Exploring market processes through the lens of identity: essays on the determinants and price consequences of contested actions

Ody-Brasier, A (2012) Exploring market processes through the lens of identity: essays on the determinants and price consequences of contested actions. Doctoral thesis, University of London: London Business School.

Abstract

This dissertation explores the role of social identity in buyer-supplier relations. Many strategic benefits can be derived from managing supplier relations, yet little attention has been paid to the role of identity -- especially at the organizational level. In a number of markets, identity shapes the perceptions of buyers and sellers; it creates an understanding of how organizations should act and what they should look like. This understanding about attributes and behaviors can both constrain and enable organizational behavior -- an idea this dissertation explores with three essays based on a mix of fieldwork and panel data on the market for Champagne grapes. My findings highlight how identity affects a variety of outcomes, including the actions an organization can adopt or the prices it is charged by suppliers. This has important implications for the literature on organizational identity as well as on the sociological foundations of market processes -- particularly the formation of prices. The first essay shows that champagne producers (grape buyers) who display a non-traditional identity are charged higher prices by grape growers (i.e. grape sellers). Perceived threats to the collective identity of Champagne are thus penalized by suppliers in exchange relationships. Price differences are significant even in this context where the product is extremely homogenous, relationships are stable and information asymmetries are low. My qualitative evidence provides deeper insights into the underlying mechanisms of this identity-based price discrimination. This suggests that identity constrains organizational behavior; the other two essays show how it can act as an enabler of strategic action. I first look at which kind of firm is more likely to engage in contested actions when these are not easy to detect. I focus on one of the actions highlighted in the first essay, Champagne producers selling to supermarket brands. This is frowned upon by suppliers of grapes, yet it is not easily observable without some careful monitoring. I find that firms that display more traditional identities are ironically more likely to sell to supermarkets. My evidence suggests that this is due to them being less scrutinized, since suppliers assume them to be more trustworthy. I then focus on the other two actions highlighted in the first essay, Champagne producers making other sparkling wines abroad and producers acquiring vineyards in Champagne. These contested actions are easy to observe and clearly attributable to causes internal to the firm. I find that Champagne producers who display a traditional identity experience lower price increases for their grapes following their engaging in one of these actions. I argue this is because suppliers attribute these actions to situational factors rather than chronic predispositions. In sum, the last two essays show how a positive identity may allow firms to engage in actions that are economically advantageous if socially unacceptable.