Competition‐driven repositioning

We study competition as an impetus for firms to reposition—to abandon their current positioning strategy and adopt a new one. We predict that as a strong firm moves closer, competition erodes the profitability of situated firms and prompts them to reposition. We expect this effect is pronounced the greater difference in competitive strength. However, we expect that countervailing forces exist such that the viability of alternative positions and the opportunity cost of abandoning a current position mitigate this effect. Evidence from a natural experiment in China's satellite television industry supports our hypotheses. This research adds to the existing literature on repositioning, which emphasizes the phenomenon as opportunity‐driven, and to the competitive interaction literature, which typically does not distinguish between noncounterattack strategies. Copyright © 2013 John Wiley & Sons, Ltd.     

Detecting the relationship between competitive intensity and firm product line length: Evidence from the worldwide mobile phone industry

The way firms lengthen or shorten their product line with respect to rivals is regarded as one of the possible strategies firms can pursue to respond to competition. This article builds and tests hypotheses to study the effect of different levels of competitive intensity on product line length. The empirical analysis of data on 3,527 handset models introduced by 66 mobile phone vendors from 1994 to 2010 shows a consistent inverse U‐shaped relationship between competitive intensity and the firm's product line length. In this way, we pinpoint an interesting link between the product line extension literature and the competitive dynamics and competitive intensity perspectives. Copyright © 2013 John Wiley & Sons, Ltd     

Competitive repertoire complexity: Governance antecedents and performance outcomes

Research summary : Past inquiry has found that implementing complex competitive repertoires (i.e., diverse and dynamic arrays of actions) is challenging, but firms benefit from doing so. Our examination of the antecedents and outcomes of complex competitive repertoires develops a more nuanced perspective. Data from 1,168 firms in 204 industries reveal that complexity initially harms performance, but then becomes a positive factor, except at high levels. We use agency and tournament theories, respectively, to examine how key governance mechanisms—ownership structure and executive compensation—help shape firms' competitive repertoires. We find that the principals of agency theory and the pay gap of tournament theory are both important antecedents of competitive complexity, and an interaction exists wherein firms build especially complex repertoires when both influences are strong. Managerial summary : In boxing, the fight does not always go to the bigger or stronger person, or even to whomever throws the most punches—the fight is sometimes won by the boxer who is unpredictable, such as throwing an uppercut when the opponent expected a right hook. Similarly, when companies compete in the marketplace, advantage is afforded not only to those with more resources or who engage in more competitive activity, but also to those whose actions are unpredictable. In this study, we develop the notion of “competitive complexity,” which describes the diversity and changing nature of a company's competitive moves. Implementing complex competitive repertoires can be painful in the short term but, if done correctly, can help company performance in the long run. Copyright © 2016 John Wiley & Sons, Ltd.     

Strategic factor markets,scale free resources,and economic performance: The impact of product market rivalry

This paper analyzes how scale free resources, which can be acquired by multiple firms simultaneously and deployed against one another in product market competition, will be priced in strategic factor markets, and what the consequences are for the acquiring firms' performance. Based on a game‐theoretic model, it shows how the impact of strategic factor markets on economic profits is influenced by product market rivalry, preexisting competitive (dis)advantages, and the interaction of acquired resources with those preexisting asymmetries. New insights include the result that resource suppliers will aim at (and largely succeed in) setting resource prices so that the acquiring firms earn negative strategic factor market profits—sacrificing some of their preexisting market power rents—by acquiring resources that they know to be overpriced. Copyright © 2014 John Wiley & Sons, Ltd.     

Porter's ‘competitive advantage of nations’: An assessment

Porter's Competitive Advantage of Nations is an important book which bridges the gap between strategic management and international economics while contributing substantially to both. Porter's analysis of the impact of national environment on international competitive performance demonstrates the potential for the theory of competitive strategy to rescue international economics from its slide into refined irrelevance, while simultaneously broadening the scope of the theory of competitive strategy to encompass both the international dimension and the dynamic context of competition. Nevertheless, the breadth and relevance of Porter's analysis have been achieved at the expense of precision and determinancy. Concepts are often ill defined, theoretical relationships poorly specified, and empirical data chosen selectively and interpreted subjectively.     

Incremental value creation and appropriation in a world with multiple stakeholders

There is a renewed interest among strategy scholars in the relationship between stakeholder theory and the dynamics of value creation‐appropriation in firms. Further advancements in this field are arguably impeded by an incomplete conceptualization and measurement of value and by scant characterization of the different patterns of stakeholder value appropriation. We develop a conceptual framework—based on an analytical taxonomy of value creation and appropriation—consistent with a more complete notion of value and wherein the trade‐offs in stakeholder value appropriation can be included. In essence, our analytical taxonomy contributes to enlarge the spectrum of value creation‐appropriation scenarios to be considered by researchers working on the stakeholder view of strategy. Copyright © 2014 John Wiley & Sons, Ltd.     

Motivation matters: Corporate scope and competition in complementary product markets

Research summary : We argue that a pure capabilities‐based view does not accurately explain the competitive dynamics of increasingly common settings in which firms act as both complementors and competitors. We propose that the Awareness‐Motivation‐Capability framework is more appropriate for these settings. We derive predictions from both a pure capabilities view and the AMC framework, and test those predictions in the U.S. auto leasing market, in which the leasing subsidiaries of car manufacturers directly compete with the same independent lessors who provide complements to the manufacturers. Although our results are consistent with capabilities playing an important role, motivation appears to be a critical factor explaining the competitive dynamics of the market. Managerial summary : Firms that compete with business units owned by larger corporate parents face additional considerations. Such subsidiary competitors can be motivated by broader corporate considerations, shifting their objectives, and consequently, their strategic actions. Expecting subsidiary competitors to pursue business unit profitability can mislead managers toward pricing, product mix, or market entry errors. We present an important example from consumer finance, where independent auto lessors, such as Bank of America (BoA), compete with captive leasing subsidiaries like Ford Motor Credit (FMC). Since FMC is motivated to subsidize and support vehicle sales for its manufacturer parent, a cost advantage is not enough for BoA to dominate the market. Understanding broader corporate motivations of competitors helps managers anticipate competition levels in potential markets, thereby improving decision‐making and performance. Copyright © 2015 John Wiley & Sons, Ltd.     

Time delays,competitive interdependence,and firm performance

Research summary: Competitors' experiences of prior interactions shape patterns of rivalry over time. However, mechanisms that influence learning from competitive experience remain largely unexamined. We develop a computational model of dyadic rivalry to examine how time delays in competitors' feedback influence their learning. Time delays are inevitable because the process of executing competitive moves takes time, and the market's responses unfold gradually. We analyze how these lags impact learning and, subsequently, firms' competitive behavior, industry profits, and performance heterogeneity. In line with the extant learning literature, our findings reveal that time delays hinder learning from experience. However, this counterintuitively increases rivals' profits by reducing their investments in costly head‐to‐head competition. Time delays also engender performance heterogeneity by causing rivals' paths of competitive behavior to diverge. Managerial summary: While competitive actions such as new product launches, geographical expansion, and marketing campaigns require up‐front resource commitments, the potential lift in profits takes time to materialize. This time delay, combined with uncertainty surrounding the outcomes of competitive actions, makes it difficult for managers to learn reliably from previous investment decisions. This results in systematic underinvestment in competitive actions. The severity of the underinvestment grows as the time delay between an investment and its positive results increases. Counterintuitively, however, competitors' collective underinvestment increases profit‐making opportunities. In industries with large time delays, companies that do invest in competitive actions are likely to enjoy high returns on investment. It is also likely that rivals' paths of competitive behavior bifurcate. Together, these mechanisms generate large differences in competitors' profits. Copyright © 2016 John Wiley & Sons, Ltd.     

The competitive implications of the deployment of unique resources

The ‘resource‐based’ view focuses on unique resources as the fundamental sources of competitive advantage and superior profits. We use a game‐theoretic model to analyze the impact of the deployment of unique resources on product market competition, and the impact of unique resources and sustainable competitive advantages on profits when the competitive implications of resource deployment are taken into account. We find that some of the core propositions of the resource‐based view do not necessarily hold when the impact of resource deployment on product market competition is explicitly considered. Specifically, the accumulation and deployment of unique resources does not necessarily increase the firm's profit and the difference between its profit and competitors' profits. Furthermore, achieving a sustainable competitive advantage does not necessarily lead to higher profits. Copyright © 2012 John Wiley & Sons, Ltd.     

Total quality management as competitive advantage: A review and empirical study

Total Quality Management (TQM) has become, according to one source, ‘as pervasive a part of business thinking as quarterly financial results,’ and yet TQM's role as a strategic resource remains virtually unexamined in strategic management research. Drawing on the resource approach and other theoretical perspectives, this article examines TQM as a potential source of sustainable competitive advantage, reviews existing empirical evidence, and reports findings from a new empirical study of TQM's performance consequences. The findings suggest that most features generally associated with TQM—such as quality training, process improvement, and benchmarking—do not generally produce advantage, but that certain tacit, behavioral, imperfectly imitable features—such as open culture, employee empowerment, and executive commitment—can produce advantage. The author concludes that these tacit resources, and not TQM tools and techniques, drive TQM success, and that organizations that acquire them can outperform competitors with or without the accompanying TQM ideology.     

CEO compensation: A resource advantage and stakeholder‐bargaining perspective

This paper studies how CEO pay and its composition is shaped by strategic factors related to the firm's capacity to generate rents and value, the uncertainty of its resource advantage, and the competitive interaction between firm stakeholders and top management. This is done using an analytical framework in which the CEO and other firm stakeholders interact over the firm's resource surplus as utility‐maximizing claimants based on their relative bargaining power while providing shareholders their market‐based required return. Results from the model yield a number of cogent strategic insights and predictions on the causal interplay between CEO pay, firm growth and risk characteristics, stakeholder management, corporate strategy (e.g., offshoring production), and behavioral biases such as CEO optimism and overconfidence. Copyright © 2012 John Wiley & Sons, Ltd.     

Playing dirty or building capability? Corruption and HR training as competitive actions to threats from informal and foreign firm rivals

Research summary : We examine why a firm takes specific competitive action in nonmarket and resource‐market spaces, particularly when it perceives threats from informal and foreign competitor groups, respectively. We address this question by combining insights from competitive rivalry, strategic groups, and nonmarket strategy literatures in an emerging economy context. Specifically, we theorize how threats from informal and foreign rival firms in an emerging market influence a firm's engagement in corruption activities and its investments in HR training, respectively. We also argue that the likelihoods of such focal firm actions against competitor group threats differ, contingent on the focal firm's market and resource profiles. Results from the empirical analyses, with survey data from the Indian IT industry, provide broad support to our hypotheses. Managerial summary : Based on a World Bank dataset on the Indian IT industry, this study finds that corruption and HR training are pursued by firms in emerging economies as mindful strategies against specific types of rivals—informal and foreign firm rivals, respectively, and are not pursued simply as culturally‐based practices. Multinational companies may need to understand that domestic firms in emerging countries will engage in corruption strategically to reduce their costs and time to market of their products/services. Therefore, multinational firms may need to devise suitable strategies other than corruption to reduce their costs and time to market if they wish to compete with firms in emerging economies for customers who don't care about ethical issues and will buy a cheaper product/service that is delivered quickly. Copyright © 2015 John Wiley & Sons, Ltd.     

Hidden but in plain sight: The role of scale adjustment in industry dynamics

While much is understood about the general pattern of industry dynamics, a critical element underlying these dynamics, the rate of the expansion of individual firms, has been largely overlooked. We argue that the rate at which firms can reliably increase their scale of operations is a critical factor in understanding the structure of industries. Further, success at scaling‐up the firm's operations provides a dynamic‐isolating mechanism that insulates established firms from new competition. We show that the bases of profitability in the industry (monopoly‐like profits stemming from the restriction of output, efficiency rents based on firm‐specific productivity differences, or transitory Schumpeterian profits) can be traced to the scale adjustment process. We explore these issues in a computational model of industry dynamics. Copyright © 2013 John Wiley & Sons, Ltd.     

Antecedents and Consequences of Creativity in Product Innovation Teams

The generation of creative ideas and their manifestation as new products (NPs) are fundamental innovation activities of product innovation teams. Despite the importance of generating creative ideas at the fuzzy front end of the product innovation process, our understanding of antecedents and consequences of creativity of product innovation teams is limited. Drawing on Shane and Ulrich's organization design perspective of innovation, this study aims at examining the intermediary role of creativity as a critical link between team dynamics and product competitive advantage. In this study, the authors focus on NP and marketing program (MP) creativity in product innovation teams. They develop and empirically test a model that examines how internal and external team dynamics influence NP and MP creativity, and how NP and MP creativity affect product competitive advantage as a strategic innovation outcome. The study uses 206 matched responses from senior managers and product team leaders in high‐tech manufacturing firms in the United States to avoid common‐method bias. The authors use maximum likelihood estimation in a structural equation model to empirically test the proposed model. They find that two separate dimensions of creativity—novelty and meaningfulness—are differentially affected by team dynamics. For example, NP novelty as a result of divergent process is predominantly influenced by external team factors such as market‐based reward system and planning process formalization. On the other hand, NP meaningfulness as a result of convergent process is dominantly influenced by internal team factors such as social cohesion and superordinate identity. In addition, MP novelty is determined by social cohesion, superordinate identity, planning process formalization, and encouragement to take risks, while MP meaningfulness is influenced by social cohesion and planning process formalization. Our findings also suggest that NP novelty and meaningfulness, but not MP novelty and meaningfulness, play important intermediary roles in determining product competitive advantage. This study contributes to narrowing the important gap in the literature by examining the effect of team dynamics on creativity and by linking creativity to strategic innovation outcomes. Our study suggests that a firm's ability to manage team dynamics toward generating creative NPs and MPs constitutes a dynamic capability that can provide a competitive advantage over the competition.     

What doesn't kill you makes you stronger: The evolution of competition and entry‐order advantages in economically turbulent contexts

We examine the evolution of competition and entry‐order advantages in markets under macroeconomic distress. Through formal modeling of early‐mover advantages along industry life cycles subjected to economic shocks and based on simulation findings, we propose that such shocks exogenously induce temporary industry discontinuities that shift the relative value of distinct asset endowments, thereby switching the bases for competitive advantages vis‐à‐vis those found in stable contexts. A vital trade‐off then emerges between a firm's financial flexibility and its pace of investments in isolating mechanisms, such that the former operates as a contingency factor for the latter. As such, flexibility superiority boosts early‐entrants' advantages, while it alternatively gives laggards a much desired strength to out trump first‐mover rivals. Our study informs entry‐order advantage theory and management practice in economically turbulent contexts. Copyright © 2013 John Wiley & Sons, Ltd.     

When are technologies disruptive? a demand‐based view of the emergence of competition

By identifying the possibility that technologies with inferior performance can displace established incumbents, the notion of disruptive technologies, pioneered by Christensen (1997), has had a profound effect on the way in which scholars and managers approach technology competition. While the phenomenon of disruptive technologies has been well documented, the underlying theoretical drivers of technology disruption are less well understood. This article identifies the demand conditions that enable disruptive dynamics. By examining how consumers evaluate technology and how this evaluation changes as performance improves, it offers new theoretical insight into the impact of the structure of the demand environment on competitive dynamics. Two new constructs—preference overlap and preference symmetry—are introduced to characterize the relationships among the preferences of different market segments. The article presents a formal model that examines how these relationships lead to the emergence of different competitive regimes. The model is analyzed using computer simulation. The theory and model results hold implications for understanding the dynamics of disruptive technologies and suggest new indicators for assessing disruptive threats. Copyright © 2002 John Wiley & Sons, Ltd.     

Firm resources,competitive actions and performance: investigating a mediated model with evidence from the in‐vitro diagnostics industry

Building on the resource‐based view (RBV) and competitive dynamics literatures, this paper proposes that considering resources or actions independently offers an incomplete understanding of the drivers of superior performance. Instead, we hypothesize that resources enable competitive actions and that when these actions leverage the firm's resources, superior performance results. We tested these hypotheses with panelized data on the technological resources and competitive actions of firms in the in‐vitro medical diagnostic substance manufacturing industry. The results provide substantial support for our hypotheses, specifically with respect to mediation. Our theory and results underscore how the integration of the competitive dynamics and RBV literatures can significantly improve our understanding of firm performance. Copyright © 2011 John Wiley & Sons, Ltd.     

The clock is ticking! Executive temporal depth,industry velocity,and competitive aggressiveness

We examine how the interplay between executive temporal depth (time horizons that executives consider when contemplating past and future events) and industry velocity (the rate at which new opportunities emerge and disappear in an industry) shapes competitive aggressiveness (a firm's propensity to challenge rivals directly and intensely in order to maintain or improve its market position) and firm performance. Based on panel data (from 1995 to 2000) from 258 firms in 23 industries, we found that executive temporal depth exhibited different patterns of relationships with competitive aggressiveness in low‐ and high‐velocity industries. Moreover, competitive aggressiveness had a positive main effect on firm performance, but this effect was stronger in high‐velocity industries than in low‐velocity industries. Copyright © 2015 John Wiley & Sons, Ltd.     

Exploring firm characteristics that differentiate leaders from followers in industry merger waves: a competitive dynamics perspective

Research in strategic management has shown that the timing of firm participation in a merger wave matters, as early movers have been shown to outperform later ones. However, while the consequences of the timing of action within a merger wave have been assessed, the causes that drive these timing effects remain unknown. We draw on the competitive dynamics perspective to investigate firm‐level factors that influence the large‐scale strategic behavior of leading or following within industry merger waves. We develop hypotheses based on the competitive dynamics argument that the awareness‐motivation‐capability of firms will influence the timing of competitive action. Consistent with this perspective, we show that a firm's strategic orientation, its structure, and its resource base influence the timing of firm entry in merger waves. Copyright © 2012 John Wiley & Sons, Ltd.     

A Bayesian operationalization of the resource‐based view

This paper argues that the gap between the theoretical utility and the practical utility of the resource‐based view (RBV) may be narrowed by operationalizing the theory more consistently with Penrose's original framework. The operationalization proposed here is a twofold approach. First, the RBV may be enhanced by the explicit recognition of Penrose's two classes of resources, namely, administrative resources and productive resources. This distinction suggests a focus on the administrative decisions of managers that lead to economic performance. Second, we argue that the RBV is a theory about extraordinary performers or outliers—not averages. Therefore, the statistical methods used in applying the theory must account for individual firm differences, and not be based on means, which statistically neutralize firm differences. We propose a novel Bayesian hierarchical methodology to examine the relationship between administrative decisions and economic performance over time. We develop and explain a measure of competitive advantage that goes beyond comparisons of economic performance. This Bayesian methodology allows us to make meaningful probability statements about specific, individual firms and the effects of the administrative decisions examined in this study. Copyright © 2004 John Wiley & Sons, Ltd.