Research across disciplines presumes that market categories will have strong boundaries. Categories without well-defined boundaries typically are not useful and do not become institutionalized, so are expected to fade away. In contrast, many contexts contain lenient market categories, or less-constraining market categories, that persist and become important. We argue this fact can be explained by looking at market categories from the producer perspective. Lenient market categories are accepting

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... of many different types of organizations and offer more flexibility. As a result, we expect there to be high rates of entry into lenient categories. At the same time, lenient market categories offer less credibility than categories with strong boundaries, and so organizations will be more likely to exit. When entry rates are higher than exit rates, lenient market categories will endure over time. We also predict that organizations exiting lenient categories will enter other lenient categories, which further fuels their persistence. Finally, this trend is exaggerated when influential external agents favor leniency. We find support for these ideas in a longitudinal analysis of organizational entry into and exit from market categories in the software industry.