Firm Scope and Within-Industry Repositioning: Search, Resource Munificence, and Crowding

Abstract

We analyze the position moves of U.S. auto firms between the industry’s three main market segments over time and find support for arguments that sort out the relationship of scope with search, inertia, and crowding. Our predictions build on structural and behavioral considerations related to broad scope as concomitant to internal variation (which facilitates moves) and to buildup of inertia (which deters them). We reconcile the opposing predictions that broad scope both drives and impedes search by decoupling the direct positive effect of broad scope on likelihood to move positions from its second-order negative effects. The analyses support our conjectures and highlight the advantages of analyzing (changes in) market positions among all firms in an industry and of building cumulative specifications that facilitate theory integration.