Sources of Durability and Change in Market Classifications: A Study of the Reconstitution of Product Categories in the American Mutual Fund Industry, 1944-1985

Abstract

Categories are key elements of classification systems that segregate things into groups and impose coherence. Sociologists have studied how categories shape action in a wide variety of contexts but have spent much less time investigating the sources of category durability and change. We address this gap by investigating how existing product categories are reconstituted by field-level industry media. While standard accounts of industry media suggest that existing product categories will be edited on the basis of changes in the technical features of categories, we emphasize the political nature of markets and argue that powerful producers can preserve the existing structure of categories. We test these arguments in a study of the American mutual fund industry during the period from 1945 until 1985 and outline implications for research on institutional change and the political dynamics of market classification. Categorization is an ubiquitous process that involves lumping similar things into distinct clusters, rendering them cognizable, and creating shared understandings (Carruthers & Stinchcombe 1999; Douglas 1986; Zerubavel 1997). For instance, we categorize countries into democracies and dictatorships, food into proteins and carbohydrates, and financial assets into liquid assets such as stocks and bonds and illiquid assets like real estate and venture capital (Lamont & Thevenot 2000). Such categorization simplifies thought by delimiting how we allocate attention (Simon 1947), enabling us to process vast