When Being in the Minority Pays Off: Relationships among Sellers and Price Setting in the Champagne Industry

Economic sociologists have studied how social relationships shape market prices by focusing mostly on vertical interactions between buyers and sellers. In this paper, we examine instead the price consequences of horizontal relationships that arise from intergroup processes among sellers. Our setting is the market for Champagne grapes. Using proprietary transaction-level data, we find that female grape growers—a minority in the growers’ community—charge systematically higher prices than do male grape growers. We argue that the underlying mechanism for this unexpected pattern of results involves the relationships developed and maintained by minority members. More specifically, in-depth fieldwork reveals that female growers get together to compensate for their isolation from the majority. This behavior enables them to overcome local constraints on the availability of price-relevant information, constraints that stem from prevailing norms of market behavior: individualism and secrecy. We discuss the implications of these findings for the study of how relationships shape price-setting processes, for the sociological literature on intergroup relations, and for our understanding of inequality in markets

An identity perspective on coopetition in the craft beer industry

Research Summary: To further our understanding of how and why organizations engage in coopetition, we explore cooperative and competitive actions in the craft beer industry. Through an inductive field study, including interviews with craft brewery owners, we propose collective identity and collective norms play a critical role in the persistence of coopetition over time. Our process model suggests that (a) an oppositional collective identity, (b) the shared belief that a rising tide lifts all boats, and (c) the shared belief that advice and assistance should be paid forward, can lead to the persistence of coopetition beyond market category emergence. Managerial Summary: This paper develops a theory of how smaller, craft-based organizations (i.e., “Davids”) encourage cohesion and cooperation amongst themselves when operating against an incumbent market of mass-producers (i.e., “Goliaths”). An ideological opposition to existing players can lead to a shared belief that helping organizations like your own benefits everyone—the rising tide lifts all boats mentality. Similarly, when organizations first enter a market and receive help from established members, they can feel compelled to help others who enter the market after—the pay-it-forward mentality. Together, these mechanisms offer an explanation as to how and why coopetition might persist in a market category over time

Middle-status conformity revisited: The interplay between achieved and ascribed status

Decisions about conforming to or deviating from conventional practices in a field is an important concern of organization and management theory. The position that actors occupy in the status hierarchy has been shown to be an important determinant of these decisions. The dominant hypothesis, known as middle-status-conformity, posits that middle-status actors are more likely to conform to conventional practices than high- and low-status actors do. We challenge this hypothesis by revisiting its fundamental assumptions and developing a theory where actors’ propensity to conform based on their achieved status further depends on their ascribed status that actors inherit from their social group. Specifically, we propose that middle-status conformity applies only to actors who have a sense of security, based on their high ascribed status. For actors with low ascribed status, we propose that high-and low-status actors show greater conformity than middle-status actors. We test our hypotheses using data from the U.S. symphony orchestras from 1918 to 1969

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

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

Who is Punished Most for Challenging the Status Quo?

Over time, markets evolve into particular structures, with clearly defined roles in terms of who does what in the industry. When a firm ventures beyond these established roles, it often gets punished by its exchange partners. Our interviews in the market for Champagne grapes, however, suggest that some buyers get penalized substantially more than others in response to such actions. Quantitative analysis confirms that nontraditional buyers receive price penalties for role deviations—through diversification, vertical integration, or dis-integration—whereas traditional firms are treated much more leniently. We conducted a subsequent interpretivist study, using interview data from 78 market participants, to explore the exact mechanisms underlying this effect. The analysis reveals that sellers blame less traditional buyers when they cross the boundaries of their usual roles, because they are thought to act out of volition and bad faith, whereas they believe that the same transgressions by more traditional firms must have been necessitated by external circumstances. We conclude that the sanctioning behavior of actors in response to role transgressions by their exchange partners is driven by their interpretation of the motives underlying these transgressions, rather than by the actions themselves. As a result, nontraditional firms may also find it difficult to deviate from the traditional roles in their industry

The Price You Pay: Price-setting as a Response to Norm Violations in the Market for Champagne Grapes

Contrary to the general view that markets are shaped by economic forces, bargaining power, and the prior relationships between exchange partners, this paper posits that markets can sometimes also be purely socially constructed, in the sense that prices can vary irrespective of the economic value embedded in the exchange. Building on insights from the literature on categories, we argue that sellers may react to violations of local norms on the part of particular buyers by charging them higher prices. Sellers thus provide economic benefits, in the form of lower prices, to buyers who closely adhere to the category’s norms. We test these ideas using data on the market for Champagne grapes, examining the exchange between grape growers (the sellers) and the 66 houses that make the sparkling wine (the buyers). Interviews and survey data informed us that growers have clear, normative ideas about what a Champagne house should look like and do: houses that are no longer headed by a descendant of the founder, are not located in one of the traditional Champagne villages, are relative newcomers to the industry, are part of a corporate group, supply supermarket brands, operate winemaking subsidiaries abroad, or acquire their own vineyards are all viewed in a negative light. Our models provide strong support for our prediction, showing that the prices different organizations are charged for their purchases depend substantially on whether they meet local expectations for who they are and what they do. Our qualitative evidence confirms that this differential pricing by growers occurs not through collusion but through a spontaneous, bottom-up process

For Love or Money? Gender Differences in How One Approaches Getting a Job

Extant supply-side labor market theories conclude that women and men apply to different jobs but are unable to explain gender differences in how they may be have when applying to the same job. We correct this discrepancy by considering gendered approaches to the hiring process. We propose that applicants can emphasize either the relational or the transactional aspects of the job and that this affects whether they are hired. Relational job seekers focus on developing a social connection with their employer. In contrast, transactional job seekers focus on quantitative and mechanical aspects of the job. We expect women to be more relational and men to be more transactional and that this behavior will contribute to differences in hiring outcomes. Specifically, we contend that being relational suggest that one is more committed to the job at hand and therefore should increases the chances of being hired – holding constant competence. We examine behaviors in an online contract labor market for graphic designers, Elance.com where we find that women are more likely to be hired than men by about 4.1%. Quantitative linguistic analysis on the unstructured text of job proposals reveals that women (men) adopt more relational (transactional) language in their applications. These different approaches affect a job seeker’s likelihood of being hired and attenuate the gender gap we identified. Attenuation suggests that how one approaches the hiring process matters and that gender is correlated with a particular style of engagement