Let it shine

Concern about social and environmental problems like climate change is at the core of many moral markets, such as those for solar panels, plant-based meat or fair trade coffee. We spoke to Dr Panikos Georgallis about his research into the conditions that lead to the emergence of moral markets and how they subsequently evolve.

The emergence of new markets for certain products or services is not always associated just with a desire for financial profits, but increasingly also the goal of addressing social and environmental problems. Solar panels, fair trade coffee and plant-based meat are just a few examples of products that some consumers purchase in what have been described as moral markets, often because they perceive it as being the right thing to do. “The difference between moral markets and conventional markets is that at least some of the participants are in these markets, and supporting them, for reasons that go beyond profit-making,” explains Dr Panikos Georgallis, Assistant Professor of Strategy at the Amsterdam Business School. The products or services available in moral markets are perceived to be superior to others not on functional grounds, but on normative, moral grounds. This is linked to another differentiating feature. “One feature of these moral markets is that you also have other participants – who are not usually present in conventional markets – such as activists and social movements, that are trying to support them,” explains Dr Georgallis.

Let it shine project

As the Principal Investigator of the Let It Shine project, Dr Georgallis is now investigating the conditions that lead to the emergence of these moral markets and how they subsequently evolve, focusing largely on the solar energy market. In their initial stages these moral markets are to a large extent created in response to a social or environmental problem, such as climate change in the case of solar panels. “In the early stages, a lot of NGOs and activist organisations try to boost these markets, and to push policy-makers

to support them,” says Dr Georgallis. This might take the form of government subsidies, which can play a role in making these markets more profitable than they might otherwise have been. “You’re more likely to see government subsidies in markets with some social or environmental implications, compared to other areas where the role of government is more about ensuring there is fair competition,” continues Dr Georgallis. “In some cases government policy has been very important to the growth of these moral markets and their further expansion.”

There is a common perception that the solar energy market was essentially created in response to government policy, yet Dr Georgallis says the picture is actually more complex and that it developed in a more bottom-up way. There is evidence that government policy itself was influenced by the pressure from organisations producing solar panels, as well as the support of Greenpeace and other environmental groups. “That showed to governments that the public was interested in solar energy, and saw the benefits of these markets,” outlines Dr Georgallis.

The difference between moral markets and conventional markets is that at least some of the participants are in these markets, and supporting them, for reasons that go

beyond profit-making.

Policy in the solar energy market

The market has since developed further, and in the project Dr Georgallis and his colleagues are investigating the factors that influence a firm’s decision on whether to enter a foreign market, looking at a large dataset of location choices by European companies. “Part of it is the firm’s own experience and capabilities, while part of it has to do with the characteristics of the country in question,” he says. “This includes things like how easy it is to set up a business and the level of bureaucracy. Then there are also factors like political uncertainty, and the institutional characteristics of the country.”

A lot of attention in the project has been focused on the experience of the solar energy market that these firms possess. Alongside this, Dr Georgallis is also investigating their experience with non-market aspects such as certain policy features, and whether they have

dealt with them in the past. “We found that the experience of facing similar policies gives them a perceived advantage, and it makes them more likely to enter markets in countries that have similar policies, which in this case is feed-in tariffs,” he outlines. Researchers found that the extent of this advantage depends also on the nature of the experience they had with this policy. “We see that firms that were exposed to similar policies may have had to deal with adversity. It may be that support was reduced, or completely taken away. Then they see seemingly generous policies in other countries more sceptically,” continues Dr Georgallis. “Even if objectively those policies are generally linked to profitable investment opportunities, and the country doesn’t have a history of changing policies very often, firms are still more sceptical.”

Policy stability

This implies that the level of policy stability in a country where a firm already operates affects how they perceive similar policies in another country. If Spain and Germany have similar policies and there is instability in Spain for example, then that will affect how firms perceive the policy in Germany; this is an important consideration for governments that want to stimulate the growth of moral markets. “If they want to encourage firms to invest, it’s not enough that they have a stable policy environment themselves, they also have to ensure that there is a stable policy environment elsewhere,” explains Dr Georgallis. This research holds wider importance in the context of concern about climate change and the current high cost of energy, which Dr Georgallis believes will accelerate the transition to renewable energy. “The current position will push both individuals and governments to get more serious about the transition to renewables,” he says. “If there are going to be more subsidies for renewable energy, or other forms of policy intervention, then it will be important to consider what other countries are doing.”

The solar energy market is still growing, and researchers are in way observing its ongoing development in real time. While the first practical silicon solar cell was demonstrated in 1954, it was not until the ‘90s that the market became more established, and work continues to improve them further. “Solar cell efficiencies in the lab are usually double what we see in commercial applications. But of course it takes a lot of time for that to filter down,” says Dr Georgallis. Solar is of course not the only form of renewable energy or the only moral market, and Dr Georgallis is also looking at other areas in which the project’s results could be generalised. “Wind energy is the obvious one, as it’s very similar to solar. It took off earlier, but there are similar characteristics in terms of societal and policy support,” he outlines. “Other markets are also emerging, such as plant-based alternatives to meat, which are motivated by concern about climate change. The boundary of where we can generalise the results is, generally speaking, markets that are promoted because of social or environmental benefits.”

A government seeking to encourage investment in a moral market can gain valuable insights from these other cases. The EU has an ambitious agenda for addressing climate change, yet they typically leave it up to individual governments to implement it, and the project’s research can help policy-makers assess the likely impact of specific policies.

The emergence and evolution of moral markets

Project Objectives

The aim of the Let It Shine project is to investigate how moral markets emerge and then evolve. Moral markets emerge for reasons that go beyond profit-making, for example concern about climate change, or a desire to share profits from a particular product more equitably.Researchers are investigating how markets for products like solar panels or fairtrade coffee develop over time, and the role of several different actors in supporting and encouraging the growth of these markets.

Project Funding

This project is funded by The Dutch Research Council (NWO) (project 016.Veni.195.232)

Contact Details

Project Coordinator, Panikos Georgallis Assistant Professor Strategy & International Business Amsterdam Business School University of Amsterdam T: +31 (0)20 525 5311 E: p.georgallis@uva.nl W: https://www.moralmarkets.org/2018/ let-it-shine-the-emergence-and-evolutionof-moral-markets/ W: https://www.uva.nl/en/profile/g/e/p. georgallis/p.georgallis.html

Georgallis, P., Albino-Pimentel, J., & Kondratenko, N. (2021). Jurisdiction shopping and foreign location choice: The role of market and nonmarket experience in the European solar energy industry. Journal of International Business Studies, 52(5), 853-877. (available open access here: https://link.springer.com/article/10.1057/ s41267-020-00358-2)

Panikos Georgallis

Panikos Georgallis is an Assistant Professor of Strategy at the Amsterdam Business School. His main research interests lie in the areas of strategy, organisation theory and sustainability. His research currently focuses on moral markets, business-society interactions and organisational responses to climate change.