Competing through category interaction codes: An inhabited view of category strategy

Research Summary This study introduces category interaction codes—knowledge regarding the expected interactions around entities in a given category—as a critical dimension of category strategy. Through historical analysis of Wang Laboratories in the early computer industry, we demonstrate how these codes shape strategic categorization and competitive dynamics. We show that firms can exploit ambiguous interaction codes to access advantageous decision makers and organizational routines, circumventing entrenched competitors. Further, firms can institutionalize preferred interaction codes through product design, reshaping category prototypes and market dynamics. However, overcommitment to specific interaction codes creates competitive vulnerabilities when market conditions shift. By developing an “inhabited” view of categories that emphasizes socially embedded practices, this study reveals how market categories are enacted through interactions and offers new insights into category‐based competition. Managerial Summary This study introduces category interaction codes—expectations about where, when, how and by whom products are evaluated, used, and purchased within a market. Using the case of Wang Laboratories in the early computer industry, we show that companies can gain a competitive advantage by leveraging and reconfiguring category interaction codes. For example, Wang Laboratories sidestepped direct competition with IBM by categorizing its products for engineers and department managers rather than MIS executives, and outperformed IBM in word processing by innovating how actors interact with the new category. For managers, the key insight is that success depends not only on product features but also on how your product fits into the daily decisions, roles, and behaviors that define a category.