The cultural side of value creation

The question of how organizations create value has become a central question for understanding inter-firm competition and performance differentials. Much of the work on the topic emphasizes the importance of technological innovation for improving operational efficiency and/or product functionality . Accordingly, much of the work in the area has focused on understanding the development of technological capabilities and the dynamics of competition among different technologies. Whereas this line of research has contributed greatly to our understanding of value creation through technology performance improvement, it has also left unexplored the strategies for differentiating products on the basis of their cultural significance. Yet, research in a wide variety of disciplines ranging from anthropology, to cultural sociology, and consumer behavior shows that consumers value products not only for their functional and technical performance, but also for their cultural meanings. The infusion of products with cultural meanings enables consumers to use these products to make statements about their personal and social identity and status. It is therefore well understood that consumers derive value not only from what products do (functional value), but also from what they signify in a given social group (symbolic value). While strategy scholars recognize that product meanings are a source of differentiation and generate price premia (Porter, 1980), they also tend to view the activities that generate them – e.g. branding – as a part of the marketing strategy of the firm. More generally, strategy research has been criticized for its reluctance to delve into the demand side of value-creation. Rooted in disciplinary assumptions about atomistic consumers with idiosyncratic preferences, strategy researchers view demand as largely exogenous and ignore its cultural embeddedness in social conventions that define the cultural meanings of objects and shape consumption choices. As a result, they have given limited attention to the question of how firms can strategically manage the symbolic value of their products. In this paper we propose a cultural perspective on value creation that can direct strategic organization research toward the systematic investigation of how producers engage with the cultural meaning systems that supply frameworks for interpretation and valuation of goods. To guide research in this direction we first discuss how products acquire cultural significance and then outline three core implications of these ideas for the strategy and organization of firms. First, we discuss how recognizing the cultural significance of products shifts attention from technological innovation that alters product functionality to cultural innovation that alters their cultural significance. Second, we explain the need to develop distinct cultural resources that enable firms to identify and exploit opportunities for cultural innovation. Third, we draw attention to the need for cultural intent defined as developing an explicit strategy for utilizing cultural resources to achieve specific cultural positioning for the firm’s products

A Cultural Quest: A Study of Organizational Use of New Cultural Resources in Strategy Formation.

Our study was motivated by the growing influence in cultural sociology and organizational research of the view of culture as a “toolkit”, from which individuals draw resources flexibly to develop strategies of action that address different circumstances. To investigate if and how organizations can also use new and diverse cultural resources, we undertook a historical case study of the incorporation of new cultural resources in an organization’s cultural repertoire. In-depth analysis of four rounds of incorporation of new cultural resources led to the development of a robust theoretical model that identifies cultural repertoire enrichment and organizational identity redefinition as two core mechanisms that facilitate the use of new cultural resources for the development of unconventional strategies and strategic versatility. Our model contributes to organizational research novel theoretical understanding regarding the use of cultural resources in strategy formation and change

Combining Logics to Transform Organizational Agency: Blending Industry and Art at Alessi

To understand how organizations combine conflicting institutional logics strategically to create and pursue new market opportunities, we conducted an in-depth longitudinal study of the multiple efforts of the Italian manufacturer of household goods Alessi to combine the logics of industrial manufacturing and cultural production. Over three decades, Alessi developed three different strategies to combine normative elements of the two logics, using each strategy to envision and pursue different market opportunities. By combining the logics of industrial manufacturing and cultural production, Alessi was able to envision new possibilities for value creation and to enact them through innovation in product design. The three strategies triggered a common set of mechanisms through which the purposeful combining of logics enabled the pursuit of opportunity, while each strategy structured the process differently. We develop a theoretical model linking the development of recombinant strategies to the dynamic restructuring of organizational agency and the related capacity to create and pursue new market opportunities. Our findings and theoretical insights advance understanding of the processes through which organizations challenge taken-for-granted beliefs and practices to create new market opportunities, use logics as resources to enable embedded agency, and design hybrid organizational arrangements

Enacting competitive wars: Competitive activity, language games, and market consequences

This paper has benefited from the comments of David Allen, Avi Fiegenbaum, Luis Martins, Antoaneta Petkova, Rhonda Reger, Kamenna Rindova, and Ken Smith. We also thank Sameer Wadhwa for help with the research on the “cola war ” in the 1980s