Factor markets, actors, and affordances

In this article, we challenge the notion of the efficiency of factor markets and provide an alternative. We specifically identify both the environment- and actor-related origins of heterogeneity in markets. We first discuss how environments have an exaptive nature, where new uses and possibilities emerge continuously and are poised for the taking. We then highlight how actor perceptions result in heterogeneous outcomes, and how the identification of novel affordances—new uses or functions—for factors is a central origin of heterogeneity. We also discuss the existence of actor- and environment-related pressures toward homogeneity and seeming market efficiency. In conclusion, we highlight the implications of our arguments for the strategy and innovation debate, and for our understanding of the nature of markets and economic activity.