Rational imitation among producer firms: Some insights from social psychology

Abstract

Focusing on production markets, the article provides a detailed description of the particular conditions that turn rational imitation the most feasible strategy for reducing the uncertainties that firms face when making business decisions. On the basis of this description several features are identified, which in a unique combination induced by the particularities of the production process characterize the imitative behavior of producer firms. First, the existence of a substantial niche overlap is crucial for any individual firm to identify the most relevant significant others to be imitated. Second, rational imitation is a dual process in that the functional similarity that provides the firms in a single market with a ground for imitation also underpins their attempts at individuation through product differentiation. Finally, in its pursuit to stay in the market, any individual firm continuously needs to fit its choices into those of its peers – requiring the firm not only to monitor the business decisions the other firms actually make, but also assuming the choices they are most likely to make.