This article revises and expands the theory of collective strategy to include firms in fragmented industries. Collective strategy in fragmented industries may be less visible, but it is no less extensive than in concentrated industries because repetitive patterns of pairwise interorganizational activity can aggregate into emergent collective strategy. This implies that collective activity is a ubiquitous strategy, permeating all types of organizations in fragmented industries. The article offers a process model and a mechanism for aggregating pairwise activity into collective activity based on an extension of the prisoner’s dilemma game. A curvilinear relationship between environmental factors and cooperative behavior is proposed. Propositions suggest that the effects of cooperation on performance shift from the firm level to the population level as colonization is completed.
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