Collective Action Problems and Resource Allocation During Market Formation

Jeroen Struben (), Brandon H. Lee () and Christopher B. Bingham ()
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Jeroen Struben: emlyon business school, 69134 Ecully Cedex, France
Brandon H. Lee: Melbourne Business School, University of Melbourne, Carlton, Victoria 3053, Australia
Christopher B. Bingham: Kenan-Flagler Business School, The University of North Carolina at Chapel Hill, Chapel Hill, North Carolina 27599

Strategy Science, 2020, vol. 5, issue 3, 245-270

Abstract: Collective action is critical for successful market formation. However, relatively little is known about how and under what conditions actors overcome collective action problems to successfully form new markets. Using the benefits of simulation methods, we uncover how collective action problems result from actor resource allocation decisions interacting with each other and how the severity of these problems depends on central market- and actor-related characteristics. Specifically, we show that collective action problems occur when actors undervalue the benefits of market-oriented resource allocation and when actors contribute resources that are imperfectly substitutable. Furthermore, we show that collective action problems occur when actors are embedded in networks with others sharing a similar role in market formation. Collectively, our findings contribute new insights to organization theory regarding collective action and market formation and to strategy on value creation and strategic decision making regarding resource allocation.

Keywords: market formation; industry emergence; collective action; collective action problems; resource allocation; decision making; simulation (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:orstsc:v:5:y:2020:i:3:p:245-270

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