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Green to Gone? Regional Institutional Logics and Firm
Survival in Moral Markets
Siddharth Vedula, Jeffrey G. York, Michael Conger, Elizabeth Embry
To cite this article:
Siddharth Vedula, Jeffrey G. York, Michael Conger, Elizabeth Embry (2022) Green to Gone? Regional Institutional Logics and
Firm Survival in Moral Markets. Organization Science
Published online in Articles in Advance 13 Jan 2022
. https://doi.org/10.1287/orsc.2021.1533
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Green to Gone? Regional Institutional Logics and Firm Survival
in Moral Markets
Siddharth Vedula,
a
Jeffrey G. York,
b
Michael Conger,
c
Elizabeth Embry
b
a
Entrepreneurship Research Institute, Technical University of Munich, 85748 Garching Bei M ¨
unchen, Germany;
b
Leeds School of Business,
University of Colorado Boulder, Boulder, Colorado 80309;
c
Miami University, Oxford, Ohio 45056
Contact: siddharth.vedula@tum.de,https://orcid.org/0000-0002-6171-8388 (SV); jeffrey.york@colorado.edu,
https://orcid.org/0000-0002-8669-2153 (JGY); michael.conger@miamioh.edu,https://orcid.org/0000-0001-7464-4413 (MC);
Elizabeth.a.embry@colorado.edu,https://orcid.org/0000-0001-6889-669X (EE)
Received: December 17, 2019
Revised: October 6, 2020; May 14, 2021;
August 19, 2021
Accepted: September 1, 2021
Published Online in Articles in Advance:
https://doi.org/10.1287/orsc.2021.1533
Copyright: © 2022 The Author(s)
Abstract. A growing body of scholarship studies the emergence of moral markets—
sectors offering market-based solutions to social and environmental issues. To date,
researchers have largely focused on the drivers of firm entry into these values-laden
sectors. However, we know comparatively little about postentry dynamics or the de-
terminants of firm survival in moral markets. This study examines how regional insti-
tutional logics—spatially bound, socially constructed meaning systems that legitimize
specific practices and goals within a community—shape firm survival in emerging mo-
ral markets. Using a unique panel of firms entering the first eight years of the U.S.
green building supply industry, we find that (1) a regional market logic amplifies the
impacts of market forces by increasing the positive impact of market adoption and the
negative impact of localized competition on firm survival, (2) a regional proenviron-
mental logic dampens the impacts of adoption and competition on firm survival, and
(3) institutional complexity—the co-occurrence of both market and proenvironmental
logics in a region—negates the traditional advantages of de alio (diversifying incum-
bent) firms, creating an opportunity for de novo (entrepreneurial entrant) firms to
compete more effectively. Our study integrates research on industry emergence, insti-
tutional logics, and firm survival to address important gaps in our knowledge regard-
ing the evolution and growth of environmental entrepreneurship in moral markets.
Open Access Statement: This work is licensed under a Creative Commons Attribution-NonCommercial-
NoDerivatives 4.0 International License. You are free to download this work and share with others,
but cannot change in any way or use commercially without permission, and you must attribute this
work as “Organization Science. Copyright © 2022 The Author(s). https://doi.org/10.1287/orsc.2021.
1533, used under a Creative Commons Attribution License: https://creativecommons.org/licenses/
by-nc-nd/4.0/.”
Funding: J. G. York thankfully acknowledges support from the Michael and Sherri Miske Faculty
Research Award given by the Leeds School of Business, University of Colorado, Boulder.
Keywords:entrepreneurship •social responsibility •sustainability/corporate environmentalism •culture •strategy •organization and
management theory •institutional theory •organizational ecology (population ecology) •organizational identity and identification
One of the central issues facing both business and so-
ciety today is how to reconcile economics and the en-
vironment, economizing and ecologizing—those two
forces of nature, each magnified by human culture,
that make our life possible. (Frederick 1995, p. 151)
Introduction
Human-induced climate change threatens biodiversity,
reduces clean water access, increases catastrophic weath-
er events, and jeopardizes the very subsistence of human
life (Intergovernmental Panel on Climate Change 2018,
Wallace-Wells 2019). Increasingly, scholars have
theorized that business can and should play a role
in combating environmental problems such as climate
change (Howard-Grenville et al. 2014, Hoffman 2018).
Studies of renewable energy (Sine and Lee 2009,Pacheco
et al. 2014,KapoorandFurr2015, Hiatt and Carlos 2019),
organic agriculture (Lee 2009,Leeetal.2017), and green
building (York et al. 2018,Jonesetal.2019) examine how
such sectors develop. Collectively, these studies increase
our understanding of the emergence of moral markets—
values-laden sectors whose core purpose is to offer mar-
ket solutions to social and environmental issues (Russo
2003, Zhao and Wry 2016, Corbett and Montgomery
2017,Congeretal.2018,WryandZhao2018, Markman
et al. 2019, Georgallis and Lee 2020).
1
ORGANIZATION SCIENCE
Articles in Advance, pp. 1–26
ISSN 1047-7039 (print), ISSN 1526-5455 (online)
http://pubsonline.informs.org/journal/orsc
January 13, 2022
To date, research has largely examined how firm
entry impacts the emergence of moral markets (Meek
et al. 2010, Durand and Georgallis 2018, Hoppmann
and Vermeer 2019, Vedula et al. 2019). Our under-
standing of firm survival in this context is compara-
tively sparse (Kapoor and Furr 2015, Georgallis and
Durand 2017, Vedula et al. 2021). This gap is problem-
atic given that traditional industry emergence re-
search emphasizes not only entry, but also firm sur-
vival dynamics (Baldwin and Gorecki 1991, Agarwal
and Gort 1996, Malerba and Orsenigo 1996, Dunne
et al. 2013). Although some have theorized how de
novo (i.e., entrepreneurial start-ups) and de alio (i.e.,
diversifying incumbents) firms might compete in
moral markets (Hockerts and W ¨
ustenhagen 2010,
Georgallis and Lee 2020), to our knowledge, no stud-
ies have examined firm survival in this context.
This critical omission is worthy of exploration for
two reasons. First, moral markets promise market-
based solutions for the most intractable social welfare
issues, such as climate change, poverty, and inequali-
ty. Yet, for moral markets to help solve such issues,
the firms that enter them must persist and survive.
This is a challenge as moral markets encompass both
a market logic of commercial business and a social
welfare logic of addressing environmental and social
issues (Georgallis and Lee 2020). Prior research shows
that firms often struggle when seeking to address
multiple logics (Besharov and Smith 2014, Smith and
Besharov 2019). Therefore, firm survival in moral mar-
kets is essential but far from assured. Second, moral
markets offer a compelling setting for expanding
research on institutional complexity (Battilana and
Dorado 2010, Greenwood et al. 2010, Lee et al. 2017),
settings in which firms face competing institutional
demands. Recent literature has theorized that the or-
ganizational form of entrants (de novo startups versus
diversifying de alio incumbents) could impact firms’
efficacy within moral markets (Georgallis and Durand
2017, Wry and York 2017). By examining survival dif-
ferences in de novo and de alio firms within moral
markets, we may refine our understanding of how
conflicting logics (Thornton and Ocasio 1999, Dunn
and Jones 2010)influence market emergence.
In this study, we seek to understand (1) how the tra-
ditional drivers of firm survival may be altered within
moral markets and (2) how institutional complexity
within a moral market alters survival likelihood for de
novo versus de alio firms. To address these questions,
we theorize and test a model of survival in emerging
moral markets shaped by regional institutional logics
(Thornton and Ocasio 2008, Thornton et al. 2012, Be-
sharov and Smith 2014)—spatially bound, socially
constructed meaning systems that legitimize specific
practices and goals within geographic communities
(Greenwood et al. 2011, Durand et al. 2013, Lee and
Lounsbury 2015, Vedula et al. 2019). Empirically, we
model the survival of 1,233 firms that entered the U.S.
green building supply industry during the first eight
years (1999–2007) of its emergence. Two institutional
logics, the market logic of commercial real estate and
contradictory proenvironmental logic of reducing envi-
ronmental impact (Lee and Lounsbury 2015) are sa-
lient in green building (York et al. 2018, Jones et al.
2019).
We find that (1) a regional market logic amplifies the
impacts of market forces by increasing the positive
impact of market adoption and the negative impact of
localized competition on firm survival, (2) a regional
proenvironmental logic dampens the impacts of market
forces by reducing the positive impact of market adop-
tion and the negative impact of localized competition
on firm survival, and (3) institutional complexity—the
co-occurrence of both market and proenvironmental
logics in a region—negates the traditional advantages
of de alio firms and increases the likelihood of de novo
firm survival.
Our study contributes to several literature streams.
First, we extend the literature on moral markets to the-
orize and explain how regional logics may moderate
competitive dynamics and survival in such values-
laden sectors. Our findings suggest that these dynam-
ics are more complex than simply buoying the chances
of survival for firms that align with the dominant
logic. Rather, regional logics can amplify or dampen
both the positive and negative effects of a variety of
factors on survival in ways requiring nuanced expla-
nation. Second, we reveal that, within moral markets,
institutional complexity may actually offer advantages
to de novo hybrid organizations because they appeal to
both a market and proenvironmental logic. Institutional
complexity can give new firms room to differentiate
themselves from more conventional incumbents. Third,
by highlighting how regional logics can condition the
impacts of market forces and organizational forms, our
study extends the literature on institutions and entre-
preneurship. Finally, we provide entrants in moral mar-
kets with practical guidance on how geographic entry
decisions may impact their chances of survival.
Theoretical Background
Moral markets explicitly seek to address social and
environmental problems while simultaneously pursu-
ing economic profit (Georgallis and Lee 2020). This fo-
cus on addressing social (e.g., economic development
through microfinance; Wry and Zhao 2018) and/or
environmental problems (e.g., addressing climate
change through renewable energy; Pacheco et al.
2014) delineates such markets. New entrants into mo-
ral markets combine a market logic with a social wel-
fare logic to define their identity and goals (Durand
et al. 2013, York et al. 2016b). Although such firms
Vedula et al.: Regional Logics and Survival in Moral Markets
2Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s)
maintain a commercial structure, part of the value
they create accrues to the commons as public goods
(Ostrom 2009). Thus, entrants into moral markets may
not capture the same level of economic value as their
purely commercial counterparts (Ostrom 1990, Dart
2004, Santos 2012). Therefore, firms operating exclu-
sively in moral markets often need to expend more
effort to build relationships within their community
(Newbert and Tornikoski 2013) and secure resources
from those invested in their social welfare goals (Hill-
man et al. 2009, Villanueva et al. 2012). Unlike sectors
with a dominant market logic, it is less clear how val-
ue can or should be captured by the firm or stakehold-
ers in moral markets (Santos 2012, Pache and Santos
2013b). Accordingly, in moral markets, securing re-
sources often involves additional negotiation, which
may be complicated or even adversarial (O’Neil and
Ucbasaran 2016).
The emergence of moral markets has been mea-
sured by examining the entry of both de novo and de
alio firms at the industry level (York and Lenox 2014,
Georgallis et al. 2019). Several studies of moral market
entry find that social norms movements often play an
influential role (Sine and Lee 2009, Meek et al. 2010,
Durand and Georgallis 2018). Social norms—collective
beliefs regarding the morality of actions and products—
may influence entrepreneurs to see opportunities based
on their own beliefs (Weber et al. 2008). Social move-
ments can help to define and delineate markets as mor-
ally superior, encouraging both political support as well
as a perception of opportunity (Waldron et al. 2019).
Such activism can help establish regulations and infra-
structure for emerging moral markets, such as in the re-
newable energy sector (Pacheco et al. 2014, Pacheco and
Dean 2015).
Although the literature shows that these forces
drive firm entry, we know far less about the drivers of
firm survival in moral markets. Surprisingly little link-
age has been made between extant studies of firm sur-
vival in emerging markets and the literature on moral
markets. This is a critical oversight as the promise of
moral markets clearly cannot be realized if entrants
do not survive. Because moral markets are beholden
to both economic and social welfare goals, the values
and beliefs embodied by institutional logics could be
critical. Yet the underlying assumption of current
research is that entry alone is adequate to under-
stand the potential of moral markets. Organization-
al scholars have long studied the determinants of
survival in emerging markets, offering a starting
point for developing a theory of survival in moral
markets.
Survival in Emerging Markets. Scholars have long ex-
amined and differentiated the drivers of de novo and
de alio survival
1
within emerging markets (Carroll
and Khessina 2006, Khessina and Carroll 2008). Three
factors are consistently shown to be important: market
adoption, localized competition, and firm endow-
ments (Josefy et al. 2017). First, in order for firms to
survive within an emerging market, their products
and/or services must achieve legitimacy and wide-
spread market adoption among consumers; this insight
applies to both de novo and de alio firms (Geroski
2003). However, when demand for new products and
services is volatile, new entrants have smaller reserves
to draw on to survive the lean early years. Because
they are often reliant upon the emerging market and
do not have extant sales from other product offerings
(Carroll 1985), de novo firms are extremely sensitive
to market adoption. This challenge is exacerbated in
the early stages of industry emergence when entrants
must often charge a price premium compared with
current scaled market offerings, and de novo firms
have no cognitive legitimacy in the eyes of their cus-
tomer base (Zimmerman and Zeitz 2002, Shepherd
and Zacharakis 2003, Deeds et al. 2004). These factors
also apply at a product level for de alio firms; they
must incur the opportunity cost of entering emerging
markets versus already successful product lines
(Khessina and Carroll 2008, Steen and Weaver 2017).
Thus, survival for all firms is positively related to mar-
ket adoption in emerging markets.
Second, survival is also highly influenced by local-
ized competition. When geographic markets are mean-
ingful for resource distribution and firm outputs,
localized competition is likely to intensify (Sorenson
and Audia 2000, Greve 2002, Freeman and Audia
2006). This distinction is critical when considering
“traded industries”in which firms in one geographic
location compete globally (e.g., Silicon Valley software
firms) versus “local industries”in which firms com-
pete with each other within distinct geographic mar-
kets (e.g., Chicago-based construction contractors)
(Delgado et al. 2015). Studies indicate that competitive
intensity is a function of similarity between organi-
zational resource requirements and target markets
(Hannan and Freeman 1989, Baum and Mezias 1992,
Lomi 1995). Although early entry by both de novo
and de alio firms can help legitimize an emerging
market for all (Hiatt and Park 2021), competition com-
pounds as the overlap in resource requirements be-
tween firms grows along with the market (Barnett and
Carroll 1987).
Localized competition effects further intensify with-
in less knowledge-intensive sectors in which intangi-
ble assets are less critical (Sorenson and Audia 2000),
the scope for product differentiation is limited (Krider
and Putler 2013, Teller et al. 2016), and firms are of
similar size (Ranger-Moore et al. 1995). Under these
conditions, firmsmustrelyonrelationalcapabilitiesasa
basis of competitive advantage, embedding themselves
Vedula et al.: Regional Logics and Survival in Moral Markets
Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s) 3
within the local community to build legitimacy (Smith
and Stevens 2010, Newbert and Tornikoski 2013). Be-
cause of these factors, over time, increased localized
competition is negatively related to both de novo and
de alio survival within emerging markets.
Third, the organizational endowments of firms impact
their ability to persist within emerging markets.
Emerging markets provide fertile ground for de novo
entrants and growth and diversification for de alio in-
cumbents (Markman and Waldron 2014). Each group
brings different capabilities to bear within an emerg-
ing market. De novo firms are shown to possess some
advantages, such as the ability to bring more innova-
tive products to market (Khessina and Carroll 2008)
and to learn more quickly (Ganco and Agarwal 2009).
However, de alio firms benefit from their prior experi-
ence (Khessina and Carroll 2008, Chen et al. 2012), can
leverage an established reputation (Choi et al. 2016),
and have the legitimacy of a recognizable brand and
organization (Dencker et al. 2009, Ganco and Agarwal
2009). Moreover, although de novo entrants typically
base their identity and products solely within an
emerging industry (Khessina and Carroll 2008, Navis
and Glynn 2010), de alio firms retain a broader, less
specialized identity and can rely on their prior track
record to justify their exploration of the new sector
(Zhao et al. 2013). Thus, de alio firms typically outlast
de novo entrants over time as markets consolidate
(Podolny et al. 1996, Carroll and Hannan 2000, Barnett
and Freeman 2001, Helfat and Lieberman 2002,Cantner
et al. 2006, Bayus and Agarwal 2007, Khessina and
Carroll 2008).
Survival in Moral Markets? Although these findings
are consistent across multiple industries, we argue
that moral markets may present an exceptional con-
text. Firms in new moral markets may be particularly
sensitive to the effects described because of the differ-
ence between the value they create and the value they
can (or should) capture (Santos 2012). Because moral
markets exist, in principle, to benefit the environment
or vulnerable populations, the products and services
sold through them effectively demand a premium
from buyers, exacerbating the challenges firms face. It
is also possible that moral markets benefitsomefirms
disproportionately in terms of localized competition
and organizational endowments, particularly when
there are perceived differences in the veracity and/or
authenticity of firms’moral missions.
In their review of the moral markets literature,
Georgallis and Lee (2020, p. 65) suggest “…a focus on
social context and identity can help explain instances
of entry that are not fully explained by resource or
capability-based theories,”We extend this insight to
survival within moral markets. Entrants into moral
markets seek to solve environmental or social issues
through for-profit businesses and, therefore, must ad-
dress the demands of diverse audiences (Smith and
Besharov 2019) when developing and portraying their
identity (York and Lenox 2014). The distinctiveness of
a moral market affects the way in which its members
identify themselves (Gehman and Grimes 2017)and
how new entrants are perceived (York et al. 2016b).
Thus, firm identities in moral markets are often shaped
by their community (Conger et al. 2018,Grimesetal.
2018) and the feedback they receive (O’Neil and
Ucbasaran 2016).
Further, perceptions of firms in moral markets are
likely influenced by the lens through which audiences
view the issue the market addresses (Ansari et al.
2013, Munir et al. 2021). By engaging in environmental
and social issues, moral market participants are likely
perceived either positively or negatively by different
audiences (Hoffman 2015). Moral markets involve not
only spanning logics, but also a convergence of acti-
vists, investors, industry groups, and policy makers.
These diverse audiences have substantively different
theories of value that that influence their evaluation of
firms in the market (Paolella and Durand 2015). Be-
cause of these logic combinations and collisions of di-
verse audiences, the meanings associated with a moral
market are often unclear and contested (Weber et al.
2008).
In a related stream, the hybrid organizing and social
entrepreneurship literature has recently begun to con-
verge around localized solutions as critical to under-
standing how new firms and markets affect social
change (Peredo and Chrisman 2006, Lumpkin and
Bacq 2019). Moral markets tend to be local rather than
traded industries (e.g., service firms seeking to train
and employ returning citizens in a particular city or
community; Delgado et al. 2015). Even efforts to ad-
dress social and environmental issues with a global
scope are shaped by the local context in which they
are developed and how firms translate local cultural
factors as they scale (Gras et al. 2020). For these rea-
sons, the question of survival in moral markets re-
quires theoretical explanations beyond those offered
for traditional emerging markets. We next theorize
how localized differences in firm identities and audi-
ence perceptions may alter traditional factors of firm
survival in moral markets.
Theory Development and Hypotheses
We contextualize the extant literature on firm survival
by theorizing the potential impacts of regional institu-
tional logics. Building on Friedland and Alford (1991),
Thornton and Ocasio (1999, p. 804) define institutional
logics as “…socially constructed, historical patterns
of material practices, assumptions, values, beliefs, and
rules by which individuals produce and reproduce
Vedula et al.: Regional Logics and Survival in Moral Markets
4Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s)
their material subsistence, organize time and space,
and provide meaning to their social reality.”Logics
are comprised of symbolic elements, such as shared
beliefs, interests, preferences, and goals, embedded
within a region through material practices (Thornton
and Ocasio 2008). Thus, a logics approach integrates
regulative, normative, and cognitive forms of legiti-
macy (Scott 1995) to explain how institutional forces
motivate behavior (Thornton et al. 2012).
Importantly for this study, the prevalence and
strength of institutional logics varies across geograph-
ic regions (Marquis and Lounsbury 2007, Greenwood
et al. 2010, Lee and Lounsbury 2015, Vedula et al.
2019). Regional logics—institutional logics that are
particularly salient within a geographic community—
influence the actors within a community by legitimat-
ing organizations’goals and/or practices. For exam-
ple, Lee and Lounsbury (2015) show that a regional
proenvironmental logic, defined as attributing high
value to protection of the natural environment, posi-
tively influences the environmental performance of
chemical facilities on a regional basis. Lounsbury and
Crumley (2007)find that mutual funds in Boston align
with a regional trustee logic, whereas New York–based
funds emphasize growth and speculative investing,
aligned with a regional professional logic of “money
management.”These findings suggest regional logics
influence how actors both interpret and respond to
stimuli in their local environment (Marquis and Louns-
bury 2007, Marquis et al. 2007,Ocasio2012).
Numerous researchers examine the impact of the
institutional environment on entrepreneurship, specif-
ically focusing on the role of social movement organi-
zations (SMOs) (Lounsbury et al. 2003, Hiatt et al.
2009, Pacheco and Dean 2015) and social norms (Meek
et al. 2010) in moderating founding rates at a regional
level. For example, York and Lenox (2014) show that
both local activism and environmental norms influ-
ence the entry of entrepreneurs into environmentally
beneficial sectors; however, these factors had no influ-
ence on entry by incumbent firms. Building from this
work, we theorize that regional logics act as perceptual
filters for both firms and their stakeholders in regional
communities (Lee and Lounsbury 2015,Vedulaetal.
2019). Therefore, we argue that, in the context of moral
markets, regional institutional logics likely moderate
the effects of the previously established drivers of firm
survival discussed.
Moral markets integrate market and social welfare
logics (Grimes et al. 2013). A market logic valorizes
economic efficiency and profits with rewards going to
the best performers, and a social welfare logic sup-
ports acting to resolve social and/or environmental
problems (Pache and Santos 2013b). For this study, we
focus on two established institutional logics that coex-
ist within moral markets such as green building: (1)
the market logic to capture a commercial real estate
focus on efficiency and profits and (2) the proenviron-
mental logic as a specific type of social welfare logic
to capture an environmentalist focus on reducing the
environmental and health impacts of commercial
construction.
Market Logic and Survival
We propose that a strong regional market logic, priori-
tizing economic profits, competitive advantage, and
cost efficiency, amplifies the impact of economic
forces on firm survival. Recent studies have suggested
that market logics are manifested at a regional level
through political conservatism (Lee and Lounsbury
2015, York et al. 2018). Politically conservative groups
tend to advocate giving a greater share of resources to
the highest economically performing members of soci-
ety (Khayesi and George 2011). We expect regions
with a strong market logic to have merit-based norms
of resource allocation with equity being preferred
over equality (Morgan and Sawyer 1979, Mannix et al.
1995, Lin and Si 2010). Under this logic, members of
the community who are deemed harder working and
more talented receive more resources. This merit-
based resource allocation norm produces a positive
feedback loop between financial success and firm re-
sources; successful firms are able to claim more re-
sources, which, in turn, fuels further success (Morris
et al. 2010).
In such regions, economic performance is the stan-
dard for the appropriateness of firms’mission and
goals. Legitimacy is, thus, strongly coupled to market
adoption of a firm’s offerings (Shepherd and Zachara-
kis 2003). A market logic also heightens the inherent
disparities in power between customers and suppliers
in the value chain (Thornton 2002, Greve and Man
Zhang 2017) as both parties are likely to pay increas-
ing attention to market forces (Thornton and Ocasio
1999). Thus, firms are likely to focus on customers,
competitors, and their financial performance in mak-
ing strategic decisions (Thornton 2004, Glynn and
Lounsbury 2005), such as whether to persist in or exit
the market (Gimeno et al. 1997, Wennberg et al. 2010).
In sum, we expect that, when a market logic in a re-
gion is stronger, downstream dependencies that firms
face in terms of early market adoption of their services
and products as well as direct competition between
firms are amplified.
In the case of moral markets, regional dominance of
a market logic shifts emphasis toward economic goals
and away from the social welfare objectives of the
market. For moral markets, legitimation of new tech-
nologies and practices creates underlying market
adoption. For example, in the case of renewable ener-
gy, the fostering of cognitive and normative legitimacy
Vedula et al.: Regional Logics and Survival in Moral Markets
Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s) 5
for wind and solar practices translated into consumer
demand for utilities to adopt them (Sine et al. 2005).
In the organic foods industry, widespread legitima-
tion of farming without pesticides translated into de-
mand for “safer”organic produce (Lee et al. 2017).
We argue that these impacts are likely to be even
more pertinent in regions dominated by a market
logic as firms, customers, and other stakeholders rely
on market signals, in the form of increased sales, to
determine their strategies. Conversely, competition
creates increased pressures as investors and other
stakeholders can choose from a variety of organiza-
tions to support. Although the drivers of competitive
pressure on survival are similar to traditional mar-
kets, we argue that regional logics moderate competi-
tion’simpactwithinmoralmarkets.Becausecompetition
can be viewed as offering greater choice and economic
efficiency, a market logic valorizes and justifies the fail-
ure of firms that cannot effectively compete on price
and/or efficiency. When a market logic is highly salient
in a region, decisions are made on the basis of profit-
ability, sales growth, and efficiency rather than
supporting social welfare goals. Audiences view
competitive pressure as a beneficial and justified
mechanism for markets selecting “winners and
losers”rather than seeking to grow the sector. Un-
der such conditions, the impact of competition on
firm survival is stronger. Thus, we hypothesize the
following:
Hypothesis 1a. In moral markets, the positive relation-
ship between market adoption and firm survival is amplified
(i.e., is more positive) when the market logic in a region is
stronger.
Hypothesis 1b. In moral markets, the negative relation-
ship between localized competition and firm survival is am-
plified (i.e., is more negative) when the market logic in a re-
gion is stronger.
Proenvironmental Logic and Survival
Just as with the market logic, the prevalence of a pro-
environmental logic varies across regions. Because a
proenvironmental logic prioritizes addressing and re-
versing environmental degradation (Lubell 2002), we
expect it influences assessments of the intrinsic, nor-
mative value of firms in moral markets focused on
environmental issues. The salience of regional proen-
vironmental logics is likely to reduce market-based
pressures on firm survival by encouraging stakehold-
ers to support such ventures as ethically preferable to
alternatives (York et al. 2016a). In moral markets, pro-
environmental logics are often enacted by SMOs that
formally organize and mobilize resources for collec-
tive action (Rao et al. 2000). For example, Sine and Lee
(2009) show how activism by the Sierra Club helped
to legitimize and initiate the wind energy industry.
Following these findings, Pacheco et al. (2014)find
that “clean energy”activist groups emerged in the
United States to provide technical knowledge and
supportive policies for new wind-energy firms. These
studies and others (Georgallis et al. 2019, Hiatt and
Carlos 2019) suggest that entrants into moral markets
can align their identity with proenvironmental logics
to receive support from stakeholders.
In this way, entrants may be able to depict their
organization as culturally aligned with a region
and, thus, normatively legitimate (Lounsbury and
Glynn 2001,Zhaoetal.2013). Hence, even in the
face of lower demand for their products or height-
ened competitive pressure, firms in regions with
strong proenvironmental logics may receive sup-
port and encouragement from the broader commu-
nity. Such support, garnered from the belief that
environmental protection is more important than
economics, can alter firm exit thresholds (Gimeno
et al. 1997). Firms that receive such psychological
and economic support likely persist longer (Wennberg
et al. 2010, DeTienne and Chirico 2013, DeTienne et al.
2015, Eesley et al. 2018).
Intuitively, it would seem that this support would
disproportionately benefitnewfirms that are per-
ceived to be more authentically “green.”Indeed, prior
research on entry finds that de novo firms, started
specifically with the goal of entering emerging moral
markets, are likely to be the earliest to do so, ignoring
the economic viability or legitimacy of the market
(York and Lenox 2014, Hiatt and Carlos 2019). How-
ever, in terms of survival, this benefit would likely
accrue to both de novo and de alio firms that visibly
embrace the moral mission of an emerging market
(Ruef and Scott 1998). Rather than translating into dif-
ferential support for firms, the overall market likely
gains support from regional proenvironmental logics
aligned with ecological goals. For example, in organic
foods, later entrants of store-branded staples from
large wholesalers, such as Costco or Wal-Mart, have
been supported by consumers along with smaller,
niche brands. As the social welfare goal (e.g., benefits
of organic foods) obtains legitimacy, distinction be-
tween de novo or de alio firms’products fades. Rath-
er, all offerings achieve support that are aligned with
salient regional logics; the market expands to support
all entrants.
We, therefore, expect that, in regions with a strong
proenvironmental logic, all firms entering into moral
markets are likely to have a normative basis of legiti-
macy distinct from their financial performance. This is
likely to lower their attention to market forces in mak-
ing strategic decisions, such as whether to persist in or
exit the industry. Moreover, the normative orientation
of the community in such locales also heightens the le-
gitimacy of all entrants and weakens external resource
Vedula et al.: Regional Logics and Survival in Moral Markets
6Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s)
dependencies in the value chain. Thus, we hypothe-
size the following:
Hypothesis 2a. In moral markets addressing environmen-
tal degradation, the positive relationship between market
adoption and firm survival is dampened (i.e., is less posi-
tive) when the proenvironmental logic in a region is
stronger.
Hypothesis 2b. In moral markets addressing environmen-
tal degradation, the negative relationship between localized
competition and firm survival is dampened (i.e., is less neg-
ative) when the proenvironmental logic in a region is
stronger.
Institutional Complexity and Survival
Up to this point, we have discussed regions as being
embedded in either a high market logic or a high pro-
environmental logic. But what of the case when both
logics are highly salient in a region? Following extant
theory, regions may also be embedded within institu-
tional complexity when multiple conflicting logics are
prevalent (Friedland and Alford 1991, Lounsbury
2007, Greenwood et al. 2011, Micelotta et al. 2017). Be-
cause “there is no question but that many competing
and inconsistent logics exist in modern society”(Scott
1995, p. 130), institutional complexity is common. In-
stitutional logics designate “which means are mean-
ingful”and which “means-ends couplets are thought
appropriate”(Friedland 2002, p. 383), but they are
not, by definition, oppositional. Multiple logics may
simultaneously influence the goals that actors find im-
portant and also the means selected to achieve those
goals (Greenwood et al. 2002). Logic complexity arises
from differences between both the goals and the means
associated with distinct logics. For example, Pache
and Santos (2013b) describe how incompatibilities be-
tween market and social welfare logics create tensions
within social enterprises. These organizations con-
front institutional complexity because certain practi-
ces are more aligned with a market logic’s banking
means, yet incompatible with the poverty alleviation
goals of a social welfare logic.
Institutional complexity exists in a regional commu-
nity when the realization of one logic’s goals under-
mines the realization of another’s because “goals
reflect core values and beliefs and are evaluated based
on a logic of appropriateness, making them hard to
challenge or modify”(Besharov and Smith 2014,p.
367). Complexity occurs in geographic regions where
multiple, historically conflicting institutional logics
are prevalent. For example, in many western college
towns, (e.g., Boulder, Colorado; Eugene, Oregon; Mis-
soula, Montana) community focus on environmental
sustainability is high. Simultaneously, and congruent
with a market logic, there is also support for entrepre-
neurship and funding of startups (see Figure A.1 for
additional regions embedded in institutional complex-
ity within our sample). In such areas, firms that
encourage environmental responsibility and offer en-
trepreneurial solutions are likely to find support from
multiple audiences. However, such complexity can
present a challenge to firms that cannot appease mul-
tiple audiences embedded in differing logics (Pache
and Santos 2013a).
We theorize that organizational identity acts as a
mechanism to determine how firms are differentially
impacted by regional institutional complexity in mo-
ral markets. As reviewed, market adoption, competition,
and firm endowments offer well-established drivers
of firm survival. However, recent work suggests that
the focus and congruence of firms’identities may also
play a role (Georgallis and Lee 2020) in moral mar-
kets. A more focused identity aligns the firm solely
with the moral market and can enhance perceptions
of legitimacy and, thus, stakeholder support. In addi-
tion, identities that are congruent with an emerging
market’s goals and attributes can be linked to authen-
ticity of firms in a moral market. We argue that iden-
tity focus and congruence are driven by firms’(1)
founding date, (2) declared mission, and (3) diversity
(or lack thereof) of product offerings.
De novo entrants are often perceived as more au-
thentic and, thus, worthy of greater support (McKen-
drick et al. 2003) because they have no past record of
providing products that are not congruent with the
goals of the emerging market. For example, de novo
craft brewers are often perceived as authentic to the
“movement”of craft brewing; thus, they continued to
thrive even with de alio large-scale breweries offer-
ing less expensive products mimicking “craft”beer
styles (Carroll and Swaminathan 2000, Mathias et al.
2018). De novo firms are often deemed authentic be-
cause of their mission’s alignment with the goals of
differentiating an emerging market. Such identity
dynamics have enabled new firms to compete in
long-established industries, such as commercial ra-
dio (Navis and Glynn 2010), agriculture (Weber et al.
2008), and cuisine (Rao et al. 2003). By setting them-
selves apart as authentic purveyors of an emerging
market, de novo firms can challenge more powerful
incumbents. Further, they can do so while remaining
focused within the emerging market (Gehman and
Grimes 2017). For example, Khessina and Carroll
(2008)find that de novo firms stayed on the frontier
of technology as a reflection of their focused identity
and refused to branch out into more established
product lines.
We argue that such dynamics are heightened in mo-
ral markets. Firms with identities most congruent
with the market’s social welfare goals are shown to be
more likely to enter the market (Georgallis et al. 2019),
be influenced by social norms (Meek et al. 2010),
Vedula et al.: Regional Logics and Survival in Moral Markets
Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s) 7
promote their participation in the market (Gehman
and Grimes 2017), be influenced by social movements
(York and Lenox 2014), and be de novo firms (Geor-
gallis and Lee 2020). Based on these findings, we ar-
gue that the identity of de novo and de alio firms
drives differential impacts of institutional complexity
on survival.
De novo firms in moral markets explicitly integrate
seemingly contradictory logics within the core values
and goals of the organization (Battilana et al. 2017,
York et al. 2018). Although much of the literature pro-
poses that such blending of logics within a firm creates
tensions and challenges (Battilana and Dorado 2010,
Grimes et al. 2019), recent work suggests that such a
hybrid identity can potentially lead to advantages for
nimble, entrepreneurial firms (Conger et al. 2018,Mon-
gelli et al. 2019). A focused identity in the emerging
moral market could act as a resource for less path-
dependent and more adaptable start-up firms. The
agility of start-ups aligns with recent work suggesting
that entrepreneurs with salient identities tied to both
market and social welfare logics develop unique busi-
ness models (Wry and York 2017). Prior studies in the
green building context find that entrepreneurial en-
trants can successfully cross the “cultural chasm”and
appeal to audiences embedded in both market and
proenvironmental logics (York et al. 2018). We posit
that, because de novo firms in the green building sec-
tor explicitly integrate market and proenvironmental
logics and have an identity focused in the emerging
moral market, they are able to garner wider support in
regions in which both logics are highly salient.
In institutionally complex regions, de novo firms
are likely perceived as authentic to stakeholders
embedded in either logic because of (1) their identi-
ty being centrally founded within the emerging
moral market, (2) their ability to appear more au-
thentic to supporters of the social welfare goals of
the market because of their focus only in green
building products, and (3) their ability to simulta-
neously show congruence with a market logic of en-
trepreneurial growth and a proenvironmental logic
of ecological protection through their stated mis-
sion and greater flexibility. This broader basis of
support likely enables more creative business mod-
els, products, and strategies in the face of de alio
entry. Thus, for de novo firms, rather than a chal-
lenge, institutional complexity presents an opportu-
nity for institutional ambidexterity (Jarzabkowski
et al. 2013). Because they have greater flexibility
and are not beholden to path dependency, de novo
firms may be able to take advantage of institutional
complexity through their hybrid identity (Smith
and Besharov 2019).
Conversely, institutional complexity presents prob-
lems for de alio firms because of prior resource
commitments and path dependencies (Seo and Creed
2002, Ganco and Agarwal 2009, Pache and Santos
2013a). For these firms, simultaneously catering to the
values espoused by two competing contradictory log-
ics is likely to be quite difficult (Battilana and Dorado
2010). The challenges of attempting to cross over mar-
ket categories are well documented (Vergne and Wry
2014) because of audiences having confused per-
ceptions of the organization’s true identity. De alio
entrants into moral markets face a double-edged
sword of potential negative perceptions from their
stakeholders. Because they already have an estab-
lished identity located within an extant business, de
alio firms likely face scrutiny from SMOs and other
groups supporting the social and environmental goals
of the emerging moral market.
De alio firms do not, by definition, have focus in the
emerging moral market. For example, multiple oil and
gas companies face activist claims of “greenwashing”
in their efforts to diversify into renewable energy
(Waldron et al. 2019). The fear of being accused of hy-
pocrisy can even lead de alio firms to hide legitimate
social or environmental credentials that could aid
their success in a moral market (Carlos and Lewis
2018). Conversely, when a moral market is in a na-
scent stage, de alio firms may also face skepticism
from financial stakeholders, such as investors and
suppliers who view the new market as a distraction
and less proven opportunity. Therefore, they struggle
to show congruence with the integrated social welfare
and economic goals of emerging moral markets. These
effects are likely even stronger within regions embed-
ded in institutional complexity.
Based on this, we argue that institutional complexity
in a region levels the playing field between de novo and
de alio firms. Institutional complexity allows de novo
firms to leverage their focused and congruent identity
to appeal to a wider range of stakeholders within the
region and garner greater support and resource access.
De alio firms are less well suited to handle institutional
complexity because of their path dependency and estab-
lished oppositional identity within an existing industry
(Georgallis and Lee 2020). In combination, we expect
that these dynamics should negate the well-established
competitive advantages that de alio entrants typically
possess over de novo firms over time (Carroll and
Khessina 2006). In sum, we argue that institutional
complexity within a region reduces the competitive
advantage of de alio firms and enhances the ability of
de novo firms to persist. Thus, we hypothesize the
following:
Hypothesis 3a. In moral markets, the likelihood of de novo
firm survival is higher in regions embedded in institutional
complexity than in regions not embedded in institutional
complexity.
Vedula et al.: Regional Logics and Survival in Moral Markets
8Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s)
Hypothesis 3b. In moral markets, the likelihood of de alio
firm survival is lower in regions embedded in institutional
complexity than in regions not embedded in institutional
complexity.
Data and Methods
Research Context
We tested our theory utilizing a unique panel of 297
de novo and 936 de alio firms (1,233 in total) that pro-
vided products and services for green buildings in the
United States, over the period 1999–2007. We chose
this context for several reasons. First, we sought to
identify an industry sector in which both market and
proenvironmental logics were clearly salient. Because
green buildings are designed to use less energy and
water and reduce the overall life cycle of environmen-
tal impacts through improved siting design, material
selection, and construction, they are inherently
aligned with a proenvironmental logic (Hoffman and
Henn 2008, Jones et al. 2019). Yet the majority of green
buildings are commercial real estate projects, behold-
en to a market logic.
When our sample period began in 1999, the term
“green building”was little known and associated
with environmentalism. By 2008, however, the value
of green building projects had increased to $60 billion,
comprising 10% of commercial construction with $464
million worth of construction registering with the U.S.
Green Building Council’s Leadership in Energy and
Environmental Design (LEED) voluntary certification
program (Jones et al. 2019). This increase in LEED
adoption led to heightened demand for the under-
lying products and services required to engage in
green building (Lockwood 2006, Nalewaik and
Venters 2010). During the time period of our study
(1999–2007) green building was a rapidly emerging
moral market. Second, because we were interested in
the impact of regional institutional logics, we needed
a research context in which local, community-based
factors help determine firm performance (Vedula
and Frid 2019). The construction business is well suit-
ed because building material supplies are a highly dis-
aggregated and regional industry; during the period
of our study, firms typically sold few products only
in one geographic location. Third, we had access to
reliable longitudinal data of both firm entry and exit
during the green building supply sector’s initial years.
In sum, the green building supply sector provides a
robust setting to better understand how regional log-
ics impact the exit rates of both de novo and de alio
firms in moral markets.
Sample
Our data set examines organizations that entered and
exited the U.S. green building supply industry from
1999 to 2007. We utilized the GreenSpec Directory of
green building products and suppliers created by
BuildingGreen, a nonprofit organization focused on
promoting green building practices (Wilson et al.
2007). It is important to note that, although the U.S.
Green Building Council (USGBC), the nonprofit orga-
nization that created the LEED building standard was
founded in 1994, the GreenSpec directory was pub-
lished annually from 1999–2007. GreenSpec identifies
products screened through criteria including con-
serving natural resources, saving energy or water,
or avoiding toxic emissions. For each product, the
directory identifies the firm providing the product
and the firm’s physical address. This data is used
by previous studies examining the green building
sector (York and Lenox 2014,Yorketal.2018). Our
use of a directory as a proxy for measuring firm
survival follows the long-standing practice of stud-
ies in the organizational ecology and entrepreneur-
ship literature (Baum and Singh 1994,Carrolland
Swaminathan 2000,Chenetal.2012). We end our
sample in 2007 to avoid the exacerbating impact of
the 2008 U.S. real estate–driven recession. Addi-
tionally, GreenSpec moved to an online format that
was continuously updated in 2008, negating our
ability to track firm exit by year. We organized
these data as a firm-year panel, to identify the year
when a firm firstenteredthesampleaswellasits
last year of operation. We computed all regional co-
variates at the metropolitan statistical area (MSA)
level.
Dependent Variable
Firm Exit. We use a Cox hazard modeling framework
(see model and analysis section for more details) for
the dependent variable of firm exit, a binary variable
that takes the value of zero for all years in which the
firm survives (i.e., was listed in the GreenSpec directo-
ry) and is set to one for the first year in which a firm is
delisted in the GreenSpec directory (other than the fi-
nal year of our sample window in 2007). The variable
is set to missing (“.”) for all years prior to entry as
well as all years subsequent to a firm not appearing in
the directory. To confirm that the exit of de novo firms
from the GreenSpec directory were actually the result
of firm failure, we (1) conducted a web search for any
evidence of the firm and (2) utilized the listing phone
number to try to reach the firm. Of the 106 exits of de
novo firms that we recorded from the GreenSpec di-
rectory, we found four firms that were still active. In
robustness checks, dropping the active firms, there
were no changes in our results.
2
We repeated this pro-
cedure to confirm the exit of de alio firms. Of the 233
de alio firms delisted from GreenSpec, we found 97
still open; none of these surviving firms featured
Vedula et al.: Regional Logics and Survival in Moral Markets
Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s) 9
green building products on their web page, confirm-
ing their exit from the green building market.
Baseline Independent Variables
Market Adoption. We measured market adoption by cal-
culating the number of LEED registered buildings
(logged) in each MSA-year. This measure has been
previously used to capture adoption in the green
building context as it inherently requires the purchase
of products and services that the firms in our sample
offered (York et al. 2018, Jones et al. 2019).
Localized Competition. We measured localized compe-
tition by calculating the number of active peer firms
(logged) in the same MSA as the focal firm for each
firm-year observation. We defined industry peers at
the granular product category level.
33
For example, a
firm producing doors and windows is unlikely to be
in direct competition with one selling heating and air
conditioning equipment. By restricting our measure to
peers in the same product category, we were able to
more accurately identify localized competitive effects
in this context.
De Novo Firm. We included a dummy variable to in-
dicate if the focal firm was a de novo (one) or de alio
(zero) firm. We categorized firms as de novo based on
their (1) founding date, (2) mission statement, and (3)
product offering. We first identified the founding year
of each firm through a search of company websites
and online databases. Following prior work in entre-
preneurship (Shrader et al. 2000, Amezcua et al. 2013)
that has designated new firms to be those six to eight
years old as well as prior work in the green building
sector (York and Lenox 2014), we parsed the sample
into de alio firms founded before the year 1994 (five
years prior to the first GreenSpec listing in 1999) ver-
sus de novo firms founded after 1994. The year 1994 is
significant as the year the USGBC was founded, sig-
naling that green building became nationally known
as an emerging moral market. Field interviews with
green building entrepreneurs vetted this assumption
as many of the firms we met with had indeed been
founded to enter the emerging green building market,
signaled by the establishment of the USGBC. We
found that de alio firms had a much longer heritage as
the construction supply industry is not particularly
turbulent, barriers to entry are quite low, and firms of-
ten diversify into emerging markets.
Second, to verify the identity congruence of the de
novo firms with the green building supply market,
we validated the preceding age-based classifications
through verifying the firm’s mission statement. Using
the WayBack Machine (http://web.archive.org), a
digital archive of old and/or inactive websites, we
located the oldest web page for each firm available
andanalyzedthefirm’s original mission statement.
Through our analysis, we inferred whether the firm
was established with the sole intent of servicing the
green building industry and promoting a proenviron-
mental logic. We then examined the firm’smission
statement each year that they were in the directory,
and reviewed the company’s history, when available,
to see if there was a change in focus over time. If the
firm’s mission statement clearly identified it as a green
building–focused firm, then it was verified as de novo.
If the mission indicated that the firm provided prod-
ucts and services to the full building industry, then it
was verified as de alio.
Third, we examined the firms’product catalogs in
the earliest year available and all years they were
listed in the directory to verify their focus in the green
building market. If the firm only sold the products
listed in the GreenSpec directory, they were verified
as de novo. If the firm sold a variety of products be-
yond those that met green building standards, then
the firm was verified as de alio.
We were able to locate mission and product data
for all but 61 of the 1,233 firms (5%). For firms for
which we could not find these data, we simply catego-
rized firms as de novo if they were founded after
1994. We gain confidence in this classification based
on our analysis; of the firms for which we found mis-
sion statements, only two de novo firms as catego-
rized by founding date did not have a clear focused
environmental mission (and were, thus, reclassified as
de alio).
In sum, to be classified as de novo, a firm must
have (1) been founded after the creation of the USGBC
in 1994 and, hence, less than six years old upon the
creation of the GreenSpec directory in 1999, (2) explic-
itly stated a proenvironmental focus in its mission
statement, and (3) only sold products for the green
building market. Based on these criteria, we identified
297 firms of our sample as de novo entrants and 936
as diversifying de alio incumbents.
Moderating Variables
The state of the art in quantitative institutional logics
research is to create multidimensional measures that
capture underlying ideologies, norms, and instantiat-
ed practices (Lee and Lounsbury 2015, Zhao and Wry
2016, Vedula et al. 2019). In the context of our study,
the two relevant and competing institutional logics
are the market logic (promoting wealth creation) and
proenvironmental logic (promoting protection of the
natural environment), respectively (Lee and Lounsbury
2015,Yorketal.2018).
Market Logic. To compute this measure, we followed
prior work (York et al. 2018) and created a factor com-
posed of six items for each MSA-year observation in
Vedula et al.: Regional Logics and Survival in Moral Markets
10 Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s)
our sample. The first two items focus on regional ide-
ologies of an MSA’s political leaders and citizens on a
liberal–conservative continuum (source: Citizen and
Government Ideology database, https://rcfording.
wordpress.com/state-ideology-data/) weighted for
each MSA by population. Our third item was the
percentage of voters in a congressional district (aggre-
gated to the MSA level) who voted Republican in
national elections (source: DailyKos.com, http://www.
dailykos.com/news/Pres-by-CD). Our fourth item
was the ratio of contributions to Republican candi-
dates relative to all donations in each county (aggre-
gated to the MSA level) (source: Center for Responsive
Politics, https://www.opensecrets.org). Our fifth item
was a measure of the local tax burden for businesses
(source: Moody’s analytics, https://www.economy.
com/regions/us-states-and-metro-areas). We reverse-
coded this measure to reflect a stronger market logic in
an MSA. Our sixth and final item captured the density
of labor unions in an MSA. Labor unions have long
been theorized to directly conflict with a market logic
(Friedland and Alford 1991). As Western and Rose-
nfeld (2011, p. 536) empirically observed, “…unions
offered an alternative to an unbridled market logic…
As unions declined, not only did the logic of the mar-
ket encroach on what had been the union sector, but
the logic of the market deepened in the nonunion sec-
tor, too, contributing to the rise in wage inequality.”
To create this measure, we obtained data on the annu-
al number of registered labor unions and similar labor
organizations (North American Industry Classification
System (NAICS) code 813930) at the county level from
the Quarterly Census of Employment and Wages.
We then aggregated to the MSA level, reverse-coded,
and normalized by population to create a measure of
labor union density (Western and Rosenfeld 2011). A
principal component analysis loaded these six items
onto a single factor with an eigenvalue of 2.25 and an
alpha value of 0.66. In sensitivity analyses, we examined
the use of alternate measures and data sources for our
items and also checked that our measure correlated well
with other published metrics (Zhao and Wry 2016).
Proenvironmental Logic. We similarly created a mul-
tidimensional measure of the proenvironmental logic
in an MSA-year following prior studies (Zhao and
Wry 2016) using multiple items to capture under-
lying ideologies, values, and practices. Our first item
captured the environmental attitudes and ideologies
of citizens in an MSA. To measure this, we used en-
vironmental voting record scorecard data from the
League of Conservation Voters (LCV; Delmas et al.
2007, Kahn 2007). This metric, which ranges from 0 to
100, measures how members of Congress vote on a
range of environmental issues, such as energy, climate
change, and conservation. We averaged the LCV score
across the Congresspeople representing each congres-
sional district and then matched congressional dis-
tricts to MSAs to aggregate the measure to the MSA
level following prior work (Vedula et al. 2019). Our
second, third, and fourth items measured the number,
revenue, and assets of environmental nonprofits per
capita in an MSA, respectively (source: National Cen-
ter for Charitable Statistics, www.urban.nccs.org).
Our fifth item measured the strength of social move-
ment organizations focused on promoting green
building practices through the number of nonprofit
organizations that were members of the USGBC per
capita in each MSA. Prior studies show that activism
by both environmental nonprofits and technology-
focused social movement organizations corresponds
to a strong proenvironmental logic in a region (York
et al. 2016a). A principal component analysis loaded
these five items onto a single factor with an eigenval-
ue of 2.52 and an alpha value of 0.74.
Institutional Complexity. Institutional complexity refers
to situations in which firms face incompatible prescrip-
tions from multiple institutional logics (Greenwood et al.
2011, Smets and Jarzabkowski 2013). In the context of
our study, this measure refers to situations in which
the market and proenvironmental logics in a region
are both at high levels. To compute this measure, we
first generated a two-by-two matrix of market and
proenvironmental logics for each year in our sample,
using a median split (our results were also robust to
using a mean split). We then created a dummy vari-
able to indicate either the absence (zero) or presence
(one) of institutional complexity. MSAs were catego-
rized as exhibiting institutional complexity (1) in an
observation year when both the market and proenvir-
onmental logic values were above the sample median
levels, respectively (i.e., the high–high quadrant). See
Figure A.1 for a table and heat map showing the re-
gional distribution of institutional logics, highlighting
complex regions.
Control Variables
We controlled for a variety of factors that may impact
survival rates of firms. First, we controlled for age at
the time of entry (i.e., first listing in the GreenSpec Di-
rectory). Second, we controlled for the number of local
policies in each MSA that were put into place to incen-
tivize green building (source: USGBC and Database of
State Incentives for Renewables and Efficiency, www.
dsireusa.org). We expected that firms in regions with
more policies should have a higher degree of regulato-
ry legitimacy and, hence, be more likely to survive.
Third, we controlled for the cost of building permits in
each MSA (source: U.S. Census Bureau). We expected
that this capital expense should impact green building
industry emergence as well as the performance of
Vedula et al.: Regional Logics and Survival in Moral Markets
Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s) 11
LEED supplier firms. Fourth, we controlled for market
intermediaries per capita in each MSA by measuring the
number of LEED-accredited practitioners divided by
the MSA population. We expected that these individ-
uals, in their efforts to enable the adoption of the
LEED standard, would increase the demand for LEED-
registered buildings and positively impact firm sur-
vival rates. Fifth, we controlled for the energy price
(source: Moody’sAnalytics,www.moodysanalytics.
com) in each MSA. Sixth, we controlled for the water
usage in each MSA (source: U.S. Geological Survey).
We expected that the cost and usage rates of both
these utilities could impact the adoption of practices,
such as LEED, that reduce consumption (Asensio and
Delmas 2017). Seventh, we controlled for average dai-
ly temperature in each MSA to address higher energy
usage that may motivate adoption of LEED to reduce
energy consumption resulting from heating and/or
cooling (source: U.S. Centers for Disease Control,
https://wonder.cdc.gov/wonder/help/nldas.html).
Eighth, we controlled for the affluence of each MSA
in our sample by using a measure of gross domestic
product (GDP) per capita (source: U.S. Bureau of Eco-
nomic Analysis) as regional munificence can have an
impact on the survival rates of firms (Vaessen and
Keeble 1995). Ninth, we controlled for the degree of
urbanization in each MSA by using the log number of
inhabitants per 100 square miles because this general
characteristic of metro regions has been shown to im-
pact firm survival (Ruef and Scott 1998, Renski 2011,
Amezcua et al. 2020). Tenth, we controlled for the
number of establishments per capita to account for the
overall level of business activity in an MSA (source:
U.S. Bureau of Economic Analysis). Eleventh, we con-
trolled for the manufacturing intensity of each MSA
(manufacturing jobs as a percentage of all jobs)
(source: U.S. Bureau of Economic Analysis). Given the
manufacturing-intensive nature of the green building
supply industry, we used this measure to account for
the availability of relevant regional human capital that
can impact firm survival (Vedula and Kim 2019).
In addition to these firm- and regional-level con-
trols, we also included a full set of industry, regional,
and temporal dummy variables to address omitted
variable bias in our models at (1) the firm’s product
category to account for industry-specific factors that
could impact new venture survival, (2) the MSA and
state level to account for any time-invariant regional
factors, and (3) year dummies to account for any mac-
roeconomic temporal trends.
Model and Analysis
We used a Cox proportional-hazard regression model
(stcox command in Stata) to model the likelihood of a
firm exiting from the GreenSpec directory in a calen-
dar year. This semiparametric model is flexible and
well suited to our analysis as it makes no assumptions
about the functional form of the hazard function and
instead derives it from the underlying data (Allison
1995). The data set is structured with a set of annual
observations, 1999–2007, for each firm, allowing for
model covariates to vary by time. Left-side truncation
is not an issue in our sample, given that our data col-
lection window starts with the initial GreenSpec direc-
tory publication. The model structure accounts for
right-side truncation in the sample as we end our ob-
servation period at 2007.
Results
From 1999 to 2007, the total number of firms was
1,233, of which 339 were removed from GreenSpec
(survival rate of 72.5%). We found that 297 de novo
firms entered the industry, and 106 of these (approxi-
mately 36%) failed; 936 de alio diversifying incumbents
entered the industry, and 248 of these (approximately
26%) exited the market. Thus, although there were
fewerdenovothandealioentrantsduringthestudy
period, their failure rate (i.e., likelihood of exit from
the GreenSpec directory) was comparatively higher.
Table 1shows descriptive statistics, variance inflation
factors (VIFs), and pairwise correlations between the
variables in our model. All bivariate correlations for
theoretical variables of interest were in the direction
we expected, and we found no concerns of multicolli-
nearity (mean VIF 1.85).
Next, we carried out a series of multivariate analy-
ses, which we report in Table 2. Because the Cox haz-
ard model estimates the hazard rate of firms exiting
from the sample, a negative βcorresponds to a lower
likelihood of firm exit (i.e., a higher survival probabili-
ty), and a positive βcorresponds to a higher likelihood
of firm exit (i.e., a lower survival probability). In Mod-
el 1, we only include control variables. We observe
that the likelihood of firm survival is higher for firms
that enter at an older age (β−0.005, p0.03), are lo-
cated in MSAs with more LEED accredited practi-
tioners (β−0.16, p0.09), a higher GDP per capita
(β−0.08, p0.05), and where water usage rates are
higher (β0.17, p0.06). In Model 2, we introduce
the baseline effects. As expected, we observe that the
likelihood of firm survival is higher in MSAs where
there is higher market adoption of LEED (β−0.72, p
0.01) and lower in MSAs where there is more localized
competition (β0.54, p0.10). We also observe that de
novo firms are less likely to survive than de alio firms
(β0.67, p0.00).
In economic terms, our results indicate that a ten-
fold (log-unit) increase in the number of LEED regis-
tered buildings in an MSA relative to its existing level
would increase the probability of firm survival by
14.79% relative to the baseline level (p0.5 −{exp(β)/
Vedula et al.: Regional Logics and Survival in Moral Markets
12 Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s)
Table 1. Descriptive Statistics, Variance Inflation Factors, and Correlation Matrix
Variables Mean Standard deviation VIF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
1Firm exit 0.06 0.23 1.01
2Firm age at time of entry 28.71 34.22 1.2 −0.03
3Local policies 0.3 0.71 1.55 −0.01 −0.02
4Cost of building permits 5.47 0.49 1.94 −0.03 −0.09 0.34
5LEED accredited practitioners 0.81 1.1 2.04 −0.04 −0.01 0.24 0.07
6Energy cost 0.12 0.04 1.94 −0.02 −0.02 0.41 0.37 0.01
7Water usage 2.37 3.03 1.93 0.01 0.05 0.33 0.3 −0.01 0.44
8Average daily temperature 64.07 8.8 2.37 0 −0.1 0.05 0.4 −0.17 0.03 −0.01
9GDP per capita 44.1 7.78 2.01 −0.01 0.01 0.38 0.25 0.4 0.35 0.34 −0.24
10 Urbanization 0.25 0.28 1.38 0.03 0.02 −0.14 −0.3 −0.08 −0.03 −0.32 −0.13 −0.12
11 Establishments per capita 0.03 0.003 1.8 0 −0.02 0.14 −0.05 0.32 −0.03 0.01 −0.4 0.38 0.02
12 Manufacturing intensity 0.13 0.07 1.65 0.03 0.13 −0.21 −0.31 −0.21 −0.33 −0.21 −0.22 −0.19 0.22 −0.18
13 Market adoption 0.73 0.62 3.56 −0.04 0.01 0.52 0.46 0.55 0.31 0.51 −0.03 0.56 −0.38 0.19 −0.27
14 Localized competition 0.25 0.28 1.58 0.01 0.07 0.32 0.32 0.14 0.28 0.44 −0.1 0.39 −0.28 0.2 −0.1 0.5
15 De novo firm 0.19 0.39 1.17 0.08 −0.37 0.05 0.05 0.05 0.01 −0.02 0.06 0.01 −0.03 0 −0.07 0.05 0.01
16 Market logic 0.14 0.06 2.64 −0.01 −0.09 −0.24 0.03 −0.19 −0.43 −0.35 0.51 −0.44 −0.03 −0.17 0.12 −0.33 −0.28 0.01
17 Proenvironmental logic 0.1 0.07 2.23 −0.02 −0.02 0.23 0.02 0.41 0.25 0.17 −0.32 0.45 −0.05 0.44 −0.37 0.36 0.21 0.05 −0.52
18 Institutional complexity 0.09 0.28 1.33 0 −0.04 −0.05 −0.08 0.12 −0.14 −0.16 −0.18 −0.05 0 0.31 −0.01 −0.03 −0.01 0.02 0.09 0.26
Notes. n 6,030 observations from 1,233 firms. |r|>0.03 were significant at the 95% confidence level. Two sided t-tests.
Vedula et al.: Regional Logics and Survival in Moral Markets
Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s) 13
Table 2. Cox Hazard Models
Variables (1) (2) (3) (4) (5) (6)
Controls
Firm age at time of entry −0.00* −0.00 −0.00 −0.00 −0.00 −0.00
(0.00) [0.03] (0.00) [0.42] (0.00) [0.43] (0.00) [0.45] (0.00) [0.39] (0.00) [0.44]
Local policies −0.02 0.03 0.02 −0.00 0.01 0.02
(0.11) [0.87] (0.11) [0.80] (0.11) [0.84] (0.11) [0.99] (0.11 )[0.91] (0.11) [0.84]
Cost of building permits 0.48 0.69 0.72 0.94 0.80 0.74
(0.86) [0.58] (0.88) [0.43] (0.89) [0.41] (0.91) [0.30] (0.91) [0.38] (0.89) [0.40]
LEED accredited practitioners −0.16
+
−0.07 −0.07 −0.08 −0.11 −0.07
(0.09) [0.09] (0.09) [0.41] (0.09) [0.44] (0.09) [0.39] (0.10) [0.26] (0.09) [0.42]
Energy cost −5.91 −5.69 −5.59 −5.00 −5.16 −5.88
(5.74) [0.30] (5.55) [0.31] (5.55) [0.31] (5.44) [0.36] (5.54) [0.35] (5.56) [0.29]
Water usage 0.17
+
0.23** 0.24** 0.22* 0.24** 0.24**
(0.09) [0.06] (0.09) [0.01] (0.09) [0.01] (0.10 )[0.02] (0.09) [0.01] (0.09) [0.01]
Average daily temperature 0.02 0.03 0.03 0.04 0.04 0.03
(0.08) [0.83] (0.08) [0.73] (0.08) [0.69] (0.08) [0.61] (0.08) [0.64] (0.08) [0.67]
GDP per capita −0.08* −0.07
+
−0.06 −0.08
+
−0.07
+
−0.06
(0.04) [0.05] (0.04) [0.10] (0.04) [0.17] (0.04) [0.06] (0.04) [0.09] (0.04) [0.17]
Urbanization −11.43 −82.39 −85.51 −73.99 −72.05 −74.19
(87.31)[0.90] (96.12)[0.39] (96.96)[0.38] (98.27) [0.45] (99.43) [0.47] (96.52) [0.44]
Establishments per capita −11.21 9.99 7.89 12.99 5.09 8.80
(60.61) [0.85] (58.66) [0.86] (58.86) [0.89] (57.50) [0.82] (57.01) [0.93] (58.63) [0.88]
Manufacturing intensity 5.01 6.40 6.35 6.56 5.57 6.47
(5.04) [0.32] (5.05) [0.21] (5.08) [0.21] (5.08) [0.20] (5.13) [0.28] (5.13) [0.21]
Baseline effects
Market adoption −0.72** −0.73** −0.20 −1.06** −0.73**
(0.26) [0.01] (0.27) [0.01] (0.38) [0.61] (0.33) [0.00] (0.26) [0.01]
Localized competition 0.54
+
0.54
+
−0.93 1.39* 0.52
(0.33) [0.10] (0.33) [0.10] (0.67) [0.17] (0.63) [0.03] (0.33) [0.12]
De novo firm 0.67*** 0.67*** 0.70*** 0.66*** 0.76***
(0.16) [0.00] (0.16) [0.00] (0.16) [0.00] (0.16) [0.00] (0.17) [0.00]
Main effects of regional institutional logics
Market logic 0.77 0.37 0.72 0.68
(1.98) [0.70] (2.04) [0.86] (2.08) [0.73] (1.99) [0.73]
Proenvironmental logic −0.47 −1.42 −2.74 −0.37
(2.85) [0.87] (3.14) [0.65] (3.64) [0.45] (2.83) [0.90]
Institutional complexity 0.17 0.19 0.21 0.41
(0.35) [0.62] (0.37) [0.60] (0.36) [0.55] (0.34) [0.23]
Moderating effects of regional institutional logics
Market adoption ×Market logic −3.88
+
(2.07) [0.06]
Localized competition ×Market logic 12.18*
(5.09) [0.02]
Market adoption ×Proenvironmental logic 2.98
+
(1.55) [0.05]
Localized competition ×Proenvironmental logic −7.11
+
(4.31) [0.10]
De novo firm ×Institutional complexity −0.78
+
(0.46) [0.09]
Product category dummies Yes Yes Yes Yes Yes Yes
Year dummies Yes Yes Yes Yes Yes Yes
MSA dummies Yes Yes Yes Yes Yes Yes
State dummies Yes Yes Yes Yes Yes Yes
Observations (firm-year) 6,030 6,030 6,030 6,030 6,030 6,030
Firms 1,233 1,233 1,233 1,233 1,233 1,233
Exits 339 339 339 339 339 339
McFadden’s Pseudo R
2
0.09 0.10 0.10 0.10 0.10 0.10
Notes. Hazard rate of firm exit exp (β). A positive coefficient indicates a higher hazard rate of a firm experiencing an exit event from the study
sample (i.e., a lower survival). Standard errors in parentheses.P-values in square brackets.
+
p≤0.10, *p≤0.05, **p≤0.01, ***p≤0.001.
Vedula et al.: Regional Logics and Survival in Moral Markets
14 Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s)
[1 +exp(β)]})0.5 −{exp(−0.61)/[1 +exp(−0.61)]}
0.1479). Conversely, a tenfold (log-unit) increase in the
number of LEED suppliers in an MSA relative to its
existing level would decrease the probability of firm
survival by 13.18% relative to the baseline level (p0.5
−{exp(β)/[1 +exp(β)]}) {exp(0.54)/[1 +exp(0.54)]}
−0.1318). Ceteris paribus, de novo firms have a proba-
bility of survival that is 16.15% lower than de alio firms
(p0.5 −{exp(β)/[1 +exp(β)]}) 0.5 −{exp(0.67)/[1 +
exp(0.67)]} −0.1615).
In Model 3, we introduce the variables to mea-
sure institutional logics. We find no statistically
significant main effects between the strength of an
MSA’smarket logic,itsproenviromental logic,orthe
presence of institutional complexity on firm survival
rates.InModel4,weexaminethemoderatingef-
fectsofthemarket logic variable. We observe that
the interaction terms with both market adoption and
localized competition are statistically significant
(β
Market adoption*Market logic
−3.88, p0.06; β
Localized
competition*Market logic
12.18, p0.02). Thus, we find
support for Hypotheses 1a and 1b.Weplotthesein-
teractions in Figure 1,convertingthecoefficients to
survival probabilities to facilitate the interpretation
of economic effects.
In Figure 1(a), we observe that the positive relation-
ship between market adoption and firm survival is
amplified by the strength of the market logic in an
MSA-year (i.e., the solid line is steeper than the
dashed line). That is, in MSAs with a stronger market
logic, firm failure rates are more sensitive to market
adoption rates. At the mean level of market adoption
(0.7), we observe that the probability of firm survival
is 5.55% higher in MSAs with a strong market logic
(solid line) compared with those with a weak market
logic (dashed line). At one standard deviation above
the mean level of market adoption (1.3), we observe
that the probability of firm survival is 9.53% higher in
MSAs with a strong market logic (solid line) com-
pared with those with a weak market logic (dashed
line).
In Figure 1(b), we observe that the negative rela-
tionship between localized competition and firm sur-
vival is amplified by the strength of the market logic
in an MSA-year (i.e., the solid line is steeper than the
dashed line). At the mean level of localized competi-
tion (0.25), we observe that the probability of firm sur-
vival is 8.39% lower in MSAs with a strong market
logic (solid line) compared with those with a weak
market logic (dashed line). And at one standard devi-
ation above the mean level of localized competition
(0.53), we observe that the probability of firm survival
is 16.05% lower in MSAs with a strong market logic
(solid line) compared with those with a weak market
logic (dashed line).
In Model 5, we examine the moderating effects of
proenvironmental logics. We observe that the interaction
terms with both market adoption and localized competition
are statistically significant (β
Market adoption*Proenvironmental
logic
2.98, p0.05; β
Localized competition*Proenvironmental logic
−7.11, p0.10). We, thus, find support for Hypothe-
ses 2a and 2b. We plot these interactions in Figure 2to
interpret the economic effects, again expressed as the
probability of firm survival.
In Figure 2(a), we observe that the positive relation-
ship between market adoption and firm survival is
dampened by the strength of the proenvironmental
logic in an MSA-year (i.e., the solid line is less steep
than the dashed line). That is, in markets with a stron-
ger proenvironmental logic, firm survival probabili-
ties are less influenced by market adoption rates. At
the mean level of market adoption (0.7), we observe
that the probability of firm survival is 1.95% higher in
MSAs with a strong proenvironmental logic (solid
line) compared with those with a weak proenviron-
mental logic (dashed line). At one standard deviation
above the mean level of practice adoption (1.3), we ob-
serve that the probability of firm survival is 2.73%
lower in MSAs with a strong proenvironmental logic
(solid line) compared with those with a weak proen-
vironmental logic (dashed line).
In Figure 2(b), we observe that the negative rela-
tionship between localized competition and firm surviv-
al is dampened by the strength of the proenvironmental
logic in an MSA-year (i.e., the solid line is less steep than
the dashed line). At the mean level of localized competi-
tion (0.25), we observe that the probability of firm
survival is 15.64% higher in MSAs with a strong proen-
vironmental logic (solid line) compared with those with
a weak proenvironmental logic (dashed line). At one
standard deviation above the mean level of localized
competition (0.53), we observe that the probability of
firm survival is 22.35% higher in MSAs with a strong
proenvironmental logic (solid line) compared with those
with a weak proenvironmental logic (dashed line).
In Model 6, we examine the moderating effects of
institutional complexity with the organizational form
(de novo versus de alio) variable. We observe that the
interaction term is statistically significant (β
De novo firm*
Institutional complexity
−0.78, p0.09). We, thus, find
support for Hypothesis 3a. We plot this interaction in
Figure 3.
In MSAs without institutional complexity, de novo
firms had a survival probability of 32% (hazard rate of
exit 2.14) in comparison with the de alio firm base-
line survival probability of 50% (i.e., baseline hazard
rate of exit 1). This means that the probability of de
novo firm survival was 18% lower than de alio firms,
ceteris paribus. However, in MSAs with institutional
complexity, we observe that the survival probabilities
Vedula et al.: Regional Logics and Survival in Moral Markets
Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s) 15
of the two firm types are equal, with de novo firms just
as likely to survive as their de alio counterparts. The
probability of survival 40% for de novo firms (hazard
rate of exit 1.48), and the probability of survival
40% for de alio firms (hazard rate of exit 1.51). Thus,
we also find support for Hypothesis 3b.Comparinga
region without institutional complexity to one in which
it is present, the survival likelihood of de novo firms
increases by 8%, and that for de alio firms decreases by
10%, effectively eliminating the 18% initial spread be-
tween survival rates of the two organizational forms.
Sensitivity Analyses
We carried out a series of additional sensitivity analy-
ses to ensure that our findings were robust to alternate
methods of operationalizing variables and model
Figure 1. Probability of Firm Survival as a Function of Market Adoption (a) and Localized Competition (b)
Note. The response curves are shown for weak (mean −1 SD) (dashed lines) and strong (mean +1 SD) (sold lines) levels of the market logic
variable.
Vedula et al.: Regional Logics and Survival in Moral Markets
16 Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s)
specifications. First, for control variables and baseline
effects that could be measured in multiple ways, we
replaced the covariates we used with alternate met-
rics. Because local policies for LEED building come in
the form of both incentives and mandates, we used
these two separate measures instead of a single com-
bined count of LEED policies. Next, we replaced our
measure of GDP per capita with household income and
poverty rates to capture the affluence of each MSA. In
addition, we created an alternate measure of market
adoption by using the number of LEED-certified build-
ings (rather than LEED registrations) in an MSA.
Finally, we measured localized competition at a narrower
product subcategory (instead of product category) level.
Results from these alternate specificationsofourcontrol
variables are consistent with our main models.
Second, we also ensured that the key moderating
institutional logics variables were robust to alternate
specifications. We replaced items capturing ideologies
that underpin each region’smarket logic with alternate
measures of liberalism versus conservatism (source:
Americans for Democratic Action). We used alternate
NAICS-based industry codes (source: Quarterly Cen-
sus of Economics and Wages) to identify environmen-
tal nonprofit activity for the proenvironmental logic
measure. Our results were robust to these alternatives.
Although we inherently conceptualize institutional
complexity as categorical and multidimensional, we
Figure 2. Probability of Firm Survival as a Function of Market Adoption (a) and Localized Competition (b)
Note. The response curves are shown for weak (mean −1 SD) (dashed lines) and strong (mean +1 SD) (sold lines) levels of the proenvironmental
logic variable.
Vedula et al.: Regional Logics and Survival in Moral Markets
Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s) 17
also examined whether our results would be robust to
operationalizing it along a continuum. To do so, we
created an alternate specification of this variable by
summing (or alternately multiplying) the market logic
and proenvironmental logic measures. As shown in
Figure 4, our results were robust to this alternate spec-
ification (β
De novo firm*Institutional complexity continuous
−3.66, p0.07). We observe that, with increasing insti-
tutional complexity, the survival likelihood of de
novo firms increases (solid line), the survival likeli-
hood of de alio firms decreases (dashed line), and the
difference between the two lines converges to zero at
high levels of institutional complexity (dotted line).
Third, we reran our analyses with alternate model
specifications. We first used a stratified Cox hazard
model, referred to as a frailty model, in which data
were stratified by year instead of using year fixed
effects. Second, we replaced the continuous time as-
sumption in the Cox model with a discrete-time logis-
tic regression specification. As a third test, we used a
piecewise exponential hazard rate model with year
fixed effects (Guler and Guill´
en 2010, Vedula and Ma-
tusik 2017), in which we allowed the underlying haz-
ard function to vary over each time period (i.e., each
year). Finally, we reran our analysis on a subset of de
novo firms to ensure robustness of our findings re-
garding the impacts of proenvironmental logics and
institutional complexity on their survival. Although
we saw some instances of increased p-values (e.g.,
0.16 versus 0.09 for an interaction term) all of our re-
sults were directionally consistent and robust to these
alternate model approaches.
Discussion
In this study, we found that regional institutional
logics can shape the survival of firms entering
emerging moral markets. We extend prior work by
showing that the strength and distribution of mar-
ket and proenvironmental institutional logics can
moderate the established positive effects of market
adoption and negative effects of localized competi-
tion on firm survival. Our findings suggest that a
stronger market logic in a region amplifies the im-
pacts of economic forces, and a strong proenviron-
mental logic dampens the impacts of economic
forces, enabling firms to persist in the face of lower
demand and higher competition. Further, our find-
ings suggest that de novo firms can benefitfromin-
stitutional complexity—situations in which both
market and proenvironmental logics are strong in a
community—to reduce the survival disparity they
typicallyfacerelativetodealiofirms. These find-
ings contribute to research on firm survival and to
understanding the relationship between institu-
tions, entrepreneurship, and moral markets.
Regional Logics and Firm Survival
Although well-established insights regarding the rela-
tive competitive advantages of de novo and de alio
firms hold in moral markets, the values-laden nature
of such markets does moderate these effects. We show
that the impact of adoption and competitive pressure
within a moral market is filtered through regional in-
stitutional logics. Entrepreneurship scholars have
long focused on the strategic impact of colocated
peers and formal institutions; however, this study
suggests that the broader sociocultural environment
Vedula and Kim (2018), embodied by regional institu-
tional logics, may also be a critical consideration.
Institutional logics scholars have begun to under-
stand how regional variation may impact the behavior
and practices of firms, yet logics have been little
Figure 3. Probability of Firm Survival for De Novo (Solid Columns) and De Alio (Striped Columns) Firms in MSAs Where Insti-
tutional Complexity Is Absent and Present, Respectively
Note. The baseline probability of survival is 50% (i.e., hazard rate of exit 1).
Vedula et al.: Regional Logics and Survival in Moral Markets
18 Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s)
explored as a strategic resource for firms in emerg-
ing markets (Durand et al. 2013). Our findings indi-
cate that the extent that firms benefit from or are
hurt by adoption and competition effects, respective-
ly, may be conditioned by the strength of regional
logics. Although prior studies suggest strong proen-
vironmental logics may encourage entry by de novo
firms (York and Lenox 2014), we find that de novo
firms in the green building sector did not improve their
survival chances versus de alio firms in regions with a
high proenvironmental logic. This finding is important
for both understanding the impact of logics on entre-
preneurial firms and for advising such firms on entry
strategy.
Although current work suggests the proenviron-
mental logics may help firms through greater regional
valuation of their environmental mission (Meek et al.
2010, Lee and Lounsbury 2015), our results suggest
that de novo firms, but not de alio, actually have a bet-
ter chance to survive under conditions of institutional
complexity. This is a critical insight because it runs
counter to our current understanding that institutional
complexity presents an obstacle for firms (Greenwood
et al. 2011, Vergne and Wry 2014). Our findings sug-
gest that, on a regional basis, institutional complexity
presents greater challenges for diversifying incum-
bents and opportunity for start-ups within moral mar-
kets. When de novo firms’identity is aligned with
complex regional logics, they may not only enjoy
greater legitimacy, but also be insulated from competi-
tion by incumbents who are viewed as less authentic.
We believe the distinctiveness of de novo firms with
respect to diversifying incumbents may be drawn into
sharper contrast under institutional complexity. Thus,
regional logics may create a form of sociocultural
munificence, providing a strategic resource to new
firms. Future studies should examine the impact of in-
stitutional complexity across other moral markets as
well as emerging markets based in authenticity, such
as artisan or craft industries (Solomon and Mathias
2020). One pertinent extension of our work would be
to the hybrid organizing literature (Battilana and Dora-
do 2010, Battilana and Lee 2014, Lumpkin and Bacq
2019) to understand how social enterprises may benefit
from regional complexity.
Survival in Moral Markets
The literature on hybrid organizations posits that
firms attempting to blend multiple institutional logics
(e.g., market and proenvironmental logics) face chal-
lenges in acquiring resources (Kraatz and Block 2008,
Battilana and Lee 2014) and resolving internal ten-
sions (Tracey et al. 2011). In contrast, our findings sug-
gest that a dual identity congruent with an emerging
moral market could be an asset for new ventures un-
der institutional complexity. Because such organiza-
tions can emphasize a market logic and also shift
focus to social welfare logics as needed, they may be
able to wield institutional logics as a dual-edged
sword, appealing to stakeholders motivated by either
logic (York et al. 2018).
For entrants within emerging moral markets, we
offer, to our knowledge, the first empirical study to di-
rectly examine how the institutional environment
impacts survival. Future research could explore how
organizations adapt to shifting conditions over time,
how they frame their practices in contrast to larger
competitors, and the implications of such actions for
their performance. Although such studies could take
place within moral markets, we believe the promise of
Figure 4. Probability of Firm Survival for De Novo (Solid Line) and De Alio (Dashed Line) as a Function of the Level of Institu-
tional Complexity in an MSA (Alternate Specification of Complexity as the sum of the Market and Proenvironmental Logic)
Note. The baseline probability of survival is 50% (i.e., hazard rate of exit 1).
Vedula et al.: Regional Logics and Survival in Moral Markets
Organization Science, Articles in Advance, pp. 1–26, © 2022 The Author(s) 19
understanding the role of regional logics in industry
emergence, strategic success, and new firm survival
could extend well beyond such values-laden sectors.
Ongoing research about when and why firms survive
should continue to attend to how important audiences
make sense of and renegotiate the meaning structures
that define moral markets. In this way, researchers may
flip the lens to focus on how social welfare logics be-
come engrained or corrupted, coopted, or muted over
time such that the moral distinction of markets becomes
either taken for granted or irrelevant. We expect that
the survival or demise of firms in these industries is the
crucial factor in how these dynamics play out in the
long run.
Extending Research on the Competition and
Coexistence of Multiple Logics
We also contribute to the broader literature on institu-
tional complexity by showing how competing logics
can help or harm different firms, thus shaping indus-
try dynamics (Carroll and Khessina 2006). Our study
extends prior research aiming to better understand
the mechanics of logics at multiple levels (Thornton
and Ocasio 2008), supporting work that explores con-
flicting logics institutionalized at the geographic re-
gion level (Lounsbury 2007). We show that competing
logics function as (de)legitimizing forces at the in-
dustry/market level, thus extending work conceptu-
alizing logics as embedded within communities
(Thorntonetal.2012, Lee and Lounsbury 2015). Our
findings suggest that logics’legitimizing effects in-
teract with localized competition to affect industry
dynamics and, ultimately, firm survival. Finally, we
show that institutional complexity within a region
may affect competition in complex ways, extending
work on competing logics (Thornton and Ocasio
1999