Competitive Pressure: Competitive Dynamics as Reactions to Multiple Rivals

Zucchini, Leon and Kretschmer, Tobias (August 2011): Competitive Pressure: Competitive Dynamics as Reactions to Multiple Rivals. Discussion Papers in Business Administration 2011-3

Abstract

Competitive dynamics research has focused primarily on interactions between dyads of firms. Drawing on the awareness-motivation-capability framework and strategic group theory we extend this by proposing that firms’ actions are influenced by perceived competitive pressure resulting from actions by several rivals. We predict that firms’ action magnitude is influenced by the total number of rival actions accumulating in the market, and that this effect is moderated by strategic group membership. We test this using data on the German mobile telephony market and find them supported: the magnitude of firm’s actions is influenced by a buildup of actions by multiple rivals, and firms react more strongly to strategically similar rivals.

• Item Type: Paper
• Keywords: Competitive rivalry, competitive dynamics, strategic groups, mobile telecommunications
• Faculties: Munich School of Management > Discussion Papers > Communication Economics; Munich School of Management > Institute for Strategy, Technology and Organization
• Subjects: 300 Social sciences > 300 Social sciences, sociology and anthropology; 300 Social sciences > 330 Economics
• JEL Classification: D83, M10, D22, L11
• Language: English

References

Barnett WP, Sorenson O. 2002. The Red Queen in Organizational Creation and Development. Industrial and Corporate Change 11(2): 289–325.

Barney JB, Hoskisson RE. 1990. Strategic Groups: Untested Assertions and Research Proposals. Managerial and Decision Economics 11: 187–98.

Belsley DA, Kuh E, Welsch RE. 1980. Regression Diagnostics: Identifying Influential Data and Sources of Colliearity. John Wiley & Sons: New York.

Bettis RA, Weeks D. 1987. Financial Returns and Strategic Interaction: The Case of Instant Photography. Strategic Management Journal 8: 549–63.

Bothner MS, Kang J, Stuart TE. 2007. Competitive Crowding and Risk Taking in a Tournament: Evidence from NASCAR Racing. Administrative Science Quarterly 52: 208–47.

Chen MJ. 1996. Competitor Analysis and Interfirm Rivalry: Towards A Theoretical Integration. Academy of Management Review 21(1): 100–34.

Chen MJ, Hambrick DC. 1995. Speed, Stealth, and Selective Attack: How Small Firms Differ from Large Firms in Competitive Behavior. Academy of Management Journal 38(2): 453–82.

Chen MJ, MacMillan I. 1992. Nonresponse and Delayed Response to Competitive Moves: The Roles of Competitor Dependence and Action Irreversibility. Academy of Management Journal 35(3): 539–70.

Chen MJ, Miller D. 1994. Competitive Attack, Retaliation and Performance: An Expectancy-Valence Framework. Strategic Management Journal 15: 85–102.

Chen MJ, Smith KG, Grimm CM. 1992. Action Characteristics as Predictors of Competitive Responses. Management Science 38(3): 439–55.

Chen MJ, Su K, Tsai W. 2007. Competitive Tension: The Awareness-Motivation-Capability Perspective. Academy of Management Journal 50(1): 101–18.

Cool KO, Dierickx I. 1993. Rivalry, Strategic Groups and Firm Profitability. Strategic Management Journal 14: 47–59.

Fernández Z, Usero B. 2009. Competitive Behavior in the European Mobile Telecommunications Industry: Pioneers vs. Followers. Telecommunications Policy 33: 339–47.

Ferrier WJ. 2001. Navigating the Competitive Landscape: The Drivers and Consequences of Competitive Aggressiveness. Academy of Management Journal 44(4): 858–77.

Ferrier WJ, Lee H. 2002. Strategic Aggressiveness, Variation, And Surprise: How The Sequential Pattern Of Competitive Rivalry Influences Stock Market Returns. Journal of Managerial Issues 14(2): 162–80.

Ferrier WJ, Mac Fhionnlaoich C, Smith KG, Grimm CM. 2002. The Impact of Performance Distress on Aggressive Competitive Behavior: A Reconciliation of Conflicting Views. Managerial and Decision Economics 23: 301–16.

Ferrier WJ, Smith KG, Grimm CM. 1999. The Role of Competitive Action in Market Share Erosion and Industry Dynamics: A Study of Industry Leaders and Challengers. Academy of Management Journal 42(4): 372–88.

Fjeldstad OD, Becerra M, Narayanan S. 2004. Strategic Action in Network Industries: An Empirical Analysis of the European Mobile Phone Industry. Scandinavian Journal of Management 20: 173–96.

German Federal Network Agency. 2009. Jahresbericht 2009: Annual Report of the German Federal Network Agency [16 March 2011].

German Federal Statistical Agency. 2006. Recalculating the Consumer Price Index for Telecommunications Services on Base 2000: Methodological Description. http://www.destatis.de/ [16 March 2011].

Greve HR. 2003. A Behavioral Theory of R&D Expenditures and Innovations: Evidence from Shipbuilding. The Academy of Management Journal 46(6): 685–702.

Grzybowski L, Pereira P. 2008. The Complementarity Between Calls and Messages in Mobile Telephony. Information Economics and Policy 20(3): 279–87.

Hatten K, Hatten ML. 1987. Strategic Groups, Asymmetrical Mobility Barriers and Contestability. Strategic Management Journal 8: 329–42.

Hoetker G. 2007. The use of logit and probit models in strategic management research: Critical issues. Strategic Management Journal 28(4): 331–43.

Hseih K, Chen M. 2010. Responding to Rivals' Actions: Beyond Dyadic Conceptualization of Interfirm Rivalry. Working Paper presented at the Academy of Management Annual Conference 2010.

Hutzschenreuter T, Israel S. 2009. A Review of Empirical Research on Dynamic Competitive Strategy. International Journal of Management Reviews 11(4): 421–61.

Keil T, Maula M, Schildt H, Zahra SA. 2008. The Effect of Governance Modes and Relatedness of External Business Development Activities on Innovative Performance. Strategic Management Journal 29(8): 895–907.

Ketchen DJ, JR., Shook CL. 1996. The Application of Cluster Analysis in Strategic Management Research: An Analysis and Critique. Strategic Management Journal 17: 441–58.

Ketchen DJ, JR., Snow CC, Hoover VL. 2004. Research on Competitive Dynamics: Recent Accomplishments and Future Challenges. Journal of Management 30(6): 779–804.

Kilduff GJ, Elfenbein HA, Staw BM. 2010. The Psychology of Rivalry: A Relationally Dependent Analysis of Competition. Academy of Management Journal 53(5): 943–69.

Lambert D. 1992. Zero-Inflated Poisson Regression, with an Application to Defects in Manufacturing. Technometrics 34(1): 1–14.

Leask G, Parker D. 2007. Strategic Groups, Competitive Groups and Performance Within the U.K. Pharmaceutical Industry: Improving Our Understanding of the Competitive Process. Strategic Management Journal 28: 723–45.

Li J. 2008 Asymmetric Interactions between Foreign and Domestic Banks: Effects on Market Entry. Strategic Management Journal 29(8): 873–93.

Livengood RS, Reger RK. 2010. That's Our Turf! Identity Domains and Competitive Dynamics. Academy of Management Review 35(1): 48–66.

Marcel JJ, Barr PS, Duhaime IM. 2011. The Influence of Executive Cognition on Competitive Dynamics. Strategic Management Journal 32(2): 115–38.

Más-Ruiz FJ, Nicolau-Gonzálbez JL, Ruiz-Moreno F. 2005. Asymmetric Rivalry Between Strategic Groups: Response, Speed of Response and Ex-Ante vs. Ex-Post Competitive Interaction in the Spanish Banking Market. Strategic Management Journal 26: 713–45.

McGee J, Thomas H. 1986. Strategic Groups: Theory, Research and Taxonomy. Strategic Management Journal 7: 141–60.

Miravete EJ. 2009. Competing with Menus of Tariff Options. Journal of the European Economic Association 7(1): 188–205.

Nath D, Gruca TS. 1997. Convergence Across Alternative Methods for Forming Strategic Groups. Strategic Management Journal 18(9): 745–60.

Norton EC, Wang H, Ai C. 2004. Computing Interaction Effects and Standard Errors in Logit and Probit Models. The Stata Journal 4(2): 154–67.

Peteraf M, Shanley M. 1997. Getting to Know You: A Theory of Strategic Group Identity. Strategic Management Journal 18: 165–86.

Porac JF, Thomas H. 1990. Taxonomic Mental Models in Competitor Definition. The Academy of Management Review 15(2): 224–40.

Porac JF, Thomas H. 1994. Cognitive Categorization and Subjective Rivalry Among Retailers in a Small City. Journal of Applied Psychology 79(1): 54–66.

Porac JF, Thomas H, Baden-Fuller C. 1989. Competitive Groups as Cognitive Communities: The Case of Scottish Knitwear Manufacturers. Journal of Management Studies 26(4): 397–416.

Porac JF, Thomas H, Wilson F, Paton D, Kanfer A. 1995. Rivalry and the Industry Model of Scottish Knitwear Producers. Administrative Science Quarterly 40(2): 203–27.

Porter ME. 1979. The Structure within Industries and Companies' Performance. Review of Economics and Statistics 61(2): 214–27.

Porter ME. 1980. Competitive Strategy. The Free Press: New York.

Reger RK, Huff AS. 1993. Strategic Groups: A Cognitive Perspective. Strategic Management Journal 14(2): 103–23.

Smith KG, Ferrier WJ, Ndofor H. 2001. Competitive Dynamics Research: Critique and Future Directions. In The Blackwell Handbook of Strategic Management, Hitt MA, Freeman RE, Harrison JS (eds). Blackwell Publishing: Oxford; 314–361.

Smith KG, Grimm CM, Gannon MJ. 1992. Dynamics of Competitive Strategy. SAGE Publications: Newbury Park, CA.

Smith KG, Grimm CM, Gannon MJ, Chen M. 1991. Organizational Information Processing, Competitive Responses, and Performance in the U.S. Domestic Airline Industry. The Academy of Management Journal 34(1): 60–85.

Smith KG, Grimm CM, Wally S, Young G. 1997. Strategic Groups and Rivalrous Firm Behavior: Towards a Reconciliation. Strategic Management Journal 18(2): 149–57.

Tang M, Thomas H. 1992. The Concept of Strategic Groups: Theoretical Construct or Analytical Convenience. Managerial and Decision Economics 13: 323.329.

Winkelmann R. 2003. Econometric Analysis of Count Data. 4th ed. Springer: Berlin et al.

Young G, Smith KG, Grimm CM. 1996. "Austrian" and Industrial Organization Perspectives on Firm-Level Competitive Activity and Performance. Organization Science 7(3): 243–54.

Young G, Smith KG, Simon D. 2000. Multimarket Contact and Resource Dissimilarity: A Competitive Dynamics Perspective. Journal of Management 26(6): 1217–36.

Yu T, Cannella AA. 2007. Rivalry Between Multinational Enterprises: An Event History Approach. Academy of Management Journal 50(3): 663–84.

Zelner B. 2009. Using Simulation to Interpret Results from Logit, Probit, and Other Nonlinear Models. Strategic Management Journal 30(12): 1335-1348.