1. AMA SUMMER EDUCATORS’ PRECONFERENCE 2010 Ravi S. Achrol Professor of Marketing Science George Washington University THEORY DEVELOPMENT IN MARKETING Boston. August 12, 2010

2. I WILL COVER THE FOLLOWING TOPICS - Epistemology in Marketing - Induction - Disciplined Imagination - Metaphor - Borrowing - Models I WILL COVER THE FOLLOWING TOPICS - Epistemology in Marketing - Induction - Disciplined Imagination - Metaphor - Borrowing - Models

3. Fundamental processes Largely autonomous but fixed Fundamental processes Largely autonomous but fixed Phenomena Observations Constructs/ Measures Constructs/ Measures THEORY Reductionist Holistic EMPIRICS EPISTEMOLOGY THE PURE SCIENCES EPISTEMOLOGY THE PURE SCIENCES

4. EPISTEMOLOGY MARKETING SCIENCE EPISTEMOLOGY MARKETING SCIENCE Fundamental processes are dynamic and created Fundamental processes are dynamic and created Phenomena are enacted Phenomena are enacted Observations Constructs/ Measures Constructs/ Measures RELEVANT THEORY METASTASIZES & METAMORPHS MARKETING RELEVANT THEORY METASTASIZES & METAMORPHS MARKETING

5. MARKETING EPISTEMOLOGY TWO KEY IMPLICATIONS MARKETING EPISTEMOLOGY TWO KEY IMPLICATIONS -Marketing theories offer slices or lenses -Because marketing is enacted, very unusual role for “visionary theory”. -Marketing theories offer slices or lenses -Because marketing is enacted, very unusual role for “visionary theory”.

6. PATHWAYS TO THEORY DEVELOPMENT 1.INDUCTION: The Problem With Domain of Theory X Domain of Theory Y Empirical studies Empirical studies Empirical studies do not explain phenomena. Explanation is in the theory. Empirical studies only test small parts of a theory. Can this lead to theory development? Can this lead to theory development?

7. Induction at Work

8. THEORY 1 THEORY 3 THEORY 2 What works What doesn’t work What works What doesn’t work THEORY 4 PATHWAYS TO THEORY DEVELOPMENT 1.INDUCTION MIGHT WORK IF Logical construction vs. cherry picking [Marxian dialectics; Kuhn’s structure of scientific revolutions] Logical construction vs. cherry picking [Marxian dialectics; Kuhn’s structure of scientific revolutions] Mechanism driven not variable driven Mechanism driven not variable driven

9. PROBLEM FORMULATION - More explicit assumptions - More detailed more accurate representation PROBLEM FORMULATION - More explicit assumptions - More detailed more accurate representation THOUGHT EXPERIMENTS - More trials - More variation THOUGHT EXPERIMENTS - More trials - More variation PATHWAYS TO THEORY DEVELOPMENT 2. WEICK’S DISCIPLINED IMAGINATION or Evolutionary Epistemology 2. WEICK’S DISCIPLINED IMAGINATION or Evolutionary Epistemology Although Weick puts metaphor at the heart of disciplined imagination, he does not elaborate on how metaphors work SELECTION CRITERIA - Apply more consistently - More diverse criteria - Simultaneously not linearly SELECTION CRITERIA - Apply more consistently - More diverse criteria - Simultaneously not linearly LITERATURE REVIEWS LITERATURE REVIEWS METAPHORS PICTURES, MAPS METAPHORS PICTURES, MAPS Outcome judged on the bases of Plausib- ility and Survival Value, not validity Outcome judged on the bases of Plausib- ility and Survival Value, not validity

10. 3. MAX BLACK on METAPHOR Substitution view Comparison view Interaction view Stylistic decorations upon plain sense Metaphor as creative filter. Interaction between two “systems of associated commonplaces.” Emphasize some details, suppress others—in short organize our view of a subject in a new light

11. PATHWAYS TO THEORY DEVELOPMENT 4. BORROWING FROM OTHER DISCIPLINES -Literal vs. “metaphorical application” of borrowed theory. Transaction Cost Economics ----- Marketing Channels Market failure Market development Firm boundary definition Interorganizational division of (make or buy) functions, risks and rewards Opportunism Mutuality/Interdependence Assets specificity Power Uncertainty Social norms of behavior Hostages/credible commit. Relational variables Transaction Cost Economics ----- Marketing Channels Market failure Market development Firm boundary definition Interorganizational division of (make or buy) functions, risks and rewards Opportunism Mutuality/Interdependence Assets specificity Power Uncertainty Social norms of behavior Hostages/credible commit. Relational variables

12. PATHWAYS TO THEORY DEVELOPMENT 5. MODELS & ARCHETYPES - Exemplar (model husband), version, or display (fashion) - Scale model or replica of something (educational) - Analog model or icon (change of medium) isomorphic structure/pattern of relationships - Mathematical models: -Descriptive models -Theoretical models - Archetypes - Exemplar (model husband), version, or display (fashion) - Scale model or replica of something (educational) - Analog model or icon (change of medium) isomorphic structure/pattern of relationships - Mathematical models: -Descriptive models -Theoretical models - Archetypes

13. PATHWAYS TO THEORY DEVELOPMENT Mathematical Models - Descriptive math models are based on finding the functional form (e.g. logistic) that best fits data. - “Black box” approach to theory - Generate testable hypotheses - Useful practical tools - Descriptive math models are based on finding the functional form (e.g. logistic) that best fits data. - “Black box” approach to theory - Generate testable hypotheses - Useful practical tools

14. Mathematical Models at Work

15. PATHWAYS TO THEORY DEVELOPMENT Theoretical Mathematical Models - Theoretical math models are based on rules of correspondence in structure and mechanisms (putative isomorphism) - Generate falsifiable hypotheses - Often the explanation is built on metaphor, - A good model suggests further questions that take us beyond the phenomenon from which we began - Theoretical math models are based on rules of correspondence in structure and mechanisms (putative isomorphism) - Generate falsifiable hypotheses - Often the explanation is built on metaphor, - A good model suggests further questions that take us beyond the phenomenon from which we began

16. PATHWAYS TO THEORY DEVELOPMENT Archetypes: Model as Exemplar - More topographic or normative, than driven by putative mechanisms - Unique role in “visionary theory” - Caveat - More topographic or normative, than driven by putative mechanisms - Unique role in “visionary theory” - Caveat

17. Takeaways The Wheel of Theorizing Metaphorical constructions are at the heart of new theory development Mechanisms are as important, if not more, than the variables Theories are lenses or slices of complex and dynamic phenomena Metaphors, Models, Borrowing are interactive processes not literal Marketing is a dynamic field that’s is created by the theories used to explain it ! Visionary theory and dialectical processes are the key to continuous theory development

18. I think good theories are playful. They chide conventional “rationality,” make flights of fancy, and add drama to an otherwise dreary profession.