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

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.