The logic of organizational markets: thinking through resource partitioning

Resource partitioning theory claims that “Increasing concentration enhances the life chances of specialist organizations.” We systematically think through this theory, specify implicit background assumptions, sharpen concepts, and rigorously check the theory’s logic. As a result, we increase the theory’s explanatory power, and claim-contrary to received opinion—that under certain general conditions, “resource partitioning” and the proliferation of specialists can take place independently of organizational mass and relative size effects, size localized competition, diversifying consumer tastes, increasing number of dimensions of the resource space, and changing niche widths. Our analysis makes furthermore clear that specialist and generalist strategies are asymmetric, and shows that not concentration enhances the life chances of specialists but economies of scale instead. Under the conditions explicated, we argue that if scale economies come to dominate, the number of organizations in the population increases, regardless of the incumbents’ sizes.