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Doing More With Less! How Population Density Impacts the Product Scope Strategies of Real Ale Breweries in the United Kingdom

Karsch, Mirjam Barbara; Huynh, Silvia
Master thesis
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URI
http://hdl.handle.net/11250/2623831
Date
2019
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  • Master of Science [1117]
Abstract
This paper seeks to explore how an organization’s product scope evolves upon changing population

density. Considering prior academic achievements on both focal topics, our study provides

an exciting opportunity to enhance our knowledge by investigating the potential connection between

them.

In more detail, we contend that the competitive component of population density is more prevalent

in mature industries and narrow down our research setting accordingly. Against this background,

we draw upon arguments from different conceptualizations linking competition and innovation

to eventually construct our hypotheses for analyzing the effect of population density

on product scope expansions. Specifically, we claim that the two dimensions of an organization’s

product scope – namely product breadth and product depth – are positively affected by

population density.

To test these two assumptions under a quantitative research approach, we collected firm- and product

level data within the British real ale brewing industry between 2000 and 2018 upon which we

were able to construct our own dependent and explanatory variables. This mature market reveals a

considerable degree of heterogeneity on the number and organizational characteristics of active

firms as well as on the length and style dispersion of their product lines over time. It therefore

serves as a suitable research setting for examining the relationship between product scope and population

density.

We find that breweries facing a high population density are more likely to introduce new products

than organizations that launch under a low population density. Additionally, breweries are under

this scenario prompted to specialize their product launches in a few style categories. Whereas the

first observation on product breadth is in line with the reasoning given in previous literature, we

assert that organizations deliberately restrict their product depth to a few style categories owing

to handling of cost constraints, preventing of learning myopia, and erecting of entry barriers for

potential competitors.

Our study contributes to the field of strategy in several ways. First, it enhances the current literature

on density-dependence by drawing attention to the strategic behavior of alive firms. Whereas prior

density-dependence research merely focuses on firm birth and firm death, we investigate the strategic

moves of existing organizations with regards to their product scope introductions. Second,

we illustrate that population density exerts different effects on product breadth and product depth

and thus reconcile the two prevalent streams on innovation and competition. As such, we add to the present literature on product scope that rigorously elaborated on a variety of other critical determinants

of a firm’s product line. Third, our results emphasize that managers should maintain

dual awareness of both exploration and exploitation when deciding to proliferate their company’s

current product scope. In particular, launching additional products onto new market segments

within a few already applied style categories constitutes a reasonable and cost-efficient approach

to strategically behave in a mature business environment.

We anticipate that our study results are to a large extent generalizable towards industries with similar

features to those of the real ale brewing industry in the United Kingdom. As such, comparable

studies should confirm population density as an important determinant of product scope expansions

and should henceforward be explicitly considered when analyzing the product line decisions taken

by extant companies.
Description
Masteroppgave(MSc) in Master of Science in Business, Strategy - Handelshøyskolen BI, 2019
Publisher
Handelshøyskolen BI

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