The Organization of Market Boundaries

3.1 Mutual Adaptation

In economics and elsewhere, there is a long tradition of emphasising processes of mutual adaptation to understand how markets come about and change (Aspers, Bengtsson, and Dobeson 2020; Lindblom 2001). Markets are described as spontaneous emergent orders, arising from the day-to-day behaviour of buyers and sellers. Market boundaries are no exception.

In order to determine a market’s content, and the level of competition, scholars have developed various techniques of delimiting individual markets by studying mutual adaptation. A product movement test (Elzinga and Hogarty 1973) analyses how products are moved to determine a market’s geographic boundaries. If a high percentage (at least 75 %) of the total sales of a product occur within the geographic area where it is produced, a geographic boundary element of that market is defined. Further, a price correlation test (Stigler and Sherwin 1985) states that if prices of a product and its substitutes conform and change in a similar way, a geographical market boundary can be settled. In a similar vein, a critical loss analysis investigates sellers’ profit margins and buyers’ sensitivity to price-increases to delimit markets (Baker 2007). Furthermore, buyer mobility is suggested to determine geographic market boundaries (Anic and Radas 2016) – the more mobile the buyers, the wider the market.

Geographic market demarcations are often combined with product boundaries. The formation of product boundaries includes whether sellers and buyers treat product differences as categories within a market or as separate markets (Rosa et al. 1999) and whether there are substitutes that serve similar buyer needs. Following a similar logic, a cluster market analysis (Punj and Stewart 1983) includes whether sellers cluster their services in ways that make their offering relatively unique, affecting the product boundary.

In the literature, the constitution of market boundaries is largely based on mutual adaptation as well. Elements that may hinder market entry (or exit) have primarily concerned the various resources available to sellers, for example economies of scale, access to distribution, research & development, differentiation, and capital (Bain 1956; Han, Kim, and Kim 2001; Porter 1980), and sellers use such resources to exclude other potential sellers (Santos and Eisenhardt 2009). Redefining market boundaries by innovation has been described as the only way to enter a market protected by high entry barriers (Geroski 1998), and the company Tesla is argued to exemplify such an accomplishment (Stringham, Miller, and Clark 2015).

In many of the examples of boundary formation based on mutual adaptation, scholars have aimed to inform buyers, sellers, and others of how to determine market boundaries properly, offering various techniques with objective outcomes. Brooks (1995), however, demonstrates that market boundaries are enacted by their stakeholders (cf. Weick 1979). Through their experience and selective attention, buyers and sellers establish the market boundaries to which they respond. Accordingly, they may each perceive the boundaries of a market differently, and these boundaries may be more or less divergent from the outcomes of a product movement test or an entry barrier analysis, for example.

3.2 Institutions

Shared ideas – institutions (cf. Meyer and Rowan 1977; Selznick 1949) – represent another type of order forming market boundaries. Established ideas of how things are (conceptions) and should be (norms) have the framing power. From a normative perspective of mainstream economics, entry and exit barriers are not supposed to exist for sellers or buyers (Lipsey, Steiner, and Purvis 1987). Thus, the often stated strong influence of economics on markets in general (Callon 1998; MacKenzie, Munieza, and Siu 2007) also includes market boundaries. Regarding market demarcations, boundaries are explicitly or implicitly drawn to separate markets from each other or from other forms of order. As pointed out, an established way of doing this is to delimit markets in terms of product and geography (Werden 1992).

Institutions not only affect what elements are used to demarcate markets, but also the specific placement of demarcations. Such institutional boundaries of markets may diverge from those formed by other processes. Bowblis and North (2011) describe how studies of markets for elderly care take particular geopolitical boundaries for granted (e.g. county, province, nation). By studying day-to-day patient flows, they demonstrate that market boundaries derived from mutual adaptation often differ from institutionalized geopolitical ideas. Similarly, scholars implicitly tend to equate industries with markets (Brooks 1995). This institutionally based approach excludes substitutes competing for the same buyers, producing a more delimited product boundary.

While ideas based on individual experience and selective attention lead to diverse market boundaries, widely diffused institutions produce the opposite. However, shared conceptions and norms about market boundaries may vary geographically. Market cultures often differ in content and strength (Abolafia 1996; Aspers 2010), and the internet has not removed these differences (Rothaermel, Kotha, and Steensma 2006). Moreover, institutionalized ideas often change over time. Some increase in strength and diffusion whereas, earlier, established ideas may be questioned based on new ones. Further, institutions are emergent, difficult to change and often taken-for-granted, in contrast to organization described next.

3.3 Organization

Organization implies decisions about what others shall do. As stated, the most fundamental organizational decisions are those about membership, rules, monitoring, sanctions and hierarchy. They represent the elements of organization, significant also in analyses of order outside formal organizations (Ahrne and Brunsson 2011, 2019). This explicit and nuanced concept of organization – of which its elements are often pressured by a multiplicity of stakeholders concerning markets – substantially expands the analysis compared to market organization perspectives limited to occasional regulatory interventions by states (Boyer 1990; Streeck 2005). Questions about market boundaries that may be settled by organization include who, and what, has the right to be part of a market, what rules (including standards) apply to entry, how should market boundaries be monitored and illicit or desired entry sanctioned, and who has the right to decide on market boundaries and regarding what issues and when?

The type, number, design and combination of organizational elements used in market boundary work is an open question with an almost infinite number of potential forms. As with boundaries of formal organizations (Santos and Eisenhardt 2005; Thompson 1967), there is potential for significant variation in the organization of market boundaries.

Moreover, organization has its limits. Scholars of organizations have long considered the importance of substitutes and complements to organization, such as leadership (Bolden et al. 2011), information (Bloomfield et al. 1997) and organizational culture (Alvesson 2002). In a similar vein, market organization is often complemented or substituted with technology and information to form individual markets (e.g. Alexius 2018). While superior monitoring has traditionally been described as a distinguishing feature of organizations (Williamson 1985), digitalization and information technologies have brought increased possibilities to monitor markets (Kirchner and Schüßler 2019). Complements and substitutes to organization may be used to form market boundaries, potentially adding to their diversity.

Organization produces a different kind of market boundaries than mutual adaptation and institutions. While boundaries derived from the spontaneous ordering of markets have been described as ‘equivocal’, ‘fuzzy’ or ‘blurry’ (e.g. Chimenti 2020; Rosa et al. 1999) from an outside perspective, market boundary organization is less vague and ambiguous. Decisions about organization elements are explicit and most often documented, in contrast to institutional or spontaneous market boundary orders. The relative distinctiveness and transparency of organization is suggested to drive change as it produces disagreement among stakeholders (Ahrne, Aspers, and Brunsson 2015), although market organization change also differs between markets, suggestively due to variation in market contextual dynamism and in organizers experiential learning (Jutterström 2018). The organization of market boundaries implies attempts, of which the outcomes are uncertain. The attempts are carried out by market organizers, i.e. actors that can make decisions about markets or have access to such decision-making processes.

While formal organizations concentrate responsibility, the responsibility for individual markets is more fragmented and ambiguous (Brunsson and Jutterström 2018). Because markets are not legal persons, there is less accountability for market boundary organization and its outcomes. There is also competing market boundary organization. Market boundaries decided by a public authority, for example, may be very different from the ones decided by a cartel of sellers (Strandqvist 2018).

Why is organization used to order boundaries of individual markets? Boundaries emerge by other processes anyway, and individual markets outside organizations are not legal entities with responsibilities, potentially subverting the relevance of organization. An overarching reason can be found in the concept of ‘hyperorganization’, described as a characteristic of the contemporary world: ‘faced with any problematic situations, the modern impulse is to create more organizational structures’ (Meyer and Bromley 2015). However, the problems and organizational solutions perceived by organizers and the entities they seek to order come in many forms, with varying prerequisites and potential explanations for organization. The ambition of this paper is to investigate more specific reasons for the use of market boundary organization, based on the empirical study. Such explanations contribute to our understanding of organization and its prerequisites, in the forming and reforming of markets.

All in all, organization, mutual adaptation and institutions are different parallel processes of market boundary formation, seemingly generating a plurality of co-existing boundaries of individual markets. The typology helps untangle the often-stated ambiguity and complexity of market boundaries. In the following, the article is confined to market boundary organization, and the empirical study thereof.

4.1 Design and Data Collection

The premium pension market in Sweden was chosen because of the many market challenges over time, the substantial longitudinal boundary work in response to perceived market problems, and for the favourable access to primary and secondary in-depth data from the premium pension authority (PPM) and other stakeholders. It covers the years between 1998 and 2021, allowing for longitudinal patterns to emerge. By triangulating data from the use of interviews, texts and observations as specified below, my overall aim was to achieve an elaborated and initiated chronological reconstruction of the empirical case.

From the longitudinal study, four time spans of market boundary organization were subsequently extracted: ‘pre-launch boundary organization’, ‘price-pressure revaluation’, ‘side-market pushback’, and ‘supply-side quality uplift’. They were chosen for two main reasons. First, each time span demonstrates how market boundaries are formed through organization, in response to perceived market problems. Second, each time span reveals relatively distinct drivers of boundary organization. By ‘time span’ I mean a temporally limited process within the longitudinal study, consisting of stakeholders perceiving a substantial market challenge and responding to it with boundary (re-)organization. I determined the time spans during data collection by means of this definition, reflected in the time spans’ titles above – time span three, for example, includes the functional market problems caused by advisory firms, and the reactive boundary work. As market problems were not easily solved and conditions were dynamic, each time span after the first one covers several market boundary decisions over several years. The time spans are presented in chronological order based on the start of their descriptions. Due to the market problems being addressed in parallel by practitioners, time span two, three, and four partly overlap.

Many market stakeholders participated in the processes of its organization and reorganization. The empirical data comprises 26 in-depth interviews with various relevant stakeholders – in particular, civil servants, politicians, CEOs and other employees in business associations, advisory firms and fund selling companies.^[1] When choosing respondents, I searched for persons with longer experience of the premium pension market, primarily from being involved in the decision-making processes of its boundary changes. A majority were head of departments within the PPM or politicians in the pension working group. Other interviewed stakeholders – mainly CEOs or head of departments at fund sellers, business associations, other public agencies and advisory firms – were important further sources of information, contributing to a more objective and substantial empirical transcript. With this overall orientation, respondents were selected based on snowball sampling (Patton 2015).

Interviews were semi-structured and conducted in an open-ended conversational style. They were normally around 1 to 1.5 h long, conducted face-to-face in the respondent’s workplace, audio-recorded and transcribed. A second data source comprises written reports from public authorities (including all annual reports of the PPM/Pension Authority within the studied time span) and other stakeholders, as well as articles published by Swedish mass media during the period studied, systematically collected through a key word search for ‘premiepension’ in the Retriever data base (4378 articles, all headings checked, circa 500 read). These texts played a major role in later stages of the study, complementing and verifying the description of the four empirical time spans. From the opportunity to follow the organization of the premium pension market over a long period of time within the research theme Organizing Markets at Score (www.score.su.se), the analysis draws on primary and secondary data collected between 2006 and 2022 (last interview). An elemental advantage of a temporally extended data collection of a longitudinal case is the avoidance of key persons’ increasing obliviousness over time, still allowing for longitudinal patterns to emerge. Observations constitute a third data source, carried out at two stakeholder meetings and a seminar (2 to 3 h each). Although a minor data source in comparison to interviews and texts, the observations allowed me to make additional notes on opinions and arguments. The concepts used and developed in the article derive from the outside perspective of the researcher, but partly correspond with practitioners’ discourses in the study. Reconstructing the four empirical time spans, data saturation was reached at the specified number of interviews and texts.

4.2 Data Analysis

The organizational elements – membership, rules, monitoring, sanctions, and hierarchy – were employed in the analysis together with the elements of market boundaries that organization may target: product, buyer, seller, price, transaction, competition, time and space. This analytical framework is an abductive product. On the one hand, it draws on the elements of partial organization (Ahrne and Brunsson 2011) as well as on previous work on market organization (Brunsson and Jutterström 2018). On the other hand, it was developed in parallel to the empirical data collection, to ensure its adequacy for addressing market boundary organization (e.g. by including also time and space). The framework is used to analyse both market demarcations and boundary constitution. In addition, I explore the use of complements and substitutes for organization, for example technology and information, reflecting organizers’ perceived limits of organization in the forming of market boundaries. Focussing on the use of organization to order market boundaries, other intended or unintended effects of organization are omitted.

The analysis was undertaken in several phases, although acknowledging the iterative form of qualitative data analysis and overlapping between the phases. The analytical steps are largely reflected in the article’s structure. First, I sought to reflect the longitudinal process of market boundary forming by organization, paying specific attention to empirical time spans of substantial boundary organization and its context. In parallel to the textual transcription, further data were collected to fill any gaps I perceived in the material. Second, the four observed empirical time spans were extracted from the material and compiled in text form. As stated, each time span was determined by the observation of a generally perceived substantial market problem and the attempts to solve it through market boundary (re-) organization. Third, I analysed the organizational elements used, and boundary elements targeted in the empirical processes. Due to the extensive longitudinal study, organizations rather than individuals were the level of analysis, thus focussing on inter- rather than intra-organizational differences. The results of the analysis are described after the transcription of each time span, and summarized in Table 1. Parallel to the second and third analytical phase, I sought tentative explanations to market boundary organization in an abductive approach (Alvesson and Sköldberg 2009), moving back and forth between the studied phenomenon, my preunderstanding, the empirical data, and existing literature. The outcomes are compiled in Table 2, highlighting the relations between market boundaries formed by organization, institutions, and mutual adaptation.

5.1 Pre-Launch Boundary Organization

Before the market’s launch, the PPM spent more than two years of extensive work to organize the market and its boundaries – considerably more than forecast. The PPM had initially been planned for a staff of around 20 people, but soon engaged around 200 employees, and many consultants, to manage its mission. The market was launched in autumn 2000, one year delayed. The main explanation for the delay, described by the PPM officials and others, was that organizers underestimated the complexity of constructing the market, extending not least the time for developing the overall digital system.

One significant goal in the PPM’s organizing work was to achieve a market with many sellers and products, the idea at the time being the larger the supply side the better. Overall, the PPM tried hard to establish a market close to the ‘perfect’ market ideal of neoclassical economics – including having a low market concentration; that is, many sellers in non-dominant positions. Moreover, there should preferably be an extensive variety of funds; index funds, ethical funds, regional funds, interest funds, mixed funds etcetera.

The concern for supply-side multiplicity resulted in an organization of low market boundaries for sellers and products – significantly lower than later. However, each seller had to sign a standard contract with the PPM before market admittance; concerning trade, payments, information, and price (mainly forbidding additional fees, such as for deposits and withdrawals). The PPM was responsible for sellers and products following the contract; whereas the Swedish Financial Supervisory Authority was responsible for monitoring more general aspects, for example that fund prices reflected their underlying assets.

Another overall goal for the PPM, decided by the politicians (Proposition 1998/99: 98), was to pressure the annual fund rates, substantially affecting buyers’ long-term returns. PPM developed a price reduction model with a progressive volume discount on fund rates. The more buyers choosing a specific fund, the higher the discount returned to PPM – acting as a coordinative buyer. PPM then redistributed the discounts back to the buyers, the Swedish pension savers.

Overall, the two goals for the market – a large supply side and low prices – conflicted. Supply-side multiplicity was regarded as a quality-mark of the new market. However, although acknowledged as important for future pensions, market organizers generally saw a far-reaching price-reduction model as carrying the risk of not attracting many sellers and product variants.

The risk was to take the price-reduction model too far, so that prices would be too low. It could have resulted in a supply that was too low or too poor.

Civil servant, PPM

The Swedish Investment Fund Association and fund sellers participated in the public debate, pushing for less extensive price discounts to make the new market attractive to sellers. The PPM eventually decided to establish a more modest price-reduction model to ensure supply-side multiplicity. This was also the outcome after the market’s launch: buyers could choose between 460 different funds of extensive diversity, offered by sellers from Sweden and many other countries. The supply-side outcome was generally seen as a success. Prices after discounts ranged from 0.15 % (AMF Interest fund) to 3.97 % (Nomura Eastern Europe) of the invested capital per year.

5.2 Price-Pressure Revaluation

In autumn 2000, almost three million people, or 67 % of Sweden’s pension savers, made an active choice of funds (PPM 2001). This proportion of active buyers was generally seen as a success among market stakeholders, who generally promoted active choice. The launch of the new market had been extensively covered by mass media in Sweden.

Once the first choice was over, general interest collapsed, however. The PPM had estimated the number of fund changes between 2000 and 4000 per day and had dimensioned the market to be able to handle peaks of 15,000 to 20,000 changes. In 2001 there were only about 300 to 600 fund changes per day, and about 18 % of all new pension savers (mainly young adults) made an active choice. The number of calls to the PPM service centres fell from some 6000 calls per day to 300, where it stabilized. The PPM responded with massive information campaigns and decision-support tools in the following years to promote buyer activity – yet it remained low. A member of the PPM’s expert committee, publicly expressed opinions of excluding buyers that did not make active choices from the market. This was not decided, however.

In the subsequent analyses of the market by PPM and others, a new idea about the disturbing buyer inactivity began to spread. Theories on decision-making state that with many alternatives and consequences to consider, uncertainty increases and the number of active choices falls drastically. Results from consumer choice research on marmalade and chocolate in supermarkets (Iyengar and Lepper 2000; Loewenstein 1999) began to circulate in reports (SOU 2005: 87) and emerge in discussions among market stakeholders. A manager at the Swedish Social Insurance Agency involved in the investigation (SOU ibid) – with a PhD and familiar with decision theory – visited the board of PPM several times to inform them about this research and its implications. The huge number of sellers and funds to choose between gradually shifted to an explanation for the disturbing buyer inactivity. Consequently, the extensive supply (644 funds in 2002, and 727 in 2005) went from being perceived as an obvious quality of the market into a substantial problem.

Before the start, people within the PPM were extremely worried that there wouldn’t be enough funds. Because if it hadn’t, then it wouldn’t have been a market. Now, in this later phase, the problem was the reversed one.

Head of department at fund seller, former civil servant at PPM

Due to this overall shift, market organizers decided on a new price-reduction model in 2007, with significantly higher volume discounts. In the decision-making process, many small sellers, and the Swedish Investment Fund Association, had argued that the price changes would make it difficult for small sellers to cover their fixed costs, forcing them to leave the market. A civil servant at the PPM described:

The way the discount model is designed [from 2007 onwards] large fund sellers are favoured in the system.

The PPM calculated that the average annual fund fee after discounts would decrease from 0.4 % to 0.3 % due to the decided changes. Furthermore, volume discounts were to now be calculated per seller instead of per fund, preventing sellers from offering many funds to avoid the progressive volume discounts. According to the PPM, this change would further decrease the number of funds.

In 2014, the PPM decided to impose a ceiling on annual fund prices in response to some sellers drastically raising their fees to sidestep the discount model effect. For annual fees over 1.0 % for interest funds and 2.25 % for mutual funds before volume discounts, sellers had to repay a discount of 100 % to PPM. In 2014, sellers withdrew about 10 funds from the market. To further highlight the importance of low fund fees, the PPM used information campaigns and developed decision-support models for buyers.

5.3 Side-Market Pushback

Despite all efforts to increase buyer activity over the years, the number of buyers making active fund choices remained low. However, an alternative solution to the problem of uncertainty and low activity eventually appeared. Some entrepreneurs saw an opportunity to benefit from the situation by intervening in the function of the focal market. A side-market emerged – an advisory market for uncertain buyers in the premium pension market.

Advisors offered premium pension savers the service of choosing and changing funds for, on average, EUR 50–60 per person per year. Their business rapidly expanded. Two early companies that grew quickly were Monetar and Solidar Pension. According to Solidar, 300,000 pension savers used such services in 2008. By the end of 2009, this market had grown to approximately 600,000 customers, and 20 to 30 advisory firms then controlled investments of about EUR 3 billion (PPM 2009). Mainly due to this expansion, the number of fund exchanges went from about 0.64 million in 2004 to 4.5 million in 2009 (PPM 2010). The emergence and explosive expansion of the advisory market were totally unexpected by market organizers. A politician in the pension working group described:

It did not exist in our world of imagination when the premium pension system was created.

To PPM officials, politicians, and sellers in the premium pension market, the advisory sellers were also unwanted. There were several reasons for this scepticism. The advisory firms frequently changed funds for many or all their customers at the same time. This affected the PPM negatively, as it increased both administrative and capital costs and caused capacity problems in the transaction systems. The PPM, on occasion, had to administer 50,000–100,000 changes within a few hours, with total values of up to EUR 1 billion. Fund sellers were similarly affected – their business became more uncertain, difficult and expensive to run. A manager at PPM exemplified:

We had an Eastern Europe Fund where an advisory firm did such a big change that the whole fund practically collapsed. It was shut down for over a month.

Furthermore, PPM officials and politicians were concerned about the extra advisory fees, hollowing out future pensions. Neither did the advisory firms generally beat index funds over time. All in all, the increased activity that had earlier been so desired by market organizers now implied a considerable problem and a driver for market boundary reorganization.

PPM officials reacted by trying to raise market boundaries for the intrusive advisory sellers. One proposition was to require a personal electronic identification when changing funds, putting an end to mass changes; another was to introduce a fee for each fund change. A fee of EUR 8 was initially discussed, but EUR 2 was formally proposed. This change would make frequent mass changes costly, practically excluding the advisory firms from the market. The proposed changes were not supported by the government, however.

The PPM then began to develop a solution that would allow the advisory sellers into the focal market, if signing a standard contract called ‘2K’ – a resource-demanding project. This change would allow the PPM to better control the activities and information of advisors, was the idea. For the reasons addressed above, the 2K project was heavily criticized. In 2009, after the debate became public, the 2K project was halted, and the PPM went back to developing more restrictive solutions.

In 2011, the government approved PPM’s requests to end mass exchanges. Technically, individual transaction codes were decided to make automated computerized mass exchanges impossible. Moreover, the PPM continued its efforts to inform buyers of how additional fees reduce their future pensions – for example, by posting a letter to 570,000 buyers. The reorganization caused the number of fund changes to fall from 4.6 million in 2011 to 1.4 million in 2012. Several advisory firms reacted quickly to the PPM’s planned changes by establishing fund-in-funds, introducing these funds into the premium pension market, putting their clients’ money there, and having these funds invest their capital in other funds in the same market (often their own new funds) – usually for above-average total fund fees.

Attempts to make mass changes and ID hijacking nevertheless continued, and in 2014 the PPM decided to implement a more advanced identification-system for buyers at market entry. Due to continuous problems, marketing and sales of all premium pension products over the telephone were forbidden in 2018.

5.4 Supply-Side Quality Uplift

In 2015 and 2016, the PPM exposed several cases of abuse by fund sellers in the premium pension market. According to the PPM, several sellers had severely violated the contract rules requiring that they act in accordance with the buyers’ interests. Investments had been made in assets rapidly losing their value or with high transaction costs being levied at the buyer’s expense. Marketing activities had also been aggressive and deceptive, with thousands of buyers contacting the PPM for help. Sellers mentioned as part of these abuses were foremost Falcon Funds, Allra, Oppenheim, Lemanik, and Solidar. Three sales companies were stopped from offering funds. The suspected sellers and their funds covered tens of billions of Swedish Krona, and the PPM continued their investigations. In some cases, there were suspicions of fraud, misappropriation of funds and forgery. The PPM contacted police authorities in Sweden and elsewhere (mainly the UK and Malta). Furthermore, the PPM claimed compensation from several sellers to get at least part of the money back to affected buyers, while some sellers claimed compensation from the PPM for being excluded from the market. In 2021, the CEO of Allra was sentenced to jail.

The incidents were extensively covered in the mass media, and the PPM tightened its standard contract regarding the exclusion of funds, penalty fees, and the right to stop sellers from selling fund shares. In 2016, the PPM considered five funds as having violated the contract to such a degree that they were excluded from the premium pension market.

To further increase and secure the quality of funds and sellers, the PPM decided on new contract rules in 2018. Now sellers must have a minimum of three years in operation, a minimum of three years of financial returns per fund, a certain level of sustainability in their operations, and a minimum of SEK 500 million per fund outside the premium pension market. Sellers should also follow ‘good practice’ market norms. The new entry demands would allow additional review of sellers and help the PPM to assess that sellers have withstood the competition outside the premium pension market. All existing contracts were terminated. Sellers had to sign a new contract for each of their funds to access the market. A PPM manager describes:

We [the PPM] threw out all our 800 mutual funds. And they who wanted to re-enter the market had to apply again… an extensive audit process for the PPM. Many were denied re-entry as they did not meet the demands.

Due to the further increase in market boundaries through organization, the PPM had estimated that many sellers and funds would not be able to re-enter the market in 2019. At the end of 2018, there were 94 sellers and 783 funds in the market. One year later, the numbers had decreased to 67 sellers and 478 funds. At around this time, the PPM was mandated by the government to develop a proposition for the public procurement of funds to the market to increase quality and price demands further. Various market stakeholders estimated that this change would decrease the number of funds to between 150 and 300. No decision for such a change was made during the period in this study, however. On the question of how procurement would affect the premium pension market, the director general of the Swedish Pension Authority replied:

There is an agreement among politicians to insert public procurement of funds, giving us further possibilities to scrutinize sellers before they are let in, and to continuously monitor them. This will also lead to fewer funds, making it easier to keep everyone in order.

(Dagens Industri, July 23, 2021)

6.1 Market Boundary Organization

In this study, market boundaries were frequently formed and reformed through organization, to address perceived challenges. Table 1 summarizes the organizational elements used and the boundary elements targeted for each empirical time span. Further, it identifies the complements and substitutes for organization, and whether organization is primarily concerned with demarcation or boundary constitution. The boundary organization in the time spans is cumulative. For example, membership is established in time span 1 and modified in time span 4, but continues to exist throughout time spans 2 and 3.

Table 1 shows that most organizational elements were employed. There were more decisions on rules, membership, and hierarchy, fewer on sanctions, and none on monitoring (although considered by organizers in time span 4). The decisions were directed to many of the market boundary elements – buyers, sellers, and products, but also to the elements of price, transactions, and geography. Boundary decisions often explicitly directed buyers, sellers, and products (e.g. sellers needed to be sustainable to enter the market from 2018). However, many boundary decisions directing price and transactions targeted the market entry possibilities for sellers and products (e.g. transaction fees would end automated mass exchanges, thus excluding advisory sellers by ruining their business). In contrast to geography, there were no decisions creating time boundaries – the digital market was basically free to access anytime. The study illustrates that information and technology were recurrently used as a complement to boundary organization.

The initial demarcation of the market through organization remained essentially unchanged in the longitudinal study – it covered space and buyers, but also sellers, products, and price. The many reorganizations of market boundaries to manage the challenges primarily concerned the constitution of market boundaries. Over time, organization was increasingly employed to gradually raise the boundaries of the individual market. Many stakeholders were involved in the decisions, as exemplified in the empirical descriptions, and the PPM generally in contact with them throughout the longitudinal study.

6.2 Explanations for the Use of Boundary Organization

Based on the empirical case, explanations for the use of organization to form market boundaries arguably derive from the relationships between the initially described ordering processes – mutual adaptation, institutions, and organization. To understand why organization is used to form and reform individual market boundaries, we need to reintroduce the two other ordering processes.

Overall, the empirical case supports the basic argument made by Meyer and Bromley (2015): the modern impulse is to expand the use of organization when faced with any problematic situation. More specifically, however, the two main problems addressed with boundary organization concerned: 1) the legitimacy of the market, and 2) the function of the market.

First, legitimacy implies cultural support (Meyer and Scott 1983) and arises through accordance with prevailing institutions (shared conceptions and norms). Time span 1 illustrates the widely shared idea that a ‘good’ or ‘real’ market is one with supply-side multiplicity. Accordingly, relatively low initial market boundaries were decided in the trade-off between lower prices and an extensive supply side. After its launch, the extensive supply side was considered a success, improving the market’s legitimacy.

Time span 2 shows that passive buyers were recognized as a serious problem by organizers, paving the way for the institutionalization of a new idea – that numerous alternatives produce buyer passivity. Accordingly, the previous norm of supply-side multiplicity lost strength – it was de-institutionalized (Oliver 1992). Due to the shift of ideas, a new, more radical, price-reduction model was decided. This reorganization increased the price boundary of the market by raising the burden for smaller sellers lacking economies of scale. For this reason, the boundary organization change was criticized by smaller sellers and their association.

Second, the function of the market was of considerable concern to market stakeholders and a reason for market boundary organization. Thus, market efficiency and stability were key drivers of boundary organization, similar to why formal organizations buffer their technical cores from external disturbances (Thompson 1967). Time span 3 describes how market boundaries were raised to remove or mitigate the negative impact of intruding advisory sellers. The entry of advisory sellers caused significant functional market problems – concerning transactions, predictability, and costs for PPM and fund sellers. In reaction, new stricter boundary rules were investigated and decided, supported by technology and information. Advisory sellers, however, responded to the boundary reorganization by transforming themselves and their products to retain favourable positions within the market.

Time span 4 illustrates how market boundaries were reorganized to include only sellers and products of higher quality and lower prices, in response to severe price and quality (fraud) problems in day-to-day market practice. Market boundaries were significantly raised by the use of several organization elements to improve the function of the market, in the interest of buyers and rule-abiding sellers.

7.1 Conclusions

In this article, I have suggested and developed a typology of three basic processes of market boundary formation – mutual adaptation, institutions, and organization. The specific purpose has been to develop an organization perspective on market boundary order, and to investigate how and why boundaries of individual markets are ordered through organization.

The empirical case gives an in-depth description of how organization is used to form and reform market boundaries. For the analysis of market boundary organization, I developed and applied an analytical frame of organization elements used and market boundary elements addressed, to the empirical case – a nuanced and expanded perspective on market boundaries. The results are summarized in Table 1, illustrating the substantial and increasing amount of organization to order market boundaries, producing significantly higher market boundaries over time. Almost all organizational elements were used, addressing almost all boundary elements. Organization made boundaries more distinct, and the individual market and its content more separable from its context.

So, under what circumstances can we expect organization of individual market boundaries? The study illustrates that legitimacy and function constitute generic sources of market problems driving the use of boundary organization. The many challenges within the individual market over time resulted in market boundary organization being used to reinforce (boundary complementarity) or replace (boundary competition) market boundaries established by institutions or mutual adaptation (see Table 2). By reinforcement or replacement, boundary organization attempted to direct market content, in response to legitimacy and functional market challenges. Without organizers’ perceived inadequacies of boundaries produced by other processes, we would, according to the results of this paper, see substantially less market boundary organization. All in all, the results indicate the difficulties to explain boundary order without organization, and the use of boundary organization without noticing the relations between the three forms of boundary order.

7.2 Discussion

The presented empirical study illustrates a substantial and recurrent use of organization to order individual market boundaries. Moreover, it illustrates the use of boundary organization to affect other elemental issues than market concentration (Bain 1956), for example transactions and seller quality. Stakeholders’ perceived inadequacies of boundaries produced by the two emergent forms mutual adaptation and institutions, drive the use of the decided form organization.

Altogether, market boundary forming is more similar to the formation of boundaries for organizations than institutionalized ideas of markets and organizations have us believe. Organization is used to order boundaries of both markets and formal organizations, seemingly through resource demanding processes for both forms. The organization of boundaries addresses many relevant aspects of markets and organizations, and contributes to explaining the content of both forms. Moreover, the drivers of market boundary organization resemble those of formal organizations. The attempt to incorporate complementary sellers and their products into the focal market (the 2K contract), for example, resembles how organizations may take control over disturbing contextual factors by expanding their boundaries (Pfeffer and Salancik 1978; Thompson 1967). And the organization of market boundaries helped produce an initially prized identity of the individual market; one characterized by an extensive supply side (cf. Santos and Eisenhardt 2005).

Similarities in how boundaries of markets and organizations are ordered highlight the possibilities of using concepts from organizational theory in the study of markets, regarding, for instance, decision making, implementation, configurations, escalation, and learning. The nuanced and expanded organization concept used in this article enables progressed analyses and results, providing yet an example of the relevance of elaborated organization analyses in studies of markets. Beyond similarities, there are also intriguing differences between the forming of boundaries for organizations and for markets to explore further. While boundaries of organizations are often moved to handle environments (e.g. by insourcing or outsourcing), the organization of market boundaries was foremost a question of raising or lowering the boundaries in the empirical case. By raising or lowering market boundaries through organization, organizers attempted to direct the content of the individual market, in response to legitimacy and functional demands.

The subject of market boundary order is foundational. It includes the processes involved in separating individual markets from their environments, and provides a valuable lens to examine how markets and environments operate and relate to each other. Furthermore, it addresses the processes of directing individual market content, a content that becomes clearer through boundary organization. The question of variation in boundary organization between markets indicates the limitations in this study, stemming from a lack of market comparisons in the design and from the minor possibilities for generalizations. Conversely, however, it highlights the opportunity for further research. Would the use of boundary organization differ if the products are outside the core of state responsibilities (such as pensions) for example? And to what extent do the results reflect the boundary organization work of digital market “gatekeepers” like Apple, in seller-organized markets? More studies of market boundary organization – including its relations to other forms of boundary order – may provide relevant points for comparison in the development of market theory.