Shared value economics: an axiomatic approach

TL;DR

This paper develops an axiomatic economic framework for shared value, clarifying its definition, measurement, and practical application by integrating coalition formation, sustainability, and logical consistency.

Contribution

It introduces a formal, axiomatic model of shared value, connecting theory with empirical applications and providing a clear, testable definition within economic analysis.

Findings

A formal economic framework for shared value is proposed.

Shared value models can be characterized through logical deductions.

The framework facilitates empirical testing and hypothesis generation.

Abstract

The concept of shared value was introduced by Porter and Kramer as a new conception of capitalism. Shared value describes the strategy of organizations that simultaneously enhance their competitiveness and the social conditions of related stakeholders such as employees, suppliers and the natural environment. The idea has generated strong interest, but also some controversy due to a lack of a precise definition, measurement techniques and difficulties to connect theory to practice. We overcome these drawbacks by proposing an economic framework based on three key aspects: coalition formation, sustainability and consistency, meaning that conclusions can be tested by means of logical deductions and empirical applications. The presence of multiple agents to create shared value and the optimization of both social and economic criteria in decision making represent the core of our quantitative definition of shared value. We also show how economic models can be characterized as shared value models by means of logical deductions. Summarizing, our proposal builds on the foundations of shared value to improve its understanding and to facilitate the suggestion of economic hypotheses, hence accommodating the concept of shared value within modern economic theory.