO of Brandon

Group.

TECHNOLOGIES

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What does history teach us? Those of us whostudy the past for a living, and that includeseconomic historians, have asked themselves

this question at least once in their lives. Historystudents are likely to have done the same. "History islife’s teacher," Cicero famously said in theDe Oratore.Almost two millennia later, philosopher GeorgeSantayana expressed an equally favorable judgment onhistory: "Those who do not remember the past arecondemned to repeat it.” Summing up these positions,we could answer the question by saying that knowinghistory helps avoid repeating mistakes already made byothers; in a certain sense, it provides us with a surplusof human experience compared to what we directlyaccumulate in the course of our lives.However, it is inevitable, faced with the sad spectaclethat human societies often provide, to ask if knowinghistory really enables us to avoid past mistakes (andhorrors). Are Cicero and Santayana too optimistic,perhaps? Is it instead possible that we do not learnmuch from the past, or at least not enough to avoidfalling over and over again into the same traps?There are professional historians who argue, betweenthe serious and the facetious, that, technically, we learnnothing from history (at least in the performative senseof guiding and orienting human behavior).I am personally convinced that the lesson of history isactually useful to avoid some mistakes, or at leastmitigate their consequences. But this is not why I tellmy students to study history, including relatively remoteperiods, whose practical usefulness for the present iseven less obvious. In fact, from my point of view, theutility of history is to put events, even those unfoldingbefore our eyes, in a different and more complexperspective. The historical perspective only in rarecases shows us the right or the wrong thing to do. Muchmore often, it helps us to understand what is actuallyhappening, or has just happened, and the real nature of

the options thatwe are facing.To clarify, take theexample of China’semergence in the globaleconomy, a macro-historicalphenomenon before our very eyesand which is likely to have majorconsequences for future globalarrangements. Let's limit ourselves to oneaspect: China’s level of development relative tothe West. In terms of per capita income, China isstill markedly behind the most advanced OECDeconomies, but it is catching up quickly. The situationwas different in the past, five or six centuries ago, whenChina had comparable per capita income and livingstandards, as well as levels of knowledge, with respectto the most advanced areas of Western Europe. Allscholars are basically in agreement on this point.There is no agreement, however, about the timing ofoccurrence of the so-called Great Divergence, whichput Western Europe ahead of East Asia, which is to sayChina. For some, divergence in growth patterns startedaround year 1500, at the time of the opening of the newAtlantic trading routes. For others, it is a much laterprocess, starting with the Industrial Revolution (so after1750).In what sense are these two different views of thehistorical process relevant to the way we look at theemergence of today's China? Those who believe thatdivergence began in a more remote past tend to see thecurrent historical dynamics as exceptional andunprecedented, thus also worrisome and threatening,i.e. the rise of China corresponding to the West’s

GUIDO ALFANIFull Professor

Economic HistoryDepartment of Socialand Political Sciences

Bocconi University

HISTORY

78781-2/20

Stuto

by Guido Alfani @Stories by Claudio Todesco @

dying thepastocomprehend

thepresentThe study of history helps usunderstand how economies

and societies evolved and providesa rationale to assess current politicaldebates and paths of development

HISTORY

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decline. On the other hand, those who believe thateconomic divergence between the two regions is a morerecent trend, since it’s a consequence of the IndustrialRevolution (and of Europe's temporary ability tocontrol, through its own colonies, the resources of amuch larger part of the world), interpret China’s rapidgrowth as simply the return to the multi-millennialpattern of substantial balance between East andWest. Ittherefore gives a much more reassuring interpretation.Although today the first interpretation is prevalent, thepoint that I would like to emphasize here is thatembracing one or the other position allows you toproduce a very different narrative, which is thenexpendable in current intellectual, and especiallypolitical, debates. We should thus be aware thathistorical narratives are never neutral, but reflectprecise convictions and, frequently, overt or covertaims; it is thus essential to be capable of criticallyanalyzing the news and information that bombard usdaily, and for this historiography is indispensable.I will provide a second example, also linked to the issueof long-term divergence between regions of the world: inthis case, between Northern and Southern Europe.Sometimes, I ask this question in class: why is theEuropean Central Bank located in Frankfurt?Obviously, one could provide an excellent answer basedon the political-diplomatic dynamics that formally ledto this choice, perhaps adding some considerations onEuropean geopolitics in the late Twentieth century.However, our perspective on the issue changes if webroaden our view a little. If the European Central Bankhad been established in 1300 instead of 1998, it wouldhave almost certainly been headquartered in Florence.If it had arisen in 1600, it is very likely it would havebeen located in Genoa. What happened in themeantime? Many things, of course, but one of these wasthat Italy, the veritable core of the European economy inthe Middle Ages and at the beginning of the modernage, slowly slipped towards the periphery of theContinent while the center of the European economymoved north. Therefore, certain choices made today arethe direct result of historical processes that begancenturies ago. It is not always pleasant to be aware ofhistorical dynamics: nobody likes to be on theperiphery! But it certainly helps us understand thenature of the economic problems Italy is facing.�

GIUSEPPE BERTA The evolution ofentrepreneurship from Ford to Apple“The concept of entrepreneurship is overly broad, andtherefore ambiguous. History can help us to better understandits characteristics and functions.” Giuseppe Berta, AssociateProfessor of Contemporary History, traces the evolution of theentrepreneur in “L’enigma dell’imprenditore (e il destinodell’impresa),” a book published by Il Mulino in 2018.“Entrepreneurship is a function of culture,” he says. “Duringthe Industrial Revolution, which took place in England in thesecond half of the 18th century, the category of entrepreneurdid not even exist. Entrepreneur is a word borrowed fromFrench. According to classical economics, from Adam Smithonwards, there was no entrepreneur. There was the personwho employed people and who was therefore defined by hisrole: the employer.”The entrepreneur, as we know him or her today, was born incontinental Europe. They undertake to organize and assumerisks. They use their creative intelligence to improve acompany’s business.This idea, less objective and more subjective, has provensuccessful. In “The Theory of Economic Development,” JosephSchumpeter turned the creative function of the entrepreneurinto the engine of economic growth. The entrepreneuranticipates times to come and recognizes unexpressed needs.“In the 20th century, the man who best embodied these virtueswas Henry Ford. Today, this man is Steve Jobs. He was not an

inventor, he was the Schumpeterianentrepreneur who envisioned the future. Hewas the turning point between the culture

of enterprise and innovation in the 20thand in the 21st century. He had anunmistakable aesthetic and established

that what is beautiful is good and viceversa. Today, we swing between the

idea of great entrepreneurssuch as Elon Musk, MarkZuckerberg or Jeff Bezosand the daily dimensionof entrepreneurship.”Entrepreneur is still anambiguous word: onlyhistory can give it ameaning.THE BOOK

The history of the NinteteenthCentury, historians, sources, andevalutaion of sources: Storia by Giovanni DeLuna and Chiara Colombini (Egea, 2017, inItalian, 144 pages, €10.90) looks at howhistory is narrated and how it is used inpublic debate.

GIUSEPPE BERTASenior ProfessorDepartment of Socialand PoliticalSciencesBocconi University

MARISTELLA BOTTICINIFull ProfessorDepartment

of EconomicsBocconi University

ANDREA COLLIHead

of Departmentof Social

and PoliticalSciences

Bocconi University

811-2/20

History can help us to assess the impact of cultural andreligious norms on demographic and economic patterns. In“Child Care and Human Development: Insights from JewishHistory in Central and Eastern Europe, 1500–1930,”Maristella Botticini (Department of Economics at BocconiUniversity, Innocenzo Gasparini Institute for EconomicResearch), Zvi Eckstein (Interdisciplinary Center IDC, Israel)and Anat Vaturi (Hebrew University of Jerusalem) study thecase of the Jews in Central and EasternEurope in pre-modern and moderntimes.The total population in the area grewat the annual rate of 0.43% from1500 to 1930. The Jewish populationgrowth rate was almost 1.4%. In1500, Jews were only0.13% of the totalpopulation in the vastgeographical area of Polandand Lithuania. By 1880,just prior to the greatwaves of immigrationin Europe and to the

US, they were over 15%. The authors surveyed primary andsecondary sources and documented that child care practicesrooted in Biblical and Talmudic rules account for the lowerinfant and child mortality among Jews. This, in turn,explains about 70% of the difference between Jewish andnon-Jewish population growth. Some of these rulesemphasized the importance of breastfeeding the newbornchild immediately after birth, they recommended longerbreastfeeding duration and the use of one source of breastmilk. The use of mechanical contraception was permittedduring lactation to preserve the mother’s ability to nurse.Other rulings concerned diet, personal hygiene of motherand newborn, support from the wife’s family.“Many centuries later, the recent medical research hasshown that these rules and practices actually improve thehealth and survival of infants and children. They enhancecognitive and non-cognitive skills and account for the lowerinfant and child mortality among Jews,” Maristella Botticinisays. “Two thousand years ago, Judaism enforced education

in a world of almost universal illiteracy,” she says. “It alsocaused lower infant and child mortality rates,contributing to Jewish economic prosperity andintellectual achievements in Eastern and Central Europein the early modern and modern times.”

To understand an organization, it is not enough to analyzeits current state. It is necessary to study its evolution overtime. History, says Andrea Colli, Head of the Departmentof Social and Political Sciences, can help us to betterunderstand the present, not to predict the future. “Historyis not a series of events that happened in the past,” hesays. “It is not the answer to the question of ‘whathappened.’ It is a tool that retraces events andrelationships to help us understand present-dayphenomena, their strength, their weakness.”For example, managers and entrepreneurs are notnecessarily aware of the road they have traveled. Writinga company history is a way to show them the route theytook. “History is this act of looking back,” he says. This isthe logic Colli applied is a case study of Edizione, theholding company established in 1981 to diversify theBenetton family’s investments. Today, Edizione operatesin many areas, from transport infrastructure to food andbeverage. Its concessions contracts in the public sector

yield steady returns and investments.It did not happen in a day, nor wasthe success of the holding companythe result of planning. It happenedat the end of a long process oflearning and adaptation. Resourcesand knowledge have beenaccumulated over time. “Historyteaches us that the Benetton family

have learned to create amanagement team separate

from the ownership,” hesays. “They have appointedhigh-level managers tokey positions and curbedthe temptation to meddlein decision-making.”

MARISTELLA BOTTICINI Religion and demographic growth: insights from Jewish history

ANDREA COLLI Mapping the Benetton family’s learning curve at Edizione

THE PAPERIn Child Care and Human Development: Insights fromJewish History in Central and Eastern Europe. Botticini andco-authors assess religion on development of Jewish population.

HISTORY

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The study of history requires scholars to analyze primarysources. Misinterpretations may occur when researchersdo not take the context of events into account. One couldotherwise jump to wrong conclusions, likefor example that a transfer of sharesoccurred during the late RomanRepublic, around 50 BC. The claimis based on the alleged existenceof trading in ‘shares’ of societatespublicanorum, corporationsthat offered public servicessuch as road constructionand tax collection.Geoffrey Poitras(Simon FraserUniversity) andManuela Geranio(Department ofFinance, Bocconi)demonstrated

that this claim can not be supported in their paper “Tradingof shares in the Societates Publicanorum?,” published inExplorations in Economic History. “Tax collectionorganizations in late Roman Republic were nothing likemodern public limited companies,” Manuela Geranio says.“The equites, that is the knights who could aspire tobecome members of the societates, were a minority of thepopulation and could be held personally responsible for thecompany’s liabilities. The societates had no legalpersonality. All members needed to agree with theappointment of new sub-members and in any case theseappointments did not constitute a sale of shares.” Themodern stock exchange requires that shares be associatedwith risks and returns, that they be freely transferable, thatthere be a speculative goal: none of these assumptions wastrue in Roman times. Transfer of goods, currencies, andgovernment bonds precede the transfer of shares thatwould occur only the 17th century. “It is necessary to carryout careful analysis of the historical, legal and institutionalcontext before offering appealing, but debatableinterpretations,” Manuela Geranio says.

MANUELA GERANIO Debunking the myth that stock markets were born in Ancient Rome

The Scottish Parliament building in Holyrood, Edinburgh,has won nine major international architectural awards. It isconsidered to be a masterful piece of architecture, but alsoa dismal economic failure. Inauguration was set for 2000,but it only finally opened its doors in 2004. Costs increasedfrom a budget of £40 million to a final cost of £431 million.“Everything that could have gone wrong, went wrong,”Beatrice Manzoni says. Along with Leonardo Caporarello,she uses the Holyrood story both as a case study in SDA andBocconi classes and as an online management simulationdesigned by the SDA Bocconi Learning Lab.“The clients started off on the wrong foot,” she says. “Theyasked for a sensational project that was also cheap anddelivered quickly – it was an unrealistic goal. Thearchitectural competition was held with no sharedevaluation system. There was no real project executionplan and risk assessment policy. Also, the tendering andconstruction procedures were not compatible with areasonable timetable.”Team dynamics caused further trouble. Four differentproject managers were appointed. The starchitectdemanded to take part in the decision-making process, butfailed to attend meetings. Cultural differences among teammembers, who were partly Scottish and partly Spanish,

created tensions. As if that was not enough, both thearchitect Enric Miralles and the political project leader,Prime Minister Donald Dewar, died in the year 2000.“This is a textbook case of bad project and teammanagement. When managing a complex multi-actorproject, it is essential to oversee both its ‘hard’ and ‘soft’

components. It is fundamental to establish a cleartimetable, costs and objectives, design an

effective decision-making process, plan everystep and review risks. It is also important toappoint a project manager with bothtechnical skills and relationship abilities.Architects who want the spotlight should be

carefully managed. When it comes to complexprojects, genius is collective.”

BEATRICE MANZONI Studying past economic failures to learn lessons for success

THE PAPERTrading of shares in the Societates Publicanorum? byManuela Geranio debunks an assumption that Romans during the lateRepublic traded shares on a precursor to today’s stock market.

MANUELA GERANIOResearcherDepartmentof Finance

Bocconi University

BEATRICE MANZONISDA Associate

Professorof Practice,

SDA Bocconi Schoolof Management

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Achieving a successful business modelwith culture has always been a challengethroughout history, and Bertelsmann, the

media corporation which acquired the Ricordi recordcompany in 1994, entrusted Pierluigi Ledda with thetask of managing the Ricordi Historical Archive.A Bocconi class of 2010 graduate in Economics andManagement of Arts and Culture (CLEACC), Ledda washired just whenRicordi was turning its vast collection ofprivate documents, including librettos, composers’ letters,music scores, photographs, sketches of opera sets and

costumes into a historical archive officially acknowledgedby the ItalianMinistry of Culture.“Ever sincemy university years, I have wanted to work inthe record industry or inmusical events management,” hesays. “Bocconi taught me to look at the complexity ofsituations, observing problems frommultiple points ofview. I found this approach, which falls somewherebetween the holistic and the pragmatic, extremely usefulwhen it came to reorganizing the Ricordi HistoricalArchive according to a logic of financial sustainability.”The collection, hosted by Brera’s Braidense National

ELISABETTA MERLO Investing in corporate heritage can create competitive benefitsIn an age when entrepreneurs are oftendescribed as innovators and disrupters, a projectby Elisabetta Merlo and Mario Perugini(Department of Social and Political Sciences)highlights the importance of corporate heritage.This is the unique and inimitable legacy thatevery company receives from its past.It can be promoted by opening archives to thepublic or through museums, foundations, jubileevolumes, or campaigns that revive old productsand brands, such as for example Fiat 500. Theproject is being carried out with the AUB Observatory onItalian Family Companies (AIDAF, UniCredit and Bocconi).It led to the construction of a data set on corporateheritage investments of 862 Italian firms with a turnoverof at least €50 million in 2000-2016. As Mario Peruginiexplains, “One of our many goals is to understand thedrivers of investment in corporate heritage, in relation tothe ownership and governance.” Researchers askedthemselves whether family businesses are more likely toinvest in corporate history, as the qualitative literaturesuggests. “According to preliminary results, the investmentin corporate heritage is a lever used more by externalmanagers than by members of the founding family,”Elisabetta Merlo says. Company performance isanother unexpected aspect: leverage of history isused most frequently by firms with dismaleconomic results in the previous five-yearperiod. In other words, the investmentin corporate heritage is not a luxurythat only wealthy familybusinesses can afford. It is atool used to recovercompetitive margins.“This projectintroduces the

new idea of defining and using an index of therelationship between investment in corporatehistory and other variables includingownership, governance, the type ofbusiness, whether B2B or B2C,economic performance, Italian orforeign ownership,” ProfessorMerlo adds.

ELISABETTA MERLOAssociate Professor

Departmentof Social and

Political SciencesBocconi University

Pierluigi Ledda, Bocconi alumnus andManaging Director of theRicordi Historical Archive, was charged with turning a vast

collection into an easy-to-use digital platform. Here is how he did it

Ricordiand itsmusic

Thevalueofmemory

by Ilaria De Bartolomeis @

COVERSTORY

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MARA SQUICCIARINIAssistant Professor

Departmentof Economics

Bocconi University

GUIDO TABELLINIFull ProfessorDepartmentof Economics

Bocconi University

During the Second Industrial Revolution (1870-1914), astechnology became skill-intensive and human capitalbecame crucial for industrial development, the Frenchgovernment decided to introduce technical education inprimary schools. During the same time period, theCatholic Church promoted an anti-scientificand conservative agenda, and opposed theadoption of the technological curriculum.This is not the setting of a historicalnovel, but the premise of “Devotion andDevelopment: Religiosity, Education,and Economic Progress in 19th-CenturyFrance,” a paper by Mara Squicciarini,Assistant Professor at the Departmentof Economics. The paper won theYoung Italian Economist Award2018 for the best studypresented by an under-35scholar at the annual meeting

of the Società Italiana degli Economisti (SIE, the ItalianEconomists Society). Mara Squicciarini used data collectedfrom primary and secondary sources to perform ananalysis at the French department level. She compareddata on industrialization and schooling collected by theFrench government with seven indicators of religiosity atthe local level, the main being the percentage of priestswho confirmed loyalty to the Catholic Church.“Before choosing whether to accept or reject the oath ofallegiance to the Civil Constitution, the clergymen neededthe approval of the local community,” she says. “It wassort of a referendum. We can use it as a measure ofreligiosity, together with data on church attendance orthe number of readers of the Catholic newspaper parexcellence, La Croix.”Professor Squicciarini showed that the more religiousdistricts had lower economic development not before, butafter 1870. The more religious areas saw a slowerintroduction of the technical curriculum. “This storyteaches us that not only the quantity of human capital -school enrollment rates - is important, but above all it isthe curriculum that really matters. The intensity ofcultural factors, such as religion, is crucial. Religion is notalways a barrier to economic growth, but it can slow itdown.”

Baghdad during the Islamic golden age, Florence in theRenaissance period, early 20th century Vienna, and morerecently, the San Francisco Bay Area are all examples ofclusters of creativity and innovation. Guido Tabellini(Department of Economics) and Michel Serafinelliinvestigated the determinants of these agglomerations.In “Creativity over Time and Space,” they matchedhistorical data on institutions and populationsof European cities with over 5,000 residentswith data on 21,906 notable individuals indifferent creative endeavors (arts,humanities, science, business) who were bornin Europe between the 11th and the 19thcentury (source: Freebase.com and Wikipedia).“Given that talent is evenly distributedthroughout time and space, the presence ofa large number of creative peopleshows an environment that ismore likely to captureinnovation and creativity,”Tabellini says. The authorsmatched the number offamous people born in a cityand the number of famousimmigrants (per 1,000inhabitants) with a

historical data set on local institutions. They showed thatbirths of creative people and famous immigrants arespatially more concentrated than population. It means thatthese talented people were not born necessarily in bigcities. Moreover, creative clusters exist in many disciplines.In addition, births and immigration display persistence:cities that are at the height of creativity in one centuryretain an advantage in the following century.Finally, surprisingly enough, “local prosperity, measuredby population and wage growth, does not play a crucial rolein the formation of hubs of creative talent. It is the otherway round: becoming a creative cluster contributes toeconomic growth. The effect of local political institutionsaccount for the agglomeration of creative people. Theemergence of autonomous cities that protected economicand political freedoms and that also had forms ofrepresentative democracy, albeit limited, facilitated theattraction and production of creative and innovativetalent,” he says.

MARA SQUICCIARINI Religion and educational impact on 19th-Century French economy

GUIDO TABELLINI From Baghdad to San Francisco: good government draws talent

THE PAPERThe impact of religion on economic growth is the focus ofDevotion and Development: Religiosity, Education, and Economic Progress in19th-Century France, by Mara Squicciarini

THE PAPERWhy is creativity often concentrated in one place at acertain time? Michel Serafinelli and Guido Tabellini find out inCreativity over Time and Space

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Library inMilan, is one of themost extraordinary privatecollections relating to the great opera composers, inparticular Giuseppe Verdi andGiacomo Puccini."It is an incredible heritage that includes lettersexchanged betweenmusic publishers andmusicians,copyright registers, which Ricordi first introduced in Italy,as well as contracts stipulated for the staging of operas.What emerges from these documents are exceptionalexamples of cultural enterprise management, well beforeany theorization of the subject: the staging of operas, interms of technical sophistication, was not very far fromtoday's movie productions.”Ledda oversaw the digitization of the Ricordi archive oneasy-to-use platforms, so as to make its contentsaccessible to the greatest number of users from every partof the world. “Our aim is to offer researchers andmusicologists a unique source of knowledge in the world:the history of themusic publisher Ricordi and itscomposers.”The archive is also available to the general public,although reaching this target is a real challenge. “To winit, we have developed a hybrid formula that weaves digitaland real-life elements.The exhibits can caputre attention because the originalphysical documents can spark strong feelings; we cancomplete this type of experience through onlineconsultation and the use of interactive software: digitaland physical can coexist because they serve differentfunctions." FromVerdi to Puccini, through Luigi Nonoand Lucio Battisti, the history of the Ricordi label ismarked bymusic giants."Today there are nomoremass phenomena in popularmusic, like Led Zeppelin in 1970s, but we are facing anunprecedented wealth of genres. Contemporary popmusicis able to speak to the general public while experimentingat the same time; I’m thinking of artists like KanyeWestand FrankOcean, who have been capable of innovatingwhile retaining pop’s accessibility, by flirting with theworlds of fashion and art.” �

PIERLUIGI LEDDAAn Alumnus

Bocconi, nowManaging Director

of the HistoricArchive at RicordiTAMAS VONYO Revising reasons for

Germany’s postwar economic boomWhen the German military forces surrendered in May 1945,bridges over the Rhine were destroyed, the transport system hadstopped and cities lay in ruins. Yet West Germany subsequentlyenjoyed rapid economic growth that most contemporaryobservers ascribed to the liberal reforms of 1948 and to theMarshall Plan.Quantitative economic history has since revised this view. “TheEconomic Consequences of the War: West Germany’s GrowthMiracle after 1945” (Cambridge University Press, 2018) summedup a decade of research by Tamás Vonyó, Assistant Professor atthe Department of Social and Political Sciences.“West Germany did not start again from scratch,” he says.“Manufacturing industry survived the war remarkably intact andsaw its productive capacity expand.” Millions of ethnic Germanrefugees expelled from Central and Eastern Europe after 1945enhanced the labor force despite horrendous war casualties. TheWest German economy was more richly endowed with bothphysical and human capital than ever before. Low productivity,not inadequate resources, was responsible for modest industrialoutput in the post-war years.Professor Vonyó collected detailed industry statistics and censusdata to show how geographic dislocation and structuralimbalances owing to spatial variation in strategic bombing andthe post-war division of Germany can explain this low-productivity paradox. The elimination of these bottlenecks, inturn, fueled post-war recovery.Macroeconomic policy mattered surprisingly little. “The state’sbiggest contribution to the economic miracle was the rebuildingof the urban housing stock and the resettling of refugees.Marshall aid was equally insignificant in Germany and theinvestments it financed were allocated to declining industries,”Professor Vonyó notes. “The German miracle is a fine example for

why quantifying history matters, as itcan radically alter views based on

contemporary observation.”

TAMAS VONYOAssociate Professor

Department of Socialand Political Sciences

Bocconi University

THE BOOKIn “The Economic Consequencesof the War,” Tamás Vonyó finds newreasons for Germany’s post war economicgrowth. Rather than economic reforms orthe Marshall Plan, Germany’s success camefrom a largely intact industrial base andincreased workforce from ethnic Germansexpelled from Central Europe after 1945.

Firm generated content can

Social media marketing spending by American com-panies hit a staggering $13.7 billion in 2017. Yet,in a recent survey of chief marketing officers

(CMOs) conducted by Duke University, only one in sixCMOs agreed that social media marketing has aquantitatively proven impact on business performan-ce.The disconnect between social media marketingexpenditures and their perceived effectiveness isalarming. Thus, it becomes imperative to investigatehow and under which conditions social mediamarketing can lead to better performance.While this can be addressed by analyzing the effecton sales, a more long-term oriented approach is toinvestigate how social media affects customermetrics that eventually translate into profitability.One key challenge is that consumers mostly usesocial media to connect to each other, making it yetunclear whether active marketing through this mediahelps or hurts customer metrics.In a study with Ashish Kumar and Peter O’Connor,we address these issues by studying how firm

generated content (FGC) and user generated content(UGC) affect brand awareness, consideration,purchase intention, and customer satisfaction.For this research, we used a sample of 19 US brandsand analyzed their daily social media engagement onFacebook over a two-year span. We collected dailyvolume, valence and richness (e.g. image, video) ofsocial media buzz associated with the brand. Thevolume of buzz is given by the total amount of userand firm generated conversations around the brandand is relatively straightforward to measure.For example, brands can directly fetch the number oflikes, comments, shares and overall impressionsfrom Facebook Insights.However, measuring the valence of social mediaposts is more challenging. Given the vast amount ofsocial media data, brand managers cannot read everysingle comment, post and re-share.A more pragmatic approach, which we employ andrecommend, is to use machine learning algorithmsthat allow us to automatically and systematicallyextract the tonality and other features of posts from a

by Anatoli Colicev @

ANATOLI COLICEVAssistant Professor

Department of MarketingBocconi University

SOCIAL MEDIA MARKETING

86861-2/20

Firm generated social media content can create future income. But only if it’s not too positive,

THE PAPERModeling the relationship between firm and usergenerated content and the stages of the marketing funnelby Anatoli Colicev, Ashish Kumar, Peter O'Connor.

have impact if tone is rightvast amount of textual data.We then related social media measures to consumermetrics collected from a 5 million panel of customersfrom YouGov group, a marketing research companyspecialized in survey data.Using the estimates from our model, we find that usergenerated content has a strong relationship withbrand awareness. In other words, due to highervirality and reach, user generated content is the mosteffective way of spreading brand identifiers andincreasing awareness.We also find that firm generated content is moreeffective in driving consideration and purchaseintent. Thus, firm generated content seems to be

effective in driving future profitability. However, it’snot that simple. Indeed, in order for firm generatedcontent to be effective, it should not have a strongpositive tone. Why? A positive tone can be perceivedas being overly commercial and pushy. It implies thatone of the hallmarks of marketing communications intraditional settings - adopting positive language -may not be effective in the social media context.So, what should firms do? They should use a moreobjective, neutral tone in their social media postsand try to employ more videos and images.Importantly, we also find that brands with goodcorporate reputation have more leverage in terms ofhow they use social media.These findings echo the paradigm that being anethically responsible business provides a wide rangeof positive externalities.We find that even positive language in firm generatedcontent is not detrimental to brand perceptions forbrands with a higher corporate reputation.Thus, keeping the house in order seems to be anoverall effective strategy in the digital age. �

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researchers say. Use neutral language. What counts the most is who you really are

The profound transformations produced inless than a century since the start ofglobalization transcend national

boundaries and regulatory mechanisms in amanner that goes far beyond a more intenseconnection between states, redefining thegeography of social relations and requiringnew categories of analysis and intervention inthe field of health governance and healthpolicies.The planetary scale of current environmental,social and economic problems that aredramatically reflected in health indicatorsrequire public health policies that take intoaccount the global and cross-sector nature ofdetermining factors.Global health studies differ from the moretraditional international public health studiesthat deal with initiatives negotiated and agreedin the context of relations between nationalstates.

by Eduardo Missoni @

Aglobalized world calls for amultidisplinary approach that unitesdoctors, managers and policymakersto deal with global health issues

GlobalizationrequiresaglobalPOLICY

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commercial strategies that only a jointtransnational action of all sectors of societycan effectively counteract.In this sense, the Framework Convention forTobacco Control, which came into force in2005, constitutes an important referencemodel for other industries.The easy spread of epidemics, the impact onhealth and access to healthcare in relation tofree trade agreements, the health of migrants,the consequences of an uncontrolledcirculation of medical information on socialnetworks, are other examples of importantissues in global health.To make the goal of “healthy lives and well-being for all, at all ages,” written into theWHO mission statement on sustainabledevelopment, become real and not rhetorical,we need a major paradigm shift.Human health and the global ecosystem mustbe placed at the center of political, social andeconomic actions taken at global, national andlocal levels, ensuring there are appropriateinteractions and alliances betweenstakeholders, so that “no one is left behind.”And thus doctors, managers and policy makersinterested in healthcare, irrespective of thefield they work in, should arm themselves withthe skills and knowledge of globalhealthcare.�

They also differ sharply from purely cosmeticoperations such re-labeling so-called tropicalmedicine - the various health activities carriedout in the context of internationaldevelopment and aid programs - as a globalhealth endeavor.The global health approach instead looks athealth in its broadest sense, not only as thephysical and mental condition of an individual,but in its correlation with social well-being.It is a necessarily interdisciplinary approachthat addresses health issues in a transnationaland global, planetary dimension, where thesocial, environmental, economic and politicaldeterminants intersect with increasingcomplexity, inevitably interacting with nationaland local systems.To give just a few examples, think of thetransformation of ecosystems caused byclimate change, where despite the evidence ofenvironmental risks for health, commitmentsundertaken at a global level still delay thenecessary policies and investments to reducetheir impact, with consequent inexorablegrowth in the social and economic costs ofmaladies due to pollution and global warming.The increase in the proportion of chronicdiseases is also significantly affected byconsumption of ultra-processed foods,promoted by aggressive production and

EDUARDOMISSONIAcademic FellowDepartment

of Social and PoliticalSciences

Bocconi University

891-2/20

approachtohealthproblems

To protect public health we need everyone's cooperation. Here's what Bocconi alumniDadari and Capello ask of stakeholders in order to meet this challenge

Whatcompaniesandotherscando

Achieving the global health targets of theSustainable Development Goals (SDGs) by2030 will require significant inputs and

innovative approaches. Public and privatecompanies and institutions can play an importantrole in achieving global health targets includingthe unfinished business of the MDGs, non-communicable diseases (NCDs) and universalhealth coverage (UHC). Institutions andcompanies should advance and promote specialfocus on research and innovation geared atpreventing or managing targeted diseases, such asrapid screening techniques for early detection ofNCDs, new or heat-stable vaccines for emerginginfectious diseases and even NCDs, etc.Companies can also fund global health projects inthe form of corporate social responsibility (CSR),which should prioritize equity-focusedinterventions, considering universal access is a keyfocus of the 2030 global health agenda.Communities and development agencies should beable to tap into these available funds. Companiescan also serve as voices of global health.

Companies should support governments indesigning and implementing public healthpolicies that address health determinants,

so that people have the information and themeans to stay healthy.They have the duty toprotect people's right to health, especiallythose who are most vulnerable, such as women,migrants, children and people with disabilities,whose right to health is often unprotected oreven violated by current governments.Companies must protect the right to accessgoods and health services and the citizens' rightto know how to be healthy and stay healthy,how to access a healthy diet and exercise,have access to vaccines and other preventivemeasures, sexual education in schools, etc.Sustainable development goals can be achievedonly if companies enter into partnerships withcitizens, civil society, non-governmentalorganizations and the state in support ofpeople's right to health.

POLICY

90901-2/20

THE BOOKGlobalHealthGovernanceandPolicy (Routledge),byMissoni,PacileoandTediositraces the foundationsofglobalhealthbyexploring therelationshipbetweenglobaliztionand its social,economicandenvironmentaleffects.

IBRAHIMDADARIFrom vaccines to screening techniques

CECILIA CAPELLOInformation and access to services

THE BOOKInSalute circolare (Egea,2019,128pages, in Italian,15euro),IlariaCapuadiscusses theneedtoreturn toaviewofmedicinewherebyhumanbeingsarepartofanaturalbalance.Rich inanecdotes, thebookspoints to therole thatBigDatacanplay.

IBRAHIM DADARIMaternal & Child Health

Specialist, United NationsChildren’s Funds, PacificOffice-Solomon Islands

(MIHMEP alumnus,SDA Bocconi

School of Management)

CECILIA CAPELLOHealth Advisor

at Enfantsdu Monde

(MIHMEP alumna,SDA Bocconi

Schoolof Management)

RISK MANAGEMENT

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Buildingbetter tools

The financial crisis is behind us, butthe world arguably holds more risksthan ever for investors, policy makersand managers. Here is a look at thelatest developments in the art andscience of risk management

Risk is thewater inwhich investorsusually swim.Theirjob is tomakedecisions, tochooseoneactionoveranother.Todo this, theymustcarefullyweighall the

options: theycanbegoodorbadat it, but this ishowthegamemustbeplayed. InSeptember2008, the financial firmLehmanBrotherswentbankrupt, settingoff the financial crisisthathadaknock-oneffect across theglobe in the followingmonths,destroying largeamountsof capital, countless jobsand turninga riskysituation intoanuncertainone.Investors suddenly found themselveswithno ideaofwhatwasgoing tohappennext. Itwas impossible toweigh theprobabilityof eachof thepossible scenariosandchoiceshad to

bemadebasedonvery littledata.What'sworse is thatnooneevenknewwhat thepossible scenarioswere: the futurehadturned intoanunknowablespecterofunforeseencontingencies.Theproblemwasno longerdearold risk: investorswerenowfacedwithanunusualanddisturbinguncertainty.Theirreactionwasessentially to freeze.Paralysis is the typicalresponsepeopleandmarketshave touncertainty: it is theresult of reasonableprudence in the faceofanincomprehensible situation.Asoftenhappens,however, thisreactionmade thingsevenworse.ThebankruptcyofLehmanBrothers reveals someof the fundamental characteristicsofuncertainty.Whenasituation isuncertain, it isdifficult todiscernwhich futurescenariosaremost likely. Insomecases itis evendifficult to imaginewhichscenariosarepossibleandwhicharepure fantasy.This stateof thingsoften translates intothe inability tomakedecisionsor takeaction.Manyof today’seventsprovoke thesamereaction,becauseuncertainty isnoweverywhereagain (oftenevokedwith thegeneric term"risk"which includeswhatwerefer tohereasriskanduncertainty).Climatechange, forexample, is themost important formofenvironmentaluncertainty.Humanityhasalwaysbeenexposed to the riskofabnormal, if not catastrophic,meteorological events: shepherdshave to face the riskof

by Massimo Marinacci @

931-2/20

MASSIMOMARINACCIAXA-BocconiChair in RiskDepartment

of Decision SciencesBocconi University

s tounderstand risk

drought, farmers face the riskof floods, sailors face the riskofstormsandgenerals face the riskof snow.Eachof thesepeoplehasexpectationsabout the likelihoodof sucheventshappening, and for this reasonuses theclues theyhaveavailable todecidewhether to run the riskor takeprecautionstoprotect themselves.Imagine, for example, anareaof theworldwhereshepherdsknowfromexperience thataperiodofdroughtoccursmoreorlessevery tenyears.Theydon'tknowif itwill hitnext yearor infiveyears.Butbasedon theseexpectations, theycanestimatehowmanyprovisions to set aside tobeprepared, or theycancreateanemergencygardenwhensignsshowthatadrought ison theway.However, thingsgoverydifferentlywithclimatechange.Theshepherds'problemisno longeraboutwhen thedroughtwillarrive.Nowtheirproblemis that theexpectationsandcluestheyhavealways trustedno longerwork.Therecouldbe fiveyearsofdrought, or their once-green regioncould turn intoadesert forever.According to the IntergovernmentalPanelonClimateChange(IPCC), over thenextcentury, theglobal temperaturecouldincreasebetweena few tenthsof adegreeand fivedegrees (inthebest andworst scenarios, respectively).Thepossibletrajectoriesof globalwarmingbetween these twoextremestranslate intodifferent local scenarios in the regionofourshepherds.What is themost likely?For shepherds it isdifficult toguess.Theoutcomedependsonunpredictableagentswho influencetheclimateall over theworld: states, companies, communities,individuals, etc.Fromtheexamplesgivenabove,wecouldconclude thatuncertainty isacurse thatproducesonlybewildermentandparalysis.

But there isalwaysanotherangle.Uncertainty rewardsintelligenceandentrepreneurship.Thosewhoknowhowtobetterprocess theavailable informationand thosewhoaremore inclined to take riskscanbenefit greatly.Talentandmerit shine inconditionsofuncertainty.Uncertainty iswhatmakes life interestingandnotbanal.Butwemustnever forget that it is alsoasourceof inequality: agamewithwinnersand losers, inwhich fate,more thanmerit,canplayadecisive role (even thebestplayers losewithbadcards).Uncertainty isa fundamental characteristicofhumansociety,whichshapes it anddifferentiates it fromthenaturalworld.While theparticles that composematterpassivelyobeynatural, deterministicorprobabilistic laws, the individualsandgroups thatmakeupasocietyareactiveagents: theirbehavior isguidedby their interestsandchangesaccording totheir ideasandexpectations.Theeconomy is thusdifferentfromphysics.Forexample, inorder tobeeffective, aneconomicpolicyactionmust take intoconsiderationhowpeoplewill changetheir consumptionandsavingdecisionsaccording to theirinterestsandexpectations.Forexample, a reduction inincome tax thatcausesan increase inpublicdebtcan result inan increase insavings, andnotconsumption, if peopleexpecttaxeswill then rise tocover the largerdebt.Compulsoryandcoercivemeasurescanworkonlyup toacertainpoint, even in totalitariansystems, if theyarenotaccompaniedby incentives that align themwithpeople’sinterests.In short, riskanduncertaintyarewhatmakehumansocietysomethingspecial anddifferent fromthe rest of thenaturalworld.�

MASSIMO AMATOAssociate ProfessorDepartment of Socialand Political SciencesBocconi University

RISK MANAGEMENT

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Uncertainty is the only certainty there is, the readers of JohnMaynardKeynes’ “The General Theory of Employment, Interest andMoney” musthave thought in 1936. We need to dust off this idea in the context offinancial markets, saysMassimo Amato, researcher in EconomicHistory.“According to Keynes, economists struggle to accept the existence ofincalculable risks,” he says. “This is what Keynes called ‘fundamentaluncertainty.’ The rationale of financial markets, by contrast, is theircapacity for standardization of risk by the quantification ofasset prices.” This is not antiquated economics. Twomainstream scholars have recently addressed the issueof the opacity in financial markets. “Olivier Blanchardsaid that, due to the unpredictability of the markets, anew crisis is highly possible. Paul Romer wrote that inthe last thirty years macroeconomics has notprogressed, it has actually gone backwards. A Nobelprize-winner, Romer said that the implicitassumptions of econometrics do notprovide reliable indicators of theeconomic cycle.”Massimo Amato therefore points out

the need to restore a greater sense of prudence. “The idea that we canprice every risk leads us to take any risk. This argument does not take intoaccount the systemic risks that, once revealed, throw calculations offcourse.” A new crisis will have unforeseen and unmanageable effects.According to Amato, it is a good idea to adopt financial models not basedexclusively on price risk considerations. They should take into account theexistence of events we are not aware of.“As Keynes said, the only thing we know is that there are things we willnever know,” he says. “ We should be aware of this, in the name ofmarket efficiency.”

MASSIMOAMATO Investorsmust beware of risk of believing they can calculate risk

THE BOOKFromOne Precariousness to Another:The Ideological Role of Financial Calculationin theOutbreak and Perpetuation of theCrisis - Preliminary Considerations Based onChapter 12 of theGeneral Theory” is thechapter by Amato in “The CrisisConundrum,” edited byMauroMagatti(PalgraveMacmillan, 2017).

A lack of risk culture among top management is no longer a majorproblem at listed firms. Yet a gap still separates awareness andpractices. “Risk management is one thing, risk governance is another,”says Sergio Beretta, Professor of Planning and Control Systems.“Risk management devises specific measures to deal with risks. At topmanagement level, however, there must be a risk managementstrategy providing skills and resources to the organization. According tothe most recent studies of large firms, there is still a huge gap betweenthe awareness of risk and the work done to set up an integrated riskmanagement system.” Current corporate governance codes featurechapters on risk management that are too generic and oversimplified.Professor Beretta pinpoints two major problems. “First, there is nocomprehensive definition of all contexts of risk exposure. Threedifferent contexts must be taken into account: those in which we have areasonable knowledge of both the chance of occurrence and theexpected impact of known risks; those in which we know the existenceof risks, but we do not know their impact; those in which we are notaware of the risk exposure. The so-called ‘black swans’ belong to thelatter category. They are unexpected and yet have catastrophic effects.The guidelines do not mention these contexts or the way to deal withthem.” The second problem is risk appetite: the quantification of theamount of risk that a firm is willing to take. In order to spreadawareness on risk appetite, it has been defined in a very generic waythat is of little help in implementing it at the operational level. “Wemust rethink risk governance,” Professor Beretta concludes. “Today, itis inadequate to deal with all the risks inherent in businesses.”

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SERGIO BERETTAWays to bullet-proofyour company’s riskmanagement

THE BOOKIssues of riskmanagement and riskgovernance, and the differences betweenthem, are the focus of the chapter“Directors’ Duties and RiskGovernance” bySergio Beretta, in the volume edited by P.Linsley et al called “Multiple Perspectives inRisk and RiskManagement” (Springer,2019).

SERGIO BERETTAFull ProfessorDepartment of AccountingBocconi University

1-2/20

EMANUELE BORGONOVOFull ProfessorDepartment of DecisionSciencesBocconi University

MARIANOMAX CROCEFull Professor

Department of FinanceBocconi University

RISK MANAGEMENT

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On January 28, 1986, the space shuttle Challenger exploded 73seconds after take-off at the Kennedy Space Center, Florida. B. JohnGarrick was one of the experts that contributed to the official accidentreport.His recommendations influenced NASA’s decision to adopt a moreinformed approach to risk analysis.Five years before that, B. John Garrick worked with Stanley Kaplan tolay the foundations for risk analysis for nuclear power plants. Theirarticle “On the Quantitative Definition of Risk,” which appeared in thefirst issue of Risk Analysis, is a milestone in risk-informed decisionmaking. According to Kaplan and Garrick, risk analysis consists of ananswer to three questions: what can happen? How likely is that it willhappen? If it does happen, what are the consequences?In a recent article, Emanuele Borgonovo,, Veronica Cappelli,,Fabio Maccheroni and Massimo Marinacci establish a formallink between risk analysis and decision theory, that is, the study of thereasoning underlying a choice during a decision-making processinvolving incomplete information.“Risk analysis helps us to understand what will happen in the future

A global economy is exposed to the spread of turbulence from onemarket to another. One might think that this kind of pass-through mainlyworks in one direction: from bigger countries to smallercountries. Max Mariano Croce,, RiccardoColacito,, Yang Liu and Ivan Shaliastovichfound that it is usually the other way round: shocksare more easily transmitted from smaller countriesto bigger countries.Focusing on the international propagation of outputvolatility shocks to consumption, equity prices, andcurrencies, the authors compared a volatility indexthat takes into account the difference

and what we can do today to mitigate the risks. Decision analysis ismainly about modeling issues of decision making,” EmanueleBorgonovo says. “Until now, they were separated. We show that forevery risk analysis there is a corresponding model of decision theory.In doing so, we provide risk analysis with access to the toolbox thatdecision theory has developed so far. At the same time, we providedecision theory with broader scope and new stimuli.”There are many areas of applicability.“Any decision-maker who wants to solve a complex problem, be it therenovation of a chemical plant, space missions programming orprotection against cyber attacks, can use this joint methodology tomitigate risks and identify optimal risk management options,” he says.

EMANUELE BORGONOVO Combining risk analysis and decision theory for complex problems

MARIANO MAX CROCE Nobody is safe because financial shocks spread quickly and often in unexpected directions

THE PAPERRisk Analysis and Decision Theory: a Bridge, by EmanueleBorgonovo, Veronica Cappelli, Fabio Maccheroni and MassimoMarinacci.

VALENTINA BOSETTIFull ProfessorDepartmentof EconomicsBocconi University

971-2/20

When faced with ambiguity, the elites who develop responses toclimate change do not act rationally. Like many of us, they areambiguity adverse. Behavioral traits and preferences of climatepolicymakers are the focus of a field experiment run by ValentinaBosetti and Loïc Berger during COP 21, the Paris Climate ChangeConference in 2015.Negotiators, researchers, journalists and representatives of the privatesector from 52 countries were asked to chose from urns containing redand black balls. Each urn described a different type of uncertainty: thenumber of red and black balls was known or unknown or randomlydetermined.Participants facing pairs of urns were asked to pick one of two, with apayoff for a correct bet. The ambiguity derived not only from theuncertainty about the occurrence of random events, but also from thelack of information. This is the typical situation in which climatepolicymakers are called upon to make decisions based on experts’conflicting evaluations. “We ran a similar experiment on universitystudents at the Bocconi Experimental Laboratory in the SocialSciences,” Valentina Bosetti says. Policymakers behaved just like

between actual and estimated GDP with macroeconomic data from 1971to 2013 for 17 major industrialized countries. These were divided intoG7 countries (Canada, France, Germany , Japan, Italy, United Kingdom,United States) and other G17 countries (Australia, Belgium, Denmark,

Norway, New Zealand, the Netherlands, Portugal, Spain, Sweden,Switzerland). “The average consumption pass-through is 50%, meaningthat a 1% increase in output volatility in country A increases consumptionvolatility in country B by 0.5%,” Professor Croce says. The average pass-through rises to 70% for shocks originating in small countries. How doesit happen? “Trading financial derivatives helps smaller countries toincrease their export-to-output ratio. The local output volatility shockspills over to the other country,” he says.Due to financial integration, the effect is even greater on stock markets:the equity volatility pass-through is 90%. “We also found that thevolatility of consumption differentials and the volatility of exchange ratesare disconnected,” he says.

students, proving to be consistently ambiguity adverse:they preferred situations where the probabilitieswere known to situations where they wereunknown.“Their preferences were not due to an irrationalbehavior or to the inability to perform probabilitycomputations, but to intrinsic preferences in the

face of unknown probabilities. Ourexperiment is the first step in

understanding the ambiguityaversion of social planners.”

EMANUELE BORGONOVO Combining risk analysis and decision theory for complex problems VALENTINA BOSETTI When faced with ambiguity, policy-makers act like everyone else

MARIANO MAX CROCE Nobody is safe because financial shocks spread quickly and often in unexpected directions

THE PAPERAre Policymakers Ambiguity Averse? by Loïc Berger andValentina Bosetti.

THE PAPERVolatility Risk Pass-Through by Riccardo Colacito, Yang Liu,Mariano Max Croce, Ivan Shaliastovich.

RISK MANAGEMENT

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International trade is associated with peace and prosperity, but itcomes with a hidden risk: it facilitates conflict under certaincircumstances. Kerim Can Kavakli, Assistant Professor at theDepartment of Social and Political Sciences, came to this conclusionusing a detailed commodity-level trade database from 1962 to 2000.“Political scientists have not previously used this database in thisstrand of research,” he notes. Professor Kavakli and his co-author, J.Tyson Chatagnier, looked at every country’s export portfolio fornearly 1,300 commodites. For each pair of trade partners theymeasured how much they compete in international markets. “Wefound out that countries that sell similar goods to the global marketare more likely to fight with each other,” he says. “In this case, thechance of engaging in some kind of conflict goes up from 10% to25%.” It happens regardless of government, political culture, balanceof power, geographical proximity, economic development level, orbilateral trading ties. Moreover, Professors Kavakli and Chatagnierfound that the effect is even stronger for manufactured goods thanraw materials (e.g. agriculture and mining). They think that the effectis mostly driven by domestic special interest groups. These lobbies

influence their nation’s political elites and use foreignpolicy to gain an economic advantage in theinternational market. They reap the benefits ofmilitary competition and offload the cost ontheir country. Is this a cautionary tale about thedangers of globalization? “Literature has shownthe pacifying effects of commerce upon pairs of

states. The conventional wisdom says that theeconomic integration of China is making it more

peaceful. Our paper shows that it mayincrease the risk of conflict withcountries that sell similar goodsto the global market.”

KERIM CAN KAVAKLI Trade can createconflict as well as prosperity

The paradigm in business risk assessment is radically shifting fromdeterministic models to richer and more complex probabilistic models.“This is an epochal change,” says Alessandro Nova, professor ofCorporate Finance. In April 2019, he and Maurizio Poli presented aprobabilistic assessment model for business plans at #MINE, theknowledge sharing event of SDA Bocconi School of Management. Themodel is based on a dataset of 60,000 companies over 6 years. It canverify the degree of reliability of the assumptions underlying a businessplan and the degree of risk faced by lenders through the Monte Carlosimulation, which enables estimations of unknown parameters by usingstochastic variables.

ALESSANDRO NOVA An epocal change in risk modelling provides useful tool for SMEs and private equity funds to gauge business models

THE PAPERFrom Economic Competition to Military Combat: ExportSimilarity and International Conflict by Kerim Can Kavakli andJ. Tyson Chatagnier

KERIM CAN KAVAKLIAssistant Professor

Department of Social and Political SciencesBocconi University

The spread of antimicrobial resistance in hospitals can be limited bysanitation methods that remodulate the hospital microbiota, leadingto lower antimicrobial consumption and costs, according to a paperpublished in “Infection and Drug Resistance” co-authored by twoBocconi University scholars (for the part related to costs) withUniversity of Ferrara and colleagues from University of Udine. Anexperiment in five Italian hospitals using the Probiotic CleaningHygiene System (PCHS), a trademarked probiotic-based sanitationmethod, coordinated by the CIAS research centre of the University ofFerrara led to a 52% decrease in healthcare associated infections, a60.3% reduction in associated drug consumption and a 75.4%decrease in the related costs. “The results suggest that theintroduction of probiotic based sanitation methods can beconsidered as a useful component of infection preventionstrategies,” says Bocconi University’s Rosanna Tarricone, co-author of the study. “Money savings are only a part of the story, asHAIs affect 3.2 million people.” The new sanitation system wasassociated with a mean 83% decrease of the detected pathogens onhospital surfaces and a significant reduction (70-99.9%) ofantimicrobial resistant genes. In the case of Staphylococcus aureus,

the isolates from the post-intervention phasewere 63.9-93.5% less resistant to antibiotics,depending on the antibiotic type, and thoseresistant to three or more antibioticsdecreased by 72.4%. The number of

healthcare-associated infections diminished by52%, as detailed in another co-authored paper

(PLoS ONE 13(7): e0199616), and thecost per HAI episode diminished by

45.6%, translating into theaforementioned 60.3%

reduction in associateddrug consumption.

ROSANNA TARRICONEAssociate Professor

Department of Social and Political SciencesBocconi University

ANDREA RESTIAssociate ProfessorDepartment of Finance Bocconi University

ALESSANDRO NOVAAssociate Professor Department of Finance

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According to data collected by the European Banking Authority, thenon-performing loans to total loans ratio in the EU has fallen since2014 by nearly 3%. However, some countries still report high ratios.What to do? Andrea Resti studied the problem for the EuropeanParliament’s Economic and Monetary Affairs Committee. He haspinpointed four main levers that can be used to drive down non-performing loans (NPL). The first one is the improvement of therecovery process. “Banks often lack specialized skills and ITinfrastructures,” he says. “Additionally, an independent unit shouldoperate the workout of defaulted loans.” The second lever is NPLsales. Italy for example has lowered its NPL ratio from 16.3% to 9.4%.Sales are not without risks when large investment funds look fordouble-digit rates of return and buy at a low price. The differencebetween price and underlying long-term economic value causes awealth transfer from the banking system to outside investors. Thethird lever is the creation of state supported bad banks that can buyNPLs and wait for better times to resell them. The fourth lever is theintroduction of calendar provisioning: lenders must write down NPLsbased on a pre-defined schedule. “Banks are held to a calendar of

increasing devaluations that will leadover the years to total devaluation. This was decided by the EuropeanCentral Bank - stealing, so to speak,the European Parliament’s law-

making role. A similar but morelenient rule was later approved by the

European Parliament itself.Unfortunately, the rule couldact as an incentive to

lenders to sell NPL at aprice below their long-

term economicvalue,” he says.

ANDREA RESTI Four key levers havehelped reduce non performing loans

ROSANNA TARRICONE Hospital infectionrisk reduced by new cleaning methods

“Unlike existing models, it allows us to estimate not only singlevariables, but a perfectly congruent system of variables,” ProfessorNova says. “It allows us to reconstruct the relationships between thedistributions of variables and thedistributions of ‘downstream’variables, through a cascadingprocess.This is an extremely effectivemodel in long-term simulations.Being perfectly congruent, it doesnot just evaluate the reliability of a

business plan, but it is able to identify critical variables.” Theprobabilistic model is a useful tool for small and medium sizedenterprises, which in Italy have a low aptitude for strategic planning,

and even more so for financial investors and private equity fundsinterested in determining the solidity of business hypotheses. “Bankscould use it too,” he says.“The new reporting standard IFRS 9 requires business planassessment. Many banks do not have the necessary know-how to doso. This model will help them to readily verify the reliability ofbusiness plans and to determine the default probability and theanalytical measure of loss in case of default.”

ALESSANDRO NOVA An epocal change in risk modelling provides useful tool for SMEs and private equity funds to gauge business models

THE PAPERImpact of a probiotic-based hospital sanitation onantimicrobial resistance and HAI-associated... by ElisabettaCastelli, Carla Rognoni, Rosanna Tarricone et al.

THE REPORTProvisioning policies for non performing loans: How tobest ensure a ‘clean balance sheet’?, by Andrea Resti

Rankings impact competition across avariety of industries. Be it in the case ofcolleges and universities, restaurants and

hotels, or books and movies, the existence of aranking that evaluates organizations orproducts along a series of parameters restrictsour consideration set and help us make choicesmore easily.But if rankings have the power to change ourbehavior as customers, how do they impact thebehavior of the organizations being ranked?Together with colleagues Saverio DaveFavaron and Rodolphe Durand (HEC Paris), Itackle this question in a recent working paper,where we look at how organizations modifytheir behavior when a new ranking, producedby a prestigious evaluator, is introduced.Our investigation started on May 31, 2016,when Michael Ellis, director of the Michelinguide, announced that the first edition of theWashington DC Michelin Guide would bepublished in the fall of the same year.According to Michelin, the publication of theGuide would “put the city more firmly on theworld stage of great gastronomic destinations.”Press interviews released by prominent chefs,and our own interviews with food critics andrestaurant managers in the weeks that followed

the announcement, substantially confirmedMichelin’s expectations. As the manager of arestaurant in DC commented: “It is asignificant standard for dining and so for DC tobe included for the first time is a big deal.”With the publication of the guide on October13, 2016, Washington DC joined New York,San Francisco and Chicago as the fourth UScity considered by Michelin for its red guide.Of all restaurants in the city, only 106 wereincluded, with 12 of these being awarded stars.In this study, we look at how these hundredrestaurants modified their behavior comparedto similar DC restaurants that, based on theirYelp rating, price point, and cuisine style,could have made it into the guide, but wereultimately not included. We further compareincluded restaurants to similar restaurantslocated in a comparable city where Michelindid not enter (i.e. Boston).Our results show that inclusion in the guidepushed restaurants to enact a series of“ceremonial” changes to their menus, aimed atsignaling the newly acquired position and“prove” they belong to the elite of theindustry.In particular, restaurants increased referencesto sophisticated cooking techniques and

by Giada Di Stefano @

How do commercial dynamics change whenan authoritive reviewer enters the market?A study looking at Michelin Guide and Washington DCrestaurant rankings provides some clues

The three stars that rule eve

GIADA DI STEFANOAssociate Professor

Department ofManagement

and TechnologyBocconi University

MANAGEMENT

1001-2/20

provided longer descriptions of dishes.Restaurants that were not well known in thelocal dining scene further emphasized theorigin of the ingredients used in their dishesand reduced references to the size of portions.Lastly, since both the rated restaurants andtheir customers observed and reacted toMichelin’s arrival, we examine howrestaurants’ reactions changed when, after theentry of Michelin, the profile of customersmaking evaluations or the content ofevaluations themselves shifted.We find that Michelin-included restaurantsfurther emphasized the origin of ingredients if,in the two months following the publication ofthe guide, customers’ reviews became morefocused on food.This last finding is particularly interesting as itsheds light on the existence of an interplaybetween the evaluations provided byprofessional critics and those made byordinary customers. As the number ofindustries not affected by online feedbackcontinues to shrink, and the volume of onlinereviews generated each day continues to grow,organizations find themselves in a positionwhere it is hard to dismiss the opinionscustomers express online as inconsequential. �

1011-2/20

erywhere

Does the diaspora of minds bringbenefits to a country that exportshuman capital? A case study of Indiasuggests it does, since a large portionof skilled people do return home

Braindrainnotnecessarilyby Stefano Breschi @

India is one of the biggest sources of internationalmigration today, with over 15 million Indiansresiding abroad. Indians with degrees in science,

technology and engineering represent a driving forceof the US innovation environment, contributing toaround 6% of all innovations patented in the US and15% of startups founded in Silicon Valley.Considering other countries that are exporters ofskilled human capital, including Italy, the question ofwhether India is benefiting from this diaspora ofminds is an important one.For a long time, the emigration of young graduates wasperceived as a negative phenomenon, the so-called“brain drain.” Only recently has a more positivevision emerged, according to which intellectualmigration can be a vehicle for the transfer ofknowledge, technologies and skills back to thecountry of origin. In this sense, one of the mostimportant channels is certainly the return of skilledpersonnel returning back home. The issue is soimportant that even the Indian Prime Minister,Narendra Modi, on a recent trip to the United States,spoke of Silicon Valley as a repository of Indianbrainpower, waiting for the right time to return to themotherland.Despite the importance of the problem, however, verylittle is known about the extent of the phenomenon,since official statistics do not record migrantsreturning to their countries of origin. For this reason,in a recent study, we looked at the population ofinventors of the 179 largest IT companies listed in the

US for the 1975-2016 period, andanalyzed the curricula of 5,500 Indianinventors. For each individual, we codedthree sets of variables concerning, respectively:educational attainment (Bachelor, Master, PhD)and place (India, United States) and year ofgraduation; career (name and place of employer andperiod of employment); and the age of the inventor.Finally, based on this information, every Indianinventor in a given year was classified based on threepossible conditions: non-migrant, migrant to theUnited States, returning migrant to India.The most intense Indian migratory outflow to the UStook place in the 1990s and 2000s. Moreover, aboutthree quarters of the individuals examined had

STEFANO BRESCHIFull ProfessorDepartment of

Management andTechnology

Bocconi University

MIGRATION

1021021-2/20

aneconomic lossexpatriated to study abroad, i.e.

the year of entry into the UnitedStates coincides with the beginning

of a Master or PhD program, while justover a quarter of Indian inventors migrated

through the labor market. The data show thatreturn rates differ significantly depending onthe reasons behind the choice to move abroad:while one third of migrants in the United Statesfor employment reasons returned to India by2016, the same occurred for only 22% ofmigrants for study reasons. In both cases,

however, the phenomenon appears to be far fromnegligible.A more sophisticated econometric analysis reveals a

further difference between the two types of migrants.The likelihood of returning to India decreases as afunction of time spent in the United States for peoplethat left India to seek employment, a result thatsuggests the increasing difficulty of transferring theskills acquired abroad back to the country of origin astime passes, while the opposite occurs for migrantswho left the country to pursue their studies.To answer the initial question of whether migration ofqualified human capital to the United Statesconstitutes a net economic loss for a country likeIndia, the answer - although cautious and based onstill exploratory analysis - seems to be negative. Anon-negligible proportion of migrants returns to theircountry and, more importantly, the knowledge andskills acquired in the United States have value inIndia’s labor market. The potential for knowledge,innovation, and business relations that these peoplebring with them is significant. This lesson should bekept in mind by a country like Italy, which in 2016alone lost 114,000 people – an estimated 30% ofwhom were university graduates – thus entering theunenviable club of the 10 OECD countries having thehighest emigration rate. �

1031-2/20

THE PAPERReturn Migrants’ Self-Selection: Evidence for IndianInventors by Stefano Breschi, Francesco Lissoni and Ernest Miguelez.

Stereotypes, even if they are distorted like Italy’s clumsy accountant Ugo Fantozzi, area guide to social interatction. A Bocconi study looks at howaccountants are seen today

Do accountants still seemdull? Taking a new lookby Ariela Caglio and Mara Cameran @

Who's that? It is a question that we oftenask ourselves about accountants, aprofessionn depicted by contrasting

images, opinions and perceptions. Italiansremember the hapless Ugo Fantozzi, who embodiedthe bad luck of an average office worker. Hispopularity turned the accountant into comicstereotype.A stereotype can be defined as a collection ofcharacteristics (related to appearance, personality,skills, etc.) that are intended to describe themembers of a group. The simplifications ofstereotypes serve to cope with our limited ability toprocess complex data. Stereotypes bring order intoour social environment, on the one hand byabolishing individual variety and, on the other, bymaking it possible to make inferences towardspeople about whom there is no information.Stereotypes therefore serve as a guide for socialinteraction even when distorted. They are part ofthe collective knowledge of society.Starting from these ideas, we wrote an article withJane Klobas entitled “What Is an Accountant? AnInvestigation of Images,” being published in theEuropean Accounting Review.We investigated the perceptions of different groups,including accountants themselves. The surveyinvolved around 1,800 respondents includingstudents in economic and non-economicdisciplines, newly hired employees and people whohave been working as accountants for no more than2 years.

The questionnaire included questions aboutpersonal and physical characteristics (for example,is an accountant shy, boring, trendy?), on the skillsassociated with the profession (does the job requireIT skills, leadership, ability to solve problems?)and professional results (does an accountant enjoyprestige, earn a lot?). Respondents had to expresstheir agreement or disagreement on each matter.The results highlight three distinct perceptions.The most frequent one (36% of respondents) showsa modern professional, in step with the times andthat, despite the scandals that have repeatedlyaffected the profession, has very high standards ofprofessional integrity. The second (34% of thesample) is similar to the traditional view of theaccountant: boring work, done by physicallyunattractive people, who are however reliable andcapable. Finally, for 30% of respondents,accountants and their profession do not haveparticular positive or negative connotations, withthe sole exception of professionalism, consideredas high by the other groups.The characteristics of the respondents areimportant: the greater the distance from theprofession (like students of non-economicsubjects), the less attractive the perception.On the other hand, perception is very positive forthose who, although not accountants themselves,know them personally. The source that led to theperception is also relevant: those who rely on theinformation they received from the media have aless positive image.Finally, our survey shows that the perception thataccountants have of themselves changes over time.New hires have a very positive image on all fronts,while those with more experience show a sort ofdisillusionment with regard to professionalism.It will be up to new generations to change thisperception through their work, and by investing inkey abilities such as organizational skills,professional diligence and technical knowledge. �

ARIELA CAGLIOAssociate Professor

Department of AccountingBocconi University

MARA CAMERANResearcher

Department of AccountingBocconi University

PROFESSIONS

1041041-2/20

THE PAPERWhat is an Accountant? An Investigation of Imagesby Ariela Caglio and Mara Cameran (Bocconi University), Jane Klobas(Murdoch University, Australia)

In a situation of conflict, communicationbetween the parties is of the utmostimportance, especially when the causes of the

conflict itself involve the absence of preciseinformation. And in this, the figure of themediator can play a key role.In my recent publication in the Journal ofPolitical Economy with Adam Meirowitz(University of Utah), Kristopher W. Ramsay(Princeton University) and Francesco Squintani(Warwick University), entitled “DisputeResolution Institutions and StrategicMilitarization,” we outline our surprising findingson the importance of mediators for theresolution of conflicts and for incentives toarmament (nuclear or non).It is uncertainty, in fact, that can lead to war. Astrong country that is unable to evaluate thestrength of the enemy can well be induced tolaunch an attack if it believes there is a highprobability the enemy is weaker. Maybe it would

by Massimo Morelli @

Uncertainty about an enemy can often lead to war. Mediatorsimprove communication, often reaching a compromise that avoidsthe outbreak of conflicts and even can avoid an arms race

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DDeeppaarrttmmeenntt ooff SSoocciiaallaanndd PPoolliittiiccaall SScciieenncceess

BBooccccoonnii UUnniivveerrssiittyy

WAR

1061061-2/20

International organizations shoulduse mediation as sole tool in conflict

THE PAPERDispute Resolution Institutions and StrategicMilitarization by Adam Meirowitz, Massimo Morelli, Kristopher W.Ramsay, Francesco Squintani.

not attack if it had clearer and more preciseinformation.A weak country, on the other hand, does notwant to reveal itself to be weak: in this case, adirect line of communication in general is of littleuse.The figure of the mediator, from Kissinger toCarter, up to Kofi Annan, serves precisely toincrease the incentives to reveal, at least to themediator, information that can help the mediatorto formulate a peace proposal that constitutes areasonable compromise. The most surprisingresult of our study, however, is that the presenceof institutional mediators can even discourage

countries from pursuing the arms race. This canhappen if mediation is perceived as the mainform of communication in the event of conflict.Mediation has taken hold above all as analternative to arbitration in the judicial sector.But this new information on the disincentiveeffect of mediation on arms buildup should be adecisive stimulus to make the United Nationsorient itself toward this kind of intervention.In an article not yet published with the sameauthors we show that, unlike mediation, mostother common intervention policies lead insteadto exacerbating conflicts. For example, if theUnited Nations were to follow a constant policyof intervention alongside or in support ofminority rebel groups, such groups would havemuch more ex ante incentive to start conflicts. Ifthen the expected help is late in coming, theconflict that has already begun can lead to greatbloodshed. A policy of almost exclusivemediation by international organizations istherefore preferable. �

1071-2/20

International organizations shoulduse mediation as sole tool in conflict

EU

1081081-2/20

Twenty colors

for EUROPE

by Gianmarco Ottaviano @Stories by Andrea Celauro,Davide Ripamonti,Claudio Todescoand Fabio Todesco

What would be the economicimpact of an EU break-up?Average pro-capita incomeswould fall 6.5%, accordingto estimates by GianmarcoOttaviano. But the advantagesof the European Union are morethan “just” economic. We askedtwenty professors and alumnifor their views about whatmakes this kaleidoscope uniqueand how tomake it even better

1091-2/20

TheEuropeanUnion is the child of war andmother ofpeace. It is the product of a revolutionary vision ofinternational relations which has no precedent in

world history: following centuries of conflict andwar, facedwith the ruins ofWorldWar II and later of Communistregimes, a growing number of democracies spontaneouslydecided to breakwith the past. They put the Continent'speace, unity and prosperity ahead of national egotism, byhampering the expansionist aims of stronger countries andrelieving the reflexive distrust felt by smaller ones. Thecornerstone of the European project is the idea that peaceand prosperity go hand in handwith the removal of tradebarriers between countries: peace generates prosperity andprosperitymaintains peace.But is it true that trade defuses conflict? In general, thenature of the relationship between openness ininternational trade andmilitary confrontation is not soclear. The reason is the existence of two countervailingeffects. On the one hand, the probability of military conflictis low among countries that trade a lot among themselvesfor a simple question ofmutual interdependence. On theother hand, countries that are very open to internationaltrade typically havemany trading partners and thisreduces the negative economic consequences of wagingwar on an individual trading partner. In other words,"commercial monogamy" discourages bilateral conflict,while "commercial polygamy"makes it less penalizing.However, the former generates fewer benefits from tradethan the latter.For this reason the EuropeanUnion has institutionalized"commercial polygamy" through a framework in which allmember countries are ready to collectively sanction thenationalist deviations of anymember country.Although in general it is difficult to conclude thatinternational trade acts as an antidote to war, in the specificcase of Europe it is undeniable that the creation of a freetrade area between the countries of theOldWorld hascoincidedwith a prolonged period of peace andunprecedented prosperity.Despite this, a quarter of a century after the creation of theSingleMarket in 1993, we are living in a historicalmomentwhen - given the rise of nationalist forces which favor areturn to national sovereignty - the fragmentation ofEuropeanmarkets along national boundaries is no longer azero-probability scenario.What would be the economic damage from a splintering ofthe EU?Answering this question is not easy, because itdepends on the specific disintegration scenario and thetype of effects that one seeks to highlight: static (onproduction efficiency) or dynamic (on economic growth).Since the dynamic effects aremuch stronger but alsoharder tomeasure, the economic consequences of non-Europe would best be limited to the static effects. Thisapproach enables us to at least calculate aminimum for thecosts resulting from a fragmentation of the EuropeanCommonMarket.This exercise requires the definition of plausible Common

Market breakdown scenarios and the use ofmathematicalmodels to simulate the economic consequences of thevarious scenarios identified.Themost plausible scenario in the event of a breakdown ofthe singlemarket is a return to the situation of the early1980s, in which trade between themember countries of theEuropeanEconomic Community (EEC) was regulated by aregional free trade agreement. From this point of view, thedifference between the EEC (which appeared in embryonicform in 1957) and the EU (started in 1993) is fundamentalwhen it comes to economic integration. Broadly speaking,a free trade agreement eliminates all duties andquantitative restrictions whichwould otherwise hinderinternational trade in goods and services betweenmembercountries.TheEU addsmany other features to being simply a free-trade area. Indeed, the EU is also a customs union, that is,a union wheremember countries, in addition to removingobstacles to the internalmovement of goods and services,also commit themselves to a single trade policy towards therest of the world: not only internal duties are abolished, butexternal duties are the same for everyone. Therefore, noEU country can conduct independent trade negotiationswith non-EU countries.Furthermore, within the EUSingleMarket, free circulationconcerns not only goods and services, but also flows ofcapital and people. These fourfold freemovementstranslate into the four pillars of the SingleMarket that allmember states have pledged to respect under penalty ofexclusion from theUnion.A return to anEECpast wouldmean shifting from a unifiedfreemarket to a free regional trade area. The resultingreduction in per capita income formember countries wouldbe significant, on average about -6.5%across the EU.Before deciding to give in to sovereign temptations andleave the EuropeanUnion, countries should first askthemselves what problems need to be solved andwhetheran exit from the EUwould help solve them. Likewise,countries should also consider the advantages, monetaryand non-monetary, that EUmembership ensures in a worldwhere the economic, social, cultural andmilitary weight ofthe great powers of theOldWorld are declining. Britain’stravails with Brexit are a striking example of what it meansto decide to leave the EuropeanUnionwithout ponderingthese questions first. �

EU

1101101-2/20

THE BOOKGeografiaeconomicadell’EuropasovranistabyGianmarcoOttaviano(Laterza,2019).WhatarethecostsandbenefitsofbeinganEUmember?Whateconomic impactwouldleavingtheEUhave,andwhowouldsuffermost?TheauthorrepsondstotheseandotherquestionsinthissnapshotofEurope.

GIANMARCO OTTAVIANOFull Professor

Department of EconomicsBocconi University

Achilleand Giulia Boroli

Chair in European StudiesThe Chair was

inauagurated on May 6,2019 with a Lectio

Inauguralis in whichGianmarco Ottavianodiscussed Europe’s

economic geography ofnationalism. Karen HelenUlltveit-Moe (University ofOslo) looked at how the

Norwegian modelfunctions as analternative to EUmembership.

CARLO ALTOMONTEAssociate Professor

Departmentof Social

and PoliticalSciences

Bocconi University

1111-2/20

There is no consensus on the origin of the protest vote and the riseof Europe’s far right. Some scholars see the causein financial crisis and wealth inequalities,others point to trends such as immigration andthe globalization of markets. In “CollectiveEmotions and Protest Vote,” CarloAltomonte,, Gloria Gennaro aannddFrancesco Passarelli build a behavioraltheory of protest votes.The key element for them is the increase ofrelative deprivation, a concept takenfrom social psychology. Itmeasures the differencebetween an individual’s

income and the income of richer individuals. “The financial crisisand the globalization of markets may not have changed my incomelevel, but seeing my neighbor getting richer and richer mayincrease my relative deprivation. This fuels my desire to vote foranti-establishment parties that promise change,” Carlo Altomontesays.Parties calling for wealth redistribution are not rewarded, though.The increase in relative deprivation alone cannot explain thephenomenon. According to the Intergroup Emotions Theory,resentment is amplified if the individual identifies with acommunity experiencing the same feeling of relative deprivation.The authors tested their theory using data on 2010 and 2015 UKnational elections, when UKIP support rose from 3.1% to 12.6%.The vote share for the UK Independence Party was significantlylarger in districts where the identification with the community washigher and the relative deprivation with respect to richerindividuals had worsened. “Protest voting is caused by the desire to take revenge againsttraditional parties,” he says. “It has a cost, because it can lead tothe election of politicians that cannot solve problems, or to vote forparties that have a slim chance of winning a seat in parliament.And yet, the psychological benefit of having acted to protect yourcommunity is greater than this cost.”

CARLO ALTOMONTE Explaining the protest vote with a theory of collective emotions

THE PAPERCollective Emotions and Protest Vote by Carlo Altomonte (Bocconi), Gloria Gennaro (Bocconi)and Francesco Passarelli(University of Turin)

MARIO NAVADirector DG FinancialStability, FinancialServices and CapitalMarkets Union,European Commission

GUIDO FARAAuditor,

European Court of Auditors

EU

MARIO NAVAMy life in Brussels: Never a dull day in 25 years of service

My high school final examination, in June 1985,coincided with the European Council being heldat the Sforza Castle in Milano, not far from my

school. That Council laid the foundations for the SingleMarket, which was enacted by the Maastricht Treaty in1992, and became an economic and political reality inthe following two decades.While I was preparing for my diploma examination, Idevoured all the news I could find about what washappening inside the Castle. It was very clear to methat Bocconi, where I was to enroll in September,would help me move from the subtleties of Latin andGreek (wonderful schools of life) to the complexities ofEuropean policymaking. The dream became realityduring my years at Bocconi and during my PhD, whenI decided that applying for a EU competitive exam tojoin Europe’s institutions was the best way to give backto society what I had received in my undergraduateand graduate studies.Twenty-five years have passed since I started workingin Brussels on September 1st, 1994. I have seenEurope go from 12 to 28 states (and now, perhaps,decrease to 27), I have seen 5 presidents of theCommission and countless commissioners take office,and I have changed 9 jobs, while remaining in the field

of economics and finance, where I wasgiven growing levels ofresponsibility. But above all I sawEurope, our home, change andimprove. Calling, traveling,studying, working, buying,investing, paying are just a subsetof the everyday activities that thatwere almost exclusively national in

1994 and have now becomeEuropean, thus creating

incredibleopportunities foreveryone,especially foryoung people.The EuropeanUnion hasensured thelongest periodof peace andthe highestlevel ofprosperityever achievedby this

Continent,guaranteeing its

citizens a lifestyle (limited social inequality, goodwork-life balance, healthy eating habits, care for theenvironment etc.) envied across the world. This is notsomething that can be taken for granted. It is anoutstanding result that must be defended and nurturedevery day.Working for European institutions is incrediblyexciting. In 25 years, never a dull day! Colleaguesoffer a wealth of cultures and contacts unimaginable inany national context, which allows for open andconstructive discussion. There is a common feelingthat pervades everyone's behavior and actions.The paradox is precisely this, that cultural diversitydrives union of intent, because everybody is united inthe pursuit of the public interest. High skills andprofessionalism make the working environmentcompetitive but in a healthy way.I have always believed I was lucky to work in EUinstitutions, but also as a duty towards the rest of thepopulation and towards our children andgrandchildren. To work for the EU, one needs to puttheir hearts into solving problems. Long live and thankyou Europe! �

GUIDO FARA It all started with asummer internship...

It was our university, in 2012, that gave me theopportunity to learn about the world of Europeaninstitutions through a summer internship in

Brussels at the Directorate General for Competition.From that experience, I quickly realized that the jobdid not end with our daily institutional tasks, but

rather was a tangibleexample of collaborationand common commitmentto solve challenges too bigfor individual MemberStates.In my current role asperformance auditor at theEuropean Court ofAuditors, I ask myselfevery day, alongsidecommitted colleagues fromall over the Union, about

how to make EU action more effective and createa apositive impact on citizens and Member States. I am well aware of the need to improve many aspects,but also that I am contributing to the key role that theUnion continues to play in developing a moreprosperous, cohesive and conflict-free Europe. �

FRANCO AMATORISenior Professor Department of Social and Political SciencesBocconi University

1131-2/20

ANDREA ENRIA Our duty is to makethe European dream last over time

Working for Europe is exciting in many ways:you find yourself committed to the frontierof the most important debates in public

policy, in any possible field; it allows you to workwith high-quality peers from all EU countries,providing a formidable contamination of differentcultures; actual and visible results are obtaineddespite the often slow and difficult decision-makingprocess. Active participation in the European

project makes the job exciting.Jean Monnet said thatnothing is possiblewithout men (and women,I would add), nothing islasting without

institutions. Great menand women have workedto achieve the dream of a

united Europe. Today morethan ever we have the

duty to ensurethat thisdream willlast overtime. �

The sociologist and anthropologist Karl Polanyi believed that societywants to protect itself from the Darwinian forces of competition. Hiswords come to mind thinking about the theories on Europeancapitalism developed recently by Franco Amatori.. According to theProfessor of Economic History at Bocconi, European capitalism –taking into account the most significant countries France, Germany,Great Britain, Italy, Spain and Sweden – had four pillars from the mid-19th Century to the mid-20th Century.The first one was the contractual cooperation between companies tocontrol the market. In the US there was strong antitrust legislation toprotect the country from "monster” firms, but it encouraged

concentration in the end. This isthe American paradox.Companies that were notallowed to set prices with rivalstried to beat them throughcompetition. As long as theycould provide good quality andreasonable prices, they weresafe from criticism from theopponents of concentration.The second pillar of Europeancapitalism was the hegemony offamily business, whereas in theUS firms were led by managers

and viewed as commodities that could be bought or sold. The third pillar was the active presence of the State in the economy.And the fourth was a politicized workers’ movement. “In Asia (China and Vietnam) the goal of the political action of workerswas national independence,” he says. “In the US good salaries andindividual wealth expectations (the frontier myth) made workersreluctant to engage in militant actions. In Europe, the workers’movement focused on the idea of using power to change society,whether in reformist or radical mode.”In the second half of the 20th Century, these four pillars weresubmerged by three waves: the process of Americanization; theconstitution of the European Union based on “American” rules;globalization. After the crisis of 2008 the original characteristics re-emerged: theState was once again deemed strategic; the number of antitrust casesincreased dramatically; family businesses dealt more effectively withuncertainty than non-family firms; there was a resurgence of workers’movements.“The four pillars make European capitalism one of a kind,” he says.“They are not ephemeral. Policymakers should be aware of them.”

FRANCO AMATORI How European capitalism is one of a kind

ANDREA ENRIAChair of the European

Central Bank SupervisoryBoard

”Progress is an ideal notion, whereas development is a pragmaticfact. Yet true progress is inconceivable unless the economicfoundations needed to achieve it are created,” Pier Paolo Pasoliniwrote in the essay “Scritti corsari.”This quotation opens a paper by Leonardo Borlini on theEuropean Union’s promotion of human rights through preferentialtrade agreements (PTAs). “The EU is the perfect laboratory forunderstanding the tension between development and progress,”he says. In his paper “The EU’s Promotion of Human Rights andSustainable Development through PTAs as a Tool to InfluenceBusiness Regulation in Third Countries,” Professor Borlinidiscusses the steps that have marked theEU’s action in using trade agreementsand development cooperation topromote the respect of human rights, theenvironment and labour standards.“The Treaty of Lisbon is a milestone,” hesays. “The introduction of Articles 3(5)and 21 TEU, establishes the protectionand promotion of human rights as aforeign policy directive.” However, the inclusion of human rightsclauses in bilateral trade agreementsdates back to the mid-1990s. Thoseclauses define the reciprocal obligationsof the parties, so that human rightsviolations of a certain scale by one ofthem can justify suspension or other counter-measures. Over time, sustainable development obligations and corporatesocial responsibility clauses have been incorporated to theagreements. This latest initiative makes it all the more evident thatthe EU wants to influence business activities beyond its borders bypromoting market regulation in other countries.“Some claim that projecting the EU model worldwide complieswith an ideal of sustainable global development, while othersbelieve that the failure to export its standards would penalizeEuropean firms,” Borlini notes.

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LEONARDO BORLINILinking human rights and trade

When the European Central Bank Single Supervisory Mechanismchief Danièle Nouy’s term was about to expire, the EuropeanParliament’s Economic and Monetary Affairs Committee asked agroup of academics to look back at the first Single SupervisoryMechanism (SSM) term and to identify the challenges facing itsnew head, Italy ’s Andrea Enria, in four reports. The authors of twoof these four reports are Bocconi professors: Andrea Resti andElena Carletti with Brunella Bruno.Professor Resti focuses on three challenges and three possibleimprovements. Low profitability is probably the the worst dangerfacing the banking sector. Andrea Resti proposes alleviating theburden of compliance costs and overlapping requirements. “Banks that protect themselves with heavy armor are safer, butthey move like turtles,” he observed. Shadow banking is another source of concern. It accounts for 40%of the assets held by the EU financial system and it is deeplyinterconnected with banks: an implosion would have dramaticrepercussions.“The key issue, though, is poor governance,” he points out.“Misconduct by managers is not rare. Their power is notcounterbalanced by board members equipped with an adequatetechnical background.”Professor Resti suggests simplifying the regulatory framework andsanctions, and giving the head of the SSM control of budgets andstaffing. The head of the SSM currently relies heavily on staffsupplied by national authorities. This negatively affects theeffectiveness of supervisory action.

BRUNELLA BRUNO, ELENA CARLETTI, ANDREA RESTIIdentifying some new challenges for incoming Single Supervisory Mechanism chief

THE PAPERThe EU’s Promotion of Human Rights and SustainableDevelopment through PTAs As a Tool to Influence BusinessRegulation in Third Countries by Leonardo Borlini

LEONARDO BORLINIAssistant ProfessorDepartmentof Legal StudiesBocconi University

ANDREA RESTIAssociate Professor

Department of FinanceBocconi University

BRUNELLA BRUNOResearcher

Department of FinanceBocconi University

THE PAPER The next SSM term: Supervisory challenges ahead by Andrea Resti, Associate Professor at Department of Finance at Bocconi University

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To overcome this constraint, the ECB has made significant use ofexternal consultants that raise concerns in terms of conflict ofinterest. “Accountability is the third challenge for the SSM,” hesays. “The ECB has been criticized for not making its processesclear enough and supervisory processes uniformly implemented.Tasks, methods and decisions must be transparent.”Elena Carletti and Brunella Bruno agree on the latterrecommendation. If professor Resti sees the glass half empty in thefirst part of his report, they see it half full. In the first term, theSSM has addressed capital inadequacy; it has rebuilt confidence inregulatory capital ratios; has addressed the non performing loansissue; made stress tests an important component of thesupervisory assessment; and has enhanced financial integration. “This is the area in which least has been done,” Professors Carlettiand Bruno say. “We recommend weakening the bank-sovereigndebt nexus in order to avoid the so-called diabolic loop. One wayof doing this is to introduce safe assets and a European depositguarantee scheme.It would be beneficial in encouraging cross-border consolidation.” Other challenges for the head of the SSM highlighted by ProfessorsCarletti and Bruno are the strengthening of transparency andaccountability, and the reduction of costs of banking supervision. “An over-demanding supervision may lead banks to try tocircumvent rules and to become overly risk-averse, thusdampening credit supply,” they caution.

BRUNELLA BRUNO, ELENA CARLETTI, ANDREA RESTIIdentifying some new challenges for incoming Single Supervisory Mechanism chief

GUIDO BICHISAODirector of InstitutionalStrategy Department,

EuropeanInvestment Bank

ELENA CARLETTIFull ProfessorDepartment of FinanceBocconi University

GUIDO BICHISAO Four concepts tosum up a single goal: a better future

After a long experience in finance, institutionalaffairs and banking at the EIB, I believe thatworking for Europe in one of its institutions can

summed up by four concepts. Decision by consensus: thedecision-making system is based on the principle ofchecks and balances. The internal consultation at thedifferent institutions that form Europe, as well as betweenthem, allows them to weigh all sides of an issue beforereaching a decision, even if this requires the search forcompromise. International breadth: in addition to workingand interacting in multilingual and multiculturalenvironments, a European institution interacts with a

multitude of private and public actors. BuildingEurope: the international scope empowers aserious search for adequate solutions to social,economic, development, and innovationproblems which require the understanding ofall relevant aspects contributing to the buildingof a more effective Union. Economic diplomacy:Europe often presents itself as divided ininternational diplomacy. European institutionswork to give more cohesion to Europe’sinternational profile, by balancing thepromotion of our companies exports with the

need to reduce global imbalances that are sources of socialand political tension, and promoting European values andstandards. Working for Europe means imagining the futureand helping to improve it, while knowing that “the futuremeans losing what you have now and see something comeinto being.” (Haruki Murakami) �

THE PAPERThe next SSM term: Supervisory challenges ahead by Brunella Bruno and Elena Carletti, respectively Reseracher and Professor at the Department of Finance at Bocconi University

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The crisis of inclusive liberalism and the surge of right-wing partiesin Europe date back to the 1990s, when economic change drovethe realignment of social groups along new dividing lines. This isthe central thesis of Italo Colantone’s and Piero Stanig’spaper “Alle radici del nazionalismo” that was featured in theJanuary-March 2019 issue of Economia & Management, the magazineof SDA Bocconi School of Management.

The shocks of globalization andautomation played a key role in therise of radical-right parties inWestern Europe.“These changes generated aggregategains, but penalized medium-skilledand less-educated workers,” Professor

Colantone says. “The losers ofglobalization were notadequately compensated.Governments becameincreasingly ineffective atdelivering redistributivepolicies also due to the

liberalization of capital flows that reduced state revenues. Thelosers of globalization no longer felt represented by traditionalmainstream parties and turned to the anti-globalization camp. Thisis a phenomenon mainly triggered by socio-economic concerns,that then are manifested in cultural changes as well.” As a result, the economic nationalist political platform emergedthat is a mix of isolationism, nationalist narrative and economicconservatism. The future, however, is not written in stone. “The promises of economic nationalists are clashing with reality,and maybe mainstream parties will be able to restructure andbecome credible again by effectively addressing the inequalitiesgenerated by economic shocks,” he says.

ITALO COLANTONE Promises of economic nationalists are now clashing with reality

Public procurement is an important part of the European economy,accounting for 15% of its GDP. The directive 2014/24/EUintroduced limits to bidders with records of past anticompetitiveactivity. It also states that public contracts can be awarded on thebasis of many factors, not only price. The directive opened thedoor to the introduction of reputational incentives to improvesupplier performance. In the working paper “Past Performance and ProcurementOutcomes,” Francesco Decarolis, Riccardo Pacini and GiancarloSpagnolo studied the outcome of an experiment run by a largemulti-utility firm in Central Italy. The introduction of a reputationmechanism for suppliers who maintain the power grid had asignificant impact on their performance.“Over the course of a year, after the announcement of the switchfrom price-only to price-and-rating auctions, with a scoring rule

assigning 25% to the reputation index, overall complianceimproved from 25% to 80%, ”Professor Decarolis says. Priceslowered right after the announcement when suppliers competedto win contracts to get scored.After having established a good reputation, though, the priceincreased by 9%. “According to our cost-benefit analysis, the priceincrease appears rather small when compared to the improvement

in performance.” Yet the EU regards reputationalincentives with suspicion, whereasin the US past performance hasplayed a role in public procurementsince the mid-1990s. “Europeanlawmakers fear favoritism andcorruption, and they worry thatthese mechanisms may prevent thecreation of a single market, byfavoring already established localsuppliers who have won in previousbiddings.”

FRANCESCO DECAROLIS Making supplier reputation part of public procurement process

THE PAPERAlle radici del nazionalismo by Italo Colantone and Piero Stanig, both Associate Professors at the Department of Social and PoliticalSciences at Bocconi

THE PAPERPast Performance and Procurement Outcomes by FrancescoDecarolis (Bocconi), Giancarlo Spagnolo (Stockholm School of Economics) and Riccardo Pacini (State-Owned Property Agency)

ITALO COLANTONEAssociate ProfessorDepartment of Social and Political SciencesBocconi University

FRANCESCO DECAROLISAvvocato Giovanni Agnelli

Associate Professor of Economics

Bocconi University

MARIA BIANCHIEconomic Analyst at theEuropean Commission,

Directorate-Generalfor Economic andFinancial Affairs

(DG ECFIN)

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Enlargement is the name of the process whereby new countries join theEuropean Union. It was thought to be irreversible. Then came Brexit. PaolaMarianidevoted her most recent research activity to the United Kingdom’swithdrawal from the Union. In her book “Lasciare l’Unione Europea: riflessionigiuridiche sul recesso nei giorni di Brexit” (Egea 2018), she analyzes the exitthrough the lens of international law and EU law, offering a systematic andoriginal interpretation of Article 50 of the Treaty on European Union.In the first case of interpretation of this same article by the Court of Justice(Andy Wightman MSP and others v Secretary of State for Exiting the EU), theAdvocate General Campos Sánchez-Bordona quoted, among otherinternational academic contributions, the work of professor Mariani insupport of the thesis to allow unilateral revocation of the notification of theintention to withdraw.In her article “Brexit e il sistema di soluzione delle controversie nell’accordo direcesso dall’Unione europea: quale ruolo per la Corte di giustizia?”, ProfessorMariani focuses on the role of the Court of Justice in resolving disputesbetween the UK and the EU during the transitional periodthat will last until 31 December 2020. “British Prime Minister Theresa May’s government putdown some Brexit red lines including the end of thejurisdiction of the European Court of Justice,” she says.“The greater the use of EU rules in relations with the UK,the less the possibility of excluding the Court from thedispute settlement system.”In “The Framework of Future Relations: Trade,” PaolaMariani and Giorgio Sacerdoti explore the future of EU-UK trade relations. The future of trade relation betweenEU and UK has not been written. It will be a compromisebetween the aspirations of the UK to conduct anindependent trade policy and the aspirations of the EU topreserve the unity of its market.

PAOLA MARIANI Post-Brexit UK-EUtrade relations a delicate compromise

In the European Union, companies with foreign CEOs are more likely toengage in cross-border mergers. Why does this happen? And do thesetransactions generate more, or less profits? Antonio Marra and AngelaPettinicchio of BocconiUniversity, with Ron Shalev(Rotman School ofManagement, University ofToronto), raise thesequestions in “Home SweetHome: CEOs Buying Firms intheir Home Countries -Information Asymmetry orHome Bias.”The authors focus on EU firmsto determine whether thecountry in which the CEO wasborn and raised drives thepreference for domestic orcross-border mergers.“Literature on Mergers & Acquisitions shows that these transactions are notalways efficient. Sometimes they are disastrous,” Angela Pettinicchio says.According to data, non-domestically born CEOs are 87% more likely toengage in cross-border acquisitions. The relationship is driven by the CEOs’preference to purchase in their own country of birth. There are twoalternative explanations: the acquiring CEO may have a home bias (a non-rational bent towards the country of birth); or, the preference could stemfrom a superior knowledge of that country that allows him or her to mitigateinformation asymmetries.“The latter seems to be the correct explanation,” she says. “Acquisitions ledby CEOs from the country of the target firm generate abnormal positivereturn in the following days compared to acquisitions led by domesticallyborn CEOs.” The performance is better when the acquisition is led byrecently hired non-domestically born CEOs. They are more equipped tomitigate information asymmetries because they have more up- to-dateinformation and more recent connections in their country of birth. Thisability is even more significant when the CEO is born and raised in a countrywhere legal enforcement and disclosure quality are weak.

ANGELA PETTINICCHIO Foreign-bornCEOs keener on cross-border M&As

MARIA BIANCHI Working at the Commission taught me to overcome borders

Career start, personal growth, and overcomingborders: this is what working at the EuropeanCommission means to me. A career start, because

I began at the European Commission, in a livelyinternational environment at the heart of Europe.Personal growth because, in less than two years, I haveacquired a profound knowledge of how EU decisions aretaken and how the policy positions of the Commissionare prepared. I had the opportunity to collaborate withcolleagues and "national experts" from all memberstates. I am constantly challenged by different points ofview and the need to reconcile different opinions toarrive at a final position. Overcoming national

boundaries because living abroad, learning a newlanguage, traveling freely around European cities

allowed me to consider Europe my true home,and European values my own personal

principles.I feel privileged and honored to be part ofthe European project, not only for theopportunities for personal andprofessional growth it offers, but aboveall because I am aware that the ultimategoal of my work is nothing other thanworking on behalf of the interests andwelfare of European citizens. �

THE PAPERThe Framework of Future Relations: Trade by Paola Marianiand Giorgio Sacerdoti, respectively Associate Professor and SeniorProfessor at the Department of Legal Studies at Bocconi

ANGELA PETTINICCHIOAssistant Professor

Departmentof Accounting

Bocconi University

PAOLA MARIANIAssociate ProfessorDepartment of Legal StudiesBocconi University

EU

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Pierre Moscovici, the former EU Commissioner for Economic andFinancial Affairs, Taxation, and Customs, proposed changing the EUdecision rules on taxation issues. He suggested moving from thecurrent unanimity system toward a Qualified Majority Voting(QMV) System. His proposal opened a large debate: on the oneside, unanimity guarantees national sovereignty on taxation issues,which is considered a top priority for many EU countries; on theother, changing the unanimity rule is a necessary starting point ifwe want more integration in Europe on tax policies.Paola Profeta (Department of Social and Political Sciences)discussed the proposal with Mr. Moscovici, during a Bruegelworkshop.“Unanimity is difficult,” says Profeta. We know from public choicetheory how difficult – or impossible – it is to reach unanimity on agrouping of mixed options. EU countries are heterogeneous inseveral ways which affect not only taxdecisions but more generally theirviews on the role and size ofgovernment -- national andsupranational -- such as the level ofeconomic development, politicalinstitutions, and a country ’s opennessand specialization. Persistentdifferences are linked to countries’different political histories. Countriesalso differ according to their favoritetax instrument at the domestic level:corporate income tax is a small share of budget in some countries,large in others. Thus, moving to qualified majority voting makes iteasier to reach an agreement and enlarges the field for potentialactions.Moreover, qualified majority voting is already used in more than80% of legislative procedures! Most experts agree that greater taxcoordination is desirable. Tax coordination is needed to avoid tax base erosion and profit shifting (BEPS) in business, to fight againsttax evasion, and to combat tax abuse. It is also needed tointroduce a tax environment at the EU level and a Digital tax. Thecase of Apple was decided by EU antitrust regulators as a state aidprocedure, because “Ireland granted illegal tax benefits to Apple.”With an integrated tax policy there could be tools to prevent thesesorts of things from reoccuring.

PAOLA PROFETA Why EU must moveto majority voting on taxation rules

“Metaphors in Law should be handled with care,” OrestePollicino warns. He is referring to applying the metaphor of thefree marketplace of ideas to the information sector in Europe,following the example of the United States. In Europe, though, thelegal paradigm and the set of values are rather different. “Weshould be even more cautious when dealing with onlineinformation because of the spread of fake news and because of theprevalence of monopolies and oligopolies,” he says.As a professor of Information Technology law, Oreste Pollicino waspart of the high-level group of experts set up by the EuropeanCommission to advise on policy initiatives to counter fake news. In“Truth and Deception Across the Atlantic: A Roadmap ofDisinformation in the US and Europe,” forthcoming in the ItalianJournal of Public Law, professor Pollicino and Elettra Bietti proposediscarding the term "fake news” and replacing it with“disinformation.” This is defined by three factors: the content’sfactual truth; the intent associated with the content’s generation

and sharing; and the harm caused in thepublic sphere.“The First Amendment to the United StatesConstitution addresses the active dimensionof speech and protects the marketplace ofideas, thus shielding the press and otherspeakers from liability for the spread ofdisinformation. Article 10 of the EuropeanConvention on Human Rights addresses thepassive dimension of speech and highlightsthe social dimension of disinformation since itaffects the right to be informed in a truthful orat least verifiable manner.”

The role of digital platforms like YouTube and Facebook is critical.The European Commission looked for ways to involve them withoutcensoring them. In 2018, it let them draft codes of conduct. Afterone year, if self regulation fails, a stricter regulation may follow.

ORESTE POLLICINO Europe should not adopt US approach to fake news

It is a great honor, and the culmination of a calling that Inurtured at Bocconi. If I close my eyes, I find similaritieswith academic life. First and foremost, the need to

reconcile different points of view, which we learned throughteamwork we did on projects at the Velodrome. Then, there isthe dialogue between theory and policy. Theory brings backmemories of the almost reverential fear we feltwhen we visited our professors' offices; publicpolicy cannot be learned in textbooks, but muststart from economic analysis to be effective.

Then, the useful tension between European and nationalperspectives, similar to the one that exists betweenmacroeconomics and microeconomics, something that ispart of my academic curriculum. I could continue: thecomplexity of Community Law, which was broken down forus by teachers who put reasoning ahead of rote learning; ameeting of EU cultures, similar to the languages studied invia Calatafimi. Last but not least, raising your hand in acrowded classroom is not so different from making asuggestion to break an impasse in Brussels!�

ALESSANDRO MALCHIODI Teamwork? I learned it during group projects at the Velodrome

THE PAPERFake News, Internet and Metaphors (to be handled carefully) by Oreste Pollicino, Full Professor at the Department ofLegal Studies at Bocconi

PAOLA PROFETAAssociate Professor

Department of Social and Political Sciences

Bocconi University

ORESTE POLLICINOFull ProfessorDepartment of Legal Studies Bocconi University

ALESSANDRO MALCHIODI Policy Officer, EuropeanCommission

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Recognition of fundamental rights can be an incentive for theEuropean integration process.“Pessimism about integration stems from the belief that it is notpossible to create a European ‘state’ because of member states’diversity,” says Graziella Romeo, who addressed the issue in“Building Integration Through the Bill of Rights? The EU at theMirror.” “This theory assumes that elsewhere the process has beenfluid and natural,” she continues. “But even the United States -- asuccessful federal experience --has had a troubled history inintegrating the cultures of states that wanted to preserve their ownidentity and culture.” In the US, the recognition of fundamental rights in a process thatmoves from the center (the federation) to the edge (the states),played a decisive role in building national identity. Somethingsimilar can happen in Europe.“Political considerations cannot be overcome by legal integration,”Romeo acknowledges. “But it is also true that some rights, forinstance the freedom to contract marriage or personal dataprotection, may turn into powerful identity-creationtools if their exercise is ensured by centralinstitutions.” This process is enabled by twodynamics: federalization -- that is, the process ofmoving towards political integration -- andconstitutionalization, or the transformationwhereby constitutional norms end up permeatingthe legal system and therefore touch both therelationship between citizen and state and betweencitizens. “The EU has made significant progress inthis transformation,” she says. “Integration is stillpossibile.”

GRAZIELLA ROMEO Legal rights, too,can be a key EU integration driver

If you think that Southern European countriesshould close their productivity gap by subsidizingIT adoption, then you’d better think again. Itactually may lower productivity even further.“It would encourage unproductive firms to adoptIT systems that are too sophisticated,” he says. “Itwould be a waste of resources. Low IT adoption isa symptom, not the problem.”TToomm SScchhmmiittzz is Assistant Professor of Economics atBocconi University. In “The IT Revolution andSouthern Europe’s Two Lost Decades,” co-authored with Fabiano Schivardi, they looked into why Italy, Spainand Portugal have lower productivity growth compared to Germanyand the U.S. “Literature has documented the influence ofmanagement practices and technology adoption at the firm level,” heexplains. “We adopted a more macroeconomic approach.” Theauthors used a subset of the World Management Survey on medium-sized manufacturing firms from 1995-2008. More than one third ofthe North-South productivity gap is caused by inefficientmanagement practices that limits gains from the IT revolution. Theyidentified three reasons why.“The most obvious one is the direct effect of inefficient managementpractices that lowers firms’ productivity gains from IT,” he says. “Thesecond one is more indirect: IT increases the importance ofmanagement practices, making its inefficiencies even moreprominent.” Lastly, IT-driven wage increases in Northern Europeancountries create incentives for high-skilled emigration from theSouth. A few suggestions for policymakers: promote knowledgetransfers by multinational firms from countries with superiormanagement practices. A judicial system that efficiently resolvesconflicts between family business owners and non-family executiveswould make it easier for firms to delegate more.

TOM SCHMITZ IT not the key to solveSouthern Europe’s productivity gap

As a graduate with a degree in Management ofPublic Administrations and InternationalAgencies, working for the European Union was one

of the natural professional destinations after my studies atBocconi. I moved to Brussels in 2010, thanks to theSchuman internship program of the European Parliament.I started my professional experience at the administrativeoffices of Parliament's Communication Department,where I still work overseeing internal control and resourcemanagement. Working for Europe for me meanscontributing to efficient administration, by putting theskills learned at Bocconi at the service of EU institutions

in terms of process effectiveness, orientation to results,and accountability. It also means representing my countrybeyond national borders in a context of quality and

excellence, by applying rigorous methods ofanalysis and performance management tocommunicate the results achieved by theEuropean Parliament. And finally, havingdirect contact with European citizens, in

particular with young people, in order toinform them and make them aware of how

crucial it is to exercise their right tovote in EU elections. �

CHIARA LANDOLFOMaking young people aware how crucial it is to vote in EU elections

TOM SCHMITZAssistant Professor

Department of EconomicsBocconi University

CHIARA LANDOLFOAdvisor to the Director,European Parliament

GRAZIELLA ROMEOAssistant Professor Department of Legal Studies Bocconi University

THE PAPERThe IT Revolution and Southern Europe’s Two Lost Decades by Fabiano Schivardi (Luiss) and Tom Schmitz (Assistant Professor at Bocconi)

Women are underrepresented in politics in nearly every country. Studies show they areless corrupt and more collborative than their male peers. The tools to overcomethe gender gap are well known, but women still face obstacles to get elected

Women are still underrepres

GENDER GAP

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Gender inequality is greater in the politicalsphere than in the economic sphere.According to the Global Gender Gap Index

(World Economic Forum, 2018), based on the150 countries considered in this annual report,only 22% of the gap between women and men wasbridged in the political sphere, compared to 59%of the gap filled in terms of economicparticipation (where 100% is perfect genderequality). In Europe, an average of 30% of MPsare women, as are 29.5% of governmentministers. The European Parliament, wherewomen MPs are about 36% of the total, has agreater female representation than any individualnational parliament (except for Belgium,Denmark, Portugal, Lithuania, Bulgaria, Estonia,and Cyprus). Several reasons explain the lowfemale presence in political institutions, mostlyregarding the obstacles that women mustovercome in the selection process that leads toelective office. First of all, women themselves maynot be available for or interested in politicalcompetition: they have no role models, forexample. Secondly, they suffer more than menfrom the lack of time available to devotethemselves to political activity since they arebusier than men with unpaid household work.Lastly, they might think they have lower prospectsfor success, which has a negative impact on theirwillingness to run. However, parties also play animportant role: they often discriminate againstwomen in their lists or nominate them only inconstituencies where the chances of winning arelower. Finally, if voters can only express onepreference, they can pick either a male or afemale candidate, thus determining the gendercomposition of those elected. Women are about50% of the electorate and fair representationwould require they filled half of decision-makingposts, which is clearly not the case. But it's notjust a matter of numbers. There are studies

showing that women in politics are better atworking in teams and less prone to corruption.For developing countries, there is empiricalevidence that women in politics act as role modelsfor girls, who have an incentive to invest more inthemselves to gain space in the economy and insociety. More controversial is the empiricalevidence concerning the impact of women onpublic policy: while there are studies that showthat, in certain contexts, women allocate moreresources to education, environment and health,in others female representation does not translateinto the effective representation of the interests ofwomen. The question about women in politics isnot only their number, but also how they can makea difference in political decision-making. Still,increasing their number is a necessary condition.But how do we get there? Setting gender quotas isone of the most frequent tools for achieving thatobjective: they exist in many European countries;in some cases, they are voluntarily set by politicalparties, while in others they are required by law.They can be both local and national. Althoughwidespread and time-tested, quotas still causecontroversy in policy circles. What do we knowabout the effectiveness of quotas? Research tellsus that in Italy, for example, where quotas were inuse for a brief period in the 1990s and have beenin place again since 2013 for municipal elections,they have increased the number of women in citycouncils, rejuvenated the political class, increasedvoters’ participation, and, above all, improved thequality of elected politicians. In a recent work, weshowed how the double gender preference –another tool being used to increase women’srepresentation in politics – when combined withgender quotas, increases the presence of womenin municipal councils, thanks to the greaternumber of preference votes going to womencandidates. It also has spillover effects oncomposition of regional councils, although theyare not bound by law to respect gender diversity inthe same way as mandated by the electoral law formunicipal elections. The tools to increase thepresence of women in politics exist, and there aregood reasons for using them. If only the politicalwill were there to achieve the gender transition incontemporary politics.�

ALESSANDRA CASARICOAssociate Professor

Department of Social andPolitical SciencesBocconi University

by Alessandra Casarico @

ented in politics. Why?1211-2/20

THE PAPERLet the Voters Choose Women by Audinga Baltrunaite (Bank ofItaly) , Alessandra Casarico and Paola Profeta (Bocconi), Giulia Savio(Università della Svizzera italiana)

Married couplesmake awinFAMILYBUSINESS

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Married couples make a formidable teamwhen appointed to the top of a familybusiness. An analysis of Italian family

firms over 12 years, conducted with DannyMiller, Isabelle Le Breton-Miller and GuidoCorbetta, shows that firms led by marriedcouples (as co-CEOs or CEO and ExecutiveChairman) outperform all the family and non-family combinations of leadership, includinglone founders, multiple founders, father/son,mother/daughter, brothers, sisters and cousinsor in-laws. The firms led by married couples inour sample recorded returns on assets of onepercentage point higher than the average ofaround 5.3%, which represents a 19%improvement on the rest. Exploring thedynamics behind this result, we show thatperformance improves when firms appoint acouple to the top position, but that findingreverses when firms abandon such a leadershipmodel. Moreover, leadership by couples worksespecially well when the firm operates inknowledge-intensive industries and ones wherenetworks and social capital are crucial forsuccess.What explains the superior performance offamily firms led by married couples?Our argument is that the alignment of long-runinterests and incentives by married leaderscan make the firm more resilient to turbulenttimes and improve its ability to nurture acorporate culture of healthy relationships withstakeholders. In line with these conjectures,we show that firms led by married couples arebetter able to invest during periods ofuncertainty. Moreover, they benefit fromlower labor costs in parallel with a lower riskof layoffs in the wave of industry shocks.Whether families can promote or obstruct

performance is a crucial question given thepredominance of family firms in the corporatelandscape. A general implication of our studyis that alignment devices that make shareddecision-making more harmonious within thefamily while also spurring long-run incentivesare crucial for family firms to prosper.Understanding whether family members aremore successful than professionals in runninga business has been fiercely debated byacademics and policy-makers. On one hand,family leaders tend to have interests alignedwith those of owners. On the other hand,family leaders may be drawn from smallertalent pools compared to the broader labormarket. Family leadership by multiple familymembers may enlarge the skill set at the top ofthe company, but at the same time paves theway for conflicts, e.g. as siblings compete forrent and power for their separate familybranches.We argue that leadership by couples canalleviate the disadvantages of familymanagement while benefiting from commoninterests and incentives to manage for thelong-run. A more skeptical view could suggestthat marriage ties at the top of the companywill provide a transmission channel throughwhich family conflicts may feed back into thefirm’s decision-making.Leadership by couples mirrors the fact thattwo partners have discovered importantaspects of compatibility and have made acommitment to share both their lives andcareers. Leadership by couples may thusfeature benefits in terms of commonunderstanding, better coordination andgreater information sharing. Moreover, theinterests of married couples are often well-aligned and should thus display a lower risk ofconflicts. Finally, married couples can benefitfrom skill complementarity and bring to thebusiness a broader set of experiences andnetwork relationships. Our results highlightthe material relevance of these advantages forthe financial performance of family firms. �

MARIO DANIELE AMOREAssociate Professor

Departmentof Managementand TechnologyBocconi University

by Mario Amore @

Family-owned firms managed by a husband-and-wife team achieved betterperformance than all other combintions, according to a 12-year study by Bocconi

ning teamasmanagers too

1231-2/20

THE PAPERFor love and money: Marital leadership in family firms, byMario Daniele Amore, Danny Miller, Isabelle Le Breton-Miller, andGuido Corbetta.

THE PAPERIs the Stock Market Biased Against Diverse TopManagement Teams? by Alberto Manconi, Antonio Emanuele Rizzoand Oliver G. Spalt.

Diversity has become a hot topic. Yet analysts are more pessimistic about earnings atcompanies with diverse top management teams, and funds under-invest. This apparentbias raises new questions and opportunities

Diversity leaves analystsand funds unimpressed

Stock market investors are becomingincreasingly vocal about the diversity ofcorporate leadership: Institutional Shareholder

Services (ISS) listed diversity as the number oneitem on their list of the “Top 10 CorporateGovernance Topics to Watch in 2019.” In a paperwith Antonino Rizzo and Oliver Spalt, we propose anew approach to studying how diversity among topmanagers matters for firms in the stock market.Most academic work on diversity is concerned withthe choices made by firms with diverse leadership and whether diversity, via its impact on corporatedecision making, relates to firm performance.In contrast, we studied how diverse top managementteams are perceived in the stock market.That is important, because stock prices reflectexpectations, and because perceptions of diversitycan potentially color expectations, even if there is nodifference in what firms with diverse managers do.We ask whether biases in investor expectations existfor diversity, whether such biases are quantitativelymeaningful, and whether they are in favor of oragainst diverse teams.Following a long tradition among managementscholars emphasizing the multi-dimensional natureof diversity, we develop a new text-based measurethat can capture many dimensions of diversitysimultaneously and apply it to the financial marketin the United States.Our novel approach is to measure the diversity of atop management team’s biographies, which all USlisted firms are required to file with the Securitiesand Exchange Commission.That allows us to assemble what is, to ourknowledge, the largest and most comprehensivedatabase on corporate diversity to date.We study investor expectations and how they relate

to diversity by looking at earnings per shareforecasts by financial analysts. Our main finding isthat analyst forecasts on firms with more diverse topmanagement teams are more pessimistic thanforecasts for otherwise similar homogeneous firms.That is consistent with analysts believing that thecosts of more diversity in a top management teamoutweigh the benefits.We also find that analyst experience with a givenfirm substantially reduces the bias in expectationsdue to diversity, suggesting that inexperiencedanalysts make systematic mistakes in incorporatingthe diversity attribute into their forecasts and, on amore positive note, that learning may help reducethe bias.We also find a similar effect among institutionalinvestors, who tend to under-invest in diverse firms.This effect diminishes, on the other hand, forinvestors headquartered in states with greaterminority populations, more votes for the Democraticparty, and states that rank lower on an index of racialanimus, i.e. where diversity may plausibly have aless negative connotation.In sum, the results of our study argue strongly infavor of the view that a substantial fraction ofanalysts and stock market investors are biasedagainst firms with diverse top management teams.This raises many new questions – and opportunities– for firms, analysts, investors, researchers, andlawmakers. �

by Alberto Manconi @

ALBERTO MANCONIAssistant Professor

Department of FinanceBocconi University

FINANCE

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THE PAPEROrganized Crime, Institutions and Political Quality:Empirical Evidence from Italian Municipalitiesby Gianmarco Daniele and Benny Geys

by Gianmarco Daniele @

A study shows that organized crimeviolence targets exclusively local politiciansand particularly mayors during the firstmonth after they take office

Mafia attackson politiciansmore likely atelection time

POLITICS

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THE PAPERMafia, elections and violence against politiciansby Gianmarco Daniele and Gemma Dipoppa

Italy is not the only country in the worldtroubled by organized crime. However,movies like The Godfather and TV series like

Gomorrah have made Italian criminalorganizations well-known worldwide. Althoughdirectors tend to glamorize the phenomenon,their films help us understand how Mafia-typeorganizations resort to violence to influence andweaken public institutions.Data collected by the NGO Avviso Pubblico[Public Notice] report 1,191 violent attacks onItalian politicians in the 2013-2015 period. Thisis “just” aggressions and threats reported topolice authorities, so the actual number is likelyto be much higher. How does political violenceaffect Italian politics? In a recent study publishedin the Journal of Public Economics, co-authoredwith Gemma Dipoppa of the University ofPennsylvania, I have sought to understand theproblem by studying the data collected by AvvisoPubblico.Why do criminals attack politicians? The goals ofcriminal organizations differ from one group toanother. Organized crime is defined as acentralized, often international, criminalenterprise that seeks to infiltrate politics andextract public resources in order to secureprivate benefits.In Italy, according to our study, the Mafia oftenthreatens politicians to win government contractsfor waste management, procurement, and otherpublic services. Individual politicians whothreaten Mafia interests are often put in danger.Physical assaults, arson, and death threats are

the Mafia's favorite tactics. These crimesconstitute 70% of the 1,191 attacksdocumented by Avviso Pubblico.In 2016, Giuseppe Antoci, director of a nationalpark in Sicily, suffered a murder attempt afterhaving strengthened the anti-Mafia checks onlocal businesses that work in the park. Otherpoliticians are corrupt and contribute to theproblem of Italian organized crime by sharingillegal profits with the Mafia."We must all be sated," a bribed bureaucrat fromthe Campania region was overheard saying overthe phone by magistrates who had tapped hisline. Between 1991 and 2018, the Italian policedissolved 266 municipal councils for their linkswith criminal organizations.It is interesting to note that none of thedocumented political violence concerns nationalpoliticians, presumably because attacking well-known politicians would bring excessive mediaexposure. So the attacks target local politicians.Mayors were targeted 310 times out of thedocumented 1,191 attacks occurred from 2013to 2015. Italians know this, because they readthese stories in local newspapers.For example, the mayor of Marcianise, a citynear Naples, left office in early 2018 after awave of threats. And the mayor of Rizziconi, inthe Reggio Calabria province, was blacklisted bymembers of the community (including some ofhis relatives) after denouncing the mob’s tacticsto pressure him. Mafia attacks on politicians areusually linked to the electoral cycle. In regionswhere criminal organizations are entrenched(such as Sicily, Calabria and Campania), politicalviolence is much more likely to occurimmediately after local elections, our studyfound.Attacks on politicians are 25% more likely in thefour weeks immediately following the election ofa new mayor. The strategy has a specific intent:to send a clear message to the newly electedrepresentative and communicate the riskassociated with taking policy decisions inimical toMafia groups. Political violence also diminishespolitical selection: in a previous research study, Ishowed that when politics looks like a dangerousjob, the most competent and educatedindividuals will be discouraged from applying.And while organized crime gets richer, Italianpolitics gets impoverished, as our researchshows. �

GIANMARCO DANIELEResearcher

Department of Social andPolitical SciencesBocconi University

1271-2/20

THE BOOKIl socio occulto, by Marella Caramazza(Egea, 2019, 176 pages, in Italian, €16.15)reconstructs Mafia infiltration in companiesand the social fabric of Northern Italythrough figures, facts, interviews and directexperiences.

When fiscal policy

AUSTERITY

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THE PAPERDoes austerity really kill? by Veronica Toffolutti and Marc Suhrcke

The link between fiscal policy and health is clearly visible in suicide and mortality rates.And the consequences show up both in times of austerity and of expansion

y is bad for your health

Many countries implemented austeritymeasures to deal with recession by increasingtaxation and/or reducing social spending.

This generally caused consumption to fall, which inturn caused a drop in gross domestic product.However, the empirical evidence concerning thepotential effects of fiscal policy on people’s health isvery limited, despite the interest taken by manyresearchers and policymakers, including formerdirector of the IMF Dominique Strauss-Kahn, whosaid at the height of the Great Recession: “Theconsequences of austerity policies in terms of humanlives could give rise to a real tragedy.”In the study “Does austerity really kill?” I publishedtogether with Marc Suhrcke (Center for HealthEconomics, University of York and LuxembourgInstitute of Socio-Economic Research) in Economics& Human Biology we look at data coming from 28 EUcountries from 1991-2013. We gauge the correlationbetween fiscal policy (austerity or fiscal stimulus) andpublic health, by using seven specific mortality ratesby cause and the total mortality rate as synthetichealth indicators.In particular, we distinguish the effect of fiscalpolicies from that of economic fluctuations, such asfor example periods of boom or crisis.

The results are quite complex, and offer only partialconfirmation of theoretical hypotheses.First, austerity regimes really are associated with anincrease in the suicide rate and the total mortalityrate, but periods of fiscal stimulus lead to an increasein specific mortality rates, in particular those linkedto road accidents and cirrhosis and other chronic liverdiseases.Secondly, our work corroborates previous resultsregarding the association between economicfluctuations and mortality rates; in fact, with theexception of suicides, most mortality rates tend todecrease as the unemployment rate increases, thuscompensating for the negative effects of fiscal policy.Suicides, however, are a case apart, as they respond toboth unemployment rate increases and austeritypolicies.There are various mechanisms that can explain thepositive correlation between austerity and mortality.For example, austerity measures could increase thestress to seek a new job, thus influencing thepsychological health of individuals, increasing theirrisk of committing suicide.Moreover, during periods of austerity the purchasingpower of individuals is likely to be hit by a doublewhammy: taxation increases as social protection islowered.The latter is also associated with a deterioration ofhealth services, such as screening for infectiousdiseases.In conclusion, fiscal policy does have an impact onhealth, but we are only beginning to understand howand further research is needed to understand theadverse effects in greater detail. �

by Veronica Toffolutti @

VERONICA TOFFOLUTTIAcademic Fellow

Departmentof Social and Political

SciencesBocconi University

1291-2/20

by Nicola Gennaioli @

Economic theory is based on theassumption that investors makerational choices. But experienceshows us that is not always true.Here’s a look at how we really makedecisions when choosing software,a college major, answer a surveyor manage a start-up

IRRATIONALITY

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Exposing themyth of rationa

al decision-making1311-2/20

NICOLA GENNAIOLIFull Professor

Department of FinanceBocconi University

IRRATIONALITY

1321321-2/20

People routinely decide how much to save, whichstocks to buy, which skills and knowledge toacquire, which politician to vote for, etc. These

decisions breathe life into firms, governments andmarkets, shaping their functioning in critical ways. Buthow are individual decisions made?In traditional economics, decisions are rational: theybest promote the decision maker’s self-interest.Rational investors form the best forecasts of the pricesof traded assets, and buy those that best match theirrisk preferences. Rational consumers make a purchase- say a sweater - when the best assessment of itsqualities (color, materials…) is larger than itscombined costs (price, taxes...). In intertemporalchoice, it is rational to decide whether to do physicalexercise when the current cost is smaller than thefuture benefit of earning a higher pension or of beinghealthier.Rational decisions are of course not perfect becausethere is much uncertainty about them. But nosystematic mistakes are made. People do the best giventheir limited information.This idea has deep implications. When decisions arerational, competition functions like clockwork. Itrewards the best goods or financial assets, drivinginferior ones out of the market. It also causes firms tomake the best decisions: to produce goods that rationalconsumers like, to take risks that rational investors arewilling to bear. Of course, there are externalities andmarket failures. But in a rational world these can oftenbe fixed, for instance by taxing undesirable activities.Indeed, rational people will follow tax incentives.Thus, rationality offers an optimistic perspective:public policy can steer markets for the better.Despite its appeal, much evidence in the last thirtyyears shows that rationality is a poor way to describemany decisions. For instance, when choosinginvestments, we are often too optimistic about assetsthat have been recently delivering high returns.Rational investors do not make this mistake: theyquickly learn that recent history is a poor predictor offuture returns.Critically, irrelevant factors appear to influence manyother decisions: we buy sweaters during unusually colddays, or convertible cars during sunny days, and then

regret our choices. Rational people are not swayed bythese patently transient conditions. Interestingly, wealso make the opposite error of neglecting some highlyrelevant factors. For instance, when buying a good wedon’t pay enough attention to taxes or fees that are notdisplayed in the posted price. A rational consumer isattentive to all costs, even the less salient ones.Finally, we all know too well the failings of our ownwillpower: we would like to save or go to the gym, butunlike a rational agent we are often tempted toprocrastinate.There are two important lessons from this body of work.First, markets are far less benign than we think, inways that help explain key phenomena. When boomscause many investors to be too optimistic, asset pricesare inflated and the system is vulnerable to crashes.The dot-com bubble in 2000 or the 2007-08 crisis inthe US are cases in point. When many purchases areinfluenced by irrelevant attributes and inattentive tonon-salient costs, competition encourages firms todupe unsuspecting consumers. Strategic discounts toartificially inflated regular prices or hefty fees hiddenin fine print are examples of practices that have fallenunder the radar screen of consumer protection agenciesin many countries.Secondly, when decisions are not rational classicalpolicy levers are often ineffective. Raising taxes todiscourage the use of environmentally unfriendlyproducts will not reduce demand unless the taxincrease is so large as to be noteworthy. But then such alarge increase may be problematic to implement.Subsidizing gym enrollment to promote health in anaging population will not help: people may well enroll,but still lack the willpower to go to the gym. Raisinginterest rates during a boom may not discourage excessborrowing by over-optimists; it could actually increasetheir debt burden. And ultimately, the ability of theelectoral process to solve social problems is questionedwhen voters may fail to pick the best politicians.Are things so bleak?Not really. The pitfalls of the rational approach markthe beginning of a new enterprise: developing a bettertheory of human behavior. Many economists arestarting to take psychology seriously, developingtheories founded on robust regularities about humanperception, memory, emotions, etc. These efforts arebeginning to put conceptual order in the long list ofanomalous decisions. Applications of these theoriesare shedding light on important economic problems.Furthermore, more realistic theories of human behaviorcan offer new, and smarter, policy tools that are basedon the subtle psychological cues that anchor ourthinking. This research program is still at an earlystage, but eventually a new synthesis and a betterunderstanding will emerge. Back to the drawing board:there is an exciting way ahead!�

THE BOOKIn A Crisis of Beliefs (Princeton UniversityPress), Nicola Gennaioli and AndreiShleifer (Harvard) reinterpret thecollapse of the US financial system as aconsequence of investors’ misplacedconfidence in regulators.It looks at the destabilizing role played bybelief formation.

1331-2/20

Choices of college major account for 30% of the gender pay gap amongworkers after they graduate. Women tend to opt for humanities, whilemen prefer scientific degree courses that result in better economicoutcomes. Researchers have investigated the determinants of thesechoices in order to find a way to counterbalance them. Laboratoryexperiments conducted by behavioral economists have shown, forinstance, that women shy away from competition with men. This could bethe reason why female students, after having experienced competition inhigh school, stay away from prevalently male scientific degree courses.A zero cost policy of classroom gender composition could therefore be away to reduce the gender pay gap. Massimo Anelli tested this theorywith Giovanni Peri on a longitudinal data set of 30,000 Italian studentswho graduated in 1985-2005.“We found that gender composition of peers in high school does notaffect the choice of college major by female students,” Massimo Anellisays. “Only male students attending a high school class with 80% or moremale classmates have a probability of choosing a prevalently male collegemajor between 6% and 15% higher than the average.”This could be explained by the way female students and male studentsform their networks of friends. The former prefer strong ties with a fewpeople, regardless of the number of other girls in the classroom; malestudents tend to expand their social network and this attitude ends upinfluencing their choice of college major. “This is not necessarily goodnews. The influence of the social network pushes male students to enrollin majors too complicated for them. They end up graduating with badgrades or dropping out of school before completing their degree. Theincreased likelihood of choosing prevalently male majors does nottranslate into any significant effect on income of male individuals whoattended a high school class with more than 80% of male peers.Segregating classes by gender would be ineffective or even harmful.”

MASSIMOANELLI Peers and gendercan influence choice of collegemajor

New research shows that political corruption creates long-term scars onthe trust in democratic institutions and on voters’ behavior.These effects differ according to one’s age cohort. People who vote for thefirst time when corruption is revealed are still being affected 25 yearslater. In particular, Bocconi University’s Arnstein Aassve,, GianmarcoDaniele,, and Marco Le Moglie focus on the Italian ‘Mani Pulite’scandal between 1992 and 1994 that revealed widespread corruptionamong Italian politicians. Twenty-three percent of national MPs and astaggering 75% of MPs from the then-ruling Christian Democrat andSocialist parties were charged with corruption, and the 1994 electoralcampaign was centered on this topic.Political corruption, completely missing from Italian TV news up to then,suddently dominated both TV news and newspapers (with almost 90% ofthe front pages dedicated to the scandal in 1993).Using data from Trustlab, coordinated by the OECD to collect nationaldata of trust and political beliefs, the scholars find that Italian first-timevoters in 1994 were 9% more likely to vote for populist parties in 2018(according to their self-reported behavior) and recorded lowerinstitutional trust (i.e. trust in parliament, government and civil servants).Their trust in bodies not immediately related to the Clean Hands scandal(police, media, and financial institutions) and their social trust (trusttowards other individuals) were unaffected.The effect is stronger for less educated individuals and for people moreexposed to TV news in the areas most affected by the corruption scandal.Furthermore, the effect is driven by the 2018 vote for the populist right-wing party Lega, while vote for the left-wing populist party Movimento 5Stelle was unaffected.

ARNSTEIN AASSVE Corruption canhave longterm impact on voter views

THE PAPERNever Forget the First Time: The Persistent Effects ofCorruption and the Rise of Populism in Italy by Arnestein Aassve, Gianmarco Daniele, Marco Le Moglie

THE PAPERThe Effects of High School Peers’ Gender on CollegeMajor, College Performance and Income by Massimo Anelliand Giovanni Peri.

ARNSTEIN AASSVEFull ProfessorDepartment of Socialand Political SciencesBocconi University

MASSIMO ANELLIAssistant Professor

Department of Social

and Political SciencesBocconi University

PIERPAOLO BATTIGALLIFull ProfessorDepartmentof Decision SciencesBocconi University

GIADA DI STEFANOAssociate Professor

Departmentof Managementand Technology

Bocconi University

IRRATIONALITY

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Anger affects decision making. It can lead us to act aggressively and toforgo material gains. Pierpaolo Battigalli has explored the subject inthe context of game theory. Drawing on insights from psychology, he hasdeveloped a formal approach with Martin Dufwenberg and Alec Smithaccording to which the choice of accepting or rejecting an unfair proposalis affected by frustration due to unfulfilled expectations. Frustration, inturn, triggers anger.The authors tested the theory in the strategic context of an UltimatumMinigame conducted on 350 Bocconi students. The Ultimatum Minigameis a social dilemma where a proposer can decide to make a fair offer that isautomatically accepted or a greedy offer that the responder can eitheraccept or reject. “According to the traditional economic theory, rationaleconomic agents aim to maximize their gain and expect others to do thesame. The proposer should therefore offer an asymmetric division of theamount of money and the responder should accept it just to earnsomething. Experiments have shown that, in the case of an asymmetricproposal, many responders deliberately choose not to earn anything,doing great harm to the proposers and minor harm to themselves. Themore the responder expects a fair offer, that is, when his expectations arefrustrated, the more it happens.”The experiment was applied using also the so-called strategy method thatasks the responder to specify a rule of play that is therefore executed bydefault. According to the expected utility theory, the responder shouldmake the same choices he would make with the direct method afteractually observing the offer. “But simply imagining that an adverse eventmay occur is not enough to ignite thefrustration that generates anger andrejection. And that is actually what wehave found in the context of theUltimatum Minigame by comparingdirect and strategic methods. We alsoincreased the responder’s payoff with thepurpose of increasing his frustration dueto the unfair proposal, with no effect.Or rather, only thedistribution ofactions of malesubjects was inline with thetheory. Thisdifference willbe the subjectof furtherresearch.”

PIERPAOLO BATTIGALLI Anger affectsdecision making, game theory shows

When we have to choose between trying a out new experience by doinga task or reflecting on previously accumulated experience, we are likelyto choose the first option. We are convinced that doing is the mostimportant component of learning, but we are wrong, as Giada DiStefano has proved with her field and laboratory experiments.The Professor of Strategy and three co-authors have measured thebenefits of articulating and codifying an experience, focusing onactivities with which ordinary people, students and corporate employeeswere unfamiliar. “It only takes a minimum level of familiarity with a taskin order for a minute spent on codifying and reflecting on the experienceaccumulated to be more beneficial than a minute spent on accumulatingadditional experience,” she says.The researchers initially tested their hypothesis on a hundredindividuals doing a training program in a firm that provides back-officeservices to large companies in the IT sector. They were divided into twogroups. One group was asked to spend the last 15 minutes of the day ontheir normal training activities. The other group was asked to spend thesame amount of time on reflecting. The difference in participants’ performance surprised the researchers.“At the end of the training program, all candidates took a test.Candidates who were asked to replace practice with reflection improvedtheir score by 20% on average. They continued to perform better incustomer satisfaction surveys until one month after the end of theexperiment.” Two mechanisms explain the effects of reflection on performance: 1)the individual’s increased self-effictiveness, regardless of the quality oftheir performance; 2) better understanding of the task itself.“These two mechanisms coexist, but only the latter significantly mediatesthe relationship with performance. We replicated the experiment usingmany different tasks, and the result is pretty robust. Whether it’s findingimages on a computer screen, solving math puzzles or singing in tune,our performance improves when we are forced to reflect.”

GIADA DI STEFANO When learningsomething new, try reflecting on it

THE PAPERFrustration and Anger in the Ultimatum Game: AnExperiment by Chiara Aina, Pierpaolo Battigalli, and Astrid Gamba

THE PAPERMaking Experience Count: The Role of Reflection inIndividual Learning by Giada Di Stefano, Francesca Gino, Gary P.Pisano, Bradley R. Staats

1351-2/20

VALENTINA MELEAssociate Professor

Department of Socialand Political Sciences

Bocconi University

PAOLO BELARDINELLIPhD Candidate

Department of Socialand Political Sciences

Bocconi University

Imagine that a civil servant is purchasing a software package, and he istold that it is a suboptimal choice even though it is recommended by hisprofessional association. What will he do? Will he go along with his peers,or will he choose an alternative? This is the question posed by VVaalleennttiinnaa MMeellee and PPaaoolloo BBeellaarrddiinneellllii whileinvestigating the decisions of civil servant managers through eightexperiments conducted with Nicola Bellé and Paola Cantarelli.“In the literature, isomorphism (or taking on the same shape) is theprocess by which organizations become similar to each other,” they say.“We have investigated the micro-foundations of isomorphism to find out ifisomorphic pressures lead to suboptimal decision making in the context ofpublic administration.”The authors asked 764 public employees to imagine themselves as asuperintendent who has to choose between two refresher courses or twosoftware packages. One option was explicitly worse than the other, yetsupported by guidelines, colleagues or professional associations. Withoutisomorphic pressures, 11% to 17% of individuals, depending on theexperiment, chose the worst option. With isomorphic pressures, thepercentage rose to a maximum of 63%. “According to a qualitative inquiry, civil servants have not engaged inirrational choices,” they explain. “They opted for the suboptimal optionbecause it actually met some need; because it guaranteed uniformity ofthe public sector; because they trust institutions and colleagues who makerecommendations.” The risk of a suboptimal decision is lessened when subjects have to decideon their own that the recommended product is inferior based on data.“Beware: isomorphic pressure does not necessarily lead to suboptimaldecisions,” they say. “Isomorphism should be used with awareness topromote evidence-based choices.”

MELE AND BELARDINELLI Peer choicescan have an impact on behavior

THE PAPEROn Iron Cages and Suboptimal Choices: an ExperimentalTest of the Micro-Foundations of Isomorphism... by NicolaBellè, Paolo Belardinelli, Paola Cantarelli, Valentina Mele

CHIARA SPINAPhD candidate

Departmentof Managementand Technology

JOACHIM VOSGERAUFull ProfessorDepartment of MarketingBocconi University

IRRATIONALITY

Small and medium-sized enterprises (SMEs) are a vital part of theUnited Kingdom’s economy. The sub-group of micro-enterprises(up to 9 employees) represents 96% of all businesses, but it onlyaccounts for 33% of turnover. The British government hastherefore solicited research ideas aimed at improving productivityin SMEs.Arnaldo Camuffo,, Alfonso Gambardella,, Chiara Spina,,Elena Novelli (Bocconi alumna and academic at Cass BusinessSchool) and Teppo Felin (University of Oxford) submitted aproject that focuses on decision making.“The lack of systematic approaches to decision making in micro-enterprises is a barrier to productivity,” Chiara Spina says.A course was made available to small classes of entrepreneurs,whose work in SMEs has a direct effect on performance. They

were taught a systematicapproach to decisionmaking: definition ofobjectives, systematictesting, rigorousevaluation of results.Classes were held in early2019. Entrepreneurs weretrained in operational andstrategic efficiency over

seven sessions of three hours each.The program involved about 250 companies of all kinds, from ajewelry store to a fintech startup. “We already have somepreliminary results. After reflecting on these issues, 35% ofentrepreneurs have changed their behavior.Many have learned to focus on new issues, for instance shiftingattention from increasing revenue to understanding customerneeds,” she says. Experience has shown that these courses areuseful, but in the long run subjects return to making decisionsbased on old habits. Researchers are therefore offering individualmentoring sessions.

CHIARA SPINA Improving SMEperformance with decision skills

THE PROJECTBusiness Basics Fund: Objectives and Round 1 Resultsby Arnaldo Camuffo, Alfonso Gambardella, Chiara Spina, Elena Novelli,Teppo Felin.

If we need people to give truthful answers to sensitive questions,relying on people’s rationality turns out to be a bad strategy. In a seriesof lab experiments, Joachim Vosgerau and colleagues show that theRandomized Response Technique (RRT)―developed to encouragerespondents to give truthful answers to sensitive questions―rarelyworks and may even backfire.A direct question may be better, according to Vosgerau’s study.To assess the extent of corruption, for example, a researcher needssurvey respondents to give truthful answers to sensitive questions. A

JOACHIM VOSGERAU For sensitive questions, a direct approach may be more effective

THE PAPERWhen and Why Randomized Response Techniques (Fail to)Elicit the Truth by Leslie K. John, George Loewenstein, AlessandroAcquisti, Joachim Vosgerau.

researcher using the RRT would, before asking whether a participanthas ever paid a bribe, ask respondents to toss a coin. If the coin tossshows heads, respondents are asked to tell the truth. If it turns out tails,respondents are instructed to say “yes”, no matter whether s/he hasever paid a bribe or not. Because respondents’ privacy is protected, the RRT should makerespondents comfortable to answer such sensitive questions truthfully.In their main experiment, Prof. Vosgerau and his colleagues askedparticipants whether they had cheated in a test that had beenmonitored by the researchers. In the RRT group, 54.9% of the participants had cheated, but the RRTestimated the prevalence of cheating at only 2.6%; when participantswere directly asked whether they had cheated, 27.4 % admitted havingdone so (61.4% in this group had actually cheated).“Knowing the prevalence of sensitive behaviors is essential for policy-makers and managers who allocate scarce resources to social policiesor corporate investments,” Prof. Vosgerau says. “If you want to knowabout questionable behaviors, direct questioning may get you closer tothe truth than the RRT.”

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THE BOOK In Influenza invisibile (Egea, 2019, in Italian),Jonah Berger looks at factors thatinfluence our behavior, from the productswe buy to the jobs we chose. Without usrealizing, other people have an enormousinfluence on what we do, regardless ofwhether we try to imitate them or try to dothe direct opposite.

Given that globalization and automation have exacerbated economicinequalities, why do the losers from globalization vote for a party that isproposing a flat tax and not for a party that promotes redistributive policies?Nicola Gennaioli and Guido Tabellini provide the answer in theirpaper “Identity, Beliefs and Political Conflict.”“Large shocks have changed the political conflict,” Professor Tabellini says.“New divisions in society emerged, dividing winners and losers in the wakeof globalization and automation. The split between left and right hasbecome less important.”The authors integrated the social psychology of groups into politicaleconomic analysis. They found that shocks cause individuals to change theirsocial identity -- which may be defined by their occupation, region ofresidence, social class or religious belief.“There is an element of depersonalization in the acquiring of a socialidentity,” he says. “Individuals stereotype themselves by viewing themselvesmore as members of their group than as unique personalities. Thus, thewinners from globalization who identify with an educated and urban groupare led to praise cosmopolitan policies, whereas the losers fromglobalization are driven to exacerbate the conflict between nationalists andcosmopolitans and to mitigate the class conflict.”In other words, globalization causes income inequality to increase, but thepolarization of conflict between nationalists and cosmopolitans dampensthe demand for redistribution by those who would benefit from it. There is more. Political dimensions are correlated across individuals. Voterswho traditionally identified with left-wing groups are now attracted bynationalism because it satisfies their demand for protection and also theirviews on immigration and civil rights. Opinion polls in France and the UShave confirmed the theory.“This is not a passing phenomenon. The shocks that have caused it are nottransitory. They may get worse,” he says.

GUIDO TABELLINI Shocks can causevoters to change political preference

THE PAPERIdentity, Beliefs, and Political Conflict by Nicola Gennaioli and Guido Tabellini

GUIDO TABELLINIFull Professor

Department of EconomicsBocconi University

The expansion of credit markets in 2006-2007 and the subsequent financial crisishas renewed the curiosity of economists

and policymakers about the connectionbetween financial cycles and the businesscycle. Credit expansions are predictors oflower economic growth, lower equity returnsfor banks and lower returns on corporatebonds. Minsky (1977) hypothesizes that theseeconomic/financial cycles reflect oscillationsin irrational expectations. According to thismechanism, the arrival of good news oneconomic fundamentals makes entrepreneursand investors overly optimistic. In turn,excessive optimism leads to an excessivedecrease in the cost of capital, inducingcompanies to borrow and invest in excess. Thesubsequent reversal of good news onfundamentals triggers systematicdisillusionment among investors, andtherefore the reversal of theeconomic/financial cycle. Bordalo et al (2018)

propose a formal model of this mechanismcentered on extrapolative expectations.In a recent study by Huseyin Gulen (Purdue),Mihai Ion (Arizona) and myself, we propose asystematic empirical evaluation of Minsky'shypothesis and of the connection betweenexpectations, credit, and investment. In thefirst part we show that the aggregated cycles inthe credit market reflect cycles ofexpectations. As financial analysts increasetheir positive forecasts for economicfundamentals, credit expands and its averagequality deteriorates. Consistent with theMinsky hypothesis, analysts’ optimism reducesthe cost of capital, and credit expands throughexcessive issuing of junk bonds. Later, weshow that credit booms are followed by asystematic downward revision in analysts’expectations, especially 3-4 years after theboom. Thus, credit expansions are followed byinitial optimism and subsequent systematicdisillusionment, consistent with the Minsky

by Stefano

Credit cycles drive investmentexpectations, leading to bubble

not adopt a laissez faire appbenefits are less than

Central banksquickly to pop

STEFANO ROSSIFull ProfessorGenerali Chairin Insurance

and Risk ManagementBocconi University

FINANCE

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THE PAPERCredit Cycles, Expectations, and Corporate Investmentby Stefano Rossi, Huseyin Gulen, Mihai Ion.

hypothesis.In the second part, we show that at the level ofindividual companies, credit cycles generateinvestment cycles. An increase in creditmarket sentiment’s standard deviation in ayear generates an increase in corporateinvestment equal to 5.1% in year T+1, both interms of investment in physical capital andintangible assets, especially for financiallyweak companies. Subsequently, the investmenttapers off in years T+4 and T+5, for allcompanies and not only weak ones. Thus,credit cycles generate investment cycles.In the third and last part, we close the circle

and link investment cycles to expectations. Wefind that company analysts who are moreoptimistic are also ones that: increaseinvestment most at year T+1; reduce it most inyears T+3 and T+4; and are also those forwhich analysts make the largest systematicerrors in expectations. These results areconsistent with a Q-theory model of financialinvestment, augmented by irrationalextrapolative expectations (Bordalo et al.,2018) to model the Minsky hypothesis.These results imply that in the presence ofbubbles in the credit market, central banksshould avoid laissez-faire accommodation andinstead take a leaning-against-the-wind stance,i.e. raise interest rates to curb the surge inprices. In fact, the short-term benefits of alaissez-faire monetary policy - an increase ininvestment by financially weak companies - arelower than the medium-to-long term costs, i.e.the subsequent drop in investment for allcompanies in all industries. �

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Rossi @

t spending because of positivees. Monetary authorities shouldproach, because short termn medium term costs

shouldmovecredit bubbles

THE PAPERActivist Shareholders at De Facto Controlled Companiesby Gaia Balp

When the minority share

by Gaia Balp @

The phenomenon of shareholder activism by hedgefunds is growing by leaps and bounds on bothsides of the Atlantic. This happens when, by

purchasing a significant stake in a target company(close to 10% of equity capital with voting rights)hedge funds undertake campaigns that can be more orless aggressive, often leveraging the seats obtained onthe company’s board of directors. They push throughsignificant changes to governance, strategy andfinancial structure, so as to increase stock price andthen divest from the company when the desiredcapital gain is achieved.Increasingly often, the campaigns are successful, inthe sense that the company implements the activist’sproposals. Hedge fund activism is successful first andforemost because of the considerable level of supportthat their proposals win from co-shareholders, inparticular from non-activist institutional investors. Inselecting the targets, the activist funds therefore tendto concentrate on companies with a large amount ofinstitutional investors in their shareholder base.This does not mean, however, that the activism ofalternative funds focuses only on public companieswith dispersed share ownership: listed companieswith controlling shareholders are also targeted. Thisis made possible, in part, by corporate rules that favorinstruments to protect minority shareholders, such asthe right to appoint so-called minority boardmembers. This right is guaranteed in Italy by the listvoting system and is made possible in other countriesby virtue of various mechanisms. The potentialaggregation of significant voting power in support ofminority members, with support from other co-shareholders, encourages activists to launchcampaigns even in companies with controllingshareholders.

There is widespread conviction that the activism ofhedge funds can have a disciplining effect oncontrolling shareholders. Such activism is believed tomitigate the conflict between majority and minorityshareholders and favor the exercise of stewardship bynon-activist institutional investors.These potential benefits of activism, however, must beassessed on the basis of a necessary and fundamentaldistinction between situations of legal control andsituations of de facto or working control. One Italiancase can be a good example. In 2018, a big Italiancompany was the target of an activist campaign led bya major US hedge fund. In this case the company wascontrolled not by an absolute majority of voting rightsin the shareholders’ assembly (legal control), but by arelative majority, albeit stable (working control).Therefore the interrelation between de facto and legalcontrol led to controlling shareholder’ voting rightsbeing outnumbered and the passage of the majority ofboard seats to minority shareholders, with consequenttermination of the former’s control without any changein ownership structure and voting rights.Potentially, the most significant, and probablyunexpected, effect is that corporate governance couldbecome less efficient than in a normal situation of defacto control. A controlling shareholder with greaterexposure to the performance of the businessstrengthens its commitment to the company andpursuit of the entrepreneurial vision, which benefitsall shareholders. However, the instability inherent ina situation where the normal majority-minorityrelationship gets reversed increases the likelihood ofconflict within the board regarding strategicorientation, without ensuring that traditionalinstitutional investors maintain their support forcontrolling shareholders. On the other hand, theactivist fund that imposes its agenda on the boardruns the risk of being qualified in turn as a de factocontrolling shareholder, something which wouldsubject it to heavier regulatory requirements. Thatwould have an adverse impact on the hit-and-runbusiness and investment model which is typical ofhedge funds. �

GAIA BALPAssociate Professor

Department of LegalStudies

Bocconi University

GOVERNANCE

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When an activist hedge fund buys 10% in a company, it can join with other minorityshareholders to wrest control of the board. A study looks at the implications

holder takes control1411-2/20

“Urbano Cairo combines qualities that arerarely found in a single individual:creativity as well as rigor, courage,

energy, a deep sense of logic, pragmatism, and theability to dream." This is how Riccardo Monti,president of Bocconi Alumni Community, describedthe Milanese publisher when announcing Cairo’snomination as Bocconi Alumnus of the year 2019.The alumni community decided to award the RCSMedia Group Chairman for his various achievements,but above all for the ability to transform his passionsinto entrepreneurial ventures, following a rigorousapproach to business and the impulse to rise to evergreater challenges, something that he considers theBocconi trademark. "Dreaming of ambitious goalsmust continue to be what drives Bocconians," saidCairo. "Bocconi plays a fundamental role because ithelps future managers and entrepreneurs competesuccessfully internationally.”� What kind of student were you?Very serious and dutiful. From the start, I consideredstudying at Bocconi as a job I had to keep up with.Perhaps because I came from a high school thathadn’t prepared me so well; it was the 1970s and withstudent strikes, demonstrations, and sit-ins almostevery week, I felt I had wasted too much time. Iremember that I really wanted to get started with myuniversity studies and engage in something serious. Imaintained my commitment and managed achieve anaverage of 28.5/30, which was not bad.� In the light of your subsequent career as managerand entrepreneur, what do you think is the mostimportant legacy of the years you spent at Bocconi?I could list so many things. In addition to business andeconomics, I became interested in economic policy,sociology, marketing, business organization, allsubjects I found very useful for my profession in thefollowing years. But the main lesson was certainlylearning a habit of rigor, discipline, and consistency inapplying a method. It was something you breathed in

the University’s halls and classrooms, and I was a bitin awe at the beginning. One time, when I was havingrelationship issues, I arrived very unprepared for anoral exam. I went, but when I saw the professor andmy classmates I felt ashamed; I went back home tostudy for real and passed the exam at the next session.Bocconi demanded the best from everyone, and I forone wanted to do things well.� When you were a Bocconi student, you won ascholarship and attended a semester at New YorkUniversity. Is that where your passion for the world ofmedia and advertising began?That was a fundamental experience, even though Ialways had a passion for media and communication.In the family we read Corriere della Sera every day,and I often bought La Notte at the newsstand becauseat the time there was this editor-in-chief, Stefano“Nino” Nutrizio, who was putting out an innovativeand popular daily newspaper. Private televisionmeanwhile was growing fast in Italy, and that also wasa world which attracted me. In the US, I came acrossa more advanced form of television communicationthan I was used to in Italy, and I decided I wanted toexplore that world further. I read some essays onmedia in America. In particular The Powers That Beby David Halberstam struck me deeply. When Ireturned to Italy, I immediately wanted to talk aboutwhat was happening in the US with the Italianbusinessman who, at that moment, was at the top ofour industry: Silvio Berlusconi.� What was your ambition then?At the time, I already wanted to be an entrepreneur,but I was aware that to do that, I first needed tobecome a manager. I wanted to own a televisionchannel one day and headed in that direction; Ithought it was difficult but not impossible, because thesector was opening up. In the US, I had alreadyexperimented with the early forms of pay televisionand I thought of bringing the idea to Italy but thennothing came of it. As for Corriere della Sera, as I

by Emanuele Elli @

Alumnus of the Year Urbano Cairo knows how to transformdreams into reality. He shares his story with viaSarfatti25

Bocconians must continueto think and dream big

URBANO CAIROBorn in Milan, UrbanoCairo, 62, is president ofCairo Communication andRCS Media Group (where

he is also CEO). Hegraduated in BusinessAdministration from

Bocconi in 1981 with athesis on "The financialstrategy of medium-sizedindustrial companies thatare expanding." He joined

Fininvest right aftergraduation where he hada long managerial career,becoming also CEO of

Mondadori Pubblicità. In1995, he made the leapinto entrepreneurship byfounding Cairo Pubblicità.In 1999 he acquired the

Giorgio Mondadoripublishing company. In2003 he founded CairoEditore, which today isleader in the Italianmarket for weekly

magazines; in 2013 heacquired the La7 televisionnetwork, and in 2016 helaunched the successfultakeover bid for RCS

Media Group becomingmajority shareholder.Since 2005, he has alsobeen the owner of TorinoFootball Club, a Serie A

team.

BOCCONI PEOPLE

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said it was a constant presence at home and areference point, but I thought it was aclosed world very difficult to penetrate. Ido not say impossible because I believenothing is really impossible, butcertainly if they had told me then thatone day I would become theCorriere’s publisher, I would havereally struggled to believe it.� Is dreaming really so important foran entrepreneur?My mantra is "nothing happens if youhaven't dreamed it before." Imagining newpossibilities is a constant exercise for me.Certainly there are moments when you needto really focus to bring a new project to life,and there is not much time left over for themind to wander. There are financial accountsto turn around, jobs to be maintained,decisions to be taken. But as soon as thewaters calm down and the situationstabilizes, I start thinking about what thenext step might be.� You have always had a passion forpolitics. Could this be your next step?In this case, I believe you need to bemore cautious than in other realmsof life. It is true that I ampassionate about politics. As ayoung man I followed USpolitics with great interest,but I am aware thatpolitics is not acommitment that canbe taken lightly, on awhim. I have a lot ofrespect for publicaffairs but also for thepeople at mycompanies whowork in a complexand constantlyevolvingenvironment. Idon't think itwould be asimpledecision toleave allthesepeoplebehind.�

THE PAPERA test of the impact of mergers on bank competitionby Vittoria Cerasi, Barbara Chizzolini, and Marc Ivaldi

Since the 1990s, in the wake of Directive646/1989/EC, the hitherto highly regulatedbanking industry has been liberalized.

Successive waves of bankmergers and acquisitionshave increased the sector’s concentration, initiallywithin national borders of individual EuropeanCommunity countries, then through the creation oftransnational banking groups.The avowed purpose of the bankingmergers wasnot to gain greater market power, but rather toenter newmarkets and diversify operations, as wellas transfer ormore efficiently exploit managerialskills about customers and targets. For their part,competition authorities have been torn between theopposing imperatives of reversing the concentrationprocess, which generally improves marketcompetition, or instead favoring it to strengthenfinancial stability in an integrated Europeanmarket.But how and to what extent does greaterconcentration imply less competition betweenbanking groups? If the result of a merger is theentry of a new and larger bank in amarketpreviously dominated by a single major group, theentry of the new entity favors greater competition inthat market. The opposite occurs if the new bankresults from themerger between two ormorealready existing banks, leaving only smaller banksoutside themarket agreement, so as to create anear-monopoly in that market.Our analysis of bankmergers in Italy and Francebetween 2004 and 2008 verifies these insights.

Taking advantage ofpublic information onbank deposits and the size ofbanking group branchnetworks in the provinces of Italyand in the departments of France,we derive the profitability of Italianand French pre-merger banks,separately identifying the cost componentthat varies across banking groups, and theintensity of competition in local markets, whichinstead affects profitability for all banks operating inthesemarkets. Estimates of group costs andintensity of local competition vary when, aftermergers, the number of banks and branches, bybank and bymarket, changes.Our results show that in France after a string ofmergers between Crédit Agricole and CréditLyonnais, between Caisse d'Épargne and BanquePopulaire, and between Crédit Mutuel and CréditIndustriel Commercial, the intensity of competitionincreased, thanks to the creation of groups capableof competingmore effectively with each other and

by Barbara Chizzolini @

Not always. Mergers in Italy andFrance between 2004 and 2008had different impacts. In France,banking competition increased,whereas in Italy, it actually declinedin manymarkets.

Do bank mergers create co

BARBARA CHIZZOLINIResearcherDepartment

of EconomicsBocconi University

BANKS

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Prestiti) in the lendingmarket have since thensubstantially changed the structure of the bankingindustry in Italy. The number of privately-held bankbranches has fallen by 25% across the country,while it is not entirely clear how the interactionbetween private and public banks will affect themechanisms that currently regulate competition inthe industry. These considerations shall receivefurther andmore in-depth study.�

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mpetition?

with La Poste on retail credit on all local markets.On the contrary, in Italy, the twomergers betweenIntesa and Sanpaolo and between Unicredito andCapitalia have caused a significant reduction incompetition inmany local markets. Either IntesaSanpaolo or Unicredit have become dominantgroups in several provinces, despite competitionfrom local banks. It should be added that while inFrance all the banks had even larger networks ofbranches in all departments before themergers, inItaly there are few banks that operate throughoutthe national territory andmergers have furtherreduced that number. Asymmetries in number andsize of banks across provinces favors situations ofpoor competition in several local markets.The advent of technological innovations and entryinto the sector of state-controlled BancoPosta (andto a lesser extent of state-owned Cassa Depositi e

by Andrea Colli - Research stories by Claudio Todesco @

The BerlinWall. And Tiananmen,Gorbachev andDeKlerk in SouthAfrica.What looks like a “sudden” change isoften the culmination of a long process

Berlin Wall and more: the decCONTEMPORARY HISTORY

Dates on the calendar with importantanniversaries are rightly celebrated,although it is worth remembering that

they are symbolic: historic choices are hardlyall concentrated in what the great historianStefan Zweig calls "decisive moments."However, it is hard not to label November 91989 as such, since so many changes since thatdate have profoundly affected the modern

world. On closer inspection, however, the day"the world changed" can be viewed not somuch and not only as the fall of a barrier –symbolically, the expansion of the space thattakes the name of globalization – but also thepoint of arrival of a long journey that beganmany years before, when the cracks in thebipolar geopolitics of the Cold War had begunto spread everywhere.

AANNDDRREEAA CCOOLLLLIIHHeeaadd ooff DDeeppaarrttmmeenntt SSoocciiaallaanndd PPoolliittiiccaall SScciieenncceess

Berlin Wall and more: the decisive year of 1989

CONTEMPORARY HISTORY

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Like in East Asia, when China initiated thereform policy in 1978 that sanctioned re-entryinto the global economic system; shortlyafterwards, in Eastern Europe, when the firststrike in the Danzig shipyards in August of1980 led to the birth of an opposition to theregime by the Solidarity trade union. Just likethe center of an hourglass, in short, November1989 was as much a starting point as it was apoint of coagulation of transformations thathad started long before. If, however, we lookat a simple chronology of the events of thatyear, it is difficult to escape the impressionthat it really was a decisive moment,characterized by an exceptional, unusualbundle of revolutionary events destined todeeply and permanently influence the times tocome. By the time the Wall was demolished, 1989had already witnessed a quick sequence ofevents that heralded radical changes. Startingin the spring, student protest movementsinflamed China and led to the tragic events ofTiananmen. At the same time, the Sovietsfinally admitted the failure of their Afghancampaign, starting the withdrawal of troopsthat had occupied the Central Asian country,while Mikhail Gorbachev, President of theUSSR since May, had lunch at BuckinghamPalace, shortly before meeting Pope Wojtylain Rome.With the election of Frederik De Klerk inSouth Africa in August, the process ofknocking down another equally hateful wallhad begun: a racial one. Meanwhile, Hungary

started the removal of hundreds of kilometersof border fences with Austria (a gesture thattoday has a bitter taste). Demonstrations of theVelvet Revolution followed in Czechoslovakiain the spring, while the songs of the "SingingRevolution" resounded in the Baltic republics.In Romania, the autocratic regime of NicolaeCeausescu was inexorably disintegrating.But it wasn't just a political revolution. Otherbarriers were falling, in a world that wassuddenly increasingly interconnected: in early1989, Motorola launched the Micro TAC, thefirst real mobile phone, and in the UnitedStates the first commercial internetconnections were established.At the same time the first GPS satellite wasbeginning to orbit the Earth. Privatization andliberalization spread everywhere in Europe,effectively symbolized by the privatization ofthe water sector signed by the Britishconservative government in the summer of1989.Unfortunately, however, there was even moreto the cornucopia of 1989.On 28 June 1989, on the 600th anniversary ofthe Battle of Kosovo, Slobodan Milosevic wasspeaking in the middle of the ethnic Albanianmajority region in Kosovo, in front of aSerbian multitude. He gave a speech praisingpeace, prosperity and unity – but which, infact, constituted the first episode of a tragicconflict destined to ignite the Balkans for adecade, and to turn into one of the most tragicand shameful legacies of that extraordinaryyear.�

THE BOOKBerlin bombarded by candies;hundreds of balloons flying overhead. Ananarchist collective called “Third Berlin.” Portraits of three future leaders and eventsin the daily lives of a few ordinary people.This is Il Muro (The Wall) by FrancescoCancellato (Egea 2019, 144 pages, inItalian, €16).

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Income disparity across regions is one of the causes of therise of populism in Eastern Europe. These disparities are veryoften rooted in history, as in Romania’s case, which wasstudied by Carlo Altomonte.After the fall of the Berlin Wall, the transition to a marketeconomy benefited the country, which received advantagesfrom financial resources transferred from Western Europe.The growth was geographically unbalanced, however.“Every Romanian region was different,” ProfessorAltomonte says. “For strategic reasons, in many EasternEuropean countries heavy industry was located near theSoviet Union border, where factories could be defendedmore effectively.”Investments in service and technology-intensive sectors inbig cities drove the country’s growth after the fall of theBerlin Wall. Meanwhile, in industrial areas, multinationalswere restructuring their operations. This led to job lossesand a rise of political tension. For this very reason, theEuropean Commission allocated €345 billion in 2007-2013 tocorrect these regional disparities.“Regional disparities across Eastern Europe have contributedto the emergence of anti-European parties,” saysAltomonte. “The allocation of European funds has reducedthese disparities, yet they persist. This must be taken intoaccount in the management of the European budget 2021-2027. Lowering resources for regional development could bedangerous,” he says.

CARLO ALTOMONTE Romania andlessons for the EU budget 2017-2027

In the eleven years following German reunification, morethan two million people fled from East Germany to WestGermany. That was not the only immigration wave in late20th-century Germany. Between 1988 and 2001, 2,800,000Germans living abroad returned to their homeland.“What are the effects of these waves of immigration on thelabor market?” Gianmarco Ottaviano asks.“The decision to open the border was made on a purelypolitical, not economic, grounds. It therefore allows us toseparate cause and effect. Also, the arrival of these newworkers allows us to check what happens when immigrantsenter the labor market without any cultural conflict.”According to the analysis of an administrative dataset on theGerman labor force in 1987-2001, native workers were nothurt by immigration, while previously migrated workers,mainly Greeks, Turks and Italians, suffered negativeemployment effects, in particular those with lower levels ofeducation.For every 10 new immigrants joining the German laborforce, two old immigrants lost their jobs. The wage effectswere negligible.The authors suppose that new immigrants and previouslymigrated workers competed for the same jobs. The fact thatthey were not familiar with customs and traditions madethem both unsuitable for jobs that required a high degree ofinteraction with customers.“The German market was highly regulated,” ProfessorOttaviano notes. “So, the wave of immigration impacted onthe employment rate, not on wages. In the absence of theserigidities, adjusting wages would have cost the taxpayer lessthan spending on welfare.”

GIANMARCO OTTAVIANO Impact ofGerman unification on domestic jobs

THE PAPERThe Labor Market Impact of Immigration in WesternGermany in the 1990s by Francesco D’Amuri, GianmarcoOttaviano, and Giovanni Peri.

THE PAPERFirm Heterogeneity and Endogenous Regional Disparitiesby Carlo Altomonte and Italo Colantone.

GIANMARCO OTTAVIANOAchille and Giulia Boroli

Chair in European StudiesBocconi University

CARLO ALTOMONTEAssociate Professor Departmentof Social and PoliticalSciencesBocconi University

CONTEMPORARY HISTORY

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The fall of the Berlin Wall triggered a chain reaction on theeastern side of the Iron Curtain. With the proliferation of newstates, from Estonia to Macedonia, and of entities claiming to bestates, the international community was called on to considertheir membership of the United Nations (UN). One criteria wasthe exercise of control by their government over most of theirterritory. Georgia, Moldova and Bosnia-Herzegovina did notseem to meet this requirement, yet were promptly admitted tothe UN. According to many, the timing was premature.Conversely, Macedonia seemed to satisfy all criteria, yetadmission was delayed for a year. Was a double standardapplied by the UN? “The name ‘Macedonia’ and a flag bearing asymbol said to be linked to Alexander the Great were vigorouslyobjected to by the Greeks, who hinted at war,” says RogerO’Keefe, Professor of International Law. “So the admission ofwhat came to be referred to as the ‘former Yugoslav Republic ofMacedonia’ (FYROM) - now ‘northern Macedonia’ - was put onhold. It looked like a case of sordid politics that had nothing to dowith the law. In reality, the law of the Charter of the UnitedNations was central.” Central to becoming a member state of theUN is the approval of the UN Security Council, which also has“primary responsibility” under the Charter for internationalpeace and security. “Both premature and delayed admissionsreflect the exercise of this responsibility,” Professor O’Keefeobserves. Given that outside states were already occupying partsof Moldova, Georgia, and Bosnia-Herzegovina, not admittingthem would have invited their complete carve-up through all-out war. Their prompt admission secured their legal protection .Macedonia’s admission was delayed because, given the positionof Greece, it would have threatened peace and security. The UNSecurity Council put it on ice and held negotiations to resolve thesituation peacefully. Macedonia was eventually admitted, undera different name, when tensions had cooled.

ROGER O’KEEFE UN played importantrole in recognizing new states

The enlargement of the European Union to include countriesfrom Eastern Europe after the fall of the Berlin Wall causedsome major institutional changes. While it was acquiring(albeit minimal) competencies in foreign policy, the EU hadto reconsider its geopolitical role.The member states have tried to find the best way toprevent the democratic regression of the former SovietUnion and Eastern Bloc countries. The protection offundamental rights and the respect of the rule of law havetherefore been included in the accession criteria and theEuropean Council was given the task of identifying violations. Unspecified sanctions were supposed to beimplemented in the event of a persistent violation.“Thirty years later, these procedures have proved ineffectivein dealing with Hungary and Poland’s anti-democraticdrifts,” says Eleanor Spaventa of the Department of LegalStudies. “The first procedure requires a majority of fourfifths of the countries and can be blocked rather easily. Thesecond one requires unanimity. Also, governments don’tlike to interfere in internal affairs. They do not want toadopt state-specific measures, nor do they want todisadvantage citizens of those countries, feeding an anti-European sentiment.” The European Commission isproposing regulation, requiring a smaller majority of votes,according to which European funds may be suspended incase of systemic violations of the rule of law.The Commission has also suggested that European fundsshould be allocated only to political parties whose membersrespect democracy, the rule of law, and human rights. “These decisions, too, are bound to be met with criticism,”she says. “Enlargement to Eastern Europe meant greateconomic and geo-political opportunities for the EU. Yet thissuccess story is undermined by anti-democratic drifts insome countries. The EU seems unable to react both legallyand politically. It is still unclear if it will find a way to helpstrengthen young democracies.”

ELEANOR SPAVENTA Enlargement tothe East changed the face of the EU

THE PAPERThe Admission to the United Nations of the Ex-Soviet andEx-Yugoslav States by Roger O’Keefe

ROGER O’KEEFEFull ProfessorDepartment

of Legal StudiesBocconi University

ELEANOR SPAVENTAFull Professor Departmentof Legal StudiesBocconi University

A study of the 2010-2012 debt crisisshows that when banks lackedshort-term financing, they reacted byreducing their lending, with a knock-on effect for the real economy

Higher bond spreads did force banksOver the last year, Italy has been threatened

again with rising spreads on treasury bills, i.ethe difference between the yields paid by the

Italian government and the German government totheir bond investors. A rise of the spread signals thatinvestors believe Italian securities are riskier andtherefore of lower value, asking for higher returns(since yields and asset prices are negativelycorrelated). Many commentators argue that due to thehigher spread, Italian banks, which hold about €380by Filippo De Marco @

FILIPPO DE MARCOAssistant Professor

Department of FinanceBocconi University

MARKETS

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THE PAPERBank Lending and the European Sovereign Debt Crisisby Filippo De Marco.

to reduce lendingbillion in government bonds, have increased rates onnew mortgages and reduced the supply of credit tothe real economy.In this context it is useful to examine the experienceof the 2010-2012 sovereign debt crisis, when thespread, not only in Italy but also in Greece, Ireland,Spain and Portugal, reached levels much higher thancurrently. Analyzing the data on sovereign debtexposure of the main European banks, I was able toprovide econometric estimates of whether the banks

most exposed to spread variations actually reducedthe supply of credit to businesses and increased rateson loans in the 2010-2011 period. The reducedavailability of credit has had negative effects onprivate investment, especially by small and youngfirms, which tended to borrow more heavily frombanks with higher exposure.But what are the channels that can damage banksand, ultimately, households and businesses? First, adecrease in the market value of the securities held inthe portfolio can reduce the bank’s capital, forcing itto cut credit to meet capital requirements. However,market losses are only potential, and depend on howthe bank classifies government securities in itsbooks. By simplifying a lot, these can be valuated atmarket prices (Marked-To-Market, MTM) or athistorical prices (Held-To-Maturity, HTM). In theformer case, but not in the latter, a rise in the spreadimmediately impacts the bank’s equity capital.However, it is unlikely that the capital channelworked this way. Stress test data from the EuropeanBanking Authority show that in large part (about50%) banks’ sovereign debt exposure was not MTM.Moreover, even among those MTMs, potential

impairment losses were not accounted for in thecalculation of prudential capital. However,

the banks which were most exposed didreduce lending. How? Potential losseson sovereign debt increased the costof short-term refinancing on thewholesale market funding channel.

In fact, institutional investors who lendfunds to banks react to potential losses,

even if not yet realized. In other words: financialmarkets are not interested in the accountingdefinition of a bank’s sovereign debt exposure, butrather whether sovereign risk exists and if it canappear in the future.In support of this thesis I found that the Americanmutual funds which invested in unsecured securitiesissued by European banks (in particular commercialpaper and certificates of deposits) were no longerwilling to renew their loans to banks, especially ifthey were exposed to the sovereign spread risk.And it was the banks which relied on these marketsfor their short-term funding that cut the supply ofcredit the most. In conclusion: the spread does haveeffects on the real economy through the bankingsystem. �

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When managing alliances,standardizing procedures in a dedicatedunit can help to onboard new partners.But rigidity can destroy valuefor familiar “old buddies”

One size doesnot always fit all

by Dovev Lavie @

MANAGEMENT

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THE PAPERThe Contingent Value of the Dedicated Alliance Functionby Melike Findikoglu and Dovev Lavie.

Adedicated alliance function (DAF) is abusiness unit directly responsible fordeveloping and disseminating alliance

management practices and overseeing thecompany’s alliances. Companies in manyindustries establish DAFs, hoping to createmore value in their alliance relations.However, some studies reveal that a DAF canlimit flexibility and may not necessarilycontribute to the success of alliances. In arecent study, I analyzed more than 15,000alliances, and found that by enhancingstandardization, formalization, andcentralization of alliance managementpractices, a DAF creates value with newpartners, but at the same time, destroys valuewith repeated partners.The DAF enables companies to learn how tomanage alliances, but learning depends alsoon the company’s experience with partners.The DAF can leverage industry best practiceswhen codifying and integrating know-howgained in the company’s various alliances. Ittransforms diverse inputs into standardpractices that can be consistently applied withnew partners, and improve the predictabilityof outcomes. The DAF also facilitatesformalization by codifying tacit know-how,and introducing manuals, checklists, andreview forms, such as those used for assessingprospective partners. This formalization ismost valuable when forming alliances withmany new partners. Finally, by appointing acorporate executive who oversees alliances,the DAF can effectively monitor alliances andintervene in their operations. This isespecially useful when collaborating withmultiple new partners, because centralizationsupports effective application of coherentalliance management practices. The diverseexperiences gained with various partnersincrease the potential value that the DAF cancreate for the company.Paradoxically, the same approach that

enables the DAF to create value with“strangers” (new partners) destroys value inthe company’s alliances with “old buddies”(repeated partners). Specifically,standardization of company-specific practicesmay become suboptimal when applied inrepeated alliances with a partner whosecharacteristics are unique. In these alliances,the company and its partner need to developmutually agreeable partner-specific routines,as IBM’s vice president noted: “It took usnine months to resolve the management stylesbetween us and Siemens. You have to talkabout it, work through it and come toagreement on how you are going to exerciseleadership.” A DAF that instead promotescompany-specific routines may imposerigidity and restrict adaptation to the uniqueneeds of such a partner. Efficiency comes atthe expense of flexibility and adaptability inthis case. Moreover, the DAF’s formalitycounters the informal nature of repeatedalliances with the same partner, in whichmutual trust, social embeddedness, andcommitment evolve naturally. A partner withwhom the company has built trust and formedinterpersonal ties may be discontented byformal practices. This creates tension thatundermines trust and collaboration. Finally,the centralization imposed by the DAF cangenerate tension between the corporate officeand alliance managers. As an alliancemanager noted: “You cannot do that from thecorporate office. I am here every day. I havelunch with these people, I go out with thesepeople. You can gain a lot of access just bywalking down the hall.” Hence, thecentralized practices may be disconnectedfrom the alliance’s actual needs.In sum, the DAF enhances standardization,formalization, and centralization of alliancemanagement practices, which can underminerelational mechanisms that evolve withpartner-specific experience. By introducingcompany-specific practices that conflict withpartner-specific routines that were jointlydeveloped with some partners, the DAF maydestroy value in repeated alliances with thesepartners. Companies that form alliances witha diverse set of partners can benefit from aDAF, but those that repeatedly ally with aselect group of partners may not gain fromthe DAF, and may want to restrict it. �

DOVEV LAVIEFull ProfessorDepartment

of Managementand Technology

Bocconi University

1551-2/20

by Angelo Ditillo and Angela Pettinicchio @

Academic research on the role of auditors in guaranteeing accurate financialinformation is now homing in on demographic composition of auditing teams. A morediverse mix improves the quality: something to keep in mind when selecting a team

To achieve an effective audit,ACCOUNTING

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Financial reporting plays a decisive role inensuring the efficient functioning of capitalmarkets, since it is a staple of the decision-

making process of investors and stakeholders, whichin turn is aimed at optimizing the allocation ofsavings. The accounting scandals that have sweptinternational markets since the year 2000 show howinformation asymmetry between companies andmarkets can arise from incomplete andmisleadingfinancial communication, and that it can generatedevastating economic impacts.For this reason, international legislators andacademic researchers have focused their attention onthe role of auditors in expressing independentjudgment on the reliability of corporate informationreleased to themarket. The purpose is to studypotential tools that can improve the quality andtransparency of companies’ balance sheets.Whileacademic literature focused on auditing firms at first,in order to determine which of their characteristicscould positively influence the quality of the auditingservices provided (for instance, consultancy size),over the last decade the level of analysis has gottenmore specific, focusing on key offices and, finally, onindividual auditors.In this regard, it was shown that the demographiccharacteristics of signatory partners, above all theirgender, can have a decisive impact on the quality ofthe audit provided (and, therefore, indirectly, on thequality of financial information disclosed by the clientcompany). It should be kept inmind, however, that

individual auditors do not operate in isolation, sincetheir work is by necessity influenced by theinteractions and social dynamics present in workteams. In a recent paper co-written withMaraCameran, published inEuropean Accounting Reviewin 2018, we have uncovered which key features ofauditing teams have a positive impact on the qualityand efficiency of company audits. In particular, thedata show that a higher percentage of work hours ofpartners andmanagers assigned to an audit in theearly stages of the consulting relationship has anegative impact on the quality of the audit, while thiseffect becomes positive as the duration of therelationship with the client company increases. Thisresult can be explained by considering that a highernumber of hours assigned to partners andmanagerscorresponds, in relative terms, to a lower number ofhours assigned to seniors and staff, which actuallycarry outmost of the technical work. And the focuson technical aspects is of particular importance in theearly stages of the assignment, as it is necessary todeepen knowledge of the client being audited. Inaddition, the diversity of partners andmanagers in terms of training and gender in the workteam has a positive impact on the quality andefficiency of the auditing of financial statements. Theresults are primarily relevant for auditing companiesin terms of their personnel selection policies andorganization of their auditing activities.Furthermore, they have implications for theinternational bodies which set auditing andaccounting standards and in the last few years haveunderlined the importance of the characteristics ofauditing teams for the quality of financial reporting.This could lead to the definition of standards for theselection of individuals that are assigned to thevarious auditing tasks, in order to increase the qualityof external audits on companies’ accounts.�

ANGELO DITILLOAssociate Professor

Departmentof Accounting

Bocconi University

ANGELA PETTINICCHIOAssistant Professor

Departmentof Accounting

Bocconi University

select a mixed team

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THE PAPERAnauditing team’s composition and impact on reporting is thetopic examined by Mara Cameran, Angelo Ditillo and Angela Pettinicchioin Audit Team Attributes Matter: How Diversity Affects Audit Quality

Investmentin renewableenergy sourcesis overtakingspending on newcoal- and gas-firedplants. But it is stilltoo soon to talkabout abandoningfossil fuels.Here’s why

Rewable energy sources still

In 2017, according to the OECD-affiliatedInternational Energy Agency (IEA), investment inrenewable energy plants represented two-thirds of

total spending on new generation capacity installedworldwide, surpassing investment in new coal-firedpower plants. Not surprisingly, therefore, according toa recent report compiled by UNEP (United NationsEnvironmental Program) and Bloomberg New EnergyFinance, in 2017 alone, about $160 billion was spentglobally to install 98 GW of new solar capacity (+18%compared to the previous year) as compared to the 70GW added to gas- and coal-powered electricitygeneration at the cost of about $70 billion.Interestingly, $49 billion of the $160 billion spent onsolar went to build small-scale photovoltaic systems,i.e. a power capacity smaller than 1 MW, mostly fordomestic consumption and connected to the gridbehind the house meter. Looking at the near future,IEA estimates that between 2017 and 2023 theinstalled capacity of electricity generation comingfrom renewable energy sources will increase by 43%,while green energy will increase its share from 25% to30% of the global electricity generation mix. Despitehaving recently lost the leadership for investment inrenewables in favor of the United States, China andIndia, Europe maintains the lead in havingunderstood and started the decarbonization of itsenergy system earlier than the others through policiesand incentives aimed at particularly ambitiousenvironmental targets: according to EuropeanCommission projections, the share of electricity in theEU coming from green sources will increase from25% in 2009 to 55% in 2030.In Europe, the renewable energy revolution since2009 has gradually undermined the traditional utilitymodel that relied on large gas or coal plants forelectricity generation and distribution through thegrid to end users. However, this does not mean thattraditional power plants must be shut down, as theircontribution is still needed for several years to come.

by Matteo Di Castelnuovo @

MATTEO DI CASTELNUOVOAssociate Professor

of PracticeDepartment of Economics

Bocconi University

ENERGY

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need a hand from fossil fuels

In fact, as EU countries increase the percentage ofenergy produced from intermittent renewable sources,they will have a greater need for reserve capacity. Inparticular, most scenarios see gas continuing to play acritical role in electricity generation for a number ofyears, both as a substitute for the much morepolluting coal-fired plants, and as a reserve bufferwhen the wind does not blow or the sun does not shineand there is no sufficient storage capacity (e.g.batteries). An analysis of grid operators belonging toENTSO-E shows the potential risk of energy scarcityin certain Italian areas after 2025.Therefore several EU countries have introducedcapacity remuneration mechanisms, which meansthat financial incentives are given to operators toguarantee the availability of the power supply in thefuture regardless of whether the plant has the turbinesgoing or not, in order to ensure energy security. TheEuropean Commission has finally approved capacitypayment measures put forward by France, Germany,Belgium, Greece, Poland, and Italy. The choicebetween the various remuneration mechanisms iscomplex and their implementation must be carefullymanaged and, especially, monitored, because theseare economic tools capable of having a significantimpact on the fixed components (not being linked tovariable costs) of electricity bills paid by consumers.What’s worse, they interfere with the efficiency of thewholesale electricity market. From this point of view,it is positive that the new European ElectricityMarket Regulation introduces stricter rules onelectrical capacity, including a limit to emissions of550 grams of CO2/kWh, which effectively excludesthe most polluting fossil-fueled plants from themechanism. The hope is that this EU regulation willcontribute to better trade-off between security ofenergy supplies and reduction of carbon emissions.The Old World has begun the transition towards amore innovative and sustainable energy system, but itwill still need help - limited in time and cost - fromsome of the old carbon-based technology. �

by Emanuele Elli @

1591-2/20

The renewable energy revolution is gaining speedby challening the traditional utility models ofelectricity generation. In Europe the transition is

fully underway, according to OECD data compiled bythe IEA. But also in the rest of the world, investmentin renewables already accounts for the lion’s share ofnew capacity added in power generation. The ReFeelGroup, an integrated and independent energyoperator founded by three Bocconi alumni a decadeago, understands this well. It works in variouscountries around the world to provide innovative andsustainable solutions for energy efficiency and thedevelopment of renewable sources.“ReFeel was born a long time ago, from the dream Ihad at an early age to achieve sustainable self-sufficiency, for example by making things out of foundobjects,” says Carlo Maria Magni, Bocconi alum(Class of 1988, Economics), entrepreneur andfounder. “The dream then became an ambition whenthe enrgy market changed in a revolutionary,disruptive way. We began as a startup and today weare in a number of countries on several fronts, byoffering the construction of renewable energy powerplants from scratch, as well as management anddevelopment of existing electricity generation plants,and new solutions for energy efficiency andsustainable mobility.”

Carlo Maria Magni, entrepreneur and Bocconialumnus, sees “still plenty of opportunitiesin the energy market for technology and services”

The time is ripe forenergy startups

� What is the approach to renewable energyyou have found in developing countries likeColombia, Costa Rica, Panama, etc.?Our approach consists in seeking to maximize localpotential, not only in terms of market opportunitiesbut also local resources. For this reason, we developthe collaboration between the central team and localones, because only they are able to interpret andmanage the dynamic of the host country. At themoment in Latin America, for example, there is a lotof activity, and renewable energy sources havebecome the natural answer to growing energydemand. The phenomenon is similar to whathappened with the arrival of mobile phones, whichenabled developing countries to sidestep the costlylaying of landlines. The technical capability andexperience are still lacking and there is strongopposition coming from conventional fossil sources.�There are areas, such as mobility, wherethe issue of renewables is very important, andothers where it fails to capture the public’sattention. How is your business influenced bythe interplay of energy trends, politics,media, and marketing?The media mainly care about appealing images: abuilding’s heating system is not catchy, while abeautiful electric car attracts more interest. LatinAmerican media tend to work in the same way,although, in my opinion, the low quality of Italianmedia and of people’s communication on social

media is worrying, andeven more so is the

level of functionalilliteracy, which isthe worst inEurope. Havingsaid that, I believethat people reallywant greatersustainability,understood as

cleaner air and water, and, more generally, a worldthat can be hospitable to and habitable by futuregenerations. Today, the world’s cities, where 50% ofthe global population is concentrated, are becomingincreasingly inhabitable. The planet is becomingless and less welcoming, as an unpredictable anddangerous climate crisis looms over the horizon.Renewables can make the difference and improvethe situation. Zero-emission mobility is certainlyone way to get there, but there are many other areaswhere policy and businesses can have beneficialimpacts.�From your point of view, therefore, isrenewable energy still an area where newstartups and business ventures can emerge?The renewable energy market, and more broadlyenergy sustainability, is a huge and constantlychanging industry. There are plenty of businessopportunities in areas such as: market expansion oftechnological solutions already being tested;development of new service models in a market thatis changing the traditional distinction and dynamicbetween producer and consumer, by evolvingtowards Prosumer Energy Systems; energyoptimization as service to the final user that needsto be enhanced in terms of advanced integration andenvironmental comfort (Energy PerformanceContracts); the increasing availability of data tomake energy systems more responsive/ adaptive(Smart Energy Systems).�How does renewable energy affect thebusiness models of new operators entering themarket compared with industry incumbentsrelying on conventional sources?Renewables can be integrated in a world refusing tobe divided into different areas of production,commerce, recreation, and habitation. In my view,our society is looking for something more varied,and is less willing to sacrifice scarce land foreconomic function. Renewable energy sources makethis increasingly feasible. Thanks to their lowenvironmental impact and modularity, these sourcesallow distributed energy production, whileminimizing the need to connect electricitygeneration plants with final demand by way ofkilometers of power cables. In this, energy is a bitlike tomatoes: growing them in China so that theycan be eaten in Milan is something that doesn'treally make any sense. �

CARLO MARIA MAGNIManaging Director of ReFeel, 44.In 1998, Magni earned a PoliticalEconomy degree from Bocconi

and wrote his thesis at the WorldBank in Washington DC,

developing an algorithm thatcalculated how long it takes newtechnologies for the production ofrenewable energy sources tobecome competitive. ”This

opportunity had a huge impacton my future career goals. Today Iam fortunate enough to be doingwhat I dreamed of at age 20: tobring the best sustainable energysolutions to developing countries.My experience at Bocconi has

given me important andformative friendships. I havefriends all around the world,some of them I have known foryears. Being able to comparenotes with people you’ve known

for 25 years is a fantasticopportunity. My partners atReFeel, who are also friends,went to Bocconi too. Sharing

success and good times, as wellas overcoming the tight spots, iseven more rewarding becausethere are three of us. In terms oftraining, I have to thank Prof. TitoBoeri, who helped me go to theWorld Bank and gave me theunforgettable experience ofteaching a few lessons at

university. And I must mentionProf. Remy Cohen, who was mybiggest sponsor. We have

remained in touch since my veryfirst internship.”

ENERGY

CULTURE INDUSTRY

1621621-2/20

Digital music opens up pop

Compared to the days of vinyl or CD, in the era of digital music a greater numberof artists are reaching the charts. But the top spots are still dominated by just a few

Music consumption has undergone one of thedeepest transformations of all industries inthe last thirty years. It has progressively

changed from a market where content was sold as aphysical good (vinyl records) purchased and ownedindividually, to one where the physical support hasdisappeared and recorded music, now in digitalformat, is no longer owned by the listener, who onlypays for the right of access to a large catalog ofmusic content (e.g. Spotify).This phenomenal technological transition did nothappen overnight. The music market went throughseveral phases over the last thirty years: the vinylrecord dominated production and consumption untilthe early 1980s, when it was replaced by thecompact disc. Then in 1999, in an innovationintroduced by an American student, Napster madeit possible for users to listen to music for freethrough the sharing of the music files stored on theirhard disks via the Internet.The recording industry fought back with a longseries of lawsuits for copyright infringement. Thenin 2004 a new operator (Apple) entered the marketand proposed a legal way to consume and purchasemusic in a digital format: paid downloads. Andsince the early 2010s, music consumers no longerhave to buy and download music files, but simplypay for access to individual songs, records,compilations, and enjoy fruition of endless onlinecatalogs without obtaining ownership of content.This Copernican revolution in music consumptiontechnology has dramatically changed the scenario

for record companies. But how has the attitude ofcompanies changed towards the "content" of music?In other words, has technology also changed theprocesses of artistic selection, offer and promotionof artists?A study focusing on Billboard charts from 1974 tothe present day has revealed that the digitaltransformation introduced at the turn of the 2000shas increased market differentiation in the popmusic industry, as reflected by the larger number ofsongs which made it to the charts in this sub-period.In essence, the advent of Internet technology seemsto have increased the chances of success forindividual artists, thus “democratizing” popularityto a degree.The increase in content differentiation has gonehand in hand with another phenomenon, alsoconnected with technological change: the rise of theartistic collaboration known as “featuring” (feat.),i.e. the presence of "guest" artists singing and/orplaying in other artists’ pop songs. Looking at theUS charts, “featuring” seems to have facilitated thesuccess of a larger number of musicians, and itworks better when it combines artists coming fromtwo different musical genres.Despite signs of greater openness anddifferentiation generated by the digitization ofmusic, when we repeated the same kinddifferentiation analysis, narrowing it down to theTop 10 Hits in the Billboard charts, we found therewas not the same decrease in variance over theperiod considered. This means that when it comes tomajor hits and most popular artists, technology hasnot fundamentally changed the mechanics of accessto pop stardom: the new digital format has allowed agreater number of songs and music artists to enterthe market for pop hits, but there has been noequally enlarged access to the top positions ofmusic rankings, which have remained theprerogative of a few big hits by few big stars.If we wanted to sum up all this in a sentence, wecould say that technology has significantly changedmusic consumption and differentiated the forms ofaccess to the music market, but has only marginallychanged the percentage of artists finding success.There hasn’t really been a change of tune at the topof the charts. �

by Andrea Ordanini @

ANDREA ORDANINIFull Professor

Department of MarketingBocconi University

1631-2/20

THE PAPERThe “Featuring” Phenomenon in Music: How CombiningArtists of Different Genres Increases a Song’s Popularity byAndrea Ordanini, Joseph Nunes and Anastasia Nanni.

THE PAPERFrom Fewer Blockbusters by More Superstars to MoreBlockbusters by Fewer Superstars by Andrea Ordanini andJoseph Nunes.

charts to more new artists

Starting in 2014, Italian listed companies,or at least some of the 300 that arepublicly traded, started to look at ways to

reward their shareholders. But it was not, asoften happens, in the form of an extradividend, perhaps tied to exceptional businessperformance. They opted instead for thestrategic choice of rewarding shareholdersloyal to the company.And in spite of the obvious capitalist logicwhich drives the normal operations of joint-stock companies, the premium in question isnot a monetary one. In fact, the decision thatmany companies have considered, and somehave implemented, was to include a clause inthe corporate statutes to reward a certain classof shareholders by giving them extra powers.What does the loyalty of an investor consist of?The shareholder who believes in the companystays in for the longer term. The long-termshareholder pursues a buy-and-holdinvestment logic in contrast with those whoseek short-term returns on equity markets.Thanks to a base represented by loyalshareholders, chief executives are free topursue value-creation strategies and invest ininnovation and R&D, without undergoingexcessive market pressure.And what is the premium? The premium,really, is superpower. In terms of corporatelaw, it means being able to "weigh" more inshareholder meetings, or having additionalvotes when, for example, appointing directorsor approving financial statements.The question was posed in 2014. That was theyear, as some may recall, when Fiat ChryslerAutomobiles CEO Sergio Marchionne, choseto relocate the company’s HQ to theNetherlands, partly because the Dutch systemallowed a “loyalty” premium to assign morethan one vote per share.The reaction of the Italian government,worried that other companies could followsuit, was not long in coming. With a decreepassed in the summer of 2014, loyalty shareswere introduced for listed companies,consisting of a mechanism based on theregistration of shareholders who could doubletheir voting rights if they held onto shares formore than twenty-four months. The premium

by Chiara Mosca @

With the introduction in2014 of loyalty sharesawarding extra votingrights, controllingshareholders can nowdominate an EGM

Superpowers for loyal shareh

CHIARA MOSCAAssociate ProfessorDepartment of Legal

StudiesBocconi University

CORPORATE LAW

1641641-2/20

does not have any (direct) economic value, as itcannot be transferred, and expires when sharesare sold. The mechanism is comparable, in allrespects, to a control-enhancing mechanism(significantly strengthening the power of thosewho already have controlling stakes in thecompany), but subjected to some sunset clauses(such as forfeiture in the event of a sale).To tell the truth, if one looks at theinternational scene, double voting rights are notan Italian novelty.A similar loyalty award has existed in Francesince 1933, and was recently transformed (in2014) into a rule that is automatically valid forall companies, unless a different corporategovernance choice is made.But it is still difficult to deny that this isrevolutionary in corporate democracy. While inpolitics weighing votes according to voterswould be taboo, European business (in France,Italy and recently in Belgium) is experimentingwith instruments that, bypassing the one share-one vote rule, assign more votes to loyalshareholders who are more invested in thegrowth of the company.In Italy, the measure has by and large beensuccessful. There are currently 45 listedcompanies that choose to reward long-termshareholders (according to CONSOB figures).The empirical analysis shows that, in almost allcases, these are companies where controllingshareholders have acquired, or are set toacquire, voting superpowers.In particular, from an analysis conducted on thecompanies that had adopted double votingrights by October 2018, it emerges that this hasallowed controlling shareholders to dominatenot only ordinary shareholder meetings but, inmany cases, also extraordinary ones. �

holders no longer a novelty

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THE PAPERShould Shareholders Be Rewarded for Loyalty? EuropeanExperiments on theWedge Between Tenured Voting andTakeover Law, by Chiara Mosca.

BOCCONI@ALUMNI

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166

Alumni leaders confess the

by Andrea Celauro

Who are your heroes and whoelse would you be if youcould? What film reminds youmost of your on campusyears? If Bocconi were a dish,what would it be? These aresome of the ten out-of-the-boxquestions that we askedChapter Leaders, TopicLeaders, and Class Leadersof the Bocconi AlumniCommunity. The result is avery very special edition of theQuestionnaire.

If youweren’t yourself, whowould you like to be?�An animal. (SandraDonelli)�A rock star! But the trulyinspiring type - the kind ofpopstar that keeps makinggoodmusic year after year,without indulging in drugs orother forms of excessivebehavior. A bit like BruceSpringsteen, to name one.(Vittoria Villa)�Bill Gates. (Paola Berton)�Oscar Farinetti. (FabrizioIaconetti)� I would like to be amusical dancer. (FrancescaPaolino)�I like the way I am, Iwouldn’t trade places withanybody. (StefanoModena)�Robby Naish at 30. (MarcoGuazzoni)� I would like to be a vintnerand seemy vineyards prosperfrom the top of the hill.(Claudio Zamagni)�RobertoMancini.(Francesco Arduini)� I’d like to be either amusician or producer ofEasternMediterraneanmusic. (Kerim Gurkan)� The leader of a country(but only for a limited time - Ilove to have a private life).(Pietro Macchiarella)� Somebody whosignificantly contributes tothe sustainable well-being ofpeople. (Andrea Carissimo)� ThomasMore. (GiovanniDi Francesco)�An actor. (Giulio Saitta)�Mario Draghi, who had thelucidity and resolve toweather the perfect stormwith his “whatever it takes.”(Ferdinando Ferrari Bravo)� Someone who left the

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eir passions to Ferdinando

world a better place than hefound it. (Paolo Barbanti)�Apolicymaker. (FabrizioSechi)�President of the “UnitedStates of Europe” (i.e. of aeconomically and politicallyfully integrated EuropeanUnion). (Umberto Prandi)�Apianist. (MaurizioCohen)

Music, books andmovies:which ones do you associatewith your Bocconi studentyears?� The bookMarketing&Control by RichardM.Wilsonand Antonella Cugini.(Donelli)�Music by Iggy Pop. It talksabout a female leader in anironic, iconic, assertive andlight yet meaningful way -like Bocconi shows us we canbe. (Vittoria Villa)�Dead Poets Society.(Berton, Francesco Cometa,Fabrizio Sechi and AnitaLombardi)� AnOfficer and aGentleman. (Iaconetti)�Queen.When I wasstudying finance at Bocconi, Ihad no time for reading booksother than textbooks. Movie:TheWolf of Wall Street.(Paolino)�Dire Straits and the movie9½Weeks. (Modena)� Avengers: ready to save theworld working as a team.(Guazzoni)�Zen and the Art ofMotorcycle Maintenance byRobert Pirsig, while listeningto Concerto Pour laMainGauche byMaurice Ravel.(Zamagni)�Chariots of Fire. (ValeriaVerdini and Barbanti)

� TheItalianpop artistsLigabue andSamuele Bersani.(Arduini)�Forrest Gump! Afantasticmovie that I watchedwithmy college sweetheart.Also a reminder that we alwayshave to run. (RobertoDeMeo)�Rocky, the soundtrack. Iused to play it over and overduring the last rush ahead offinals. (Macchiarella)� Themanagement bookBlue Ocean Strategy. (SvevaPolispermi)� ThemovieZeitgeistAddendum. (Paolo Lombardi)� The Rocky Horror PictureShow. (Andrea Carissimo)�Don’t You Forget About Meby SimpleMinds. (DiFrancesco)�Music: The soundrack toTrainspotting. Book:BlueOcean Strategy. Film: TheBig Short. (Ferrari Bravo)� The bookBe Stupid by

Renzo Rosso.(Jacopo Cecchi)

Of all the people youmetthrough Bocconi, whomwould you travel with andwhere to?�WithMarioMonti to NewYork. To uncover the hiddensecrets of the world offinance. (Donelli)�My classmates! I would befine to go anywhere with themas long as we are together. Iguess they’d opt forsomewhere warm and nice,with beaches and cocktailsand lots of music. (Villa)�With Gianmario Verona toSilicon Valley. (Iaconetti)

Andrea CarissimoMadrid Chapter Leader

Anita LombardiEMBAS 8 Class Leader

Francesco ArduiniMBA 35 Class Leader

Claudio ZamagnMBA 13 Class Leader

Elisabetta PeroLegal Topic Leader

Fabrizio IaconettiMBA 16 Class Leader

BOCCONI@ALUMNI� The whole gang of Bocconialumni leaders! I’d take themto Dubai. (Paolino)�Withmy girlfriendSimonetta to SouthernSardinia (Teulada Cape), tohave her unwind and smile abit. (Zamagni)�All my classmates.(Verdini)�Vincenzo Dedè, myclassroom pal. (Arduini)� I’d takemy dearMBAcolleague AdamAdamosi toNaples to watch La Traviataat San Carlo theater. (Gurkan)� I met two of my bestfriends in Bocconi. I wouldtake both of them for a fun-filled week on a beach inMexico. (Macchiarella)�Marco Dellernia, in

Argentina.

(Di Francesco)�Prof. Biaggi because hewas so interesting to listen to.(John Taylor)�All together toMiami.(Saitta)�Riccardo on a sailing boatin theMediterranean andDomitilla in the Alps withoutInternet connection. (FerrariBravo)� Prof. Giorgio Invernizziand his “polenta recipe.” I’dtravel with him everywhere, todiscover how versatile hismetaphor is for business.(Anita Lombardi)�Withmy classmatestravelling... Back to theFuture! (Barbanti)�GianfrancoMinutolo to theFar East, for networking anddevelopment. (Sechi)� I would take GiovanniSoltoggio to Argentina.(Prandi)

What if Bocconi werea dish?

� Parmigiana,my favoritedish.

(Elisabetta Pero)� Salmon with chives.(Donelli)�Caviar. (Anthea SpuriZampetti)� Pizzaaaa!!! It is Italy’s andthe world’s favorite food. It isdeceptively simple to make,with only three ingredients,but it’s good, nutritious, andhealthy as long as theingredients are genuinelyfresh. Bocconi is the bestpizza. (Villa)�Whole wheat penne withtomato and basil. Good andperfect in their simplicity.(Iaconetti)� Sorrento-style gnocchi! Asimple and delicious dishwhere the end result mainlydepends on the quality of theingredients! (Paolino)� Penne arrabbiata.(Cometa)�Milanese risotto withossobuco: a bit heavy, but sogood. (Zamagni)� Sage-and-butter ravioli.(Arduini)� Tajarin with white truffles -timeless distinction.(Gurkan)�A tasty fusioncombination. (DeMeo)� Steak with fries.(Macchiarella)�Mixed salad. (Lombardi)� The finest starter, creatingappetite for the rest of thecourse. (Kyoko Shinonaga)� Timbale of macaroni, fullof surprises. (Carissimo)� Filet mignon à lamoutarde. (Di Francesco)�A lasagna dish. (Saittaand Barbanti)� Surely a club sandwich: it’scosmopolitan (you can find itanywhere), nutritionallycomplete and balanced.(Ferrari Bravo)� Polenta served with manyideas and connections, ofcourse. (Anita Lombardi)�A fusion recipe. (FabrizioSechi)

� Tiramisu. (Prandi)

Who is your hero? Andwhileyouwere a Bocconi student?� I look up to no heroes.(Donelli)� Julius Caesar. ChristopherColumbus. After studying atBocconi, Mario Draghi. Self-made people, managers,condottieri, visionary, ironic,attractive. Leaders. Historywill decide about Draghi, butit already gave its verdict onCaesar and Columbus. (Villa)� John F. Kennedy. AtBocconi, Vittorio Coda.(Iaconetti)�AudreyHepburn!(Paolino)� SergioMarchionne andSteve Jobs. (Guazzoni)�Hans Rosling, author ofFactfulness, a beacon of lightin the current ignorance anddarkness. But my hero wasPrince during my studentyears. (Zamagni)�Yvon Chouinard(Patagonia), for turning hispassion into a responsiblebusiness. (Gurkan)�Mario Draghi, ever sincethe time hemet with usBocconi students. (DeMeo)� Silvio Berlusconi. In spiteof all his flaws and recentmishaps, he’s the bestentrepreneur Italy has everseen. (Macchiarella)�Batman. (Lombardi)�Andreina Longhi, founderand CEO of Attila.(Shinonaga)� Superman. (Saitta)�Until college it was DylanDog, the horror detective,then it became vice presidentAl Gore because he was thefirst to put climate changeand the greenhouse effect atthe forefront of the politicalagenda. (Ferrari Bravo)�At Bocconi, my hero wasRobert Swanson, thevisionary founder ofGenentech. (Barbanti)

Ferdinando Ferrari BravoEMBAS 14 Class Leader

Francesca PaolinoArabian P. Chapter Leader

Francesco CometaFrankfurt Chapter Leader

Giulio SaittaEMCFB 5 Class Leader

Jacopo CecchiBoston Chapter Leader

Kerim GurkanIstanbul Chapter Leader

1691-2/20

What are youmost proud ofin your private life?�My family. (Pero,Guazzoni)�Myself. (Donelli)�My daughter. (SpuriZampetti, Arduini and Sechi)� To have been true to myvalues: honesty, correctness,self-improvement. I loveBocconi because it mirrorsmy values. (Villa)�My son. (Berton)�My family, andmyintegrity and autenticity.(Iaconetti)�My communication skillsand the good care I take of myfriends (also the other wayaround). (Paolino)�All the experiences I hadall across Europe. (Cometa)�Mywife and children.(Modena)�A stable family, sensiblechildren and plans for thefuture with my wife.(Zamagni)�My family relations: aloving wife, a beautifuldaughter, my relatives andhaving a close friendships allover the world. (Gurkan)�That I managed to moveout of Italy and built asuccessful life in the US.(Macchiarella)�Whenever, besides family,

friends and an interesting job,I need to take care of theBocconi Alumni Communityand be taken care of by them.(Shinonaga)�My children. (Carissimo)�My two children. (DiFrancesco)�Having travelled and livedin many countries. (Taylor)� Freedom. (Saitta)� Seeing many of my dreamsas a child come true. (FerrariBravo)�My daughter. Intelligent,resilient, cheerful. She is mysplendid spur. (AnitaLombardi)�Not having forgotten wheretrue lifetime values lie.(Barbanti)� Family and friends.(Cecchi)�Developing a globalnetwork of friends with mywife and children. (Prandi)

And in your professional life?�My achievements. (Pero)�Growth of the people onmy staff. (Donelli)� The achievements madewithout nudges. (SpuriZampetti)� That I did it all by myself(with the help of talents Godgaveme). I like Bocconibecause it gives you the skills

andassetsto do it.(Villa)� That I treatmy customerswith humility.(Berton)�Ofmymanifold passionsand that I like challenges(even too much). (Iaconetti)�My tenacity. (Paolino)� The resilience I developedthanks to many jobexperiences. (Cometa)� The willingness to go outthere and get your handsdirty. (Modena)�My past experience asGeneral Manager. (Guazzoni)�My company - inspired byadult learning - like VincenzoPerrone taught me.(Zamagni)� The position I hold.(Arduini)� I started a business withmy dad andmanaged to sell itafter 5 years. It was great to beable to develop it fromscratch, work together andfinalize it with a reward.(Gurkan)

�Experienced asuccessful internationalcareer working in 4 differentcountries. (Macchiarella)� That I savedmycolleagues’ jobs whenmybank’s parent company askedme to close the branch andfire everyone. (Roberto DeCardona)�My adaptability.(Carissimo)�Having createdmy ownbusiness. (Di Francesco)�Owningmy own company,my free time. (Taylor)� Independence, loyalty.(Saitta)� That I keep reaching thenew goals I set for myself.(Ferrari Bravo)� I’m inmy third

Kyoko ShinonagaTokyo Chapter Leader

Marco GuazzoniEMBAS 3 Class Leader

Roberto De CardonaMBA 4 Class Leader

Pietro MachiarellaDallas Chapter Leader

Maurizio CohenMonaco Chapter Leader

Paolo BarbantiMBA 15 Class Leader

Paolo LombardiMBA 30 Class Leader

thatkickstarted all the successesin my life. (Macchiarella)� “The School.” (Lombardi)�Adoor open to the bluesky. (De Cardona)�Ahub of personal andcareer stimulation.(Shinonaga)�My secondmummy. (DiFrancesco)� School of life, source ofinspiration, and pool offriends. (Ferrari Bravo)�A stream that channelspassionate and diverse ideas,and leads to open waters ofopportunities. (AnitaLombardi)�Aplace I have never leftbehind. (Barbanti)�A source of inspiration andan occasion for debate.(Sechi)� Italian excellence (Cecchiand Prandi).� Personal growth, training,networking. (Polispermi)

�Knowledge.(Donelli)�Anetwork. (SpuriZampetti, Guazzoni andSaitta)�ABocconi MBAwas onemy dreams which I had theluck to achieve. Tome,Bocconi is a place wheredreams become possibilitiesand you gain the skills to turnthem into reality. (Villa)�A lifetime chance and aglobal business card. (Berton)�A living community and anidea factory. (Iaconetti)�My adoptive Italian familyaccompanying me around theworld. (Paolino)�Achieving one’s dreams.(Cometa)�Giving back. (Cohen)� The pillar of my cultureand education. (Modena)�Bocconi has been anelevator for upwardmobility.Bocconi gaveme lot and Ishall be forever grateful.(Zamagni)�Home. (Verdini)�A growth accelerator.(Arduini)�A core part of my identity.(Gurkan)� The original launch ramp

BOCCONI@ALUMNI

1701701-2/20

professional life, who knows?(Lombardi)�Having helped somebodyachieve their dreams.(Barbanti)� The professional growth ofmy collaborators. (FabrizioSechi)

If youwere a character in afairy tale, which onewouldyou like to be?�Avatar. (Donelli)� Peter Pan. (Spuri Zampettiand Guazzoni)�Heroines usually end uptragically. I prefer true-lifemodels, like ChristineLagarde. (Villa)� The Lion King. (Iaconettiand Arduini)�Ariel, the little mermaid.(Paolino)� Prince Charming.(Modena and Saitta)� Jack and the beanstalk heuses to climb the sky, face thegiant and bring prosperityback to his country.(Zamagni)� Simba from The Lion King- it’s all about having thecourage to come back!(Gurkan)� The Ugly Duckling.(Macchiarella)�Eikichi Onizuka.(Lombardi)�Alice inWonderland. (DiFrancesco)�Quasimodo, thehunchback of Notre Dame, torestore the church after the2019 fire. (Ferrari Bravo)� TomThumb: he learns touse his intelligence, sight andears to improve the lives ofhimself and his loved ones,which is cool. (AnitaLombardi)� The protagonist inMasterand Commander. (Barbanti)

What could you never dowithout?�Nature. (Donelli)� Traveling. (Spuri

Zampetti)�Myself. (Villa)� Playing. (Iaconetti)�Music. (Paolino)� The sun and the sea.(Cometa)�A good whisky. (Modena)� Sports. (Guazzoni andCarissimo)�Mywatch and anastronomymap to tell aboutconstellations while lying onthe grass. (Zamagni)� Inter football team.(Arduini)�Dignity. (Gurkan)�A good book in mybackpack (yes, I dig books onpaper). (DeMeo)� The Internet!(Macchiarella)� Internet neutrality.(Lombardi)� Traveling across variouscities to discover things thatare different and taste thecuisine. (Shinonaga)� Integrity. (Taylor)�Setting challengingobjectives for oneself.(Saitta)�A good espresso (no sugar)reading the newspaper,possibly looking out at thesea. (Ferrari Bravo)�Coffee, the sea, a book, myMac. (Lombardi)� The values I was taught.(Barbanti)�My dearest friends. (Sechi)� Family and friends.(Prandi)

For you, Bocconi is...

Roberto De MeoMoscow Chapter Leader

Sandra DonelliEMBA 6 Class Leader

Stefano ModenaGovernance Topic Leader

Sveva PolispermiNapoli Chapter Leader

Umberto PrandiMunich Chapter Leader

Vittoria VillaGEMBA 8 Class Leader

Bocconi University Press

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PSYCHOLOGYOF THE ASSOCIATED MINDS

Carlo Cattaneo

Edited by

Barbara Boneschi

Foreword by

Carlo Lacaita

WORKINGWITHTHE FUTURE

Roberto Poli

W

Ideas and Tools to Govern Uncertainty

DESTINATION

2050

Cristina Pozzi

D

A Practical Guide to the Future

Young Global Leaders 2019-2024 of the World Economic Forum

Francesca Romana Rinaldi

F

Reshaping the FutureThrough Sustainability and Responsible Innovation

Foreword by

Matteo MarzottoAfterword by

Matteo Ward

THE AGE OFSHARP POWER

Paolo Messa

T

The infi uence of China, Russia and Iran abroad: the Italy case

Introduction by

Francesco BechisI

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