11257: Consumption by the Base of the Pyramid: The Influence of Resource (Dis)Advantages on Value Creation (session 25763)

Base of the pyramid (BoP) scholarship emphasizes the potential for enterprises to generate profits by enhancing the well-being of the impoverished, often by selling socially-beneficial products (SBPs). Yet, many such BoP enterprises have experienced mixed results. We argue that this may result from insufficient attention to how the BoP value SBPs and other products. Applying a human capital framing, we use a novel data set from rural India to better understand value creation from the perspective of the BoP. Measuring changes in well-being, we test competing hypothesis about how resource (dis)advantages influence value creation associated with SBP consumption. Our results show support for the logics of both cumulative advantage and diminishing marginal returns. We posit that these conflicting findings over the role of resource (dis)advantages in value creation can be explained by how the resource conferring (dis)advantage is acquired. These results contribute to a more fine-grained understanding of the influence of human capital on value creation and offer insights into better enterprise performance in impoverished contexts. The paper closes by exploring critical ethical issues for BoP enterprises to consider in evaluating value creation through SBP consumption, including changes in inequality within the BoP, the morality of selling products to impoverished individuals, and potential negative effects on these consumers.

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