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Wolves in Sheep's Clothing: Corporate Front Groups as a Response to Activism and Industry Emergence

A growing literature examines how social movement efforts can facilitate entrepreneurial activity and the emergence of new markets. Yet, despite our increased understanding of activism’s impact on these processes, less is known about the role that incumbent firms play. In the case of social movement-backed industry emergence, activists present their championed product or practice as the solution to the problems caused by incumbent offerings. Additionally, social movements may even call for the elimination of their entrenched rivals – a pressure often absent from more traditional forms of market change. Under these potentially hostile conditions, it is unclear how and why incumbent firms will respond to entrepreneurs in the emerging industry and their activist supporters. To address these questions, I investigate incumbent firm response to these pressures through an examination of the electric power industry from 1994 to 2010 in the U.S. Following the interactions of pro-wind-energy social movement organizations and incumbent electricity industry firms in three states, I reveal that firms sometimes use corporate front groups as a nonmarket strategy. Through an inductive analysis, I develop theory explicating how institutional entrenchment shapes firms’ use of these subversive nonmarket strategies in the context of movement-driven markets.