Speaker Series 2004-2005

Constructing Markets and Organizing Boundaries: Entrepreneurial Action in Nascent Fields

Kathleen M. Eisenhardt
Stanford University

Thursday, April 21, 2005
Room 2505, 3:00-5:00pm

Abstract:  This paper examines how entrepreneurs manage the organizational boundaries in nascent markets. Given the focus of prior research on established markets and the limited applicability of these findings to nascent markets, we conducted a grounded theory building study of 5 firms over a multi-year period. These firms were all founded in the mid-1990’s during the confluence of numerous communications and computing innovations, thus sharing a similar industry context. Yet, each firm was formed under different founding circumstances and addressed different potential markets. The result is a framework that suggests that these entrepreneurs managed organizational boundaries in three arenas. First, they attempted to claim a nascent market as their own, thereby simultaneously making both the market and their own firm identity synonymous. Second, they tried to demarcate this market by partnering with established players in related markets in order to structure the roles of these players and create a “demilitarized zone” for themselves. Third, these entrepreneurs attempted to control their nascent market by using acquisitions to eliminate entrepreneurial rivals and block entry of powerful players. The managers of these 5 firms were varyingly successful in these three arenas which, in turn, affected significant outcomes, such as market creation, level of competition, and market share. The primary rationale of these efforts was to survive by establishing their market conception as dominant and build a dominant position. More broadly, we observe the simultaneous structuration of markets and organizations, and the ubiquitous use of power as fundamental to entrepreneurial action.  

Kathleen M. Eisenhardt is Professor of Strategy and Organization at Stanford University. She is widely known for her work on strategy, strategic decision making, and innovation in rapidly changing and highly competitive markets. She is the coauthor (with Shona L. Brown) of the book Competing on the Edge: Strategy as Structured Chaos, published by Harvard Business School Press. Using analogies from The Grateful Dead to the Tour de France and scientific underpinnings from complexity and time-paced evolutionary theories, this book describes how to compete successfully in dynamic markets. For thoughts and course material for using the book in teaching, please see the link above.

Professor Eisenhardt's current research centers on collaboration and competition in the converging computing, telecommunications, and semiconductor industries, from the perspectives of complexity, evolutionary and game theories. For her past research on fast strategic decision making, she won the Pacific Telesis Foundation Award. She has also received the Whittemore Prize (with D. Charles Galunic) for her writing on organizing global corporations in high velocity markets, and the Stern Award (with Claudia B. Schoonhoven) for her work on the formation of strategic alliances in entrepreneurial companies. She was Co-Principal Investigator on the Global Electronics Study for Andersen Consulting.