An Ecology of Market Categories

Elizabeth G. Pontikes

University of Chicago - Booth School of Business

Michael Hannan

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: 44

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Date posted: December 19, 2012  

Suggested Citation

Pontikes, Elizabeth G. and Hannan, Michael, An Ecology of Market Categories (December 7, 2012). Chicago Booth Research Paper No. 12-62. Available at SSRN: http://ssrn.com/abstract=2191176 or http://dx.doi.org/10.2139/ssrn.2191176

Contact Information

Elizabeth G. Pontikes (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
Michael Hannan
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
650-723-1511 (Phone)
650-725-7692 (Fax)

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