"Market Partitioning Under Varying Resource Landscapes"
Market Partitioning Under Varying Resource Landscapes César E. García-Díaz First-year PhD Student University of Groningen Faculty of Economics Department of International Economics & Business The Netherlands Abstract In its attempt to understand population-level adaptation through the behavior of founding and mortality rates and the proliferation of organizational forms, Organizational Ecology (Hannan & Freeman, 1977, 1989) has brought alternative views to classical organization theory’ contingency approach regarding optimal strategies in uncertain environments through the formulation of Niche Width Theory (Freeman & Hannan, 1983; Péli, 1997; Bruggeman, 1997; Bruggeman & O’Nualláin, 2000; Baum & Amburgey, 2002; Hannan, Pólos & Carroll, 2003), to organizational change theories through the formulation of Structural Inertia Theory (Hannan & Freeman, 1984; Péli et al., 1994; Péli et al., 2000; Hannan, Pólos & Carroll, 2003) and to economists’ neoclassical theory regarding the understanding of markets composition. Organizational Ecology has also introduced its own vision of market structures and, as emphasized by Vermeulen & Bruggeman (2002) and Carroll & Hannan (1995), has proposed opposite perspectives to classical industrial organization theory views on the role of market concentration, as is the case in Resource Partitioning Theory (Carroll, 1985). Carroll (1985)’s seminal paper in Resource Partitioning Theory (RPT) in Organizational Ecology gives explanation about the coexistence of generalist organizations with specialist organizations in a two-dimensional resource space characterized by scale economies and a center. RPT emphasizes that some necessary (but no sufficient) conditions are needed for such dual market structure: heterogeneity of resources, the presence of a market center and economies of scale/scope. Although Witteloostuijn & Boone (2003) develop a market structure typology with eight typical cases, there is no theoretical investigation that connects the emergence of such typology with different sets of initial conditions for the n-dimensional resource space in which such market evolves. A theory to explain the emergence of these market configurations structures is needed. Some attempts like the first-order logic model by Vermeulen & Bruggeman (2001), which states that resource partitioning occurs independently of organizational mass, size-localized competition, diversifying consumer tastes and changes in niche width, misses important elements needed to fully understand the dynamics process that generates market partitioning. Through computer simulation of different resource landscapes, with “spatial” variations, we want to understand how such different resource spaces generate specific partitioned-market structures. We study which are the thresholds in the degree of homogeneity at the market center that account for specific levels of generalist concentration (and consequently, if size-localized competition (Baum & Amburgey, 2002) is effectively related to size or if it is a consequence of certain levels of homogeneity of the resource space). In the search of conditions for sufficiency in market partitioning, we also explore which are the heterogeneity thresholds that allow market partitioning to appear.