Pricing capability development and its antecedents Andersson, Linn

347 Pages·2017·5.18 MB·English

by  Linn Andersson

Pricing capability development and its antecedents
Andersson, Linn
2013
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Citation for published version (APA):
Andersson, L. (2013). Pricing capability development and its antecedents. [Doctoral Thesis (monograph)].
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LUND UNIVERSITY
PO Box 117
221 00 Lund
[phone]
Pricing capability development and
its antecedents

Linn Andersson

DOCTORAL DISSERTATION

by due permission of the Department of Business Administration,
School of Economics and Management, Lund University, Sweden.
To be defended at Holger Crafoords Ekonomicentrum EC2:101.
Date 4. October 2013 and time 13.15.

Pricing capability development and
its antecedents

Linn Andersson
Copyright © Linn Andersson

Institute of Economic Research
School of Economics and Management
Department of Business Administration
ISBN 987-91-7473-627-4

Printed in Sweden by Media-Tryck, Lund University
Lund 2013
En del av Förpacknings- och
Tidningsinsamlingen (FTI)
Acknowledgements
I wish to thank several people for their valuable help and support throughout
this four-year long journey.
This thesis would not have been finished without the guidance and support
from my supervisors Thomas Kalling and Niklas L. Hallberg. I am very grateful
for all insights, inspiration and advice they have provided me with. I would also
like to offer my special thanks to my seminar opponents Teppo Fellin, Lars
Bengtsson, Magnus Johansson and Benjamin Weaver for reading my
manuscript and providing me with highly valuable comments and constructive
critique.
I would like to express my very great appreciation to Technologica for
generously giving me extensive access and allowing me to study their
organization. I have been in contact with numerous employees at Technologica
and I am very grateful to everyone who offered some of their precious time for
interviews, patiently answered all my questions, ensured that I got the empirical
material I asked for and generously hosted my visits at several of Technologica’s
sites across Europe.
I would also like to extend my thanks to my dear colleagues at the Institute of
Economic Research, who have been very supportive throughout this journey
and given me both inspiration and insightful comments. A special thanks to
Lena Hohenschwert, Wen Pan Fagerlin and Yaqian Wang for sharing these
four years with me and helping me develop ideas. Thanks to Elsbeth
Andersson, Barbara Ahlfors, Nathalie Larsson, Kaj-Dac Tam, Christian Koch
and Violeta Kaleskovska for all support. Lastly, I want to thank Gillian Sjödahl
for proofreading my manuscript.
Lund, July, 2013
Linn Andersson

Table of content
1. Introduction .......................................................................................... 1
1.1. Pricing capability development .......................................................... 2
1.1.1. Towards a better understanding of the antecedents of pricing capability
development ........................................................................................................ 4
1.1.2. A longitudinal case study of pricing capability development in mature
industries ............................................................................................................. 5
1.1.3. The nature of the customer relationships and its potential relevance ..... 9
1.2. The role of managerial design in general capability development ..... 10
1.3. Antecedents of organizational capability development ..................... 11
1.4. Purpose ........................................................................................... 13
1.5. Outline of the thesis ........................................................................ 14
2. Pricing capability development ............................................................ 17
2.1. Managers’ ability to design organizational capabilities ..................... 18
2.1.1. The role of managerial decision making and capability development ... 18
2.1.2. Managerial decision making constrained by bounded rationality ......... 21
2.1.3. The influence of path dependency ....................................................... 22
2.2. Different types of organizational capabilities ................................... 24
2.3. The notion of pricing capability ...................................................... 29
2.3.1. The novelty of the notion of pricing capability .................................... 33
2.3.2. Pricing capability elements .................................................................. 34
2.4. Eleven key concepts that supposedly explain organizational capability
development .............................................................................................. 49
2.4.1. Search routines .................................................................................... 52
2.4.2. Trial and error based learning .............................................................. 53
2.4.3. Changes in routines ............................................................................. 53
2.4.4. Dynamic capabilities ........................................................................... 58
2.4.5. Ad hoc problem solving ...................................................................... 67
2.4.6. Knowledge deployment ....................................................................... 67
2.4.7. Changes in resources ........................................................................... 72
2.4.8. External influences .............................................................................. 73
2.4.9. Managerial perception ......................................................................... 73
2.4.10. Managerial motivation ...................................................................... 76
2.4.11. Path dependency .............................................................................. 77
2.5. Defining central theoretical concepts ............................................... 78
2.5.1. Defining organizational capabilities .................................................... 78
2.5.2. Defining resources .............................................................................. 78
2.5.3. Defining routines ................................................................................ 79
2.5.4. Defining organizational capability development .................................. 79
2.5.5. Defining pricing capability development ............................................ 79
2.6. Preliminary theoretical framework ................................................... 80
2.6.1. Preliminary antecedents to pricing capability development ................. 82
2.6.2. Pricing capability elements .................................................................. 88
3. Method ................................................................................................ 91
3.1. Research design ............................................................................... 91
3.2. Choice of case company .................................................................. 96
3.3. Embedded case study design ............................................................ 97
3.4. Selection of embedded cases ............................................................ 98
3.5. Constructing the preliminary theoretical framework ...................... 103
3.6. Collection of empirical material .................................................... 104
3.6.1. Participating observations ................................................................. 105
3.6.2. Document studies ............................................................................. 105
3.6.3. Interviews ......................................................................................... 105
3.7. The empirical presentation ............................................................ 112
3.8. The phase of analysis ..................................................................... 113
3.9. Comments on validity and reliability ............................................. 114
4. The case company .............................................................................. 117
4.1. Company background ................................................................... 118
4.2. Industry context ............................................................................ 119
4.3. The group-wide pricing excellence project ..................................... 120
4.3.1. The first meeting with the project team ............................................ 121
4.3.2. Challenges encountered by the project .............................................. 123
4.4. Results of the pricing excellence project ......................................... 125
4.5. The five embedded cases ............................................................... 129
4.5.1. Alfa ................................................................................................... 133
4.5.2. Beta .................................................................................................. 134
4.5.3. Gamma ............................................................................................. 136
4.5.4. Delta ................................................................................................. 138
4.5.5. Epsilon ............................................................................................. 139
4.5.6. Timeline for the studied pricing capability development projects ...... 141
5. Pricing capability development at the embedded cases ....................... 143
5.1. Stated reasons for initiating pricing capability development .......... 144
5.1.1. Alfa ................................................................................................... 146
5.1.2. Beta ................................................................................................... 146
5.1.3. Gamma ............................................................................................. 147
5.1.4. Delta ................................................................................................. 148
5.2. Pricing capability elements prior to development projects ............. 149
5.2.1. Pricing organization and pricing information system ......................... 149
5.2.2. Pricing skills ...................................................................................... 155
5.2.3. Pricing strategy .................................................................................. 162
5.3. The phase of pricing capability development ................................. 162
5.3.1. Two different approaches for changing the pricing organization ....... 162
5.3.2. Restricting the sales representatives’ pricing autonomy ...................... 165
5.3.3. Restricting the sales representatives’ pricing authority ....................... 178
5.3.4. Summary of managerial actions taken in order to achieve pricing
capability development .................................................................................... 190
5.3.5. Changes made in pricing resources .................................................... 192
5.3.6. Changes made regarding pricing routines .......................................... 192
5.4. Pricing capability elements after development projects .................. 194
5.4.1. Pricing organization and pricing information system ......................... 194
5.4.2. Pricing skills ...................................................................................... 208
5.4.3. Pricing strategy .................................................................................. 214
5.5. Perceived performance outcome from the new pricing capability
according to self-assessment ...................................................................... 217
5.5.1. Perceived performance outcome at Alfa ............................................. 217
5.5.2. Perceived performance outcome at Beta ............................................ 219
5.5.3. Perceived performance outcome at Gamma ...................................... 220
5.5.4. Perceived performance outcome at Delta .......................................... 223
6. Analysis .............................................................................................. 225
6.1. Managerial perception about opportunities for pricing capability
development ............................................................................................ 227
6.2. Managerial motivation to achieve pricing capability development . 235
6.3. Sales representatives’ perception and motivation ........................... 236
6.3.1. The influence of sales representatives’ hedonic intrinsic motives on
pricing decisions .............................................................................................. 237
6.3.2. Hedonic intrinsic motives versus extrinsic motives ............................ 239
6.4. Managerial pricing governance choices .......................................... 241
6.4.1. Handling the influence from sales representatives’ hedonic intrinsic
motives on prices ............................................................................................. 245
6.4.2. The influence of myopic behavior on pricing decisions ..................... 249