In their recent paper “Institutions and axioms: an extension and update of service-dominant logic,” Stephen Vargo and Robert Lusch summarize key steps in the evolution of Service-Dominant Logic since their original formulation of S-DL appeared in 2004.
Within this one paper, Vargo and Lusch provide several perspectives on the evolutionary path of S-DL.
Along its evolutionary path, Service-Dominant logic has recognized and taken steps to address two deficiencies:
- An imprecision in delineation of the Foundational Premises (FPs) and specification of the Axioms of S-DL
- An absence of a clearly articulated specification of the mechanisms of (often massive-scale) co-ordination and co-operation involved in the co-creation of value through markets and, more broadly, in society.
To alleviate this limitation and facilitate a better understanding of co-operation (and co-ordination), an eleventh Foundational Premise (Fifth Axiom) is introduced, focusing on:
- the role of institutions and
- institutional arrangements
- in systems of value co-creation (aka service ecosystems)
While Vargo and Lusch have collaborated together and separately with many other researchers in the past decade, their tradition has been to come together (on their own) every two years to refine their specification of Service-Dominant Logic (S-DL):
Table 1. Bi-annual collaboration of Vargo-Lusch on Service-Dominant Logic (2004 – 2014).
Vargo and Lusch have represented the evolution of Service-Dominant Logic in terms of refinements of its Foundational Premises (FPs) and Axioms:
||The application of specialized skills and knowledge is the fundamental unit of exchange.
||Service is the fundamental basis of exchange
||No Change – AXIOM STATUS
||Indirect exchange masks the fundamental unit of exchange.
||Indirect exchange masks the fundamental basis of exchange.
||Goods are distribution mechanisms for service provision.
||Knowledge is the fundamental source of competitive advantage.
||Operant resources are the fundamental source of competitive advantage.
||Operant resources are the fundamental source of strategic benefit.
||All economies are service economies.
||The customer is always the co-producer.
||The customer is always a co-creator of value.
||Value is co-created by multiple actors, always including the beneficiary – AXIOM STATUS
||The enterprise can only make value propositions.
||The enterprise cannot deliver value, but only offer value propositions.
||Actors cannot deliver value but can participate in the creation and offering of value propositions.
||Service-centered view is customer oriented and relational.
||A service-centered view is inherently customer-oriented and relational.
||A service-centered view is inherently beneficiary–oriented and relational.
||All social and economic actors are resource integrators.
||No change – AXIOM STATUS
||Value is always uniquely and phenomenologically determined by the beneficiary.
||No change. – AXIOM STATUS
||Value co-creation is coordinated through actor-generated institutions and institutional arrangements. – AXIOM STATUS
Table 2. Development of the Foundational Premises of Service-Dominant Logic.
At a more general level of description, we would describe the evolution of Service-Dominant Logic turns on promoting three new classes of objects:
- service ecosystem
… and four dynamics of service:
- the role of co-operation (versus competition) in service provision
- the role of institutions in value co-creation
- the role of experience in service evaluation
- the role of value co-creation in service innovation
The Service-Dominant Logic of today imagines resource-integrating, reciprocal-service-providing actors co-create value through meaning-laden experiences in service ecosystems governed and evaluated through institutional arrangements.
The major components of this emerging narrative are presented in Figure 1.
Figure 1. The narrative and process of Service-Dominant Logic.
We’d now like to consider the innovative elements of this narrative, beginning with the three new classes of objects (Actor, Institution, and Service Ecosystem) in Service-Dominant Logic.
Abernathy, W. J., & Clark, K. (1985). Innovation: mapping the winds of creative destruction. Research Policy, 14(1), 3–22.
Akaka, M. A., Vargo, S. L., & Lusch, R. F. (2013). The complexity of context: a service ecosystems approach for international marketing. Journal of International Marketing, 21(4), 1–20.
Alderson, W. (1957). Marketing behavior and executive action. Homewood: Richard D. Irwin.
Alderson, W. (1965). Dynamic marketing behavior. Homewood: Richard D. Irwin.
Alderson, W., & Cox, R. (1948). Towards a theory of marketing. Journal of Marketing, 8(2), 137–152.
Araujo, L., & Spring, M. (2006). Services, products, and the institutional structure of production. Industrial Marketing Management, 35(7), 797–805.
Arndt, J. (1981). The political economy of marketing systems: reviving the institutional approach. Journal of Macromarketing, 1(2), 36–47.
Arnould, E. J. (2006). Service-dominant logic and consumer culture theory: natural allies in and emerging paradigm. Marketing Theory, 6(3), 293–298.
Arrow, K. J. (1987). Reflections on the essays. In G. Feiwel (Ed.), Arrow and the foundations of the theory of economic policy (pp. 727–34). NY: NYU Press.
Arthur, B. W. (2009). The nature of technology: What it is and how it evolves. New York: Free Press.
Arthur, B. W. (2013). Complexity economics: A different framework for economic thought. Santa Fe Institute Working Paper 2013-04-012. Santa Fe: Santa Fe Institute.
Arthur, B. W. (2014). Complexity and the economy. Oxford: Oxford University Press.
Battilana, J., & D’Aunno, T. (Eds.). (2009). Institutional work and the paradox of embedded agency. New York: Cambridge University Press.
Beinhocker, E. D. (2006). The origins of wealth: evolution, complexity, and the radical remaking of economics. Boston: Harvard Business School Press.
Beinhocker, E. D. (2010). Evolution as computation: Implications for economic theory and ontology. Santa Fe Working Paper 2010-12037. Santa Fe: Santa Fe Institute.
Bello, D. C., Lohtia, R., & Sangtani, V. (2004). An institutional analysis of supply chain innovations in global marketing channels. Industrial Marketing Management, 33(1), 57–64.
Bernstein, W. J. (2004). The birth of plenty: How the prosperity of the world was created. New York: McGraw-Hill.
Bettencourt, L., Lusch, R. F., & Vargo, S. L. (2014). A service lens on value creation: how marketing should enable strategic advantage. California Management Review, 57(1), 44–66.
Bill, J. A., & Hardgrave, R. L., Jr. (1981). Comparative politics: The Quest for theory. Washington, DC: Bell and Howell.
Bourdieu, P. (1977). Outline of a theory of practice. Cambridge: The Press Syndicate of the University of Cambridge.
Brodie, R. J., Glynn, M. S., & Little, V. (2006). The service brand and the service-dominant logic: missing fundamental premise or the need for stronger theory? Marketing Theory, 6(3), 363–379.
Brodie, R. J., Saren, M., & Pels, J. (2011). Theorizing about the service dominant logic: the bridging role of middle range theory. Marketing Theory, 11(March), 175–191.
Cannon, J. P., Achrol, R. S., & Gundlach, G. T. (2000). Contracts, norms, and plural form governance. Journal of the Academy of Marketing Science, 28(2), 180–194.
Carson, S. J., Devinney, T. M., Dowling, G. R., & John, G. (1999). Understanding institutional designs within marketing value systems. The Journal of Marketing, 63(Special Issue), 115–130.
Chandler, J., & Lusch, R. F. (2015). Service systems: a broadened framework and research agenda on value propositions, engagement and service experience. Journal of Service Research, 18(1), 6–22.
Chandler, J., & Vargo, S. L. (2011). Contextualization: network intersections, value-in-context, and the co-creation of markets. Marketing Theory, 11(1), 35–49.
Coase, R. H. (1937). The nature of the firm. Economica, 4(16), 386–405. Coase, R. H. (1972). Industrial organization: A proposal for research. V. Fuchs (ed.) in Policy Issues and Research Opportunities in Industrial Organization: National Bureau of Economic Research (pp. 59–73).
Commons, J. R. (1934). Institutional economics: its place in political economy. New York: Macmillan.
Davis, L. E., & North, D. C. (1971). Institutional change and American economic growth. Cambridge: Cambridge University Press.
DiMaggio, P. J. (1988). Interest and agency in institutional theory. In L. Zucker (Ed.), Institutional patterns and organizations: Culture and environment (pp. 3–21). Cambridge: Ballinger.
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160.
DiMaggio, P. J., & Powell, W. W. (Eds.). (1991). BIntroduction^. The New Institutionalism in Organizational Analysis (pp. 1–38). Chicago: University of Chicago Press.
Duddy, E. A., & Revzan, D. A. (1953). Marketing: An institutional approach. New York: McGraw-Hill.
Durkheim, E. (1912/2008). The elementary forms of the religious life . Oxford World’s Classics.
Edvardsson, B., Tronvol, B., & Gruber, T. (2011). Expanding understanding of service exchange and value co-creation: a social construction approach. Journal of the Academy of Marketing Science, 39(2), 327–39.
Friedland, R., & Alford, R. R. (1991). Bringing society back in: Symbols, practices and institutional contradictions. In P. DiMaggio & W. W. Powell (Eds.), The New Institutionalism in Organizational Analysis (pp. 232–263). Chicago: University of Chicago Press.
Giddens, A. (1984). The constitution of society. Berkeley: University of California Press.
Giesler, M. (2008). Conflict and compromise: drama in marketplace evolution. Journal of Consumer Research, 34(April), 739–753.
Granovetter, M. (1985). Economic action and social structure: the problem of embeddedness. American Journal of Sociology, 91(3), 481– 510.
Grewal, R., & Dharwadkar, R. (2002). The role of the institutional environment in marketing channels. The Journal of Marketing, 66(3), 82–97.
Gronroos, C. (2008). Service logic revisited: who creates value? And who co-creates? European Business Review, 20(40), 298–314.
Gronroos, C., & Voima, P. (2013). Critical service logic: making sense of value creation and co-creation. Journalofthe AcademyofMarketing Science, 41(2), 133–150.
Gundlach, G. T., & Achrol, R. S. (1993). Governance in exchange: contract law and its alternatives. Journal of Public Policy & Marketing, 12(2), 141–155.
Hakansson, H., Ford, D., Gadde, L. E., Snehota, I., & Waluszewski, A. (2009). Business in networks. Chichister: John Wiley and Sons.
Harrison, D., & Kjellberg, H. (2010). Segmenting a market in the making: Industrial market segmentation as construction. Industrial Marketing Management, 39(5), 784–792.
Hawley, A. H. (1968). Human ecology. In D. L. Sills (Ed.), International encyclopedia of the social sciences (pp. 328–337). New York: Macmillan.
Heide, J. B., & John, G. (1992). Do norms matter in marketing relationships? The Journal of Marketing, 56(2), 32–44.
Hinings, C., Tolbert, P. S., Greenwood, R., & Oliver, C. (2008). Organizational institutionalism and sociology: A reflection. The Sage handbook of organizational institutionalism (pp. 473–490).
Holland, J. (2014). Complexity: A very short introduction. Oxford: Oxford University Press.
Humphreys, A. (2010). Megamarketing: the creation of markets as a social process. Journal of Marketing, 74, 1–19.
Hunt, S. D. (1983). General theories and the fundamental explananda of marketing. Journal of Marketing, 47, 9–17.
Hunt, S. D. (2012). Toward the institutionalization of macromarketing. Journal of Macromarketing, 32(4), 404–411.
Kates, S. M. (2004). The dynamics of brand legitimacy: an interpretive study in the gay men’s community. Journal of Consumer Research, 31(2), 455–464.
Kjellberg, H., & Helgesson, C.-F. (2006). Multiple versions of markets: multiplicity and performativity in market practice. Industrial Marketing Management, 35(7), 839–855.
Kjellberg, H., & Helgesson, C.-F. (2007). On the nature of markets and their practices. Marketing Theory, 7(2), 137–162.
Koestler, A. (1973). The tree and the candle. In W. Gray & N. D. Rizzo (Eds.), Unity through Diversity, pt I (pp. 287–314). New York: Gordon and Breach Science Publishers.
Korkman, O., Storbacka, K., & Harald, B. (2010). Practices as markets: value co-creation in e- invoicing. Australasian Marketing Journal, 18(4), 236–247.
Latour, B. (2005). Reassembling the Social: An introduction to actornetwork-theory. Oxford: Oxford University Press.
Lawrence, T. B., & Suddaby, R. (Eds.). (2006). Institutions and institutional work. London: Sage.
Lawrence, T. B., Suddaby, R., & Leca, B. (2009). Introduction: Theorizing and studying institutional work. In T. B. Lawrence, R. Suddaby, & B. Leca (Eds.), Institutional work: Actors and agency in institutional studies of organizations (pp. 1–28). New York: Cambridge University Press.
Layton, R. A. (2011). Towards a theory of marketing systems. European Journal of Marketing, 45(1/2), 259–267.
Lewin, K. (1939). Field theory and experiment in social psychology. American Journal of Sociology, 44(6), 868–896.
Loasby, B. J. (2000). Market institutions and economic evolution. Journal of Evolutionary Economics, 10(3), 297–309.
Loasby, B. J. (2001). Knowledge, institutionsand evolution ineconomics. New York: Routledge.
Lusch, R. F., & Brown, J. R. (1996). Interdependency, contracting, and relational behavior in marketing channels. Journal of Marketing, 60, 19–38.
Lusch, R. F., & Nambisan, S. (2015). Service innovation: a servicedominant (s-d) logic perspective. Management Information Systems Quarterly, 39(1), 155–175.
Lusch, R. F., & Tay, N. (2004). Agent-based modeling: Gaining insight into firm and industry performance. In C. Moorman & D. R. Lehman (Eds.), Assessing marketing strategy performance (pp. 213–227). Cambridge: Marketing Science Institute.
Lusch, R. F., & Vargo, S. L. (2006). Service-dominant logic as a foundation for a general theory. In R. F. Lusch & S. L. Vargo (Eds.), The service-dominant logic of marketing: Dialog, debate, and directions (pp. 381–420). Armonk: ME Sharpe.
Lusch, R. F., & Vargo, S. L. (2014). Service-dominant logic: Premises, perspectives, possibilities. Cambridge: Cambridge University Press.
Lusch, R. F., & Webster, F. E. (2011). A stakeholder-unifying, cocreation philosophy for marketing. Journal of Macromarketing, 31(2), 129– 134.
Lusch, R. F., Vargo, S. L., & O’Brien, M. (2007). Competing through service: insights from service-dominant logic. Journal of Retailing, 83(1), 5–18.
Lusch, R. F., Vargo, S. L., & Tanniru, M. (2010). Service, value-networks, and learning. Journal of the Academy of Marketing Science, 38(1), 19–31.
Macneil, I. R. (1980). The new social contract: An inquiry into modern contractual relations. London: Yale University Press.
Maglio, P., Vargo, S. L., Caswell, N., & Spohrer, J. (2009). The service system is the basic abstraction of service science. Information Systems and e-Business Management, 7(4), 395–406.
McAlexander, J. H., Dufault, B. L., Martin, D. M., & Schouten, J. W. (2014). The marketization of religion: field, capital, and consumer identity. Journal of Consumer Research, 41(3), 858–875.
McColl-Kennedy, J. R., Vargo, S. L., Dagger, T. S., Sweeney, J. C., & van Kasteren, Y. (2012). Health care customer value co-creation practice styles. Journal of Service Research, 15(November), 370–89.
Menard, C. (1996). Markets as institutions versus organizations as markets? Disentangling some fundamental concepts. Journal of Economic Behavior and Organization, 28(2), 161–82.
Merriam Webster Online: An encyclopedia of the Britannica Co. (2015) http://www.merriam-webster.com/dictionary/interaction.
Merz, M., He, Y., & Vargo, S. L. (2009). The evolving brand logic: a service-dominant logic perspective. Journal of the Academy of Marketing Science, 37(3), 338–44.
Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: formal structure as myth and ceremony. American Journal of Sociology, 83(2), 340–363.
Mitchell, W. C. (1937). The backward art of spending money and other essays. New York: Augustus M. Kelley, Inc.
Mitchell, M. (2009). Complexity: A guided tour. New York: Oxford University Press.
Moeller, S. (2008). Customer integration – a key to an implementation perspective of service provision. Journal of Service Research, 11(November), 197–210.
Mokyr, J. (2002). The gifts of Athena: Historical origins of the knowledge economy. Princeton: Princeton University Press.
Nicolini, D. (2009). Zooming in and out: studying practices by switching theoretical lenses and trailing connections. Organization Studies, 30(12), 1391–1418.
North, D. C. (1990). Institutions, institutional change, and economic performance. Cambridge: Cambridge University Press.
Orlikowski, W. J. (2007). Sociomaterial practices: exploring technology at work. Organization Studies, 28(9), 1435–1448.
Ostrom, E. (1990). Governing the commons: The evolution of institutions of collective action. Cambridge: Cambridge University Press.
Ostrom, E. (2005). Understanding institutional diversity. Princeton: Princeton University Press.
Payne, A., Storbacka, K., & Frow, P. (2008). Managing the co-creation of value. Journal of the Academy of Marketing Science, 36(1), 83–96.
Payne, A., Storbacka, K., Frow, P., & Knox, S. (2009). Co-creating brands: diagnosing and designing the relationship experience. Journal of Business Research, 62(3), 379–389.
Peters, B. G. (2012). Institutional theory in political science: The new institutionalism. New York: Continuum International Publishing Group.
Polanyi, K. (1968). The economy as instituted process. In E. LeClair & H. Schneider (Eds.), Economic anthropology (p. 126). New York: Holt, Rinehart and Winston.
Ramaswamy, V., & Ozcan, K. (2014). The co-creation paradigm. Redwood City: Stanford University Press.
Rand, W., & Rust, R. T. (2011). Agent-based modeling in marketing: guidelines for rigor. International Journal of Reserch in Marketing, 28(3), 181–193.
Randall, W. S., Pohlen, T. L., & Hanna, J. B. (2010). Evolving a theory of performance based logistics using insights from service-dominant logic. Journal of Business Logistics, 31(2), 35–61.
Reckwitz, A. (2002). Toward a theory of social practices: a development in culturalist theorizing. European Journal of Social Theory, 5(2), 243–263.
Revzan, D. A. (1968). The holistic-institutional approach to marketing. In J. B. Kernan & M. S. Sommers (Eds.), Perspectives in marketing (pp. 97–136). New York: Appleton.
Rindfleisch, A., & Moorman, C. (2003). Interfirm cooperation and customer orientation. Journal of Marketing Research, 40(4), 421–436. Schumpeter, J. A. (1934, 1980). The theory of economic development. London: Oxford University Press.
Scott, W. R. (2001). Institutions and organizations. Thousand Oaks: Sage.
Scott, W. R. (2008). Institutions and organizations: Ideas and interests. Los Angeles: Sage.
Shaw, E. H., Brian Jones, D. G., & McLean, P. A. (2010). The early schools of marketing thought. In P. Maclaran, M. Saren, B. Stern, & M. Tadajewski (Eds.), The Sage handbook of marketing theory (pp. 27–41). Los Angeles: Sage.
Shaw, G., Bailey, A., & Williams, A. (2011). Aspects of service-dominant logic and its implications for tourism management: examples from the hotel industry. Tourism Management, 32(2), 207–214.
Sheth, J. N., & Parvatiyar, A. (1995). Relationship marketing and consumer markets: antecedents and consequences. Journal of Academy of Marketing Science, 23(4), 255–271.
Simon, H. A. (1945/1997). Administrative behavior: A study of decisionmaking processes in administrative organizations. New York: The Free Press.
Simon, H. A. (1957). A behavioral model of rational choice. in Models of man, social and rational: mathematical essays on rational human behavior in a social setting. New York: Wiley.
Simon, H. A. (1978). Rationality as process and as product of thought. The American Economic Review, 68(2), Papers and Proceedings of the Ninetieth Annual Meeting of The American Economic Association. 1–16.
Simon, H. A. (1996). The sciences of the artificial. Cambridge: The MIT Press.
Smith, A. (1980). The principles which lead and direct philosophical enquiries: Illustrated by the history of astronomy. In W. P. D. Wightman (Ed.), Essays on philosophical subjects (pp. 33–105). Oxford: Oxford University Press.
Spencer, H. (1910). The principles of sociology. London: Appleton.
Spohrer, J., & Maglio, P. P. (2008). Fundamentals of service science. Journal of the Academy of Marketing Science, 36(1), 18–20.
Spohrer, J., Maglio, P. P., Bailey, J., & Gruhl, D. (2007). Towards a science of service systems. Computer, 40(1), 71–77.
Stern, L. W., & Reve, T. (1980). Distribution channels as political economies: a framework for comparative analysis. Journal of Marketing, 44(Summer), 52–64.
Swedberg, R. (1991). Major traditions of economic sociology. Annual Review of Sociology, 17, 251–276.
Tay, N., & Lusch, R. F. (2005). A preliminary test of Hunt’s general theory of competition: using artificial adaptive agents to study complex and ill-defined environments. Journal of Business Research, 58(9), 1155–1168.
Tesfatsion, L. (2002). Agent-based computational economics: growing economies from the ground Up. Artificial Life, 8(1), 55–82.
Thornton, P. H., Ocasio, W., & Lounsbury, M. (2012). The institutional logics perspective: A new approach to culture, structure and process. Oxford: Oxford University Press.
Vargo, S. L. (2007). On a theory of markets and marketing: from positively normative to normatively positive. Australasian Marketing Journal, 15(1), 53–60.
Vargo, S. L. (2008). Customer integration and value creation: paradigmatic traps and perspectives. Journal of Service Research, 11(November), 211–215.
Vargo, S. L. (2009). Towards a transcending conceptualization of relationship: a service dominant logic perspective. Journal of Business and Industrial Marketing, 24(5), 373–78.
Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing, 68(January), 1–17.
Vargo, S. L., & Lusch, R. F. (2006). Service-Dominant Logic: What it is, what it is not, what it might be. In R. F. Lusch & S. L. Vargo (Eds.), The service-dominant logic of marketing: Dialog, debate, and directions (pp. 43–56). Armonk: ME Sharpe.
Vargo, S. L., & Lusch, R. F. (2008). Service-dominant logic: continuing the evolution. Journal of the Academy of Marketing Science, 36(1), 1–10.
Vargo, S. L., & Lusch, R. F. (2010). From repeat patronage to value cocreation in ecosystems: a transcending conceptualization of relationship. Journal of Business Market Management, 4(4), 169–79.
Vargo, S. L., & Lusch, R. F. (2011). It’s all b2b and beyond…: toward a systems perspective of the market. Industrial Marketing Management, 40(2), 181–187.
Vargo, S. L., & Morgan, F. W. (2005). Services in society and academic thought: an historical perspective. Journal of Macromarketing, 25(1), 42–53.
Vargo, S. L., Maglio, P. P., & Akaka, M. A. (2008). On value and value co-creation: a service systems and service logic perspective. European Management Journal, 26(3), 145–52.
Vargo, S. L., Wieland, H., & Akaka, M. A. (2015). Institutions in innovation: a service ecosystems perspective. Industrial Marketing Management, 44(1), 63–72.
Veblen, T. (1899/1934). The theory of the leisure class: an economic study of institutions. New York: The Modern Library.
Venkatesh, A., Penaloza, L., & Firat, A. (2006). The market as a sign system and the logic of the market. In R. F. Lusch & S. L. Vargo (Eds.), The service-dominant logic of marketing: Dialog, debate, and directions (pp. 251–265). Armonk: ME Sharpe.
von Mises, L. (2008/1949). Human action. The scholar’s edition. The Ludwig von Mises Institute, Alabama.
Weld, L. D. H. (1916). The marketing of farm products. New York: Macmillan.
Whitehead, A. N. (1911). An introduction to mathematics. Cambridge: Cambridge University Press.
Williamson, O. E. (1975). Markets and hierarchies: Analysis and antitrust implications. New York: Free Press.
Williamson, O. E. (1981). The modern corporation: origins, evolution, attributes. Journal of Economic Literature, 19(4), 1537–1568.
Williamson, O. E. (1985). The economic institutions of capitalism. New York: Free Press.
Williamson, O. E. (1988). The logic of economic organization. Journal of Law, Economics, and Organization, 4(1), 65–93.
Williamson, O. E. (1991). Comparative economic organization: the analysis of discrete structural alternatives. Administrative Science Quarterly, 36(2), 269–296.
Williamson, O. E. (2000). The new institutional economics: taking stock, looking ahead. Journal of Economic Literature, 38(3), 595–613.
Yan, J., Ye, K., Wang, H., & Hua, Z. (2010). Ontology of collaborative manufacturing: alignment of service-oriented framework with service-dominant logic. Expert Systems with Applications, 37(2), 2222–2231.
Yang, Z., Su, C., & Fam, K. S. (2012). Dealing with institutional distances in international marketing channels: governance strategies that engender legitimacy and efficiency. Journal of Marketing, 76(3), 41–55.