The Emergence of New Markets for Environmental Services

Abstract

Does membership in industry associations affect whether firms extend beyond their traditional markets? I use a data set from a survey of U.S. shellfishermen and empirically examine the relationship between membership in associations and participation in new markets. Traditionally, shellfishermen have been growing and harvesting shellfish for human consumption. However, some shellfishermen also engage in alternative revenue-generating environmental projects such as coastal restoration, clean-up, and research. Drawing on the organizational literature on associations and economic sociology literature, I test hypotheses about whether associations contribute to generating value and promoting cooperation among their members thus fulfilling requirements for a new market to emerge. I find that shellfishermen who are members of industry associations are more likely to participate in alternative revenue-generating activities and derive revenues from environmental projects. I argue that industry associations play an important role in firms’ decisions to pursue new markets by contributing to creating value and promoting cooperation.

Keywords

new markets industry associations institutional theory economic sociology sustainability natural environment survey research market coordination coastal industries

Jim¹ is a New England farmer. In growing his crop, Jim does not fertilize the soil, nor does he use any pesticides or insecticides to protect his harvest. He grows and harvests shellfish—oysters, clams, and scallops. I met him at a shoreside restaurant where he sells what he harvests. Slurping live oysters and telling his story, Jim makes sure that I understand how much he and his colleagues, members of a local shellfisheries association, care about the coastal environment. Jim leases several acres of the sea bottom near an estuary, and its clean waters feed his products. As bivalve mollusks filter nutrients out of the water, they acquire the salty briny taste that is unique only to the location of his farm. Jim recently got involved in a number of environmental activities. In collaboration with state agencies and local nonprofits, he and other shellfishermen have been rebuilding the oyster reefs that have been depleted by centuries of overharvesting. They place oysters in the polluted waters near agricultural farms and waste water facilities to clean the water. Shellfishermen are also involved in educating the public about the role of shellfish in the coastal ecosystem. When I ask Jim why, as a busy shellfisherman, he would spend his time on all of these extra activities, he rubs his fingers together—to make money. Jim is a businessman. He is all about the market.

Markets have been a topic of significant scholarly interest in the organizational literature (Fligstein & Dauter, 2007; Swedberg, 1994). Fligstein (2001b) argued that markets, as organizational fields, go through three phases of development: market nascence, development of new market institutions, and the crisis of established market institutions. Despite this scholarly interest in how new markets come about, however, we know relatively little about how organizations help markets transition between these three stages of development. These field transitions manifest themselves as changes in individual organizations, in an entire population of organizations, and in their relationships and governance structures (Dacin, Goodstein, & Scott, 2002). They can be facilitated by participating organizations on the supply side (Greenwood & Suddaby, 2006; Greenwood, Suddaby, & Hinings, 2002), driven by consumers on the demand side (Ansari & Phillips, 2011), or captured by the complex interactions between institutions, networks, and cognitive interpretations (Beckert, 2010). In other words, what happens in the field is reflected in organizations’ behavior and choices (Hoffman, 2001). At the same time, while the social forces in a field influence agency, either individual or collective (Beckert, 2010), the particular mechanisms through which this agency occurs have yet to be explored. Can industry associations be that intermediate link that mediates between the organizational and field levels? Do the collective-action organizations that represent Jim and his colleagues play any role in the emergence of a new field—the nascent market for environmental services—making industry members extend their activities beyond the traditional business models of growing and harvesting shellfish?

The shellfish industry provides a useful empirical setting for examining these questions. First, it is a mature industry that has existed for several centuries. Thus, the organizational field displays established industry structures governed by a set of taken-for-granted institutions. Moreover, the industry produces biologically identical products (Kurlansky, 2007) and is geographically constrained to coastal areas. This makes it easier to understand the boundaries of the market. Most important, the shellfish industry has been undergoing changes that make it especially beneficial for studying new market creation. Traditionally, shellfishermen have been growing and harvesting shellfish for human consumption, yet they have come under increasing pressure from regulations and environmental disasters. The adoption of new environmental practices establishes new services, while offering alternative streams of revenues for shellfishermen.

Using this industry and data from a unique survey of commercial shellfishermen,² I pursue a twofold contribution in this article. First, I provide an alternative explanation of how new fields emerge. Constituted by frequently interacting organizations that share common systems of meaning (DiMaggio & Powell, 1983; Scott, 2007), fields experience institutional changes through the interactions between the institutions, networks, and cognitive frames of field participants (Beckert, 2010). These changes take place as institutional contradictions increase during the maturation of the fields (Seo & Creed, 2002). New fields may emerge as a result of the development of rules and regulations (Fligstein & Sweet, 2002) or new market categories (Kennedy, 2005, 2008; Khaire & Wadhwani, 2010; Navis & Glynn, 2010). In their nascence, the new fields share common features, such as undefined industry structures, the absence of clear market categories, and high levels of ambiguity regarding the events and situations relevant to securing market transactions (Santos & Eisenhardt, 2009). Drawing on Fligstein’s (2001b) view of the market as a field, I explore the role that organizations play in the development of new fields. In doing so, I draw on a theoretical framework from economic sociology that explains new market creation in terms of the embeddedness of market transactions in the social structures constituted by relationships among field participants and their preferences (Beckert, 2009). According to Beckert (2009), new markets emerge once three fundamental coordination problems in market exchanges have been resolved—value, competition, and cooperation. He argued that

[t]hese coordination problems can only be resolved if market actors are able to form stable expectations with regard to the actions of other market actors and future events relevant for their decisions, and if they consider the expected outcomes to be sufficiently in their material interest and normatively acceptable. (Beckert, 2009, p. 247).

His tripartite framework is based on the following assumptions: (a) the market offering needs to exhibit value for consumers; (b) the sellers need to be able to make a profit, that is, transactions should take place not in the zero-profits market equilibrium and be structured by market-distorting actions of economic agents who seek to gain advantage over their competitors; and (c) transaction participants on both demand and supply sides need to be confident that one party will pay and the other party will deliver what is expected (Beckert, 2009). I argue that industry associations help resolve these coordination problems. In doing so, such associations enable field-level changes that, in turn, translate to changes at the organizational level. By performing their functions in representing their constituent members (Greenwood et al., 2002), associations influence the development of new fields by affecting the choices and actions of their constituents to participate in novel activities.

Second, I respond to a call by researchers to improve our understanding of how industry associations work (Barnett, 2013), focusing on what is known in the literature as “business and professional” associations (Tschirhart & Gazley, 2014). By testing a set of hypotheses that draw on the economic sociology of markets, I explore the mechanism of such associations’ engagement in new market development. In their seminal article, Greenwood et al. (2002) suggested that associations carry out three important functions in a field that help them legitimate institutional change; they provide forums for interaction, represent organizations to other field communities, and monitor compliance with existing norms. They also create centers of expertise that help their members comply with emerging industry norms (Marshall & Standifird, 2005). In addition, associations often respond to external risks of sanctions from governments and the communities in which they operate by imposing additional “voluntary” regulations on their members in their field (Furger, 1997; Lenox & Nash, 2003).

Markets can become stable institutions when a dominant field actor, such as a government entity, imposes rules and regulations on other groups (Fligstein, 2001a). In the case of environmental markets, governments often adopt preemptive strategies to minimize the potential damage that could be caused by underregulated markets (Mariola, 2011). Regulations of shellfishing area closures are an example of formal, preemptive steps taken to reduce the risk of exposure to shellfish-borne diseases (U.S. Department of Health and Human Services, 2013). Market building often involves the creation of rules that will benefit a specific group of actors, and when those rules become outdated, those actors may lobby to change the rules (Fligstein & Sweet, 2002). One of the nonexcludable services that associations provide to all of their members is the lobbying of government agencies (Bennett & Ramsden, 2007). Historically, associations, particularly in the United States, have represented the interests of their members before governments, providing governments with information about the needs of the industry and reporting the activities of the government agencies to the industry (Spillman, 2012). Similarly, the U.S. shellfisheries associations meet regularly with policy makers and institute regular “walks on the Hill” (Capitol Hill in Washington, D.C.) to inform members of the U.S. Congress about industry needs. In their newsletters, the shellfisheries associations disseminate the latest industry-relevant research and policy news. The U.S. East Coast Shellfish Growers Association’s mailing list also provides industry members with a convenient forum to share and exchange information.

Recently, researchers have suggested that associations help legitimate new industries (Esparza, Walker, & Rossman, 2014) and increase entrepreneurial activity (Teckchandani, 2014). I argue that in addition to representing, monitoring, and enforcing normative institutional constraints or providing legitimacy to new industries, industry associations purposefully affect the field dynamics and lay foundations for new organizational fields. Some scholars have argued that, in certain environments, associations may act as institutional entrepreneurs (Shah & Rivera, 2012). Given the context of the shellfish industry, in this article, I treat associations as “collective actors embedded in, and trying to navigate, specific social contexts by mobilizing other actors to partake in divergent change projects” (Battilana, Leca, & Boxenbaum, 2009, p. 87). I suggest that by deploying their social skills (Fligstein, 1997), associations help overcome market coordination problems (Beckert, 2009).

The U.S. Bivalve Shellfish Industry: Its Challenges and Associations

In this article, I focus on the industry that farms and harvests bivalve shellfish—a species of mollusks that includes oysters, clams/quahogs, scallops, and mussels. Marine scientists and policy makers have emphasized the many virtues of bivalve shellfish. Unlike other types of shellfish (e.g., crustaceans such as shrimp and lobsters), when bivalve shellfish feed, they filter out polluting substances, such as nitrogen, thereby removing pollutants from the water column; they also contribute to creating habitats for other marine species (Shumway et al., 2003). According to recent marine surveys, these are the major mollusks cultivated and harvested along the East Coast of the United States. Furthermore, oysters grown and harvested along the East Coast are biologically identical species. This mature industry carries a rich historical legacy both in Europe and the United States, where the wild harvesting and farming of shellfish have existed for centuries (Buestel, Ropert, Prou, & Goulletquer, 2009; Kurlansky, 2007; Rice, Valliere, & Caporelli, 2000). Due to the natural abundance of shellfish in the coastal areas of the United States, the shellfish industry developed very rapidly. Over the course of two centuries, from 1600 to 1800, the industry expanded along the East Coast from the Hudson River in New York down to Texas (Kirby, 2004). Shellfish became a staple food for many coastal communities.

However, the negative anthropogenic influence on the U.S. shellfish industry—on both aquaculture and wild harvesting³—was documented as early as the end of 19th century (Ingersoll, 1881). Overfishing and the destruction of the habitat in the major shellfish-producing areas of the East Coast have continued ever since (Kennedy et al., 2011). The shift from manual tools to mechanized ones (i.e., using dredges) in order to gain economies of scale has led to the demise of shellfish populations, and the production in many areas has moved away from wild harvesting toward farming. For example, marine scientists documented that oyster landings on the East Coast declined by 99% between 1890 and 2004 as a result of overharvesting and disease (Mackenzie, 2007). Furthermore, the changing climate, increasingly restrictive state and federal regulations, and a growing not-in-my-backyard sentiment among coastal communities have become impediments to the functioning and development of the U.S. shellfish industry (for a discussion, see Committee on Best Practices for Shellfish Mariculture and the Effects of Commercial Activities in Drakes Estero, Pt. Reyes National Seashore, California, 2010).

Traditionally, shellfishermen have grown and harvested shellfish for human consumption. However, the areas where shellfish are harvested are often closed by regulators as a result of an outbreak of shellfish-related disease or excessive rainfall that may bring in pollution off the coast (U.S. Department of Health and Human Services, 2013). These closures pose a risk to shellfishermen, as they are not able to harvest their products for an indefinite period of time. However, these closed areas may also represent conservation and population restoration opportunities (Beck et al., 2011). Given the ecological value of bivalve shellfish for the ecosystem (Newell, 2004), coastal communities have developed a number of shellfish population restoration strategies (Brumbaugh, Beck, Coen, Craig, & Hicks, 2006). In light of the increasing environmental pressures, some shellfishermen have begun pursuing these opportunities and engaging in alternative revenue-generating environmental projects. These projects include activities such as restoring oyster reefs, releasing scallop seeds, participating in the cleanup of oil spills and industrial hazardous waste leaks or participating in dredging surveys; commercial shellfishermen often get paid a fee from an implementing agency for their participation in such activities (see Rice et al., 2000). The involvement in these projects provides shellfish farmers and harvesters with alternative streams of revenues. For example, this is how one shellfisherman I interviewed explained the process of getting paid for rendering environmental services:

When [our state] has an area, actually several areas in polluted waters, that they relay clams out of, it constitutes a significant percentage of fisheries. So they would take clams from [the] Cove and will move them to [the] Bay or other areas where they can dig them in the winter. So they really get paid twice—they get paid to move them [at a] very low rate, like $7 a bag or something, and then they get paid in the winter the market rate when they dig them again. So it makes sense for them, a lot of them to participate in the program.

There is demand for these services, as another shellfisherman I interviewed explained:

For a shellfish restoration project, you need a commercial entity. Most of the shellfish commissioners are old, they need someone younger to carry the totes. And the shellfishermen have employees. Even if they don’t take cash [when implementing a project], they may take some percentage. For example, there were restricted areas, and the public could not harvest there, but commercial shellfishermen could, since they worked for the town. Even if they didn’t get cash, they worked on percentage: out of 80 bags they would keep 20.

The collective-action organizations of the U.S. shellfish industry have a long history, starting with the establishment of the Oyster Growers and Dealers Association in the early 1900s and the subsequent formation of the National Association of Fisheries Commissioners, which eventually became what is now known as the National Shellfisheries Association (Carriker, 2004). Members of these organizations were originally shellfishermen, representatives of some governmental agencies, and marine scientists. Today, there are a number of associations that represent wild harvesters and aquaculturists at the state and federal levels. Most of the organizations serve a range of organizations and individuals. They charge dues, employ staff, involve volunteers, and disseminate information through list serves and newsletters. One shellfisherman explained:

You can get information that you would not otherwise. . . . Information about the sources of funding. So, I can definitely see benefits [of participating in associations].

The associations help organize industry fairs, scholarly workshops, conferences, and the “walks on the Hill” (Capitol Hill in Washington, D.C.) to inform legislators of the industry’s pressing issues. According to a shellfisherman:

We should have an organization that would address these issues when they come up. For me it’s being able to work with growers from all over the coast [ . . . ] whatever the issues we have. We have an association with an executive director, we have a machine that operates that can help us educate legislators, lobby, educate public, identify research needs, do things that we need.

I argue that the U.S. shellfish industry associations are the “skillful” actors Fligstein (1997) refers to, in that they know “(a) the current condition of the organizational field and the place of the various groups in that field and (b) the types of strategic action that ‘make sense’ given the objective conditions” (pp. 398-399). As shown in Figure 1, the vast majority of the shellfishermen I surveyed indicated a number of functions of the associations as being either “important” or “extremely important.” Almost 9 out of 10 industry participants placed importance on providing information about environmental threats such as invasive species and shellfish diseases; and three quarters of the surveyed shellfishermen considered it important to facilitate information about products and suppliers. Shellfisheries associations often hold annual meetings, which cover topics such as the latest developments and research on preventing the spread of invasive species. They often issue alerts about cases of shellfish poisoning in particular locations. Over 80% of respondents considered it “important” for associations to “[a]dvocate and lobby for regulatory support with government agencies or [U.S.] Congress.” Besides working with local regulators on issues, such as shellfish area closures and permitting, shellfisheries associations seek to convince regulatory agencies and Congressmen to allocate funds for projects and programs that would benefit the shellfish industry. The industry’s best management practices are often published in newsletters and scientific publications (Hargreaves, 2011). Excelling at these activities, shellfish industry associations act as intermediaries between their community of practice and powerful field actors. Next, I present my theoretical argument of how associations contribute to the development of new markets for their constituents.

Figure 1.

Survey of shellfishermen: Functions of shellfish industry associations.

Theory and Hypotheses

A useful theoretical lens for studying markets is one that views them as special types of organizational fields (Beckert, 2009; Bourdieu, 1993; DiMaggio & Powell, 1983; Fligstein, 2001b; Scott, 2007). Membership in a field is determined by more frequent interactions between field participants than with those who are not members, shared systems of meaning, and a common interest in particular issues (DiMaggio & Powell, 1983; Galvin, 2002; Hoffman, 1999; Scott, 2007). Thus, markets include a palette of organizations, including those that are directly involved in transactions, those involved in rule setting and the monitoring of state agencies, social movement organizations, and trade associations. These “field-level communities” interact and exploit their own sets of tools—frames and language—to achieve the desired outcomes for their field (Hoffman, 2001).

Associations are important actors in an organizational field as they represent the collective action of an industry. Their members participate voluntarily and are driven by benefits that can only be obtained within the community—the boundaries of which are outlined by the association membership (Knoke, 1990). Associations are full-fledged participants of an organizational field, since they both influence and are affected by its institutional dynamics (Furger, 1997; Galvin, 2002). The organizational literature has suggested that these so-called metaorganizations (Ahrne & Brunsson, 2005, 2008) perform a set of important functions that contribute to the theorization stage of institutional change (Greenwood et al., 2002). In the course of performing these functions, they may act as institutional mechanisms that coerce member organizations into enacting certain types of behavior that are valued by the industry or society (King & Lenox, 2000; Lenox, 2006; Lenox & Nash, 2003). For example, they can provide the foundations for the diffusion of institutionalized practices (Balla, 2001), the diffusion of new technological innovations (Swan & Newell, 1995), or an increase in organizational founding rates (Russo, 2001; Sine, Haveman, & Tolbert, 2005). By encouraging and monitoring socially desirable behaviors, associations can provide alternative solutions to the “tragedy of the commons” problems (Ingram & Inman, 1996, p. 635) and help resolve conflicts that may arise through resource sharing (Esparza et al., 2014). Typically, members of an association are among the first to adopt a behavior sanctioned by their collective-action organization (Delmas & Montes-Sancho, 2010). But, can associations also encourage their members to reach out beyond their traditional markets?

Market participants engage in repeated exchanges structured by an established set of rules, such as property rights, governance structures, rules of exchange, and conceptions of control, that is, cognitive perceptions of how markets work (Fligstein, 2001b). It is due to these stabilizing attributes that Fligstein (2001b) conceived of markets as a special category of organizational field. Different factor or product markets vary with respect to how well these rules are developed. While stable markets are characterized by industries that have moved beyond the point of the liability of newness and have achieved cognitive and sociopolitical legitimacy (Aldrich & Fiol, 1994; Stinchcombe, 1965), nascent markets lack established industry structures and display ambiguity (Santos & Eisenhardt, 2005, 2009). Likewise, actors embedded in organizational fields vary regarding their ability to contribute to institutional change. The agency of socially and politically skillful actors is likely to move nascent field markets toward the stability of institutional structures (Fligstein, 1997). Associations can mobilize their members to achieve certain goals by drawing on their political capacity, which is translated through their complex organizational structures (Knoke, 1990). The social and political skills of associations make them institutional entrepreneurs—prominent organizations that span several fields and realize an opportunity when they encounter conflicting institutional logics (Greenwood & Suddaby, 2006; Thornton & Ocasio, 1999).

Markets require coordination among actors to reduce the uncertainty over transactions. Moreover, actors need to see the value of a new offering, be confident in the other party’s reciprocity during transactions, and ensure economic returns (Beckert, 2009). At a market’s nascence, politically skillful associations can facilitate this coordination by channeling information and establishing networks. Enjoying higher visibility and having greater access to experts and communities of knowledge (Shah & Rivera, 2012), they foster cooperation among field actors by helping them collectively construct shared meanings and identities (Fligstein, 1997, 2001a; Navis & Glynn, 2010). Being embedded in their traditional markets, firms may not see opportunities in other fields. They require intermediary organizations that span fields and are able to jump-start institutional change within one field by allowing their members to perceive institutional opportunities in other environments (Dorado, 2005). If associations contribute to the creation of shared meaning, by helping their members perceive a new market as an opportunity, member organizations will be more likely to get involved in new activities compared with nonmembers. Recent empirical evidence has suggested that membership in multiple associations increases the entrepreneurial activity of organizations by giving them access to additional information and resources (Teckchandani, 2014). Thus, I hypothesize that a firm’s participation in several associations will increase its exposure to the influence of these metaorganizations and thus increase the likelihood of its involvement in alternative revenue-generating projects.

Hypothesis 1: Firms that are members of an association are more likely to participate in environmental projects.

Hypothesis 2: The more associations that firms are members of, the more likely the firms are to participate in alternative revenue-generating projects.

In line with the extant literature, I argue that one of the ways in which associations can spur their constituents to venture beyond the boundaries of their traditional marketplace is by creating a shared understanding of the value of new products or services. As follows from Lepak, Smith, and Taylor’s (2007) discussion, associations need to effectively communicate to their members that new markets will benefit consumers who adopt new services and products, members will diversify their revenue sources by limiting their reliance on traditional business models, and there will be an overall net benefit to society. Member firms will expect that their participation in new markets will translate into the creation of value compared with their involvement in traditional markets. Assuming that associations communicate the opportunities for obtaining value from environmental projects, membership in more associations should result in the participation in more projects bringing in additional revenues.

Hypothesis 3: Firms that are members of an association are more likely to derive revenues from environmental projects.

Hypothesis 4: The more associations that firms are members of, the more likely the firms are to derive revenues from environmental projects.

Moreover, the market-shared identity and systems of meaning that associations skillfully build must ensure a sufficient level of cooperation among field participants; this involves building trust (Beckert, 2009; Moellering, 2006; Smith, Carroll, & Ashford, 1995). Confidence in the good will (Ring & Van de Ven, 1994) of other market participants will facilitate the repeat nature of transactions required by the market. Associations must take advantage of their centrality in industry networks and established organizational structures to build up this confidence. Furthermore, the view that markets are embedded in the existing social structures of the organizational field suggests that social connections and knowledge prevent the other party from defaulting on their part of the deal (Beckert, 2009; Granovetter, 1985; Moellering, 2006). Since market transactions are more likely to happen when there is a low degree of uncertainty with respect to the malfeasant behavior of the other party (Beckert, 2009), I argue that membership in associations contributes to the development of the trust needed for actors to participate in economic exchanges in the realm of new markets. Moving beyond pure market motives, shellfishermen may choose to “jump on the bandwagon” and to follow their colleagues who feel responsible for their industry. As Spillman (2012) argued in her book examining American trade associations: “Business associations certainly produce and reproduce discourses and symbols of occupational identities as collective identities” (p. 149). Association members may be driven by the potential to learn new, effective practices for their business, their willingness to be a part of a community that cares for the environment, or their desire to prevent a possible regulatory response that would penalize the entire industry (King & Lenox, 2000; Lenox & Nash, 2003). Industry associations facilitate a dialogue among competing industry members, state agencies, and social movement organizations. Thus, association members will have more trust in each other and develop a sense of community when engaging in alternative revenue-generating activities.

Hypothesis 5: Association membership is positively related to higher levels of trust among shellfish farmers and wild harvesters.

Hypothesis 6: Membership in more associations is positively related to higher levels of trust among firms.

Hypothesis 7: Association membership is positively related to a firm’s increased sense of community.

Hypothesis 8: Membership in more associations is positively related to a firm’s increased sense of community.

Method

Sample and Data Collection

I conducted a survey of the shellfish industry on the East Coast of the United States from May to August 2011. The target population of the study was commercial shellfishermen, including both farmers and wild harvesters. I constructed the sample frame using several sources: the U.S. Department of Agriculture, the National Shellfish Association, the East Coast Growers Association, and websites of aquaculture organizations. The questionnaire contained 20 questions. It was pretested by 15 shellfish industry participants and was also discussed during several interviews with members of the community. Then, to reach the respondents, the questionnaire was sent out either by mail or electronically. The survey included a card thanking respondents for their participation and inviting them to participate in a raffle. One hundred and fifty-seven respondents filled out and returned the survey. The overall survey response rate was 10%, yielding 125 valid responses after excluding those with incomplete data or that were irrelevant to the study target population. As Table 1 shows, the respondents came from three coastal regions of the United States—Northeast, Mid-Atlantic, and Southeast. They included those engaging in shellfish aquaculture, wild harvesting, and processing. The majority of the respondents were male (87%) with a mean age between 45 and 54 years. The median annual revenue value was between $51,000 and $250,000, which fits the definition of a small and medium-sized farm enterprise (U.S. International Trade Commission, 2010).

Table 1.

Sample Characteristics.

Sample characteristics
Gender	Men	87%, n = 90
	Women	13%, n = 14
Median age		45 to 54 years
Median revenues		$51,000 to $250,000
Occupation	Aquaculture	28%, n = 35
	Wild harvesters	6%, n = 7
	Hybrids	66%, n = 81
Regions	Northeast (ME, MA, RI, CT)	34%, n = 36
	Mid-Atlantic (NY, NJ, VA)	30%, n = 31
	Southeast (NC, SC, LA, FL)	36%, n = 38

Measures

Participation in Environmental Projects

This measure indicated involvement in environmental projects, such as the restoration of shellfish habitats, environmental cleanup, and participation in research projects providing functional solutions to existing environmental problems, thus creating value for society and individual consumers (Lepak et al., 2007). This was a dichotomous variable that indicates participating and not participating.

Revenues From Environmental Projects

This dependent variable was based on the definition of value as a monetary amount transferred by one party to another for completed work (Lepak et al., 2007). The survey questionnaire included an item asking respondents to indicate the percentage of their total annual revenue deriving from environmental projects. Since most of the responses fell between 0% and 5% to 10%, I constructed a dummy variable to indicate whether a shellfisherman derived any value from environmental projects.

Trust

I used trust as a proxy for cooperation (Argyle, 1991). This measure was based on a seven-item Likert-type scale for a question asking if, based on previous experiences, shellfishermen thought that they could rely on organizations and people involved in environmental projects (Rempel, Holmes, & Zanna, 1985; Zaheer, McEvily, & Perrone, 1998). It correlated with four other trust-related questions as to whether shellfishermen would hesitate getting involved in environmental projects, whether they believed other participants to be trustworthy, and whether they thought that others could take advantage of them. Thus, I assumed that this measure would capture trust in terms of individuals’ confidence in other market participants (Ring & Van de Ven, 1994).

Sense of Community

Developing a sense of community among shellfishermen reflects the existence of shared systems of meanings and a common identity, which are important for cooperation (Fligstein, 1997, 2001a; Navis & Glynn, 2010). This measure was based on a seven-item Likert-type scale for a question asking if participating in environmental projects made shellfishermen feel that they were part of a group or community.

Association Membership

This variable represented the choice of shellfishermen to be a member of an association. The questionnaire asked if respondents were members of national, regional, or state shellfish associations. Their positive responses to at least one of these questions placed them into the category of association members for this dichotomous variable.

Number of Associations

This variable represented the total number of industry associations at the national, regional, and state levels in which shellfishermen were members.

Control Variables

I controlled for the size of the firm’s operations by including gross revenues and number of leases. This measure was preferable to using the number of employees since, according to interviewed experts, the majority of the operations on the East Coast are smaller family-owned businesses that may hire additional seasonal workers. I also included regional fixed effects to account for variations along the East Coast, dividing the area into Northeast, Mid-Atlantic, and Southeast regions. Other control variables included how long the firm had been in business, whether it did aquaculture or aquaculture plus wild harvesting, and whether operations had been affected by regulatory area closures.

Results

To test the hypotheses, I used R software (R Core Team, 2014) and its packages, including Zelig (Imai, King, & Lau, 2008, 2009) and ggplot2 (Wickham, 2009). Table 2 shows the means and standard deviations of and correlations between the key variables used in my analysis. I used logistic regression analysis to test the first four hypotheses, for which the dependent variables were dichotomous. I used ordinary least squares regression analyses for the other four hypotheses with seven-item Likert-type scale dependent variables. I calculated the variance inflation factor values to determine if multicollinearity existed in the data. Variance inflation factor values for all 16 models did not exceed 1.92, which is well below the cutoff of 10.0 that would indicate a problem with multicollinearity (Chatterjee & Price, 1991).

Table 2.

Descriptives and Correlations.

		n	M	SD	1	2	3	4	5	6	7	8	9	10	11	12	13
1	Participation in environmental projects	125	0.73	0.45
2	Revenues from environmental projects	110	0.45	0.50	.45***
3	Trust	107	4.50	1.89	.20*	−.03
4	Community	103	4.91	1.41	.20*	.20*	.18
5	Association membership	125	0.54	0.50	.23**	.24*	.28**	.07
6	Number of associations	125	0.96	1.10	.26**	.21*	.29**	.13	.81***
7	Number of leases	106	6.40	18.18	.14	.26**	.15	.12	−.10	−.07
8	Annual revenues	103	2.83	1.50	.19	.23*	−.02	.10	.09	.07	.13
9	Occupation	123	0.66	0.48	−.05	.16	−.07	−.02	−.18	−.18*	.18	.06
10	Time in industry	121	19.61	12.30	.13	.20*	.00	−.10	.16	.22*	.28**	.21*	.18
11	Affected by closures	108	0.45	0.50	.02	.03	−.03	.23*	−.12	−.07	−.18	.16	.08	.00
12	Northeast	105	0.34	0.48	.15	.20*	.10	.19	.27*	.25**	−.16	.1	−.17	.06	.07
13	Mid-Atlantic	105	0.30	0.46	−.10	−.07	−.10	−.23*	.07	.05	.33***	−.23*	−.07	.11	−.38***	−.47***
14	Southeast	105	0.36	0.48	−.06	−.14	.00	.03	−.33***	−.30**	−.15	.12	.23*	−.16	.29**	−.54***	.49***

p ≤ .05. **p ≤ .01. ***p ≤ .001.

Hypothesis 1 predicted that association membership would be positively related to a firm’s propensity to participate in environmental projects, while Hypothesis 2 predicted that if a firm was a member of more than one association, the firm would be more likely to participate in environmental projects. Figure 2 is a visual representation of the positive relationships between the independent variables of interest—association membership and number of associations—and the likelihood of firm participation in environmental projects. Table 3 shows the models testing the first two hypotheses. For each of the hypotheses, two models were run, one that included all controls without regional fixed effects and the other with regional fixed effects. Both of the hypotheses were supported, as the coefficients for association membership and number of associations in the models with fixed effects were significant, β = 1.77, p < .05 and β = 0.98, p < .01, respectively.

Figure 2.

Effect of association membership and number of associations on participation in environmental projects (not adjusted for covariates).

Table 3.

Logit Estimates for Participation in Environmental Projects.

	1	2	3	4
Intercept	−0.55	0.06	−0.38	0.41
	(0.84)	(1.08)	(0.81)	(1.02)
Association membership	1.32*	1.77**
Association membership	(0.54)	(0.57)
Number of associations			0.81*	0.98*
Number of associations			(0.32)	(0.38)
Annual revenues	0.21	0.09	0.20	0.08
	(0.23)	(0.23)	(0.23)	(0.23)
Occupation	0.07	−0.06	0.07	0.02
	(0.55)	(0.58)	(0.56)	(0.60)
Number of leases	0.03	0.05	0.02	0.05
	(0.07)	(0.08)	(0.07)	(0.08)
Time in industry	0.01	0.01	0.00	0.00
	(0.02)	(0.03)	(0.02)	(0.03)
Affected by closures	0.34	−0.00	0.29	−0.04
	(0.54)	(0.58)	(0.53)	(0.58)
Regional fixed effects		Yes		Yes
N	90	90	90	90
AIC	106.89	104.19	105.00	102.94
BIC	176.88	194.19	174.99	192.93
log L	−25.44	−16.10	−24.50	−15.47

Note. AIC = Akaike information criterion; BIC = Bayesian information criterion. Standard errors are in parentheses.

p ≤ .05. **p ≤ .01. ***p ≤ .001.

Figure 3 shows the positive relationships between association membership and the likelihood of deriving revenues from environmental projects without including covariates, as well as between the number of associations and revenues. Table 4 presents the results for Hypotheses 3 and 4 that predicted that association membership and a greater number of associations would be positively related to the increased likelihood of deriving revenues from environmental projects. Models 1 and 2 supported Hypothesis 3, with the second model including regional fixed effects. Models 3 and 4, which included the number of associations, showed support for Hypothesis 4. The coefficients for Models 2 and 4, which accounted for regional fixed effects, were β = 1.37, p < .05 and β = 0.41, p < .10, respectively.

Figure 3.

Effect of association membership and number of associations on revenues from the environmental projects (not adjusted for covariates).

Table 4.

Logit Estimates for Revenues from Environmental Projects.

	1	2	3	4
Intercept	−2.72**	−2.02*	−2.08**	−1.37
	(0.87)	(0.96)	(0.77)	(0.85)
Association membership	1.74**	1.37*
Association membership	(0.54)	(0.57)
Number of associations			0.47	0.41^†
Number of associations			(0.22)	(0.23)
Annual revenues	0.21	0.16	0.18	0.14
	(0.18)	(0.19)	(0.17)	(0.19)
Occupation	0.38	0.49	0.34	0.49
	(0.52)	(0.57)	(0.51)	(0.56)
Number of leases	0.02	0.04	0.03	0.05
	(0.04)	(0.05)	(0.04)	(0.05)
Time in industry	0.02	0.02	0.02	0.01
	(0.02)	(0.02)	(0.02)	(0.02)
Affected by closures	0.38	0.36	0.19	0.21
	(0.51)	(0.54)	(0.48)	(0.52)
Regional fixed effects		Yes		Yes
N	85	85	85	85
AIC	114.99	114.52	118.52	117.59
BIC	183.38	202.45	186.91	205.52
log L	−29.49	−21.26	−31.26	−22.79

Note. AIC = Akaike information criterion; BIC = Bayesian information criterion. Standard errors are in parentheses.

†

p ≤ .10. *p ≤ .05. **p ≤ .01. ***p ≤ .001.

Table 5 shows the results of the ordinary least squares regressions testing Hypotheses 5 and 6. The results showed support for the tested hypotheses, as the coefficients for both independent variables of interest were positive and significant, suggesting that association membership and membership in more associations are significant predictors of cooperation among organizations. The results of Models 1 and 2 supported Hypothesis 5 that predicted that association membership would be positively related to higher levels of trust among shellfishermen (β = 0.40, p < .01 for the model with regional fixed effects). In line with the prediction of Hypothesis 6, the independent variable for the number of associations in Models 3 and 4 was a positive, significant predictor of the level of trust among shellfishermen (β = 0.14, p < .05 in the model with regional fixed effects).

Table 5.

Ordinary Least Squares Estimates for Log of Trust.

	1	2	3	4
Intercept	1.16***	1.23***	1.27***	1.38***
	(0.20)	(0.23)	(0.19)	(0.21)
Association membership	0.33*	0.40*
Association membership	(0.13)	(0.14)
Number of associations			0.13*	0.14*
Number of associations			(0.06)	(0.06)
Annual revenues	0.03	0.00	0.03	0.00
	(0.04)	(0.05)	(0.04)	(0.05)
Occupation	−0.02	−0.09	−0.03	−0.08
	(0.13)	(0.14)	(0.14)	(0.14)
Number of leases	−0.01	−0.00	−0.01	−0.00
	(0.01)	(0.01)	(0.01)	(0.01)
Time in industry	−0.00	0.00	−0.00	−0.00
	(0.01)	(0.01)	(0.01)	(0.01)
Affected by closures	−0.05	−0.13	−0.08	−0.16
	(0.13)	(0.13)	(0.13)	(0.13)
Regional fixed effects		Yes		Yes
N	82	82	82	82
R ²	.10	.16	.08	.13

Note. Standard errors are in parentheses.

p ≤ .05. **p ≤ .01. ***p ≤ .001.

Finally, the models in Table 6 show support for Hypotheses 7 and 8, suggesting that there is a positive relationship between both association membership and number of associations and the feeling of a community among the shellfishermen. Association membership and number of associations were significant predictors of a feeling of community with β = 0.20, p < .05 and β = 0.09, p < .05 in the respective models including regional fixed effects.

Table 6.

Ordinary Least Squares Estimates for Log of Sense of Community.

	1	2	3	4
Intercept	1.35***	1.47***	1.40***	1.53***
	(0.14)	(0.16)	(0.13)	(0.15)
Association membership	0.20*	0.20*
	(0.09)	(0.10)
Number of associations			0.09*	0.09*
			(0.04)	(0.04)
Annual revenues	0.03	0.01	0.02	0.01
	(0.03)	(0.03)	(0.03)	(0.03)
Occupation	0.03	0.01	0.03	0.02
	(0.09)	(0.10)	(0.09)	(0.10)
Number of leases	−0.00	0.00	0.00	0.00
	(0.01)	(0.01)	(0.01)	(0.01)
Time in industry	−0.00	−0.00	−0.01	−0.00
	(0.00)	(0.00)	(0.00)	(0.00)
Affected by closures	0.12	0.09	0.10	0.08
	(0.09)	(0.09)	(0.09)	(0.09)
Regional fixed effects		Yes		Yes
N	79	79	79	79
R ²	.10	.15	.11	.15

Note. Standard errors are in parentheses.

p ≤ .05. **p ≤ .01. ***p ≤ .001.

Discussion

In this article, I have argued that associations matter for the creation of new markets for their constituents, and that there is a positive relationship between membership in associations and the involvement of firms in activities that extend beyond their traditional markets. The data analysis supported the prediction that membership in associations is related to participation in environmental projects; the more associations that firms are members of, the more likely the firms are to participate in environmental projects. The results showed that shellfishermen who were association members were 3.7 times more likely to participate in environmental projects. This number increased to 5.8 times when I accounted for the region in which they operated. Increasing a firm’s membership in associations by one made firms 2.2 times more likely to get involved in these new market activities, or 2.6 times when accounting for regional variations.

Furthermore, associations played a role in whether firms derived monetary value from their involvement in environmental projects. Association members were 3.9 and 4.4 times more likely to receive additional revenue from environmental projects compared with those who were not members. Becoming a member of one association translated to an increase of roughly 1.5 in the probability of deriving revenues from environmental projects. Finally, association membership mattered for building trust and a sense of community among shellfishermen. These aspects help foster cooperation, which is one of the key conditions for markets to function effectively (Beckert, 2009).

This study makes several contributions to the organizational literature. First, it contributes to our understanding of the role of associations in creating new market institutions. While I do not provide causal evidence of the link between association membership and participation in environmental projects, the results show that the presence of associations affect the building of the organizational field. The greater likelihood of association members being involved in activities beyond their traditional markets provides evidence of the relationship between the presence of industry structures, such as industry associations, and the emergence of new markets. Even though the shellfish industry has been using the same grow-harvest-sell business model for centuries, membership in shellfisheries associations is positively related to their constituents’ willingness to extend beyond their traditional markets. In light of this, I theorize that association membership is the factor that reduces the uncertainties related to undefined market boundaries and unclear product definitions (Santos & Eisenhardt, 2005, 2009), and enables transactions to be carried out. Furthermore, it appears that membership in associations can provide a medium through which member firms are able to identify opportunities in a field that would otherwise seem “opportunity opaque” (Dorado, 2005).

Second, this article seeks to improve our understanding of the institutional mechanisms through which associations influence the development of an organizational field. Markets, as fields, are affected by the structure of competition in traditional markets (Beckert, 2009; Giddens, 1979). I argue that the provision of additional value creation opportunities at different levels of analyses (Lepak et al., 2007; Mahoney, McGahan, & Pitelis, 2009; Pitelis, 2009) is one of the benefits that only members of associations are able to access, as outlined in the traditional definition of an association (Knoke, 1990). This article provides evidence that membership in associations is a significant predictor of firms engaging in activities that extend beyond their traditional markets and thus help realize value. I argue that the presence of associations in the field, and firms’ affiliation with them, is another determinant of potential value creation at the firm level that the organizational literature has not identified yet (see Pitelis, 2009).

Finally, this article provides support for the theoretical framework suggested by Beckert (2009), who argued that stable market structures emerge if the coordination problem is resolved. Support for the hypotheses suggests that shellfishermen are capable of realizing value, as discussed above. They are more likely to trust one another and share the same systems of meaning; this, in turn, reduces transaction costs and enables repetitive transactions (Williamson, 1998). The concept of socially constructed markets (Berger & Luckmann, 1966) implies that such markets require interactions among the field actors. The shellfish industry associations provide forums for discussion and interaction, creating “arenas of social interaction for the exchange of goods and services” (Beckert, 2010, p. 609).

A potentially fruitful avenue for future research on industry associations is to link them with the opportunity identification literature (Alvarez, Barney, & Young, 2010; Sarasvathy, Dew, Velamuri, & Venkataraman, 2010; Shane, 2012; Shane & Venkataraman, 2000). Do associations create the conditions for recognizing additional opportunities in new markets that set shellfishermen engaged in environmental projects apart from their competitors who pursue the traditional grow–harvest–sell models? One could argue that associations are those organizations that make their fields what Dorado (2005) calls “opportunity transparent” by affecting the constitution of rules and bargaining for better institutional outcomes for their members. Indeed, shellfish farmer Jim, mentioned at the beginning of this article, can obtain competitive information through his membership in an association and act on it, becoming one of the first entrants into a new market. This is consistent with findings by Delmas and Montes-Sancho (2010).

Jim can also see that the organization charging him dues is representing his interests by lobbying to change legislation and to make his sector more profitable compared with other shellfish sectors such as those harvesting crustaceans. In this way, an association member can minimize his or her costs spent on lobbying for these better outcomes by sharing the costs with other association members (Barnett, 2013). It can also be the case that entrepreneurial Jim and those like him self-selected to be members of an association. The shellfish industry provides an empirical context within which to explore questions from both a realist perspective that assumes that entrepreneurial opportunities are objective and a constructionist perspective that implies that an individual is capable of socially constructing opportunities for his or her own advancement (Alvarez et al., 2010).

The practical implications of this study include highlighting the important role played by collective action in an industry faced with great uncertainty as a result of its natural and regulatory environments. For coastal firms, being a member of an association that represents coastal businesses increases the likelihood of discovering new business models and opening up new channels for additional revenues. Shellfisheries operate in the coastal zones of the so-called marine–society interface. While many other industries have to make an extra effort to be sustainable, the shellfish industry is sustainable by definition. This article makes an empirical case for the sustainable value creation of the shellfish industry through the presence of collective-action organizations (Mahoney et al., 2009; Pitelis, 2009).

This study involved several limitations and opened up possible avenues for further research. First, it used cross-sectional data, which limited what could be claimed regarding new market creation over time. In light of this limitation, the investigation of new markets would benefit from a study with a longitudinal design. Alternatively, experimental or well-identified quasi-experimental evidence would help shed light on any causal relationships between a firm’s association membership and its participation in new markets. Another limitation was a response rate of 10%, which is lower than industry standard. When I sought to validate the measures and results in presurvey and postsurvey interviews, members of the shellfish industry explained that the low response rate was due to survey fatigue in the community.⁴

Conclusion

In this article, I have explored the relationship between association membership and a firm’s propensity to participate in new market activities. I used a unique data set from a survey of U.S. shellfishermen to empirically examine the relationship between membership in associations and participation in environmental projects such as coastal restoration, cleanup, and research. My results suggest that the presence of associations in an organizational field matters for the development of new market institutions. While shellfishermen have traditionally grown and harvested shellfish for human consumption, membership in associations increases the likelihood of being able to diversify into new markets. The results also indicate that the more associations a shellfish farmer or harvester is a member of, the greater his or her likelihood of participating in environmental projects and deriving revenues from them. Association membership is also positively related to trust and a sense of community among participants in environmental projects. This suggests that being a member of a collective-action organization is a significant predictor of sharing the same system of meaning, which is, as the organizational literature has argued, important for the formation of new fields. Thus, the findings of this article have implications for both organizational scholars and practitioners in highlighting the importance of associations in the development of new markets for their constituents.

Footnotes

Acknowledgements

When working on this article, I greatly benefited from the guidance of Silvia Dorado, Ken Smith, Douglas Creed, James Opaluch, Judith Swift, Carrie Byron, and Pete August. I appreciate valuable insights and assistance from Robert Rheault, Dave Beutel, Sandra Shumway, Perry Raso, and comments of Alicia Robb.

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: I gratefully acknowledge funding and support from the Ewing Marion Kauffman Foundation and the University of Rhode Island Coastal Institute IGERT Project.

Notes

Author Biography

Bogdan Prokopovych is a lecturer at the Isenberg School of Management, University of Massachusetts Amherst. His research draws on economic sociology and organizational theory, and his research interests include studying the contribution of organizations to the creation of markets for sustainable technologies and services. He holds a PhD from the University of Rhode Island and a master’s in public policy and management from the University of Pittsburgh.

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