How market conditions affect new ventures’ propensity to engage in category spanning

Abstract

In our study, we examine how category density affects entrepreneurs’ propensity to engage in category spanning, and investigate the moderating effects of category fuzziness, regional density, and the number of entrants in a system of categories. We test our hypotheses by focusing on 3707 bands in the British metal music industry. Our findings indicate that increased category density reduces the degree of category spanning, but this effect is attenuated by increased category fuzziness and an increase in the number of new ventures founded in the same market. Regional density has no moderating effect, but its positive main effect points to the independence of the effects of categorical and regional density on category spanning. Our findings facilitate theory building regarding the antecedents of category spanning and the evolution of the categorical system of markets.