The Social (Re)construction of Price and Pricing: Organizational Perspectives

This paper describes an ethnographic field study of the pricing process in a manufacturing firm selling products to its distributors. In the study, we address the social construction processes by which organizational members make meaning of prices and pricing. Following the logic of the social construction of reality, we treat price and pricing as a “sector of reality,” a specific part of everyday life in which organizational members make meaning of their world. We treat economic theory as a “province of meaning,” a realm that provides specific circumscribed meanings to the price setting experiences. We show how economic theory generates contrasting views of the market for the firms’ goods. In particular, we distinguish between the general views of pricing that emerge from economic theory and the specific views that emerge from dirct experience with customers. We show how the different constructions of reality lead to tensions in organizational interpretation of and action about pricing. The resulting tensions have implications for the flow of information between sales and marketing, for the rules and routines in the pricing process, and ultimately for the ability of the firm to control the price of its products. We suggest that the social construction process also has implications for incentive systems. We discuss how organizational implications have direct effects on price, a central economic construct. We can think of managerial tools as socially constructed technology. Managerial tools such as total quality management (TQM) (Zbaracki, 1998), business planning (Oakes, Townley, and Cooper, 1998), and management by objectives (Covaleski, et al., 1998) combine rhetorics and logics of rationality and efficiency with tools based to varying degrees in some technology. The combination of rhetorics and logics underlying these tools present a problem for both managers and organizational scholars. The organizational evidence suggests that the diffusion processes for such socially constructed technologies are something of a problem, in that fads apparently based in the logics of rationality can take over the diffusion processes (Abrahamson, 1991; Abrahamson, 1996). Research on the internal organizational processes underlying the diffusion of these socially constructed technologies suggests that diffusion leads to the distortion of the technology, as for instance, in the case of total quality management (Zbaracki, 1998). Such organizational evidence is consistent with the sociological evidence that suggests that organizations come to value socially constructed technologies more because they demonstrate that the organizations are legitimate, rather than for the technical benefits that gave rise to the practices originally (DiMaggio and Powell, 1983; Tolbert and Zucker, 1983). Following that recent work on the social construction of technology, here we explore the relationship between the technology of rational managerial tools and the processes by which organizational members socially construct that technology. We extend that work in three ways. First, we focus on the internal organizational dynamics as organizations construct and reconstruct the technologies behind these practices. Second, we address how organizational members understand the technologies and their implications in the activities of the organization. Third, we address the social structure of the organization, considering both