Does digital creativity differ from non-digital creativity?


In order to answer the question of whether digital creativity differs from non-digital creativity we will explore the definition of the creative act as that of bringing together previously unassociated ideas from within or across domains (Koestler, 1981) and whether creativity is domain-specific (Baer, 1998) in order to understand how creativity in a digital context differs from the traditional. 

In exploring how digital media utilises ‘the double logic of remediation’ (Bolter & Grusin, 2000) we see how new media oscillates between immediacy and hypermediacy as it hides and reveals itself, and how it is digital media’s interactivity and multiplicity that results in it surpassing traditional media to become experience for participants.

And to consider how digital technology affects the production and consumption of new media we briefly discuss the foundational technologies and ‘proto-affordances’ (McMullan, 2020) that make new digital media fundamentally different from other forms of media.

The combination of this understanding of creativity in the digital context, modes of production and consumption for new media, and the underpinning technologies lead us to conclude that digital creativity is indeed different from a popular perception of non-digital creativity; different in origin, in format, in production, and in experience.

Defining creativity

In attempting to define creativity, Koestler speaks of conscious and unconscious processes which enact through the three forms of creative activity which he defines and have a basic pattern in common (1981). Describing that all creative activity falls into one or another of three categories: artistic originality, scientific discovery, and comic inspiration, or, more frequently, into a combination of them, we can consider creativity as a context-specific activity, that is to say that the way in which one is creative whilst making a scientific discovery differs from making a work of art. And in describing creative activity as having common patterns Koestler says, “The creative act consists in combining previously unrelated structures in such a way that you get more out of the emergent whole than you have put in” (1981). These definitions help us understand creativity as having categorically-specific and common characteristics.

General or specific creativity

How general or specific is creativity? Is it the same process for artistic creativity as it is for scientific discovery? The domain-specific view of creativity says that content matters, that no one is creative across all domains, that an artist has specific skills in visual arts that allows them to be creative in producing artworks, but wouldn’t be able to be creative in all domains. These domains are broadly defined as cognitive domains, for example mathematical, musical, and visual (Baer,1998). This raises the question of whether traditional arts and digital arts are fundamentally cognitively visual and so within the same domain, and so sharing the same creative processes. Or do we consider digital art to be a different domain to the traditional arts, perhaps less visual and more technical in cognitive processing, in which case we may conclude that digital creativity is within a different domain to the visual creativity that produces the traditional arts.

The computational bisociation of ideas

Creative activity does not create something out of nothing. It is an activity that, “combines, reshuffles, and relates already existing but hitherto separate ideas, facts, frames of perception, associative contexts. This act of cross-fertilization – or self-fertilization within a single brain – seems to be the essence of creativity. I have proposed for it the term bisociation.” (Koestler, 1981). The more unfamiliar and unconnected the joined ideas are, the more creative and original they appear (Koestler, 1981), which poses questions about collective creativity in the digital age. In new media artwork is it only the artist that conceived of the idea for the artwork who is being creative, or in the case of artwork that requires input from multiple people, are they all being creative? And if creativity in the digital age is the process of bisociation, then can computers be creative?

In considering the complex challenge of computational creativity, Dubitzky and Kötter (2012) utilise Koestler’s concept of bisociation to present a framework. They highlight a number of issues that require resolution in order for computational creativity to become a reality. The interoperability of the knowledge bases to allow ideas from one domain to be intersected with another, recognising usefulness and applicability of the idea, and deciding whether a new idea meets the definition of being creative, that is being new, surprising and valuable (Boden, 1994).

This attempt to discover how computers might be creative provides some insight into the complexities of human creativity in the realm of digital technologies. It highlights how the bisociation of ideas to lead to creative insight requires far more than simply joining two previously unconnected ideas together, the resulting creativity must be useful and new. As such, we can say that digital creativity must not only meet the criteria of traditional creativity but has additional criteria based on the limits of the technology being used.

How new media differs from traditional

If the digital creative act can be said to be different to the traditional act of creating something new, then how different can the outputs of those creative acts be? How different is new media from traditional media?

From the development of spoken language, to written language and the formalisation of an alphabet, the printing press and electronic media, to the world wide web, all were built on top of the previous media (McLuhan, 1964). The new media often fails to acknowledge the previous media (Bolter & Gromala, 2005) but arguably could not exist without earlier those versions. McLuhan’s assertions that the “content of any medium is always another medium” and “the “message” of any medium or technology is the change of scale or pace or pattern that it introduces into human affairs” (1964) helps us conceive of the ways in which new digital media differs from traditional media. It is not only the contents of the message of traditional media that become the message of new media, in the way that a story in a book is made into a film, it is also the traditional media itself that becomes the message of new media, such as characteristic notions of narrative and sequential story-telling that are taken from the medium of printed books and become raw materials of new media to be explored, critiqued, disrupted and challenged as the new medium evolves.

Means of comparing media

It is degrees of definition that separates hot and cool media. Hot media are high definition, that is containing lots of sensory data, whilst cool media are low-data, low-definition (McLuhan, 1964). Although McLuhan’s idea of hot and cold media may lack empirical basis (Douglas,1970) it provides a means by which we can compare one media with another. Cool media require higher involvement from the viewer, expecting them to fill in the gaps in their understanding whilst hot media is usually linear, sequential and logical requiring less of the viewer in order to understand the message. (McLuhan, 1964). Writing in the sixties, McLuhan did not have any examples of modern digital media to consider in his definitions but it is useful to consider both of McLuhan’s concepts, that of ‘the medium is the message’ and that of ‘hot and cool media’, together in order understand how new media builds on existing media and may change its nature in comparison to the existing media.

We can consider, as an example, the remediation of the moving image in how online videos took from cinema. Online videos on platforms such as YouTube maintain and reference many of the conventions established by earlier cinema including the rectangular format of the image and the synchronised image and sound. Remediating moving images changed video from hot media to cool, taking the immersive and single-sense experience that cinema provides and replacing it with a low-definition experience that asks of the viewer far more participation in order to gain any value from the experience. YouTube, as a cool media, provides viewers with the means to pause, skip, replay, choose another video; all mechanisms for increasing engagement that do not exist, and are not required, as part of the hot experience cinema provides. YouTube did not invent watching videos but it has accelerated and enlarged the scale (McLuhan, 1964) of the production and consumption of video, making cinema the message of its medium.

New media converges in the minds of the viewer

The idea of convergence offers a contrast with older notions of media spectatorship (Jenkins, 2006) and passive consumption, transforming those who experience the media into participants each at the centre of their own network of multiple media platforms. The experiencers of new media have no choice in this. Convergence occurs within the brains of every individual consumer (Jenkins, 2006) as they interact with media generated by each other and every kind of organisation. Social media, as a pervasive, widely used, and culturally relevant (Appel et al, 2020) means of propagating content in various forms to billions of people, offers an example of the difference convergence suggests occurs from consuming television. Social media offers a multitude of points-of-view leading to what Appel et al refer to as how “digitally enabled social interactivity is shaping culture itself” (2020) by removing the trusted authority of a single source of media. New media, utilising network effects and not presenting itself with singular coherent narrative as in traditional media forces different patterns of consumption.

How digital changed consumption of new media

Having critiqued the position that creativity differs depending on the cognitive domain and that technology creativity may exist within a different domain to the visual, we can consider the medium by which those creative outputs are engaged with to understand how digital media may differ from traditional media.

In traditional media such as painting, artists have adopted the mechanisms of perspective, natural light and shade and the removal of brush strokes from the painting in an attempt to achieve immediacy and cause the viewer to forget the presence of the medium (Bolter & Grusin, 2000). In expressing this cultural need to reflect our reality through the media we consume, media producers have adopted these mechanisms to allow the viewer to regard the medium as transparent. This transparency, whilst not intending to fool the viewer into believing that the medium they engage with is reality (Bolter & Grusin, 2000) has sought to express that reality in ways that enable interaction. Perhaps an artist’s expression of the reality and their emotional experience of the reality can be felt more deeply by a viewer where the interface does not seem to be a barrier.

Digital media requires and creates a different relationship with its viewer. It also intends to make itself disappear and so enable a direct “confrontation with the original” (Bolter & Gromala, 2005), but recognises that this can never be possible. Digital media is interactive and multiple in nature, which requires that it reveals the interface to the viewer. Hypermediacy is a reusing and refashioning of traditional and contemporary media to offer a more authentic experience (Bolter & Gromala, 2005). McLuhan’s point that the, “The business of art is no longer the communication of thoughts or feelings which are to be conceptually ordered, but a direct participation in an experience. The whole tendency of modern communication… is towards participation in a process, rather than apprehension of concepts.” (1951, p.73) expresses a recognition of the difference in intention between traditional and new media. Experience rather than expression is the aim of digital media. In participating, or converging as Jenkins would describe it (2006), the viewer becomes part of a digital artwork, fundamentally challenging conceptions of originality and creative ownership held as essential aspects of traditional art.

The oscillation of media

This oscillation between immediacy and hypermediacy, hiding the medium and revealing it, is what Bolter and Grusin refer to as the double logic of remediation (2000). It expects of the viewer a shifting between interacting with the media through a transparent interface and knowing that the interface is mediating that experience. Bolter and Gromala argue that “remediation is a defining characteristic of the new digital media” (2005) and as such guides us to consider how remediation takes place within a medium and between mediums, in often contradictory ways.

Stories, the mobile-device full-screen vertical video format introduced by Snapchat in 2012 and adopted by many other products, including Twitter, Spotify and LinkedIn since (Moriarty, 2017), is an example of the remediation of the portrait format from painting and an attempt by digital media to achieve immediacy by enabling viewers to use video in ways that are more natural to their use of the mobile device. Despite the initial barriers to adoption (Glove and Boots, 2012) vertical video has become mainstream and can be expected to shift towards hypermediacy, making viewers aware that their act of viewing is not reality. “If the ultimate purpose of media is indeed to transfer sense experiences from one person to another” (Bolter & Grusin, 2000), then vertical video will experience the oscillation of remediation as the technology that replaces it emerges with increased immediacy. 

New media attempts to surpass old media, to replace it with something that better meets the promise of immediacy (Bolter & Grusin, 2000). It attempts to create the belief that digital technologies have passed beyond mediation, that they have achieved such immediacy of experience that the interface no longer exists and the viewer is interacting directly with reality. In many respects new media is on a continuum with old media. All expressions of creativity are remediations of other mediums and digital expressions are no different (Bolter, & Gromala, 2005). But where new digital media deverges and differs is in its interactivity and multiplicity leading us to adopt a position that creativity expressed through digital media differs from creativity expressed in traditional media.

The foundational technologies of new media

McMullan goes even further, suggesting that digital media is not merely a continuation and remediation of older media but that it is based on different foundational technology and so is fundamentally different. This difference is explained through the concept of proto-affordances (McMullan, 2020) which define a technology’s relationship with a culture. The predominant foundational technology in play prior to the digital age was ‘electronic’ from which we see media that is instantaneous in nature and associated with technologies such as television. The proto-affordance of the foundational technologies of digital media is computability, that is, McMullan says, that all digital media has in common that it was produced by computer and as such is determinable by mathematical means. It could be considered counter-intuitive to speak of mathematics when discussing creativity but this only serves to further reinforce our earlier conclusion about the cognitive nature of digital creativity.

Artificial Intelligence has been used to create music since the 1990’s (Deahl, 2018). If any creative endeavour lends itself to being mathematically determinable, then music with its formalised language and relationships must be it. A wide range of methods have been successfully used in music composition including heuristics in evolutionary algorithms, neural networks, stochastic methods, generative models, agents, decision trees, declarative programming and grammatical representation (Lopez-Rincon, 2018) with results indistinguishable from that of human composers (Barbican, 2019). This remediation of music by software into data where production can be automated (Manovich, 2003) is indicative of the effect digital technology has and will continue to have on media production.

The most fundamental of digital technologies; the internet, has and stands to continue to have a profound effect on the remediation of traditional media. The internet combined with other modern technologies such as 3D printing and artificial intelligence has the potential to remediate all other mediums (McMullan, 2020) and generate entirely new, new media (Manovich, 2003). No other technology in the history of our culture has had that power.


Digital creativity differs from non-digital creativity. It differs in the nature of the creative act, in its definition of creativity, in its outputs as digital media, in how new media is experienced by its participants, and in the technology that underpins new media. 

Taking Koestler’s definition of the creative act as “combining previously unrelated structures in such a way that you get more out of the emergent whole than you have put in” (1981) and his notion of the bisociation of ideas across domains, we developed an understanding of creativity having common patterns and categorical specificites. Baer’s work on the domains of creativity (1998) builds on Koestler and provides insight into the creative act leading us to conclude that when digital creativity stems from a different cognitive domain to more traditional visual creativity then we can consider this a fundamental difference in the source and nature of the creativity, especially as it pertains to the production of new and digital media. 

McLuhan’s oft quoted, “the medium is the message” (1964) began our understanding of the difference between old media and new media, and how new media references what has been before but generates a change of scale or pace for that message. The nature of this change is particularly important for understanding how different digital media in the 21st century is from traditional media in previous centuries as the internet has enabled a speed of change that has been impossible in earlier decades. The ways in which we understand new media as different from old media continued with McLuhan’s definition of hot media as high definition whilst cool media requires more viewer participation (1964). Using this perspective we considered cinema as old media and online videos such as those on YouTube as cool media, showing that for the medium of online video the message of the moving image had undergone a change in scale and pace from how viewers experience cinema. Also, in appreciating the difference between new and old media we looked at the concept of convergence (Jenkins, 2006) which described how old media is consumed in a passive spectator mode whilst new digital media is more of an experience participated in by individual consumers at the centre of a network of media content. New digital media differs in these many aspects from traditional media.

Finally, in considering the effects that foundational digital technology (McMullan, 2020), artificial intelligence and the internet has on new media production we conclude, as McMullan (2020) and Manovich (2003) do, that new media is fundamentally different from traditional media. 

We can also put forward the opinion that digital creativity will continue to diverge from traditional creativity as technology becomes more embedded in more creative endeavours.


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Bolter, D.J. & Grisin, R. (2000). Remediation: Understanding new media. The MIT Press.

Deahl, D. (2018). How AI-Generated music is changing the way hits are made – The Future of Music, episode 2. The Verge.

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Lopez-Rincon, O., Starostenko, O.,  and Martín, G. A. (2018). Algoritmic music composition based on artificial intelligence: A survey, 2018 International Conference on Electronics, Communications and Computers. (CONIELECOMP), Cholula, 2018, pp. 187-193.

Glove and Boots. (2012). Vertical Video Syndrome. Retrieved 11/02/2021.

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Walker, E. (2020). 100 art-world Instagram accounts to follow right now — Artists. Retrieved 14/01/2021.

Analysis of the business model, pricing strategies, and digital product characteristics of Shopify


This analysis of the business model that underpins the success of Shopify, the ecommerce software-as-a-service business, seeks to show that core to the business model is the idea that success comes from helping their customers be successful by providing digital products that seek to solve the challenges and meet the needs of modern retail businesses selling on the web. All aspects of Shopify’s business model are designed to acquire and retain high quality small to medium retail businesses as customers who are serious about building successful ecommerce businesses, and supporting them to succeed. This strategic approach could be summed up with the phrase, ‘your success is our success’.

Background and history of the business

Shopify started life as a single ecommerce store selling snowboards, and was built on the new (in 2004) open source software framework called Ruby on Rails. With 78% of the internet running on open source software (Vaughan-Nichols, 2015), contributing to the development of Ruby on Rails software and its community helped support the Canadain tech start-up ecommerce software-as-a-service platform that became Shopify in 2006 to develop a platform that could grow over the coming decades. The business raised $7m in 2010 and $15m in 2011 in funding, and by 2017 Shopify was hosting “over 325,000 shops for individual sellers and internet giants like Google and Tesla” (Product Habits, 2017), and by 2019 had expanded to 1,000,000 businesses in approximately 175 countries (Shopify, 2019).

Analysis of the business model

The term ‘business model’ requires definition before an analysis can be undertaken. A business model can be described as “a conceptual tool containing a set of objects, concepts and their relationships with the objective to express the business logic of a specific firm. Therefore we must consider which concepts and relationships allow a simplified description and representation of what value is provided to customers, how this is done and with which financial consequences.” (Osterwalder et al, 2005). 

Understanding business models is particularly important for businesses that rely on technology to deliver value as how transaction cost economics (Williamson, 1989) and innovation are incorporated into the model will greatly impact its chances of success. Over time, the rate of innovation in any given technology falls (Abernathy & Utterback, 1978), and so technology becomes easier to use at scale so reducing the transaction costs, which increases margin, unless and until a competitor product steals market share through new innovation that better meets the customer needs. The objective of the business model of a technology company then, is to deliver maximum value to customers to increase revenue whilst reducing transaction costs to increase margin, and continually innovating to stave off competitors in order to maintain or increase market share. 

With this understanding of a business model we are able to use the business model framework (Rayna & Struikova, 2016) to analyse Shopify’s business model to understand if it meets the objectives above.

Value creation 

Core competencies

Shopify provides hosted ecommerce solutions to enable retailers to quickly and easily launch an online business and make that business a success. Developing and maintaining the software-as-a-service platform that enables its customers to set up and run online stores is Shopfy’s core competency.

Key resources

Shopify’s key resources include:

  • Web infrastructure
  • Ecommerce platform software
  • Payment provider
  • Point-of-sale technologies
  • Marketing
  • Fulfilment & logistics
  • Partner programme

The breadth of these resources extends beyond competitor ecommerce software providers which don’t also offer physical retail technologies and fulfilment services, making Shopify unique in the market.


Shopify is an incorporated public company with a board of directors responsible to its shareholders for increasing value over the long term (Shopify, 2018).

Complementary assets

Shopify’s complementary assets include marketing capabilities, strategic partnerships, brand awareness & market share, and investment & acquisition capabilities. Having the complementary assets to commercialise the technological innovation (ecommerce platform in Shopify’s case) is essential for the success of the business (Teece, 1986).

Value networks

Shopify understands the need for commercially successful partnerships and business relationships and places itself in a network with a multitude of other modern internet businesses, including Amazon, Facebook, Snapchat, Ebay, logistics and delivery firms. These indirect network externalities all increase the power of lock-in Shopify has over its customers (Arthur, 1989). 

Value proposition 

Product offering

Shopify competes in the business-to-business ecommerce technology market, with other hosted solution providers such as BigCommerce and Volusion. Shopify could be seen as competing with consumer ecommerce marketplaces such as Ebay and Amazon, however Shopify is clear in its market positioning for small to medium business and not consumers. Shopify is increasingly moving into the large business market (Shopify, 2014) to compete with enterprise ecommerce software providers such as Magento and Salesforce Commerce Cloud.

Service offering

Shopify offers a number of services in addition to its core product offering, including:

  • Capital – provides capital investment in customer’s businesses to enable the customer to purchase merchandise to sell.
  • Partners – supports an ecosystem of partners that provide services such as custom design and development, and are rewarded for referrals to Shopify.
  • Fulfilment – offers a logistics and delivery service to customers to enable them to fulfil orders placed on their Shopify store.

These supporting services fit the ‘your success is our success’ approach of Shopify’s strategy as the capital investment encourages customer businesses to prosper and so continue selling through Shopify, the partners help to maintain and recruit Shopify’s customers, and the fulfilment services contribute to a more complete offer.

Pricing model

Shopify utilises a ‘freemium and versioning’ price model. Potential customers are offered a 90 day trial period at no cost and then a choice of three levels of features at three corresponding prices (Shopify, 2020). The pricing tiers seek to communicate Shopify’s position in the market for small to medium businesses; more expensive than selling on Ebay (as an individual might) and less expensive than running a Magento website (as a large retail business might). It also communicates that Shopify only wants customers who are committed to building their own brand and developing their business over a longer term.

Value delivery

Distribution channels

As a software-as-a-service business Shopify distributes its products to its customers over the internet, via a browser. This meets the fourth characteristic of digital goods; being aspatial (Quah, 2003), and enables customers to have near instant access from anywhere in the world and allows Shopify to update it’s software quickly and regularly to meet the needs of its customers.

Value capture

Shopify captures value from its customers through its monthly subscription model, adding to the value provided to customers through investment in developing new products, features and services and through acquisition of companies that add to its portfolio of services. This investment in technology drives increasing returns for adoption as improved capabilities serve more customer needs and so “the tendency for that which is ahead to get farther ahead” (Arthur, 1996) results in an increase in the number of customers using Shopify.

Revenue model

Shopify’s revenue model for it’s ecommerce platform and associated services is a monthly subscription fee and additional transaction fees. This model has provided revenue growth of 6475% (Table 2) and profit growth of 4457% (Table 3) over seven years.

Analysis of the digital product

Public goods

The Shopify ecommerce platform is built on open source software called Ruby on Rails. Open source software is non-rivalrous and non-excludable, making it a public good in the economic sense. Once produced there are zero extra costs associated with allowing another person to use it (Coase, 1974) whether or not they contribute to its maintenance. 

Digital goods

In Shopify’s case, the additional programming that is done to utilise the open source software and packaged up in a way for customers to use defines the ecommerce platform as a digital good. Quah argues that excludability is not an intrinsically part of the economic nature of the digital good but instead follows from additional protective mechanisms (Quah, 2003). Shopify put barriers, both technological and legal, in place to prevent copying of the software in an attempt to make the digital good excludable (Whinston et al, 1997). 

In addition to being non-rivalrous, Shopify’s ecommerce platform exhibits the other four characteristics of digital goods. The ecommerce platform is infinitely expansible – it can be copied as a means to increase the number of users or to create backups, is discrete – it only exists as a whole and will have no value if broken down, is aspatial – does not physically exist, and is recombinant – can be combined with other digital goods to form new digital goods (Quah, 2003). All of these characteristics lead to Shopify’s core digital product to enable the realisation of the benefits of digital goods, including increasing returns and decreasing average cost.

Shopify’s software product does not utilise network effects, meaning the value users receive does not increase with the number of users (Katz & Shapiro, 1994), and does not create customer lock-in, however the business model utilises complementary assets (Teece, 1986) to create commercial gain from the digital product and external partnerships that do create customer lock-in through making it difficult for customers to move to other suppliers (Vandermerwe, 2003).

The Shopify business model and digital product offering is a system of interdependent activities (Zott & Amit, 2009) of public good (open source software), digital good (ecommerce platform), and supporting services.

Analysis of the pricing strategy

Shopify has adopted a ‘freemium and versioning’ pricing model for the subscription revenue from it’s ecommerce platform.

Whilst the majority of companies utilising the freemium pricing models for software allow users to use the product for free with the expectation that a percentage will convert to a paid version (Teece, 2010. Günzel-Jensen & Holm, 2020), Spotify fixes the length of the freemium offer to ninety days resulting in reducing the barrier to entry for digital goods where the value cannot be realised until experienced (Varian, 1998) whilst also driving those customers with a serious buying intention to purchase the paid versions within a predictable time frame. This ‘try before you buy’ approach enables Spotify to understand conversion rates and make financial modelling and cash flow predictions more reliable. 

The versioning aspect of Shopify’s pricing strategy enables the business to target multiple markets (small to medium, and large) with essentially the same product and certainly the same underlying infrastructure, codebase, developers, etc. The three price tiers of $29, $79, & $299 per month have different features and benefits associated with them, and as monthly recurring revenue give Shopify a level of predictability, and for its customers costs are not tied to the success of their business in the same way a cost-per-sale model (for example) would be. 

This ‘freemium and versioning’ pricing model fits the proposed strategic approach of Shopify recognising that the success of their business is dependent on the success of their customer’s business, and so avoiding a pricing strategy that appears to penalise or prevent the growth of businesses using the Shopify platform.

Alternative pricing strategies

There are a number of alternative pricing strategies Shopify could consider:


  • Description: Cost related to the number of services in use.
  • Benefits: Can increase revenue where services are either the cheapest, highest quality, or have few competitors.
  • Disbenefits: Could cause businesses to look to competitors for services such as email marketing and fulfilment thus reducing Shopify’s lock-in.
  • Example: Stripe payments.
  • Assessment: Not be a viable option for Shopify.


  • Description: Cost related to the number of users.
  • Benefits: Increases revenue as customer business grows and requires more users.
  • Disbenefits: Only fits products that require lots of users.
  • Example: Freshdesk customer service.
  • Assessment: Not a commercially successful option for Spotify.

Active users

  • Description: Cost is related to number of users active in a given month.
  • Benefits: Is a selling point for customers as they feel that charging is fair.
  • Disbenefits: Only fits products that require lots of users.
  • Example: Slack messaging
  • Assessment: Not a commercially successful option for Spotify.


  • Description: Cost is related to quantity breaks, e.g. value of transaction processed
  • Benefits: Revenue increases with higher revenue customers.
  • Disbenefits: Makes forecasting and financial modelling difficult.
  • Example: PayPal
  • Assessment: Could potentially be successful for Shopify although favours large business customers rather than small to medium sized businesses that process lower value transactions.


  • Description: Cost is variable and related to demand.
  • Benefits: Enables revenue to be maximised depending on demand.
  • Disbenefits: Harder to be transparent with customers and maintain relationships.
  • Example:
  • Assessment: Not a commercially successful option for Spotify.

Two-Part Tariff

  • Description: Cost is lump sum and per unit.
  • Benefits: Decouples the price charged for digital goods from processing costs, enabling increases in one without affecting the other.
  • Disbenefits: Can result in uncertainty for customers and in forecasting.
  • Example: Credit cards
  • Assessment: It could be argued that Shopify uses this model as there is a fixed cost for the platform and a per unit cost for processing transactions, but equally these could be viewed as different charges for different products and services.

Shopify could perhaps adopt an alternative pricing strategy to increase revenue but a cohesive business model is one where there are “business design choices that reinforce one another” (Osterwalder, 2005) and it seems clear that Shopify’s current pricing strategy supports the wider business strategy and business model.


Given Shopify’s strategy of providing complete products and services that support retailers it is difficult to uncover any aspect of ecommerce that Shopify hasn’t already provided services for. Below are some suggestions of how Shopify could expand their offer whilst remaining true to their ‘what’s good for our customers is good for us’ approach.

Sourcing & procurement

Provide buying and merchandising services that locate suppliers and negotiate on costs on behalf of Shopify’s customers to enable them to expand their product range.

Further expansion into the enterprise market

Integrate with large enterprise ERP systems such as Microsoft Dynamics AX and Power BI, Oracle and IBM systems.

Consumer services

Move into the consumer market and leverage existing infrastructure such as Shopify Shipping to enable individuals to send packages (that they may have sold on Ebay, for example), and personal website and blog builders to compete with WordPress, Medium, Wix, SquareSpace, etc.

Partnering with adjacent business services

Support merchants to run their business by partnering with adjacent service providers such as accounting and tax returns, human resources management, etc. all part of Shopify’s strategy to help its customers run successful businesses.


Shopify’s business model  utilises the public good nature of open source software, builds digital goods that leverage the technologies of increasing returns and decreasing average cost, forms strategic partnerships that achieve customer lock-in, and provides additional services that offer the complete solution for businesses selling online. These elements achieve an effective business model made up of “business design choices that reinforce one another” (Osterwalder, 2005). 

Based on our agreed definition and objective of a business model, we can assert that Shopify has a successful business model. It is able to deliver maximum value to customers and collect on that value as revenue, seen by the increase in annual revenue between 2012 and 2019. whilst developing technology that reduces transaction costs to increase margin, and continually innovating with new services to stave off competitors in order to increase market share. 


Annual revenue

Table 2 – Source:

Annual Profits

Table 3 – Source:

Shopify plans & features

Basic ShopifyAll the basics for starting a new businessShopifyEverything you need for a growing businessAdvanced ShopifyAdvanced features for scaling your business
Monthly price$29 /mo$79 /mo$299 /mo
Online StoreIncludes ecommerce website and blog.YesYesYes
Unlimited productsYesYesYes
Staff accountsStaff members with access to the Shopify admin and Shopify POS.2515
24/7 supportYesYesYes
Sales channelsSell on online marketplaces and social media. Channel availability varies by country.YesYesYes
LocationsAssign inventory to retail stores, warehouses, pop-ups, or wherever you store products.up to 4up to 5up to 8
Manual order creationYesYesYes
Discount codesYesYesYes
Free SSL certificateYesYesYes
Abandoned cart recoveryYesYesYes
Gift cardsYesYesYes
Professional reportsNoYesYes
Advanced report builderNoNoYes
Third-party calculated shipping ratesShow calculated rates with your own account or third-party apps at checkout.NoNoYes
Fraud analysisYesYesYes
Online credit card rates2.2% + 20p1.9% + 20p1.6% + 20p
In-person credit card rates1.7% + 0p1.6% + 0p1.5% + 0p
Additional fees using all payment providers other than Shopify Payments2.0%1.0%0.5%
Table 4 – Source: Shopify website

Shopify products and services

Through development or acquisition:

  • Shopify – ecommerce platform for small and medium businesses.
  • Shopify Capital – financial loans to customers.
  • Shopify Payments – online payment processing.
  • Domain name registration and hosting – website services.
  • Business name and logo generators – branding assets.
  • Buy button – enabling non-Shopify websites to embed Shopify functionality.
  • Select Start Studios – mobile software developer.
  • Jet Cooper – design studio.
  • Shopify App Store – API platform for third party developers.
  • Build-A-Business competition – encourage entrepreneurship. 
  • Shopify Plus – ecommerce platform for large businesses with access to additional features and support.
  • Boltmade – Product design.
  • Frenzy – mobile app for flash sales.
  • Tiny Hearts – mobile products research and development.
  • Amazon integration – allow Shopify merchants to sell on Amazon marketplace.
  • Point of sale systems – a Bluetooth enabled debit and credit card reader for physical retail purchases.
  • Oberlo  – connects Shopify merchants with drop-ship suppliers.
  • Shopify Compass – Entrepreneurship guidance and learning.
  • Shopify Studios – full-service television and film content and production house.
  • Snapchat integration – manage Snapchat Story ads.
  • Facebook Messenger integration – customer communication.
  • Shopify Chat – native chat function allowing merchants to have real-time conversations with customers.
  • Handshake – business-to-business e-commerce platform for wholesale goods.
  • Shopify Fulfillment Network – shipping logistics for merchants.
  • 6 River Systems – fulfillment solutions.
  • Shopify Email – native email marketing tool.
  • Shop – personal shopping assistant app.


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Shopify. 2019. Now Powering Over 1 Million Merchants, Shopify Debuts Global Economic Impact Report. Shopify press release.

Osterwalder, A., Pigneur, Y., and Tucci, C. L. 2005. Clarifying business models: Origins, present, and future of the concept. Communications of the association for Information Systems, 16(1):1–25.

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Shopify. 2014. About Shopify Plus.

Shopify. 2020.

Danny Quah. 2003. Digital Goods and the New Economy. Centre for Economic Performance London School of Economics and Political Science.

W. Brian Arthur. 1996. Increasing Returns and the Two Worlds of Business. Harvard Business Review, July-August, 1996.

Shopify Gross Profits & Revenue. 2019.

R. H. Coase. 1974. The Lighthouse in Economics. Journal of Law and Economics, Vol. 17, No. 2 (Oct., 1974), 357-376. The University of Chicago Press.

Andrew B. Whinston, Dale O. Stahl, Soon-Yong Choi. 1997. The Economics of Electronic Commerce. Macmillan Technical Pub

Katz, M. L. & Shapiro, C. 1994. Systems Competition and Network Effects. Journal of Economic Perspectives. Vol. 8, No. 2, Spring 1994. (pp. 93-115).

Vandermerwe, Sandra. 2003. Getting Customer Lock-on Through Innovation in Services, in Service Innovation: Organizational Responses to Technological Opportunities & Market Imperatives. Ed. Joseph Tidd, Frank Hull. Imperial College Press, 2003.

Christoph Zott & Raphael Amit. 2003. Designing your future business model: An activity system perspective.

David J.Teece. 2010. Business Models, Business Strategy and Innovation. Long Range Planning. Volume 43, Issues 2–3, April–June 2010, Pages 172-194.

Franziska Günzel-Jensen and Anna B. Holm. 2020. Freemium business models as the foundation for growing an e-business venture: a multiple case study of industry leaders. Journal of Entrepreneurship, Management and Innovation.

Varian, Hal R. 1998 (revised: October 16, 1998). Markets for Information Goods. University of California, Berkeley.

Organisations implement CSR practices and make ethical decisions primarily to increase shareholder profit as opposed to wider social considerations


Business Ethics – ‘the study of business situations, activities, and decisions where issues of right and wrong are addressed’ (Crane and Matten, 2016).

Corporate Governance – ‘the direction, management and control of an organisation’ (Cadbury, 1992).

Corporate Social Responsibility (CSR) – ‘a concept whereby companies integrate social and environmental concerns in their business operations and in the interaction with their stakeholders on a voluntary basis’ (European Commission, 2011).

Legitimacy Theory – ‘a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions’ (Suchman, 1995).

Shareholder – ‘a person who owns shares in a company and therefore gets part of the company’s profits and the right to vote on how the company is controlled’ (Cambridge dictionary).

Social Contract – a ‘moral and civil’ (Boucher & Kelly, 1994), formal and informal, tacit and explicit agreement, ‘grounded to mutual consent’ (Boucher & Kelly, 1994), by individuals, organisations and the state, under which ‘people can be expected to keep their promises and cooperate with one another (Hobbes)’, and accept authority, to constrain their behaviour, with the expectation that others will be equally compliant, at risk of sanction, ostracization, and other consequences.


The position taken in this essay is that organisations do implement CSR practices and make ethical decisions primarily to increase shareholder profit.

An understanding of the social contract between society and business helps us frame the question of whether organisations implement corporate social responsibility practices and make ethical decisions due to wider social considerations or primarily to increase shareholder profit. We consider liberal market economies and the sociological perspective on how society creates the environment for business to operate, and how business contributes to society, starting with the purpose being solely to generate profit and then through how notions of corporate social responsibility have changed over time and how the distinct boundaries between business and society were challenged to form the permeable boundaries we see today. We look at some examples of business not adhering to the social contract and society’s response through regulation, and how the internal control mechanism of corporate governance changed over time and is becoming a less reliable means of driving ethical business decisions in the twenty first century. Consideration is given to the false dichotomy of CSR or profit and how both can be aspects of a strategy that leverages CSR for competitive advantage to increase profits for shareholders.

Society’s role in providing the right environment for business

Society sets the environment for businesses to operate in through establishing laws and regulations and by forming the social contract between society (which for the purposes of this essay includes the Public Sector and Welfare State) and business (a catchall term to describe all types of commercial organisations owned by individuals).

Hall and Soskice’s concept of ‘liberal market economies’ (Hall & Soskice, 2001), which are prevalent in countries such as the UK, US and Australia, describes how the coordination of the relationship between society and business (or “economic actors and institutions of a country” in their words) relies on market forces. Examples of these market forces include society assuming responsibility for creating a supply of skilled employees by providing vocational training, and business establishing a demand for commitment from workers whilst supplying low levels of trust between the employer and employee (Blyton & Turnbull, 2004).

The sociological perspective asserts that there is “a great deal of agreement that markets are social structures characterized by extensive social relationships between firms, workers, suppliers, customers, and governments” in which “repeated exchanges occur between buyers and sellers under a set of formal and informal rules governing relations” (Fligstein & Dauter, 2006).

It is in this environment of formal and informal rules, with a multitude of supply and demand relationships between a diverse and broad range of actors, that the social contract between society and business is formed. If the environment created by society is too hard on business, through harsh regulation, or too soft on citizens, through overly-lenient social security provision, then the social contract that exists between society and business fails.

Business’ role in contributing to society

The social contract framing allows us to consider how corporate social responsibility changes over time as the view of business as having defined boundaries separate from society shifts to a view of business as having permeable boundaries that interact with society in a variety of ways. This shift did not occur in a linear fashion, and as far back as the 1800’s with Cadbury (Idowu, 2011) there are examples of businesses taking on responsibilities in society, but we can consider the interplay of different ideas about the social contract that exists between society and business as the framing the change of opinion about CSR.

People-focused CSR in the sixties

In 1962 Friedman said “there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” Since then, this quote, and Friedman’s opinions, have been a guiding principle for business that focused on returning the maximum profit for its shareholders at the cost of any wider social considerations.

It underpins the view of shareholders as self-interested individuals who “adopt constraints on their behaviour in order to maximise benefits” (Boucher & Kelly, 1994). As owners of the business the shareholders, accepting of Locke’s premise to permit “individuals to appropriate, and exercise control rights over, things in the world” applying to the assets of the business, including its workforce, exercise the unequal power balance between themselves and the worker (often through managers), to command work to be performed that returns the greatest value to themselves.

The view that business focused purely on maximising their profits expressed and reinforced the clearly defined boundaries between business and society. This is a social contract where business accepts very little responsibility towards society, and regarding workers as assets, might see no value in treating workers in ways that society might regard as fair. As society considers this ill-treatment a breach of the social contract it looks to redress the balance through regulation such as the ‘Contracts of Employment Act 1963’ which required companies to give reasonable notice before dismissal, and through an increase in the expectations society has on business to take into account their human resources as something to be looked after (Frederick, 1960).

Formal CSR in the seventies

Introduced in the seventies, Sethi’s framework for analysing corporate social responsibility formalises a means of comparing CSR within a business in three specific stages: social obligation, or response to market or legal constraints; social responsibility, or congruence with current social norms and values; and social responsiveness, or anticipation of social change and problems, with development of appropriate policies to meet these needs (Sethi, 1975). Sethi splits the social norms aspects of the social contract between business and society from the market and legal constraints allowing business to understand their corporate social responsibility in the context of their industry and place in society, giving them the means to assess whether they are complying with the laws and regulations that apply to them, adhering to the expectations from the areas of society that are meaningful to them.

This formalised approach to matching CSR practices and activities to the norms, values and expectations of society helps us begin to regard CSR as a response to changes in the social environment in which businesses are operating.

Cynical CSR in the eighties

The eighties brings cynicism to CSR. The political economic thinking at the time was that “the state should create and protect private property rights (privatisation), encourage free trade and free markets (deregulation and liberalisation) and ensure that freely negotiated contracts are enforced (rule of law), but should not do much more.” (Pillay, 2015). This rational market approach focuses on generating increased profits for shareholders, and it is against this backdrop that CSR is considered as having more of a public relations purpose than contributing to wider social considerations, which is more effective when a company has a longer history of CSR activities (Vanhamme & Grobben, (2009).

A number of scandals and tragedies occurred throughout the eighties that drove a need for business to have more public CSR programmes. The Piper Alpha disaster in July 1988 in which 167 people lost their lives as a result of inadequate safety procedures (Cullen, 1990) demonstrates how business breaches the social contract to keep workers safe by pursuing profits instead.

Inclusive CSR in the nineties

The nineties sees the Pyramid of CSR (Carroll, 1991) attempting to pull together the different views of the relationship between business and society into a single picture. The pyramid says that business has a responsibility to society to be profitable (removing the duality and adversarial nature of the profit vs. wider social concerns discussion), and then builds on that with legal responsibilities, and then ethical and philanthropic responsibilities on top.

Social contract changes over time

Looking back over four decades we can see a shift in the social contract from one of clearly defined boundaries to one of society having higher expectations and business becoming more involved in social concerns, with CSR and ethical decision making in business becoming a means for business to demonstrate how it attempts to meet the expectations of the social contract.

Business and society succeed together

The change in the nature of the social contract is driven by needs on both sides. CSR, as an expression of business trying to meet the expectations of society, has gone from a focus exclusively on people to also including concerns for the environment, to having a model that includes making profit and philanthropic activities together. As that change has happened, demonstrating how business is adhering to the social contract has become more complex.

Legitimacy theory offers business a means to show society that it is upholding it’s part of the bargain. It “is a mechanism that supports organisations in implementing and developing voluntary social and environmental disclosures in order to fulfil their social contract” (Burlea & Popa, 2013). Those disclosures range from demonstrating compliance with laws, regulations and standards, implementing corporate governance that supports ethical decision making. The forms of CSR have expanded and developed as the boundaries between business and society have become more permeable.

In looking for evidence that the success of business and the success of society are closely linked, we could consider  ‘life expectancy’ as an indicator of how society has progressed. In the UK specifically, life expectancy has risen 15% from 70.9 years in 1960 to 81.8 years in 2015 (Riley, 2005, Clio Infra, 2015, & UN Population Division 2019). Over the same period of time GDP increased 187% from £10,436 to £29,985 (Broadberry, et al., 2015 via Bank of England, 2017). Although not robustly causal, the increase in both a measure of how successful society is being in increasing life expectancy and how successful business has been in increasing GDP could be taken as an indicator of the obvious; that the success of both society and business are inextricably linked.

Change in society and business affects the social contract

The twenty first century sees repeated breaches and re-establishment of the social contract and result in both society and business trying to understand the change, and respond to it. In the case of business, how to utilise the new technologies whilst contending with the struggle to respond to the newly raised expectations, and in the case of society, how and when to regulate for these new ways of doing business. Some understanding of the push and pull of social contract negotiations is necessary for framing contemporary CSR as a means for business to demonstrate its attempt to meet the expectations of society.

Dot-com business in the early 2000’s

The dot-com era, from approximately 1994 to 2000’s saw a multitude of early internet-enabled businesses spring up and drive considerable investment causing the Nasdaq index to rise above 5000. Then, the crash saw the Nasdaq fall to just over 1000 in October in 2002. The business models, or lack of, has been suggested as a contributing factor to the dramatic failure of so many internet businesses at that time. Given that “business models play a complex range of roles and that they can even become products in their own right, often creating or transforming markets” (Hawkins, 2004) it’s useful to focus on the business model as the means by which new business has the most effect on society.

In the accepted trend of capitalism, we can accept the dot-com bubble bursting as a bust with a boom to follow in the form of internet businesses with more robust business models that utilise technology platforms to connect crowdsourced supply and demand for services. Businesses such as Uber and AirBnB provide platforms to connect those who have something to offer with those who are looking for those things.

This disruption of the usual supply and demand business model in which the business would be either providing the supply or creating the demand, these new businesses simply act as enablers for others to establish supply and demand relationships. In the case of Uber in London in 2018, Transport for London did not agree that Uber could separate itself from the responsibilities of an employer, finding them “not a fit and proper operator” and refusing to renew their license to operate until TFL had “developed a future regulatory position” (Ram, 2018). So, “ changing the way that people do business, … they created unique regulatory challenges…” (Harris, 2017) that needed to be responded to by society. These new ‘platform-as-employer’ (Prassl & Risak, 2016) businesses were breaking the social contract and triggering a response from society.

Regulating new business models

Society’s response to the new platform-as-employers business that didn’t fit the norms of how business operates was to introduce regulation. In July 2019 the European Commission introduced legislation to tackle unfair and harmful practices that affect business users of online intermediaries and search engines (European Commission, 2019), and in a blog post post about the future of ways of working the Director General of DG Connect at the European Commission said, “We need to accept that platform work is here to stay and put the right legal framework in place to make sure that workers taking advantage of its flexibility are not in turn taken advantage of by operators exploiting loopholes in labour laws from another era.” (Viola, 2019).

The idea that regulation should be the dominant means of controlling these new business models is perhaps rooted in Keynesian economics that viewed markets as not inherently self-correcting and requiring government to play a role through introducing regulation (Keynes, 1973). However, given that these businesses are technology driven it seems more appropriate to consider them from the perspective of network theories of globalization and how it is the technology that drives the change in business model. Castells’ conclusion that “Networks constitute the new social morphology of our societies, and the diffusion of network logic substantially modifies the operation and outcomes in processes of production, experience, power and culture… the new technology paradigm provides the material basis for its pervasive expansion throughout the entire social structure.” (Castells, 1996) bring into question whether regulation is the right way for society to re-establish the social contract in the twenty-first century.

Corporate governance in platform business models

Corporate governance offers another means for society to exert some influence over business and for business to demonstrate its position on the social contract. Much of the discussion around business ethics is centred on corporate governance (Crane & Matten, 2016) and the ownership versus control power relationships between shareholders and managers of the firm.

Prior to the twentieth century the governance of companies most usually followed the owner-manager pattern (Crane and Matten, 2016) where the founder of the company managed it directly. In the twentieth century corporate governance changed to became one of separation between shareholder as owner and manager as controller. This separation is important in understanding how corporate governance is used as a mechanism for enabling business to uphold its part of the social contract.

Contractual Theory offers an economic theory of the firm based on Coase’s modeling of the firm as, “a nexus of contracts in which each corporate constituency… supplies some asset in return for some gain” (Boatright, 2002). Contracts, whether formal or informal, exist between shareholder and manager, manager and employer, and firm and customer. Given that “contracting is the principal means by which we conduct our economic affairs and structure economic relations” (Boatright, 2002), Coase, through Contracting Theory, tells us that whilst markets are coordinated by exchange, within a hierarchical firm coordination takes place by direct control (Boatright, 2002). It is easy to see how that direct control would operate between manager and employee but the locus of control is shifted between shareholders and managers with shareholders having “at best indirect and impersonal control” (Crane & Matten, 2016).

The shareholder responsibility for governance and control of the business, which they exercise through the managers of the company is not without its ethical and financial issues (Jensen & Meckling, 1976). Agency theory explains the nature of the issues as arising from the idea that all individuals (agents) act in their own best interest but when part of a firm agree to act on behalf of another person, referred to as the principal (Ross, 1973). This principal-agent relationship between shareholders and managers explains why in some cases managers may choose to advance their own self-interest over acting in the best interests of the company, such as making ethical business decisions that don’t increase profits or avoid social contract damaging scandals.

Corporate governance for platform businesses in the twenty-first century sees a return to founder as owner (and major shareholder) and manager. This drastically changes the traditional power balance and leads to the conflicted perception of modern day tech CEO’s such as Mark Zuckerberg of Facebook and Elon Musk of Tesla and SpaceX being both admired and despised (Bloom & Rhodes, 2018). Bloom and Rhodes describe how these CEO’s are “characterised at one and the same time as visionaries and realists; ethical innovators and moral hazards; generous benefactors and selfish hoarders”. Zuckerberg has 53% voting rights in Facebook and Musk has a 54% stake in SpaceX, which means that the usual balances of corporate power are becoming less relevant.

This weakening of corporate governance as a mechanism to drive ethical business decisions along with society’s acceptance of the modern tech CEO indicate a further shift in the social contract, one that at first glance seems to put the power in the hands of business to lead the redefinition.

Corporate social responsibility as response to changes in society

Shifting power shifts the social contract

The success of society and success of business are tightly interwoven. They succeed together. But, in the fast-paced and rapidly changing twenty-first century world, society is unable to regulate new business models quickly and effectively enough, and corporate governance cannot be relied upon to provide sufficient control mechanism for platform businesses. In this environment of a lack of clear boundaries between society and business, both look for ways for business to demonstrate legitimacy and maintain acceptance within society to continue to operate.

With the social contract re-negotiations taking place, the question of whether corporate social responsibility activities are undertaken by the twenty-first century business to turn into a competitive advantage. Rupp, Williams & Aguilera are worth quoting at length on the matter. They said, “In the organisational behaviour literature, a great deal of research has focused on the seemingly incongruent goals of wealth maximization and social responsibility. This research has suggested that these goals are not necessarily incompatible and that CSR may actually be leveraged to serve a strategic advantage. That is, empirical research has sought to determine if there is a significant link between corporate social performance and corporate financial performance. The first of these studies was conducted by Bragdon and Marlin (1972) who found a positive relationship between these two variables.” (Rupp, Williams & Aguilera, 2010). An important point to reiterate is that making profit and doing good for society don’t have to be incongruent goals. CSR can have a positive impact on society whilst also increasing profits. This leads us to questioning the motivations of business; do they undertake CSR activities primarily for the wider social considerations or to be leveraged as a competitive advantage to increase profits?

Corporate social responsibility and ethical business as a competitive advantage

CSR as a response to social pressures

The adoption of CSR practices and ethical decisions by business is a response to changes in society (Aguilera, et al 2007). Aguilera goes on to say that “corporations are being pressured by internal and external actors to engage in CSR actions to meet rapidly changing expectations about business and its social responsibilities.” Society’s expectations around social and environmental issues have changed over the decades, reforming the social contract between business and society, and Corporate Social Responsibility activities are business’ demonstration of legitimacy and adherence to the social contract.

CSR affects financial performance

In 2016 Volkswagen’s profits fell by 20% after they admitted installing software in cars to cheat emissions tests (Kollewe, 2016). This demonstration of not being a socially responsible business breached the social contract in a number of ways; environmental impact from vehicle emissions, cheating regulatory tests, and customer trust in the product, all of which contributed to the reduced profits. This, and many other examples, suggest that scandals of this nature lead to reduced profits.

After studying thirty years of data, Orlitzky, Schmidt and Rynes concluded that Corporate Social Performance is positively correlated with Corporate Financial Performance and that the reputational benefits appear to be an important part of explaining the correlation (Orlitzky, et al. 2003).

Given the statistically validity of that study and the anecdotal information from the Volkswagen scandal we can conclude that businesses that adopt Corporate Social Responsibility practices recognise commercial benefits from doing so (Bonini, 2009).

CSR can become a competitive advantage

Corporate Social Responsibility activities can be a differentiator for businesses, providing “hard-to-duplicate competitive advantage” (Melo & Garrido‐Morgado, 2011), and having an ethical stance can become a competitive advantage (Seifert, Morris, & Bartkus, 2003). Linking Corporate Social Responsibility practices to business objectives creates a competitive advantage (Porter & Kramer, 2006). Porter and Kramer call out the fragmented and disconnected approaches many businesses take towards CSR initiatives and how the notion of business and society as separate rather than interconnected entities fuels the opinion of CSR activities as a cost to the business rather than contributing to profits. They go on to make the point that if CSR activities were aligned with a business’ strategy they would be leveraged as a competitive advantage. As with any competitive advantage, the aim for business is to use it to increase profits for shareholders.


Organisations implement CSR practices and make ethical decisions primarily to increase shareholder profit as opposed to wider social considerations. Changes in society and business are causing a redefinition of the social contract, which causes business to look for other means of demonstrating its adherence to the social contract. CSR is rarely implemented by a business because of wider social considerations, but instead as a means of demonstrating its attempts at meeting the expectations within the social contract. A business that is able to make corporate social responsibility part of its strategy and so leverage the reputational and other benefits to create a competitive advantage can improve its financial performance and increase profit for shareholders.


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