Journal zyxwvutsr of Management Studies zyxwvutsrq 26:4 zyxwvut July 1989 0022-2380 $3.50 COMPETITIVE GROUPS AS COGNITIVE COMMUNITIES: THE CASE OF SCOTTISH KNITWEAR MANUFACTURERS zyx * JOSEPH F. PORAC HOWARD THOMAS University of Illinois at Urbana-Champaign CHARLES BADEN-FULLER University of Bath ABSTRACT This article explores how the mental models of organizational strategists determine perceptions of competing organizations and responses to competitive conditions. We first outline a cognitive perspective for discussing competitive strategy, and then use this framework to analyse the particular case of the Scottish knitwear industry. We show how the structure of that industry both determines and is determined by managerial perceptions of the environment. We conclude by drawing out a few general implications of our framework for research and theory on competitive strategy. INTRODUCTION Research on business competition has largely focused upon two issues. First, in an efffort to explain why some generic organizational forms succeed and others fail, industrial economists zyxwvu (e.g. , Scherer, 1980) and population ecologists (e.g. , Hannan and Freeman, 1977) have studied the evolution and structure of competi- tive groups such as ‘industries’and ‘organizational species’. O n the other hand, strategy researchers (e.g. , Porter, 1980; Rumelt, 1984) have typically focused upon individual firms, with an eye toward explaining why the strategies of some organizations lead to competitive superiority while those of others do not. These two issues are not, of course, independent. The structure of competitive groups partly emerges from the strategies of individual firms. Conversely, the strategies of individual firms, both realized and intended, reflect the nature of the broader competitive environment. This non-independence means that a complete under- standing of competition will be possible only when the reciprocal links between firm-level strategies and group-level structures are uncovered. Address for reprints: Joseph Porac, Department of Business Administration, University of Illinois, 350 Commerce (West), 1206 S. Sixth St., Champaign, Illinois 61820, USA.