Old at Heart, young at the periphery: An age-dependence approach to resource partitioning

Abstract

This study examines how the age of categories and organizations within an industry affects the likelihood of de novo entry. Whereas previous literature on age dependence focused on the effects of aging for individual organizations, we analyze how aging processes drive the evolution of markets. We offer an age-related explanation for the mechanism of resource partitioning, i.e., the relative increase in the number of new entrants in a market’s periphery as a result of increasing concentration among central incumbents. We theorize that, as the incumbents within a category grow older, their capacity to undertake structural changes diminishes: coupled with evolving audience preferences, this generates a gap between what the incumbents are capable to offer and what the audience demands, hence creating opportunities for new entrants to step into the market. We also conjecture that such entry opportunities are more likely in younger categories, where the audience’s preferences change more rapidly. We test our arguments through a longitudinal study of market segments in the recording industry.