Managerial cognition and the mimetic adoption of market positions: what you see is what you do

TLDR

When managers abandon a market position, they seek alternatives and often imitate successful positions from other firms, a process driven by uncertainty, rivalry avoidance, and the appeal of novel, lightly contested markets, which amplifies differentiation. The theory is supported by analysis of the spread of new radio formats in the United States. © 1998 John Wiley & Sons, Ltd.

Abstract

Managers planning to abandon a market position need to find a promising alternative, and face a choice of inventing a new market position or entering an existing one. The great uncertainty on the consequences of different actions leads them to rely on other organizations for information on how to compete, making adoption of existing market positions likely. Their wish to avoid direct rivalry and maximize growth leads them to seek out information on new market positions with few incumbents. As a result, recently innovated market positions are mimetically adopted by organizations that can easily observe previous adoptions and see them as relevant to their market situations, increasing the market differentiation. This theory is tested and supported by analysis of the spread of new radio formats in the United States. © 1998 John Wiley & Sons, Ltd.