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COPYRIGHT 2006 Society for the Advancement of Management
Introduction
Beer and Impact, Texas
West Texas was parched and dry in many ways in 1960. The temperature was 106 degrees Fahrenheit by June (NOAA, 2005), and liquor sales were illegal in the almost 15,000 square mile area surrounding Abilene (Whitaker, 2001). Texas adopted local option following the 1933 repeal of prohibition in the U.S. Constitution, and each municipality and county in the state could vote to allow or prohibit liquor sales (Gould, 2002). Liquor sales were prohibited in all cities and counties in the nine counties surrounding Abilene because of the area's conservative Bible Belt roots (Whitaker, 2001). The prohibition of legal liquor sales encouraged bootleggers to produce illegal home made liquor or moonshine (O'Neal, 1984).
This situation changed when businessman Dallas Perkins incorporated his 20-acre poultry farm and an adjoining 27 acres on the outskirts of Abilene into the town of Impact in 1960 expressly to sell liquor (Troesser, 2004). The citizens of the newly incorporated town of Impact--mostly Perkins' family and friends--complied with Perkins' wish and voted 18-2 to permit liquor sales (Whitaker, 2001). A series of court battles followed, and the Texas Supreme Court upheld Impact's incorporation and local option election in 1963 (Handbook of Texas Online, 2002). Perkins began selling alcohol in Impact in 1963, and the first month's sales were $463,000 (Haymes, 1995), equivalent to roughly $3.0 million in 2006 dollars.
Entrepreneurs and market creation
The story of Impact illustrates the central point of this paper: Entrepreneurs attempt to create the necessary market structures to enable their concepts to succeed. They convert an abstract idea into something concrete in a process of "proactive reification" (Reification is the process of regarding something abstract as a material thing). This paper addresses the call for examining the boundaries of entrepreneurship and, in particular, the boundary of understanding entrepreneurial opportunities and start-up factors of production (Busenitz, West, Shepherd, Nelson, Chandler and Zacharakis, 2003). This paper also suggests that market structuring is a unique entrepreneurial opportunity.
Market structures consist of 1) the set of elemental factors involved in the production and distribution of goods or services, and 2) the set of relationships among those factors (Black and Sherman, 2004; Sarasvarthy and Dew, 2005). Proactive reification, as defined in this paper, is the process of actively reifying previously unrelated sets of market factors to create new market structures. The entrepreneur's need to create market structures contrasts with conventional views of strategy that assume market structures are fixed as part of the environment and that the role of the strategist is to search for suitable matches between available resources and existing market structures that produce the optimum level of economic rent (Rumelt, Schendel, and Teece, 1991, 2005). Few studies have linked competitive dynamics and market dynamism (Meyer and Banks, 1999; Soberman and Gatignon, 2005). This paper suggests that entrepreneurs create dynamic market structures in the process of proactive reification and that the focus on reifying market structures is a powerful tool for the entrepreneur versus the conventional strategic view of fixed market structure and resource-based strategy (Barney, 1991). The next discussion will explore and explain the concept of market structures and proactive reification.
Market Factors and Market Structure
Market factors are environmental and competitive elements that constitute a firm's external environment and constrain firm action (Porter, 1980). Market factors include environmental items such as inflation, and technological or legal shifts and competitive factors such as competitors, entrants, and rivalry dynamics. Significant business strategy literature is dedicated to examining the effect of market factors on firm performance, specifically Porter's five forces industry model and the technology management literature (Porter, 1980; Sherman, Hitt, Demarie, and Keats, 1999).
Market structure is both the set of elemental factors involved in the production and distribution of goods or services and the set of relationships among those factors. Market structure can be viewed as constellations of market factors and how they are arranged and connected to each other. Market structure provides boundaries for the set of elements and relationships among those elements that constitute member firms' market networks (Cramer, 1993; Waldorp, 1992). Market structures allow markets to operate as interconnected exchanges across firms and to function successfully as large, complex, interactive adaptive networks (Anderson, Arrow, and Pines, 1988). Market structures, like other adaptive networks, are governed by rules generated over time as the network elements and market factors interact with each other (Voss, Voss and Moorman, 2005; Anderson, 1999; Stacey, 1995; Waldorp, 1992). Some of these rules are formally documented, others are not. The liquor market structures in West Texas before the incorporation of Impact was that fundamentalist churches opposed legalizing liquor sales, and the churches' costs to battle legalizing liquor sales often were paid for by bootleggers producing illegal liquor, known as moonshine (Haymes, 1995; Whittaker, 2001). The churches and the bootleggers were confederates with different motives, and the churches, the bootleggers, legal system and the community as a whole was components of the market structure of liquor sales in West Texas. Rules governed each party's behavior, i.e., church ministers were the vocal forces opposing legalized liquor sales, the bootleggers financed the ministers' fight, and neither took direct action against the other.
Market structures are a more complex and dynamic market conceptualization than market orientation, market factors, or industry structures (Soberman and Gatignon, 2005). Market structures include all market elements at the firm, industry, and macro environmental levels and all of the interaction among these elements as a network constellation that affect how a market operates and how firms generate economic rent. The result is that market structures are dynamic, three-dimensional interactive views of the external environment in action versus the relatively static, two-dimensional view of the external environment provided by conventional conceptualizations, such as market orientation and industry structures.
A firm's market structure also differs from its market orientation in that market orientation is focused on a firm's implementation of marketing concepts to support its entrepreneurial efforts (Hult, Snow and Kandemir, 2003; Barrett and...
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