When commitment matters : essays on social evaluation and its market outcomes

Abstract

In my doctoral dissertation, I attempt to understand why and how an individual or organization's perceptions of commitment affect different market outcomes. This dissertation consists of three essays. In the first essay, I study the effect of organizational form on market performance in the diamond retail industry. Building on the notion that profit-oriented motives create the risk that sellers may not be committed to customers, I develop the argument that the chain form of organization generates beliefs about profit-oriented motives that give rise to the perception that small retailers have higher moral standing. I argue that when organizational actions are morally ambiguous but there is no explicit violation of a moral norm, consumers are less likely to penalize small organizations than large organizations, providing small stores with an advantage in the market. I use retailers' responses to "conflict diamonds"-diamonds that fund rebels in war zones-in the diamond retail industry as an empirical case of moral ambiguity. This argument is tested in a series of online experiments. I also empirically validate the implications of my finding using observations from diamond retailers' websites and field interviews. My second essay (coauthored with Renee Gosline and Ezra Zuckerman) illustrates that social valuation plays a role in shaping consumers' social acceptance of technological innovation. In this paper, we investigate a technological innovation in diamond production, namely, labmade diamonds. While this provides a more efficient way of achieving a given level of quality, consumers have generally been resistant to lab-made diamonds. We argue that one mechanism that drives this resistance is the use of a product in the performance of a social ritual. The underlying logic is that a deviation from the traditional rules of a ritual carries the risk of signaling a lack of commitment or cultural competence. In a series of experiments, we show that consumers are more resistant to lab-made diamonds when they buy diamond jewelry for an engagement gift, compared to when they buy diamond jewelry for a more routine gift. The perceived risk associated with the ritual is found to mediate consumers' resistance to lab-made diamonds. In the third essay (coauthored with Oliver Hahl), we argue that perceptions of commitment to the customer is an important demand-side factor that influence a firm's ability to diversify to related business lines. We focus on an emerging activity in the US behavioral health industry: the private equity-backed clinics. We show, through experiments on therapists in the field of behavioral health, the industry's key audience, that perceptions of commitment are influenced by a firm's authenticity and influence the firm's likelihood of selection after diversification from addiction recovery clinics into substance abuse and eating disorder clinics. This study makes important contributions through causal evidence of demand-side limits to the boundaries of a firm via perceptions of commitment.