Patterns of Competition: The Diffusion of a Market Position in Radio Broadcasting
Greve, Henrich R., Administrative Science Quarterly
How do organizations come to adopt a new market position? In markets in which several distinct products can co-exist because consumer tastes are differentiated, choosing a market position is an important strategic decision, but it is also difficult. According to the sociological theory of markets, the uncertainty of consumer response to changes is so great that large changes in position are unlikely (Leifer and White, 1987). Strategic group theorists argue that economic barriers constrain the organization's ability to enter a new position (Caves and Porter, 1977). Finally, population ecologists argue that marketing strategy is a core feature of the organization that is subject to inertial forces that make it difficult to adopt a new position (Harman and Freeman, 1977). Yet new market positions are occasionally created and populated by new or existing organizations. In the U.S. beer brewing industry, Carroll and Swaminathan (1992) found that micro-breweries had come to occupy the market position of small-quantity, premium beers and ales, a position that did not exist 20 years earlier, and that new organizations had been established across the country to take advantage of it. The same industry saw the "light" beer market position appear in the mid-seventies, and light beer was added to the product lines of existing organizations (Scherer and Ross, 1990: 583-584). In radio broadcasting, music formats are made to appeal to the tastes of specific demographic groups, allowing stations to sell a specialized audience to advertisers. In the last ten years a number of new formats have appeared. For example, Soft Adult Contemporary is supposed to appeal to women in their 30s and 40s, and Modern Country seeks a younger audience than traditional country formats. These formats have spread to markets across the nation as they have been adopted by existing organizations.
The common theme in these events is that a new market position has spread through mimetic organizational establishment or change. The entry of some organizations into a new market reduces the uncertainty of others about introducing new organizations and organizational practices, allowing entrepreneurial action to take place. Such imitation is seen in a variety of settings and is predicted by a number of theories (Mansfield, 1961; Coleman, Katz, and Menzel, 1966; Meyer and Rowan, 1977). This paper uses arguments found in institutional theory, population ecology, and herd behavior theory to build a theoretical foundation for the prediction of mimetic entry into a market. Herd behavior, the most recent of these theories, uses a model of rational decision making to predict that practices will be mimetically adopted because strategists use the actions of others to infer the information that they have, incorporating the idea of social influence into a model of rational action under uncertainty. The decision maker, according to herd behavior theory, is influenced by others because they are also rational, so their actions reveal how they view the available opportunities.
CHANGING MARKET POSITION
The concept of a market position begins with the observation that products differ in characteristics along some dimensions and that customers differ in their tastes for these characteristics. This means that the producer's decisions on volume and price are preceded by and constrained by a choice of what kind of product to offer (Prescott and Visscher, 1977; Scherer, 1979). Market position is related to the concept of niche in ecological theory (Hannan and Freeman, 1977: 946-956), because each position implies a fundamental niche, in which firms could exist in the absence of competition from neighboring positions, and a realized niche, in which firms can exist given a specific set of competitors. Because the success of firms in any position is determined by competition within the position and competition from firms in positions nearby, positional markets are very complex. …