Competitive Dynamics: Themes, Trends, and a Prospective Platform

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Competitive Dynamics: Themes, Trends, and a Prospective Research Platform
Ming-Jer Chen
Darden Graduate School of Business
University of Virginia
(434) 924-7260
[email protected]
Danny Miller
HEC Montreal and University of Alberta
(514) 340-6501
[email protected]
February 8, 2012
Academy of Management Annals (June 2012), 6: 1-89 (forthcoming)
Corresponding Author: Ming-Jer Chen, [email protected]
*This paper is dedicated to Ian C. MacMillan, whose mentorship and guidance has been
instrumental not only to Ming-Jer’s work in competitive dynamics, but also to his academic career
in management. The authors would like to thank Royston Greenwood, Ken Craddock, George Huber,
Dev Jennings, Gavin Kilduff, Hao-Chieh Lin, Isabelle Le Breton-Miller, John Michel, David Sirmon,
Wenpin Tsai, and Jing Zhou for their valuable comments on an earlier draft of this paper. Financial
support from the Darden Foundation, University of Virginia, and from the Social Sciences and
Humanities Research Council of Canada is acknowledged.
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Competitive Dynamics: Themes, Trends, and a Prospective Research Platform
ABSTRACT
We provide a critical retrospective of the competitive dynamics perspective before proposing an
integrative research platform for the future. We argue that competitive dynamics can serve as a
synthesizing framework for linking strategy content and process, resource-based and market
perspectives, strategy development and implementation, and macro-competitive and micro-actor
viewpoints. We first present the core distinguishing elements and purposes of competitive
dynamics. Then, we identify and relate the most prominent research themes in the field: a focus
on action/response dyads, strategic competitive behaviors, competitive repertoires,
corporate-level competitive and resource analyses, and competitive perceptions. Characteristic
methodological concerns are also discussed. Recent trends in each of these areas are
highlighted; these include an increased emphasis on context-specific research, cross-border
investigations, and behavioral interdependencies. We conclude by identifying gaps in the
literature and proposing a general model and research agenda that integrates micro-behavioral
and macro-organizational aspects of strategy and connects competitive dynamics to previously
unexplored domains in the literature .
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Competitive Dynamics: Themes, Trends, and a Prospective Research Platform
Several major lines of work have emerged in the strategic management field since its rise
in the early 1980s.
These include the resource-based view (Barney, 1991), the dynamic
capabilities perspective (Teece, Pisano, & Shuen, 1997), and the study of top management teams
(Hambrick & Mason, 1984).
Competition per se has been the focus of scholars of industrial
economics and structural analysis (Porter, 1980), strategic groups and configurations (Cool &
Schendel, 1987; Miller, 1996), game theory (Brandenburger & Nalebuff, 1996), network theory
(Tsai, 2002), population ecology (Freeman, Carroll, & Hannan, 1983), and competitive dynamics
(Baum & Korn, 1996; Smith, Grimm, & Gannon, 1992).
This chapter reviews the literature on competitive dynamics, first defining its distinctive
elements, then highlighting its core themes and research foci.
It proceeds to identify prominent
trends in the research before pointing out gaps and areas of promise. Competitive dynamics
remains notably underdeveloped in several key respects:
It lacks an integrative framework that
can organize its many facets; its potential to bridge micro and macro perspectives within the
discipline has not been realized; and it has yet to establish many fruitful links with other
disciplines in the management field. We shall try to address these challenges, concluding by
proposing a general model of competitive behavior that can bridge micro and macro approaches
and connect with key paradigms in management.
The field of competitive dynamics has flourished in recent years, for a variety of reasons.
First, it offers a fine-grained approach to understanding what specific firms do when they
compete with specific rivals.
It studies measurable actions that are subject to rigorous study
and therefore yield cumulative findings.
It also examines the interactions among competitors,
focusing not only on actions but on the responses elicited. Thus competitive dynamics is one of
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the few areas of strategy study that is quintessentially longitudinal.
Moreover, it has benefited
from several frameworks that enrich our understanding of the forces driving competition.
In
this essay, we shall build on a framework, the awareness-motivation-capability (AMC) model,
that shows promise for linking micro and macro perspectives of organizations.
Finally,
competitive dynamics is beginning to demonstrate, to mutual benefit, its potential for forging
closer links with other areas of strategy and organization.
Historical Roots
The term “competitive dynamics” has been used in many contexts, ranging from studies
of the competition among species for survival to those considering how different organizational
forms vie for dominance, and to studies pursuing game theoretic models.
however, and the scope of this essay, is quite specific:
Our use of the term,
Competitive dynamics is the study of
interfirm rivalry based on specific competitive actions and reactions, their strategic and
organizational contexts, and their drivers and consequences (Baum & Korn, 1996; Smith, et al.,
1992). We situate competitive dynamics quite squarely in the literature on competitive
strategy.
Although competition is a central element of strategy, too little research has been done to
take it beyond simple and static characterization and toward a detailed analysis of dynamic
competitive-behavioral patterns.
Much of the early work on strategy, for example, relied on
approaches such as industry-structure analysis (Porter, 1980).
The intent of competitive
dynamics research, like other research on strategy, has been to address such fundamental
questions as:
ways?
How do firms interact when they compete?
Why do they compete in particular
How do competitive behaviors influence organizational performance, and vice versa
(Ketchen, Snow, & Hoover, 2004; Smith, Ferrier, & Ndofor, 2001)?
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Unlike game theoretic
formulations, insights are sought from empirical observation rather than formal or logical
modeling.
In contrast to the traditional approaches taken to study these issues, competitive dynamics
research embraces as the primary object of study the competitive actions of a firm. The
intellectual roots of this micro-level focus on individual actions can be traced to Schumpeter’s
(1950) conception of creative destruction, which he used to characterize the dynamic process by
which firms act upon and react to one another in the pursuit of market opportunities.
Indeed,
creative destruction was defined as the eventual—and inevitable—decline of firms through the
process of competitive action and reaction.
Firms act and rivals respond, and these actions and
reactions determine survival and long-term performance.
Similarly, the Austrian School (Jacobson, 1992; Mises, 1949; Young, Smith, & Grimm,
1996) considered competition to be a dynamic market process rather than a static market
condition.
The focus was on the process by which a market moves toward and away from
equilibrium; it is this movement, not the equilibrium per se, that was taken to be of interest.
Premised on disequilibrium, Austrian economics viewed advantage as transient, with a limited
temporal window for exploitation (Chen, 2009; D'Aveni, Dagnino, & Smith, 2010; Gimeno &
Woo, 1996; Roberts & Eisenhardt, 2003; Thomas, 1996; Thomas & D’Aveni, 2009).
In the strategic management field, early work using this competitive framework includes
MacMillan, McCaffrey, & Van Wijks’s (1985) small-sample study of responses to a banking
innovation, and Bettis and Weeks’s (1987) case study of competitive interactions between
Polaroid and Kodak, in all cases paying special heed to the impermanence of advantage.
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The work by MacMillan, et al. (1985) and Bettis & Weeks (1987) marked the beginning
of competitive dynamics research in strategic management; only later did scholars in other fields
adopt the term to refer to this line of research.1
Defining Features
There are a number of essential features that characterize the body of work we designate
as competitive dynamics.
First, competition is considered to be “dynamic” and interactive, and
action/response dyads—and sometimes streams of such actions—constitute the building blocks
of competition. Second, the focus is on actual actions exchanged by firms: these may include
new product introductions or advertising campaigns, entry into new markets, changes in pricing
policy, and relocation or redesign of facilities.
This interaction or engagement between firms
lies at the heart of strategy, and the action/response dyad lends itself to precise and concrete
analysis.
Indeed, the emphasis on real actions taken by managers stands in direct contrast to
the common use of operating and financial statistics for inferring strategic postures.
Third, the
pairwise comparison of firms or rivals—their positions, intentions, perceptions, and
resources—is central to competitor analysis, an integral part of competitive dynamics.
Thus
relativity is an essential premise—the notion that a firm’s strategy and market position must be
examined within the context of and vis-à-vis its competitors’ strategies and positions.
Strategy is not conceived of in the abstract; rather, following Mintzberg, Raisinghani, &
Theoret (1976) and Mintzberg (1978), it is regarded as a pattern in the stream of decisions. The
term “pattern” implies some thematic consistency.
Indeed, a degree of coherence in a firm’s
competitive behaviors or actions and reactions is assumed to exist over time.
1
Moreover, the
In early years, such terms as “competitive interaction,” “competitive engagement,” or “interfirm rivalry” had been
used interchangeably (Chen, 2010). To economists, dynamics involved temporal consideration rather than the
interactive nature of competition that competitive dynamics researchers intended to explore.
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research assumes that each firm is unique, with its own specific resource endowments and
market profiles. Similarly, each competitive relationship between firms is said to be
idiosyncratic and directional.
Underlying organizational forces are believed to explain and
predict firm behaviors or (re)actions in the marketplace. Among these forces, leadership and
human agency are held to be central to strategy and competition (Hambrick & Mason, 1984;
Montgomery, 2008). These features of competitive dynamics stand in contrast to previous
approaches such as Porter’s (1980) five-force analysis, which occurs at the macro-industry level.
Exhibit1 compares some of the salient features of competitive dynamics to the more
conventional Porterian analysis.
-Insert Exhibit 1 about hereDistinctive Purposes
Predicting competitive behavior.
The firm-dyadic approach constitutes a micro
analysis that complements the conventional macro analysis of industry structure as a driver of
strategic decisions.
To predict competitive response, a central component of firm behavior in a
rivalrous situation, it is essential to understand how a competitive action affects the internal
behavior of the defending organization (Chen & Miller, 1994). The
awareness-motivation-capability (AMC) framework, on which we shall build later in this
chapter, provides an integrative model of the three key behavioral drivers that shape a
competitor’s actions and responses (Chen, 1996; Grimm, Lee, & Smith, 2006; Smith, Ferrier, &
Ndofor, 2001; Yu & Cannella, 2007). Simply stated, a competitor will not be able to respond to
an action unless it is aware of the action, motivated to react, and capable of responding.
An
attacker or action-initiator may analyze and predict each of its rivals’ response behaviors (e.g.,
likelihood and speed of reaction) along these three elements.
From an attacker’s viewpoint, the
three behavioral drivers represent possible response barriers for a given rival (MacMillan,
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1988). The AMC framework is useful in analyzing and predicting potential responses. It is
action- and competitor-specific, and analysis will vary depending on the action of interest and
the competitor under consideration. For an attacker, each of its rivals differs according to these
three elements.
Capturing asymmetrical competitive relationships between firms.
The
competitor-specific aspect of competitive dynamics highlights the nature of a critical dimension
of interfirm relationships: competitive asymmetry.
A strategist cannot assume that a
competitive action will affect each of the AMC components equally for all opponents.
Competitive asymmetry—the notion that two firms may not view their relationship or interaction
in the marketplace equally—is very prevalent in business competition (DeSarbo, Grewal, &
Wind, 2006).
It is unlikely, for example, that two rivals will perceive every competitive action
or relationship in the same way.
Due to differences in assumptions about industry outlook and
disparate organizational arrangements and preferences, rivals may differ in their views of their
competitive relationship.
Put symbolically, d(a, b) ≠ d(b, a).
As we shall see, such
competitive asymmetry has important implications for how rivals engage each other in the
marketplace.
Linking strategy formulation to implementation.
The action-based focus and
behavioral orientation of competitive dynamics construe strategy as a set of coherent decisions
and actions. Competitive dynamics thus embraces both strategy formulation and
implementation, as well as strategic content and process.
It also takes into account both
external and internal concerns.
When developing strategy, a firm must consider possible retaliations from rivals.
The
quality and depth of a firm’s knowledge of itself and its competitors, therefore, play a central
role in competitive dynamics (Barnett, 1997, Barnett & Hansen, 1996; Greve, 1996).
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Consequently, competitive dynamics scholars have studied both firm actions and the decisionmakers responsible for these actions (Hambrick, Cho, & Chen, 1996), topics that may fall both
into traditional strategy content research and into the process domain (Ferrier, 2001), and that
encompass both macro-industry forces (Derfus, Maggitti, Grimm, & Smith, 2008) and
micro-individual (Kilduff, Elfenbein, & Staw, 2010) or executive team behaviors (Chen, Lin, &
Michel, 2010; Ferrier & Lyon, 2004; Marcel, Barr, & Duhaime, 2011).
Indeed, competitive
dynamics work spans different analytical levels (e.g., action/response dyad, firm or business
level, and corporate or multibusiness level), and it provides an important micro-macro link that
bridges a wide range of research topics.
Our premise, then, is that competitive dynamics can serve as a useful integrative
framework for strategic management by linking strategy content (or formulation) and process (or
implementation), and macro-competitive and micro-actor viewpoints.
It will be useful,
however, to discuss the major research themes and thrusts in the competitive dynamics literature
before proposing a research platform that provides avenues for further empirical and conceptual
elaboration.
KEY RESEARCH TOPICS AND THEMES
There have been several attempts over the past ten years to review competitive dynamics
research (Chen, 2009; Ketchen, et al., 2004; Maggitti, 2006; Smith, et al., 2001).
takes an integrative approach to make several distinctive contributions.
This chapter
It stresses the
intellectual connections among research themes (or streams) and highlights the micro-behavioral
and macro-strategy linkages informed by competitive dynamics research.
It identifies
important research trends and opportunities, and it provides a conceptual framework for relating
the research to other important domains in the management literature.
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Five distinct research themes have emerged among competitive dynamics scholars over
the years, each of which has contributed to our understanding of firm strategy and the behavioral
dynamics of competition: (1) competitive interaction: action-level studies; (2) strategic
competitive behavior and repertoire: business-level studies; (3) multimarket and multibusiness
competition: corporate-level studies; (4) integrative competitor analysis; and (5) competitive
perception. Exhibit 2 schematically outlines the competitive dynamics research domain,
highlights the makeup of each research theme, and shows how these themes are linked.
(Appendix A presents a more exhaustive summary of the studies within each theme.)
We
conclude this section with methodological concerns associated with these five lines of
competitive dynamics research.
-Insert Exhibit 2 about hereCompetitive Interaction: Action-Level Studies
Taking the exchange of individual competitive actions and responses as the focal points
of analysis, researchers began by analyzing the drivers of competitive response. An action is
defined as a specific and detectable market move initiated by a firm, such as introducing a new
product or entering a new market; such actions may erode a rival’s market share or reduce its
anticipated returns.
A response is a specific and datable countermove, prompted by an initial
action that a firm takes to defend or improve its share or profit position in its industry (Baum &
Korn, 1999; Boyd & Bresser, 2008; Chen & Miller, 1994; Lee, Smith, Grimm, & Schomburg,
2000; Smith, et al., 1992; Smith, et al., 2001).
This focus is of theoretical consequence because it is at this very basic, concrete level that
competitive interaction occurs. Prior to the work of MacMillan, et al. (1985), the
action/response dyad level had not been a preoccupation of strategy or organizational studies.
The analysis of competition had centered on more encompassing aggregates such as a firm (Dess
10
& Beard, 1984), strategic group (Cool & Schendel, 1987), industry (Porter, 1980), and
community or population (Freeman, et al., 1983).
Competitive dynamics, by contrast, operated
at a more fine-grained, more specific, indeed more “micro” level—one that continues to lie at the
very heart of competitive dynamics and is its primary distinguishing feature.
For example,
Baum & Korn (1996, 1999), showed that for competitors in a dyad, rates of competitive market
entry and exit rose with the degree of overlap between their market domains.
Characterizing and predicting competitive response.
By employing diverse
theoretical perspectives such as expectancy-valence theory and game theory, competitive
dynamics scholars conceptualized and measured key attributes of competitive response: the
likelihood of response, the number and the speed of responses, and the extent to which a
response matches the initial action in breadth and severity.
Researchers were able to
demonstrate empirically that these attributes of response were functions of three different
characteristics: (1) attributes of the attack, such as difficulty of implementation, the amount of
effort and time required for execution, and the visibility or degree of industry attention (Young,
et al., 1996); (2) characteristics of the attacker, such as the degree of organizational commitment
to the attack (Chen, Smith, & Grimm, 1992); and (3) characteristics of the defender, such as a
competitor’s dependence or a defender’s stake in the market under attack (Baum & Korn, 1999).
The research also demonstrated the performance consequences of different types of competitive
interactions (Boyd & Bresser, 2008; Smith, et al., 2001; Young, et al., 1996).
Studies of competitive interaction have also shown, for instance, that strategic as opposed
to tactical actions, as well as those that require lengthy execution time and those that are less
visible, tend to reduce the number (Chen & Miller, 1994) and speed of rivals’ responses (Smith,
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Grimm, Gannon, & Chen, 1991).2
Moreover, both competitor dependence and action
irreversibility are significant predictors of response, and they interact positively in affecting the
likelihood of response (Chen & MacMillan, 1992). For example, when attacked in their key
markets, competitors tend generally to react decisively. However, they may react slowly to
signal their willingness to defend their position and, at the same time, show their desire to avoid
escalation.
In addition, competitive interaction has been shown to have an impact on
performance.
For example, Young, et al. (1996), found that competitive activity related
positively to a firm’s performance as evidenced by the market-share gains accruing to attackers
and early responders. Smith et al. (2001), in their review of competitive dynamics studies in
some 30 industries, concluded that one of the most consistent findings is a positive relationship
between a focal firm’s performance and the length of time taken by rivals to respond.
Attending to irreversibility.
A major thrust of the competitive interaction theme is its
explicit attention to the issue of irreversibility—the extent to which a firm is irrevocably
committed to making economic investments and/or revamping organizational and social
arrangements when it undertakes a competitive action.
Chen & MacMillan (1992) argued that
the property of irreversibility extends beyond the tangible economic investments and capital
assets emphasized in previous research (Ghemawat, 1991; Miller, 2003) to include broader
organizational, psychological, and socio-economic considerations, such as escalation of
commitment (Staw, 1981).
Chen, Venkataraman, Black, & MacMillan (2002) identified two
kinds of irreversibility: internal, for example the amount of interdepartmental coordination
required for execution, and external, for example the degree of top management’s public
2
Competitive actions vary in terms of organizational and resource commitment. Strategic actions (e.g.,
manufacturing capacity changes and major product introductions), in contrast to tactical actions (e.g., price changes,
promotions, distribution and service improvements), require a greater degree of organizational and resource
commitment (Smith, et al., 1991).
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endorsement of a move. They found that the former property tends to escalate competition,
while the latter has the opposite effect.
The idea of irreversibility is critical to such central
competitive constructs as aggressiveness (Ferrier, 2001; Ferrier & Lee, 2002; Yu & Cannella,
2007) and implementation difficulty (Chen & Miller, 1994).
A valuable contribution of competitive dynamics studies focusing on individual
competitive actions and responses is that they have illuminated the very core exchanges
constituting competitive interaction. They have moved strategy from an aggregate, sometimes
abstract concept, to one that gets to the core dynamics of individual decisions and the reactions
to them.
A limitation of these types of studies, however, is that sometimes the strategic context
is ignored—the fact that decisions often serve as part of a strategy or a strategic repertoire, and
that the rationales behind those decisions as well as the responses to them must inevitably reflect
that. Quality leaders, for example, might be less responsive to a rival’s price cuts than are cost
leaders. The next section addresses the competitive dynamics literature that takes into account
this broader perspective of strategy.
Strategic Competitive Behavior and Repertoire: Business-Level Studies
Some competitive dynamics research concentrates at the level of the firm or business,
while again adopting the individual competitive move as the building block of competition.
Studies in this second research stream strive to lay bare the organizational and contextual
antecedents that drive competitive behavior and competitive repertoires, and to capture the
ensuing performance outcomes. Firm-level data used in this stream are derived by examining a
wide variety of the competitive moves firms make in engaging their rivals over time.
Strategic competitive behavior: Antecedents and outcomes.
This research seeks to
understand strategic behaviors via a systematic analysis of the attributes characterizing sets of
competitive actions and responses. Through this lens, the behavioral properties of a firm such
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as propensity to act, responsiveness, execution speed, and action (or response) visibility are
brought into focus.
As noted, one of the premises underlying competitive dynamics research is
that a firm’s competitive profile is reflected in its actions and reactions as it engages with rivals
in the marketplace. Consequently, the behavioral properties addressed above find their
corresponding attributes at the action/response dyad level.
Drawing on theoretical perspectives such as upper-echelons theory,
information-processing theory, Austrian economics, and institutional theory, researchers in
attempting to understand competitive behavior and its performance consequences have
demonstrated empirically the significance of a firm’s information-processing capacity (Smith, et
al., 1991), size (Chen & Hambrick, 1995), and top management team (TMT) characteristics
(Derfus, et al., 2008; Ferrier, et al., 1999; Ferrier & Lyon, 2004; Hambrick, et al., 1996; Young,
et al., 1996).
For example, Chen & Hambrick (1995) tested a set of long-held assumptions about the
competitive behavior of relatively small firms in an industry. They found that small firms tend
to initiate more attacks and are speedier at their execution, yet they retain a low profile in those
attacks—which in some ways approximate guerrilla warfare.
less likely to respond and slower in execution.
Also, small firms under attack are
In addition, these firms perform best when their
behavior adheres to that typical for firms of their size: deviations from size-group patterns (e.g., a
small airline behaving like a large airline) appear to impair performance.
Ferrier, Smith, & Grimm (1999) investigated the “dethronement” and market-share
erosion of market leaders in approximately 40 industries over a seven-year period. They found
that leaders are more likely to be dethroned or to experience share erosion when, compared to
their challengers in the industry, they are less competitively aggressive, carry out simpler
competitive repertoires, and are less speedy in undertaking competitive actions.
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Chen, et al. (2010) analyzed the likelihood of attack by examining the role of the
socio-behavioral integration of the top management team.
They argued that TMT dynamics
shape how a firm enacts its environment and engages with rivals.
The more cohesive the team
and the higher its socio-behavioral integration, the easier it was to launch decisive and swift
actions against rivals.
This was especially important in hypercompetitive environments in
which the competitive context was difficult to decipher and competitive advantage temporary.
In such environments, the pressure to act quickly was intense, and generated ample conflict
among TMT members.
Competitive repertoire.
Ferrier (2001), Ferrier & Lee (2002), Ferrier & Lyon (2004),
and Miller & Chen (1994, 1996, 1996a) conceptualized competitive strategy as a repertoire of
micro competitive behaviors. A competitive repertoire is made up of the entire range of a
firm’s competitive moves (e.g., new market entries, major price initiatives). As noted, this
conceptualization differs fundamentally from approaches previously adopted by most strategy
researchers, including Porter’s well-known generic strategies of low-cost/differentiation focus.
It is, however, fully consistent with the long-held view of strategy as a pattern in the stream of
decisions (Mintzberg, 1978).
Certain vital firm attributes, hitherto neglected, were identified via the study of
competitive repertoires: a firm’s competitive inertia or the overall level of activity in its set of
competitive actions (Miller & Chen, 1994), the simplicity or diversity in the types of competitive
moves it makes (Ferrier & Lyon, 2004; Miller & Chen, 1996), and its nonconformity or degree
of departure from industry norms (Miller & Chen, 1996). By employing a repertoire approach,
the research offered a novel conceptualization of these three critical constructs of competition,
which had traditionally fallen within the realm of organization theorists and sociologists but were
shown to hold great promise for deepening our understanding of firm-level strategy. Strategic
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repertoire studies integrate market-level variables (e.g., diversity and growth) with those at the
firm level (e.g., size and age) in explaining the sources of repertoire simplicity, inertia, and
nonconformity. The latter, in turn, are shown to have important performance consequences that
differ as a function of the competitive environment.
For example, Miller & Chen (1994)
studied competitive inertia, a firm’s level of overall competitive activity. They argued that
whereas poor performance might induce tactical changes, it failed to stimulate policy reversals or
strategic actions, which are more difficult to implement, both operationally and politically.
Market growth, by contrast, related negatively to inertia in strategic actions but not in tactical
ones, suggesting that expanding markets can promote major commitments of organizational
resources.
The work on strategic simplicity (Ferrier & Lyon, 2004; Miller, 1993; Miller & Chen,
1996) was also interesting as it showed that firms that had performed well tended to simplify
their strategic repertoires, focusing on an ever narrower set of action types (e.g. price cuts, or
advertising alterations).
At first, these changes were salutary as they seemed to show
companies concentrating on what they did best and what they believed was most important.
But beyond a certain point, simplicity was associated with declines in performance.
It seems
that under conditions of success, firms engage first in veridical and then in superstitious varieties
of learning (Miller, 1990, 1993). Such repertoire studies took competitive dynamics beyond
action/ response dyads to look at the entire configuration of competitive actions, and so provide a
more holistic picture of competition posture.
Ferrier (2001), also adopting a repertoire approach, conceptualized strategy as a sequence
of competitive moves taken by a firm over time.
He and his colleagues (Ferrier & Lee, 2002;
Ferrier, MacFhionnlaoich, Smith, & Grimm, 2002), investigated competitive aggressiveness as
reflected in the characteristics of those sequences of moves. Based on a multiyear,
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multi-industry study of thousands of competitive moves, his findings suggested, among other
things, that a firm’s competitive aggressiveness is influenced by past performance,
organizational slack, and TMT heterogeneity, as well as industry characteristics such as growth
and concentration.
Characteristics of firms’ sequences of competitive moves also account for
differences in their relative performances, as is evident by the positive impact of attack volume
and duration on market-share gains.
Conceptual links.
The competitive interaction literature and strategic competitive
behavior and repertoire research are complementary. The former concentrates on the
characteristics of individual competitive actions and reactions, the latter combines these actions
at the business level to more richly characterize strategy. Here we see the early promise of
moving from decision-level behavior and the micro-influences that drive that behavior, to the
more comprehensive strategies that represent combinations or repertoires of decisions. The
former have been the province of behavioral analyses by those employing psychological lenses;
the latter have been studied by those using economic and sociological perspectives. As we shall
see, the competitive dynamics approach shows promise of bridging the two and offering a
critical micro-macro link.
It is noteworthy that explicit attention to path dependence—the connections between past
and current actions—conceptually links research in the action and strategic repertoire domains.
Firm attributes such as structure (Smith et al., 1991), top management characteristics (Ferrier &
Lyon, 2004; Hambrick et al., 1996), and firm size (Chen & Hambrick, 1995), as well as
repertoire inertia (Miller & Chen, 1994), simplicity (Ferrier & Lyon, 2004; Miller & Chen,
1996), nonconformity (Miller & Chen, 1996), and aggressiveness (Ferrier, 2001; Ferrier & Lee,
2002), may all influence the path-dependent capabilities of a firm. More specifically, each
strategic action undertaken by a firm is constrained by its prior moves and, in turn, limits future
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moves. Past investment and commitment will constrain a firm’s range of strategic options in
the future, as well as shape its capability and performance in creating and adding value. The
main implication of much of competitive dynamics work is that competition is not frictionless,
nor is it commenced de novo in any new situation, and history imprints itself on all competitive
actions.
For all of their richness, however, most competitive dynamics studies at the business
level are “under contextualized.” While they do consider the competitive context, they rarely
take into account organizational design factors or decision-making proclivities and biases that
condition characteristics such as repertoire inertia and simplicity.
They examine, or at least
empirically control for, strategy and environment but by and large fail to look into how human
and organizational agency links the two. Moreover, there has been scant effort to relate the
specific strategic actions to the repertoires in which they are embedded; for example, little is
known about whether inertial or simple strategic repertoires are a function of specific types of
actions and responses.
In short, scholars within our first two research streams have not
undertaken to integrate their efforts. The firm-level macro orientation is not linked to the
decision-level micro orientation.
Multimarket and Multibusiness Competition: Corporate-Level Studies
Multimarket competition.
There has been considerable interest over the past two
decades in the application and extension of the theory of multimarket (or multipoint) competition
across a wide range of fields (Baum & Korn, 1999; Bernheim & Whinston, 1990; Evans &
Kessides, 1994; Gimeno, 1994; Gimeno, 1999; Gimeno & Woo, 1996, 1999; Greve, 2008;
Karnani & Wernerfelt, 1985; Knickerbocker, 1973; Haveman & Nonnemaker, 2000; also see Yu,
Subramaniam, & Cannella, 2009 for a comprehensive review). The focus of the theory has
been on mutual forbearance (Edwards, 1955), that is, the idea that firms operating in the same
18
markets will recognize their interdependence and, as a result, will tailor their competitive
interactions to minimize risks of retaliation and escalation.
Baum & Korn (1996), in supporting
this mutual forbearance hypothesis, found that close competitors avoid engaging in very intense
rivalry. Moreover, firms interacting in multiple markets are less aggressive toward each other
than those that interact in one or a few markets.
In fact, Gimeno & Woo (1996) showed that
multimarket contact suppresses the intensity of rivalry, whereas strategic similarity between
firms or comparability in their competitive strategy increases it. Gimeno and Woo (1999)
demonstrated that multimarket contact, by reducing the rivalry experienced by a market unit,
increases the profitability of that unit, and that the positive relationship between multimarket
contact and profitability will be stronger if the contacts occur in markets with strong
resource-sharing opportunities.
In linking multimarket theory to competitive dynamics, Baum
and Korn (1999) found an inverted U-shaped relationship between the extent of multimarket
contact in competitor dyads and firms’ rates of entry into and exit from each other’s markets.
This curvilinear effect, however, varies from dyad to dyad and is influenced by the relative size
of competitors in a focal dyad and the relative levels of multimarket contact with competitors in
other dyads.
Multimarket competition and competitive dynamics are related but distinct research
streams, and a number of studies (e.g., Baum & Korn, 1999; Gimeno & Woo, 1996, 1999; Yu, et
al., 2007) have integrated the two, in essence by considering the former to be a subset of the latter
(Upson, et al., 2011). That is, they have employed notions from multimarket competition to
provide, in particular, a theoretical framework that enables competitive dynamics researchers to
investigate interfirm rivalry at the corporate level.
Following precedent set by studies of multimarket or multibusiness competition (e.g.
Collis & Montgomery, 2005; Greve, 2006; Haveman & Nonnemaker. 2000; Hitt, Ireland, &
19
Hoskisson, 2007), scholars have begun to study competitive modes of resource allocation by
multi-divisional corporations, and rivalry among multinational enterprises (MNEs) via
competitive moves, foreign direct investments (Barnett, 1993; Chang & Xu, 2008; Meyer &
Sinani, 2009), and market entries (Di Gregorio, Thomas, & Gonzalez de Castilla, 2008; Gielens,
Van de Gucht, Steenkamp, & Dekimpe, 2008).
Resource allocation as competitive moves.
McGrath, Chen, & MacMillan (1998)
have extended the above three research themes, which apply mainly to the business level, in
order to better understand corporate-level competition.
They proposed that an acting firm’s
resource allocations across its divisions or business units could influence those of its rivals,
thereby enhancing its sphere of influence without precipitating an all-out competitive war. This
suggests that a firm competing in multiple markets may, via its resource-allocation patterns,
orchestrate its spheres of influence and initiate mutual forbearance or tacit collusion with
multimarket competitors sharing similar markets (Edwards, 1955; Gimeno & Woo, 1996).
In
such situations, the allocation of resources across different lines of business and industries may
substitute for destructive head-to-head competition.
With that in mind, McGrath, et al. (1998)
conceptualized stratagems of thrust, feint, and gambit and concluded that corporate strategy
decisions cannot be fully understood unless competitive interaction is taken into account
explicitly.
They demonstrated that organization and market factors such as relative market
stake and competitive strength could be used to predict when such stratagems can be employed.
MNE rivalry.
Yu (2003), Yu & Cannella (2007), and Yu, et al. (2009), by studying
rivalry between MNEs in host country markets, have taken an important first step in applying
competitive dynamics to the international setting.
In employing the AMC perspective and
evaluating market-resource considerations, for example, Yu & Cannella (2007) found that the
speed of an MNE’s response to a rival MNE’s attack is influenced by resource-related factors
20
such as geographic distance and government constraints, and by market-related factors such as
the strategic importance of the initiating country and the portfolio of multimarket contacts
between the competitors.
The study highlights the significance of host-country market
constraints on MNE competitive actions, which go much beyond the constraints imposed in the
context of domestic competition.
In light of the growing economic significance and prevalence of diversified national,
multimarket, and multinational firms, the study of corporate-level strategy and competition is
increasingly relevant.
Yet, despite the focus on specific decisions for market entry and resource
allocation, there remains a glaring omission in some of this literature: a rich characterization of
strategy and strategic differences across different markets and business units.
As with our
earlier streams of research in competitive dynamics, this branch exists generally independent of
and unrelated to the others. Consequently, our knowledge of the broader macro-strategic
context of the specific decisions being examined is still relatively shallow.
Integrative Competitor Analysis
Competitive dynamics scholars have expanded the research domain of competitor
analysis to include more integrative approaches.
As we shall see, a core contribution of this
orientation is a model that we shall build on later in our analysis to more systematically organize
and unify the field of competitive dynamics and to link it to other management paradigms.
Market-resource concerns.
strategy and organizational studies.
Competitor analysis has been an important approach for
Traditional research in the area, however, has focused
primarily on static strategic profiles or firm capabilities, often via analyses such as SWOT
(strength-weakness-opportunity-threat). Too often, these analyses have only tenuous links to
actual competitive behaviors. To address this challenge, Chen (1996) proposed a model uniting
two firm-specific, theory-derived constructs: market commonality and resource similarity. The
21
notion of market commonality, or the degree of presence that a competitor manifests in the
markets it shares with a focal firm, derives from the literature on multipoint or multimarket
competition referred to in the previous section.
Resource similarity, or the extent to which a
given competitor possesses strategic endowments comparable, in both type and amount, to those
of the focal firm, is based in the resource-based theory of the firm (Barney, 1991) and notions of
strategic similarity (Gimeno & Woo, 1996). The premise is that each firm has a unique market
profile and strategic-resource endowment, and that a pairwise comparison with a given
competitor along market commonality/resource similarity dimensions helps to illuminate the
tension between the two firms and predicts how they might interact in the market.
In that sense the model represents a theoretical integration. The resource-based view
(RBV), focusing inwardly on a firm’s unique endowments, has within a short period risen to
prominence in the field of strategic management, in much the same way that Porter’s paradigm,
which focuses on external market forces, influenced the discipline during the 1980s. Chen
(1996) integrated both firm and market perspectives—the internal and the external—suggesting
that implementing such a balanced and comprehensive approach is the ultimate challenge of
strategic-management research.
A number of studies have extended and reinforced this integrative approach. Sirmon,
Gove, & Hitt (2008) have linked the resource-based view to competitive dynamics, suggesting
that comparative advantage in bundling and deploying resource stocks (as reflected by
industry-specific human-capital skills) result in superior outcomes in competitive contests.
Ndofor, Sirmon, & He (2011), integrating RBV and competitive dynamics, found that
competitive actions that leverage or liberate firm resources enhance organizational performance.
Tsai, et al. (2011) linked these market and resource elements in a mediation model, showing that
22
a firm’s ability to view things from a rival’s perspective positively moderates the relationship
between resource deployment capability and market share gain.
Competitive asymmetry.
The simultaneous consideration of market similarity and
resource commonality illustrates the complementarity between two prominent but contrasting
strategy paradigms and suggests a set of propositions that link the two to interfirm rivalry and the
likelihood of action (and response). This approach also highlights the importance of
competitive asymmetry, suggesting that two firms facing exactly the same market conditions
may view each other and their competitive relationships quite differently.
Using Tversky’s
(1977) seminal work on the dimensions of similarity, Chen (1996) proposed that competitive
relationships between firms, viewed either through market commonality or resource similarity,
are rarely symmetrical.
Such asymmetry may help to explain perceptual discrepancies and
behavioral variations in interfirm competition and information exchanges.
Awareness-motivation-capability (AMC).
The joint consideration of these
market-similarity and resource-commonality constructs, as well as consistent empirical support
from prior competitive dynamics studies, has brought to light three essential antecedents that
affect a firm’s competitive activity: its awareness of another firm’s moves, its motivation to act
(or respond), and its capability to act (or respond).
For example, the greater a rival’s market
commonality with a focal firm, the less motivated that rival would be to initiate an attack against
the firm for fear of retaliation across multiple markets, and the greater a rival’s resource
similarity with an attacking firm, the greater would be its ability to respond to the attacker (Chen
1996). This model, as we shall argue, may be used to structure an integrative research platform
for competitive dynamics going forward.
It should be noted that there is a direct correspondence between the individual
components of AMC and market commonality/resource similarity.
23
For example, market
commonality constructs, such as Baum & Korn’s (1996) market-domain overlap, tap into
motivation, while constructs relating to resource similarity, such as Gimeno’s (1999) strategic
similarity, affect action or response capability, and both constructs are often associated with
awareness (Chen, 1996).
Extensions.
Theoretical and empirical studies that have built on the AMC model and
its components include Baum and Korn’s (1999) dyadic examination of dynamic competition;
Gardner’s (2005) investigation of interfirm rivalry in human resources; and Mas-Ruiz,
Nicolau-Gonzalbez, & Ruiz-Moreno’s (2005) study of asymmetrical rivalry between strategic
groups. Studies making related contributions include DeSarbo, et al.’s (2006) verification of
competitive asymmetry based on consumer survey data; Yu & Cannella’s (2007) study of market
and resource antecedents of rivalry among MNEs; Kilduff, et al.’s (2010) exploration of the
psychology of rivalry, and Upson, Ketchen, Connelly, & Ranft’s (2011) examination of the
impact of competitor analysis on engagement between rivals with “foothold” positions in a
multimarket context.
The AMC perspective has also been used to predict a range of strategic
actions in the fields of marketing (e.g., Gielens, et al., 2008) and management information
systems (e.g., Chi, Ravichandran, Andrevski, 2010).
Conceptual links.
In a real sense, the competitive dynamics work that has been done in
the area of integrative competitor analysis is the most encompassing among the four research
streams we have dealt with so far. Several recent extensions of the integrative competitor
analysis approach are especially noteworthy in highlighting its links with our other competitive
dynamics research themes. The first is that market-resource and
awareness-motivation-capability lenses have been used to examine corporate-level competition.
These studies have investigated MNE rivalry (Yu & Cannella, 2007), foreign direct investment
24
(Meyer & Sinani, 2009), market entry (Gielens, et al., 2008), and foreign-domestic firm rivalry
(Chang & Xu, 2008).
In a second extension, the three AMC antecedents of competitive behavior were used to
predict the levels of interfirm competitive tension that managers perceive (Chen, Su, & Tsai,
2007). These studies have drawn attention to competitive perception as opposed to the
objective aspects of competition that were the focus of the first three research themes (Livengood
& Reger, 2010).
The AMC perspective also offers a useful macro/micro link in the study of competitive
dynamics (Kilduff, et al., 2010). Coupled with the idea of competitive asymmetry, this
perspective led to the development of a rival-centric perceptual approach (Capron & Chatain,
2008; Tsai, Su, & Chen, 2011) in which seeing through the eyes of a rival is a key requirement of
competitive analysis.
Such an extension offers an opportune platform for examining rivalry at
the individual or micro level (Kilduff, et al., 2010).
A third extension of integrative competitor analysis is theorization beyond industry and
market boundaries. Markman, Gianiodis, & Buchholtz (2009) focused on the idea of resource
dissimilarity and product-market dissimilarity to investigate rivalry in factor markets and in
upstream/downstream industries. Capron & Chatain (2008) explored actions that firms take to
erode rivals’ resources in factor and political markets, proposing several key drivers and
performance implications. A related line of inquiry explores the impact of executive leadership
on competition, thereby bringing people and leadership back into strategy research (Montgomery,
2008). Leaders, of course, influence strategic behavior and are a critical resource in factor-market
rivalry (Gardner, 2005; Hambrick, et al., 1996).
Lastly, researchers have extended the integrative competitor analysis to non-competing
stakeholders. Peteraf & Bergen (2003) extended the market commonality/resource similarity
25
framework to include customers, while Markman, Waldron, & Panagopoulos (2011)
differentiated “attackers” from “competitors” to theorize interfirm rivalry among
non-competitors and NGOs. Chen and Miller (2011), in proposing a relational perspective of
competitive dynamics, advanced a multidimensional framework that is more encompassing,
places greater emphasis on value creation for the community, and contemplates more
stakeholders than the conventional combative view.
In fact, by characterizing the relationship
between any actors or entities, the market commonality/resource similarity framework can be
employed for a multi-level analysis of firms, groups, individuals, and nations.
Competitive Perception
Thus far our research streams have concentrated on the actual behavior involved in
competition—the competitive actions and responses that take place at the level of
action/response dyads, businesses, or multibusiness corporations. But implicit in our discussion
are the motivations and cognitions of the actors who initiate and respond to competitive
actions—all of which relate to human perception (Miller & Droge, 1986; Staw, 1991).
A
stream of recent work has begun to make those hitherto implicit considerations explicit,
acknowledging that action can take place only via human agency, and that all human agency is
filtered by perception (Staw, 1991).
Strategy and organization studies that have adopted a
perceptual lens to investigate competition include Reger’s (1990) analysis of competitive
positioning, Reger and Huff’s (1993) examination of strategy group, and Porac, Thomas, &
Baden-Fuller (1989) and Porac, Thomas, Wilson, Paton, & Kanfer’s (1995) investigation of
intraindustry rivalry among Scottish knitwear producers.
The incorporation of perceptions in competitive dynamics research began in earnest with
the Chen & Miller (1994) paper, which was a forerunner of the AMC model.
Using an
expectancy-valence framework (Vroom, 1964), the authors developed a model to predict the
26
features of a competitive attack that would minimize the chances of retaliation.
It was proposed
that the proclivity to respond to an attack would depend on a rival’s subjective reward or
“valence” for launching a successful response (the motivational or “M” component of AMC),
coupled with that rival’s perceived probability that it would have ample capability to respond
(the “C” component of AMC). The visibility or awareness (the “A” of AMC) of an attack was
a third component of the model. The prediction of the model was borne out: that less visible
attacks, or actions attacking more peripheral markets and/or requiring more cost and disruption
to respond to, elicited the fewest competitive responses.
Indeed, highly visible attacks and
actions that were relatively easy to respond to had the highest probability of meeting with
retaliation.
As predicted, the lower the likelihood of response, the more successful the attacker.
Although this expectancy-valence model was assessed using concrete measures, it is at heart one
that is very much based on managerial perceptions.
As noted, Chen (1996) built on this framework in putting forth the AMC perspective.
The AMC model itself and each of its elements has a vital perceptual component.
Awareness
involves perception, motivation is driven by perceptions, and capability cannot lead to action
unless it is perceived to be adequate and unless a rival, threat, or advantage is perceived by
managers as being important enough to warrant the commitment of capability-building
resources. Thus, the components of the AMC model can only have implications for action via
the perceptions of managers within attacking and responding companies (Porac et al., 1995).
Notably, the model suggests that competitive asymmetries will exist between different pairs of
rivals: Perceptions, motivations, and capabilities are apt to vary considerably between the parties.
The AMC model, as noted, has served as a focal point for much of the research on
managerial perceptions and competition.
In all of this work, the perceptions of managers and
top management teams regarding the emotional and behavioral significance of specific rivals and
27
“competitive turf” is central.
As such, the research in this domain begins to examine directly
the perceptions of managers and the contexts that shape those perceptions.
In these attempts,
new concepts such as competitive tension (Chen, et al., 2007), identity domains (Livengood &
Reger, 2010), and competitive acumen (Tsai, et al., 2011) have been developed to incorporate
the importance of such perceptions.
Chen, et al. (2007), for example, have demonstrated the importance of competitive
tension—the strain between a focal firm and a given rival that is likely to elicit an attack on the
rival.
They argue that each of the components of the AMC model—awareness, motivation, and
capability—contributes to potential tension and therefore enhances the likelihood of rivalry-like
exchanges. Although competitive tension includes both objective and perceptual
considerations, this paper devotes its attention mainly to perceived competitive tension, while
controlling for the influence of objective industry-structure tension. All three factors may
enhance perceived tension and thereby increase a firm’s propensity to attack a given rival.
The
significance of competitive perception, demonstrated in this study, has direct bearing on
Livengood & Reger’s (2010) discussion of proprietary “turf.”
Yet another determinant of competitive behavior driven by perception is a firm’s
“identity domain,” or TMT members’ consensual comprehension of the competitive arena that
demonstrates and reinforces their marketplace identity (Miller, Le Breton-Miller & Lester,
2011).
Livengood & Reger (2010) suggest that firms tend to compete in certain arenas in
which they perceive their identity to be at stake—areas of enhanced “psychological
consequence.”
(Organizational identity refers to its members’ consensual understanding of
“who we are as an organization.”) Volvo, for example, with its identity as a safety-driven
company, will invest handsomely in keeping its cars safe, perhaps at the expense of emphasizing
other rewarding sources of automobile (and company) performance.
28
From a competitive
viewpoint, any attack, even an indirect and weak one, that falls into an organization’s
self-constructed identity territory may provoke fierce and forceful retaliation that may seem
irrational to outsiders. Again, the AMC model is used to predict competitive actions and
reactions. This attention to identity considerations increases awareness of that aspect of the
environment most relevant to defending or strengthening the identity domain.
Emotional ties to
identity enhance the motivation to defend or nurture the identity domain, and managerial
attention to the domain increases resource allocation toward it and augments related capabilities.
Such ties may result in the asymmetrical perceptions and actions of different competitors
operating in the same environment, as in the well-known Boeing versus Airbus case
(Casadesus-Masanell, Voigt, & Mitchell, 2006).
Their differing views of the industry and its
competitive outlook have led these archrivals to adopt fundamentally different strategies and
business and operational models.
Kilduff, et al. (2010) incorporate perceptions into their analysis in a different way.
They
are concerned with the subjective intensity of rivalry between individuals, groups, and
companies, arguing that aspects such as proximity and prior competitive interactions increase
rivals’ attention toward one another and their perceived enmity and intensity of rivalry.
For
example, a study of auction behavior showed that bidders were more apt to exceed their limits
when facing few rather than many opposing bidders. The implication is that rivalry may
develop between specific bidders who become targets of one another, and that that induces them
to try unreasonably hard to achieve “victory” (Ku, Malhotra & Murnighan, 2005).
Thus,
Kilduff et al. (2010) argue the importance of prior interactions in enhancing the desire of rivals
to best one another, even though from a rational point of view, the results of those prior
interactions may have no bearing on the situation at hand.
In short, rivalry here is conceived as
a subjective competitive relationship that actors have with one another, and that increases their
29
psychological involvement and the perceived stakes of competition—independent of the
objective characteristics of the situation. Thus the emotional aspects of competition, much
neglected in the field, now assume a new prominence.
Finally, Tsai, et al. (2011), adopting a rival-centric view of competitive dynamics, argue
that it is important for a focal firm to have “competitive acumen”—an ability to understand its
rival’s perceptions and to see things from its rival’s perspective.
Only then can it make
appropriate competitive decisions. Competitive embeddedness in the market-engagement
relationship with those rivals (Gimeno, 2004; Gnyawali & Madhavan, 2001) is shown to be
central to understanding a rival’s perceptions, which, in turn, has positive consequences for
market-share gain against the rival.
Conceptual links. Perceptual studies of competitive dynamics are especially
interesting as they bridge micro and macro perspectives (Staw, 1991).
The perceptions and
inclinations of leaders (Miller & Droge, 1986) and their interactions with other top team
members (Chen et al., 2010) may shape competitive actions (Dutton & Jackson, 1987).
Over
time, that stream of decisions constitutes strategy at the firm and corporate levels—a
quintessentially macro-organizational phenomenon (Mintzberg, et al., 1976; Mintzberg, 1978).
Individual human perceptions are also at the heart of micro approaches in organizational
behavior and behavioral economics, where perceptual biases are the focus of studies of decision
making and choice (Ariely, 2008; Barberis & Thaler, 2003; Loewenstein, 1996).
Just as individual perceptions lead to actions that are aggregated to influence corporate
behavior, so do more macro concepts such as organizational identity, identity domains, and
corporate interaction histories shape the perceptions of individual decision makers functioning
within organizations (Le Breton-Miller, Miller & Lester, 2011).
Porac et al.’s (1995) work on
rivalry among Scottish knitwear producers demonstrated that industry and market boundaries
30
were socially constructed around a collective cognitive model formed by firms as they observed
each other’s competitive interactions. Thus directions of influence between macro and micro as
mediated by perception are clearly bi-directional.
In short, the perceptual approach holds promise for multilevel varieties of research that
will provide insights into the forces that shape our organizations and competitive engagements
with rivals.
To sum up, the above five research themes constitute the core of competitive dynamics
work. Together, they provide an encompassing overview of the competitive dynamics field and
its key contributions to the strategy and organization literature. Exhibit 3 presents
schematically the core research themes (denoted in bold/italics), as well as some representative
concepts (e.g., the market commonality/resource similarity and rival-centric approaches) and
extensions (e.g., factor-market or non-market rivalry). The exhibit, which provides
diagrammatic representation of the relationships shown in Exhibit 2, displays how various
components of competitive dynamics are connected, and how they constitute an integrated line
of work.
As shown in the exhibit, the research domains of strategic competitive behavior and
repertoire (2) and multimarket/multibusiness competition (3) both derive directly from
competitive interaction (1), i.e., the exchange of actions and reactions between two firms (or
“actors”).
In the lower part of the exhibit the domain of integrative competitor analysis (4)
captures the relationship between two actors, and it is this relationship from which the domain of
competitive perception (5), and concepts such as competitive asymmetry and tension, are
formed. Clearly, integrative competitor analysis, which unites interfirm market-resource
relationship and competitive interaction, plays a central role in connecting the various research
themes and concepts in competitive dynamics. The “Extensions” box in the exhibit identifies a
31
few areas in which researchers have applied core competitive dynamics work to factor and
non-factor markets, to the study of relationships and/or interactions with customers and
stakeholders, and to multi-level analysis at the individual or team/group level.
-Insert Exhibit 3 about hereThe pivotal role of AMC (awareness, motivation, capability) in competitive dynamics
work is also conveyed in the exhibit.3
Indeed, the AMC model has emerged as the theoretical
framework with perhaps the greatest potential to connect a wide range of topics in competition
and strategy. As we shall see in the proposed synthesis in the “Research Gaps and
Opportunities” section, the AMC model can be employed to weave together the various
competitive dynamics research streams, incorporate them into an integrative framework, and tie
them to research paradigms within and beyond the strategy discipline. Most important, the
model provides a foundation for linking micro and macro organizational research and studies in
competition and cooperation.
Appendix A lists some representative studies for each of the five themes and highlights
the key findings and theoretical perspectives of each study. Due to the interconnectedness
among various research themes, a study may fit two (or more) themes but we categorize each
paper into only one theme, based on its primary theoretical focus and contribution.
In order to
link the key ideas examined in a given study to the AMC model, the appendix identifies
variables used in each analysis that relate to these three primary behavioral drivers.
3
It should be
The AMC factors can be either barriers or facilitators to action and response (Haleblian, McNamara, Kolev, &
Dykes, 2012).
32
noted that we identify the variables in a given study that correspond to the AMC components,
even though the study may not employ the AMC perspective.4
-Insert Appendix A about hereBeyond the five core themes, competitive dynamics has benefited from a range of
methodological approaches, none of which has proven to be definitive.
In fact, a strength of the
field has been its openness to a variety of methods and analytical approaches.
Methodological Approaches
A wide variety of methods has been used in competitive dynamics research. First, there
is a diversity of promising and often very fine-grained data sources.
These include revealing
archival records of actions taken (Smith, et al., 1991; Yu & Cannella, 2007), managerial
responses to questionnaires and also those of knowledgeable industry expert informants (Chen,
et al., 2010; DeSarbo, et al., 2006; Marcel, et al., 2011), and detailed field interviews (Lamberg,
Tikkanen, & Kokelainen, & Suur-Inkeroinen, 2009).
What is telling about these sources is their
level of detail and precision, which has lent considerable credibility to many findings in
competitive dynamics.
Researchers have also availed themselves of analytical approaches
ranging from quite original simulation (Chen, 2007; Chen, Katila, McDonald, & Eisenhardt,
2010) and qualitative methodologies (Lamberg, et al., 2009) to the more popular quantitative and
econometric methods (Ferrier, 2001).
As we have seen, the level of action aggregation in analyses of competitive dynamics
spans from action-response dyads (Smith, et al., 1992) to repertoires of competitive moves that
an organization exercises within a given time period (Miller & Chen, 1994; 1996; 1996a), to
4
The categorization of a same variable may differ among papers because of differences in their theoretical focus
and orientation. Unless a paper states that a variable includes more than one AMC component, each variable is
categorized by one component only.
33
streams of competitive moves (Ferrier, 2001). Even interaction histories have figured into
recent analysis to examine subjective perceptions of rivalry (Kilduff, et al., 2010).
This
diversity suggests promising opportunities for blending different methods to conduct studies that
bridge micro and macro considerations and take advantage of different approaches.
The advantage of the dyadic approach is that it allows researchers to examine the very
fine-grained attack and response behavior of particular competitive initiatives—for example,
which kinds of actions, by what kinds of organizations, elicit which specific kinds of responses?
The disadvantage of this approach is that by focusing on one kind of action and response, one
ignores the broader context of other types of decisions that may be taking place and shaping the
dyadic interchange being examined.
The advantage of the repertoire approach—which studies the majority or full set of
market initiatives for a given firm over a specified interval—is that it enables researchers to
richly characterize competitive strategy in a concrete way. As we have seen, characterizations
include such dimensions as strategic simplicity, inertia, and conformity.
For simplicity one
assesses the degree to which a firm concentrates on one or two kinds of actions, or employs a
wide array—for example, do price increases represent a large fraction of a company’s
competitive initiatives (Ferrier & Lyon, 2004)?
Researchers could also assess the degree to
which actions conform to industry norms (conformity) (Miller & Chen, 1996a) or, in
combination, represent a relatively low level of activity (inertia) (Miller & Chen, 1994).
Unfortunately, the repertoire approach, by aggregating different actions during a specific
interval, makes it difficult to ascertain the reactions from rivals that specific actions engender.
Chen (2007), Ferrier (2001), Katila & Chen (2008), Rindova, Ferrier, & Wiltbank (2010)
examine sequences of actions carried out over time.
For instance, Ferrier (2001) combines all
actions such as pricing, marketing, and capacity moves that are said to fall within a single
34
competitive attack—an uninterrupted sequence of competitive moves. He examines the
simplicity/complexity, action volumes, and heterogeneity of these sequences. This approach
has the advantage of partitioning action sequences into relatively discrete attacks according to
the natural rhythm of the focal firm, instead of according to an arbitrary time period. The
difficulty is in identifying such distinct periods and finding the true boundaries between attacks.
Similarly, by incorporating rigorous sequencing methods (Abbott, 1990; Abbott, 1995),
Chen (2007), Katila & Chen (2008), and Rindova, et al. (2010) investigated patterns in
competitive moves over time. Their studies of timed action sequences contrast with previous
treatments of isolated competitive moves, and reveal the longitudinal processes that characterize
competitive dynamics and the pivotal integrative role it plays in linking strategy content (or
formulation) and process (or implementation).
The emphasis by scholars on novel methods aimed at gathering fine-grained and dynamic
longitudinal data on strategic decisions and interaction patterns has yielded a variety of
promising examples and models for future researchers, not only of competitive dynamics but of
strategy in general.
EVOLUTIONARY TENDENCIES WITHIN COMPETITIVE DYNAMICS
Having structured and provided an overview of the competitive dynamics field and
described its methods, we now examine some important trends in the way it has emerged over
the past decades, with some foci falling away, and others receiving more attention.
Indeed, the
field has itself been dynamic over the past two decades, and is evolving at a healthy pace.
It is
useful to highlight some of the more consistent trajectories that have characterized the field’s
development.
35
From action/response dyad or individual “actions,” to a stream or pattern of
actions, to a set of interconnected actions among market players.
Initial studies of
competitive dynamics concentrated on rivalrous exchanges between two entities (either firms or
market actions).
Indeed, a core insight of the approach of competitive dynamics was this need
to examine company moves in the context of actual competitive engagements.
Therefore, the
action/response dyad served as the basic unit of observation (Smith, et al., 1991; Smith, et al.,
1992). There was interest not only in the investigation of individual moves (either actions or
reactions) per se, but also their market antecedents and consequences (Barnett, 1993; Grimm, et
al., 2006; Ingram & Baum, 1997). Over time, however, there has been a growing tendency to
consider longer and more multifaceted sequences of actions and interactions, driven in part by
researchers’ interest in assessing constructs such as competitive aggressiveness over time longer
periods of time (Ferrier, 2001).
Thus researchers began to explore the
action/reaction/counter-reaction (or “triad”) involving more extended exchanges of moves and
countermoves (Lamberg, et al., 2009). Still other scholars delved into the study of temporally
connected actions taken by a number of firms, considering the behavioral interdependencies
among market players such as “red queen” traps of running hard just to keep up (Barnett, 1993;
Haleblian, McNamara, Kolev, & Dykes, 2012; Hsih, Tsai, & Chen, 2011) and the
“follow-the-leader” behaviors first examined by scholars of international business
(Knickerbocker, 1973).
Studies also evolved from a focus on individual actions (Smith, et al., 1992) to
concentration on entire competitive repertoires encompassing not singular moves but whole sets
of interconnected actions that a firm might pursue, say, over the course of a given year. These
moves might include initiatives in pricing, advertising, marketing, product lines, and systems of
delivery (Yu, 2003; Yu & Cannella, 2007). As noted, these repertoires could be characterized
36
by their simplicity or focus on a single kind of move (Ferrier & Lyon, 2004), their inertia (Miller
& Chen, 1994), or their overall conformity to industry practices (Miller & Chen, 1996).
In this
way, a richer and more elaborate conceptualization of competitive strategy could emerge.
From a simple, specific attribute of action (or response) to a more sophisticated one.
The early work on competitive dynamics analyzed specific aspects of competitive engagements,
for example, the speed of a response (Chen & MacMillan, 1992; Eisenhardt, 1989) or the
likelihood that a given competitive move would result in a response (Barnett, 1997; Smith, et al.,
1991). The investigation tended to be limited, and the conceptualization of constructs was
specific and confined (such as response speed).
The selectiveness of a competitive attack was
also examined (Chen & Hambrick, 1995).
Later studies, however, began to embrace more sophisticated and comprehensive
conceptualizations of actions. These included considerations of actions’ inertial nature (Miller
& Chen, 1994), their consistency over time (Barnett, 1993; Ferrier, 2001; Lamberg, et al., 2009),
their institutional conformity to practice (Miller & Chen, 1996a; Podolny, 1993), or their
reflecting or aligning with the theme of a competitive repertoire (Miller & Chen, 1996).
Indeed, this increased depth of characterization grew in part by situating competitive actions
within a repertoire of types and frequencies of different moves that a firm could pursue over a
given time period—usually a year (Ferrier, 2001).
It might also apply to a temporal sequence
of moves (Rindova, et al., 2010).
Scholars building on these accumulating research findings, and driven by a desire for a
coherent and parsimonious framework, have recently begun to develop higher-level, more
aggregate constructs. These efforts are helping to capture the multi-dimensional complexities of
competitive engagements, and reveal a firm’s competitive profile in a manner that is more
comprehensive. The field has witnessed an evolution in the conceptualization and measurement
37
of even such specific constructs as competitive aggressiveness, progressing from unidimensional
considerations of moves such as volume (Ferrier, 2001), scope (Yu & Cannella, 2007), and speed
(Chen & Hambrick, 1995) to more encompassing treatments that consider amalgams of such
dimensions (Chen, et al., 2010; Lin & Shih, 2008).
From objective to perceptual considerations.
Following the then prevailing approach
among macro-management scholars, competitive dynamics research began with a focus on the
objective and observable aspects of competition: the number of competitive moves a firm made
(Smith, et al., 1992), the number of types of such moves (Miller & Chen, 1996), the market
scope of a competitive move (Yu & Cannella, 2007), the investment required and aggressiveness
of a competitive action (Ferrier, 2001), and the average delays in the responses to different
competitive attacks (Boyd & Bresser, 2008). All of these characteristics could be gauged using
quantifiable and objective indicators such as dollars, time, or counts.
However, with the advent of the expectancy-valence framework (Chen & Miller, 1994)
and the awareness-motivation-capability model (Chen, 1996), there developed a desire to get
behind observable indicators to discover the perceptions and motivations that give rise to
observable market actions. Thus, Kilduff, et al. (2010) delved into the determinants of
subjective perceptions of rivalry.
Livengood & Reger (2010) examined the impact of
organizational identities on the awareness and motivational components motivating interfirm
rivalry, and Chen, et al. (2007) focused on perceived competitive tension between a firm and its
rivals.
Tsai, et al. (2011) showed that the correspondence between the perceptions of a focal
firm and a rival (Tsai, et al., 2011) also can shape competitive behavior.
This evolution from
objective to perceptual aspects of competition has moved research from description to
explanation and from action to its underlying drivers.
38
It has also raised a deceptively simple,
but critical, question.
Is competition objective or perceived, and to what extent, and under what
conditions, are the two likely to converge or diverge?
From observable behavior to underlying behavioral and organizational drivers.
As noted, early studies concentrated on observable market behavior, on actions per se and their
various tangible—often market-related—characteristics. Gradually, however, interest grew
concerning the behavioral and organizational contexts that produced such actions, as well as the
responses to these actions. For example, the competitive identity of an organization can shape
which competitive attacks managers notice and feel obliged to react to and defend: self-described
innovators may be especially likely, for example, to respond to the product introductions of
rivals. By the same token, a firm’s definition of its “turf” can determine which attacks
managers feel they can ignore because they do not threaten what is perceived to be an essential
distinctive element or competency (Livengood & Reger, 2010). The nature of interfirm
rivalry—its aggressiveness and responsiveness—has also been shown to be influenced by the
heterogeneity (Hambrick et al., 1996) and behavioral integration (Chen, et al., 2010) of the top
management team, as well as human-resource practices (Gardner, 2005) and resource
management practices (Sirmon, et al., 2008).
Such organizational characteristics help not only
to explain observable competitive behavior, but also to surface some of its intrinsic richness.
From a phenomenon (or topic) to a theoretical perspective.
Early competitive
dynamics work tended to be phenomenon-driven and aimed to articulate some important
competitive concerns. At the same time, it applied theories from relevant fields and adopted quite
rigorous empirical and methodological standards.
The initial studies focused on testing simple
relationships observed from business competition. They began with a naïve but critical
question:
What is the relationship between competitive action and response (Chen, 2009)?
From this simple beginning the research broadened to explore a wide range of action and
39
response constructs and their relationships, such as the likelihood of response (or attack) and the
volume and speed of actions (Lee, et al., 2000; Ferrier, 2001).
Over the years, progress in the field has accelerated toward building a predictive theory
of competitive action and response.
For example, for a given competitive context, recent
research attempts to predict which actions (or responses) are likely to occur, which are likely to
produce successful results, and what impact such action/response choices may have on diverse
organizational outcomes. Studies have yielded consistent findings across different industries,
suggesting, for instance, that action volume and response speed enhance firm performance
(Smith, et al., 2001).
Other trends.
Additional research trends include progression from a comprehensive
study of the whole range of various types of actions taken by a firm (Chen & Miller, 1994;
Miller & Chen, 1994, 1996; Nokelainen, 2010; Smith, et al., 1992) to the examination of a
specific type of move, such as new product introduction (Krider & Weinberg, 1998; Lee, et al.,
2000; Lee, Smith, & Grimm, 2003; Srivastava & Lee, 2005), R&D (Chen, et al., 2010),
innovation (Katila & Chen, 2008; Semadeni & Anderson, 2010), IPO (Certo, Holcomb, &
Holmes, 2009), and mergers and acquisitions (Haleblian, et. al, 2012). There has also been a
tendency to move from context-free to context-specific research (e.g., Derfus, et al., 2008;
Upson, et al., 2011; Zhang & Gimeno, 2010); from the U.S. domestic to the global setting (e.g.,
Di Gregorio, Musteen, & Thomas, 2008; Di Gregorio, et al., 2008; Hermelo & Vassolo, 2010;
Nokelainen, 2010; Yu & Cannella, 2007) from an analysis centered on the focal firm to a
“rival-centric” approach (Tsai, et al., 2011); and from dyad to triad (Madhavan, Gnyawali, & He,
2004) or to group-level competition (Rowley, Baum, Shipilov, Greve, & Rao, 2004; Smith,
Grimm, Young, & Wally, 1997).
Methodologically, we have witnessed a trend from empirical
or quantitative (Smith, et al., 1991) to theoretical (Chen, 1996; Gnyawali & Madhavan, 2001),
40
case/qualitative analysis (Lamberg, et al., 2009), or formal modeling (Park & Zhou, 2005).
Finally, there has been a tendency to move from an analysis of competition to analyses that
embrace both competition and cooperation (Gimeno, 2004; Gnyawali & Madhavan, 2001;
Gnyawali, He, Madhavan, 2006; Silverman & Baum, 2002; Young, et al., 1996) or that examine
the interdependence between competition and cooperation (Chen, 2008).
Although the evolution of the competitive dynamics domain is salutary, it appears that
sometimes the progress to new topics has been accompanied by the premature retirement of
important older ones.
Instead of developing a more holistic conception of the field, research
has tended to “move on” instead of accumulating to form a more integrated whole.
In the next
section we shall identify some important research gaps and hence opportunities for developing
the field.
RESEARCH GAPS AND OPPORTUNITIES
Certainly, the trends we have described show a promising evolution of the field. There are
several gaps, however, that indicate areas of neglect, and from these it is possible to identify some
corresponding research opportunities. In attempting to bridge macro and micro approaches to
competitive dynamics and by building on the AMC model, we shall first provide an integrative
micro-macro research platform for the field—one that links it to other prominent conceptual
domains. Then we shall turn to more specific research opportunities.
Linking Macro and Micro Organization Research
One chasm that looms large in the literature on organizations is that between micro and
macro analysis (Miller & Droge, 1986; Miller & Lee, 2001; Nightingale & Toulouse, 1977;
Schneider, 1987; Staw, 1991). This divide occurs between scholars of organization behavior or
organizational psychology and those studying macro-organizational theory and strategic
41
management. It is also to be found between those who study decision making from a
psychological point of view and those who focus on organizational sociology and corporate
strategy. Competitive dynamics represents an underexploited but fertile domain for integrating
these macro and micro perspectives.
Competitive actions can be seen as products of the perceptions, personalities, intentions,
and motivations of individual actors in an organization (Dutton & Jackson, 1987; Chen & Miller,
1994). As such, they are “micro” in nature. However, they may also be a product of human
talents, committees, task forces, departments, and top management teams (Hambrick & Mason,
1984; Gardner, 2005). Moreover, actions accumulate to reflect and compose strategies
(Mintzberg, 1973), and strategies are in turn a guiding context in which perceptions and
motivations are molded to shape future actions (Barnett, 1993; Miller, 1990). This interplay
among internal and external forces at different organizational levels represents a neglected area
that can enlighten our understanding of strategy formulation and execution, and of individual and
group decision making.
The context of organizational design in which actions take place (Galbraith, 1995; Smith,
et al., 1991) constitutes another link between micro and macro analysis. How, for example, do
information systems, reporting hierarchies, job definitions, accountabilities, and reward structures
influence competitive actions? How do these actions in turn influence the commitments made by
an organization and its members that shape the resources and administrative arrangements of the
firm (Barnett & Hansen, 1996)? Again, far too little is known about these interactions.
Another opportunity for macro-micro integration bridges the organization and its
environment via competitive action and response. Such actions, especially those taken in the
factor-market arena (Markman, et al., 2009), lie at the heart of an organization’s
boundary-spanning activity. They represent sources of information by which an organization
42
comes to understand and represent its environment via key actors. Conversely, competitive
actions also accumulate to characterize an organization in the eyes of its key external stakeholders
(Parmar, Freeman, Harrison, Wicks, Prunell, & de Colle, 2010). Thus, in effect, competitive
actions represent not merely a central nexus between organization and environment, their
implementation and its consequences have major implications for how the environment is
“enacted” by the organization, and also for how the organization is reified and represented by
actors in the environment.
Building a research platform.
By building on the logic of the AMC model, we present
a research platform for competitive dynamics that integrates micro and macro perspectives of
organizations and connects them to some of the more prominent management theories. We
hope that doing so will lead to a more systematic and comprehensive treatment of competitive
dynamics, and one that connects more integrally to other schools of management thought.
The promise of using competitive dynamics to integrate micro and macro perspectives of
organizations can best be articulated via the AMC model.
possible platform for such a research program.
Table 1 presents the elements of a
The outcomes, not specified in the table, are the
qualities of the competitive actions engaged in by a firm; these may be initial actions of attack or
responses. Such qualities might include scale and scope, speed of response, irreversibility,
consistency with a firm’s past actions, and conformity to industry norms or precedents.
We
have already argued that actions are a function of the relevant AMC components of awareness,
motivation, and capability, and hence of the drivers of those components (Chen, 1996; Chen &
Miller, 1994). To date, however, the factors underlying each of the components of the model
have been neglected or studied only sporadically.
We shall argue that there are both micro and
macro elements that underlie each of these components, and, indeed, there may well be
interactions between these micro and macro elements. The former reside in the characteristics of
43
the executive. The latter apply to the characteristics of an organization and its external
environment.
-Insert Table 1 about hereTable 1 summarizes some of the micro and macro factors that may be instrumental in
shaping each of the components of the AMC model; in that sense it represents both a platform
for further research as well as the skeleton of a more elaborated model. The cells of the table
can be considered as the bases for hypotheses on the drivers and outcomes of competitive
dynamics. The underlying logic of the model specifies a multiplicative prediction function,
such that better prediction of competitive dynamics behavior is obtained by incorporating
simultaneously awareness, motivation, and capability components. However, given the early
stage of development of the field, we believe that it would be useful to perform research even
within single cells of the table. Ultimately, cumulative progress in the field might come as we
employ multiple AMC components and integrate both micro and macro factors on the table—for
example, individual and group factors, or organizational and inter-organizational factors. That
combination also holds promise for bringing together the diverse theoretical paradigms
referenced in the table.
In short, Table 1 may serve both as a general model of competitive
behavior, and a potential platform for organizing and situating subsequent research efforts.
We consider the cells of Table 1 in turn. First are the drivers of awareness. An actor’s
breadth of experience may make the actor more or less aware of different aspects of the
competitive environment. Thus, short job tenure may impede effective scanning, while very
long tenure may lead to too many assumptions and cause tunnel vision.
Research into these
questions may be informed by existing work on executive life-cycles (Hambrick & Fukutomi,
1991; Miller, 1990). The rapidly growing domain of behavioral economics has identified
important cognitive biases that channel individual perceptions such that past experience and
44
priorities drive what types of information are attended to in the environment (Barberis & Thaler,
2003). Awareness is also influenced by group-level phenomena such as information sharing
and top management team demographics and diversity (Chen, et al., 2010; Hambrick & Mason,
1984; Hambrick, et al., 1996), as well as organizational-level concerns such as attention (Ocasio,
1997) and reputation (Basdeo, Smith, Grimm, Rindova, & Derfus, 2006).
Awareness also will be influenced by macro-level factors.
For example, heterogeneous
top management teams will have more sources of information and a variety of perspectives from
which to view the environment (Chen, et al., 2010). Organizational scanning and information
systems will influence the breadth, accuracy, and relevance of the factors considered in taking
(or refraining from taking) action; collaborative and coordinative mechanisms will ensure that
external information goes to the appropriate parties inside the firms to enable an appropriate
response. These organizational factors are reflected in the literature on TMT demographics
(Hambrick & Mason, 1984), contingency theory (Lawrence & Lorsch, 1967), and information
processing views of firms (Aguilar, 1967; Galbraith, 1995; Tsai, et al., 2011; Wildavsky, 1979).
Finally, there are the macro-level factors influencing awareness that lie outside the organization.
The position of a firm within a network of stakeholders can influence the kind of information the
firm is able to gather on what is occurring both within the competitive environment and the
markets for the factors of production. Network theory has much to say on these matters,
especially with respect to the distinction between bonding ties that bring richly intimate and
focused information, and bridging ties that provide a broader range of information (Granovetter,
1973; Kilduff & Tsai, 2003).
The motivation component of our AMC general action model is also influenced by both
micro and macro factors.
An actor’s motivation may be a function of a wide variety of
variables, including personality (aggressiveness versus passivity, for example, or need for
45
achievement or locus of control (Miller & Toulouse, 1986)). Career stage may also come into
play, as those very early or late in their careers may be less willing to risk an erroneous or
controversial response than those in more secure positions, while those in powerful positions will
have more confidence to respond (Miller & Shamsie, 2001). A person’s wealth, social identity,
or social status may also influence his or her reference group and thus temper decision-making
behavior (Hogg & Terry, 2001). Behavioral economists, too, have contributed to our
understanding of motivation as it affects choice behavior, especially via their conceptualizations
of the factors driving attitudes toward risk (Ariely, 2008; Loewenstein, 1996). For example,
according to behavioral economists, there is risk propensity in the domain of loss. Therefore,
executives with poor track records may be more willing to take risky competitive actions to
rescue their reputations than would successful executives who have more to lose. Micro factors
also come into play at the group level, with the social identity of a group driving how it contrasts
itself with other groups inside and outside the organization, and hence impacts the kinship or
rivalry that induces cooperation or competition (Tajfel & Turner, 1979).
Again, there are organizational factors that also influence the motivation to act.
These
include firm reporting structures and accountability systems that either enable individual
initiative or induce people to remain more conservative (Galbraith, 1995; Thompson, 1967).
Also of relevance are reward systems that encourage or extinguish such initiative (Kerr, 1975),
or corporate cultures that do the same (Martin, 2002). Finally, there is the competitive turf that
the organization defines as particularly relevant given its perceptions of its competitive strengths
and areas of vulnerability (Livengood & Reger, 2010). Factors in the external environment of
the organization may be equally important.
For example, in some industries or national
cultures, institutional norms will discourage certain types of competitive behavior.
In China, it
may be more socially acceptable to launch stealthy and indirect attacks than face-to-face ones
46
(Greenwood, Oliver & Suddaby, 2008). Similarly, in family businesses, social ties with the
community and the prevalence of paternalistic family pressures over market logic will shape the
motivation to launch an attack, or respond to one (Thornton & Ocasio, 2008).
The capability component of the AMC model takes us to the final column of Table 1.
Certainly, the skill of the actor is vital: his or her understanding of the competitive environment,
the competency to formulate plans required for an effective attack or response, and the ability to
understand and marshal the resources and capabilities of the focal organization and predict the
vulnerabilities and likely reactions of rivals (Tsai et al., 2011). The actor’s interpersonal
network will also come into play wherever it is important to receive information, advice, or
political support from others (Granovetter, 1973).
Group factors too have an impact on
capabilities—for example, the ease with which group members work together represents a
potentially vital source of tacit knowledge, while the networks of interaction formed within a
group contribute to the ability to mobilize joint efforts (Kilduff & Tsai, 2003).
Numerous macro factors also shape the capability to act.
The resource-based view of the
firm signals the importance of rare, inimitable, valuable, and non-substitutable assets such as
patents, special physical properties, and tacit knowledge that reside in teams (Barney, 1991;
Wernerfelt, 1984).
Building on insights from the RBV, the dynamic capabilities perspective
proposes that resources can be developed over time and in a time-dependent manner, such that a
firm can keep renewing its skills and adapting them to stay ahead of the competition
(Easterby-Smith, Lyles, & Peteraf, 2009; Miller, 2003; Sirmon, Hitt, Arregle, & Campbell, 2010;
Teece, et al., 1997). Porter (1985) presented a value-chain scheme for evaluating which stage
of a company’s input-output cycle contributes the most to returns. The extent to which the
critical stages are rich in resources and talent also might contribute to the capabilities underlying
competitive actions. Strategic alliances can be helpful where non-critical stages may be
47
outsourced to enable a firm to focus on its most critical competencies and the actions that build
or capitalize on those competencies (Hamel, 1991).
Finally, there are the macro factors that lie beyond the boundaries of the organization.
These include industry conditions such as barriers to entry and exit and levels of demand growth
(Porter, 1980), macro-economic forces, and degrees of sophistication and development in the
legal, social, and political infrastructure of a nation (Khanna & Palepu, 2002). Each of these
factors might constrain or enhance a firm’s capabilities to undertake competitive actions.
We should emphasize that many of the factors mentioned here are not independent.
Organizational factors can shape personal ones, as, for example, when corporate cultures favor
the hiring or promotion of managers with specific personality types and skills.
Also, the
external environment can shape organizational conditions, as when economic constraints cause
the need to centralize power, or legal requirements impose higher levels of bureaucracy.
It
would be useful to examine the importance of these kinds of interactions in furthering this
“multi-level” approach to competitive dynamics.
Our model represents a first attempt at integrating the complex field of competitive
dynamics.
In an effort both to enrich competitive dynamics and to inform and bridge the
perspectives that connect to it, the model also maps out a general framework for integrating
macro and micro perspectives of organizations and for connecting the burgeoning field to some
of today’s most fruitful management theories.
Linking Competition and Cooperation
Another major research opportunity for scholars is to do more to examine cooperative
interactions, which have been shown to be vital aspects of competitive strategy.
competition and cooperation are both cornerstones of business strategy.
Indeed,
There has been
significant interest in the study of cooperation between firms (see reviews by Ahuja, 2000; Dyer
48
& Singh, 1998).
Strategy and organizational scholars have also undertaken the study of
competition and cooperation, owing in part to the seminal co-opetition work by Brandenburger
& Nalebuff (1996). Defined as simultaneous cooperation and competition, co-opetition has
been linked to better opportunities for organizational learning (Dussauge, Garrette, Michell,
2000), inter-unit coordination and resource-sharing capabilities (Tsai, 2002), and firm
performance (Lado, Boyd, & Hanlon, 1997; Loebecke, Van Fenema & Powell, 1998).
In
related studies, researchers have used competitive attributes such as industry structure and
interfirm competitive intensity to predict cooperative outcomes such as joint ventures and
alliances (Harrigan, 1988; Powell & Brantley, 1992) and other forms of cooperation among
competitors (e.g., Gimeno & Woo, 1996a; Gimeno & Jeong, 2001; Gimeno, 2004; Park & Zhou,
2005). Scholars also have used attributes of cooperative networks to predict the nature of
competitive actions (Gnyawali & Madhavan, 2001).
Competition-cooperation relationships. As noted, many scholars view competition,
competitors, and competitive actions in relative terms, and defined by context—that is,
relationally and by situation. Moreover, the relationship between competition and cooperation can
be considered to be interdependent. The focus of comparative competitor analysis is thus on the
relationship between firms in a given market because, although each firm is unique, its strengths
and weaknesses are relative and only relate to a specific competitor of interest. Integrative
competitor analysis therefore devotes attention to understanding how two firms relate to one
another along particular strategy dimensions, such as markets or resources. A pairwise,
market-resource comparison of interfirm relationships expands strategic vision beyond industry
boundaries and direct competitors. More importantly, it can also be used to identify and analyze
partners for joint ventures, alliances, or M&A, both within and beyond a focal industry, since the
emphasis is on the relationship between any two firms and not on the rivalry per se. Indeed, both
49
competitor and collaborator may be regarded as different forms of “the other.” Thus one can
apply the same AMC- market commonality/resource similarity approach to predicting a
competitor’s response as to projecting a joint venture partner’s reaction, so long as one strives to
understand a situation from the other party’s viewpoint. This “relational” view of competition
allows a firm to “walk in the shoes” of its rivals (Tsai, et al., 2011) and other stakeholders (Parmar,
et al., 2010; Peteraf & Bergen, 2003).
An expansive conception of competition may, in fact, be found in the roots of the word
“compete.” The original meaning of compete is “to strive or come together” (from the Latin roots
com-together + petere to seek). The “togetherness” embedded in the word’s etymology reveals
much about its nature: Even in an oppositional contest, two opponents are inextricably linked and
mutually influential.
Moreover, any interfirm relationship—as a result of the uniqueness and asymmetry of
perceptions among the parties —is fundamentally fluid and involves a constant, intricate
interplay between competitive and cooperative forces, as suggested in two examples.
General
Motors once offered a $1,000 rebate certificate for auto parts with the purchase of a GM car, but
the certificate could be redeemed at any competitor’s outlet.
Should a competitor, such as Ford,
have considered GM’s action a cooperative move, one that could boost Ford’s sales, or a
competitive action?
Similarly, Acer Computer built up a network of suppliers in Taiwan that
were as useful to its direct competitors as they were to Acer.
Yet this network gave Acer
greater access to the resources it needed to enter the global market and to compete in Taiwan
(Chen & Miller, 2010, 2011a).
for Acer?
Was this network building a competitive or a cooperative move
Clearly, it was both.
Initially competitive dynamics distinguished between actions and responses (XXX versus
YYY) and between the moves of aggressive rivals and cooperative competitors (AAA versus
50
BBB). Because, however, the elements in a continuing series of events often have no obvious
beginning and, in effect, no end, there typically is no clear distinction between an action and a
response. Most actions can also be responses either to some general economic condition or to the
actions of a rival, and most responses can have original components that could be perceived as
competitive initiatives to some organizations (Lamberg, et al., 2009). To take a simple example,
party A may “act” by cutting prices, causing a response in kind by rival B, whose reaction could
seem an aggressive move toward rival C—forcing A to re-enter the battle by cutting prices once
more or altering its strategy. In such processes, it is best to look for interactions and sequences of
moves; that is to move toward a general theory of action (Smith, et al., 1992; Smith et al., 2001),
rather than to characterize dyads of actions and responses.
The topic of competition-cooperation suggests a wealth of other research questions.
How can the AMC and market commonality/resource similarity frameworks be applied to
examine the mix between cooperation and competition?
Which lenses can be used to examine
competitive-cooperative relationships among firms in a supply chain?
What roles do national
culture, incentive systems, and organizational structures play in influencing the balance between
competition and cooperation?
How do the “either/or” Western mindset and the “both/and”
Eastern perspective inform competitive-cooperative engagements?
Finally, what are the
implications of the Chinese conception of “self-other integration” for competitive, cooperative,
and competitive-cooperative relationships?
To sum up, Exhibit 4 presents additional research questions for the micro-macro and
competition-cooperation links articulated above.
These are intended to stimulate further
thought for prospective researchers.
-Insert Exhibit 4 about hereOther Research Gaps and Opportunities
51
Exhibit 5 lists some research questions for each of the five themes (competitive interaction,
strategic competitive behavior and repertoire, multimarket and multibusiness competition,
integrative competitor analysis, competitive perception) and methodological concerns.
-Insert Exhibit 5 about hereWhat follows are additional research areas that have received too little attention but show
promise of furthering the field.
Corporate governance. The domain of corporate governance represents a critical
emerging field in management, finance, and economics. For the most part it has adopted a macro
perspective, examining, for example, the relationships between different forms and distributions of
ownership and performance (Morck, Shleifer & Vishny, 1988; Morck, Wolfenzon & Yeung,
2005). Yet results have been non-cumulative, in part because aggregates are being related to
aggregates (Miller, Le Breton-Miller, 2011; Miller, Le Breton-Miller, Lester, & Cannella, 2007).
Increasingly insightful results might be forthcoming were we to move more to micro-conceptions
that lie between ownership structure and performance—specifically, just who are the owners and
what types of competitive initiatives are they most apt to sponsor (Connelly, Tihanyi, Certo, &
Hitt, 2010; Miller et al., 2007)? For example, firms run by first-generation entrepreneurs may
favor aggressive engagement, while those owned by conservative family members may be slower
and more timid in their competitive actions and responses (Miller, et al., 2010). Surely, there is
opportunity for further research along these lines.
A few questions may serve as starting points. What are the underlying differences in
action/response attributes and competitive repertoires among the different generations of family
owners and managers in a family business? How does the interplay among boards of directors,
top management teams, and CEOs shape competitive behavior? How can we study competition
52
and rivalry among different forms of enterprise (e.g., for-profit, nonprofit, business family, and
state-owned)?
Market entry and entrepreneurship. Competitive dynamics research has tended to
focus on large established Western firms.5 Its central ideas and premises, however, can be
extended to research issues pertinent to the study of entrepreneurial organizations (Lumpkin &
Dess, 1996) and firms that are small, young, or limited in market scope or resource endowment
(Certo, et al., 2009). Competitive dynamics lenses can also be applied to study local champions
in emerging economies who desire to expand internationally (Dawar & Frost, 1999). One of the
key issues for entrepreneurial ventures—as challengers, or late movers—is anticipating and
minimizing the responses of entrenched incumbents. There are several ways in which this
research can be advanced. One may examine how a challenger minimizes a defender’s
awareness; how it can reduce a defender’s motivation to retaliate; and, if retaliation is
unavoidable, how it may prepare for head-on capability-based competition (Gielens, et al., 2008).
Future research also might study the timing of entrepreneurial initiatives or disruptive attacks, and
their retaliatory responses, paying special attention to the drivers of awareness, motivation, and
capability and thus developing a process view of competitive dynamics (Lamberg, et al.; 2009).
Competitive asymmetry. The study of competitive asymmetry may be especially
relevant to market entry and entrepreneurship, particularly when conducted through the lens of
competitive perception (Marcel, et al., 2011). What are some conditions under which an entrant
can create and maintain the advantage of asymmetry? How can a new entrant or late mover
position itself to maximize both market non-commonality and resource dissimilarity in the eyes of
key incumbents or defenders (Chen, 2011; Markman, et al., 2009)? Which potential disruptions
might the attacker create in the marketplace? How likely, quickly, and in which markets, will
5
This section draws considerably from Chen (2011).
53
defenders be able to mount effective retaliations? Which strategic and market considerations can
an entrepreneurial venture employ to outmaneuver its larger local or global rivals (McGrath, et al.,
1998)? How do original equipment manufacturers (OEMs) expand and transform themselves to
become MNEs? Specifically, how do OEMs engage simultaneously with their global rivals and
partners in their international expansion? How do local champions fight against attacking MNEs
or defend their home turf?
The notion of asymmetry has broad implications not only in a competitive context but
also for interfirm cooperation.
Indeed, it can be extended to the study of many kinds of
relationships, at both individual and organizational levels.
The market commonality/resource
similarity framework can also be used to study interorganizational cooperation and partnership as
well as competition and cooperation among firms from different countries.
Such efforts should
highlight the promise of competitive dynamics in advancing action-based general strategy theory
and a competition-cooperation link.
East-West competitive thinking. With its emphasis on duality and relativity, the study
of competitive dynamics represents a compelling vehicle for comparing and possibly integrating
Eastern and Western approaches to management (Chen & Miller, 2010).
Many of the ideas
explored in competitive dynamics trace their intellectual roots to Chinese philosophy and
traditional systems of thought.
Indeed, China’s long history is rich with philosophical thinking
that has been applied to commercial, social, and military practices over the millennia.
Resource-diversion strategies (McGrath, et al., 1998), for instance, correspond to the competitive
wisdom of “making noise in the East when attacking in the West”. The idea of “irreversibility”
(Chen & MacMillan, 1992) is exemplified by the proverb about “sinking your boat before
attacking your enemy”.
Indeed, Tsai, et al. (2011) have put to the test Sun Tzu’s doctrine of,
“If you know yourself and know your opponent, you can win 100 wars.”
54
Questions worthy of exploration might include the following.
culture affect competitive behavior?
How does national
How might a philosophy of Chinese competition be
evaluated systematically in subsequent competitive dynamics research?
How can Sun Tzu’s
competitive wisdom and other popular Eastern philosophies inform our knowledge of strategy
and competition?
Western rivals?
How do firms in the East use a non-Western approach to compete with
With today’s dramatic changes in the global economic landscape, how can
West-based perspectives of competition be adapted to Eastern environments?
Might an
“ambicultural” approach be used to examine competition and/or competitive dynamics?
Research methods.
A variety of data collection approaches, such as survey,
qualitative, or simulation approaches, should be encouraged.
In light of the burgeoning
interests in competitive dynamics research in the international arena, this call is especially
pertinent.
Research has tended to use a structured content analysis approach to identify action
and response characteristics. This method captures daily business operations and has merit
when public competition information is valid and accessible.
In many non-Western contexts,
however, secondary or objective data are invalid or unavailable.
It is also challenging to
identify actions and responses in the complicated, fast-changing competition that characterizes
many emerging economies (Chen, et al., 2010).
Moreover, since competition has both
objective and subjective elements, a well-designed survey can capture the latter while probing
into the “dynamic” and “relative” aspects of competitive dynamics.
Indeed, the literature thus
far has paid too little attention to the “process” that shapes competitive decisions—a gap that
might be addressed in part by employing fine-grained qualitative studies (Lamberg, et al., 2009)
or laboratory simulation methodologies (Chen, 2007).
Moreover, competitive dynamics research usually treats competition at a single level of
analysis. Competitive strategy, nonetheless, involves multilevel considerations. For example,
55
the industry environment can affect strategy, which in turn may lead to particular actions and
responses. Here we have interactions among phenomena at the industry level, firm level, and
action level. This kind of multilevel analysis, which is popular in the study of organization
behavior (Hofmann, 1997; Liao & Chuang, 2004; Staw, Sandelands, & Dutton, 1981), may
represent a useful approach for future studies.
Finally, most competitive dynamics studies assume that Firm A responds because of an
action taken by Firm B, but often we cannot know with certainty whether a move is an action or
a counteraction.
In contrast to litigation where it is clear who is charging whom (Markman, et
al., 2011), in business competition an outsider may not be able to discern whether a price cut is
in fact an attack, a defense, or a response to an exogenous event. Similarly, internal responses
may be hard to observe and conceptualize, and thus remain unexplored in literature.
Future
researchers may wish to address these issues by applying more precise measurements and
research designs.
CONCLUSION
Competitive dynamics remains a young and expanding field.
We have in this review
attempted to explain its roots and defining features, laid out its core purposes, and identified its
major research themes of the past two decades.
These include action-based studies of
competitive interaction, business-level studies of strategic competitive behavior and behavioral
repertoires, corporate-level analyses of multimarket and multibusiness competition, integrative
models of competitor analysis, and studies of how managers’ perception influences competitive
behavior. We have also described the distinctive research methods used in these sub-domains.
Certainly, the field has not been stagnant, and several evolutionary trends have become apparent.
There has been, for example, a movement from dyadic studies of individual competitive actions
to streams or repertoires of more richly characterized actions among sets of players. There has
56
also been a trend from examining objective behavior to combining that research with probes of
managerial perceptions and other underlying drivers of behavior, as well as a progression from
simple topics to situating those topics within more integrative and general theoretical
perspectives.
And yet, for all this progress, there remain important gaps in the field.
Throughout our
analysis we have pointed out the relative lack of integration. Studies within particular research
themes tend to stay within the boundaries of those themes, rarely making direct connections with
neighboring ideas or motifs. The reach of repertoire studies, for example, rarely extends to
interactions between actors, while most action-level research has been conducted without
considering the strategic context of those actions. On a more general level, the promise of
competitive dynamics research to link micro and macro research domains, and to bridge studies
of competition and cooperation, remains largely unexploited, leaving rich opportunities for
connecting the field to other research paradigms.
To begin to address these gaps and challenges, we have built on the AMC model to create
a research platform for further exploration into competitive dynamics.
In the process, we have
sought to demonstrate how micro and macro perspectives might be situated within a more
encompassing conceptual model of competition, one that enjoys some promise of linking with
paradigms such as TMT demography, identity theory, network theory, and institutional
perspectives of organizations.
This is a field with vast horizons.
One cannot help but think
that future research in competitive dynamics will mine even greater riches, and that we have only
begun to explore the possibilities for creating a more integrative discipline.
continue.
57
Let the efforts
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FIGURE 1
Comparison of Five-Force Analysis and Competitive Dynamics Perspective
Five-Force Analysis
Competitive Dynamics
Basic premise
Industry structure determines
competition and profitability
Competition is “dynamic” (or
interactive) and relative; actions/
responses matter for firm
performance
Level of analysis
Macro industry level
Micro firm and action level
Intellectual origin
Industrial organization
economics
Theoretical and empirical work in
strategic management extended
from Schumpeter and Austrian
economics
Focus
Five forces that make up the
industry structure
Action/response dyad and/or
individual action
Competitive advantage
Competitive advantage can be
created and sustained
Competitive advantage is
time-dependent and ephemeral;
only relative advantages exist
Orientation
Industry/environment
Relationship between
firms
Symmetrical
Asymmetrical
Competitive strategy
Generic types
Repertoires of actions and
responses
Dynamic consideration
Comparison between two time
points
Exchange of actions and responses
or interactive behaviors between
two firms
68
Balanced market-resource (or
external-internal) consideration
FIGURE 2
Competitive Dynamics Research
Competitive Interaction
1a. Predicting 1b. Irreversibility
Competitive
Response
-Attack
-Attacker
-Defender
-Economic
-Organizational
-Psychological
-Socio-economi
c
Strategic Competitive
Behavior & Repertoire
2a. Strategic
Competitive
Behavior
-Information
processing
-Size
-TMT
-Aggressiveness
2b. Competitive
Strategy
Repertoire
-Inertia
-Nonconformity
-Simplicity
-Sequence of
moves
Multimarket and
Multibusiness
Competition
3. Multimarket
Competition
-Resource diversion
-Sphere of influence
-MNE rivalry
-Foreign direct
investment
-Market entry
Firm Performance
-Objective
-Perceptual
69
Integrative Competitor
Analysis
4a. Market-Resource Concerns
-Dyadic comparison
-Customer analysis
-HR/TMT competition
-International business
4b.
4c. Competitive
Awareness-Motiv Asymmetry
ation-Capability
-Strategic group
-Competitive
-Customer
tension
perspective
-Rival-centric
-Factor rivalry
Competitive
Perception
5. Human Perception
-Psychological
concerns
-AMC
-Perceived tension
-Competitive acumen
-Identity domain
-TMT dynamics
-Subjective intensity
of rivalry
FIGURE 3
Interconnections and Integration in Competitive Dynamics: Core Themes, Concepts, and Extensions
1. Competitive Interaction
2. Strategic Competitive
Behavior and Repertoire
3. Multimarket-business
Competition
Extensions:
• Factor-market rivalry
Action
(Re)action
Performance
• Non-market rivalry
• Customer & other
Action/Reaction drivers:
• Awareness
• Motivation
• Capability
stakeholder analysis
• Competition-cooperation
• Multi-level analysis (e.g.,
individual and
Actor A
Actor B
team/group)
4. Integrative Competitor Analysis
• Market-commonality & resource-similarity
(MC/RS)
• Competitive asymmetry
• Competitive tension
• Rival-centric approach
5. Competitive Perception
70
FIGURE 4
Research Issues and Questions: Micro-Macro and Competition-Cooperation Link
Research Opportunities
Micro- and MacroOrganizational Research
Competition-Cooperation
Research
Research Issues and Questions
1. How do micro-concerns such as perceptions, personalities, intentions, and motivations shape actions/responses? How
does the organizational context shape those perceptions, intentions and motivations?
2. How do organizational characteristics (e.g., the degree of structure, complexity, and formality; reward system) influence
competitive actions?
3. How do external actions affect the deployment of internal resources and arrangements?
4. How do competitive actions characterize an organization?
5. What are the underlying differences of action/response attributes between various business generations?
6. How do corporate governance concerns affect action/response characteristics?
7. How can we investigate rivalry at the individual/interpersonal level and team/group level? What is the relationship between
these levels of competition?
1. How can the AMC and MC/RS frameworks be applied to examine cooperation, and competition-cooperation issues?
2. How might a firm balance competition and cooperation so as to best a given rival? What roles might national culture,
incentive systems, and organizational structure play?
3. How can we characterize the nature and discern the consequences of competitive-cooperative relationships among firms in
a supply chain?
4. How can a firm leverage its competitors to advance its capabilities?
5. How can a firm ethically cooperate with its competitors to maximize one another’s benefits?
6. Is it best to cooperate with second-ranked competitors to defeat (or defend) a first-ranked competitor?
7. What is unique about competition in R&D and patents in high-tech industries?
8. What are the implications of the Chinese conception of “self-other integration” for competitive, cooperative, and
competitive-cooperative relationships?
71
FIGURE 5
Research Issues and Questions by Major Themes
Key Themes
Competitive
Interaction
Strategic
Competitive
Behavior and
Repertoire
Research Issues and Questions
1. How does the interaction between an action and a response or between a set of actions and responses give rise to subsequent
action/response behaviors?
2. How do the combinations of various action attributes (e.g., speed and volume) affect competitive responses?
3. How should more sophisticated constructs (e.g., aggressiveness, proactiveness, and responsiveness) be conceptualized in order to
reveal robust action/response characteristics?
4. In addition to structural or resource concerns, what role do human factors of attackers and defenders play in action-response
relationships (e.g., organizational politics, family/nonfamily CEOs, first- and second-generation owners, CEOs’ educational
background)?
5. How do periodic actions/responses (e.g., seasonal promotion) affect performance?
6. How do cultural factors (e.g., face issue) affect irreversibility and other action/response attributes and competitive behaviors and/or
engagements?
7. How does the stock market react to a specific action/response?
A. Strategic Competitive Behavior
1. Which attributes can be used to capture firm competitive behavior and which theories can be used to explain competitive dynamics?
2. How do industry characteristics shape the competitive behavior of firms?
3. Why do firms in a specific industry launch certain characteristic actions/responses? Is there an industry recipe or typical “industry
repertoire” for interfirm rivalry?
4. How do TMT/CEO relationships and task-related characteristics affect competitive behavior?
5. How does the interplay between and among the board of directors, the top management team, and the CEO affect competitive
behavior of firms?
6. How do a firm’s internal decisions (e.g., R&D investment, new CEO) affect its competitive actions and competitors’ responses?
7. How does downstream competition inform upstream competition (see e.g., Google vs. Microsoft; Google vs. Facebook)?
8. How are actions/responses predicted based on both the resource profile and the market domain? Fundamentally, how is the most
critical resource in an industry defined? How are markets segmented for a more effective approach?
9. How can we study competition and rivalry among different forms of enterprise (for-profit, nonprofit, business family, and
state-owned enterprises)?
B.
1.
2.
3.
Multimarket and
Multibusiness
4.
1.
2.
Competitor Strategy Repertoire
In addition to simplicity, inertia, and nonconformity, what other repertoire strategies could be proposed and investigated?
What factors drive a firm’s tendency to adopt a particular repertoire?
Can a repertoire strategy be sustained? What factors interrupt the relationship between a repertoire and its determinants or
consequences?
When and under what conditions will a firm change its strategy repertoire?
How does a firm orchestrate various business units or external forces to engage in corporate-level competition?
What array of competitive dynamics can be used with a given rival across various regional markets or across countries?
72
Competition
Integrative
Competitor
Analysis
Competitive
Perception
Methodological
Concerns
3.
How do the organizational and strategic characteristics of a corporate headquarters affect the competitive behavior of its business
units?
4. How do MNEs select particular countries to launch their new products in order to avoid certain rivals or the escalation of
competition?
5. How do various business units compete for internal resources? How can internal competition or inter-unit competition within a
company be investigated? What are the implications of internal competition for firm strategy and competitive dynamics?
6. How best can we study rivalry at the city, national, and regional level?
1. How are competitors defined from a customers’ perspective? How does that definition affect customer behaviors?
2. What are the similarities and differences between product-market and factor-market competition?
3. How are direct, indirect, potential, and “noncompetitors” identified based on the MC/RS framework?
4. How can the AMC framework be applied to predict extended competitor behaviors?
5. What are the performance and competitive implications of competitive asymmetry?
6. How does a competitor’s generic strategy affect interfirm competitive dynamics?
7. How does a firm cultivate rival-centric capability? What are some organizational barriers of adopting a rival-centric perspective?
What are the performance implications of adopting a rival-centric approach?
8. How are competitor and customer analyses applied and integrated to advance firm advantage?
9. How can we study factor-market rivalry and non-market competitors?
10. How can we study group-based competition or rivalry between alliance networks, each with a group of upstream/downstream players
or a set of companies that span different industry boundaries?
1. How does a low-profile or high-profile perception of a competitive action affect response attributes?
2. How can perceptual tendencies and biases be exploited to mislead a competitor?
3. How does the perception of a firm’s CEO affect the perception of a rival’s actions?
4. How does a firm’s or its CEO’s reputation affect its rival’s attacks?
5. How do the social, cognitive, and psychological characteristics of decision makers affect competitive actions and responses?
6. How are competitive actions/responses utilized to shape the general public’s perception of a firm?
7. To what extent is competition a socially constructed phenomenon? How can we investigate that?
8. How can the outcomes of perceived vs. objective competitive indicators be compared and examined?
1. How can data on competitive behavior be collected when objective information is hard to obtain or where actions and responses are
hard to identify and/or connect?
2. How can a multilevel approach identify the associations among industry-, firm-, and action-level concerns.
*We acknowledge Hao-Chieh Lin’s valuable input in identifying issues and questions for future research presented in Exhibits 4 and 5.
73
TABLE 1
A Research Platform for Bridging Micro- & Macro-Organization Studies
Micro-factors
Macro-factors
Individual
Group
Organizational
Extra-organizational
Actor experience
Information-sharing
Top team heterogeneity
Network connections -Awareness
Actor tenure
within groups
Scanning routines and
bonding vs. bridging ties
Cognitive biases
TMT or group diversity
information systems
with stakeholders
Collaborative and
coordinative devices
Sample
CEO effects
TMT demographics
TMT demographics
Network theory
theoretical lenses Behavioral economics
Information processing
Social embeddedness
views
theory
Contingency theory
Actor personality. need
Group cohesion and
Reporting structure,
History of competitive
Motivation
structure, position and
morale
accountabilities
engagements
career stage, wealth, role
Group identities
Reward systems
Institutional context
identity, risk profile
Organizational culture and
turf definitions
Sample
Behavioral economics
Social identity theory
Agency Theory
Social identity theory
theoretical lenses Motivation theory
Organization culture
Institutional logics
Identity theory
Human resources
Institutional theory
perspectives
Actor training,
Group stability and tacit
Firm resources and
Alliances, state wealth,
Capability
connections, relationships, knowledge
capabilities
infrastructure development
expertise, skills
Intra-group
Dynamic capabilities and
Strengths of competitors
communication
path-dependent capacities
Sample
Learning theory
Resource-based view
Resource-based view
Competitive analysis
theoretical lenses Network theory
Network theory
Dynamic capabilities
Institutional theory
Stakeholder theory
Value chain analysis
Industrial economics
74
APPENDIX A*
Awareness-Motivation-Capability in Competitive Dynamics
Author(s)
Key AMC Constructs**
Awareness
Motivation
Key Findings
Conceptual-Theoretica
l Paradigm
Capability
I. Competitive Interaction: Action-Level Studies
Chen & MacMillan
(1992)
 Competitor dependence
 Irreversibility
Chen, Smith, &
Grimm (1992)
 Attack intensity
 Competitive impact
 Implementation
requirements
Derfus, Grimm, &
Smith (2008)
 Volume of focal-firm
actions
 Industry demand
 Industry concentration
 Rival action speed
 Relative market position
Dependence on a competitor decreases
chances of nonresponse while increasing
response delay and the likelihood that a
responder will match a move. Action
irreversibility generally has the opposite
effect.
Competitive impact, attack intensity, and
tactical actions increase the number of
responses. Implementation requirements
reduce the number and slow the speed of
responses.
“Red Queen” is a contest in which each firm’s
performance depends on the firm’s matching
or exceeding the actions of rivals. The Red
Game theory
Stimulus-response
model
Evolutionary theory
Organizational ecology
Queen effect depends on industry context and a
focal firm’s market position.
Lamberg, Tikkanen,
Nokelainen, &
Suur-Inkeroinen
(2009)
 Central administration
(focused/resourceful vs.
fragmented/weak)
 Strategic direction
(widely-accepted vs.
contested)
 Slack resources
(sufficient vs.
insufficient)
Strategic consistency is related to both
organizational survival and efficient changes
in key elements of strategy.
Evolutionary theory
Austrian economics
Competitive dynamics
perspective
MacMillan,
Mccaffery, & Van
Wijk (1985)
 Visibility
 Perceived market
 Radicality of move
 Complexity
 Misfit with
organization’s political
system
Organizational inertia (influenced by
radicality, complexity, and misfit) is positively
related, and strategic pressure (influenced by
strategic attack and perceived potential) is
negatively related, to response lag to easily
imitated new products.
Organization change
perspective
Organization process
perspective
potential of a new
product
 Strategic attack on
rival’s key market
75
 Strategic group
Smith, Grimm,
Ferrier, & Young
(1997)
Competitive response cannot be predicted by
strategic group membership. However,
strategic group membership predicts the
manner in which firms compete with one
another, and the frequency with which they
undertake competitive actions, cut prices,
instigate warfare, and imitate rivals.
Strategic groups
perspective
II. Strategic Competitive Behavior and Repertoire: Business-Level Studies
 Viability
 Competitive strength
 Firm size
Barnett (1997)
Chen & Hambrick
(1995)
 Firm size
 Firm size
Chen, Katila,
McDonald, &
Eisenhardt (2010)
 Markets with
moderately or highly
temporary advantages
 Prior performance
Chen & Miller
(1994)
 Visibility of attack
 Centrality of attack
Chen,
Venkataraman,
Black, & MacMillan
(2002)
 Public commitment
 Firm size
 Response difficulty
 Internal commitment
76
Stronger competitors are more likely to
survive when they are small; but viability and
competitive strength diverge when
organizations are large, thus leading to the
survival of weak competitors.
Small airlines induce scanning (A), motivate
stealth (M), and facilitate speedy response (C).
Small firms more actively initiated
competitive challenges and were speedy but
subtle in executing their actions.
High vs. low performers exhibit different
types of competitive moves (e.g. bold vs.
conservative); such variations are influenced
by the type of market (established vs. new).
Organizational ecology
and adaptation
Visibility of attack, centrality of attack, and
response difficulty may serve as “weak links
in the chain,” increasing the chances of
retaliation. These variables also demonstrated
interactions that compound the threat of
retaliation.
Irreversibility has two component dimensions,
internal commitment and public commitment,
which have opposite effects on response
likelihood, response delay, and likelihood of a
matching response.
Expectancy-valence
theory
Contingency theory
Institutional theory
Evolutionary search
Temporary advantage
Competitive dynamics
perspective
Behavioral theory
Escalation of
commitment
Chi, Ravichandran,
& Andrevski (2010)
 Structural holes
 IT-enabled capabilities
(sensing and
responding)
 Structural holes
 Network density
 Network density
 IT-enabled capabilities
(sensing and
responding)
Connelly, Tihanyi,
Certo, & Hitt (2010)
 Dedicated ownership
 Transient ownership
Ferrier (2001)
 Past performance
 Industry environment
(growth, concentration,
and entry barriers)
 TMT heterogeneity
 Organizational slack
Ferrier,
Fhionnlaoich,
Smith, & Grimm
(2002)
 Competition-buffered
industry environment
(industry growth,
concentration, and entry
barriers)
 Financial distress
 Market share erosion
 TMT heterogeneity
Ferrier & Lee
(2002)
 Strategic intensity
 Strategic
unpredictability
 Strategic complexity
 Strategic heterogeneity
Ferrier & Lyon
(2004)
 TMT heterogeneity
(firm tenure, industry
tenure, function, and
education)
77
The positive effects of a strong network on the
quantity and range of competitive action is
moderated by firms’ IT-enabled capabilities.
Ownership of a firm by dedicated institutional
investors, who hold concentrated portfolios
over time, is positively associated with the
firm’s use of strategic competitive actions.
Ownership by transient institutional investors,
who hold broad portfolios and make frequent
trades, has the opposite effect.
TMT heterogeneity, past performance, slack,
and the industry entry barriers, growth, and
concentration shape competitive actions,
which in turn affect performance.
TMT heterogeneity negatively moderates, and
competition-buffered industries positively
moderate, the relationship between
performance distress and aggressive
competitive behaviors (more actions,
innovative or radical actions, quick responses,
and complex and differentiated action
repertoires).
A firm’s strategic complexity and
heterogeneity each exhibited a U-shape
relationship with its stock price. A focal firm’s
strategic intensity and unpredictability each
exhibited a negative relationship with its
rival’s stock price.
TMT heterogeneities positively moderate the
relationship between competitive repertoire
simplicity and firm performance.
Social network
perspective
Information systems
perspective
Agency theory
AMC perspective
Upper echelons
perspective
Resource-based view
Organizational learning
Industry economics
Contingency theory
Prospect theory
Corporate finance
Organizational learning
Threat-rigidity
Industry organization
economics
Competitive dynamics
perspective
Strategic view of finance
Upper echelons
perspective
Ferrier, Smith, &
Grimm (1999)
Haleblian,
McNamara, Kolev,
& Dykes (2012,
forthcoming).
 Strategic orientation
(technology and
marketing intensity)
 Firm structure (size and
diversification)
 Strategic orientation
(technology and
marketing intensity)
 Firm structure (size and
diversification)
Hambrick, Cho, &
Chen (1996)
Miller & Chen
(1994)
 Market diversity
 Competitive experience
Miller & Chen
(1996)
Miller & Chen
(1996a)
Ndofor, Sirmon, &
He (2011)
 Continuity of industry
traditions
 Firm age
 Total competitive
activity
 Action timing
 Action repertoire
simplicity
 Leader-challenger action
dissimilarity
 Firm resources (slack
and past performance)
Leaders are more likely to be ousted when
they are less aggressive in competitive
situations, carry out simple repertoires of
action, and are slow to take action.
Austrian economics
A firm’s strategic orientation, structure, and
available resources influence the timing of its
mergers.
AMC perspective
 TMT heterogeneity
(Function, education,
and tenure)
TMT heterogeneity is positively related to
action propensity and magnitude, but
negatively related to the speed of action and
response.
Good past performance contributed to
competitive inertia, whereas a diversity of
markets discouraged it. Antecedents for inertia
differed for tactical versus strategic actions,
the former being driven more by performance
and market diversity, the latter by growth in
markets.
Firm age, size, breadth of competitive
experience, and past performance, as well as
market growth and market diversity, influence
the simplicity of competitive repertoires.
Upper echelons
perspective
Customer and competitor diversity, firm size,
slack resources, and market growth increase
the nonconformity of competitive repertoires;
Time elapsed since deregulation, market
growth, and prior performance decrease it.
Action deviance and complexity mediate the
relationship between technological resource
Institutional theory
 Market growth
 Past performance
 Firm age
 Firm size







 Breadth of competitive
experience
 Market diversity
Past performance
Firm age
Firm size
Market growth
Market uncertainty
Market growth
Prior firm performance
 Competitor and customer
diversity
 Firm size
 Slack resources
 Breadth and complexity
of technological
78
Organizational learning
Organizational change
Decision-making
Organizational learning
Contingency theory
Resource-based view
Competitive dynamics
resources
Rindova, Ferrier, &
Wiltbank (2010)
 Environmental
ambiguity associated
with a firm
 Action simplicity,
predictability, grouping,
and motif
Sirmon, Gove, &
Hitt (2008)
Smith, Grimm,
Gannon, & Chen
(1991)
 External orientation
Young, Smith, &
Grimm (1996)
 Industry-level horizontal
cooperative mechanisms
Zhang & Gimeno
(2010)
 Goal heterogeneity
among competitors
 Earnings pressure
 Market concentration
 Dominant competitors’
earnings pressure
 Comparative resource
stocks
 Managers’ bundling and
deployment actions
 Resource parity
 Deployment flexibility
of resources
 Type of action
 Structural complexity
(specialization)
 Organizational slack
 TMT education and
experience
 A firm’s participation in
horizontal cooperative
mechanisms
 Capacity share
 Competitors’ capacity
constraints
breadth and firm performance.
Dynamic action sequencing may provide
firms with advantages; the properties of
“simplicity, grouping, and motif” are
associated with increases in the market value
of high-ambiguity firms, but not of
low-ambiguity firms.
Comparative advantages in resource stocks
and managerial actions affect performance;
these effects are moderated by resource parity
and deployment flexibility.
perspective
Pattern perception
Holistic information
processing
The likelihood of imitation and the timing of a
competitive response are influenced by type of
action, external orientation, structural
complexity, firm slack, and TMT education
and experience.
Organizational
information processing
theory
Firm-level cooperative mechanisms increase
competitive activity, which in turn relates
positively to firm performance.
Firms facing earnings pressure restrict output
in oligopolistic markets, even though avoiding
such restrictions would encourage rival output
expansion. Thus, output restrictions enacted
under such circumstances tend not to produce
their intended effects.
Austrian economics
Industrial organization
economics
Agency theory
Resource-based view
III. Multimarket and Multibusiness Competition: Corporate-Level Studies
Baum & Korn
(1996)
 Market density
 Multimarket contact
 Market concentration
 Market domain overlap
79
Market domain overlap raised airlines' rates of
market entry and exit while multimarket
contact lowered them, especially in markets
dominated by a single airline.
Multipoint competition
Mutual forbearance
Industry organization
economics
Baum & Korn
(1999)
 Multipoint contact
 Competitor’s relative
size
Gimeno & Woo
(1996)
 Multimarket contact
 Strategic similarity
Gimeno & Woo
(1999)
 Multimarket contact
 Strong resource-sharing
opportunities
Haveman &
Nonnemaker (2000).
 Multipoint contact
 Spillover from mutual
forbearance
 Market dominance
 Market stake
 Relative competitive
strength
Considering the resource commitment and
market stake of an action, and its relative
competitive strength with target competitors, a
firm can use the thrust, feint, and gambit
strategies to divert competitors' resource
allocations without precipitating a destructive
all-out war.
 Multimarket contact
 Importance of the
 Home–host country
distance
The speed of an MNE’s response to a rival’s attack
McGrath, Chen, &
MacMillan (1998)
Yu & Cannella
(2007)
 Credibility (resource
commitment)
80
An inverted U-shaped relationship exists
between firms’ rates of entry into and exit
from each other’s markets and the level of
multimarket contact in competitor dyads. This
curvilinear effect varies from dyad to dyad as
a function of relative levels of multimarket
contact with competitors in other dyads and
relative sizes of competitors in a focal dyad.
Strategic similarity increases the intensity of
rivalry, while multimarket contact decreases
it. The effect of strategic similarity on rivalry
intensity may be biased if the effect of
multimarket contact is not taken into
consideration.
The confluence of scope economies and
multimarket contact results in superior
economic performance. However, scope
economies may not result in superior
performance if rivals can obtain similar scope
economies in non-overlapping markets.
Multipoint competition affects all
rivals—multi- and single-market firms alike.
Mutual forbearance is more pronounced in
markets dominated by a few large firms.
is influenced by both resource-related and
Organizational ecology
Multipoint competition
Mutual forbearance
Hypercompetition
Strategic groups
Multimarket competition
Multimarket contact
Mutual forbearance
Economics of scope
Sociological and
economical theories
Multipoint competition
Mutual forbearance
Resource-partitioning
Multipoint competition
Mutual forbearance
AMC perspective
action-initiating country
 Within-country response
Yu, Subramaniam &
Cannella (2009)
 Presence of local
competitors
 Multimarket contact
 Subsidiary ownership
 Host government
constraints
 Home government
constraints
 Subsidiary control
 Cultural distance
 Regulatory restrictions
market-related factors.
The presence of local competitors, MNC
subsidiary ownership, cultural distance, and
local regulatory restrictions moderate the
relationship between multimarket contact and
competitive aggressiveness.
Multimarket competition
International business
Mutual forbearance
IV. Integrative Competitor Analysis
Capron & Chatain
(2008)
 Formation or
discontinuity in the
resource environment
 Small number of
competitors
 Performance culture
heterogeneity
 Competitive impact of
focal firm’s actions
 Market commonality
Chen (1996)
Chen, Su, & Tsai
(2007)
 Relative scale of a given
rival
 Rival’s attack volume
Markman,
Gianiodis, &
 Product-market overlap
 Factor-market overlap
 Property-based
resources
 Resource heterogeneity
 Political influence of
consumer groups
 Difficulty of imitation
of focal firm’s actions
 Competitors’ retaliation
capabilities
 Competitors’ ability to
switch to substitutes
 Resource similarity
 Rival’s capability to
contest
81
A firm can best understand the relationship
between its resources and competitive
advantage by examining the actions it can take
to control the resource environment.
Resource-based view
First mover advantage,
Industrial organization
economics
Corporate political
activity
Competitive dynamics
perspective
A pairwise comparison of two competitors
along market commonality and resource
similarity dimensions illuminates the notion of
competitive asymmetry and the pre-battle
competitive tension between the two firms.
Perceived competitive tension is influenced by
the independent and interactive effects of
three factors: relative scale of a rival, rival’s
attack volume, and rival’s capability to
contest.
A theory of factor-market rivalry is developed
to shed light on atypical rivals and competitive
Resource-based view
Multiple-point
competition
AMC perspective
Mutual forbearance
Blind spots
Buchholtz (2009)
 Market needs
correspondence
Peteraf & Bergen
(2003)
Semadeni &
Anderson (2010)
 Firm-level: competitoroffering relatedness
Silverman & Baum
(2002)
 Rivals’ downstream
alliances
 Rival partners’ number
of alliances
 Resource equivalence
 Firm-level: competitor
organizational
innovativeness
 Offering-level:
innovativeness of a
competitor’s offering
 Rivals’ number of
alliances
 Rivals’ vertical
(downstream and
upstream) and
horizontal alliances
 Resource similarity
 Market commonality
Upson, Ketchen,
Connelly, & Ranft
(2011)
blind spots. The study introduces dynamic
constructs—resource discontinuities,
leapfrogging, and captivity—and explains
their role in triggering competitive cascade
effects.
Chances for resource substitution shape the
attainment and sustainability of competitive
advantage. Competition is driven not by
similarities in resource type, but by
similarities in resource functionality.
Organizational innovations are more apt to
spur imitation by rivals than innovations in
offerings.
Resource-based view
Information-based
imitation
A firm’s chances of exit increases with rivals’
alliances, however the effect is moderated by
alliance types and the rival partners' number of
alliances
Transaction cost
economics
Resource-based view
Organizational ecology
Market commonality and resource similarity
influence the likelihood of establishing a
foothold in a new market.
Competitive dynamics
perspective
Action aggressiveness mediates the
relationship between TMT integration and
firm performance, particularly under
hypercompetitive conditions.
Partner co-specialization determines the
nature of alliances and the evolution of
competition within an alliance network.
Teams’ similarities and interaction histories
Upper echelons
perspective
Hypercompetition
Temporary advantage
Transaction cost
economics
Social exchange theory
Relational perspective,
V. Competitive Perception
Chen, Lin, &
Michel (2010)
 Hypercompetitive
environment
Gimeno (2004)
Kilduff, Elfenbein,
 Repeated competition
 TMT socio-behavioral
integration
 Rivals’ cospecialized
or nonspecialized
alliances
 Competitors’ similarity
 Competitive
embeddedness
 Historic competitiveness
82
& Staw (2010)
(quantity and quality)
(location and actors’
characteristics)
are positively related to rivalry between
competitors, which in turn increases team
members’ motivation and performance.
Lin & Shih (2008)
 Executive SHRM
TMT social integration and action
system
aggressiveness partially mediate the
 TMT social integration
relationship of an executive SHRM system
and firm performance.
Livengood & Reger Perceived shared turf
 Perceived shared turf
Perceived shared turf
Shared competitive turf, which relates to the
(2010)
identity domain and psychological value of a
focal firm’s management, increases the
awareness, motivation, and capability to
respond to competitors’ actions.
Marcel, Barr, &
 Executive-level
 Similarity (location and
 Information-processing
Differences in executives’ cognitive
Duhaime (2011)
cognitive frameworks
actors’ characteristics)
propensity (unabsorbed
frameworks influence whether and how
(strategic importance)
slack, TMT age, TMT
quickly they commit their firms to challenge
 External cues
industry tenure)
an adversary’s action.
Porac, Thomas &
 Competitive groups
Only through multidisciplinary research that
Baden-Fuller (1989)
integrates resource, power, and cognitive
theories of industrial dynamics can we
understand the sources of industrial decline
and revitalization.
Porac, Thomas,
 Organizational
Market boundaries are socially constructed
Wilson, Paton, &
categories in an industry
around a collective cognitive model within an
Kanfer (1995)
model (core vs.
industry. The model is produced when firms
peripheral, large vs.
observe each other's actions and define unique
small)
product positions in relation to each other.
Tsai, Su, & Chen
 Structural competitive
 Relational competitive
A focal firm’s relational and structural
(2011)
embeddedness
embeddedness
competitive embeddedness vis-à-vis a given
 Resource deployment
rival is positively associated with the firm’s
capability
acumen regarding that rival.
*We acknowledge the valuable input from Hao-Chieh Lin, Jennifer Chen, Sheng-Tsung Hou, and Wan-Chien Lien in constructing this exhibit.
**Except in a few cases, we use original variable names to characterize AMC components.
83
behavioral economics
Upper echelons
perspective
SHRM perspective
Identity theory
Managerial cognition
Strategic groups
perspective
Organizational cognition
Social construction
Organizational cognition
Organizational ecology
Structural equivalence
Competitive
embeddedness
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