PurposeThe purpose of this study is to examine the impact of LEM participation on moral identity. Lateral exchange markets (LEMs) enable ordinary people to monetize idle personal resources such as cars, homes, gadgets and skills. Despite its champions portraying actors in these exchange as moral citizens of society, recent findings suggest that egoistic motives drive participation. A salient moral identity motivates behaviors that show social sensitivity to others and enable cooperative actions. Given that platform-providing firms rely on users’ cooperative behaviors to facilitate lateral exchange, understanding factors that affect moral identity can have important implications for the success of such business models.Design/methodology/approachIn this research, the authors move away from the ideological discourse behind actors’ motivations, to provide a pragmatic explanation of how participation erodes moral identity. The authors apply a social cognitive framework to examine how the environment in LEMs impacts behaviors and personal factors in a recursive fashion.FindingsAcross two studies, findings reveal that prolonged participation in lateral exchange diminishes the centrality of moral identity to the working self-concept. Moreover, the results show that keeping puritan peers moral has positive business outcomes. This research also discerns a boundary condition that determines when peers remain consistent with their moral compasses. Specifically, when engagement is perceived as effortful, the behavior becomes an informative input in the inference of one’s moral disposition reinforcing moral identity.Originality/valueMarketers can use this research to design business models in ways that mitigate the decay of moral identity.
