Organizational Knowledge and Localized Competition: A Case of a High Performer that is Socially Constructed

Abstract

This study seeks to elucidate conditions under which high performers emerge independent of their internal resources even when competition in the output market is intense. In particular, I present an extended model of localized competition in which ill-informed producers compete with each other by observing the actions of their rivals and inferring the association between the cost and benefit of their action from observable market response to the action of their rivals. To this end, I combine three independent streams of research, including the ecological model of localized competition, organizational knowledge and Harrison Whites model of market (Carroll and Hannan 2000; Garicano 2000; Grant 1996; Nelson and Winter 1982; White 1981). An analytical strategy chosen is to parameterize the interplay of organizational knowledge and localized competition so that this study seeks to theorize a general competitive process that underlies the emergence of high performers without ignoring the role of firm heterogeneity in internal resources. In particular, this study characterizes market competition with respect to four parameters, including (1) the size of the neighborhood of a firm, (2) the upper and (3) lower bound of knowledge bases, and (4) a type of the market. The implications of this model are further explored in the context of multimarket competition as well as resource-partitioning.