Crescive entrepreneurship in complex social problems: Institutional conditions for entrepreneurial engagement

This paper explores entrepreneurship in the context of complex social problems (often referred to as ‘social’ entrepreneurship). Most management research in this area studies the entrepreneurs; we explore the institutional conditions which frame the likelihood of entrepreneurial engagement. We name these conditions ‘crescive’ and, following A.O. Hirschman's studies on institutional conditions for development we identify two analytically different sets of conditions: those that can stir up actors' motivations to engage and those that can alter their decision making logic. Our exploration of crescive conditions yields a novel conceptual model for entrepreneurial engagement in the context of complex social problems, which we label ‘crescive entrepreneurship’ and place in a space between functionalist and institutional action.     

The microstructures of rhetorical strategy in social entrepreneurship: Building legitimacy through heroes and villains

For social entrepreneurs who seek to change existing community practices, the difficulties in building legitimacy may pose a challenge that compromises their ability to create sustainable institutional change. Case studies of 10 social enterprises reveal that rhetorical strategy aims to overcome this barrier. The findings suggest that the rhetorical strategy used by these enterprises casts the organization as protagonist and those that challenge the change as antagonists. The microstructures underlying this strategy include vocabulary sets that invoke socially accepted meta-narratives, and rhetorical devices that heighten the positive of the protagonist meta-narratives and the negative of the antagonist meta-narratives. The rhetorical strategy weaves together these protagonist and antagonist themes to create tension and persuade the audience of the organization's legitimacy.     

Ethics and entrepreneurship

As the study of entrepreneurship and the study of business ethics become increasingly established, the intersection of entrepreneurship and ethics is receiving increasing scholarly attention. In this paper, we review the research connecting ethics and entrepreneurship, classifying the literature into three broad themes; we also identify and integrate the key themes that emerge, and we offer suggestions for future research. We conclude by introducing the articles in this special issue.     

The impact of social norms on entrepreneurial action: Evidence from the environmental entrepreneurship context

Using insights from institutional theory, sociology, and entrepreneurship we develop and test a model of the relationship between centralized and decentralized institutions on entrepreneurial activity. We suggest that both decentralized institutions that are socially determined as well as centralized institutions that are designed by governmental authorities are important in promoting firm foundings in the environmental context. In a sample of the U.S. solar energy sector we find that state-sponsored incentives, environmental consumption norms, and norms of family interdependence are related to new firm entry in this sector. Our findings also suggest that the efficacy of state-level policies in the sponsoring of entrepreneurial growth is dependent upon the social norms that prevail in the entrepreneur's environment. We expand entrepreneurship theory and the study of institutions and the natural environment by demonstrating the integral role that social norms play in influencing the creation of new firms and by illustrating the potential effect social norms have on the effect of policy that seeks to encourage environmentally responsible economic activity.     

Optimal criteria for selecting price discrimination metrics when buyers have log-normally distributed willingness-to-pay

This paper investigates how a monopoly seller should determine the optimal set of pricing variables (pricing metrics) for third-degree price discrimination applications in which buyers have log-normally distributed willingness-to-pay (WTP). In a setup that closely resembles linear and probit regressions, this paper shows that when the monopoly seller is restricted to using one metric and no price discrimination cost exists, the pricing metric that best reduces the residual variance of buyers’ willingness-to-pay is the one that maximizes revenue. Equivalently, the explanatory power of willingness-to-pay is the ordering criterion. This paper also shows that this criterion is not universally true when willingness-to-pay follows other distributions. When the seller incurs price discrimination costs associated with different metrics, the ordering criterion becomes the explanatory power of each pricing metric divided by its cost. This paper also discusses how to apply this model to solve real-world pricing problems with contingent valuation models or using probit regression.

Competition and price discrimination in the market for mailing lists

This paper examines whether mailing list sellers, when faced with additional competitors, are more likely to try to segment consumers by offering additional choices at different prices (second-degree price discrimination) and/or offering different prices to readily identifiable groups of consumers (third-degree price discrimination). We utilize a dataset that includes information about all consumer response lists derived from mail order buyers (i.e. lists derived from catalogs) available for rental in 1997 and 2002. Our results indicate that increased competition leads to an increased propensity to price discriminate along each of the dimensions we investigate. These results hold for both second-degree and third-degree price discrimination. Further, list owners offer menus with more choices in more competitive markets. These results, taken together with results from other empirical studies, suggest that the connection between competition and increased price discrimination is a result that applies broadly.

Probabilistic selling vs. markdown selling: Price discrimination and management of demand uncertainty in retailing

Markdown selling (i.e., price reductions over the course of the selling season) is a strategy to implement price discrimination and to manage market uncertainty that has been widely adopted by retailers. This paper explores the potential advantage of introducing an additional tool to the arsenal of retailers, probabilistic selling (i.e., offering consumers a choice to buy a product that can turn out to be any item from a predetermined set of distinct items). We show that both probabilistic and markdown selling strategies serve as price discrimination tools by offering buyers an option to purchase a “damaged” good (an uncertain product under the former and delayed consumption of a product under the latter). However, the two strategies segment markets based on different types of buyer heterogeneity: buyer preference strength under probabilistic selling and buyer patience under markdown selling. Our analytical model reveals that, compared with markdown selling, probabilistic selling can (1) improve margin management by increasing revenue from full-price sales and reducing the magnitude of discounts; and (2) improve inventory utilization by reducing stockouts and the amount of excess inventory. We identify the conditions required for probabilistic selling to be more profitable than markdown selling.     

Pricing of mall services in the presence of sales leakage

For a shopping mall, sales leakage occurs when consumer purchases facilitated by the mall are finalized outside it. These sales include, for example, catalog orders filled at the leased premises in a physical mall; For an Internet mall, they include the ones consumers make on an on-line store’s website after learning about the store from an Internet mall website. While these sales are difficult to track in the physical mall, Internet malls like Yahoo can track them by placing cookies on consumers when they visit the mall. The challenge for a mall owner then is to design an appropriate pricing model which takes sales leakage into account. In fact, Yahoo currently uses an All-Revenue-Share Fee with Yahoo collecting from on-line stores a share of all sales revenue, regardless of whether the purchase was made through the mall or directly from the store’s own URL. We explore this new All-Revenue-Share Fee model, compare it with the commonly used Fixed Fee model and the two-part tariff model, and identify the model with the highest profits for the mall under different conditions. We suggest that although an All-Revenue-Share Fee is appealing for Internet malls due to its ability to capture sales leakage directly, it may cause the stores to refrain from joining the mall in certain circumstances. Thus, in certain situations charging a fixed monthly fee can actually be more profitable for the mall versus the All-Revenue-Share Fee model. We also examine how mall and product category characteristics as well as market expansion affect the optimal pricing strategy. We show that a mall should price discriminate across product categories, not just by charging different amounts of fees, but by using different pricing models. Our research provides many managerial implications on how to price over time.     

Reference points for measuring social performance: Case study of a social business venture

We present a longitudinal qualitative case study to elaborate on how a social venture forms reference points for social performance. Although organizations increasingly use various social performance targets to direct their operations, the scholarly knowledge on social performance reference points remains limited. We make use of the prior accounting literature and draw on the idea of compromising accounts to discuss how provisional and performative metrics can have a significant role in how organizations develop new ways to evaluate their social performance. Given that the social performance reference point criteria are ambiguous and the corresponding referents malleable, performative accounts are helpful as they can intervene in the organizational life by making particular things visible, providing space for interpretations, and facilitating discussion, thus creating temporary settlements and enabling opportunities for productive compromises between different organizational groups and evaluative principles. The recursive feedback loops between reference point referents, criteria and accounting artefacts help the organization to make sense of its own social performance and interpret the associated performance feedback, and thereby provide ground for organizational decisions on further action. Moreover, we discuss how imperfect accounts can be useful for social businesses in their pursuit of developing their activities and achieving social impact.     

How price complexity takes its toll: The neglected role of a simplicity bias and fairness in price evaluations

Marketing managers commonly employ complex price plans. Surprisingly, limited and conflicting evidence reports how customers perceive and react to complex prices. This study examines perceptions about price complexity and shows that customers tend to prefer simple prices. Two experimental studies show that perceived price complexity negatively affects customer perceptions of price fairness and influences product choice because customers negatively evaluate the transparency of the firm's pricing practices and infer higher total prices. Customers comparing alternate offerings may therefore prefer simple over complex prices, even when the latter are less expensive. Study results suggest limiting price plan variations positively affects customer inferences about transparency and fairness, and thus customer choice.     

Consumer responses to price discrimination: Discriminating bases, inequality status, and information disclosure timing influences

This study broadly explores consumers' perceived unfairness, negative emotions, internal reference price, and store choice under five common methods of price discrimination using two experimental studies. Study 1 investigates the interaction between discriminating bases and inequality status. Results reveal that discriminating bases only influence perceived unfairness for advantaged consumers, but affect all four responses for disadvantaged consumers. For disadvantaged consumers, direct discrimination that complies with social norms evokes the weakest unfavorable responses, whereas direct discrimination against social norms triggers the highest perception of unfairness and negative emotions but has similar effects on internal reference price and store choice to indirect discrimination. Study 2 examines the effect of information disclosure timing by comparing pre- and post-purchase disclosure policies. Results show that post-purchase disclosure of discrimination information elicits higher negative emotions for indirect discrimination involving coupon and purchase quantity, but is rather inconsequential for direct discrimination or indirect discrimination through membership.     

The role of an entrepreneurially alert information system in promoting corporate entrepreneurship

The literature has suggested that an entrepreneurially alert information system may be a salient driver of corporate entrepreneurship, even though this role has been neither theoretically articulated nor empirically substantiated. Building upon the organizational learning, information orientation, and entrepreneurial awareness literatures we identify three key elements of a firm's entrepreneurially alert information system, and then develop a parsimonious model that examines the impact of these elements on corporate entrepreneurship. Using both single- and multi-source survey data from 495 small- to medium-sized firms, we test our model and find that each element individually and collectively imparts significant positive influence on corporate entrepreneurship.     

The discriminatory incentives to bundle in the cable television industry

An influential theoretical literature supports a discriminatory explanation for product bundling: it reduces consumer heterogeneity, extracting surplus in a manner similar to second-degree price discrimination. This paper tests this theory and quantifies its importance in the cable television industry. The results provide qualified support for the theory. While bundling of general-interest cable networks is estimated to have no discriminatory effect, bundling an average top-15 special-interest cable network significantly increases the estimated elasticity of cable demand. Calibrating these results to a simple model of bundle demand with normally distributed tastes suggests that such bundling yields a heterogeneity reduction equal to a 4.7% increase in firm profits (and 4.0% reduction in consumers surplus). The results are robust to alternative explanations for bundling.

A longitudinal comparison of capital structure between young for-profit social and commercial enterprises

We develop a new perspective on capital structure differences between for-profit social and commercial enterprises by combining imprinting and social entrepreneurship theory. Using a longitudinal matched sample, we find that for-profit social enterprises have 40% to 13% lower leverage and up to four times greater leverage stability over time than commercial enterprises. Our results suggest that these differences in capital structure derive from the process of prosocial organizing, which goes beyond the primary focus on financial preferences. Thus, for-profit social enterprises—and similar hybrid organizations, such as B corporations—may require theories adjusted to their context.     

Internal and external price search in industrial buying: The moderating role of customer satisfaction

Despite price's great relevance in organizational buying decisions, prior research primarily studies price search in business-to-consumer environments. This research conceptualizes both internal and external price search in a business-to-business setting and focuses on how price importance affects these two types as well as how customer satisfaction moderates the relationships. Results show that purchasing managers' satisfaction associates positively with the effect of price importance on internal price search. Also, their satisfaction negatively associates with the effect of price importance on external price search. Price search reduces the price premium paid by customers (especially external price search).     

A model of latent symmetry in cross price elasticities

This paper develops the Latent Symmetric Elasticity Structure (LSES), a market share price elasticity model which allows elasticities to be decomposed into two components: a symmetric substitution index revealing the strength of competition between brand pairs, and a brand-specific coefficient revealing the overall impact of a brand on its competitors. An application of the model to unconstrained cross price elasticities shows that brand-price competition in one market is well-represented by a LSES model in which brand substitutability and elasticity asymmetry are related to average price level.This research was supported by the Dean's Fund for Faculty Research of the Owen School.     

Consumer responses to characteristics of price-matching guarantees: The moderating role of price consciousness

The present study develops and tests a conceptual model of consumer response to different types of price-matching characteristics (i.e., refund depth, length, and scope) across consumer segments with varying levels of price consciousness. A computer shopping simulation results show that a deep refund is interpreted as a signal of low prices by nonprice conscious consumers. However, price conscious consumers are found to associate deep refunds with increased prices, an unintended outcome for the retailer. The effects of price-matching characteristics on search and purchase behavior were also found to vary across more and less price conscious consumer segments.     

The history of entrepreneurship: Medieval origins of a modern phenomenon

The origins of enterprise are often associated with the Industrial Revolution, but this article presents evidence of entrepreneurial activities from a much earlier date – the medieval period. Between 1250 and 1500 the church, merchants and members of the royal court all engaged in activities that demonstrated the entrepreneurial characteristics of innovation, risk-taking and judgement. The activities of the prior of Tynemouth and the career of the wool merchant William de la Pole illustrate these developments. By focusing on individuals rather than firms, it is possible to push back the study of entrepreneurship beyond the Industrial Revolution and early-modern trade to a period that witnessed the origins of the modern state.     

Retailers' control of reference price given product category and level of competition

This paper examines the conditions that make reference price manipulation beneficial to retailers. The paper offers a modelling approach that is based on two distinct dimensions: product category, and degree of market competition. The model shows that reference price manipulation in a competitive market is less beneficial to retailers than it is in a monopolistic market. Reference price manipulation of a specific product is most advantageous to retailers when it is a frequently purchased, low-priced product in a monopolistic market. For an infrequently purchased, high-priced product in a competitive market, reference price manipulation is less beneficial. The analysis gives rise to policy implications that could potentially improve consumer welfare.