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Contextualization and
value-in-context: How
context frames exchange
Jennifer D. Chandler
University of Hawaii at Manoa
Stephen L. Vargo
University of Hawaii at Manoa
Abstract
The purpose of this paper is to explore the role of context in service provision and, more broadly,
in market co-creation. We oscillate foci from an individual actor at the micro level to a market at the
macro level to make the scaleable influence of context more salient. This reveals the meso level,
which is nestled between the micro and macro levels. We discuss how these market levels influ-
ence one another. We conceptualize markets as simultaneous, continuous exchanges that are
bounded by each of these levels of context.
Keywords
service-dominant logic, value-in-context, value-in-use, value networks
Most contemporary marketing scholars (e.g. Bagozzi, 1975; Hunt 1991; Vargo and Lusch, 2004a)
consider the study of marketing and, by implication, markets to be concerned with exchange. The
purpose of exchange is to access resources that have value potential – that is, that provide benefit –
to actors from within their own particular contexts. However, marketing scholars disagree about
where and how value is created through exchange and, thus, about the role of exchange in the
value-creation process itself.
One perspective views value creation as the joint integration of resources by the multiple actors
associated with an exchange. Specifically, service-dominant logic (Vargo and Lusch, 2004, 2008)
emphasizes value as co-created by multiple actors (Prahalad and Ramaswamy, 2004), rather than
viewing value as created by a single actor. In this way, the simultaneous exchange processes that
occur across actors during service provision – which Vargo and Lusch (2004) define as resources
Corresponding author:
Jennifer D. Chandler, Shidler College of Business, University of Hawaii at Manoa, 2500 Campus Road, Honolulu, HI 96822
Email: jenc@hawaii.edu
Marketing Theory
11(1) 35–49
ªThe Author(s) 2011
Reprints and permission:
sagepub.co.uk/journalsPermissions.nav
DOI: 10.1177/1470593110393713
mtq.sagepub.com
applied for the benefit of another actor – can be seen as service-for-service exchanges. This
process orientation emphasizes how multiple actors exchange service, which contrasts with the
output orientation of the ‘neoclassical economics research tradition’ (e.g. Hunt, 2000), which
emphasizes how multiple actors exchange output units. The latter orientation has also been
referred to as ‘manufacturing logic’ (e.g. Normann, 2001); ‘old enterprise logic’ (Zuboff and
Maxmin, 2002); ‘marketing management’ (Webster Jr, 1992); or ‘goods-dominant (G-D) logic’
(Vargo and Lusch, 2004a; 2008).
The purpose of this paper is to further explore how actors ‘come together’ through exchange
within a specific context and to explore the role that context plays in framing exchange. Arguably,
making salient the influence of context is relatively isomorphic with those conceptualizations of
markets that are, at least intuitively, interactive (e.g. Gronroos, 2006); networked, or contextual (e.g.
Collon, 1998). Similarly, the proposed emphasis takes a network perspective of markets, one that is
most extensively found in marketing within the work of the IMP group (e.g. Hakansson and Snehota,
1995). The proposed emphasis differs slightly, however, from the IMP group work because there the
emphasis is more on relationship than value creation. Additional insights can also be found in the
approach of the Nordic School of service marketing (e.g. Gronroos, 2006), especially in the ‘many-
to-many marketing’ approach of Gummesson (2006), but there too the emphasis is on interactions
and relationships, rather than value creation. However, all of this work, along with the proposed
framework, converge in their shared external perspectives on processes outside of actors and in their
implication that value is emergent at intersections of resource networks (Normann, 2001; Vargo and
Lusch, 2004a, 2008; Gronroos, 2006).
The purpose of the proposed framework is to extend this literature by making salient and
explicit how context, markets, and value co-creation are theoretically related. It seems that for the
study of markets and value co-creation, one should be able to call on academic marketing’s knowl-
edge of markets to better understand both the value-co-creation process and the embedded, con-
textual nature of value. Ironically, this not the case, or, at least it is only so to a limited extent.
As Venkatesh et al. (2006) indicate, ‘the market is everywhere and nowhere in marketing.’ That
is, marketing has no real theory of markets. It might be argued that the reason for this is that it
inherited one from economics but, as Vargo (2007) has suggested, to the extent that there is a
positive theory of the market in economics, it is based on a normative theory of national wealth
creation rather than a more general theory of value creation and exchange. Perhaps even more tell-
ing is the indictment of Nobel Laureate in Economics Douglass C. North (1977): ‘It is a peculiar
fact that the literature on economics ... contains so little discussion of the central institution that
underlies neoclassical economics – the market.’
We build on the aforementioned studies by conceptualizing how context frames markets such that
exchange between two actors can be seen simultaneously as exchange within and among service
ecosystems, for example, and vice versa. This is important because exchanges across different
contexts together constitute markets. To this end, we propose a multi-level perspective of context that
is based on social network theory, economic sociology, and the general management literature. We
integrate this with the service-dominant logic perspective of value co-creation and markets.
We propose three levels of context – micro, meso, and macro – that coincide with fundamental
processes of value co-creation. By conceptualizing a layer – the meta layer – that ‘covers’ each of
these levels, it is more salient how these levels evolve simultaneously. We begin building this frame-
work by exploring the role of resources as articulated in various market and network theories. Then
we explain how the recently reframed role of service, as articulated in the service-dominant logic,
36 Marketing Theory 11(1)
pushes the notion of context to the forefront of marketing thought and theory. Based on this, we discuss
how context frames exchange by making salient the simultaneous, interactive processes at each level.
The service-dominant logic perspective
Service-dominant (S-D) logic (Vargo and Lusch, 2004a, 2008) represents a broader perspective
of markets compared with traditional perspectives of markets that focus on the exchange of
goods (referred to as goods-dominant, or G-D, logic). The S-D logic emphasis on service – the
application of resources for the benefit of other actors – looks beyond goods as the basis of eco-
nomic and social exchange. That is, S-D logic emphasizes knowledge and skills (operant
resources) as primary resources of economic and social exchange, as opposed to G-D logic,
which emphasizes physical resources (operand resources). Based on this, exchange processes
that integrate knowledge and skills are focal when viewing exchange as value co-creation. To
explorethismorefully,webeginwithareview and conceptual extension of the notions of
resource and service, each of which is detailed below.
Toward understanding resources in context
Marketing scholars have traditionally focused on goods as resources and, complementary to that
view, asserted marketing processes as supplemental to the core production processes of the firm
(Prahalad and Ramaswamy, 2004). In this sense, marketing processes are traditionally seen as
‘adding value’ to goods that are already inherently valuable. Most other similar resource con-
ceptualizations stem from the resource-based view of the firm in which resources are seen mostly
as goods ‘owned by the firm’ or as ‘inputs to production processes’ (Penrose, 1959; Barney, 1991;
Peteraf, 1993; Barney et al., 2001).
However, Hunt and Morgan (1995) begin to discuss resources as owned or accessible by
multiple actors. They further describe how actors seek access to resources and, as a result, interact
with one another to gain such access. Resources thus connect actors to one another (and vice versa)
and are valuable because of this. Together, the connected actors influence the ‘expansion and
contraction’ of a resource (Constantin and Lusch, 1994). Zimmerman (1951: 15) affirms that
resources ‘are not, they become; they are not static but expand and contract in response to human
actions.’ As a result, when disparate actors access resources that they do not own or unilaterally
control, they become connected because of their joint access to a resource.
For example brand knowledge refers to the differential effect of consumer response to a firm’s
marketing efforts with regard to an offering that is known or ‘branded’ (Keller, 1993). From
Zimmerman’s perspective, brand knowledge is a resource that evolves in response to the behaviors
of actors. Together, actors that maintain favorable, strong, and unique brand associations expand
the potential of brand knowledge as a resource, while actors that do not form favorable brand
associations contract the potential of brand knowledge as a resource. For most actors, brand
knowledge is a resource that cannot be controlled because it is neither owned nor is it unilaterally
controlled. As a resource, brand knowledge can provide, among other things, benefits such as
product familiarity, uncertainty reduction, or higher price premiums (for firms).
Actors further enhance or detract from brand knowledge as a resource when they partner or
build networks that center on a brand in communities (Mun
˜iz Jr and Schau, 2002) or in alliances
(Srivastava et al., 1998; Kotler and Pfoertsch, 2006; Pfoertsch et al., 2007). Accessible to these
types of groups are other externally-based resources such as shared information or knowledge that
Chandler and Vargo 37
can also be jointly influenced by multiple actors (Rindfleisch and Moorman, 2001). For example
actors can choose to build upon one another’s knowledge in either a collaborative or competitive
fashion (Johnson et al., 2004).
Each of these – brand or information – is an example of a resource that is externally-based and
dynamically determined in the context; that is, they are resources that cannot be owned or controlled
by a single actor. As such, they are resources that represent indirect exchange, or service-for-service
exchanges that occur through service intermediaries. Often, these service intermediaries take form
within institutions (e.g. monetary systems). In fact, various types of institutions can govern indirect
exchange; for example, ownership systems draw on property rights to facilitate exchange.
Because actors are traditionally emphasized as ‘owning’ resources, actors have traditionally
been viewed as separate and unique from the resources and contexts within which they are
embedded. But often, because of their past service efforts and also because of their rights to future
service (e.g., money), they become connected within these contexts to other resources and other
actors. For this reason, many scholars emphasize the use of governance mechanisms for managing
ownership, and thus control, of resources within their contexts (for example see Wathne and Heide,
2004). However, because of resources that cannot be uniquely owned or controlled, as discussed,
we further develop the emphasis of Ford and colleagues (2003) on actors themselves as resources
within a particular context. This refers to firms whose competences and connectedness to resources
can act as resources to other actors (Bagozzi, 1975; Achrol and Kotler, 1999; Kogut, 2000; White,
2002; Araujo and Easton, 2005). This occurs when, for example, actors indirectly connect actors
with other actors (Hakansson and Snehota, 1995; Gronroos, 2006; Gummesson, 2006).
An example of this might be a brand. For example if a college student is looking to do laundry
and is unfamiliar with laundry detergents, a familiar brand may serve as a resource because it
connects the student with a firm that is reputable for providing quality laundry detergent. Or, in
another example, two fans of a popular band (e.g. the Beatles) may become acquainted on a
website such as Facebook because they seek an association with the Beatles music brand. As a
result of their individual efforts, these actors come to be in one another’s contexts. Inadvertently,
through their individual efforts, they reciprocate benefit to one another. Their access to one another
is a fundamental aspect of how they resolve their situations because they draw upon one another as
resources (Wilkinson and Young, 2005).
How actors draw upon one another as resources is critically dependent on the contexts in which
they are embedded. For this reason, actors can be said to be partially defined by their contexts
while’their contexts can be said to be partially defined by them (the actors). In other words, actors
and’their contexts are mutually constitutive, or partially defined by one another (Giddens, 1979).
Each actor brings a unique quality to the context that affects other actors in the context, as well as
the’context as a whole. Because each actor in the context is always integrating and exchanging
resources with other actors and thereby serving other actors, there is continuous change in the
context.
This continuous change highlights a market fluidity that has been understudied in the man-
agement and marketing literature. The dynamic and living fluidity of markets is framed, or formed,
because of context. Contexts frame markets as interactions or exchanges that we can ‘‘see’’ and
‘‘understand’’. But essentially markets have no beginning or end; they are continuous. Contexts
give markets form and function in time and space, whereas markets themselves transcend time and
space because market exchanges simultaneously represent past and future service-for-service
exchanges among different actors. Markets are, in fact, simultaneous exchange – whether
exchange occurs between two people, among three companies, in New York, or on websites such
38 Marketing Theory 11(1)
as ebay.com. Markets exist when two people exchange, and markets exist when twenty countries
exchange. Markets exist in geographic spaces and virtual places. But the ability to place para-
meters on exchange occurs because of contexts.
This points to a fundamental need to differentiate among contexts. This is especially important
because actors may be drawn upon as resources in particular contexts, but act as deterrents in other
contexts. Simultaneously, a particular context may act as a resource for an individual actor but act
as a deterrent for a different actor (Emirbayer and Mische, 1998). In this way, resources ‘become’
resources largely as a function of the contexts in which they are embedded; that is, the potential of
resources to be drawn upon for service depends on the context in which they are embedded. And, as
a result, resources can be more valuable in one context, but less valuable in other contexts. How
context influences the value of a resource is one way through which contexts frame exchange and
the co-creation of markets.
Toward service in context
As described above, context influences value co-creation and markets through its influence on
resources. Context also influences value co-creation through its influence on service. This is dis-
cussed below.
One of the seminal works that addresses resources and service together within a context is
Theory of the Growth of the Firm, in which Penrose (1959) describes how resources yield services.
According to the Penrosian perspective, this occurs through many steps, the first of which is firms
competing for and acquiring resources. This process continues when resources are used to offer
‘service streams’ that ultimately fill and replace the context with service outputs. Service outputs
are then chosen from the context. To illustrate this further, consider two firms that competitively
seek coal to fuel their rail transportation systems. The amount of coal is limited, and the ability to
own and thereby control coal is seen as a fundamental driver of the firm’s service provision and,
ultimately, the firm’s performance. As a result of their varying ownership and control of coal, the
two transportation firms may offer heterogeneous service outputs, each of which become woven
together, along with other firms’ service outputs, into a context that is characterized by
competition.
This Penrosian emphasis on competition and its foundation on the competitive ownership of
goods has been the basis for many subsequent management and marketing studies that address
service and context together. To summarize, the Penrosian perspective articulates that successful
firms are those that own and control the resources that yield more service outputs in the context and
‘grow’ to dominate the context. Accordingly, the focus of Penrose was to write a Theory of the
Growth of the Firm that aimed to explain the growth of multinational corporations in the 1940s to
1950s, rather than to write a theory of service, context, and value creation.
Penrose did however advance the notion that resources are distinguishable from context
because they are bundles of potential service. Recent emphasis on service in marketing has
begun to examine this more deeply by focusing on service within particular contexts. Increas-
ingly, service has been viewed as a process, situated beyond traditional firm boundaries that links
actors together, that is ‘controlled bilaterally’ with other actors (Gadde et al., 2003: 359). Such
studies explain that, within each context, each actor serves other actors when it draws upon its
resources in its own context as a benefit (Kogut, 2000; White, 2002; Araujo and Easton, 2005).
That is, when different actors connect with one another, they ultimately join their different
networks together. The newly joined actors – through their service-for-service exchanges –
Chandler and Vargo 39
constitute a context, a phenomenon studied in new institutional economics (e.g. Menard, 1995);
the IMP Group (e.g. Hakansson and Snehota, 1995); the embeddedness of markets (e.g. Grano-
vetter, 1985; Collon, 1998); and the environment of exchange (Bagozzi 1975; Achrol et al.,
1983).
Extending this further, actors come to occupy unique positions in their contexts and, from those
positions, draw on resources for service-for-service exchanges, both direct and indirect. To
explain, consider two children at the same school who trade baseball cards at recess time. When
they return to their respective classrooms, they might trade the cards with the child seated to the left
side of their desks and then in turn trade again with the child to the right side of their desks. Each of
the children with whom they subsequently exchange may offer different ‘trades’ because of what
the child can access within his or her own unique network of exchanges. As a result, the two chil-
dren in the initial trade scenario may likely end up with unique exchange experiences, as well as a
very different combination of resources (e.g. baseball cards, candy, or stickers). The children, or
actors, differ in part because of the varied nature of their interactions, including direct exchanges
with children that are ‘close-by’ and indirect exchanges with their friends’ friends that are indirect
or ‘further away’ (Granovetter, 1985).
In this way, each actor’s context affects its ability to directly access and leverage resources, and
also affects its ability to indirectly access and leverage resources beyond its immediate context
(Uzzi, 1997). Stated differently, each actor’s service provision depends on its context. Each
instance of service, or each ‘unique application of uniquely integrated resources,’ is value creation
in a particular context that is enabled by direct and indirect access to various types of resources
(Lusch and Vargo, 2006: 284). Most important, as resources are drawn upon for service across
varying contexts, each context provides conditions ‘under which different resources will and will
not be valuable’ (Barney et al., 2001: 43). This is the focus of the following section.
Rethinking context
Given the discussion above, it is necessary to deepen our understanding of context. We begin by
acknowledging the heterogeneous and distinctive nature of context, and define a particular context
as a set of unique actors with unique reciprocal links among them (Wasserman and Faust, 1994;
Sheth and Uslay, 1997; Carrington et al., 2005). The ability to define context uniquely is important
because context heterogeneity affects how resources can be drawn upon for service.
As proposed in this framework, the notion of context and its influence on markets and exchange
draws heavily from the sociology of markets literature, as well as the social networks analysis
literature. Whereas the sociology of markets literature generally explores the emergence,
dynamics, and decline of markets, the social networks analysis literature generally advances the
methodology and theory of social structures (Fligstein and Dauter, 2007). Sociologists and
anthropologists consider the study of markets and exchange to be ‘one of the most vibrant fields’ in
the past 25 years, and have made significant progress in exploring context as the ‘origins, oper-
ations, and dynamics of markets as social structures’ (Fligstein and Dauter, 2007: 106). The
proposed conceptualization of context is thus based on work originating from sociology (Freeman,
1977; Granovetter, 1985; Friedkin, 1991; White, 2002); anthropology (Emirbayer and Mische,
1998; Nakano and White, 2008); and management (Uzzi, 1997; Uzzi and Lancaster, 2003).
Social network analysis, in particular, can assist in making salient the heterogeneous nature of
context (Wasserman and Faust, 1994) when it is viewed as a set of unique actors and unique
reciprocal links among them. Social networks analysis can help to precisely and formally specify
40 Marketing Theory 11(1)
service-for-service exchanges as reciprocal links among actors by representing them as either
sociograms, sociomatrices or algebraic equations (Wasserman and Faust, 1994). These representa-
tions are precisely and formally equivalent such that context can be explored empirically.
For empirical work, many network studies begin with qualitative approaches, including primary
data collection by way of participant observation or long interview techniques. But there are also
many network studies that are quantitative in nature, including agent-based modeling, predictive
modeling techniques, and survey-based research designs, as well as secondary data model estima-
tions and simulation techniques. Visualization is also a key aspect of social networks analysis
because it enables researchers to ‘see’ context and the scaleable influence of context within market
structures (Homan, 1950; Marsden, 1982).
By defining context as a unique set of actors and the unique reciprocal links among them, it is
possible to see how hundreds of actors and links may constitute one specific context, while two
actors and links may constitute another context. Understandably, resources and service in each of
these contexts will likely vary. Furthermore, these actors, links, and contexts are complex because
links between the two actors can affect other actors or links throughout the context and vice versa.
This occurs because every actor is itself connected to many other actors (Freeman, 1977; Barney
et al., 2001; Madhavaram and Hunt, 2008). As a result, direct service-for-service exchanges
between two actors may manifest in and influence indirect exchanges throughout and beyond a
particular context (McFarland et al., 2008).
To explore how this occurs, we propose a multi-level conceptualization of context based on
three levels: (1) micro level; (2) meso level; and (3) macro level (Kjellberg and Helgesson,
2006). Above each of these three levels, there is a meta layer that helps to make salient how these
levels evolve over time. Each level of context frames service-for-service exchange in a way that
informs value co-creation uniquely at that level (Dopfer et al., 2004; Andersson et al., 2008;
Storbacka et al., 2009). And the meta layer represents evolution of these levels, which occurs
simultaneously. Capturing these various aspects requires oscillating foci to each level or layer,
as shown in Figures 1 and 2. Each level is discussed below.
Micro-context: Framing exchange among actors as dyads
Context at the micro or individual level frames exchange as it occurs among individual actors. The
important process of exchange at this level is direct service-for-service exchange. That is, each
actor draws on its resources and competences to directly serve another actor. The context of this
service-for-service exchange is a dyad, which consists of two actors and the service-for-service
exchange between them. More important, this is a reciprocal dyad because both actors serve each
other, which is an important aspect of value co-creation because both actors are active participants
in the exchange process. This is shown in Figure 2a and on the first line of Figure 1: two unique
actors (aand b) are joined by a service-for-service exchange link (s).
Meso-context: Framing exchange among dyads as triads
Context at the meso level frames exchange as it occurs among dyads. The important process of
exchange at this level is the indirect service-for-service exchange that occurs between actor aand
actor c, as shown in Figure 2b and on the second line of Figure 1. As can be seen, actor bdirectly
serves both actors aand c(and vice versa), but actors aand cindirectly serve one another through
actor b. That is, actor bdirectly serves two of the actors, while the other actors indirectly serve each
other through their service of actor b. Stated differently, two actors indirectly serve one another by
Chandler and Vargo 41
Multi-Levels
of Context
Unit of
Analysis
Service-for-
Service
Exchange
Among
Context Revealed Through
Contextual Framing
of Exchange
Static
Micro-Context
Dyads Actors Direct Service-for-Service Exchange
(Freeman 1977, Barney et al. 2001,
Madhvaram and Hunt 2008)
Static
Meso-Context
Triads Dyads
Indirect Service-for-Service Exchange
-includes direct service
(Hakansson and Snehota 1995,
Gronroos 2006, Gummesson 2006)
Static
Macro-
Context
Complex
Networks
Triads Complex Service
-includes direct and indirect service
(Bagozzi 1975; Achrol and Kotler 1999,
Araujo and Easton 2005,
Kogut 2000, White 2002)
Dynamic
Meta-Layer:
Service
Ecosystems
(Giddens
1979,
DiMaggio
and Powell
1983)
Figure 1. How Context Frames Exchange
Figure 1. How Context Frames Exchange
42 Marketing Theory 11(1)
a) Example of Micro-Context Level: Dyad
b) Example of Meso-Context Level: Triad
c) Example of Macro-Context Level: Complex Network
d) Meta-Layer of Context: Service Ecosystems
b
a
Sa
b
Actor
--- Service-for-Service Exchange
c
Evolution/
Replication
Figure 2. Rethinking context
Chandler and Vargo 43
serving the same actor. The prototypical context of this service-for-service exchange is a triad.
More specifically, this is an intransitive triad because the three actors are not all directly connected,
which is important because it is not necessary for actors to be directly connected to serve one
another and co-create value.
Macro-context: Framing exchange among triads as ecosystems
Context at the macro level frames exchange as it occurs among triads. The important process of
exchange at this level is complex service, or the synergies of multiple simultaneous direct and
indirect service-for-service exchanges that enable actors to serve in a particular context, as shown
in Figure 2c and on the third line of Figure 1. Each triad draws on its resources and competences,
and applies them for a beneficiary in a particular context. The context of service-for-service
exchanges at the macro context is a complex network. More important, the notion of a complex
network is a fundamental aspect of value co-creation because of how actors, dyads, and triads cre-
ate synergy among multiple simultaneous direct and indirect service-for-service exchanges.
Layer of meta-context: Framing exchange among complex networks as service
ecosystems
Context at the meta-layer frames exchange as it occurs among complex networks. At the meta-
level, the notions of time and replication are introduced (Giddens, 1979). Specifically, practices,
routines, activities, or processes may be replicated at any of the three levels of context. Based
on this, the important process of exchange at this level is institutionalization, or the process by
which various networks of actors become legitimized (or delegitimized) with respect to larger soci-
etal systems (DiMaggio and Powell, 1983). Included within this notion is replication, especially of
institutions, which paradoxically creates dynamically changing contexts at the same time that it
also introduces stability to the system.
As shown in Figure 2d and Figure 1, this occurs when complex networks are sustained by the
reciprocal service provision of multiple actors, dyads, triads, and complex networks that are
accessing multiple resources. As shown in Figure 2, this is a complex multi-dimensional evolution
that occurs simultaneously in three dimensions: across levels of context, over time, and through
replication. When complex networks successfully institutionalize resources, they become joined
together as a service ecosystem, or ‘a spontaneously sensing and responding spatial and temporal
structure of largely loosely coupled value proposing social and economic actors’ interactions
through institutions and technology, to (1) co-produce service offerings; (2) exchange service
offerings; and (3) co-create value’ (Lusch et al., 2010: 31). In other words, the meta layer covers
all the levels of service-for-service exchanges such that they together constitute service ecosys-
tems. The notion of a service ecosystem is a fundamental aspect of value co-creation because it
acknowledges how large-scale social structures and institutions evolve relative to the individual
service efforts of actors, dyads, triads, and complex networks.
How context frames markets
As discussed, because every actor itself integrates resources through service-for-service exchanges
with other actors, the value creation space extends well beyond direct actor-to-actor exchanges
(i.e.’firm–firm interactions or firm–customer interactions). Service directly and indirectly joins
actors together as dyads, triads, and complex networks into service ecosystems such that direct
44 Marketing Theory 11(1)
individual exchanges occur at each level and simultaneously in the ‘context’ or meta layer of
networks-with-networks and networks-within-networks. The exchange processes and the resulting
links among actors constitute markets, but they transcend space and time. Context frames these pro-
cesses and links, and begins to clarify how resources and service contribute to value co-creation and
the co-creation of markets.
How exchange is framed by context is a fundamental aspect in the study of markets and
value co-creation that requires further exploration. Viewing exchange at each level, as
embedded in the context of the other levels, can be a fruitful area of inquiry. For example value
co-creation can be viewed from both an actor’s unique individual perspective within a dyad, as
well as from an omniscient general perspective of service ecosystems. The actor perspective can
only be understood from within the actor’s direct context, while the service ecosystem perspec-
tive can only be understood from an ominiscient general perspective. However, neither perspec-
tive is mutually exclusive; rather, each perspective occurs and must be understood in the
context of the other perspectives.
As a result, the service activities of an actor – that is, an actor’s individual value co-creation
efforts – are a function of its simultaneous embeddedness within multiple dyads, triads, complex
networks and service ecosystems. Stated somewhat differently, an actor’s ability to serve is a func-
tion of its unique context which includes the micro, meso, and macro levels – as well as the
dynamic meta layer. Context is multidimensional in that it is level-specific while being embedded
in successive levels that are of a temporal nature. In this sense, practices and transformations are
temporal replications of rules, or institutions, that facilitate exchange processes. Thus, context is
an’important dimension of value co-creation because it frames exchange, service, and the potenti-
ality of resources from the unique perspective of each actor, and from the unique omniscient
perspective of the entire service ecosystem. It is for this reason that Vargo and Lusch revised the
somewhat G-D logic-oriented concept of ‘value-in-use’ to a more S-D logic-friendly concept of
‘value-in-context’ (Vargo, 2009; Vargo et al., 2009).
Conclusion
The Market is simultaneous, continuous exchange, while Markets emerge from simultaneous,
continuous processes at different levels and layers of context. As described above, Figure 1
demonstrates that each level is nested among the other levels and together they simultaneously
evolve in the meta layer. The work here suggests that markets are created when actors, dyads,
triads, complex networks, and service ecosystems evolve through unique service provision efforts.
Context frames these processes. This has been more broadly studied as the co-creation of markets.
The ability to deal with time (forward and backward) conceptually appears to be a unique
human trait that allows humans to evolve as a species not only through biological replication, but
also through conceptual or institutional replication. This occurs because humans are able to
integrate the past and present with the future. Further research is needed to distinguish empirically
among these levels and layers, and also to relate them more explicitly to one another.
The definition and measurement of value processes according to this framework requires further
empirical research. The micro level, meso level, macro level, and meta layer evolve in response to
and in synchronization with one another, but the evolutionary reactions may be different at each
level. Empirical research is needed, for example, to establish how triad counts (Skvoretz and Faust,
1999) can answer value-related questions from a marketing perspective: Which types of triads are
more prevalent in specific contexts? Why do these triads persist in these specific contexts? How
Chandler and Vargo 45
does the conceptualization of markets change when reciprocity is introduced at the complex
network level or at the dyadic level?
Most useful in this framework is the absence of the dichotomy between firms and their
‘customers’, which is replaced with a collective conceptualization of actor based on resources,
service efforts, and contexts (Vargo and Lusch 2011). This allows marketing scholars to think
more deeply about the interrelationships among different types of actors, along different levels and
layers of context – and relate them to one another within a unified framework. Such a framework
lays foundation for service-for-service exchange as the basis for a systems perspective of markets.
Within this, the notion of reciprocal service-as-resources-applied-for-benefit offers insight on
notions of power, ownership, control, and property rights in modern-day markets. Many actors
involved in service-for-service exchange have been understudied in their collective influence on
markets, marketing, and marketing theory.
Put simply, individual actors pursue value through service-for-service exchanges that are the
basis of dyads, triads, complex networks, and service ecosystems. Markets are simply collections
of individual actors reconciling tensions in their direct contexts with respect to indirect forces from
overlapping complex networks. Over time, these can be viewed as service ecosystems, within
which value lies at the tensions of micro and macro pulls. It is because of a need to reconcile these
tensions that markets evolve.
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Jennifer D. Chandler is an Assistant Professor at the University of Hawaii at Manoa Shidler College of Busi-
ness. She holds a BA from UCLA, an MBA from the University of Hawaii, and a PhD from the University of
California, Irvine. Before entering academia, Dr Chandler had a successful career in international marketing
and advertising. After working with media giants Clear Channel Communications and Raycom Media, she
began her own marketing agency working across various sectors including retailing, tourism, nonprofit, enter-
tainment, and manufacturing. Dr Chandler’s research interests include social networks analysis, strategy, ser-
vice, international marketing, organizational buying, business markets, design and collaborative innovation.
She takes a multi-method research approach that combines qualitative research and predictive modeling, as
based on resource-based theory and structuration theory. Dr. Chandler enjoys teaching and playing piano, is
an avid shopper, and is currently training for her first triathlon. Address: Shidler College of Business, Uni-
versity of Hawaii at Manoa, 2500 Campus Road, Honolulu, HI 96822. [email: jenc@hawaii.edu]
Stephen L. Vargo is a Shidler Distinguished Professor and Professor of Marketing at the University of
Hawai’i at Manoa. His primary research areas are marketing theory and thought and consumers’ evaluative
reference scales. He has had articles published in the Journal of Marketing, the Journal of the Academy of
Marketing Science, the Journal of Service Research, and other major marketing journals; he serves on six
editorial review boards, including the Journal of Marketing,Journal of the Academy of Marketing Science,
and the Journal of Service Research. Professor Vargo has been awarded the Harold H. Maynard Award by
the American Marketing Association for ‘significant contribution to marketing theory and thought.’ Address:
Shidler College of Business, University of Hawaii at Manoa, 2500 Campus Road, Honolulu, HI 96822.
[email: svargo@hawaii.edu]
Chandler and Vargo 49
