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Stakeholder Orientation and Market Impact: Evidence from India

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Journal of Business Ethics Aims and scope Submit manuscript

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others….”

Smith (1759)

Abstract

This study integrates insights from stakeholder theory and the literature on competitive dynamics and incumbent responses to entry. While research in economics and strategy has examined how market incumbents respond to new entrants, little is known about the heterogeneity in these responses to the entry of a stakeholder-oriented firm; our study addresses this research gap. Findings from a novel, longitudinal dataset of 206 granularly defined pharmaceutical markets in India suggest that stakeholder-oriented firm entry in these markets is associated with an impact on prices and product differentiation with heterogeneous responses from high-end and low-end incumbents. Specifically, entry by a stakeholder-oriented firm results in a reduction in prices and dosage sizes from high-end incumbents, whereas low-end incumbents respond in the opposite direction.

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Notes

  1. For a reference to additional robustness in our online supplement here and later, see: online supplement to this article: https://www.dropbox.com/s/2wt6x4elt94zei9/OnlineSupplement-StakeholderOrientationandMarketImpact.pdf?dl=0.

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Acknowledgements

The authors are grateful to the Section Editor, Julie Nelson and two anonymous reviewers for their comments and suggestions. The authors also thank Ernie Berndt, Iain Cockburn, Pilar García-Gómez, Maitreesh Ghatak, Ilze Kivleniece, Vineet Kumar, Richard Manning, Anita McGahan, Philipp Meyer-Doyle, Lilach Nachum, Enrico Pennings, Ivan Png, Rajnish Rai, Mike Scherer, Ken Shadlen, Jasjit Singh, K. Sudhir, Minyuan Zhao and the participants at the Academy of Management, Ghoshal Conference at the London Business School, Israel Strategy Conference, Asian Meetings of the Econometrics Society, SMS India Special Conference, DRUID Barcelona, Erasmus School of Economics seminar series (Health Group), INSEAD seminar series, Tilburg seminar series and NBER Productivity Lunch for their feedback and suggestions. Data from IMS Health India is gratefully acknowledged. Chatterjee acknowledges the Young Faculty Research Chair and Research Grant #7307A at IIM Bangalore and the Bharti Institute and Max Institute Research Fellowship at the Indian School of Business for this study. Usual disclaimers apply. Corresponding author can be reached at chirantan@gmail.com.

Disclosure

The authors declare that none of the authors of this study are affiliated with the company, Mankind, in any way, and this study reflects their unbiased evaluation of the company for the time period covered in this study.

Funding

This study is funded by Indian School of Business & IIM Bangalore Grant Number #7307A.

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Authors and Affiliations

  1. INSEAD, 1 Ayer Rajah Avenue, Singapore, 138676, Singapore

    Arzi Adbi

  2. Erasmus School of Economics, Erasmus University, Rotterdam, The Netherlands

    Ajay Bhaskarabhatla

  3. Indian Institute of Management, Ahmedabad, India

    Chirantan Chatterjee

  4. Indian School of Business, Mohali, Punjab, India

    Chirantan Chatterjee

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  1. Arzi Adbi
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Correspondence to Chirantan Chatterjee.

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This article does not contain any studies with human participants or animals performed by any of the authors.

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Adbi, A., Bhaskarabhatla, A. & Chatterjee, C. Stakeholder Orientation and Market Impact: Evidence from India. J Bus Ethics 161, 479–496 (2020). https://doi.org/10.1007/s10551-018-3919-x

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