Collective Action Problems During Market Formation: The Role of Resource Allocation

Forthcoming, Strategy Science

56 Pages Posted: 20 Apr 2020

See all articles by Jeroen Struben

Jeroen Struben

emlyon business school; Massachusetts Institute of Technology (MIT) - Sloan School of Management

Brandon H. Lee

Melbourne Business School

Christopher Bingham

University of North Carolina (UNC) at Chapel Hill

Date Written: March 27, 2020

Abstract

Collective action is critical for successful market formation. However, relatively little is known about how and under what conditions actors overcome collective action problems to successfully form new markets. Using the benefits of simulation methods, we uncover how collective action problems result from actor resource allocation decisions interacting with each other and how the severity of these problems depends on central market- and actor-related characteristics. Specifically, we show that collective action problems occur when actors undervalue the benefits of market-oriented resource allocation and when actors contribute resources that are imperfectly substitutable. Further, we show that collective action problems occur when actors are embedded in networks with others sharing a similar role in market formation. Collectively, our findings contribute new insights to organization theory on collective action and market formation and to strategy on value creation and strategic decision-making regarding resource allocation.

Keywords: market formation, collective action, resource allocation, decision-making, industry emergence, simulation

Suggested Citation

Struben, Jeroen and Lee, Brandon H. and Bingham, Christopher, Collective Action Problems During Market Formation: The Role of Resource Allocation (March 27, 2020). Forthcoming, Strategy Science, Available at SSRN: https://ssrn.com/abstract=3562150

Jeroen Struben

emlyon business school ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

HOME PAGE: http://https://www.marketformationdynamics.org/jeroen-struben

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Cambridge, MA 02142
United States

HOME PAGE: http://web.mit.edu/jjrs/www/

Brandon H. Lee (Contact Author)

Melbourne Business School ( email )

200 Leicester Street
Carlton, Victoria 3053 3186
Australia

Christopher Bingham

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

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