Navis and Glynn (2010). How new market categories emerge: temporal dynamics of legitimacy, identity, and entrepreneurship in satellite radio, 1990-2005

Chad Navis – University of Wisconsin-Madison
Mary Ann Glynn – Boston College

Amy Zhao-Ding – INSEAD
Andrea Contigiani – Wharton

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Question 1. In our view, one great contribution of this study is to bridge different streams of literature studying organizational identity and category. While the literature on entrepreneurial framing focused on the contribution of story telling and sense giving to organizational identity (Gioia, Schultz, & Corley, 2000, AMR; Lounsbury & Glynn, 2001, SMJ), institutionalists have been studying identities and categories with a focus on the evaluation role of the audience (Zuckerman, 1999, AJS; Hsu & Hannan, 2005, OrgSci). What inspired you to explore the confluence of the internal factors (entrepreneurial framing) and the external factors (audience attention) of the category? How did you manage to speak to different literatures, despite the diverging perspectives on some of the key concepts?

These questions touch on a challenge we confronted when we were writing the paper. Although we were focused from day one on unearthing the underlying mechanisms that help to explain, “How new market categories emerge,” we were intrigued not only by the role that entrepreneurial firms play in this process, but also how their efforts are received by relevant audiences. Ultimately, what pushed us to consider explicitly the confluence of both internal (entrepreneurial) and external (audience) factors was the idea that category emergence necessarily involves a social construction of reality that occurs between both producers and consumers. This approach mirrors, for instance, the socio-cognitive perspective taken by other researchers (e.g., Rosa et al., 1999). In the end, one of the main ways that we believe we managed to speak to the different literatures, despite their diverging perspectives, was to avoid grounding our paper in just one of these perspectives, but instead, drilling down to expose the more basic principles of what category emergence entails from a socio-cognitive perspective. That is, we built our theory around the basic properties of categories and the focal sensegiving and sensemaking dynamics—with their tensions—that prior research had suggested should be important to their social construction.

Question 2. Your theory predicts a shift of attention from collective identity to organizational identity when the category achieves legitimacy (H1). This two-step process appears to resonate well with the framework proposed by Zuckerman (1999, AJS). Zuckerman’s two-step evaluation highlighted the tension between firm’s attempts to conform in order to be considered and firm’s attempts to deviate in order to be chosen. Can you tell us more about the relation between your framework and that framework? Would you say your work emphasizes the temporal nature of the two steps? Does it suggest that belonging to a category is a hardly reversible process?

Great observation! Indeed, our theory and Zuckerman’s are quite compatible. However, one salient difference is that while Zuckerman describes a cognitive process in which audiences first identify relevant actors and then compare those actors selected within a particular set—a type of cognitive processing that can happen almost simultaneously—we unpacked these dynamics temporally and with regard to the emergent dynamics, over time, in the study of new a market category. Effectively, we demarcated two distinct periods that pivot around the legitimation of the category. We found that the initial pre-legitimacy period reflects a time when, in Zuckerman’s terms, not only are the appropriate bases for comparing firms unclear, but so too are the relevant firms that should even be considered in these evaluations. Subsequently, with the legitimation of the category, however, these cognitive dynamics change: Membership criteria for the category, along with the dimensions on which member firms can be meaningfully compared, begin to crystallize. Effectively, it is this type of category clarity that allows Zuckerman’s theorized process to function.

You also raise an interesting question in the point above around the reversibility of category membership. Building on the premise that a firm’s reversal of membership in one category may require the firm to find legitimate membership in another, we suppose that the answer likely depends on where a firm’s focal category of membership is situated within a broader classification system. In the case of XM and Sirius, for instance, which—through their focal membership in the satellite radio market category—were recognized as firms that provided a certain type of radio offering (e.g., one based on satellite radio transmissions), we expect they would have reasonable flexibility to “reverse” their satellite radio category membership through identity extensions into related radio- or satellite-based categories, naturally abandoning their satellite radio membership over time. In contrast, these firms may have much less potential to extend their identities into more distal categories, where the residue of their identities as satellite radio providers may create confusion, misunderstanding, and associated “legitimacy discounting.”

Other, perhaps less obvious, factors likely to influence the reversibility of a firm’s category membership are the distinctive identity attributes that firms claim, which may be more peripheral to their membership in particular market categories. Returning to our research setting, for example, XM crafted a distinctive identity within the satellite radio category as a musical purist, and Sirius crafted a distinctive identity as a provider of entertainment. Thus, apart from their market category membership as satellite radio providers, one could imagine the distinguishing “music” and “entertainment” identity attributes of these firms to also influence the nature of their opportunities for reversing their market category membership. More generally, however, it suggests that it might be useful to look at how market categories emerge (or change) within broader classification systems; in this case, perhaps, we might explore the overlap between the industry categories of “entertainment” and “satellite radio” for their overlap or embeddedness, as well as the implications for firms which might have a footing in each of these categories.

Question 3. Your H2 suggests a shift in emphasis of linguistic framing from collective identity to distinctiveness after legitimation. Much literature in innovation has analyzed the nature of new technologies, one well-known example being the idea of disruptive innovation (Christensen and Bower, 1996, SMJ). A factor that might enter the picture seems to be the technological nature of the product. If such new product is radically innovative (i.e. substantially new relative to that of other players), perhaps the emphasis on its distinctiveness is less necessary, or even costly. Do you think the technological nature of a firm’s product may be a potential moderator in this analysis?

We gave this question a lot of thought as we worked on this paper. In fact, these basic ideas are what led us to write our conceptual paper on “legitimate distinctiveness” (Navis & Glynn, 2011, AMR). In that paper, we proposed that the frame of reference provided by a focal market context can have an important influence on how external audiences evaluate the favorability of entrepreneurial identities, which we define in terms of the constellation of claims around the founder, new venture, and market opportunity as to “who we are” and “what we do.” We proposed that, in more established market categories, entrepreneurial identities would be viewed as legitimately distinctive when they were situated within the category (for legitimacy), but individuated from other members of the category by their gradient of deviation from the established categorical prototype (for distinctiveness). These ideas also seem to have close application to your question. Whereas superior technology is one type of attribute that can individuate firms in established market categories, it would be important that firms with such advantages still adhere to the categorical expectations that grant them legitimacy as valid members. Thus, in cases such as these, firms may be better served to downplay—rather than publicize—these radical, self-apparent technology differences, and, instead, emphasize their fit with existing categorical conventions. We see this approach as similar to what Hargadon and Douglas (2001, ASQ) described in their study of Edison and the electric light.

Question 4. Your study is based on a fascinating context, the US satellite radio. This choice of context has several empirical advantages, as you clearly explain in the paper. However, as you also acknowledge in the paper, this is a duopoly in an industry with high entry barriers, and needs caution before generalization. How do you think your predictions would change in a more competitive market with a large number of players? Would you predict similar behavioral patterns if there was greater heterogeneity among players in terms of age, size, and strategy?

This is another interesting—and important—question, with two distinct aspects that stand out to us. One pertains to the competitive intensity of a market where category emergence is attempted. In our case, satellite radio was an ultra-competitive duopoly, with anticipated “winner take all” dynamics characterizing both its early and later periods. Even as XM and Sirius were engaging in the type of joint efforts—described in our paper—to build a shared public understanding of the satellite radio category and its potential, they were also battling fiercely “in the trenches” to secure the type of human, technical, and financial advantages that would help them supplant their rival. In these ways, satellite radio represents a type of market where one might least expect firms to engage in the type of shared efforts that we observed in category construction; in less competitively intense markets, such shared efforts might arise more naturally. The other important aspect of your question pertains to the number of players involved in market emergence. Here, we believe the emergence of the satellite radio market benefited from the smaller set of focal firms that were involved in its construction. The reverse of this logic belies an interesting paradox related to the rationale advanced by ecologists, i.e., that the population density of producers offers a meaningful proxy for category legitimacy. Often, we suspect that the opposite, in fact, may be true—namely, that a greater number of players can invite harmful variation, contested beliefs, and difficulties in coordination, thus adding to the challenge of stabilizing the meanings and legitimacy of a nascent category.

Question 5. How does this paper fit into your larger research agenda? After completing this project, did your following work evolve in certain directions rather than others in response to your findings and your experience in this study? What would be the primary follow-up research questions? If you were to advise a PhD student who loved this paper and wanted to do a follow-up study, what would be your suggestions?

These are terrific questions! Incidentally, our answers to the first three questions very much relate to one another, such that some of the primary follow-on questions that we have pursued since our study of satellite radio have very much informed our larger research agenda and the direction that our work has taken since that study’s completion.

One important question that you touched on earlier, and which flows naturally from our study of satellite radio, is of how market category emergence might look different when greater numbers of firms are involved. Given that a greater number of firms involved in a market can potentially enable or constrain the emergence of new categories, it becomes important for scholars to understand the underlying mechanisms that inform how, when, and why this might be so. In a similar spirit, another important question that flows naturally from our study of satellite radio is how the dynamics of market category emergence might look different in a failed—rather than successful—case of emergence. Such an inquiry not only provides a point of juxtaposition for understanding the observed patterns in both studies—each associated with different market outcomes—but it also stands to illuminate a set of new factors that could hinder category emergence, and which a successful case would be less apt to reveal.

These follow-on questions led us to initiate an in-depth, multi-year research project examining the non-emergence of a potential new market category. In the late 1990s, the wide array of entrepreneurial firms that attempted to sell groceries online in the US attracted significant resources, made impressive technological advancements, and generated immense publicity. And yet, online grocery retail still failed to emerge in this country as a market category in which firms could claim meaningful membership and audiences could understand and evaluate the defining attributes of member firms. Drawing on multiple primary and secondary data sources, we elaborate how the social construction of a market category can, ironically offer an explanation for category non-emergence. Our explanations are rooted in the instability and contestation of the underlying beliefs, logics, and bases for legitimacy that can typify an emerging market’s focal actors and audiences. Our preliminary findings suggest that under such conditions of instability and contestation, if a core identity frame fails to emerge for the category as a whole, then in spite of significant advances in other areas, a new market category may still fail to emerge.

Beyond our own research extensions, we see ample opportunities for PhD students interested in our study to build on and extend these ideas. The main piece of advice we would offer to these students is to pursue the “big questions” they are most passionate about. We have offered this advice to our own students, and, several have taken the lead in extending this line of research in their own way. For instance, Chad’s current doctoral student, Shannon Younger, studying the US micro-distillery market, considers some of the unique tensions associated with category legitimation and differentiation in culturally-based markets, where meaning and value are hinged to counter-mainstream qualities that become diluted with category emergence.
Mary Ann’s doctoral student, Andrea Tunarosa, working in the context of the specialty coffee industry, looks at how market actors push the frontiers of a category that has traditionally placed little value on differentiation (as is the case of a commodity) by reframing its meanings. And, Ryan Raffaelli, Mary Ann’s former student and now an assistant professor at the Harvard Business School, has theorized the concept of “technology reemergence” through his study of the reemergence of the Swiss mechanical watch industry, which illustrates the crucial role identity can play in mitigating tensions between preservation and adaptation in organizations and industries as they attempt to reinvent themselves over time. We hope our research will continue to inspire and guide the next generation of scholars.

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  1. […] 9. Navis and Glynn (2010). How new market categories emerge: temporal dynamics of legitimacy, identity,… […]

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