Managing Categories: Essays on Sensegiving and Sensemaking in Nascent Markets
Dissertation Chair: Peer C. Fiss
Dissertation Committee Members:
In my dissertation, I study how firms manage their identity by strategically positioning themselves within an industry using category labels. Specifically, I examine how a change in categorization strategy to attract key stakeholders at the initial public offering (IPO) influences performance.
The first essay explores why, and under what conditions, firms engage in the strategic management of their market categories. I draw on the categorization literature from both sociology and social psychology to suggest that firms have different ways to present their identity using category labels: a firm can choose categories vertically at different levels of inclusiveness, that is, claim category labels that are more or less abstract to represent the size/coverage of the market domain it serves and/or span different number of categories horizontally, that is, claim category labels across different market domains to represent the diversity of market domains it serves. It is then argued that some firms will intentionally manage their identity by changing the level of inclusiveness and/or the number of categories spanned to attract key stakeholders at the time of the IPO. Hypotheses are developed regarding the prior experiences of the issuer firm’s TMT, underwriters, and venture capitalists. Market conditions such as “hot” market and the order of IPO within a similar market domain are also considered.
The second essay examines the performance consequences of different categorization strategies. Specifically, this study focuses on how the strategic use of category labels in order to attract key stakeholders influences performance. First, different expectations of stakeholders before and after the IPO are addressed: at the IPO, investors—mostly institutional investors—are concerned with future growth. They are also familiar with classifying stocks into a certain category as in the SIC code or index funds. It is then hypothesized that firms which change their category label to become more inclusive at the time of the IPO to imply larger market potential will experience more positive IPO performance. It is also hypothesized the same for firms which decrease the number of category labels spanned at the time of the IPO to convey a more focused identity. In addition, the role of the media in providing their own accounts of a firm’s identity is considered: it is hypothesized that the degree of inconsistency between a firm's categorization strategy and the media's categorization will play a moderating role.
I test my hypotheses on a set of firms that go public in the Internet sector. As a nascent industry that is characteristically ambiguous, the Internet sector provides an appropriate setting to investigate the consequences of strategically managing firm identity through positioning.
Taken together, my dissertation contributes to strategic management and entrepreneurship by connecting categorization literature and symbolic management perspective to present how firms can facilitate early-stage resource acquisition by strategically managing their industry positioning using category labels. My research also contributes to recent developments in institutional theory through its exploration of the micro-processes of how firms consciously shape and manage their institutional environment. Finally, my work presents practical implications for firms and entrepreneurs planning IPOs by suggesting an important factor that influences IPO performance.