Rotman School of Management, University of Toronto, Canada

The inclusion illusion: Firms' investment strategies and their commitment to serve the poor

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Abstract

The favelas of Rio de Janeiro, Brazil, are the archetype of settings where institutions have failed. This paper examines how these failures influence e-commerce firms’ strategy regarding delivery prices and availability of the goods sold online. The paper uses a mixed-method approach, combining a regression discontinuity design (RDDs) with ethnographic techniques, to examine delivery prices charged by e-commerce firms immediately inside and outside the open boundaries of Brazilian favelas. Results show that, on average, firms charge favela consumers more than those residing outside favelas, creating an “inclusion illusion” of online markets. Heterogeneity also arises as some firms charge consumers within favelas significantly less than others. Firms that invest more in dynamic capabilities such as internal culture and reputation towards stakeholders are more inclusive of the poor. This paper seeks to contribute to research on inclusive innovation by highlighting how a firm’s strategy can moderate the impact of institutional failures.

Biography

Leandro "Leo" Pongeluppe is a Ph.D. Candidate in the Strategic Management Department at Rotman School of Management - University of Toronto. Leo's primary research interests are related to inclusive innovation and public innovation. Particularly, Leo is interested in understanding how organizations design and governance affect the achievement of social goals, such as poverty alleviation. Leo uses mixed-methods in his research, combining econometrics causal inference models and ethnographic techniques to analyze multi-faced problems related to socioeconomic development. Currently, Leo is performing research on Brazilian favelas as the main setting. Professionally, Leo co-founded and worked as a PMO at Insper Metricis, a research group dedicated to evaluating projects' socio-environmental impact. At Insper Metricis, Leo participated in the design of Brazil's first Social Impact Bond (SIB), in partnership with the São Paulo State Government. Leo also worked for about three years as an associate researcher at Accenture Institute for High Performance.