When is collective action necessary to enable market formation? What are challenges to achieving this?

Focus 

This project is different from the others in that it starts with a focus on general principles of market formation rather than within a specific context. This project combines our understanding of market formation as developed in those other projects with what we know from the organisational literature on market formation. We focus on the problems of distinct actors joining their efforts in order to contribute to the formation of a new market or to the transformation of an existing market.

 

A key idea we develop here is that markets require a market infrastructure – general awareness of and agreement on the definition of product categories and of their valuations, resources mobilized, interested actors, physical and social structures for distribution, and sets of norms and rules of the market – whose formation is governed by multiple positive feedbacks cutting across the various actors. Because new markets lack established market infrastructure, collective efforts, to varying degrees explicitly coordinated, are often required for the emergence of a viable market.

PROJECT STATS

Project period: 2013 – ongoing

Key people: Jeroen Struben, Brandon Lee, Chris Bingham

Contexts: Generic

In this project we focus on what makes the formation and success of such collective action more problematic, including the role of actors’ uncertainty about market success, the nature and complexity of the market formation problem, and the different forms of coordination among the actors. In doing this we connect ideas from sociology-based collective action theory and organisational theory research on market formation.

Approach
 

In this project we develop theoretical frameworks and computational models to understand market formation problems across different settings. This work contributes to organisational market formation and sociological collective action theory.

Market Formation Project Outputs:
1. Academic Publications

Collective Action and Market Formation: An Integrative Framework 

In this paper we develop a novel theoretical framework detailing what collective action problems and solutions arise in market formation. We show how the challenge to develop “market infrastructure” varies across market settings and gives rise to different collective action problems and solutions.

 

Collective Action Dynamics During Market Formation (Working paper)  
Market formation is central to economic growth and social progress but challenging because it involves many and distinct resource contributions. The lack of ex-ante knowledge about how much effort suffices and who can or may contribute resources often turns market formation into a collective action problem. We exploit the benefits of simulation to create a computational representation of the micro-level processes underlying collective action dynamics during market formation and to analyze their interactions. We derive three propositions that highlight how nuanced interactions among market- and actor-related characteristics shape market formation. Collectively, our findings contribute to research in entrepreneurship, strategy, and organisational theory.

 

More research within this project

2. Engaging Practitioners  
Insights produced from our research and the research engagements through which we work within and with organisations

 

The Conversation article (2019)

When innovation isn’t enough: How collective action problems can block market formation.

 

 
 

© 2019 Market Formation Dynamics