CATEGORIES AND COMPETITION

Research summary: In this article, we review, integrate, and extend the literature on markets, competition, and categories as it applies to strategic management theory. Developments in the literatures of economics and organizational theory have shed new light on market categories and category dynamics. These developments highlight the fact that boundary questions are fundamental to the competitive process, and represent a fertile area for research and theory. The objective is to encourage a theoretically grounded rapprochement between current strategic management research and both older and newer research on categories and competition. Managerial summary: One of the key problems for business strategists is understanding the competitive environment and interpreting the effects of competition on a business. This article attempts to integrate various literatures in the study of competition by suggesting that strategists play a crucial role in linking abstract categories of firms and products that have become part of an industry's terminology with real-time competitive processes taking place among firms and buyers. Strategists interpret cues such as cross-elasticities of demand among their own and competing products and connect these cues to taken-for-granted categories demarcating the boundaries of markets. Simultaneously, strategists are introducing new categories by reformulating old nomenclatures and introducing new ones. We also trace the possible effects of this ` competitive sensemaking' on firm behaviors. Copyright c 2016 John Wiley & Sons, Ltd.