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Constructing markets and organizing boundaries: entrepreneurial action in nascent fields

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This paper examines how entrepreneurs manage their organizational boundaries in nascent markets. Given the limits of extant theory, we conducted an inductive theory-building study of five firms over a multi-year period. The result is a framework that describes how entrepreneurs co-construct the boundaries of their firm and market using three key processes. First, entrepreneurs attempt to claim a nascent market by making the identity of the firm and the market synonymous. They accomplish this by using leadership signals, disseminating stories and adopting templates that balance familiarity and novelty. Second, entrepreneurs attempt to demarcate the market by creating a clear perimeter for the firm and shaping the surrounding industry structure. They accomplish this by co-opting established firms through alliances that are often very costly to the entrepreneurial firm. Third, entrepreneurs attempt to control the market by overlapping the footprint of the firm with the changing scope of the market. They accomplish this by acquiring entrepreneurial rivals who could become stepping-stones for established firms to open new market segments or possess threatening resources. Overall, the focal firms were varyingly successful in executing these three processes. This, in turn, influenced significant outcomes such as market creation, level of competition, and market share. Taken together, these findings offer a dynamic and strategic view of boundaries that is shaped by an underlying logic of power. Overall, this paper contributes to reinvigorating the study of inter-organizational power by exploring the processes through which low power actors, such as entrepreneurs, attempt to construct new markets.

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