Its name suggests it belongs here: The power of a community namesake in decreasing founding rates during industry emergence

Abstract

This study investigates the power of a community namesake, defined as an organization named after the geographic community, in discouraging potential entrants from entering the local market during industry emergence. I argue that the presence of a community namesake is likely to make potential entrants anticipate stronger competition, because they tend to believe that the local membership proudly claimed by the namesake may drive community stakeholders to reciprocate the namesake with disproportionally more resources. During industry emergence, when there lacks objective information on competitive intensity, the presence of a community namesake can be a sufficient cue of a high local entry barrier that deters potential entrants, resulting in lower founding rates during the post-namesake period at the level of communities. I further predict that the namesakes’ symbolic power should vary depending on their material forms. Material forms that corroborate (i.e. through purpose-built buildings) or make salient (i.e. through visually prominent architectures) the namesakes’ claimed local membership should decrease founding rates to a higher degree. The analysis of the emergence of historical movie theaters in Chicago communities, 1905–1927, provides empirical support to the theorizing.