Theories of Markets - Insights from Marketing and the Sociology of Markets

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Introduction

The market is a central abstraction that seldom receives extended discussionin either economics (Lie, 1997) or marketing (Araujo, 2007). As Hahn (1993,p. 203) pointed out, Markets are conjured up, but not analyzed. Recently,

however, a wave of marketing publications signaled a renewed interest inmarkets (e.g., Araujo, 2007, Araujo, Finch, & Kjellberg, 2010; Araujo, Kjellberg,& Spencer, 2008; Ellis, Jack, Hopkinson & OReilly, 2010; Venkatesh, Pealoza &Firat, 2006). Scholars call for new understanding of markets as a core conceptin marketing (Buzzell, 1999, p. 61), and even as a transition towards a Theoryof Markets (Vargo, 2007, p. 56, 2009; Vargo & Lusch, 2011, p. 186).

For the marketing reader, however, market perspectives can be unfamiliarbecause contributions are anchored in external traditions. For instance,Kjellberg and Helgesson (2006, 2007) informed their work on market practices

The Marketing Review, 2012, Vol. 12, No. 1, pp. 61-77

http://dx doi org/10 1362/146934712X13286274424316

Theories of markets:Insights from marketing and the sociology of markets

Carlos A. Diaz Ruiz, Hanken School of Economics, Finland*

The unclear understanding of markets creates a gap that deters the constructionof a Theory of Markets. The aim here is to disambiguate, for the marketing reader,the use of the market concept. To further this aim, a literature review surveys three

approaches anchored not only in marketing but also in the sociology of markets.From the sociology of markets, Network analysis, Field analysis, and Performativityare used. From marketing, Trade arenas of price uniformity, Consumers cognitiveframeworks, and Value systems are used. This literature review reveals that, to alarge extent in mainstream marketing, markets are taken for granted. However,research streams within marketing, such as IMP, Macromarketing, or Service-Dominant Logic, have developed novel understandings of markets. This is thefirst time that a literature review on markets outlines understandings from bothmarketing and the sociology of markets.

Keywords Market theory, Market dynamics, Performativity, Consumer culture,Service systems

*Correspondence details and a biography for the author are located at the end of the article.

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from discussions originating on the sociology of science (e.g., Latour, 2005),and Araujo (2007) drew from debates within economic sociology (e.g., Callon,1998). Market perspectives, even if originating inside marketing, can beunfamiliar because of ambiguity. For instance, Kotler (1967, p. 6) referred tomarkets as a synonym for the demand side, whereas Bagozzi (1975) spoke of

markets as systems of exchange. This reveals a gap: the unclear understandingof markets.

The aim of this paper is to disambiguate, for the marketing reader,debates about markets. Toward this aim, this paper draws a literature reviewencompassing both marketing, and the sociology of markets. Interestingly, thisis novel for marketing, since no recent overview has been crafted for markets asa domain. In contrast, the sociology of markets has produced extensive reviewson market understandings (e.g., Fligstein & Dautier, 2007; Fourcade, 2007).

A review is justified because the market is an abstraction. And, as such,an abstraction can change collective understandings and inform the researchagenda (Baker, 2000; Gabbott, 2004; Hart, 1998). Hart (1998, p. 27) cautioned

to distinguish between what has been done, and what needs to be done. Inmarketing particularly, scholars seem to be susceptible to amnesia regardingcontributions to theory (Tadajewski & Saren, 2008). A comprehensive reviewreduces the risk of re-inventing the wheel (Gabbott, 2004, p. 413), becauseknowledge tends to increase by a process of accumulation (Baker, 2000).

The structure of this paper is as follows. After this introduction, thecommentary frames the scope for the literature review, including perspectivesanchored not only in marketing, but in the Sociology of markets as well. Whatfollows is an outline of each of the six streams identified with highlightedexemplars and summaries. The paper then wraps up the argument in the

discussion.

Theoretical approaches to markets

This section introduces the scope of the literature surveyed. A literature reviewon markets cannot concentrate exclusively on marketings own contributions,because the market is not marketings exclusive domain. Marketing hasfocused largely on firms, not markets, since the managerial turn during thesixties (Shaw & Jones, 2005, p. 257). During the managerial turn, marketingscholars, with the exception in macromarketing, shifted focus towards the sellerat a micro-level1. Nevertheless, other disciplines continued to focus on marketsas a domain. The Sociology of Markets (Fligstein & Dauter, 2007), within thebroader Economic Sociology (Swedberg, 2009), studies how existing marketsreally work. Economic sociologists observe markets as social mechanisms (e.g.,power, norms, and networks); in contrast, neoclassic economists picture themarket as devoid of social interaction (e.g., rationality and individuality, Lie,1993).

This paper surveys three approaches from the sociology of markets, andcomplements them with three categories that have influenced marketingliterature. The categorisation builds upon Fourcade (2007) and includes thedevelopment of the marketing discipline (Shaw & Jones, 2005). On the side of

the sociology of markets, Fourcade (2007) observed three different streams.(1) Network Analysis - interested in interactive mechanisms that stabilise

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Diaz RuizTheories of markets 63

Table 1 Perspectives on market theory

Markets as Research tradition Main themes Representative works

Trade arenas ofprice uniformity

Neoclassical Economics -Price uniformity

-General equilibrium theory

Cournot (1897)

Consumerscognitive frames

MarketingManagement School

-Customer Orientation

-Potential demand

-Customer needs and wants

Kotler (1967)

Consumer Culture -Social construction of markets

-Cognitive frames

-Sign systems

Penaloza & Venkatesh(2006); Arnould &Thomson (2005)

Fields (New) InstitutionalEconomics

-Institutions

-Rules and conventions

-Constraints

Loasby (1999, 2000); North(1990)

Sociology of Markets -Field analysis

-Structures for collective action

-Isomorphism

Fligstein (2001); Dimaggio &Powell (1983)

Networks IMP -Business networks

-Relationships

Hkansson, Ford, Gadde,Snehota & Waluszewski(2009); Hkansson &Snehota (2006)

Sociology of Markets -Network analysis

-Embeddedness of collectiveaction in markets

Granovetter (1985, 2005)

Performativepractices

Sociology of Markets -Performativity

-Performativity (i.e., practicesthat shape markets)

-Markets as outcomes

-Calculative agencies

Callon (1998); Callon &Muniesa (2005); Kjellberg &Helgesson (2006)

Value-creatingsystems

Service Logic -Value Constellations

-Configurations

Normann (2001); Normann& Ramirez (1993)

Service-Dominant

Logic

-Service Systems

-Co-creation of value

Spohrer Maglio, Bailey &

Gruhl, (2007)Marketing

Systems School;-Exchange systems

-Provision Systems

Bagozzi (1974, 1975); Layton(2007)

markets (e.g., Granovetter, 1985). (2) Field analysis - observing that subjectiveagency yields to market conventions (e.g., Fligstein, 2001). (3) Performativity- exploring how technology, artifacts, and calculative devices shape markets(e.g., Callon, 1998). On the other hand, three perspectives have influencedmarketing thought. (4) Markets as trade arenas - price-setting mechanisms seek

equilibrium of supply and demand. This perspective influenced early marketingwritings (e.g., Shaw, 1912), and is usually inspired by neoclassical economics(Cournot, 1897). (5) Markets as consumers cognitive frames - culture, signs,and logics drive demand and are the focus of marketing management (e.g.,Kotler, 1967) and Consumer Culture Theory (e.g., Arnould & Thomson, 2005).(6) Value systems - interconnected mechanisms of service. This perspectivebuilds upon exchange systems (e.g., Alderson, 1957) and reviews ServiceSystems (Spohrer et al., 2007), and Value Constellations (Normann & Ramirez,1993).

Table 1 summarises the proposed categorisations. However, a cautionarynote is in order. These categorisations are meant to give a sense of order to

the review, yet they are ideal-typical. This means that hybrid examples do


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exist, and borders can be porous. However, each category also representsa coherent body of literature. Coherence does not intend to meanhomogeneity. Different authors might not agree about the contents oftheir field or the definitions. This is why a complete representation of eachresearch stream is out of the scope. The scope here informs about general

representations of markets; the forest instead of a leaf. For space reasons,this paper surveys more briefly those approaches that arguably might bemore familiar to the marketing reader, and delves deeper in those whicheither originate outside marketings own contributions, or instead, informrecent debates in marketing. The contents of Table 1 will be discussed in thefollowing sections.

Markets as trade arenas of price uniformity: The neoclassical market

The neoclassical description of markets by mainstream economics deeplyinfluenced the development and formalisation of marketing as a research

field. Vargo (2007) traced the influence of Smiths normative ideas, insteadof a positive understanding of exchange dynamics, in the foundations ofmarketing. In the early twentieth century, marketing observed the assortmentand distribution of commodities to places of demand (Jones & Shaw,2002). Moving commodities from places of supply to places of demand,early marketing scholars argued, was socially useful and valuable. The mainphenomena for the marketing function were the effects of middlemen onprice differences between farmers and consumers (Shaw & Jones, 2005).

The market, from a neoclassical perspective, is a trade arena seekingprice uniformity (Cournot, 1897, p. 51). Price uniformity means a tendencyfor the same price to be paid for the same thing, at the same time, in allparts of the market. As a mechanism, markets allow participants to evaluateand exchange any tradable item. Trade participants consist of buyers andsellers who influence price. This influence is of major concern in scholarlywork, and several theories aim to explain the basic forces of supply anddemand through price. One of those theories is the General EquilibriumTheory (Walras, 1958). This theory explains efficient distribution via price-setting mechanisms as part of a design for an optimal economic order. Inother words, it aims to prove mathematically that a set of prices exists inwhich equilibrium results. The theory highlights the interconnectedness ofsupply and demand.

The neoclassical market is built upon three assumptions. (1) The marketis composed of individuals who have rational preferences. (2) Buyersmaximise utility and sellers maximise profits. (3) Market participants actindependently and on the grounds of full and relevant information. This viewof the market, however, is often criticised for its lack of focus on how marketsreally work (Lie, 1997, p. 342). Lie believed that mathematical proof ofefficiency postulates is based on a series of assumptions that exist only underunlikely ideal conditions, which are seldom seen empirically. Some scholarsin marketing share these concerns. Bagozzi (1974) argued for a systemicperspective on markets instead of isolating buyers and sellers. For Bagozzi

(1975), markets are inherently social and depend on power, conflict, andshared meanings. Recent empirical evidence also challenges full-disclosure ofinformation Read Dew Sarasvathy Song and Wiltbank (2009) argued that

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Diaz RuizTheories of markets

market actors deliberately co-create opportunities in their environment. Theyfound that entrepreneurs favour defining market characteristics themselvesbecause markets are characterised by uncertainty instead of fully disclosedinformation.

In review, drawing from neoclassical economics, the market

concept highlights price-setting mechanisms. The market is conceived asgeographically located and is explained in terms of price. Three assumptionsexist: the market is composed of individuals who have rational preferences;buyers maximise utility and sellers maximise profits; and market participantsact independently, and on the grounds of full and relevant informationdisclosure.

Markets as consumers cognitive frames

The market concept, as used in marketing management, usually refers toexisting or potential demand. Kotler (1967, p. 6) defined markets as All

persons or business units who buy or may be induced to buy a productor service. This focus on the demand side might be an inheritance fromthe managerial turn in marketing. In the managerial turn, marketing asan academic discipline focused on a series of management technologiesas viewed from the sellers perspective (Shaw & Jones, 2005, p. 256). Thisrequired a closer understanding of demand. The marketer is a specialist atunderstanding human wants and values and determining what it takes for

someone to act (Kotler, 1972, p. 53). Kotler echoed, to a certain degree,foundational articles in marketing by Shaw (1912) and Coutant (1936). Shaw(1912, p. 746) addressed market distribution, but also included a discussionon demand. Coutant (1936), in the very first issue of Journal of Marketing,discussed the creation of markets as linked to the creation of needs.

More recent scholarly work on marketing still inherits this traditionalfocus on the demand side, for example, the streams of market orientationand market creation. In the research stream of market orientation, customersare used as a synonym for market (Kaur & Gupta, 2010; Kirca, Jayachandran& Bearden, 2005; Slater & Narver, 1995). Kirca et al., (2005, p. 27)interchangeably used the words customer, consumer, and market in theirmeta-analysis of 114 previous studies on market orientation. Kaur and Gupta(2010, p. 90) observed that market orientation and customer orientationare often used as synonyms. Slater and Narver (1995, p. 63) explicitly used

customer as a synonym for market. In the second stream, market creation isdefined as a demand-inducing activity (Anderson & Gatignon, 2005; Darroch& Miles, 2011). Market creation is seen as a direct outcome of productdevelopment, Once a new product (that lacks close product substitutes)is launched, a new market is created (Darroch & Miles, 2011, p. 723). Amarket emerges when a firm identifies a latent need in potential demandand communicates a solution to that need (Anderson & Gatignon, 2005, p.401).

This focus on demand has led scholars to understand cognitive frameslinked to consumption. A systematic understanding of consumption can be

seen in Consumer Culture Theory (CCT). This stream focuses on the socio-cultural, experiential, symbolic, and ideological aspects of consumption(Arnould & Thomson 2005 p 868) CCT research aims at illuminating

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the consumption cycle, and advances this aim through four researchprograms (ibid., p. 871). (1) Consumer identity - how consumers build asense of self using marketer-generated materials. (2) Marketplace culture- how consumers, as culture-producers, shape dominant cultural patterns.(3) Sociohistoric patterning of consumption - how a consumer society

is constituted and sustained. (4) Mass-mediated marketplace ideologies -interpretative strategies for consumer ideology.

Through CCT lenses, markets can be seen as social constructionsmediated through sign systems (Pealoza & Venkatesh, 2006; Venkatesh& Pealoza, 2006; Venkatesh et al., 2006). Markets take on diversediscursive forms and material practices, and, therefore, are not universalor self-contained (Venkatesh & Pealoza, 2006, p. 147). Venkatesh et al.,(2006) highlighted the fundamental role of signs to understand exchange.Markets, they proposed, should be the central unit of analysis in marketingresearch and knowledge development. To this end, Pealoza and Venkatesh

(2006) proposed the study of markets as social constructions in five steps:(1) incorporate an interpretative view; (2) include meanings and values; (3)abandon the practitioners perspective, and instead don a social scientistperspective; (4) include agency in the consumer; and (5) use a social unit ofanalysis.

In short, following the managerial turn in marketing, markets refermostly to the demand side. This led scholars to focus more on the cognitiveframes linked to consumption. CCT advocates the understanding of cognitiveframes for consumption. Under a CCT perspective, markets are seen as signsystems, which are socially constructed.

Markets as institutions/fields

Market actors participate in markets only after acknowledging authoritativeguidelines on how to behave. This is an institutional view in whichsubjectivity yields to social constraints (Scott, 2008). Guidelines of action arethe centre of attention in markets. Scott (2001, pp. 53-57) identified threetypes of guidelines: regulative, normative, and cultural-cognitive. Regulativeguidelines focus on rules and sanctions, normative examines prescriptive andevaluative guidelines, while cultural-cognitive elements constitute sharedframes for sense-making.

The market as an institution has been approached from (New)

Institutional Economics, and the field-analysis branch of the sociology ofmarkets. Both traditions are briefly outlined in the following lines. Institutionaleconomists focus on constraints that shape market behaviour (Loasby, 1999,2000; Mnard, 1995; North, 1990). Mnard (1995, p. 170) suggestedthat a market is a specific institutional arrangement and highlighted theimportance of rules and conventions for the transfer of property rightson a regular basis. North (1990, p. 3) described institutions as humanlydevised constraints that shape human action. Market institutions, therefore,are explained in terms of property rights, regulations, and legal rules. Loasby(1999) observed market institutions in terms of frameworks and protocols to

support exchange. Exchange is possible since institutions focus attention ona particular set of alternatives, which, in turn, enable controlled movementby restricting alternatives (Loasby 2000 p 299)

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Economic sociologists, on the other hand, show that social structuresinfluence market actors, yet structures are also influenced in return. Themain difference with economic thinking is that firms struggle to obtainnot only profit maximisation, but also stability (Fligstein, 2001). Stabilityentails corporate decisions, which differ from profit maximisation only.

Four elements enable structured exchange (i.e., markets): propriety rights,governance structures, rules of exchange, and conceptions of control.

Field analysts borrow from Bourdieus concepts of fields of action andhabitus. Fields of action can be described as a social space where actorsorient their actions to each other. The metaphor of a field is designed tostress that firms watch one another in search of clues as to what constitutessuccessful behaviour (Dimaggio & Powell, 1983; White, 1981). An applicationof this can be seen in isomorphism (Dimaggio & Powell, 1983). Isomorphismin markets means that organisations in the same market converge into afew organisational forms. Three mechanisms converge (ibid., p. 150): (1)

coercive - political influences, regulations, and legitimacy; (2) mimetic -standard responses to uncertainty; and (3) normative - standardisation ofactors mind-frames via professionalisation.

The second of Bourdieus concepts is habitus. According to Bourdieu(2005, p. 84), Insofar as he/she is endowed with a habitus, the social agentis a collective individual or a collective individuated by the fact of embodyingobjective structures. Habitus saves calculative effort under uncertainty.Individuals internalise a set of responses for a given problem or scenario.White (1981, p. 517) claimed that markets are a structure of roles; mobileidentities that serve to position themselves vis--vis each other. Firms signalone another, by means of price and quality for instance, as to which position

in the market firms aspire.In summary, markets are explained by means of guidelines of action

which inform a determinate set of responses. In markets as fields, subjectivityyields to social constraints. Institutional economists focus on constraints thatshape market behaviour particularly regarding property rights, regulations,and legal environments. Field analysts from the sociology of markets focuson stability and corporate governance following Bourdieus concepts offields of actions and habitus. This highlights standard responses and learnedbehaviour.

Markets as networks

Sociologists and marketers alike converge on the understanding thatmarkets are social endeavours; market actors are seldom isolated. Firms andconsumers operate in relationships toward each other, among themselves,and toward third parties. Some scholars, therefore, refer to markets asnetworks. The market as seen from a network perspective has been studiedin marketing by the Industrial Marketing and Purchasing Group(IMP), andby the Network-Analysis stream in the sociology of markets. The followingoverviews the position of markets as networks from the perspective of bothmarketers and sociologists.

A network is a structure conformed by nodes, which are related to eachother by threads (Hkansson & Ford, 2002, p. 133). Nodes are market actors,such as firms and the threads are exchange relationships In marketing this

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markets-as-networks approach is associated with the work of IMP (Ford &Hkansson, 2006). IMP is concerned by evidence suggesting that, foremostin industrial settings, relationships are more important than discretetransactions. This interaction approach, in ongoing business relationships,is based on the relevance of the relationship between an active seller and an

active buyer. Instead of focusing on cutthroat competition in markets, thework of IMP, according to Hkansson, Ford, Gadde, Snehota & Waluszewski,(2009), focuses on delicate interdependencies. Under this approach,managers are encouraged to search for interdependencies and long-termbenefits, instead of encouraging survivalist behaviour in an antagonisticenvironment (Hkansson & Snehota, 2006). IMP tends to present studieswith multiple companies, instead of studies within companies.

A networks approach, from an IMP perspective, implies an interfacebetween an organisation and its environment (Ford & Hkansson, 2006;Hkansson & Snehota, 2006). Ford and Hkansson (2006) differentiated

the markets-as-networks approach in the following terms: (1) exchangeexists not only as discrete transactions, but also as ongoing relationships;(2) buyers and sellers are interconnected, and know each other, and marketagents are not anonymous; (3) the supplier and the buyer are both active inthe business relationship; (4) organisations, particularly in industrial settings,interact with a limited set of identifiable actors with considerable influencewhere agents are seldom atomised, (5) organisational boundaries are blurredand relationships extend outside the contractual boundaries of firms; and (6)bargaining power results from a relative position within a network, rationalegalitarian interactions play a part but only to a limited extent.

The second stream surveyed in this paper is the networks approach from

economic sociology. Unlike IMP where the focus is on business relationships,sociologists focus on embeddedness (Granovetter, 1985, 1992, 2005).Embeddedness highlights the effect of interpersonal connections in economicoutcomes. This is a middle-ground between economic theory, whichunder-socialises market processes, and much of the existing sociologicalthinking, which over-socialises behaviour. In this view, economic rationalityis embedded within social relationships. Market actors, to a certain degree,are embedded in affiliations, which, in turn, influence their opportunities toact. Embeddedness is explained in terms of not only quality of relationships,but also relative positions within networks. Social relationships determine

individual and collective outcomes, from access to information to innovation.The main tenets are as follows (Granovetter, 1992, p. 4), (1) economic goalsare normally accompanied by non-economic goals (i.e., approval, status, andpower); (2) economic action is socially situated, in other words, economicaction cannot be explained by individual motives only, but is embedded innetworks of relationships and seldom atomised; and (3) market institutionsare socially constructed.

Therefore, markets are social processes in which actors are seldomisolated. The market highlights interpersonal connections, instead ofexchange. In marketing, IMP studies business relationships pinpointing

interdependencies in industrial networks. In the sociology of markets, theembeddednessprogram focuses on personal relationships as an antecedentfor economic action and affiliations as interactive mechanisms that stabilise

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Markets as outcomes of performative practices

Market actors do not only act within their environment, actors shapemarkets with their everyday practices. In other words, markets are ongoingpractical accomplishments (Kjellberg & Helgesson, 2007). Practices areconceived as arrays of human activity centralised around shared practical

understandings. Practices highlight inter-definition among a large varietyof agents, which interact among each other through concrete mundaneactions, and calculative devices (Callon & Muniesa, 2005; Muniesa, Millo& Callon, 2007). The markets as practices approach has seen a surge ofrecent activity in marketing following an introduction of performativity byKjellberg and Helgesson (2006). Presented here is an overview of the threemarket practices and the resonance in the research that followed. The marketpractices are exchange, normalising, and representational.

Exchange practices contribute to stabilising modes and agents ofexchange, at least for a while. Exchange practices focus around calculative

processes (Callon & Muniesa, 2005) and market devices (Muniesa et al.,2007). For example, Andersson, Aspenberg, and Kjellberg (2008) explainedhow automated purchasing software frames the form in which an order isplaced to resupply office consumables. Rinallo and Golfetto (2006) observedhow fabric manufacturers use key trade fairs to shape fashion trends bygaining legitimacy in the eyes of other market actors.

Normalising practices contribute to shaping markets by establishing rulesand regulations. Practices might involve third parties such as governmentagencies that are not directly involved in exchange, but that are endogenousto the process of shaping markets. Holm and Nielsen (2007) observed, forexample, that the creation of a market for fishing permits (i.e., quotas)followed a specific set of normative practices to protect the biomass of codavailable in Norwegian territorial waters.

The last set of practices is representational. Market representationsare concrete activities, in this case market research, which contribute torepresenting economic exchanges as markets (Kjellberg & Helgesson, 2006,p. 843). Representational practices produce images of markets and framemental models of actors. Representations are relevant because mental modelsare antecedents to business models (Storbacka & Nenonen, 2011b; Nenonen& Storbacka, 2010. Representations can change collective understandings.Azimont and Araujo (2007) explained that category reviews in retail serve

representational practices with market-shaping potential because they (1)strengthen conventions and category boundaries, (2) create conceptualframes, and (3) provide new representations and categorisations.

The sociology of markets anchors the practice approach around theconcept ofperformativity. Callon (1998) suggested that a performative scienceis a science that simultaneously describes and constructs its subject matter,a sort of self-fulfilling prophecy. Market sociologists have presented cases ofperformativity mainly in the financial sector (MacKenzie, 2006; MacKenzie,Muniesa & Siu, 2007). MacKenzie (2006) claimed that economists makemarkets to a certain extent. He traced how traders adopted the Black-Scholes

model for pricing derivatives. He showed that the model did not fit withwhat happened on the trading floor, yet officials and theoretical economistsat the Chicago Mercantile Exchange worked to shape the behaviour of

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just represent an objective reality like a camera. MacKenzie claimed, asreflected in the title of the book, that economic representations can drivemarkets like an engine.

MacKenzie (2006) described three categories of performativity: Generic,Effective and Barnesian. Generic Performativity arises when an aspect of

economic theory is used by market actors whether or not this has any effecton market behaviour. An example might be lowering the price of fruit ona sunny day under the assumption that this will increase demand beforethe fruit rots. The seller expects to increase demand by lowering price,as suggested by economics; but the effect may or not happen. EffectivePerformativity focuses on the practical use of an aspect of economic theory,and its effect on economic processes. For example, an official used anaspect of economic theory to set up fishing quotas. Barnesian Performativityimplies that the practical use of an aspect of economic theory makes theactual processes more like their representation in theory. The Black-Scholes-

Merton model is an example of this. This means that even if a theory wasnot originally realistic, it might become real when actors conform to it. Inaddition, Kjellberg and Helgesson (2006) proposed an additional distinctionof Austinian Performativity, where a strong link has been forged between aclearly explicated theory and a resulting market, from Generic Performativity,where only a strong but partial link is formed.

Several marketing commentaries inform markets inspired by discussionson performativity (Andersson et al., 2008; Azimont & Araujo, 2010;Harrison & Kjellberg, 2010. Andersson et al. (2008) addressed the problemof distributing agency to human and non-human acting entities in a pre-configured script. Harrison and Kjellberg (2010) observed that firms might

attempt to shape market practices using iterative segmentations whenofferings are either too specialised, or without direct antecedents. Azimontand Araujo (2010) claimed that classification devices serve to reshape evenwell-established markets such as those of gas stations.

Markets are understood as mouldable outcomes following ongoingpractical accomplishments. The sociology of markets anchors the practiceapproach around the concept of performativity. Technology, artifacts, andcalculative devices shape markets. Representative, normative, and exchangepractices do not only exist in markets, but actually shape them.

Markets as value-creating systemsA system involves interaction and processes. A system view of markets has along tradition within marketing (Alderson, 1964; Bagozzi, 1974). Alderson(1964) observed marketing functioning as a dynamic system whose goalis aligning institutions and processes toward matching goods and needs.Bagozzi (1975) introduced exchange systems, and explained them in termsof social actors, which are not exclusively buyers and sellers. More recently,however, two streams within marketing observe markets as systems: provisionsystems as seen in Macromarketing, and service systems as seen in Service-Dominant Logic (S-D).

A systems perspective in marketing can be found in Macromarketing(Layton, 2007; Mittelstaedt, Kilbourne & Mittelstaedt, 2006; Shapiro,Tadajewski and Shultz 2009) For example Mittelstaedt et al (2006 p 132)

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proposed that the reason markets exist is to serve as the provision system ofsociety. They proposed three tenets: (1) markets are complex systems; (2)markets are heterogeneous in needs and offerings; and (3) actions of marketactors have consequences in society, well beyond the boundaries of firms.Layton (2007) discussed the idea of the marketing system where the key

concepts used to explain markets were, a system of actors, a participation ineconomic exchange, an assortment of (tangible or intangible) products, anda response to customer demand (p. 230).

While Macromarketing explains markets in terms of provision, Service-Dominant Logic (S-D), a proposed perspective in opposition to a Goods-Dominant Logic, explains markets in terms of value (Vargo & Lusch, 2004).Vargo (2007) proposed four ideas to understand markets: (1) a focus on valueinstead of products; (2) value creation as understood by the beneficiary, notthe seller; (3) an integrated perspective between producer and consumer;and (4) a network perspective, instead of dyads (i.e., seller and buyer).

S-D proposes the concept of service systems (Spohrer et al., 2007).Service is the application of competences by one entity for the benefit ofanother (Lusch & Vargo, 2006). A service system is a configuration ofresources (including people, information, and technology) connected toother systems by value propositions (Vargo, Maglio, & Akaka, 2008, p.145). Service systems include firms, customers, suppliers, and other partnersin a firms network. Vargo and Lusch (2011) expanded this claim by blurringthe distinction between buyers and sellers. Actors are indistinguishable fromeach other, because actors have the same function, to co-create value bymeans of resource integration and service provision.

S-D parallels previous contributions from Normann (Michel, Vargo, &

Lusch, 2008). Normann (2001) explained markets in terms of value-creatingsystems. He argued that value is unlikely to be created linearly but ratherdynamically. He stated that the metaphor of a chain in value creation isinappropriate, and instead suggested the metaphor of value constellations(Normann & Ramirez, 1993). The conceptualisation of markets as valueconstellations, including customers, is useful to see the customer as a co-producer, rather than a receiver. Firms can reframe business by rethinking thelogic of value creation to reveal opportunities in reconfiguring those valueconstellations in which firms participate.

Building upon the idea of constellations, contemporary scholars seek

to understand the technologies that firms use to influence markets froma managerial perspective (Nenonen & Storbacka, 2010; Storbacka &Nenonen, 2011a; Storbacka & Nenonen, 2011b). Markets can be viewedas configurations where interdependence leads to patterns (Storbacka& Nenonen, 2011a). Firms can, and often do, attempt to shape thoseconfigurations using three key elements (Storbacka & Nenonen, 2011b):(1) mental models, (2) business models, and (3) market practices. Businessmodels in particular, are seen as an immediate device for management toinfluence its environment (Nenonen & Storbacka, 2010).

To summarise, markets are explained in terms of value as seen by the

customer instead of the firm. This highlights interconnected mechanisms,which are sometimes called service systems, value constellations, or marketconfigurations. In this perspective, interdependence leads to patterns linked

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Discussion

The recent wave of marketing publications signals a renewed interest inmarkets (e.g., Araujo et al., 2010), and even calls for a transition towards aTheory of Markets (e.g., Vargo 2007). Nevertheless, researchers, as individuals

within society, have been socialised into how markets should work. Oneexample is the following phrase: The ideal market needs competition.Evidence, however, shows that markets might not work according tonormative views. Idealism conveys a risk for scholarly work, because theoristsmight be trapped in their own views on how markets should work, insteadof focusing on how markets actually work.

Research streams within marketing provide a rich conceptualisationof markets that is unique in the social sciences2. Marketing has extensivelystudied interactions between firms and consumers. This is a key contributionof marketing. However, marketing would side with the firm more often than

not. This seems reasonable for managerial purposes, but could be ratherlimiting for the construction of a Theory of Markets. Researchers need toovercome a normative narrative of markets. To further this goal, two stepsare identified. First, forsake the managerial perspective, and favour instead,the view of a social researcher. The second step is to question explicitlyassumptions of markets. The first step is discussed in detail by Penaloza andVenkatesh (2006), whereas the following lines expand the second step.

When constructs are modelled, assumptions permeate the design. Ifthe design is unsound, or even wrong, the construct might have limitedexplanatory capabilities. In the case of markets, this paper has shownthat assumptions are seldom questioned. This is a problem for market-based constructs. Constructs can be refined because markets are, after all,abstractions; markets do not exist objectively. As such, market assumptionscan be refined by rational and empirical scrutiny.

This paper contributes to marketing by presenting challenges toconventional assumptions about markets. The following assumptionsare challenged: (1) the isolation of market actors, (2) short-term profitmaximisation, (3) rational consumer behaviour, and (4) exchange as thecentral mechanism in markets. The following paragraphs expand in moredetail on each challenged assumption.

(1) IMP researchers challenge assumptions of isolation among marketactors. In approaches derived from economics, actors are assumedto work towards their own benefit, and are isolated from eachother. One example is when the demand side is considered differentto the supply side. Nevertheless, evidence in industrial settings, putforward by IMP researchers, does not support this gap. Instead,delicate interdependencies between buyers and sellers, along with

2 This discussion focuses only on a marketing perspective for space reasons.

However, the sociology of markets greatly contributes an understanding of

markets as social phenomena. Sociologists focus on how markets are ableto work in the aggregate. This is a central contribution of sociologists. Both

disciplines, marketing and the sociology of markets, have a valuable angle.

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long-term relationships, characterise market interactions better.Undeniably, no one prospers alone.

(2) Macromarketing researchers observe the effects of markets in society.In economics, actors aim to optimise short-term monetary benefits.One example is when the return of investment (ROI) is maximised.

In Macromarketing, instead, scholars observe that markets have arole within society. Market mechanisms are not disassociated withsociety, because firms also need long-term stability. Sustainabilityand social responsibility, along with financial returns, benefits firms.Consequently, markets are part of society.

(3) Consumer Culture Theory disputes the assumptions of (pure)rational behaviour in consumers. Traditionally, agents of supplyand demand are said to act rationally. This is seen, for example, inthe description of the homo economicusbased in Rational ChoiceTheory. However, CCT observes that sign systems, signifiers, and

interpretative understandings challenge rational choice as theunique basis of decisions. Therefore, consumers are complex beingscapable of thinking on their own.

(4) Service-Dominant Logic argues against the assumption thatexchange is the cornerstone of markets. Traditionally, value wasthought to be generated in exchange only. However, S-D observesthat resources do not have an intrinsic value. Instead, value isderived from an outcome of a process in which customers integrate,and use, available resources, including their own knowledge, skills,and motivations. Therefore, service providers should focus on service

systems that support value creation for the customer. Thus, value,not exchange, is the cornerstone of markets.

Revisiting assumptions has theoretical implications. Research streams withinmarketing have advanced the discussion of markets. However, the disciplineat large has yet to acknowledge these contributions. For instance, constructsin marketing are based still on competition disregarding interdependencies,transactions neglecting relationships, and firm performance at the cost ofsocial impact and sustainability. If scholars were to question assumptions ofwell-known constructs, new lines of research would surely surface.

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About the Author and Correspondence

Carlos A. Diaz Ruiz is a Doctoral Candidate at the Department ofMarketing, Hanken School of Economics in Helsinki, Finland. Diaz Ruiz,M.Sc., is a researcher at CERS (Centre for Relationship Marketing and ServiceManagement), where he is interested in Market Studies. This means that hestudies the organising practices that shape markets. As a practitioner, he was

regional head of Marketing Communications at the fourth oldest airline inthe world, and also a consultant in Latin America.

Carlos A. Diaz Ruiz, CERS (Centre for Relationship Marketing and ServiceManagement), Hanken School of Economics, Department of Marketing,P.O. Box 479, Arkadiankatu 22, FIN-00101, Helsinki, Finland.

E [email protected]

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