Market positioning: the shifting effects of niche overlap

Organizational ecology models of market dynamics emphasize the competition-inducing role of inter-organizational niche overlap—targeting similar market niches increases competitive pressure and thus reduces organizations’ fitness. Recent studies, however, have suggested that moderate niche overlap may positively influence organizational viability by enhancing comparability and promoting legitimacy spillovers. Data on consumers’ impressions of Dutch music festivals and on the growth and decline of early Internet search engines were used to test the proposition that niche overlap may, in fact, be non-monotonically related to organizational fitness. Since new organizations must first gain recognition by being comparable to others, they will benefit more from niche overlap than older incumbents. The results confirm that both the appeal that organizations generate as well as their growth rates are non-monotonically related to niche overlap, and that positive effects of niche overlap decrease with organizational age.