GETTING TO KNOW YOU - A THEORY OF STRATEGIC GROUP IDENTITY

This paper develops a theory of strategic group identity that explains how strategic groups emerge in an industry and how they can affect fi rm behaviors and outcomes. In so doing, it provides a theoretical basi s for the existence of strategic groups. We argue that managers cognit ively partition their industry environment to reduce uncertainty and t o cope with bounded rationality. Social learning theory and social ide ntification theory are used to describe how cognitive groups coalesce into meaningful substructures and how a group-level identity emerges. We describe the ways in which macro level factors condition the develo pment of groups and their identities. We introduce the notion of a str ong identity, which characterizes any group sufficiently recognized an d attended to by members to affect individual action. Groups with 'wea k identities' are no more than transient agglomerations of firms and d o nor exist in any meaningful sense. These ideas are developed into pr opositions that describe the conditions under which groups with strong identities are likely to emerge. A second set of propositions describ es their transformation over time. Identity strength is linked to both positive and negative outcomes in a final set of propositions. We sho w how strategic groups with strong identities can affect firm performa nce resolving a longstanding problem which has plagued strategic group s research and conclude by suggesting some approaches for measurement and future research. (C) 1997 by John Wiley & Sons, Ltd.