Aims and scope
Research on the micro-level of organizational decision
making has witnessed a surge in interest as of recent. In a dedicated special
issue in the Strategic Management Journal
(Powell, Lovallo, & Fox, 2011)
Levinthal (2011)
asks the question “A behavioral approach to strategy – what’s the
alternative?”. The SMJ Editors state that “strategic management theory lacks adequate
psychological groundings” and that “until strategy theory builds stronger
foundations in psychology, it will struggle to explain the facts of firm
performance” (Powell, et al., 2011, p. 1370).
Recent developments in finance,
organization theory and strategic management have moved micro-level aspects of
decision making solidly within mainstream research. The literature on pricing,
however, has not yet dedicated attention to the examination of its
micro-foundations, although pricing is arguably the most important driver of
short-term profits (Nagle & Holden, 2002).
While arguably journals do publish studies examining aspects related to
micro-foundations (Che-Ha, Mavondo, & Mohd-Said,
2014; Mousavi
& Kheirandish, 2014; Raghubir,
2006),
there is, as of today, no systematic research on the micro-foundations of
pricing.
Research on the micro-foundations of organizational
decision making is based on the following premises (Hodgson, 2012):
“Organizations are made up of individuals, and there is no organization without
individuals” (Felin & Foss, 2005, p. 441);
“Nothing is more fundamental in setting our research agenda and informing our
research methods than our view of the nature of the human beings whose behavior
we are studying” (Simon, 1985, p. 303);
“Combining methodological individualism with an emphasis on causal mechanisms
implies that strategic management should fundamentally be concerned about how
intentional human action and interaction causally produce strategic phenomena” (Abell, Felin, & Foss, 2008, p.
492).
The planned JBR special issue, The micro-foundations of pricing, will examine how individual-level
characteristics affect how organizations deal with pricing. We define “pricing”
broadly to include the following elements:
determination of list prices, price-setting practices, price
realization, price negotiations with customers, freedom to set prices/grant
discounts to customers, price flexibility, price communication, value
communication, information processing on competitor prices, information
processing on customers/customer needs, information processing on costs,
incentive systems, bonus systems, headquarter support on pricing, CEO
championing of pricing, pricing capabilities.
Our interest in the micro-foundations of pricing
springs from the simple recognition that organizations do not act--individuals
do. As scholars, however, we have a tendency to attribute to organizations
properties which only individuals can have. The literature speaks of “organizational
capabilities” and describes organizations as “innovative”; however,
organizations do not have capabilities, individuals do; organizations are not
innovative, individuals are. We thus want to explore how individual
characteristics affect pricing in organizations.
Consequentially, in this call for papers we aim to
shed light on the following non-exhaustive list of research questions. Individual characteristics and pricing
decisions: How do individual psychological traits (e.g. altruism, intelligence)
influence preferences for price setting practices (e.g. preferences for
value-based pricing as opposed to cost-based pricing)? Are pricing approaches
at the individual level (again: value-based pricing may be an example) the
result of particular psychological traits? How do individual characteristics
influence negotiation in pricing? Are negotiation styles of individuals (e.g.
collaborative, competitive, accommodating) the result of particular psychological
traits? Or: how do psychological traits (e.g. aggressiveness versus
assertiveness) influence price negotiation outcomes?
The
persistence dysfunctional pricing practices: Why and how do dysfunctional
pricing practices persist? Does hard-wiring of pricing practices happen
differently for functional as opposed to dysfunctional pricing practices?
Conversely: What are triggers of innovative pricing practices at the individual
level? How do innovative pricing practices at the individual level gain
traction to lead to new pricing practices at the organizational level? Or
again: which mechanisms prevent innovation at the individual level from
emerging at the organizational level? Goal
framing and pricing: How do hedonic
goals (concerned about short-term gains), gain
goals (concerned about longer term benefits), and normative goals (concerned with adhering to moral principles)
interact at the individual level to influence pricing decisions? What is the
effect of the focal goal frame on individual pricing decisions? Does an
individual preference for a given pricing approach (e.g. value-based pricing)
reflect a given focal goal frame? Individual considerations and collective
actions in pricing: Pricing is, by nature, an activity that touches virtually
all aspects of business: sales, marketing, finance, general management, human
resources, and research and development. The pricing function, if present,
leads and influences actors from these different functions. This leads to the
question: What is the origin of individual beliefs and assumptions on pricing
by different organizational actors in pricing and how are these individual
factors aggregated at a collective level to produce pricing decisions? How do
individual assumptions on pricing and individual hierarchical power interact to
lead to collective pricing decisions? Do relationships of friendships in the
organization favor the emergence of given pricing practices?
Bounded
rationality and pricing: How do cognitive biases affect pricing decisions? What
is the impact of behavioral or cognitive biases on the price setting and price
negotiation process? Irrationality explained: What is irrational behavior in
pricing? In Hamlet we read: “Though this be madness, yet there is method in’t”.
Is there a rationale for irrational behavior in pricing? Individual preferences
and pricing: How stable are customer preferences in B2B? Are preferences in B2B
constructed? Intuition and pricing: What
is the role of intuition in pricing decision-making process?
Research methods and
guidelines
We are open to a wide number of research methods and
expect all papers to either make a strong empirical contribution or to
challenge conventional wisdom concerning all aspects of pricing at the
intersection between individual characteristics and organizational practices
through novel, insightful and carefully crafted conceptual propositions.
References
Contact information:
Andreas Hinterhuber
Partner, Hinterhuber & Partners
Strategy Pricing Leadership
Innsbruck, Austria
Phone: +43 664 402 7 402