The Persistence of Lenient Market Categories

Abstract

Research across disciplines presumes that market categories will have strong boundaries. Categories without well-defined boundaries typically are not useful and do not become institutionalized, so are expected to fade away. In contrast, many contexts contain lenient market categories, or less-constraining market categories, that persist and become important. We argue this fact can be explained by looking at market categories from the producer perspective. Lenient market categories are accepting of many different types of organizations and offer more flexibility. As a result, we expect there to be high rates of entry into lenient categories. At the same time, lenient market categories offer less credibility than categories with strong boundaries, and so organizations will be more likely to exit. When entry rates are higher than exit rates, lenient market categories will endure over time. We also predict that organizations exiting lenient categories will enter other lenient categories, which further fuels their persistence. Finally, this trend is exaggerated when influential external agents favor leniency. We find support for these ideas in a longitudinal analysis of organizational entry into and exit from market categories in the software industry.

Beyond categorization: New directions for theory development about entrepreneurial internationalization

“…Categories that are more lenient allow greater flexibility with respect to inclusion than categories that are less lenient; in other words, category boundaries are more porous (Pontikes & Barnett, 2015). Lenient categories are attractive for producers -and presumably for scholars as knowledge producersbecause they can accommodate a greater range of fit (Pontikes & Barnett, 2015).…”

“…There are a host of individual-level, firm-level events and institutional-level events that can affect firms -for example, foreign travel, a change in leadership, a merger or acquisition, a change in government, a devaluation of currency, or the establishment of (or withdrawal from) a trade agreement -and these may lead to perceptions that the pursuit of a particular opportunity is more or less favorable. Entrepreneurship research suggests that even high profile firm-level successes and failures constitute vital events that signal the quality of subsequent opportunities (Pontikes & Barnett, 2015).…”

Anchors in Rough Seas: Understanding Category Spanning as a Source of Market Coordination

“…For instance, prior research has shown that, in French gastronomy, a large share of producers straddled classical and nouvelle cuisine over the period of study (Durand, ). In the broader restaurant industry, half of the restaurants in San Francisco were assigned to multiple categories/cuisines (Kovács and Hannan, , p. 189); similarly, half of the producers in the software industry appeared to span market categories, as suggested by the 0.5 mean value of fuzziness observed in these categories (Pontikes and Barnett, , p. 1424). Other contexts instead show higher or lower levels of spanning: for example, the mean value of contrast observed in the categories of corporate legal services equals 0.46 (Paolella and Durand, , p. 341) and increases up to 0.7 in the categories of the semiconductor industry (Carnabuci et al, , pp.…”

"Boundary-Crossing Job Mobility, New Product Area Entry and Performance of Entrepreneurial Ventures"

“…Innovations brought by new startup entrants can change the identity and meaning of a product category by prompting reinterpretation of the category to encompass them (G. Hsu, Hannan, & Polos, 2011;Negro, Hannan, & Rao, 2011). Moreover, high-technology product areas can generally be considered lenient categories (Pontikes & Barnett, 2015), given that change and innovation are fundamental characteristics of high-tech. Lenient categories are flexible to change by organizational members (Pontikes & Barnett, 2015), making a startup's choice to enter a new product area formative for the product category as well as the innovation.…”

“…Moreover, high-technology product areas can generally be considered lenient categories (Pontikes & Barnett, 2015), given that change and innovation are fundamental characteristics of high-tech. Lenient categories are flexible to change by organizational members (Pontikes & Barnett, 2015), making a startup's choice to enter a new product area formative for the product category as well as the innovation.…”