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From Confusion to Fusion: A New Organizational Form and the Evaluation of Category Spanning in an Established Form
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In creative industries, a producer’s choice to use specific cultural practices is often driven by considerations of industry-specific notions of creativity and artistic vision. Creative producers claim autonomy over which practices are deemed desirable or legitimate, creating resistance to influences from outside the industry, such as from social movements. This study proposes that in such contexts, externally-driven change depends on the role of prominent gatekeepers. We consider how shifts in their discourse translate and amplify external social movement pressures for producers. We further argue that higher-status producers respond more to the changing discourse of these gatekeepers, to whom they are more tightly connected. This leads to a dynamic that is counterintuitive in the context of creative industries in which higher-status producers, who can benefit most from preserving the status quo, show greater responsiveness to external pressures when translated through gatekeeper discourse. Our empirical analysis uses a unique data set related to a prototypical contested practice: fur use in high-end fashion. These findings highlight the complex role of gatekeepers in creative industries and indirect pathways through which external social movements drive change.
Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2022.1591 .
Research on the relationship between categorical unconventionality and popularity has produced mixed results. While many accounts sug- gest that unconventionality is penalized, much sociological theorizing indicates that success comes from a delicate balancing act between con- ventional and unconventional offerings. Using data on the genre self- classifications of over 2 million musicians and bands across the United States, the authors find broad support for this balancing act. Yet the shape it takes is also conditioned on local contexts, across both high-order complexes of musical genres and geographic space. The authors high- light the local metropolitan area characteristics that shift the relationship between unconventionality and popularity. They also create a typology of cities based on how their unconventional offerings are rewarded and punished. An online visualization tool enables further investigation of these relationships. The authors close by proposing an agenda for how to study local heterogeneity in the relationship between unconventionality and popularity.
Do the cultural works artists produce after receiving major awards change in character? As awards lessen the constraints artists typically face, we argue that award winners receive more opportunities, gain more autonomy, and are more likely to pursue unique creative paths. Empirically, we analyze the consequences of winning a major Grammy award, a high-profile (often status-shifting) honor in the popular music industry. Using a neural learning approach, we examine the subsequent artistic differentiation of albums of award winners from albums of other artists. We analyze whether the music styles and sonic content of post-Grammy albums of winners change, and whether they become more or less similar to the combined corpus of albums of other artists. In panel regression estimates, we find that after winning a Grammy, artists tend to release albums that stand out more stylistically from other artists. Surprisingly, artists who were nominated but did not win a Grammy became more similar to other artists than they were before the nomination. The findings suggest symbolic awards can regularly induce change and affect the heterogeneity of cultural products.
Social movements challenge incumbents and drive institutional change by introducing market alternatives—new products and organizational forms that embody an alternative institutional logic. Research has shown that in response to market alternatives, incumbents resist through heterogeneous behaviors: incumbents maintain their commitment to the dominant logic, effectively marginalizing challengers, while also ostensibly endorsing the alternative logic and often successfully coopting challengers. Although incumbents’ strategic responses to pioneering market alternatives are well documented, we do not know how their heterogeneous behaviors affect new waves of challenger mobilization and how these mobilizations may differently address the hazards of cooptation and marginalization. We investigate the rise of the B Corp (Certified B Corporation) movement against the backdrop of both ongoing shareholder supremacy and rising corporate social responsibility (CSR) among incumbent corporations. Our multi-method, multi-stage investigation reveals that heterogeneous incumbent behaviors encourage new waves of challenger mobilization by seeding divergent mobilizing frames. This variety can lead to a paradoxical form of mobilization in which challengers dynamically balance the tension between their movements’ focus on expansion and purity, rather than prioritizing one over the other. The B Corp movement demonstrates how achieving this balance may help challengers avoid cooptation or marginalization, sustain their challenge against incumbents, and achieve more-transformative change. For incumbents, our findings show that both resistance to and the ostensible embrace of alternative logics may stave off immediate challenges but can also invigorate future challenges that pose substantive threats to the dominant logic.
Myriad cross-sector initiatives seek to remake capitalism into a more just, sustainable, and inclusive system. But how do these distributed efforts—which often vary in strength—interact? We contribute by attending to the interaction between weak and strong governance reforms. Drawing on longstanding research on organizational values and the sociology of law, we theorize how the enactment of weak and broad sustainability legislation is likely to increase pressure on values-driven businesses to pursue both values authentication and material authentication by way of strong third-party certification. We test our conceptual model by examining the effects of the frequently criticized benefit corporation legislation passed in 36 U.S. jurisdictions on the related B Corporation certification. We find that both new certifications and recertifications increase in states with such legislation, and that these effects are amplified or attenuated depending on corporate sustainability norms in the region. Taken together, our findings contribute to the intensifying societal conversation regarding the prospects for remaking capitalism by illustrating how even weak legislation can contribute to systems change not only by encouraging incremental sustainability reforms within a field, but also by triggering an authentication imperative that mobilizes values-driven businesses to pursue rigorous certifications.
Research Summary
We theorize the strategies that entrepreneurial actors employ to instill their endeavors with culturally resonant meanings and rally the support of key audiences (investors, analysts, or customers). In extant cultural entrepreneurship research, endeavors are assumed to achieve resonance and gain support when actors deploy the culture they share with their targeted audiences. But what if actors and audiences hold cultural repertoires that poorly overlap? We consider actors' efforts to “mobilize” and “enrich” the repertoires of both parties. Specifically, we introduce a typology identifying four strategies: anchoring, retooling, channeling, and seeding. Viewing culture as an engine of stability and change, we contend that each strategy addresses a distinct tension that actors must skillfully balance. We develop propositions to explain how and when actors manage these tensions.
Managerial Summary
Entrepreneurs must explain their endeavors in terms that audiences (investors, analysts, or customers) will understand and value. We know that entrepreneurs do so by telling stories and performing other symbolic actions, or by revising their stories and actions. However, prior insights assume a preexisting fit between what entrepreneurs and audiences value. How is this fit created? We identify four strategies by which entrepreneurs leverage a preexisting fit, and foster greater fit. We explain how entrepreneurs leverage a preexisting fit by presenting endeavors in familiar terms, and guiding audiences' interpretations. We explain how entrepreneurs foster greater fit by learning what audiences value, and educating audiences about their endeavors' value. Considering the inherent tension that each strategy entails, we explain how and when entrepreneurs use these strategies.
Research Summary
This study investigates the relationships between consumer income, consumer education, and firms' propensities to span multiple market categories. Despite their positive correlation, I theorize contrasting effects of income and education on firms' variety‐enhancing spanning. Specifically, I propose that the strong purchasing power of high‐income communities should reduce the need for firms to operate in multiple categories, but culturally omnivorous preferences among educated elites should encourage firms' spanning. Analyses of 6,072 restaurants in a metropolitan area and a large‐scale survey offer support for these predictions. Education, though not income, has a further positive effect on firms' atypicality‐enhancing spanning. This study contributes to category and management research by focusing on audience heterogeneity as important antecedents of firms' action and explicating the multifaceted nature of spanning.
Managerial Summary
This study examines how restaurants decide their culinary categories and menus depending on residents' income and education levels of a city they are located in. I find restaurants in higher‐income communities tend to be more specialized in a single or fewer categories while those in lower‐income communities are more likely to diversify into multiple categories to reach a broader customer base. By comparison, restaurants in more educated communities tend to diversify into multiple categories and provide fusion food because educated cultural omnivores like to explore novelty. These findings imply that retail firms should consider the separate effects of income and education levels of target consumers in determining their business scope and product portfolio.
Previous work has examined how audiences evaluate category-spanning organizations, but little is known about how their entrance affects evaluations of other, proximate organizations. We posit that the emergence of category-spanning entrants signals the advent of an altered future state—and seeds doubt about incumbents’ prospects in a reordered industry-categorization scheme. We test this hypothesis by treating announcements of funding for startups as an information shock to investors evaluating incumbent financial service providers between 2010 and 2017—a period marked by atypical category combinations at FinTech startups. We find that announcements by startups that embodied unusual combinations of categories resulted in lower cumulative average returns for incumbents, both in absolute terms and in comparison with typical startups. Our theory and results contribute to research on categorization in markets and to theories of disruptive innovation and industry evolution.
This study advances and tests the notion that the phenomenon of guilt by association-- whereby innocent organizations are penalized due to their similarity to offending organizations-- is shaped by two distinct forms of generalization. We analyze how and why evaluators’ interpretative process following instances of corporate misconduct will likely include not only inductive generalization (rooted in similarity judgments and prototype-based categorization) but also deductive generalizing (rooted in evaluators’ theories and causal-based categorization). We highlight the role and relevance of this neglected distinction by extending guilt-by-association predictions to include two unique predictions based on deductive generalization. First, we posit a recipient effect: if an innocent organization falls under a negative stereotype that causally links the innocent firm with corporate misconduct, then that innocent firm will suffer a greater negative spillover effect, irrespective of its similarity to the offending firm. Second, we also posit a transmission effect: if the offending firm falls under the same negative stereotype, then the negative spillover effect to other similar firms will be lessened. We also analyze how media discourse can foster negative stereotypes, and thus amplify these two effects. We find support for our hypotheses in an analysis of stock market reactions to corporate misconduct for all U.S. and international firms using reverse mergers to gain publicly traded status in the United States. We discuss the implications of our theoretical perspective and empirical findings for research on corporate misconduct, guilt by association, and stock market prejudice.
Research in organizational theory suggests that category-spanning organizations typically suffer penalties in evaluations, as consumers downgrade producers they see as violating authenticity norms. We challenge this view by linking two heretofore separate insights: first, that categorical boundaries erode as categories become taken-for-granted and, second, that consumers in a given category tend to become more heterogeneous as their numbers increase. We argue that newer consumers employ diverse evaluative schemata and rely less on established conceptions of authenticity than do veterans, leading to more generous evaluations as the ranks of consumers grow. Using the canonical case of craft beer, we test the effect of audience growth on consumer evaluations, particularly when producers violate categorical authenticity norms. Our analysis of an original dataset of more than 45,000 ratings of craft beers from a popular online forum finds both that overall beer ratings increase and that penalties to authenticity norm violations attenuate as the number of new reviewers participating in the evaluative process rises. These results refine our understanding of shifting demands for categorical purity, conceptions of authenticity, and consumer evaluations as functions of market growth.
Research Summary
In this study, we contribute to strategy and organizational theories of organizational adaptation by developing theory about the kinds of customers that facilitate an organization's ability to adapt to changing demand‐side conditions. We propose that customers who have previously interacted with diverse types of organizations in the market convey informationally rich feedback that better enables organizations to understand and adapt to change—particularly in more rapidly changing contexts. We further expect that organizations that position themselves congruently with market preferences will be stronger market competitors. We test and find support for our arguments using a unique dataset of over 8,000 cannabis dispensaries operating in seven states that were listed on Weedmaps.com between July 2014 and June 2016.
Managerial Summary
Performance of organizations in changing markets depends on their ability to adapt to evolving customer preferences. Such adaptation requires understanding how preferences evolve—not only among existing customers, but also in the broader market in which the organization competes. We propose that feedback from customers who have previously interacted with diverse types of organizations in the market enables organizations to understand customer expectations and adapt to changing demand landscapes by positioning themselves accordingly. We find support for these arguments in legalized cannabis markets within seven U.S. states. Dispensaries that get more feedback from experientially diverse customers position themselves in ways that are more congruent with the preferences of customers in their market. Furthermore, dispensaries who are more congruent with market preferences survive longer, bring in a greater number of new consumers, and are generally more appealing to those consumers.
Although the emergence of new industries is often attributed to state support, little is known about the conditions under which an emergent category of organizations comes to receive state support in the first place. We theorize how government support for a nascent industry is jointly determined by the industry’s internal features and external forces and test our arguments by analyzing feed-in tariff policies for the emergent solar photovoltaics (PV) industry in 28 European countries from 1987 to 2012. We find that feed-in tariffs—policies that incentivize renewable energy—were more likely in countries with greater numbers of solar PV producers and where the industry was more coherent, containing fewer producers coming from industries with a contrasting identity, such as fossil fuels. Further, we find that the concentration of the incumbent (rival) energy sector in a given country enhances the effect of the number of PV producers on government policy support, but only when the emerging industry has a coherent identity. Our results shed new light on the relationship between public policy and the emergence of an industry category, and they extend our understanding of how new industries can attain valuable state support while operating in seemingly hostile environments.
When recreational cannabis dispensaries first entered the U.S. market in 2014, how did incumbent medical cannabis dispensaries react? Did they emphasize their distinct identity as medical providers, distancing themselves from recreational dispensaries and those consumers who consume cannabis recreationally? Or did they downplay their medical orientation to compete directly for potential resources? In this study, we propose that how incumbent organizations position their identities in response to increasing competition from an emerging rival form depends on key audiences’ acceptance of the new form. Using data on the evolving cannabis markets in the states of Colorado and Washington during the year following the initial emergence of the recreational category, we find a sharpening of identity among medical dispensaries in communities with low voter support for recreational-use legalization. Medical dispensaries accentuated the medical orientation of their identities as recreational dispensaries increasingly set up operations and as buyers inclined more toward recreational use. In contrast, we find a blurring of medical/recreational identity in communities where voters demonstrated support for recreational-use legalization in the state-level ballot. Overall, the theoretical framework we advance integrates cultural and strategic approaches by explicitly considering conflict in different audiences’ beliefs about the legitimacy of products and its implications for market producers seeking to connect with and appeal to current/potential consumers.
The online appendix is available at https://doi.org/10.1287/orsc.2017.1167
Recent works have documented the dark side of scandals, revealing how they spread, contaminate associated organizations, and taint the perception of entire fields. We complement this line of work by exploring how scandals durably affect competition within a field, translating into relative advantages for certain organizations over others. First, scandals may benefit organizations that provide a close substitute to the offerings of the implicated organization. Second, scandals pave the way for moralizing discourses and practices, shake taken-for-granted assumptions about the conduct of organizations, and result in a shift in the criteria used to evaluate organizations within the field. Our arguments suggest that organizations whose offerings are most similar to those of the implicated organization, yet perceived as enforcing stricter standards of conduct, are likely to benefit the most from a scandal. We find support for these arguments in a county-level study of membership in the Catholic Church and sixteen other Christian denominations in the United States in the wake of a series of sex abuse cases perpetrated by Catholic clergy between 1971 and 2000. This study contributes to our understanding of the competitive effects of scandals on organizations, and carries important implications for the management of organizations in scandal-stricken fields.
It is well established that firms make a series of positioning choices that shape how they compete within an industry. However, much of this work has examined competition within established industries where performance attributes are well understood. By contrast, we know little about how firms position their products within nascent industries, which often are characterized by extreme uncertainty about what the product even is. We address this gap through an inductive study of the emergence of the music synthesizer, drawing upon a unique data set of four leading firms’ complete product offerings and advertisements from 1975 through 1986 as well as interviews with professional musicians over the same time period. We discover that conventional dimensions of competitive positioning, such as features and price, do not capture important distinctions in how firms framed their products. Rather, firms projected two distinct meanings for the synthesizer: a new instrument that enables a musician to create and/or play new “synth” sounds, or an emulator of acoustic instruments. These meanings were also salient amongst professional musicians. The fundamental differences in meaning were distinct from both the product label as well as the technical “reality” of each synthesizer, and shaped the ways in which firms positioned and thus differentiated their products. Specifically, our analysis reveals three meaning-based strategies for positioning new products: meaning-focusing, meaning-spanning, and meaning-mixing. We also consider the implications of our findings for the literatures on emergent categories and on the social construction of technology.
We propose a synthesis of two lines of sociological research on boundary spanning in cultural production and consumption. One, research on cultural omnivorousness, analyzes choice by heterogeneous audiences facing an array of crisp cultural offerings. The other, research on categories in markets, analyzes reactions by homogeneous audiences to objects that vary in the degree to which they conform to categorical codes. We develop a model of heterogeneous audiences evaluating objects that vary in typicality. This allows consideration of orientations on two dimensions of cultural preference: variety and typicality. We propose a novel analytic framework to map consumption behavior in these two dimensions. We argue that one audience type, those who value variety and typicality, are especially resistant to objects that span boundaries. We test this argument in an analysis of two large-scale datasets of reviews of films and restaurants.
Studies suggest that category-spanning organizations receive lower evaluation and perform worse than organizations focused on a single category. We propose that (1) these effects are contingent on clients' theory of value and that as clients expect more sophisticated services, they tend to value category spanners more positively and (2) the evaluation of producers mediates the relationship between category spanning and performance. We test our hypotheses using original data on corporate legal services in three markets (London, New York City, and Paris) over the decade 2000–2010. We find that (1) category spanners receive a better evaluation, and more so when their categorical combination is more inclusive and (2) evaluation mediates significantly the relationship between category spanning and performance. This study enriches our understanding of how audiences apprehend a whole market category system and why organizations span categories.
The increasing amount of electronic word of mouth (eWOM) has significantly affected the way consumers make purchase decisions. Empirical studies have established an effect of eWOM on sales but disagree on which online platforms, products, and eWOM metrics moderate this effect. The authors conduct a meta-analysis of 1,532 effect sizes across 96 studies covering 40 platforms and 26 product categories. On average, eWOM is positively correlated with sales (.091), but its effectiveness differs across platform, product, and metric factors. For example, the effectiveness of eWOM on social media platforms is stronger when eWOM receivers can assess their own similarity to eWOM senders, whereas these homophily details do not influence the effectiveness of eWOM for e-commerce platforms. In addition, whereas eWOM has a stronger effect on sales for tangible goods new to the market, the product life cycle does not moderate the eWOM effectiveness for services. With respect to the eWOM metrics, eWOM volume has a stronger impact on sales than eWOM valence. In addition, negative eWOM does not always jeopardize sales, but high variability does.
Recent scholarship on the returns to labor market specialization often claims that being specialized is advantageous for job candidates. We argue, in contrast, that a specialist discount may occur in contexts that share three features: strong institutionalized mechanisms, candidate profiles with direct investments that signal their value, and a high supply of focused candidates relative to demand. We then test whether there is a specialist discount for graduating elite MBAs, as it is a labor market that exemplifies these conditions under which we expect specialists to be penalized. Using rich data on two graduating cohorts from a top-tier U.S. business school, we show that elite MBA graduates who established a focused (specialized) market profile of experiences relating to investment banking before and during the program were less likely to receive multiple job offers and were offered less in starting-bonus compensation than similar MBA candidates with no exposure or less-focused exposure to investment banking. Our theory and findings suggest that the oft-documented specialist advantage may be overstated.
A general finding in economic and organizational sociology shows that objects that span categories lose appeal to audiences. This paper argues that the negative consequences of crossing boundaries are more severe when the categories spanned are distant and have high contrast. Available empirical strategies do not incorporate information on the distances among categories. Here we introduce novel measures of distance in conceptual space and derive measures for typicality, category contrast, and categorical niche width. Using the proposed measurement approach, we test our theory using data on online reviews of books and restaurants.
Recent literature on organizational category spanning demonstrates that organizations that span multiple categories on average suffer social and economic disadvantages in markets. While multiple mechanisms have been proposed to explain this finding, most studies do not test directly nor contrast these mechanisms. In this article, we contrast two of the main mechanisms proposed in the literature: the audience-side typicality-based explanation (category spanners are atypical of each categories spanned) and the producer-side quality-based explanation (category spanners produce lower quality output because they cannot develop expertise in any of the categories spanned). We find evidence for both mechanisms. Furthermore, we argue that quality and typicality interact such that high-quality organizations can benefit from being atypical. Finally, we contrast two kinds of spanning, "fusion" and "food court," and argue that their effects are different depending on the overall quality of the organization. Our empirical setting is the restaurant domain, and we analyze menus and reviews of 474 restaurants located in San Francisco.
Stable category meanings act as institutions that facilitate market exchange by providing bases for comparison and valuation. Yet little is known about meaning construction in new categories or how meaning translates into valuation criteria. We address this gap in a descriptive study of these processes in an emerging category: modern Indian art. Discourse analysis revealed how market actors shaped the construction of meaning in the new category by reinterpreting historical constructs in ways that enhanced commensurability and enabled aesthetic comparisons and valuation. Analysis of auction transactions indicated greater intersubjective agreement about valuation over time as the new category institutionalized.
Conventional wisdom in organization theory holds that the environment imprints organizations at the time of their birth. We reverse the imagery and propose that early founding of a nonprofit organization in one domain imprints a community with a general institutional legacy of collective civic action. Consequently, the community is more likely to later establish new nonprofit organizations in a different domain. Empirically, we show that Norwegian communities that were the earliest to establish mutual fire insurance organizations and mutual savings banks in the 19th century were more likely to experience foundings of cooperative stores in the 20th century. We discuss how the founding of formal nonprofit organizations creates an institutional legacy that amplifies variations in the civic capacity of communities and outline how it complements accounts of organizational imprinting.
Studies show that blending multiple categories rather than fitting one category cleanly undermines the appeal of market offerings, but in science and technology, blending multiple categories has been a formula for creating important new categories like nanotechnology. What enables such blends to earn approval and become recognized as new categories? We argue that reactions to category blending are affected by both micro and macro factors. Specifically, blend reactions are affected at the micro level by cognitive limits, especially as blends are repeated, and at the macro level by domain-specific logics for judging quality. Using data on nanotechnology patents, we test this argument by analyzing two dimensions of approval: time to approval and citations by subsequent patents. In addition to showing that blending has different effects on these two dimensions of approval, our findings suggest that reactions to blending are moderated, as argued, by (1) institutional logics that value novel combinations and (2) the repetition of blends that came to define nanotechnology. Our study contributes to theory by linking approval of category blends to cognitive limitations and cultural and institutional logics of evaluation.
Various patterns of age dependence in hazards of organizational failure have been documented: liabilities of newness, adolescence, and obsolescence. Prior efforts at providing a unified theory that can accommodate these patterns as special cases have not dealt properly with obsolescence. We tackle this problem by proposing a new model that builds on the most recent unification attempt while integrating the core intuition behind obsolescence: organizations have trouble adapting to drifting environments, which leads to declining performance and, in turn, to decreasing viability. In doing so, we develop a comprehensive representational framework to precisely characterize obsolescence. Our perspective builds on recent theory and research that treats categories as constructions by audiences. We characterize environmental drift as changing audience tastes in a multidimensional feature space and organizational inertia as a decreasing ability for producers to move quickly in that space. This combination creates obsolescence with aging. We then integrate this perspective with prior theory to make novel predictions regarding the age dependence in life chances over the life courses of organizations. We also show how the predictions of our theory can be tested empirically by adapting Levinthal’s random walk model [Levinthal DA (1991) Random walks and organizational mortality. Admin. Sci. Quart. 36(3):397–420] to incorporate the possibility of organizational obsolescence.
e present two studies that together test a fundamental yet rarely examined assumption underlying the contemporary appeal of authenticity—namely, that consumers assign higher value ratings to organizations regarded as authentic. Study 1 conducts content analysis of unsolicited online restaurant reviews entered voluntarily by consumers in three major U.S. metropolitan areas from October 2004 to October 2011; the data contain information from 1,271,796 reviews written by 252,359 unique reviewers of 18,869 restaurants. The findings show that consumers assign higher ratings to restaurants regarded as authentic, even after controlling for restaurant quality in several ways. In addition, we find that consumers perceive independent, family-owned, and specialist (single-category) restaurants as more authentic than they do chain, non-family-owned, and generalist (multiple-category) restaurants. Study 2 reinforces these findings using an experimental design in which participants were presented with photos and minimal descriptions of fictitious restaurants and then asked to evaluate the likely authenticity, quality, and overall value of the restaurants in a predetermined sequence. Central to both studies is an authenticity scale that was developed through the use of an online survey that ascertains the specific language used by individuals in referencing authenticity in the restaurant domain. Taken together, these studies demonstrate that authenticity generates higher consumer value ratings of organizations; the studies also identify certain types of organizations that are more likely to receive authenticity attributions by consumers.
The literature on evolution of organizational forms remains largely silent on where the first organizational instance of a new form comes from, treating it either as a given or as an outcome of random variation. We challenge this agnostic assumption by putting the first organizational founding into a specific spatio-temporal context and revealing the role of provisional spaces, defined as small-scale, easily accessible settings where market pioneers temporarily experiment with applications of an innovation before dedicated organizations emerge. We theorize that provisional spaces disseminate necessary information about an innovation and enable potential entrepreneurs to envision a new template for organizing. Therefore, geographic communities with a higher number of provisional spaces are more likely to host the first organization embodying a new form sooner than others. Using archival data on all movie-showing venues in Chicago communities, 1896-1927, we find empirical support to our theorizing. Community variance in volume and types of provisional spaces for movie projectors, such as opera houses and penny arcades, led to community-level differences in the emergence of distinct movie theater forms: nickelodeon, movie house, and movie palace. This study advances scholarship on organizational form emergence by uncovering the role of provisional spaces in shaping localized opportunity structures.
This paper studies how audience members categorize and evaluate ambiguous offerings. Depending on whether audience members categorize ambiguous offerings based on prototypes or goals, they activate two distinct cognitive mechanisms and evaluate differently ambiguous offerings. We expect that when audiences engage in goal- versus prototype-based categorization, their evaluation of ambiguous products increases. We theorize that, under goal-based categorization, the perceived utility of unclear attributes increases for audiences, which leads them to evaluate more positively ambiguous product offerings. We test and find support for these direct and mediated relationships through a series of laboratory, online, and field experiments. Overall, this study offers important implications for research on product and market categories, optimal distinctiveness, and market agents’ cognitive ascription of value.
We connect two distinct streams of research on categories to study the role of within-category typicality in the context of legitimacy shocks. We argue that, following a legitimacy shock, member organizations of the tainted, focal category suffer equally, irrespective of their typicality. However, only the typical members of the newly favored, oppositional category benefit. Therefore, the effects of legitimacy shocks are asymmetrically influenced by typicality. We argue this pattern is the result of a two-stage process of categorization by audiences, whereby audiences prioritize distinctions between organizations in a newly favored category and spend limited efforts considering distinctions in the tainted, focal category. We examine our theory in the context of the U.S. financial services industry, where four different kinds of organizations engage in competition: traditional commercial banks, community banks, single-bond credit unions, and multibond credit unions. Consistent with our theory, we show that both traditional commercial banks and community banks suffer in terms of deposit market share following the legitimacy shock of the 2007 financial crisis, but the relative gains to credit unions are strongest for single-bond credit unions.
Authenticity is a valuable attribution for organizations, but one that raises a challenge of audience acceptance for innovative entrepreneurs. In particular, organizations that depart from an established type risk being judged as inauthentic. However, entrepreneurs may be able to overcome this challenge by basing their authenticity on notions of craft—such as skilled hands-on techniques, sophisticated ingredients, and small-scale artistry rather than mass industrial manufacturing—that better support innovation. We propose that communities vary in the extent to which they embrace craft production as an evolved understanding of authenticity that is less concerned with conformity to type. This local context, in turn, conditions the likelihood of entrepreneurs creating innovative ventures that rely on perceptions of craft authenticity. We develop this argument through a mixed-methods study of the spatially uneven emergence of gourmet food trucks across the United States. Our findings contribute to research on authenticity and the geography of entrepreneurship and innovation.
To gain attention and build support for new categories, market entrepreneurs often define a new category through its contrast with related, established offerings. Existing research has largely focused on the benefits of this oppositional categorical positioning. In this study, we explore how this strategy might be a double-edged sword. Through a longitudinal inductive study of the e-cigarette category in the U.S. (2007–2017), we develop theory on the risks of associating with an already established category. In our empirical case, we document how value-based distinctions between cigarettes and e-cigarettes became eroded and the e-cigarette category grew increasingly stigmatized. We then propose several mechanisms through which the symbolic and social boundaries between a new and an established category can weaken and the stigma associated with an existing category can become diffused, intensified, and generalized—both across organizational features and across organizations in the new category. This case allows us to investigate the processes by which strategies to legitimize categories may backfire and to consider the role that a diverse set of core and peripheral stakeholders—who enter the market with pre-existing knowledge and motivations—play in category stigmatization processes.
I've been asked to comment on this collection of three papers, each of which offers deep insights into the forces affecting the auto industry, particularly as concerns the relative positions of incumbent auto firms with respect to new electric vehicle entrants. Taken as a whole, the papers open a lens on the changes roiling the automotive sector. In this essay, I'll attempt to widen the aperture and provide a framework for a more systemic analysis of the forces reshaping the industry and the prospects for new entrants.
The "categorization as a theoretical tool" framework is delineated to clarify how innovation is possible even though candidates for exchange face a "categorical imperative" - pressure from their audience to adopt the conventional practices associated with existing categories. The key insight is that categorization is generally a useful tool for sorting and screening exchange opportunities. This insight is developed to suggest how the nature of the imperative varies with the audience's objectives and the theory of value it espouses and how the strength of the imperative varies with the social challenges and opportunities for engaging in, and learning from, experiments with unconventionality.
This paper reviews several streams of research on market category formation. Most past research has largely focused on established category systems and the antecedents and consequences of categorical positioning (i.e., categorical purity vs. spanning; combination vs. replacement) but relatively ignored the formative processes leading to new categories. In this review, we address this lacuna to posit that scholarship would benefit from clearly disentangling category emergence from category creation. We analytically describe the differences between the two and elaborate the boundary conditions that guide and define which process is more likely to occur in a given market. Our review contributes to illuminating the role of organizational agency and strategic actions in market categories and their formation, which deserve greater attention as a result of their theoretical and practical implications.
Schemas are a central concept in strategy and organization theory. Yet, despite the importance of schemas, little is known about how they emerge. Our in-depth historical analysis of how groups in the life insurance industry developed their schema for the computer from 1945–1975 addresses this gap. We identify three key processes—assimilation, deconstruction, and unitization—that collectively explain and resolve an inherent tension related to schema emergence: how to make the unfamiliar familiar but conceptually distinct. We also find that each process relates to analogical transfer, but in a more pluralistic and dynamic way than the existing literature describes. Broadly, these findings have important implications for organizational change and managerial cognition.
Trade associations are an important topic of investigation for nonprofit and voluntary sector researchers because they serve civic purposes and help to support innovative areas of entrepreneurship. We examine how local trade associations in the emerging gourmet food truck industry help to reduce uncertainty and augment industry legitimacy by (a) representing collective interests when challenged by regulators and incumbents (e.g., restaurants), (b) generating collective identity and creating cultural capital, and (c) providing a regime to manage “tragedies of the commons,” procure club goods, and promote self-regulation. We draw on social media data and narrative accounts by industry activists to explicate the evolution of the field from 2008 to 2012 in 11 cities. Findings suggest that trade associations, as an often-overlooked type of mutual benefit association, are key players in the legitimation of creative industries.
To examine the transition from a planned to a market economy in China, this study uses census data from China’s National Bureau of Statistics from 1998–2006 to investigate multi-population dynamics across the three main organizational forms in China’s domestic sector: state-owned enterprises (SOEs), collectively owned enterprises (COEs), and privately owned enterprises (POEs). We conceptualize economic transition as a community-level change from an old, dominant organizational form (SOE), through a transitional form (COE), to a new form (POE). When the new organizational form conflicts with the prevailing identity codes represented by the old form, the transitional form—which has identity overlap with both the new and old forms—performs the critical tasks of transferring legitimacy to the new form and supporting its survival and proliferation. Our analysis showed that, though the existence of state-owned enterprises increased the exit rate of privately owned enterprises, collectively owned enterprises provided legitimation for privately owned enterprises. Meanwhile, privately owned enterprises crowded out both state-owned enterprises and collectively owned enterprises. We contribute to ecology theory by extending research that typically depicts a two-population scenario. Our framework accommodates cross-effects involving three organizational forms: old, transitional, and new.
The research reported here explores how institutional practices change over time in an interorganizational field, in the historical context of the U.S. radio broadcasting industry. It identifies three endogenous mechanisms of change: analogies that are used to make sense of and manage new phenomena, private agreements between identifiable parties, and conventions, the practices adopted by some constituents to solve coordination problems. The use of each mechanism is associated with the nature of the goods transacted within a field and triggers change in established practices as actors attempt to realize value from their transactions. After describing each mechanism as found in the radio broadcasting industry, we focus our historical analysis on conventions. It reveals that conventions were introduced into the broadcasting field by fringe players to deal with shifting coordination problems and competitive pressures. Once they were adopted by the central players, these conventions transformed the organization of the industry by changing the basis of transactions and became its new institutional practices. We conclude that the organization of a field is not permanent, but is contingent upon institutionalized definitions of what is being transacted.
We advance a theory of how business models can be innovated proactively in the absence of exogenous changes, through processes of generative cognition. We contribute to the cognitive perspective in strategy by analyzing business models as schemas that organize managerial understandings about the design of firms' value-creating activities and exchanges and by theorizing how they can be innovated through processes for proactive schema change. Drawing on cognitive psychology research on two major cognitive processes through which individuals change their schema to cope with novelty, analogical reasoning and conceptual combination, we theorize firm-level strategic processes for designing innovative business models. Copyright © 2015 Strategic Management Society.
Culture influences action not by providing the ultimate values toward which action is oriented, but by shaping a repertoire or "tool kit" of habits, skills, and styles from which people construct "strategies of action." Two models of cultural influence are developed, for settled and unsettled cultural periods. In settled periods, culture independently influences action, but only by providing resources from which people can construct diverse lines of action. In unsettled cultural periods, explicit ideologies directly govern action, but structural opportunities for action determine which among competing ideologies survive in the long run. This alternative view of culture offers new opportunities for systematic, differentiated arguments about culture's causal role in shaping action.
We describe experimental vignette methodology (EVM) as a way to address the dilemma of conducting experimental research that results in high levels of confidence regarding internal validity but is challenged by threats to external validity versus conducting nonexperimental research that usually maximizes external validity but whose conclusions are ambiguous regarding causal rela-tionships. EVM studies consist of presenting participants with carefully constructed and realistic scenarios to assess dependent variables including intentions, attitudes, and behaviors, thereby enhancing experimental realism and also allowing researchers to manipulate and control indepen-dent variables. We describe two major types of EVM aimed at assessing explicit (i.e., paper people studies) and implicit (i.e., policy capturing and conjoint analysis) processes and outcomes. We offer best practice recommendations regarding the design and implementation of EVM studies based on a multidisciplinary literature review, discuss substantive domains and topics that can benefit from implementing EVM, address knowledge gaps regarding EVM such as the need to increase realism and the number and diversity of participants, and address ways to overcome some of the negative perceptions about EVM by pointing to exemplary articles that have used EVM successfully. Keywords research design, experimental design, quasi-experimental design Understanding the direction and nature of causal relationships is the cornerstone of science (Shadish, Cook, & Campbell, 2002). While the majority of management research provides evidence regarding covariation between antecedent and outcome variables, covariation alone does not answer two important questions crucial for establishing causality: (a) Did the antecedent occur temporally
We examine the emergence and proliferation of payday lenders, fringe businesses that provide
small short-term, but high-cost loans. We link the organizational dynamics of these businesses
to two trends in consumer lending in the United States: the continuing consolidation of
mainstream financial institutions; and the expansion of such institutions in the provision
of financial services regarded as similar to payday loans. We explain the coexistence in
mature industries of large-scale organizations in the market center and smaller specialists
in the periphery by testing and extending the organizational model of resource partitioning.
Our focus is on two under-examined aspects of the model: the dynamic underlying the
partitioning process, and the conditions under which the market remains partitioned. The
empirical analysis covers payday lenders, banks, and credit unions operating in Wisconsin
between 1994 and 2008.