Waves of Collectivizing: A Dynamic Model of Competition and Cooperation Over the Life of an Industry

Abstract

Firms pursue competitive advantage through both individual and collective strategic actions. Because of the difficulties of coordinating collective action, industries are characterized by extended periods of individual activity, punctuated by waves of collective activity. Rational and self-interested firms engage in individual activities unless disrupted by a force ample to overcome the collective action problem. At key points in the life of an industry, legitimacy challenges arise, presenting incentive to collectivize. In a legitimacy challenge, mobilized groups of constituents attempt to gain control of and change the institutional rules of the game. In order to regain control, firms gradually collectivize in a pattern akin to the resource mobilization perspective of social movement theory. I build a model and offer several testable propositions that trace the dynamic working balance between individual and collective activities within an industry during the emergence, maturity, and decline stages. Over the life of an industry, these ebbs and flows in collective activity take the form of waves of collectivizing.

Keywords: collective strategy, competitive strategy, legitimacy, reputation

JEL Classification: M10