Regulatory categorization can be a matter of life and death to firms, as it sets legal limitations on the production and sales of their product. In this paper we set out to uncover this critical process, for which there is only anecdotal information in extant literature, by asking how regulatory categories are determined through the strategies and interaction of firms, regulators, and other category audiences. We use extensive archival data to examine how U.S. dietary supplement makers first moved from the drug to the food category in 1976, and, when faced with resistance from the Food and Drug Administration, created an entirely new category in 1994, which then fueled their explosive market growth. Our findings show that regulatory categorization is a contest between firms and the regulator, where firms try to disrupt unfavorable regulation by overpowering the regulator through hard power imposed by other state actors, which is achieved through pressure from another category audience—consumers—who are themselves won over through soft power.
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