This paper seeks to enhance our understanding of the shaping of a market by a firm or set of firms competing in that market. The analysis draws on evolutionary economics and incorporates insights from prior research on shaping that has relied on a socio-cognitive perspective. The approach taken here can provide a means to more clearly distinguish shaping from adaptation and search and has implications for organization–environment coevolution and the evolution of competitive advantage.
{"title":"What Does Firm Shaping of Markets Really Mean?","authors":"Constance E. Helfat","doi":"10.1287/stsc.2021.0144","DOIUrl":"https://doi.org/10.1287/stsc.2021.0144","url":null,"abstract":"This paper seeks to enhance our understanding of the shaping of a market by a firm or set of firms competing in that market. The analysis draws on evolutionary economics and incorporates insights from prior research on shaping that has relied on a socio-cognitive perspective. The approach taken here can provide a means to more clearly distinguish shaping from adaptation and search and has implications for organization–environment coevolution and the evolution of competitive advantage.","PeriodicalId":45295,"journal":{"name":"Strategy Science","volume":" ","pages":""},"PeriodicalIF":3.9,"publicationDate":"2021-08-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49370103","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In several celebrated examples, incumbents with significant resources have been beaten, in their own core businesses, by young start-ups. We identify a general mechanism that explains how these entrants can succeed against seemingly impossible odds. Specifically, we argue that they circumvent the entry barriers by using new business models that do not depend on the hard-to-imitate resources protecting the incumbent. While the entrants are gaining experience with their business models, they develop their own hard-to-imitate resources, and these eventually allow them to expand into the incumbents’ core markets. We formalize the argument in a model, derive several comparative static predictions, and illustrate it with a number of examples. The mechanism does not work if the incumbents react immediately, but we will draw on the literature on corporate inertia to argue that three of the mechanism’s properties make it especially likely that incumbents will be slow to adopt new business models.
{"title":"When Does the Underdog Win?","authors":"B. Wernerfelt","doi":"10.1287/stsc.2021.0131","DOIUrl":"https://doi.org/10.1287/stsc.2021.0131","url":null,"abstract":"In several celebrated examples, incumbents with significant resources have been beaten, in their own core businesses, by young start-ups. We identify a general mechanism that explains how these entrants can succeed against seemingly impossible odds. Specifically, we argue that they circumvent the entry barriers by using new business models that do not depend on the hard-to-imitate resources protecting the incumbent. While the entrants are gaining experience with their business models, they develop their own hard-to-imitate resources, and these eventually allow them to expand into the incumbents’ core markets. We formalize the argument in a model, derive several comparative static predictions, and illustrate it with a number of examples. The mechanism does not work if the incumbents react immediately, but we will draw on the literature on corporate inertia to argue that three of the mechanism’s properties make it especially likely that incumbents will be slow to adopt new business models.","PeriodicalId":45295,"journal":{"name":"Strategy Science","volume":"7 23","pages":""},"PeriodicalIF":3.9,"publicationDate":"2021-08-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41311647","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article discusses recent results and future research possibilities in the areas of econometrics and firm growth, drawing on Dosi and Marengo’s “10 building blocks” of evolutionary theory. These 10 building blocks are: dynamics first!, microfoundations, realism is a virtue, bounded rationality, persistent heterogeneity, novelty in the system, selection mechanisms, emergent properties at the aggregate level, emergence of organizational forms and institutions, and coevolution across levels of analysis and timescales. As it happens, many of our comments relate to the theme of “realism is a virtue.” We also suggest, in some cases, which econometric techniques might be more appropriate for research into firm growth and performance, given these 10 building blocks.
{"title":"Econometrics and the Growth of Firms: Perspectives from Evolutionary Economics","authors":"Alex Coad","doi":"10.1287/stsc.2021.0132","DOIUrl":"https://doi.org/10.1287/stsc.2021.0132","url":null,"abstract":"This article discusses recent results and future research possibilities in the areas of econometrics and firm growth, drawing on Dosi and Marengo’s “10 building blocks” of evolutionary theory. These 10 building blocks are: dynamics first!, microfoundations, realism is a virtue, bounded rationality, persistent heterogeneity, novelty in the system, selection mechanisms, emergent properties at the aggregate level, emergence of organizational forms and institutions, and coevolution across levels of analysis and timescales. As it happens, many of our comments relate to the theme of “realism is a virtue.” We also suggest, in some cases, which econometric techniques might be more appropriate for research into firm growth and performance, given these 10 building blocks.","PeriodicalId":45295,"journal":{"name":"Strategy Science","volume":" ","pages":""},"PeriodicalIF":3.9,"publicationDate":"2021-07-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42155566","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
History-friendly models have been increasingly adopted to study innovation and industry evolution, the catch-up of latecomer firms and countries, and public policies. However, they have been used less in the field of strategic management. In this article, we first provide a review of the history-friendly literature, identifying its intellectual roots in evolutionary economics. Then, we discuss three possible motivations that could explain the history-friendly paradox. Finally, we propose history-friendly models as a promising tool to study current research questions in strategy.
{"title":"History-Friendly Modeling: An Evolutionary Tool for Strategy Research","authors":"Gianluca Capone, Daitian Li","doi":"10.1287/STSC.2021.0133","DOIUrl":"https://doi.org/10.1287/STSC.2021.0133","url":null,"abstract":"History-friendly models have been increasingly adopted to study innovation and industry evolution, the catch-up of latecomer firms and countries, and public policies. However, they have been used less in the field of strategic management. In this article, we first provide a review of the history-friendly literature, identifying its intellectual roots in evolutionary economics. Then, we discuss three possible motivations that could explain the history-friendly paradox. Finally, we propose history-friendly models as a promising tool to study current research questions in strategy.","PeriodicalId":45295,"journal":{"name":"Strategy Science","volume":" ","pages":""},"PeriodicalIF":3.9,"publicationDate":"2021-07-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44442383","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Does culture eat strategy for breakfast? This paper investigates the interactions among corporate culture, norms, and strategy, in order to better understand this issue and related questions. It first shows, through microfoundations, how the forces that drive toward “culture as shared beliefs and preferences” also cause the emergence of social norms (when these beliefs and preferences are unobservable), with people even endogenously enforcing norms that go against their own beliefs and preferences. The latter effect may cause a disconnect between the organization’s norms and its underlying beliefs and preferences. The paper then makes predictions on the kinds of shared beliefs, preferences, and norms that are likely to emerge, and when they are most likely to emerge. It shows, for example, that social norms are more likely in attractive organizations, for behaviors that have modest personal consequences, and on dimensions along which employees depend on others’ choices to a moderate degree. Building on these insights and on the definition of “strategy as core guidance,” we finally discuss how corporate culture and strategy interact. We show, in particular, how culture is not just an input into strategy but also a direct substitute for strategy and often even a competitor. The results throw light on ways to deal with the “breakfast” issue.
{"title":"Birds of a Feather … Enforce Social Norms? Interactions among Culture, Norms, and Strategy","authors":"Hongyi Li, E. Van den Steen","doi":"10.1287/STSC.2021.0129","DOIUrl":"https://doi.org/10.1287/STSC.2021.0129","url":null,"abstract":"Does culture eat strategy for breakfast? This paper investigates the interactions among corporate culture, norms, and strategy, in order to better understand this issue and related questions. It first shows, through microfoundations, how the forces that drive toward “culture as shared beliefs and preferences” also cause the emergence of social norms (when these beliefs and preferences are unobservable), with people even endogenously enforcing norms that go against their own beliefs and preferences. The latter effect may cause a disconnect between the organization’s norms and its underlying beliefs and preferences. The paper then makes predictions on the kinds of shared beliefs, preferences, and norms that are likely to emerge, and when they are most likely to emerge. It shows, for example, that social norms are more likely in attractive organizations, for behaviors that have modest personal consequences, and on dimensions along which employees depend on others’ choices to a moderate degree. Building on these insights and on the definition of “strategy as core guidance,” we finally discuss how corporate culture and strategy interact. We show, in particular, how culture is not just an input into strategy but also a direct substitute for strategy and often even a competitor. The results throw light on ways to deal with the “breakfast” issue.","PeriodicalId":45295,"journal":{"name":"Strategy Science","volume":" ","pages":""},"PeriodicalIF":3.9,"publicationDate":"2021-05-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45256907","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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.
{"title":"A Spanner in the Works: Category-Spanning Entrants and Audience Valuation of Incumbents","authors":"Rory M. McDonald, R. Allen","doi":"10.1287/STSC.2021.0130","DOIUrl":"https://doi.org/10.1287/STSC.2021.0130","url":null,"abstract":"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.","PeriodicalId":45295,"journal":{"name":"Strategy Science","volume":" ","pages":""},"PeriodicalIF":3.9,"publicationDate":"2021-05-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46675911","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this introductory essay, we develop a theoretical framework of agency as a basis for strategic shaping and market transformation. We conceive of agency as both constrained and enabled by structure, and we build on sociological views that treat market structures as pairings of cultural schemas and material resources that are mutually sustaining. Structures contain the seeds for change because contradictions and conflicts that are inherent to structure inspire agents to imagine a new order and provide pathways to enact them. We theorize three connected forms of agency. Constructive agency captures agents’ ability to differently apply schemas to mobilize resources and improve their strategic positions. Temporal agency underlies agents’ autonomy and individuation, and enables agents to envision new possibilities. Interactive agency captures the collective nature of agency, where interactions among heterogeneous actors provide opportunities for agents to persuade others of their changing conceptions and learn new schemas, expanding agents’ repertoires for shaping opportunities.
{"title":"Shaping Markets Through Temporal, Constructive, and Interactive Agency","authors":"Elizabeth G. Pontikes, V. Rindova","doi":"10.1287/stsc.2020.0110","DOIUrl":"https://doi.org/10.1287/stsc.2020.0110","url":null,"abstract":"In this introductory essay, we develop a theoretical framework of agency as a basis for strategic shaping and market transformation. We conceive of agency as both constrained and enabled by structure, and we build on sociological views that treat market structures as pairings of cultural schemas and material resources that are mutually sustaining. Structures contain the seeds for change because contradictions and conflicts that are inherent to structure inspire agents to imagine a new order and provide pathways to enact them. We theorize three connected forms of agency. Constructive agency captures agents’ ability to differently apply schemas to mobilize resources and improve their strategic positions. Temporal agency underlies agents’ autonomy and individuation, and enables agents to envision new possibilities. Interactive agency captures the collective nature of agency, where interactions among heterogeneous actors provide opportunities for agents to persuade others of their changing conceptions and learn new schemas, expanding agents’ repertoires for shaping opportunities.","PeriodicalId":45295,"journal":{"name":"Strategy Science","volume":" ","pages":""},"PeriodicalIF":3.9,"publicationDate":"2020-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1287/stsc.2020.0110","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45486758","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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