Responsible financing: You don’t have to be a star to play a major role
What if social and environmental issues are given greater voice via targeted financing, even on a small scale? A study of the French film industry carried out by Rodolphe Durand and Julien Jourdan shows that a minority participation of investors with an unconventional logic can significantly change the market.
Rodolphe Durand and his co-author focused on the French film industry, where two modes of thought exist side-by-side: the traditional mode revolving around co-financing by the French government with a standard pattern of distribution; and a mode that is closer to the world of financial markets and their multiple, openly-stated profitability targets. The latter is based on the participation of SOFICAs [Companies for Financing the Film and Audio-Visual Industries], which are accredited by the French Ministry of Culture and provide investment funds specializing in films and audio-visual work. As these companies are accountable to market investors, they may present filmmakers with demands that conflict with the entrenched values and goals that are largely shared by more traditional investors. Rodolphe Durand explains: “The French film industry makes an interesting setting for analyzing the way organizations respond concretely to the demands of minority investors, in so far as SOFICAs provided between 7 and 12% of the total investments made over the period we studied [bearing in mind that producers are not obliged to apply for the funds].”
SUPPORTING ROLES ARE MORE THAN EXTRAS
The authors’ work shows that the number of films released across multiple cinemas is far higher than can be explained by the resources committed by SOFICAs. According to Rodolphe Durand: “The financing structure of film-makers has an influence on how production teams position their films. When they accept money from SOFICAs, they are more inclined to meet the expectations of market logic. More generally, this shows that the companies are faced with market structures that are more complicated than is often thought when analyzing how they perform”. According to Rodolphe Durand and Julien Jourdan, the minority participation of resource providers with an unconventional logic [SOFICAs in this instance] results in what they call an “alternative conformity” – hence the reference in their article’s title to the film by François Truffaut, Jules et Jim, in which two friends are in love with the same woman. As Durand explains, “When an organization responds favorably to a minority financial participation, it leads to a decrease in the influence of the major players, alters the social structure of the resource providers, and promotes new forms of interaction. All this makes alternative conformity a ‘soft’ control strategy for organizations.”
SOCIAL ISSUES COME INTO PLAY VIA MEDIATORS
More generally, confrontation between organizations and companies, especially in terms of incompatible logics of action, pressures them to define the norms and rules with which they want to conform. In doing so, they either endorse the conditions of their own constraints or seek to establish new ones for their competitors. In particular, with the confrontation between financial and social logic becoming more and more striking, the role of market “mediators” is increasingly pivotal – a point emphasized by Rodolphe Durand during the Corporate Social Responsibility conference organized by HEC in Paris on June 21: “All the parties between the filmmaker and the end customer have to be taken into account, including the guides, critics, experts, specialist journalists, the regulator, and the customers themselves, who judge what is on offer. In the case of the cinema industry, the mediators tend to be film critics but they can also be social networks or general word of mouth. A film’s reputation no longer depends only on specialist reviews as in the past but on several different sources.” As a result, conforming to various types of logic [financial, social or cultural] is not just a choice made by filmmakers faced with their customers; rather, it involves the entire market structure, which is also made up of organizations that judge and criticize and play the role of mediators.
INCORPORATING SUSTAINABLE DEVELOPMENT FOR INCREASED COMPETITIVENESS
The above dynamic obliges companies to take into account changes in society and leads to the claim that organizations in general and businesses in particular “make” society. We can also cite the example of an organization that incorporates minorities in a reasoned, deliberate, and relatively effective manner. Rodolphe Durand further explains: “Companies are one of the vectors of socialization. Refusing to comply with existing categories, as in the case of the film industry, means creating new demands and shifting the pressure of competition onto others. When production teams agree to accept money from SOFICAs, they change their business practices and conform to new norms which, although in a minority, have an effect on the market structure.” Durand continues: “Innovation does not mean introducing new products – anyone can do that with varying degrees of success – but bringing in new categories of products that conform to distinct logics of action”. Durand states that there are numerous examples of this phenomenon, such as Renault’s Espace, smart phones, crossover vehicles and the success of French haute cuisine, which he analyzes in a different article.*
* “Code and conduct in French cuisine: impact of code changes on external evaluations” by R. Durand, R. Hayagreeva and P. Monin [Strategic Management Journal, 28: 455–472 ].
Based on an interview with Rodolphe Durand, his presentation at the “How can companies contribute to the challenge of sustainable development?” conference held at HEC Paris on June 21, 2012, and the article “Jules or Jim: alternative conformity to minority logics” by J. Jourdan and R. Durand in The Academy of Management Journal [forthcoming].
• Do not hesitate to make use of outside investment to complete certain projects [even on a small scale], as this has been found to be a more successful strategy than previously imagined for gently controlling the market structure and competitors.
• It is essential to position your company in relation to the logics of action promoted in your industry. The key questions are as follows: what are the principles and norms that you will have to comply with in the future and why? Which past examples of these do you need to use and why?
• Irrespective of how you answer the above questions, you must take into account the mediators and changes in society to establish your product range [or range of services] and try to be more competitive, even if this means being less compliant and creating a new category of products or services.
The research was undertaken on film production houses that worked with traditional investors [including filmmakers and media distributors] and SOFICAs [companies that specialize in capital investment]. The researchers combined exhaustive data from several unique sources for 2,531 films made between 1994 and 2008 to determine the degree to which filmmakers met the requirements of the SOFICAs and devoted resources to launching their films in a range of cinemas.