The last few years has seen a growing concentration of market power, with dominant companies taking an ever larger share of the spoils.  This is especially so in the digital platform economy, where the network effect ensures that the winner really does take all in their market.

New research from York University explores whether an effective counter-strategy is for smaller companies to team up to take on the market leaders.  The researchers highlight how small and medium-sized firms are able to carve out profitable and vibrant niches in various industries, and develop sizable customer bases as a result.

Collective action

The paper highlights how effective collective action can be in raising the political and financial clout of smaller firms.  It’s a strategy the researchers refer to as “collaborative market driving.”

“We identify how firm owners form a strong sense of shared identity and pool their resources to jointly develop a market category in ways that benefit all of them,” they explain. “Their collective work ranges from exchanging critical economic resources to fighting together for more favorable regulation.”

The paper also highlights the important role trade associations can play in helping to coordinate the collective actions of these smaller firms.  Such associations can provide not only a template for action, but also help each firm make sense of the competitive environment they’re in.

The research highlights the key role collective action can play among smaller firms operating in the same market.  The data suggests that firms that operate under the ‘rising tide floats all boats’ motto can find ways to benefit both themselves and the collective.

The findings present an accessible and viable strategy for entrepreneurs to pursue when developing new market categories, especially if they lack the resources to go toe to toe with large incumbents.  By acting together, smaller firms can become a force to be reckoned with and carve out a profitable segment of the market.