An Ecology of Market Categories
Elizabeth G. Pontikes
University of Chicago - Booth School of Business
Stanford Graduate School of Business
December 7, 2012
Chicago Booth Research Paper No. 12-62
This paper proposes that social categorization is driven by an ecological dynamic that operates in two planes: feature space and label space. It develops a theoretical model that links positions in the two spaces. The first part of the theory predicts that an actor’s proximity in feature space to a labeled cluster increases its propensity to adopt the label. The second part predicts that the structure of label space affects this relationship: feature space positions are more weakly related to labeling for lenient labels. An empirical analysis of software producers, based on their positions in a technical feature space (derived from portfolios of patents) and a space of market labels, supports these predictions. The results imply that one producer’s changed labeling can change the sets of feature values associated with a label, which then affects other producers in the domain. This coupled ecological dynamic is found even in a loosely governed system of self-categorization. Findings suggest that constraining categories become more constraining, while lenient categories become more lenient.
Number of Pages in PDF File: 44working papers series
Date posted: December 19, 2012
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