Bottoms Up: Micro Entry Nonmarket Strategies to Change State Policy

How do small firms overcome regulatory constraints despite opposition from entrenched interests? Micro entry strategies enable small firms to compete with larger incumbents in markets, but exploration of such strategies in nonmarket arenas is limited. Existing research suggests that when firms face regulatory constraints, they often venue shift upwards, for example overturning a local ban by lobbying for statewide legislation. This article uses qualitative data on craft breweries to identify and analyze a set of micro entry nonmarket strategies through which firms engage locally, venue shifting downwards from state to local regulators, to successfully ease state-level constraints from the bottom-up. In public hearings with city officials, entrepreneurs aligned local investment tactics and supportive coalitions with an iterative approach that motivated city-based regulators to challenge state-level restrictions on direct-to-consumer (DTC) business models that are favorable to smaller firms. Experimenting locally with the discretionary use of “event” licenses for ongoing DTC beer sales led to an accumulation of bottom-up support across locales. This support included relational infrastructure and policy-relevant information that enabled entrepreneurs to work through city officials to overcome incumbent opposition. By elaborating how small firms and local officials together create punctuations in a state-level policy monopoly and analyzing both the antecedents and consequences, this study builds a theory of micro entry nonmarket strategy and bottom-up policy change. Even in a mature industry with well-institutionalized regulations, powerful incumbents opposing changes, and minimal technological change, small businesses reshaped the policy environment of an entire state from the bottom up.