Boom and Bust: The Effect of Entrepreneurial Inertia on Organizational Populations

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2006

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Abstract

Although recent public attention has focused on boom-and-bust cycles in industries and financial markets, organizational theorists have made only limited contributions to our understanding of this issue. In this chapter, I argue that a distinctive strategic insight into the mechanisms generating boom-and-bust cycles arises from a focus on entrepreneurial inertia - the lag time exhibited by organizational founders or investors entering a market niche. While popular perceptions of boom-and-bust cycles emphasize the deleterious effect of hasty entrants or overvaluation, I suggest instead that slow, methodical entries into an organizational population or market may pose far greater threats to niche stability. This proposition is explored analytically, considering the development of U.S. medical schools since the mid-18th century. © 2006 Elsevier Ltd. All rights reserved.

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Social Sciences, Business, Management, Business & Economics, DOMINANT DESIGNS, SOCIAL-STRUCTURE, IRON CAGE, EVOLUTION, DENSITY, SELECTION, DYNAMICS, INDUSTRY, ECOLOGY, MODEL

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Published Version (Please cite this version)

10.1016/S0742-3322(06)23002-X

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Ruef, M (2006). Boom and Bust: The Effect of Entrepreneurial Inertia on Organizational Populations. Advances in Strategic Management, 23. pp. 29–72. 10.1016/S0742-3322(06)23002-X Retrieved from https://hdl.handle.net/10161/26657.

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Ruef

Martin Ruef

Jack and Pamela Egan Distinguished Professor of Entrepreneurship

My research considers the social context of entrepreneurship from both a contemporary and historical perspective. I draw on large-scale surveys of entrepreneurs in the United States to explore processes of team formation, innovation, exchange, and boundary maintenance in nascent business startups. My historical analyses address entrepreneurial activity and constraint during periods of profound institutional change. This work has considered a diverse range of sectors, including the organizational transformation of Southern agriculture and industry after the Civil War, African American entrepreneurship under Jim Crow, the transition of the U.S. healthcare system from professional monopoly to managed care, and the character of entrepreneurship during early mercantile and industrial capitalism.


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