ABSTRACT: A growing body of scholarship has studied 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 post-entry dynamics, or the determinants of firm survival in moral markets. This study examines how regional institutional logics – spatially bound, socially constructed meaning systems that legitimize specific practices and goals within a community – shape firm survival in emerging moral 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 proenvironmental 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 incumbent) firms, creating an opportunity for de novo (entrepreneurial entrant) firms to compete more effectively. Our study integrates research on industry emergence, institutional logics, and firm survival to address important gaps in our knowledge regarding the evolution and growth of moral markets.
Check out a recent press article discussing this study: “Can Startups Be the Vessel for Solving Climate Change? (https://www.colorado.edu/today/2021/11/15/can-startups-be-vessel-solving-climate-change)