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Dynamics of market transformations for sustainability: The challenge of healthy and equitable food

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Abstract and Figures

The food system in developed countries is unsustainable, with industrialized production and consumption practices binding many developed countries into states of overnutrition, of alarming levels of obesity, and of diabetes and other noncommunicable diseases. Yet, despite a proliferation of policies, programs, and investments aimed at their prevention and control by governments, industry, and nongovernmental organizations results have been slow, failure prone, and inequitable. In this paper we develop an integrative analysis of the drivers of transformation towards an equitable healthy food market-producing nutritious food at scale across heterogeneous populations. Using causal loop diagramming we extract from the literature three interconnected feedback processes of market infrastructure formation, involving respectively the development of industry capabilities, consumer acceptance, and systems and institutions. Together these undergird the dynamics of an equitable healthy food market transformation. Formalizing this framework into a computational model at the community level, and simulating distinct scenarios we demonstrate ineffectiveness of social-and commercial-oriented actions that promote changes in the food market when pursued in isolation. Instead, self-sustaining social change requires cross-sectoral convergence between mainstreaming business strategy and market transformation and cross-sector actions. Generalizing our analysis we recognize the limitations conventional corporate social responsibility (CSR) as a mitigation strategy to unanticipated negative externalities of industrial technologies and markets. We argue for convergent innovation (CI), a cross-sectoral approach to mainstream the societal issues through CSR supported by not-for-profit and government actors enacting behavioral change and ecosystem transformation at scale.
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Dynamics of market transformations for sustainability: The
challenge of healthy and equitable food
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Jeroen Struben, emlyon Business School, Lyon, France&
Derek Chan, Laurette Dubé, McGill University, Montreal, Canada&
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ABSTRACT
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Keywords: Nutritious food; 6KC=;DE@6&DBB699&;2&7228S&<D3L6;&;3D>9723<D;=2>S&B23A23D;6&
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Introduction
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8=96D969J&P(@2C8&6;&D@JF&TU44S&,G=>EC3>&6;&D@JF&TU4VQJ&0>&369A2>96F&governments and not-for
profit actors have made <ajor investments over the last two decades to slow down the epidemic
(Flegal, Carroll, Kit, & Ogden, 2012).&$=L6G=96&=>8C9;3:&A@D:639&5D?6&86A@2:68&mitigation
67723;9, in line with corporate social responsible (CSR) strategies found in other sectors
grappling with unanticipated negative externalities of technologies and markets, such as
environmental hazards, climate change, inequities, or ill human health (Aguinis & Glavas, 2012;
Campbell 2007; McWilliam & Siegel 2001)J %6;F&869A=;6&;56&A32@=763D;=2>&27&A2@=B=69F&
9;3D;6I=69F&A32I3D<9F&D>8&=>?69;<6>;9&D=<68&D;&;56=3&A36?6>;=2>&D>8&B2>;32@&DB3299&96B;239&
P.I&W&+2AL=>F&TU4XQ&369C@;9&5D?6&E66>&9@2G&=7&D;&D@@&9CBB6997C@&P(@6ID@&6;&D@JF&TU4TQJ&
Y2362?63&=<ADB;9&D36&27;6>&<=98=36B;68F&36DB5=>I&2>@:&92<6&92B=2M86<2I3DA5=B&
9;3D;D&PZ3D?6<D>&6;&D@JF&TU4UQJ&One area in most pressing need for solutions at scale may be the
progressive increase in the equity gap between socio-economically disadvantaged and
advantaged populations in Western industrialized societies. Not only is the income inequality
increasing (Deaton, 2013; Picketty, 2015), but so are various indicators of human development
such as nutrition and health (Ogden, Lamb, Carroll, & Flegal, 2010). A case in point in these
domains: low socio-economic status (SES) individuals in a country like the Untied States suffer
from significantly higher rates of obesity than their more advantaged counterparts (Cutler,
Rosen, & Vijan, 2006). Yet, any signs of progress remain absent in the low SES population
(Braveman, Cubbin, Egerter, Williams, & Pamuk, 2010). That is, low SES populations and
markets seem resistant to interventions even when they prove to be successful for the country as
a whole.
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86A@2:68&=>&D>&C>7D?2C3DE@6&<D3L6;&6>?=32><6>;&36<D=>&>=B56M@6?6@J&%6;F&B2>8=;=2>9&BD>&
E6&D@;6368&92&;5D;&AC3A2967C@&9;3D;6I=69&9BD@6&CA&/,#&67723;9&;5D;&BD>&E6&C968&;2&D@=I>&92B=D@&
&
&
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D>8&=>8C9;3:&I2D@9J&)5D;&=9F&2C3&73D<6G23LF&=>&B@6D3@:&36?6D@=>I&;56&A32E@6<9&;5D;&C>863@=6&
56D@;5:&7228&<D3L6;&;3D>9723<D;=2>9F&D@92&@D:9&I32C>8G23L&723&;3D>9723<D;=2>D@&
A2;6>;=D@=;=69J&
The Puzzle of Limited CSR Success
Corporate Social Responsibility (CSR) has emerged over the years as a mitigation
strategy to unanticipated negative externalities of industrial technologies and markets, such as
environmental hazards, climate change, inequities, or ill human health (Aguinis & Glavas, 2012;
Campbell 2007; McWilliam & Siegel 2001). CSR strategies involve broader societal-oriented
goals and consequences of business activities (Matten & Moon, 2008). These activities arise
from a business’ sense of responsibility towards external and internal stakeholders’ expectations
of their economic, environmental and social performance (e.g. Aguinis & Glavas, 2012; Carroll,
1999) and are further framed in response to institutional pressures on the organization and the
environment in which it’s operating (Campbell, 2007; Pache & Santos, 2010). Yet, while CSR
offers promise to reshape consumer practices through markets, ;56&9B2A6F&9BD@6&D>8&=<ADB;&27&
G5D;&5D9&E66>&A299=E@6&;532CI5&/,#&;5C9&7D3&=>&D883699=>I&;5696&<De23&92B=6;D@&B5D@@6>I69&
=9&B@6D3@:&=>9C77=B=6>;&P"B6<2I@C&6;&D@JF&TU4TS&'CE\&6;&D@JF&TU4TS&f3CI<D>F&4``_QJ
First, countering this enactment on a sense of responsibility is a business’ primary goal of
survival and profit. This tension implies that in practice CSR efforts take many shades. Some
organizations engage with marginalized populations by integrating small farms and small
businesses from remote areas into supply chains (London & Hart, 2004; London, Anupindi, &
Sheth, 2010) or into frugal innovation for Base-of-Pyramid markets (London, 2008; Prahalad,
2011). Yet, if we were to view the role of businesses in societal transformation along a
continuum between symbolic engagement and leading societal transformation (Pache & Santos,
2010), most would likely fall in the former half of that continuum. For example, adhering to
general CSR norms, many earmark financial resources for charity supporting social causes
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7
related or not to their domain of activity (Blair & Chernev, 2015), others engage more directly
with the environment or with social issues (Banerjee et al, 2003; Andrew et al 2014).
Moreover, CSR activities often undertaken in the periphery of business lack a focus that
allows targeting the fundamental problem or scaling up. They often are undertaken in the, in
separate social organizations (e.g. McDonald’s Ronald McDonald House) or in support of
existing not-for profit activities (e.g. through direct donations, or promoting employee volunteer
efforts). Due to their peripheral nature, these activities suffer from the many of the same
inefficiencies as not-for profit actions, often having the lack of ability to scale across different
contexts and/or suffer from financial instability (Westley & Antadze, 2010). When firms do
adopt CSR into their business are often targeted to niche markets due to increased costs,
suppressing access across larger populations.
Underlying this is that shifting market offerings at scale requires a transformation of
capabilities at the firm and industry level. However, these changes are moderated by inertia
(Haveman, 1992; Lounsbury & Glynn, 2001). Transforming organizational capabilities (Teece
et al. 1997) are challenging due to the increased routinization of activities (Hannan & Freeman,
1984). Smaller organizations lack slack resources to adapt to changes (Haveman, 1993). Once
transformed, leading organizations may exert social pressures on others to follow suit. But,
absence this, the onus of addressing complex human development issues remains predominantly
shouldered by not-for profit actors and governments, with corporate investment to address these
issues often seen as a diversion away from core profit raison d’être (Friedman, 1970). The lack
of synergy between these sectors fails to curb the progression of environmental, health, inequity,
and other societal challenges facing our current society (Acemoglu et al., 2012; Deaton, 2013;
Dubé et al., 2012; Krugman, 1996; Ostrom, 2010).
With the characteristics of pressures and firm reactions in mind, we posit that dominant
actors in a field are most likely resistant to pressures to act socially, and respond to pressures on
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8
social causes with inequitable actions, of which any benefit remains beneficial within a niche.
The fabric around which industrial society organizes itself that is woven into a clear divide
between human and economic development, with social norms, public services and institutional
arrangements aiming to address problems of poverty, education, or health being disconnected
from and failing to build synergy with technological innovations and the private sector that may
be able to serve as more than engine for economic growth (Acemoglu et al., 2012; Deaton, 2013;
Dubé et al., 2012; Krugman, 1996; Ostrom, 2010).
Because of this, we argue that the development of market infrastructure – material and
social structures such as standards, institutions, rules and routines - in structuring the interactions
between market actors (e.g. Van de Ven, 1993) such as government, for-profit and not-for profit
actors and consumers, is central in constraining and promoting market shifts (Hargrave & Van
de Ven, 2006; Lee & Struben, 2014).
Market formation and the Development of Market Infrastructure
We develop a framework to examine the major forces structuring market conditions
hampering transformation. Deriving from the literature and empirics, we capture the feedbacks
underlying market infrastructure. We build our theory in stages, beginning with the improvement
of product capabilities, then the building of consumer consideration and finally the development
of market systems and institutions. By combining these, we present a causal loop diagram
representation of the forces underlying the inertia we observe that constrain market change.
While we develop this qualitative framework for the generic market context, we connect the
exposition to the context of this paper, healthy and equitable food.
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9
Category capabilities
The process of building category capabilities is driven by a firm’s need to remain market-
focused and competitive on a cost and product level (Barney, 1991). (=3<9&86A@2:&3696D3B5&D>8&
86?6@2A<6>;&67723;9F&EC=@8=>I&L>2G@68I6&D>8&L>2G52G&D>8&9CE96KC6>;@:&A328CB;M36@D;68&
BDADE=@=;=69&Pf2IC;&W&gD>863F&4``TS&R69;&W&0D>9=;=F&TUU[QJ&They must maintain investment to
maintain their position in the market (Dasgupta & Stiglitz, 1980), Through this investment, they
work towards satisfying consumer demands by increaising consumer utility of their products
(Adner, 2002; Adner & Levinthal, 2001; Jacoby, Chestnut, & Weigl, 1976; Struben and Sterman,
2008 Tripsas, 2008). 0>&;56&B2>;6N;&27&7228F&9CB5&67723;9&D776B;&A328CB;9d&A3=B6F&;D9;6F&?D3=6;:F&
D>8&>C;3=;=2>D@&KCD@=;:J&Together, these form a reinforcing (positive) feedback (Richardson,
1995), where better performing categories see greater improvement (Figure 1, loop 1, !"#$%&'(
)*+).&
INSERT FIGURE 1 ABOUT HERE
These forces bias spending towards the product categories that are already selling better,
until diminishing returns outweigh sales potential. The dynamics of consideration and resource
allocation highlights some of the key problems: Without evidence of a shift in behaviors in the
marketplace or relevant environmental threats, firms are more likely to entrench in their current
behaviors and improve and market their best-performing categories.
Category consideration
In addition to category capabilities, affinity increases with the attention decision-makers
give to products (Moore & Lehmann, 1980). Familiarity and exposure play a key role in the
consumer decision-making process. Constrained by limited information-processing capacity and
aspirations to objectively evaluate all options, consumer attention is guided by different channels
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10
of influence: by social exposure (word of mouth, media attention, the observation of others,
social norms, and peer pressure – Bearden & Etzel, 1982; Burt, 1987; Cliff, 1981; C. Davis,
Patte, Levitan, Reid, Tweed, & Curtis, 2007a; Glaeser, Sacerdote, & Scheinkman, 1996;
Herman, D. A. Roth, & Polivy, 2003; Jacoby et al., 1976; March & Simon, 1993; Rogers, 2003)
and by individual habituation, sensitization, cultural factors, skills, absorptive ability, brand
loyalty (J. P. Dubé, Hitsch, & Rossi, 2010; Hoyer, 1984; Moore & Lehmann, 1980; Rogers,
2003). Through marketing (efforts to shape the category and brands – (Erdem & Keane, 1996),
firms can also increase attention (Dekimpe & Hanssens, 1999).
INSERT FIGURE 2 ABOUT HERE
&&
!>82I6>2C9&A32B69969&=>?2@?=>I&5DE=;CD;=2>&D>8&92B=D@&B2>;DI=2>&=<A@:&;5D;&>6G&
A328CB;9&D>8&BD;6I23=69&5D?6&;2&2?63B2<6&9;32>I&9G=;B5=>I&=>63;=D&E6BDC96&27&@2G&
DBBC<C@D;68&D82A;=2>&P,;3CE6>&D>8&,;63<D>F&TUUhQJ&R5=@6&=>8=?=8CD@@:&;5696&B2>9C<63&
=>7@C6>B69&<D:&E6&9<D@@F&BC<C@D;=?6@:&;56:&D36&7C>8D<6>;D@&;2&B36D;=>I&7D<=@=D3=;:&G=;5&;56&
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A367636>B69J&)2I6;563F&<D3L6;=>I&P(=IC36&TF&@22A&TF&,-"./'012Q&D>8&5DE=;CD;=2>&D>8&92B=D@&
A3699C36&P(=IC36&TF&#TF&3#&0-4(0154%/1&/Q&36=>723B6&BC336>;&AC3B5D9=>I&E65D?=23(=>&D&A29=;=?6&
7668EDBL&@22AJ&&
Systems and Institutions
(=>D@@:F&A3=?D;6&D>8&ACE@=B&DB;239&<DL6&B52=B69&;5D;&95DA6&;56&36IC@D;=2>F&
D?D=@DE=@=;:F&D>8&8=9;3=EC;=2>&B5D>>6@9&27&;5296&I2289&*&;56&9CAA23;=>I&9:9;6<9&D>8&
=>9;=;C;=2>9&Pg:9<D>F&4``XQ&These could be both tangible, such as upstream and downstream
industries, or intangible, such as the development of relationships and ways of doing business
that can increase affinity for certain products. For example, though the availability of food
&
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11
retailing would have direct effect on consumer affinity they are not directly controllable by food
manufacturers. As the development of systems and institutions is dependent on the current
conditions, this factor further reinforces behavior ((=IC36&4F&$22A&#XF&363'/,3(*(013'0'%'0#13).
INSERT FIGURE 3 ABOUT HERE&
Challenges to Develop Market Infrastructure that Support Self-sustaining Socially
Responsible Markets
Product capabilities, consumer consideration and systems and institutions combine to
constrain consumers’ affinity to consume particular product categories from specific firms into
direct paths, showing strong inertial forces. This interdependency further constrains effective
actor engagement in one individual factor. When the market infrastructure is well-developed,
engagement with local and/or governments and not-for-profit organizations may allow
organizations to find business opportunities that contribute to the building of social value (Porter
& Kramer, 2011). Yet, under limited market infrastructure,, single-focused efforts, such as an
advertising campaign or introduction of product labels may be ineffective in changing the
trajectory of long-established patterns. Further, =>=;=D@&B2>8=;=2>9&D>8&G=;5&;5D;&;56&B5D@@6>I6&
8=7763&DB3299&B2>;6N;9&P(=IC36&4F&9;DBL68&E2N69QJ&(23&6ND<A@6F&;56&B2>;6N;&27&7228F&@2G&,!,&
A2AC@D;=2>9&&7DB6&G=;5&5=I5&EC8I6;&B2>9;3D=>;9F&5D?6&@2G&7D<=@=D3=;:&G=;5&>C;3=;=2C9&7228F&
D>8&6NA63=6>B6&@2G&D?D=@DE=@=;:&27&;5296&72289J&)5C9F&D>&6KC=;DE@6&;3D>9723<D;=2>&27&D&7228&
<D3L6;&=9&B2>9;3D=>68&E:&;5696&<C@;=A@6&7668EDBL&A32B69969J
Interventions for Scaled and Equitable market transformation.
Using our lens of market infrastructure development underpinning market transformation,
we identify 5 types of interventions from businesses, government and social actors ( Table 1).
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Using our framework we hypothesize why unilateral interventions fail to transform markets
towards more sustainable and equitable directions
INSERT TABLE 1 ABOUT HERE
Niche CSR Innovation (Intervention 1a)
For-profit actors in response to these pressures, can act unilaterally to innovate and
release socially benefiting products. These products would be developed within the business and
contain attributes that are more attractive to consumers and at the same time address social
concerns (Christensen, Anthony, & Roth, 2013; Lukas & Ferrell, 2000). These improve
capabilities and consideration. These can be seen as market innovations that go through a process
of development and release. Market innovations would seek to recuperate initial costs of
development, so rather than target the entire population all at once, they take advantage of the
heterogeneity in population preferences to earn the highest potential margins and to test the
appeal of the product with lower initial investment and commitment (Adner, 2002; Agarwal &
Tripsas, 2008; Schumpeter, 2011). This nature of firm-driven market innovation often results in a
high price to end consumers (Jain & Bass, 1989), in addition to the geographic, social and/or
product attractiveness barriers that could potentially increase problems with accessibility in
certain segments of the population (Abernathy & Utterback, 1978; Bass, 1969). Because of this,
many new products do not reach the initial threshold necessary to bring it to mass market and
soon disappear into oblivion, while others may enjoy mainstream success but still never
experience full market penetration.
Given this, we see four challenges of improvement within the market. First, a general
explanation is that the conditions for market innovations are not aligned with what is needed for
society. Generally, large upfront investments required render much of CSR innovation
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unfavorable for firms in general, relegating most efforts to be concentrated on improving their
existing products. Innovation comes where firms sense opportunities (Drucker, 1984), and so
long as demand comes from niche markets, investment and development would remain on niche
levels, as it would be comparatively too costly to invest heavily in them.
Second, the comparative characteristics of the developed category versus the CSR
category favor innovation into the former. Consumers favor products that they are already
familiar with (Brucks, 1985), and compounded by price and acceptability barriers (Rogers, 2003;
Schroeter, Lusk, & Tyner, 2008), current purchasing habits are much misaligned with those
innovations provided. For example, certain foods will have little acceptance in populations that
are not familiar with the preparation methods required to consume them (Asp, 1999).
Third, because upfront investments are high, innovation leads to higher cost products.
Radical innovation requires high margins, together leading to prices that are too high for large
uptake, also significantly pricing out low-SES.
Finally, systems and institutions in specific communities have been developed to match
the relative level of demand and consumption, and distributing new products in which there is
little or no distribution infrastructure and support industries provide additional barriers to the
development and spread of innovation.
These problems would have direct implications for what demographic innovations are
likely to be targeted. Thus, successful market innovations have great potential in sustaining and
growing; however, only markets that are most lucrative (those that have consumers that can find
use in and can afford the products) can access them, typically high-SES.
Mainstream CSR Innovation (Intervention 1b)
Considering that niche-targeted CSR innovations only reach niche markets and aren’t
accessible in the markets that most need it, for-profit actors can choose to unilaterally develop
and release CSR products targeted directly to low-SES markets. Similar to intervention 1a, these
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are developed by the business only, targeting improvement in capabilities and exposure, but with
attributes being more attractive in price instead and compromising on other attractiveness
factors. We demonstrate here that these products suffer from the lack of profitability and are poor
investments for the firm, both in the short-term and long-term.
We model these on social entrepreneurship, which seek to produce social value to certain
populations or society as a whole (Biggs, Westley, & Carpenter, 2010; Phills, Deiglmeier, &
Miller, 2008), and profit-maximization is typically not the primary goal, though they do seek to
cover initial costs and be sustainable (Yunus, Moingeon, & Lehmann-Ortega, 2010).
We summarize the barriers that mainstreamed CSR innovations face into four. Firstly,
absorptive barriers (skills, culture and education) prove to be significant impediments to the
widespread diffusion (Dacin, Dacin, & Tracey, 2011). Like market innovations, mainstreamed
CSR innovations should need to both be developed, and diffuse, and innovations and initiatives
must work for the context they’re intended for, and addressing local needs could be very context
specific. Though there are examples of innovations that have been able to spread widely, or are
already scaled up in nature (Dacin, Dacin, & Matear, 2010), CSR working to address
underserved markets usually target these dimensions specifically to allow them to cater flexibly
to local needs, but result in them being difficult replicate and scale even in slightly differing
contexts (Granovetter, 1985; Shaw & Carter, 2007). For example, as illustrated by Rogers, what
was thought to be the straightforward introduction of the practice of water boiling in a coastal
Peruvian village by the public health service was ultimately unsuccessful because it clashed with
ingrained cultural views of food and beverage consumption (Rogers, 2003).
Second, innovations must also be accessible price-wise, physically accessible and
consistently available for the target market (Prahalad, 2011), three criteria that are particularly
difficult due to low levels of financing and poor existing support.
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15
Third, social initiatives are particularly sensitive to local power dynamics, especially
during the process of scaling up, which result in heightened power, political and dominance
dynamics between firms leading to greater coordination problems (MDacin et al., 2011; Van de
Ven, Delbecq, & Koenig, 1976). When The Big Issue, a UK-based street newspaper sold by the
homeless expanded to Southern California, homeless activists and those associated with existing
papers such as Making Change in Santa Monica felt threatened and immediately retaliated
against The Big Issue (Dacin et al., 2011).
Finally, addressing price scensitivy will require consistent investment and serves as an
additional barrier to scaling up. Though in the marketplace, there are numerous examples of
funds devoted to social causes, most of it finances the status quo, which does not promote
disruptive innovation (Christensen, Baumann, & Ruggles, 2006). Thus, it becomes rather
difficult for CSR to overcome the problems of scalability.
These problems combine to make investing in mainstreamed CSR innovation for
businesses an unattractive and risky decision.
Government and Not-for-Profit Actor Efforts (Intervention 2)
Government and NFP actors have also stepped up to reduce the barriers hindering the
acceptance of CSR due to differences in product utilities, consideration and complementary
systems and institutions. We use market infrastructure to explain the effect of these interventions
on the market and their failure to change the market. Interventions can stem from both
government and social actors and touch on all three components of market infrastructure
described: government-led marketing increasing consideration (Intervention 2a), price
modification and sensitivity changing affecting capabilities and consideration (Interventions 2b,
2c and 2d) and the improvement of complementary systems and institutions (Intervention 2e).
We explain for each that these are effective only as they continue to be funded, typically at high
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cost, but are not effective in overcoming the status quo trajectory of investment and
consumption, as they remain largely unchanged upon the end of the program.
Businesses in single-actor interventions suffer from a lack of resources because they are
required to both address capabilities and consideration simultaneously. As a result, they have less
to invest in improving their products, and result in products that are less attractive to consumers
especially as compared with their competitors. Government could step in to invest in conducting
in marketing activities, especially for greater economic and societal benefit (Intervention 2a).
Additionally, interventions can work to reduce the barriers that accentuate the equity gap
and hamper efforts to mainstream the social good (Interventions 2b, 2c and 2d). Subsidies on
socially beneficial products (especially targeting the underserved populations) and taxes on the
products that are not can modify consumer preferences and serve as additional incentive for
businesses to change the trajectory of investment. By reducing barriers on CSR products and
raising barriers on products that lower the social good, consumer demand can be modified with
potential impact on business investment (Powell, Chriqui, Khan, Wada, & Chaloupka, 2012).
With respect to market infrastructure, consideration would increase and the baseline for the cost
capabilities for CSR products will be artificially reduced in the hopes of increasing business
investment into capabilities. Finally, systems and institutions can also be targeted to equalize the
conditions across heterogeneous populations (Intervention 2e). Investment into incentives can be
given to improve them, and in optimal cases, these would improve the conditions for attracting
investment into capabilities and improving consideration.
We argue that for each of these, although relieving pressure on one or two of the three
aspects to promote innovation and experience certain amounts of success are still constrained by
the inertia in the rest of the market structure and carries very little effect if not supported.
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Directed Technical Change (Intervention 3)
Given that the first two sets of interventions are unable to sustainably mainstream CSR,
actions could be taken to give temporary incentives to improving innovation across the entire
value chain system in the hopes of generating synergistic growth (Acemoglu et al., 2012; Dubé
et al., 2012; Struben, Chan, & Dubé, 2014).&Directed technical change, as described by
Acemoglu et al. (2012), suggests taxes on undesirable inputs and subsidies on desirable inputs in
order to shift production and technology towards using desirable inputs. With the assumption
that these inputs are relatively substitutable and that the changes occur early enough, the policy
can be temporary and still be effective in changing the trajectory of innovation into the future.
Acemoglu et al (2012) modeled this on environmental policy, with “dirty” technologies as the
undesirable input and “clean” technologies as the desirable input and environmental quality as
the outcome. Subsequent innovation in related industries can subsequently help promote
innovation within the industry, given the added productivity for investment, however
consideration will continue to lag as barriers still exist in underserved populations.
Convergent Innovation (Intervention 4)
Through interventions 1a and 1b, we postulate that as resourceful as any business may be,
and no matter how large the share of their resources they can devote into CSR, businesses cannot
reach any solution to reach equitable societal goals at scale. Businesses need to strategically
partner with actors throughout society, including government and NFP actors, to weave together
their domains of technological, social and institutional innovations and create a whole ecosystem
for sustainable improvement in societal benefits. We propose CI (Dubé et al., 2012; 2014; Jha et
al., 2014) as a novel transdisciplinary and cross-sectoral approach for innovation and business
strategy that bridges the firm’s mainstream commercial activities and its corporate social
responsibility in deeper and more meaningful way than what has been achieved thus far through
pro-social activities (Sen & Bhattacharya, 2001), base-of-pyramid initiatives ($2>82>&6;&D@JF&
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18
TU4U), or shared value creation (+23;63&W&f3D<63F&TU44) in a manner that is commercially
successful for business, and at the same time contributes to impact and share of resources, we
devote as society in addressing such seemingly untractable challenges.
CI builds upon and goes beyond technological innovation by coordinating multiple actors
and ensuring all market infrastructure dynamics are addressed to interlock single and collective
actions by businesses and all stakeholders in society, starting with individuals, to reach sufficient
scale in mainstreaming CSR at the core of commercial activities at the same time as building
upon the regular activities by tighter and deeper links with what other actors in the market
ecosystem are doing to create maximum single and collective outcome for the societal goal to be
reached. Through combining business savvy, the social sector’s knowledge of local needs,
research intensity of labs and universities and resources of government, change can be pushed
upon the market infrastructure.
Transition Challenges towards Healthy and Equitable Food Consumption
We apply our framework to the context of healthy food for our study. We first introduce
the context of healthier food. Next, to further test our framework, we formalize our conceptual
model (Figure 1-3) into a formal model, calibrated on the food context, and develop this further
by exploring the dynamics of different individual and collective interventions that could alter the
path of investment.
The context of nutritious food
Obesity is a leading risk factor for non-communicable diseases (NCDs) such as
cardiovascular diseases, various cancers, respiratory conditions and diabetes (Thomas & Gostin,
2013), and increasing the consumption of healthy foods has been found to be a core element of
curbing obesity and reducing NCD prevalence (Swinburn et al., 2015). With increasing health
and economic burdens due to rapidly increasing rates of obesity and NCDs, key stakeholders
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such as the World Health Organization (Bloom, Cafiero, & Jané-Llopis, 2011) or the United
States government through organizations such as Let’s Move (Obama, 2012), have brought
attention the issue and developed integrated frameworks to encourage healthy food development,
acceptance and distribution in the population. In response to the increasing attention and pressure
to this matter, both food manufacturing firms and other market actors have put forward
innovations and initiatives.
Many food manufacturers have altered their food portfolios with lower levels of fat,
sodium or sugars in their products (Ng & Popkin, 2014; Ng, Slining, & Popkin, 2014), and to
introduce functional foods (foods that have additional benefits over traditional versions of that
food such as calcium-fortified bread, eggs with added omega-3 fatty acids, rice with added
vitamin B, etc. – Khan, Grigor, Winger, & Win, 2013; Siró, Kápolna, Kápolna, & Lugasi, 2008).
From NFP actors or government, initiatives such as farmers’ markets (Evans et al., 2012),
collective kitchen programs (Fano, Tyminski, & Flynn, 2004), or the healthy corner store
initiative (CDC, 2011) have helped to promote nutritious food availability and exposure in
certain areas outside of mainstream market mechanisms (Venn et al., 2006). Nutritious education
initiatives such as specific labeling, education and publicity campaigns have also promoted
nutritional awareness (Grunert, Wills, & Fernández-Celemín, 2010).
Despite these efforts low-SES groups remain obese. Adolescents whose parents have
lower education were found to have significantly higher rates of obesity as compared with those
whose parents have 4-year college degrees or more (Frederick & Snellman, 2014), and
significant differences were found across SES food category consumption. High SES groups
have consistently higher consumption of healthier food categories that result in higher vitamin,
mineral and fiber outcomes, while persons of lower SES have higher consumption of energy-
dense low nutritious foods (Darmon & Drewnowski, 2008). These indicate though these
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initiatives could be paying off for high SES populations, they are not having the same effects on
low SES populations.
The differences in consumption patterns and health outcomes across SES have been
explained from several angles. Firstly, significant deficiencies have been found in low-SES
healthy food environments as compared with high SES (Grier & Kumanyika, 2006; Walker,
Keane, & Burke, 2010): supermarkets, which are more likely to carry healthy foods, are more
difficult to access in low SES urban areas (Morland, Wing, Diez Roux, & Poole, 2002; Walker et
al., 2011); the ratio of shelf space for unhealthy foods (rather than healthy foods) is higher in
low-SES areas (Rose et al., 2009), and there is an increased availability of fast food restaurants
versus healthier options in low-SES (Bodor, Rice, Farley, Swalm, & Rose, 2010).
Secondly, cross-SES comparisons have found that low SES groups are especially
susceptible to the fatty and sweet motivational qualities of unhealthy foods reinforced with
biological, addiction-like mechanisms (Davis, Eisenhardt, & Bingham, 2007; Mattes, 1993;
O'Guinn & Shrum, 1997). With competing priorities (Mezzacappa, 2004), low SES have lower
sensitivity to the nutritional quality of their foods, found through generally lower nutritional
knowledge (Grunert et al., 2012) and a preference for simpler nutritional labels rather than
detailed ones (Méjean et al., 2014).
Finally, there are perceived greater time requirements of access and preparation
(Blaylock, Smallwood, Kassel, & Variyam, 1999), lower availability (Block, Scribner, &
DeSalvo, 2004), and lower perceived demand (Gittelsohn et al., 2008) for healthy foods in low
SES areas.
A Computational Model for Nutritious Food Transformations
We build upon a previous model, which captured over-time interactions of food supply,
food choice, health and governmental policy at the meso-level (Struben et al. 2014). Here we
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expand and adapt the model to further study socio-economic differences and innovation
dynamics. We provide an overview of the model and discuss the main structure.&
The model is designed to analyze market actors, in particular producers and
consumers, dynamically shape the composition of consumed food portfolios and their nutritional
quality. To make salient the historical trade-off between nutritional and motivational quality of
food, the model represents the distribution of food in the market as two intersubstitutable product
categories comprising food portfolios of respectively healthful and unhealthful foods (HF vs.
UF). While the HF category is superior in nutritional quality, the UF category is favorable with
respect to the motivational quality-related attributes (price, taste and variety).
The model represents food manufacturers allocating resources between categories, either
through marketing or the improvement of attributes. Firms may therefore also undertake
individual or coordinated initiatives to improve the nutritional quality of their product offerings,
but do this within a competitive environment. We further represent the role that systems and
institutions play. Besides market players, non-firm actors, namely government and social actors,
may intervene in the system.
We segment the population by low SES and high SES segments (LS, HS), who differ on
their price and nutritional sensitivities and to what extent their relevant systems and
infrastructure has developed (key parameters summarized in Table 2). These differences explain
the differing initial values of utility to consume, propensity to consider, systems and institutions
and market share for the two food categories in the two population strata.
INSERT TABLE 2 ABOUT HERE
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Food Market Infrastructure
We build upon the market infrastructure developed but we calibrate specific parameters
to the food context. We will show that contrasting nutritious food, years of path-dependent
investment and innovation has produced a well-oiled machine for developing, distributing and
marketing low nutritious foods. These have proven to be much more attractive to consumers in
terms of their capabilities (price, taste, variety and nutritional quality), consumer consideration
and systems and institutions (distribution, access and convenience), with all three factors
reinforcing each other. We observe both in the model and in the context that these differences are
further augmented in low SES areas. The lack of market infrastructure, lower overall food budget
and lower nutritious sensitivity helps explain why nutritious food is so underrepresented. While
the food market structure may change as a result of the actions of actors, many see components
they do not control as given, creating barriers to action and success. We will now explain what
keeps actors generally locked into this acrimonious pattern of low innovation, and with that,
develop a solution on how to overcome this.
Consumer Choice: Affinity to Consume
In our model, consumers make decisions about food choice in response to offerings of
HF and UF food. Consumer choice, through the affinity to consume, depends on the state of
underlying capabilities, consideration (socio-behavioral influences, such as marketing, social
norms, peer pressure, and habituation), and the systems and institutions (based on the food
environment). Population segments may experience differing levels of receptiveness to these
factors dependent on their SES.
&𝑆𝐻𝐴𝑅𝐸!"#,!"! =𝑓
!𝐶𝐴𝑃 𝑓
!(𝐶𝑂𝑁)𝑓
!(𝑆𝑌𝑆)& & P4Q&
Product capabilities (motivational qualities) are affected directly by firms’ investment
into food research and development, and consumers respond to these based on their sensitivity
(dependent on their SES) to each aspect of investment, captured in price, taste, variety and
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23
nutrition parameters (these individual components are described in further detail below).
Consideration is primarily reinforcing, but can also be influenced through firm marketing and the
systems and institutions (capturing the availability and accessibility of these products) also
directly influencing the convenience of access of products for the consumer and is also
reinforced by consumer consideration. Consumer choice is based on the affinity to consume each
category with mechanisms conforming the causal loop discussed above.
Firm Behavior: Marketing and Reinvestment into the Development of Capabilities
For-profit actors reinvest profits either by improving or marketing their food categories
depending on where they expect highest returns. Marketing increases the consumer
consideration, while the development of attributes increase the utility. FP actors decide based on
expected future returns how to proportion their reinvestment into differing food baskets, then
they decide in what proportion would go in either food marketing efforts or in food innovation,
and finally, for the funds allocated to food innovation, how to distribute among the different
attributes. This decision is constantly revisited.
Food product marketing directly influences the exposure that consumers have to the
firm’s basket, and increases their attention to this particular basket. If marketing is reduced,
ceteris paribus, exposure decreases and the propensity to consider decays as consumers’
attention for that food basket decreases.
We capture firm product portfolio innovation in four levers: price (including cost), taste,
nutrition and variety (including product positioning). Competition among firms to develop
products that best suit consumer evolving consumer needs and increasing safety regulations push
continuous investment into improving their product capabilities. For the firm, continual
investment in food manufacturing practices and food safety help keep costs down and ensure the
safety and shelf-life of their products (Fryer & Versteeg, 2008; Smil, 2004). Other than cost,
firms improve their products on multiple lines to attract customer, who also make food
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consumption choices based on psychological, biological or cultural factors (Blaylock et al.,
1999). Among food attribute related factors, taste and hunger satiation serve also serve as a
significant motivational force in food consumption behavior (Davis, Patte, Levitan, Reid, Tweed,
& Curtis, 2007), while convenience (including both accessibility and time for preparation –
Wright, 1974), and the health of the food (Jetter & Cassady, 2006) also play a large role. Firms
can also spend significant efforts to increase the visibility and properly position their products,
encompassing anything that helps the product itself communicate product attributes and product
convenience factors to the end-consumer including on-label claims and promotions (Campos,
Doxey, & Hammond, 2011; Wansink & Chandon, 2006), product size assortments (Wansink,
1996), increasing product variety (Hoch, Bradlow, & Wansink, 1999), shelf presentation and
packaging (Stroebele & De Castro, 2004). We capture this in the variety lever. Investment
patterns into improving food attributes follow a learning curve trajectory, where marginal returns
will be lower as more experience is gained (Argote & Epple, 1990), and the effect of experience
on capabilities will decay over time as consumer preferences shift.
Systems and Institutions: Food Environment
Food is distributed to consumers through retail outlets (e.g. supermarkets, convenience
stores, or farmers’ markets) and food service locations (e.g. restaurants, cafeterias, catered
operations). In addition to having properly equipped outlets in accessible places for consumers
(e.g. establishments with refrigeration, storage and preparation facilities as necessary),
distribution networks are necessary to transport food from farms, processing plants and
manufacturing centers to these outlets. Low investment in the food environment would mean that
consumers would have difficulty accessing certain food products, have lower exposure to them,
and as a result, would be less likely to consider them (Ford & Dzewaltowski, 2008). In addition
to poor access, more inefficient value chains mean end-consumers may experience a mark-up,
resulting in greater price barriers.
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Given the inherent preference of low SES for unhealthy foods, food environments have
developed on those lines (e.g. increase in fast-food restaurants, purchases of processed,
unhealthy foods in corner stores, the lack of supermarkets). Because of this, it becomes difficult
to introduce healthy foods which typically have shorter shelf-life and may require refrigeration
and preparation facilities which would require up-front investment, in these environments (Grier
& Kumanyika, 2006).
The quality of the food environment is developed based on perceived demand of specific
food categories of that area. Because of differences in sensitivities, low-SES populations tend to
have poor high nutrition food environments, which provide greater incentives for food firms to
supply more UF foods over HF foods (Ford & Dzewaltowski, 2008). The food environment
captures the efficiency of distribution and accessibility for consumers, and the degree to which it
is developed is determined by the relative attractiveness of each food basket.
Analyzing Interventions
We now populate the model based on the food context (Table 2, see further Struben et al.
2014). Based on this we develop a “base case”. The base case, simulated from 2015 to 2035,
assumes no intervention is undertaken, while businesses continuously reinvest based on expected
future profits and consumer demand unimpeded by interventions from government, social
organizations, or themselves. Thus, market forces and existing market structures dictate the
evolution of consumption. In the base case the healthy food (HF) market share decreases slightly
over time for both low socioeconomic (LS) and high socioeconomic (HS) status populations,
with equity gap remaining consistent over time, though reinvestment into HF is slightly
increasing over time. HF consideration, consumer utility (resulting from product category
capabilities and consumer sensitivity), food accessibility (complementary infrastructure) also
decrease slightly over time along with the market share.
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Next, we develop multiple scenarios, each representing the distinct interventions (Table
1). Table 3 shows our operationalization for the model and the specific food context. Each time,
a one-time shocks take place in 2016, with a policy period running for five years from 2016 to
2021. In the interventions that involve firm action, F1 refers to firms that are acting, while F2
conduct status quo activities. For comparison, they are identical in size and composition in the
base run and before 2016. All interventions are compared with the base case. Key outcome
variables we measure are HF market share by SES, product utility for consumers (a factor of
product capabilities and consumer sensitivities) by SES, acting firm profits, HF reinvestment by
acting firms, HF food environment – by SES), and product category consideration by SES. In the
charts where multiple SES are shown, low-SES are black, while high-SES are grey. Table 4 also
presents equity gap improvement (the SES difference between percentage improvement in HF
market share over the base case, where positive numbers indicate greater relative improvement
for low SES, or a closing of the gap). HF investment intensity compares the level of acting firm
investment into HF R&D as compared with the base case. We show the average for the policy
period (2016-2021) and final year of simulation (2035).
INSERT TABLE 3 HERE
INSERT TABLE 4 HERE
For-profit-driven (Intervention 1)
We develop two different FP-driven CSR innovations. The classic market innovation
targets a niche markets in order to reap the highest profit margin, while mainstreaming loses taste
for a more attractive price.
For the niche-targeted innovation, our results show the changing of capabilities targeted
to HS, predictably, increases in product utility for them while decreasing utility for the price-
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sensitive LS, which ultimately causing the equity gap to increase. As a result, market share
steadily increases for HS, and reinvestment patterns are higher for HF, but LS does not benefit
from the spillovers. This is a profitable venture for the acting business. But efforts to mainstream
the product, though more equitable and showing some uptake in both LS and HS, are not
profitable for firms given the lower profit margin. The higher utility and demand do not increase
market share enough for the acting firm to catch up, leading to a sustained disadvantage and the
lack of ability to further the capabilities of their products.
INSERT FIGURE 4 ABOUT HERE
Government or Not-for-profit Actor Barrier Reduction (Intervention 2)
We model the government-led marketing initiative (Intervention 2a), where awareness of
the category as a whole is increased at no cost to the firm, on FNV, an Office of the First Lady of
the United States-led initiative to promote healthy eating behavior. FNV (an acronym
representing Fruits and Vegetables) is a marketing campaign using traditional marketing firms to
increase the consumption of individual fruits and vegetables such as broccoli, and fruits and
vegetables in general (Moss, 2013). Taxes have long served as disincentives for consumers to
purchase goods that are generally deemed harmful to society (Intervention 2b), such as cigarettes
or alcohol. Increasingly, taxes on sweetened beverages are being considered and implemented,
with the widest example of implementation across the entire country of Mexico (Piernas, Ng,
Mendez, Gordon-Larsen, & Popkin, 2015). Additionally, price incentives can also be provided
for the purchase of goods deemed helpful for society (Intervention 2c). The Supplemental
Nutritional Assistance Program (SNAP, formerly known as food stamps) provide funds for low
income individuals and families to purchase food, and there is discussion on restricting them to
only healthy foods (Gundersen & Oliveira, 2001). Barriers can also be reduced through
sensitivity-changing initiatives (Intervention 2d) include increasing nutritional awareness
through nutritional campaigns would increase consumer’s sensitivity and consideration to
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28
healthy parameters of food. For example, Health Canada uses the Canada’s Food Guide and food
labeling policies to encourage healthier eating, and NGOs such as Équiterre encourage healthy
eating in schools (Grunert et al., 2010). Finally, we capture systems and institutions changes
(Intervention 2e) through using the food environment, reducing barriers to food accessibility in
low-SES. For example, various US states have created systems of support (financial and/or
technical) for corner stores in underserved areas to carry healthier foods (Gittelsohn et al., 2010).
Although all of these are effective to certain degrees during the policy period, improving
reinvestment marginally, these share one commonality, in that after the policy period, market
shares and considerations track back towards base-case levels. We present in particular our
results of Intervention 2c (Figure 6) in which pricing subsidies result in direct increase in
consideration and market share, with slight increase in reinvestment, but, these fall close to base
levels after the investment period. The expensive nature of all these initiatives will likely make
these policies unsustainable long term and their lack of ability to overcome the inertia indicates
they are not able to overcome investment patterns.
INSERT FIGURE 5 ABOUT HERE
Directed Technical Change (Intervention 3)
In the context of directed technical change, improvements across all food areas such as
ingredients, manufacturing processes or distribution can have spillover effects and encourage
food manufacturers to innovate in a similar direction.
Our results show a trajectory of change in market share and in firm reinvestment into
improving HF capabilities, with little discrimination across SES. Having a greater factor of
improvement results in equal improvements in capabilities and utility in both LS and HS, with
the trajectory of investment by firms sustained. This is reflected in improvement in consideration
and market share across SES. We note here also that the key to sustained improvement in market
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29
share and consideration lies in the ability for firms to concentrate their investment into the
improvement of capabilities. Additionally, uptake would take place in both LS and HS.
INSERT FIGURE 6 ABOUT HERE
Convergent Innovation (Intervention 4)
We demonstrate how the barrier-reducing efforts that were demonstrated in intervention
2 combined with directed technological change in intervention 3 together, forming convergent
innovation, is able to both simultaneously change the trajectory of innovation and reducing the
equity gap, and that both are necessary to achieve the synergistic effects necessary to incentivize
firms towards improving their product capabilities towards market transformation.
These mechanisms would help improve the willingness among consumers to consider
healthy foods, especially in low-SES groups, reducing many of the structural barriers that were
preventing them from greater uptake and in turn add incentive for firms to invest in their HF
capabilities. Our results (Table 4, Figure 7) show that with cumulative equity-gap reducing
policy primarily driven by the synergies of individual interventions covered under Intervention 2,
in CI, HF investment improves, and that both the reduction of the equity gap and directed
technical change help this.
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723&],J&&
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30
INSERT FIGURE 7 HERE
Discussion and Implications
We developed a theory of market dynamics and demonstrated that in order to transform the
market more socially, trajectory-changing paths of investment from the firms are required.
Participation from related industries to create added incentive for innovation and market
stakeholders, reducing the acceptance barriers and increasing consideration in low-SES groups is
key for improving investment to overcome the inertial forces in market infrastructure
(consideration, capabilities and systems and institutions).
Our business-led scenarios demonstrate the failure of market-led initiatives to both
address market needs as a whole and lowering barriers in an effort to reduce the equity gap.
Together, our analysis shows show the importance of applying coordinated actions across actors
in order to overcome the inertial forces of market infrastructure, to encourage firms to push their
socially responsible activities from niche to mainstream. Though we calibrated our model to the
context of healthy food, our findings on mainstreaming CSR are applicable to any context in
which there is social benefit at stake, such as reducing environmental impact or adopting fair
trade practices. Additionally, our insights on market equity are useful in the contexts in which
equitable access is desirable such as medical treatment (Peters et al., 2008), or
telecommunications (Hollifield & Donnermeyer, 2003; LaRose, Gregg, Strover, Straubhaar, &
Carpenter, 2007).
We demonstrate that self-sustaining CSR consumption trajectories requires a favorable
market infrastructure. However, in the status quo, the various chicken-and-egg problems that
need to be overcome to develop this market infrastructure. More so, interactions of those
barriers, and inertia in building each of the elements, are further hampering the widespread
adoption of CSR by firms.
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31
Generalizing this we argue for and further develop convergent innovation (CI - Dubé et
al. (2012; 2014). CI recognizes that difficulties in bringing solution at scale to societal challenges
such as the above were tied to the fact that their causes and solutions are woven into the
everyday life of individuals, organizations and institutions as these have evolved since the onset
of industrial revolution. For this reason, convergent innovation has been proposed as a cross-
sectoral approach to mainstream the societal issues targeted by CSR into core for-profit (FP)
activities, placing them upfront as a driver of commercially successful technological innovation,
business strategy, and market transformation, while having FP actors join with governments and
NFP actors for behavioral change and ecosystem transformation at scale. Beyond technologies
and changes in businesses processes and strategies, CI also involves social and institutional
innovation to enable such a shift in the drivers of supply and demand at market level and in
broader society.
We have demonstrated the structural reasons and inertial forces that are hampering the
widespread adoption of CSR innovations and how involving other actors to both encourage
innovation and reduce structural barriers can encourage it. Due to the differences in preferences
between low SES and high SES and the reinforced market infrastructure over time, firms have
difficulty targeting low-SES, and the CSR actions that do try to address this experience difficulty
in scaling and ensuring financial stability (Westley & Antadze, 2010). We discover that the same
inertial market infrastructure mechanisms that are constraining CSR actions can be used to
encourage the mainstreaming CSR actions through the modification of market conditions. Our
framework highlights the mechanisms through which market transformation through the
alignment of goals with collective action (King & Pearce, 2010; Lee, Struben, and Bingham
2017), in addition to constructing the possibility of creating purposeful action and change within
the market..
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Additionally, we show that it is possible to have CSR innovation without following the
classic supply-side driven market innovation patterns (Lukas & Ferrell, 2000), however efforts
will have to be spent on reducing barriers on the demand-side. If society, as a collective whole, is
able to merge their actions and collectively act in a social manner, the right market conditions
can be made to further CSR innovations in a market environment.
Our modeling results show the importance of developing favorable conditions for
socially responsible trajectories through the involvement of many market stakeholders. But, the
high coordination necessary in order to achieve these goals may cause difficulties for meeting
societal goals. Though the interventions we propose generally have aligned interest (i.e. both
government and NFP have the social good in mind), such coordinated efforts could still fall
victim to the collective action problems, in which information asymmetry and divergent interests
would result in failure (e.g. government seeking to cut their bottom line, not-for-profit seeking
power more than social change -- Olson, 1971). Additionally, though we have proposed
interventions that push market conditions to the interest of FP firms (i.e. it is profitable for them
to act in this manner), the disruption of the status quo would still carry resistance to change.
Further analysis and sensitivity analysis are needed to understand the conditions under which
such convergent efforts are critical.
As the negative effects of industry continue to show in many sectors and consumer
awareness continue to rise, the demand for more social responsibility will continue to rise. The
alternative fuel industry, medical treatment and the drug industry are additional sectors that have
experienced significant public-private alignment in an effort to align social interests that have
experienced some degrees of success (Buse & Harmer, 2007; Garud & Karnøe, 2003; Mahoney,
McGahan, & Pitelis, 2009).
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Table 1: Model scope, with actors, primary forces, and interventions.
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Table 2: Key Model Parameters
Value
Notes
Healthful
Unhealthful
Low
SES
High
SES
Low
SES
High
SES
Capabilities
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Table 3: Summary of Interventions and their Operationalization
Run/Description
Examples
Operationalization
Base: Status quo behavior, with no special interventions. Actors act as described as outlined in the model structure.
Intervention 1: For-profit-driven
Firm-led incentives to bring to market socially-beneficial innovations.
Intervention 1a: Firm-driven niche-targeted social-oriented innovation
Select firms release tastier and
more nutritious (but costlier)
foods, along with marketing to
boost the category.
Many food products have been
reformulated with reduced fat, sugar, or
sodium (Ng et al., 2014; Ng & Popkin,
2014), or fortified to contain additional
nutrients (such as Omega 3 in eggs Siró
et al., 2008).
From 2016 onward, HF products for F1 are
20% more nutritious, 20% more tasty, but are
30% more expensive. F1 spends $10 billion
yearly from 2016 to 2021 to recuperate
development costs in addition to $10 billion
for HF product marketing.
Intervention 1b: Firm-driven mainstream-targeted social-oriented innovation
HF products are mainstreamed
through price reductions and
greater nutrition, but are less
tasty. Marketing to boost the
category in LS is also conducted.
Campbell Canada’s Nourish is a
“complete meal” ready-to-eat soup
developed in 2011 specifically to address
the needs of the poor (Leeder, 2011).
From 2016 onward, HN products for F1 are
20% lower in price, 20% higher in nutrition
and but 30% lower in taste. Profit margin
decreases 20%. F1 spends $10 billion yearly
from 2016 to 2021 to recuperate
development costs in addition to $10 billion
for HF product marketing only in LS.
Intervention 2: Not-for-profit and Government-driven
Support from not-for-profit actors and government to lower equity barriers.
Intervention 2a: Socially beneficial category marketing
Government assists in the
increase of exposure of HF
products in LS.
FNV is supported by the office of the First
Lady of the United States promotes fruits
and vegetable consumption (Moss, 2013).
From 2016 to 2021, HF marketing
experiences an outside boost equivalent to
$10 billion per year.
Intervention 2b: Price incentives
To influence behaviour through
pricing. HF products are
subsidized for LS.
The Supplemental Nutrition Assistance
Program (or food stamps) initiative
subsidizes food costs for low-SES
(Gundersen & Oliveira, 2001).
From 2016 to 2021, price for HF in LS
lowers by 20%.
Intervention 2c: Social value sensitivity changes
Governments and other social
organizations can increase
nutritional awareness through
educational campaigns.
Canada’s food guides consumers to proper
nutritional eating. These are also promoted
in schools and in the community.
From 2016 to 2021, LSES consumers are two
times more sensitive to differences in
nutritional content of the food basket.
Intervention 2d: System and institutions improvement
Social organizations and
government develop the food
environment in LSES.
The Healthy Corner Store initiative offers
support to convenience stores in
underserved neighborhoods to install
facilities necessary to carry fresh foods
(e.g. refrigeration (Gittelsohn et al.,
2010)
This is formulated as a 20% boost in HN
food environment in LSES between 2016 and
2021.
Intervention 3: Directed Technological Change
Government and other research groups can influence innovation in related sectors to increase the effectiveness of innovation.
Innovation is encouraged in
complementary sectors,
increasing the effectiveness of
manufacturing firm investment.
In the energy sector, clean energy is often
subsidized to encourage development in a
nascent industry in order to counter
conventional sources of energy (Acemoglu
et al., 2012)
From 2016 to 2021, effectiveness of HF
investment ramps up to 25% and remains at
this level afterwards.
Intervention 4: Convergent Innovation
Bring together the above intervention types for synergistic
Intervention 4a (2a+3): Aligned strategy targeting capabilities and consideration improvement with multiple actors.
Intervention 4b (2a+2b+3): Adds price interventions to lower price barriers for LS.
Intervention 4c (2a+2b+2c+3): Adding increasing sensitivity to nutrition in LS.
Intervention 4d (2a+2b+2c+2d+3): Adding complementary systems and institution improvements, increasing the attractiveness
of distributing healthy foods.
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41
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Table 4: Model Results
Intervention
Equity Gap Improvement
Measures the difference between the
percentage improvement in LS and HS
(greater values imply greater closing of
the equity gap).
HF Investment Improvement
Percentage increase in acting firm
investment in HF as compared with the
base case.
PP Avg.*
Final
PP Avg.*
Final
For-profit-driven
1a: Niche CSR Innovation
-0.034
-0.073
1.6%
4.5%
1b: Mainstream CSR Innovation
0.017
-0.000
1.5%
6.0%
Not-for-profit- and Government-driven
2a: Category Marketing
0.030
0.004
0.6%
0.8%
2b: Tax: Price disincentives
0.027
0.004
1.4%
1.2%
2c: Subsidies: Price incentives
0.042
0.007
0.8%
1.4%
2d: Sensitivity changes
0.086
0.010
2.3%
2.2%
2e: System and institutions
improvement
0.032
0.030
0.4%
4.1%
Directed Technical Change
3: Directed Technical Change
0.002
0.026
4.2%
30.0%
Convergent Innovation
4a: 2a+3
0.032
0.030
4.9%
31.0%
4b: 2a+2b+2c+3
0.184
0.055
7.9%
36.8%
4c: 2a+2b+2c+2d+3
0.256
0.063
10.1%
38.8%
4d: 2a+2b+2c+2d+2e+3
0.288
0.089
10.6%
42.9%
*PP Avg.: Average result during the policy period 2016-2021
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Figure 1: Main Feedback Loops of Market Infrastruture – Product Capabilities
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Figure 2: Main Feedback Loops of Market Infrastructure – Consideration loops: Social
influence and Product marketing.
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Figure 3: Main Feedback Loops of Market Infrastructure – Systems and Institutions
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Figure 4: Simulation of ntervention 1 (CSR)
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Figure 5: Simulation of Intervention 2 (Government and Not-for profit)
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Article
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While extant research recognizes the importance of collective action for market formation, it provides little understanding about when and to what extent collective action is important. In this paper, we develop a novel theoretical framework detailing what collective action problems and solutions arise in market formation and under what conditions. Our framework centers on the development of market infrastructure with three key factors that influence the nature and extent of collective action problems: perceived returns to contributions, excludability, and contribution substitutability. We apply our framework to diverse market formation contexts and derive a set of attendant propositions. Finally, we show how collective action problems and solutions evolve during market formation efforts and discuss how our framework contributes to strategic management, entrepreneurship, and organization literatures.
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