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Prior research has firmly established that consumers draw benefits from a firm’s engagement in corporate social responsibility (CSR), especially the feeling of a “warm glow.” These benefits positively affect several desirable outcomes, such as willingness to pay and customer loyalty. The authors propose that consumers do not blindly perceive benefits from a firm’s CSR engagement but tend to suspect that a firm’s prices include a markup to finance the CSR engagement. Taking customers’ benefit perceptions and price markup inferences into account, the authors suggest that CSR engagement has mixed effects on consumers’ evaluation of price fairness and, thus, on subsequent outcomes such as customer loyalty. The authors conduct one qualitative study and four quantitative studies leveraging longitudinal field and experimental data from more than 4,000 customers and show that customers indeed infer CSR price markups, entailing mixed effects of firms’ CSR engagement on price fairness. The authors find that perception critically depends on customers’ CSR attributions, and they explore the underlying psychological mechanisms. They propose communication strategies to optimize the effect of CSR engagement on perceived price fairness.

With the permission of the American Marketing Association

The ESMT innovation index 2014 – Electricity supply industry measures innovation activities of 16 major European electricity utilities in three dimensions: research, productivity and sustainability. French company EDF and Spanish company Iberdrola score highest in the overall ranking. While 14 out of 16 utilities were able to improve their innovation performance over the last 8 years, it can also be observed that utilities readjusted and focused their research activities between 2012 and 2014, and new patent registration substantially declined since 2012.

This paper provides a legal and economic analysis of the European rules for regional state aid according to Article 107 (1) and (3) TFEU. It summarizes the historical evolution and the trends of regional aid rules and describes the economic rationale behind them. The main principles are discussed with reference to recent academic research, leading cases and the State Aid Modernization initiative (“SAM”). The current rules for the assessment of compatibility as laid down in the general block exemption and the regional aid guidelines 2014 are critically reviewed in light of these principles.

 

View all ESMT Working Papers in the ESMT Working Paper Series here. ESMT Working Papers are also available via SSRN, RePEc, EconStor, and the German National Library (DNB).

Many executives pine for their internal IT systems to give them a more consumer-friendly experience. They point to the simplicity, ease of use, and hassle-free nature of the digital services they use in their personal lives: the apps on their smart phone that make services available at the push of a button, software that can be installed and configured with the click of an icon, the ability to plug a printer into a laptop’s USB port and have it ready to print, a tablet that can be connected to the internet without any cautionary pop-ups warning about potential security risks or possible compatibility problems. In the consumer IT world everything just seems to work, they lament. Why does corporate IT make things so complicated?

The notion of public relations contributing to the fabric of society is heavily contested in the public sphere and under-researched by the academy. The authors of this paper propose that the study of the relevance of public relations to society can be enlightened by turning to economics. Using information asymmetry as a framework, the argument is that public relations can be analyzed as a social institution that both helps to mitigate market imperfections and consequently increases the efficiency with which society’s resources are allocated as well as the chances for more market participants to derive value out of economic transactions.

With permission of Elsevier

In 2002 the management team of Deutsche Lufthansa AG was considering the upcoming threat from low-cost airlines in the context of an increasingly complex and competitive strategic environment. Finally the decision was taken to respond to the innovation by opening an own low-cost carrier, Germanwings in late 2002. But over time the business model of Germanwings was modified repeatedly. The case series covers * Lufthansa’s considerations regarding various options to respond to the competitive challenges brought up by the emerging low-cost airlines such as easyJet or Ryanair in 2002 (Case A), * the foundation of Germanwings in late 2002 and some early successes until 2005 (Case B), and * some more recent changes in the Germanwings business model in the following five years until end of 2010 (Case C).

The purpose of the Germanwings case series is to develop a better understanding of possible responses to disruptive business models. It relies on the example of Lufthansa who for many years was considered to have mastered the ability to manage two alternative business models, the full-service model of the mother company and the low-cost model through its subsidiary Germanwings that was launched in 2002. The following three learning objectives are addressed in particular: 1. How can an incumbent player address the challenge of business model disruptive innovation? 2. How to structure the relationship between the two businesses exploiting the different models? 3. How can a company manage two radically different business models?

In 2002 the management team of Deutsche Lufthansa AG was considering the upcoming threat from low-cost airlines in the context of an increasingly complex and competitive strategic environment. Finally the decision was taken to respond to the innovation by opening an own low-cost carrier, Germanwings in late 2002. But over time the business model of Germanwings was modified repeatedly. The case series covers * Lufthansa’s considerations regarding various options to respond to the competitive challenges brought up by the emerging low-cost airlines such as easyJet or Ryanair in 2002 (Case A), * the foundation of Germanwings in late 2002 and some early successes until 2005 (Case B), and * some more recent changes in the Germanwings business model in the following five years until end of 2010 (Case C).

The purpose of the Germanwings case series is to develop a better understanding of possible responses to disruptive business models. It relies on the example of Lufthansa who for many years was considered to have mastered the ability to manage two alternative business models, the full-service model of the mother company and the low-cost model through its subsidiary Germanwings that was launched in 2002. The following three learning objectives are addressed in particular: 1. How can an incumbent player address the challenge of business model disruptive innovation? 2. How to structure the relationship between the two businesses exploiting the different models? 3. How can a company manage two radically different business models?