Rethink Strategy or Perish

Not long ago, the telecommunications industry was a dusty strategic backwater of little interest, primarily concerned with proprietary technologies and enjoying a protected status. Not any more; the application of silicon and software to telecom has obliterated entry barriers, forced open the market, and, according to Mariann Jelinek, created a whole new strategic situation. Telecom is now a highly competitive, innovative, high-technology industry, with a worldwide market. Professor Jelinek suggests that the key to understanding the shift lies in comprehending the new technologies being applied and understanding their impact on the traditional markets and missions of the firms that use them. The lessons of these changes are important for all managers, especially those in mature industries, since microelectronics and software applications seem to know no industry boundaries. They are invading our lives on all sides.     

Innovation via new ventures as a conversion strategy for the Chinese defense industry

The Chinese economic system is undergoing a transformation from a centrally planned to a market economic system. The process is difficult for at least two reasons: civilian producers lack innovative capability; R&D intensive defense firms need to shift some of their production to civilian markets. The latter requires management innovations that are difficult to master under present-day conditions. Based on the system characteristics of the Chinese defense industry we discuss its problems in managing technological innovation. We conclude that to facilitate the conversion process to civilian markets Chinese defense firms should be encouraged to split off those activities that are aimed at civilian markets.     

Competitive drivers and international plant configuration strategies: a product‐level test

We analyze the determinants of the decision to invest abroad and the choice of spatial configurations of overseas plants for 120 Japanese firms active in 36 well‐defined electronic product markets. We find that key competitive drivers at the firm and industry levels have a critical impact on the choice between alternative international plant configurations. Regional configurations focused on Asia are chosen by firms with weaker competitiveness for products with established manufacturing technologies. Plant configurations focused on the United States and the European Union are chosen by technology‐intensive firms facing competitive threats in foreign markets. Global configurations are chosen by firms with a strong competitive position in the Japanese and world market for their core product businesses and are more common in the case of strong oligopolistic rivalry between Japanese firms. Copyright © 2005 John Wiley & Sons, Ltd.     

The Industrial Organization of Housing Supply: Market Activity, Land Supply and the Size of Homebuilder Firms

Existing studies of housing markets assume that homebuilding is a homogeneous, perfectly competitive industry. This paper uses MSA-level data on the average size of homebuilder establishments and homebuilder market concentration to test the appropriateness of this paradigm. The data reveal a wide and systematic variation across metropolitan-area housing markets in both the average size of builders and the market share for the largest builders in an MSA. These results are more consistent with treating homebuilders as monopolistically competitive suppliers of a differentiated product than with treating them as perfectly competitive homogeneous firms. Builders are larger in more active housing markets and where there is a greater supply of readily developed land suitable for large developments. Builder size and concentration are sensitive to the type of regulating jurisdiction imposing land-use regulation. Both are lower when land-use regulations are imposed by smaller jurisdictions, and this is particularly true when the smaller jurisdictions impose more intense regulation.     

Heading for new shores: Do service and hybrid innovations outperform product innovations in industrial companies?

This study investigates the financial outcomes of product, service, and hybrid innovations in industrial markets. To date, empirical research has focused on product innovations, yet industrial firms are increasingly competing with innovative services to maintain their competitive edge. This study assesses the financial impact of service and hybrid innovations compared with more traditional product innovations. We develop a unique data set that combines information on companies' innovation activities with objective financial data. From a sample of 348 German industrial firms, the analysis reveals that service innovations do not outperform product innovations in industrial markets. A focus on service innovations only pays off in highly price-conscious markets. In contrast, hybrid innovations, referring to the simultaneous market introduction of new products and services, have a positive effect on firm performance above and beyond pure product innovations. This effect is particularly pronounced in competitive markets and under conditions of high customer concentration. In sum, this study demonstrates that hybrid innovations outperform both, pure product and service innovations in industrial markets.     

Buyer Market Power and Innovative Activities

This empirical paper deals with the effects of supplier and buyer market concentration on the innovative behavior of suppliers within the German automobile industry. The data set contains firms from all size classes and covers measures of innovation input as well as innovation output. It can be shown that (a) firms' innovation and R & D-employment intensity will decline (increase) in buyer concentrations if supplier markets are low (high) concentrated; (b) buyers' pressure on input prices reduces suppliers' innovation expenditures and their incentive to develop new products; (c) a small number of competitors in suppliers markets and a large stock of customers stimulates innovative behavior; (d) small and medium sized suppliers invest more in their innovative activities but have less probability of realizing innovations than larger firms; and (e) higher technological capabilities lead to higher innovation input and output.     

Is Netflix a threat to the cable TV industry? Evidence from Brazil

In recent years, the Brazilian cable TV industry has experienced a sharp downturn. In parallel, the over-the-top platform Netflix gained popularity and Brazil has become one of its biggest markets. The objective of this paper is to investigate the competitive effects of Netflix's entry on the incumbent cable TV industry. We explore the regional variability of Netflix's popularity (measured by Google Trends) and combined this information with official data of the cable TV market. Using a two-way fixed effects estimator with state-month observations (covering the period of 2012–2019), we showed that the increase in one standard deviation in Netflix popularity is associated with a 3.62% reduction in the density of cable TV subscribers and with a 19.69% reduction in the number of small firms that operate cable TV.     

Multimarket contact and sales growth: evidence from insurance

Research on pricing, profits, and firm survival has shown that multimarket contact causes mutual forbearance against competition, but has not considered the consequences of imperfect observability of competitive moves. Here, predictions are developed to explain how mutual forbearance occurs—but sometimes fails—in markets with imperfect observability. Mutual forbearance means that firms do not seek to take market share from each other through price cuts or nonprice competition, and thus that sales grow at uniform rates. Firms defect from mutual forbearance, and hence have higher sales growth, if the potential rewards are high and the likelihood of being discovered is low. This theory is tested on a panel of firms operating in the Norwegian general insurance industry. The evidence suggests that sales growth is most rapid in firms that do not meet many multimarket competitors in a given market and firms that are economically troubled. Growing or highly concentrated markets have higher heterogeneity of growth rates. Copyright © 2007 John Wiley & Sons, Ltd.     

Surviving the gales of creative destruction: the determinants of product turnover

Innovative industries are often characterized by rapid product turnover. Product longevity may be driven by both a product's position within a market as well as its position within a firm's larger product portfolio. However, we have little understanding of the relative importance of these factors in determining product turnover and how they interact as an industry evolves. Although researchers have invested substantial effort in analyzing firm survival and turnover, there are far fewer studies of the determinants of product survival and turnover. We use hazard rate models and count regression models to describe the behavior of firms and their products with a new and detailed database on the laser printer industry. We show, first, that competition and market structure variables have a large impact on both speeding product exit and delaying product entry. Second, there is some evidence that firms that have maintained a high market share for a number of years keep their products on the market longer than those with lower market share. Finally, firms with high innovative capacity tend to enter markets frequently, but withdraw their products at average rates. Firms with strong brands tend to introduce few products and withdraw their products slowly. With these findings, the paper links product entry and exit decisions to the broader literature on firm strategic and product management. Copyright © 2006 John Wiley & Sons, Ltd.     

The trade-off between institutionally proximal and distal markets: The impact of home market pressures on firms’ export market selection

This study uses an organizational change perspective to analyze firms' export market selection (EMS) to adapt to home country market pressures. We argue that firms' strategic objectives influence whether they will enter institutionally proximal or distal markets. A model with two curvilinear (U-shaped and inverted U-shaped) relationships is found by testing 1940 Taiwanese export firms based on two official datasets. The model shows that firms are more likely to increase their exports to institutionally proximal markets and to decrease their exports to institutionally distal markets if they have an increasing but still controllable degree of competitive and marketing pressures in the home country. This response represents an incremental change by exporting firms. However, firms increase their exports to institutionally distal markets while decreasing their exports to institutionally proximal markets if they have an excessively increasing degree of competitive and marketing pressures in the home country. This response represents a radical change by exporting firms. We find that export firms' strategic objectives in choosing different organizational change styles (incremental or radical) are highly related to this trade-off in their EMS decision making.     

New Product Strategies of Large, Dominant Product Manufacturing Firms: An Exploratory Analysis

Although researchers have expended considerable effort exploring the links between new product strategy and firm-level performance, most studies of this subject focus on small- to medium-sized firms. Compared to smaller firms, however, large companies typically maintain broader portfolios of products and have easier access to capital markets. Such fundamental differences suggest the need for closer examination of the relationship between new product strategy and the performance of large firms. Based on a study of 459 new products introduced during a 5-year period, Richard W. Firth and V. K. Narayanan profile the new product strategies of 18 large companies. They examine the methods used to acquire new products (internal development or external sources) as well as three dimensions of each firm's new product introductions: newness of embodied technology, newness of market application, and innovativeness in the market. In other words, these profiles identify the degree to which a firm's new product introductions involve core technologies and markets that are new to the firm, as well as the degree to which the market views these products as innovative. Because new product strategy is an investment decision, the study also examines the relationship between these strategic profiles and two facets of firm-level performance: risk and return. The study identifies five archetypes of new product strategy: Innovators, who produce innovative products by using their existing resources; Investors in Technology, who focus on expanding their technological base. Searching for New Markets, firms that venture into unfamiliar markets by introducing products closely aligned with those in their existing portfolios; Business as Usual, firms that rely on existing technologies and products to serve existing markets; and Middle-of-the-Road, firms content to introduce new products rated as low to moderate along all three dimensions of the strategic profile. For new products closely aligned with their core markets and technologies, the firms in this study typically rely on internal development. To introduce products involving new technologies or market applications, they turn to acquisition from external sources. Firms that emphasized market innovativeness in their new product introductions enjoyed higher returns than less innovative firms. And contrary to conventional wisdom, they gained this advantage without an accompanying increase in risk. In other words, continual innovation might provide a large firm with the means for achieving higher returns without higher risk.     

Creating Growth in New Markets: A Simultaneous Model of Firm Entry and Price*

Sales in a new market generally follow a hockey‐stick pattern: After commercialization, sales are very low for some time before there is a dramatic takeoff in growth. Reported sales takeoffs across products vary widely from a few years to several decades. Prior research identifies new firm entry or price declines as key factors that relate to the timing of a sales takeoff in new markets. However, this literature considers these variables to be exogenous and only finds unilateral effects. In the present article, new firm entry and price declines are modeled as being endogenous. Thus, the simultaneous relationship between price declines and firm entry in the introductory period of new markets when industry sales are negligible is studied. Using a sample of new markets formed in the United States during the last 135 years, strong support for a simultaneous model of price and firm entry is found: Price decreases relate to the competitive pressures associated with firm entry, and, in turn, firm entry is lower in new markets with rapidly falling prices. Furthermore, a key driver of firm entry during the early years of a new market involves the level of patent activity, and a key driver of price decreases is the presence of large firms. In contrast to the recommendations from other research, these results indicate that rapid price declines may further delay sales takeoff in industries by dampening new firm entry. Instead, rapid sales takeoffs in new markets come from encouraging greater innovative activity and the entry of large firms.     

Strategic focus of incumbents in the European telecommunications industry: The cases of BT,Deutsche Telekom and KPN

This study investigates the internal and external strategic choices that telecommunications firms, operating in a dynamic network environment, make to adapt to changes and to respond quickly in order to create or to sustain their competitive advantage. In particular, in the European telecommunications industry incumbent firms have faced important challenges from new technologies, liberalization and the convergence of markets. The leading European telecommunications companies initially focused on new markets and new businesses, emphasizing their plans to become major players in relevant markets. However, after the telecommunications euphoria companies were more restrained due to their huge burden of debt and their market value. Through refocusing or restructuring, these companies have tried to streamline their businesses in order to restore their value and to improve their competitiveness. Insight into the specific strategic actions of traditional telecommunications companies in Europe to the recent developments in the industry is provided from the analysis of three leading traditional telecommunications companies: BT, Deutsche Telekom and KPN.     

Price asymmetries and the path dependence of market power: Evidence from the U.S. airline industry

This paper uncovers price asymmetries across oligopolistic and monopolistic markets that are seemingly identical in structure but different in competitive history. This is done by identifying “quiet life” markets that have not (yet) experienced a change in structure, and “non-quiet life” markets that have been disrupted by firm entry and/or exit. Using a long panel dataset from the U.S. airline industry, we find that quiet life duopolies price significantly higher than duopolies that come about by entry in monopoly, and that quiet life monopolies price significantly lower than monopolies that come about by exit in duopoly. We show that the path towards a particular market structure matters for the determination of prices and explore several mechanisms that likely explain the price asymmetries, including engagement in anticompetitive behaviour, adjustment behaviour to market structure changes, and the cost heterogeneity of competing firms.     

Understanding the role of service innovation behavior on business customer performance and loyalty

Providing new services to customers gives firms a competitive advantage in the market. Consequently, firms strive to develop innovative service that delivers new value propositions to customers and leads to customer satisfaction and the acquisition of new customers. The authors investigate the relationship between the innovative behavior of service providers, business customer performance, and business customer loyalty in the safety industry. The study's results show that technology-oriented and co-creation-oriented innovative behavior leads to business customer performance. Business customer performance is closely related to recommendations and re-contracts. Moreover, the degree of safety involvement has a moderate effect between service innovation and business customer performance. The findings have important theoretical and managerial implications for service innovation for researchers as well as service providers.     

基于企业竞争力视角的物流金融服务研究

作为顺应市场发展、实现多方共赢的创新型物流服务,物流金融不仅有利于中小企业融资和银行金融业务的创新,也是提高物流企业竞争力的重要方式。本文以我国物流企业的未来竞争力为视角,对发展物流金融服务的具体策略和路径进行深入探讨,指出物流金融服务必将推动物流企业的管理创新和业务发展,成为我国物流企业决胜未来和物流产业迅猛发展的重要手段。     

Employer discrimination and market structure: Does more concentration mean more discrimination?

We formalize Gary Becker’s dynamic conjecture that competitive forces drive discriminating employers from the market in the long run, using a dynamic model of a monopolistically competitive industry characterized by sunk costs and sequential entry. An advantage of this formalization is that it demonstrates the importance of the structure of production costs, as well as market power, in explaining the long-run survival of discriminatory firms. In addition, we show that, despite decades of empirical research on this connection, there is no consistent theoretical relationship between the degree of market concentration within an industry and the degree of discrimination. However, we do find an indirect link in which market liberalization has a more pronounced effect in reducing discrimination in more concentrated markets.     

Multi-Market Collusion with Demand Linkages and Antitrust Enforcement

This paper analyzes dynamic cartel formation and antitrust enforcement when firms operate in demand-related markets. We show that cartel prosecution can have a knock-on effect: bringing down a cartel in one market reduces profits and cartel stability and leads to the break-up of the cartel in the adjacent market. Cartel prosecution can also have a waterbed effect: disrupting a cartel increases cartel stability in the adjacent market and induces cartel formation in previously competitive markets. We discuss the impact of dynamic cartel formation on consumer surplus, explore antitrust spillovers, the optimal scope of antitrust interventions and cartel formation with local firms.     

Why Do Firms Enter a New Product Market? A Two‐Dimensional Framework for Market Entry Motivation and Behavior

What are the energetic forces that induce established firms to enter new product markets? While most previous research has explained the economic profits expected from a new product market as firms' distinctive motivation for market entry, some recent studies also emphasize interfirm competition and benchmarking activities as another important factor that motivates firms' new market entry. To explain the established firms' diverse new product market entry behaviors, this study presents a two‐dimensional scheme of entry motivation in terms of the degrees of target market profit focus and competitor focus. The first dimension captures the economic motivation of firms' new market entry that ranges from focusing on the direct expected profits from the target market to considering more strategic/indirect benefit incentives. The second dimension captures the degree of firms' external motivation for entry affected by competitors that ranges from independent entry decisions to fully competitor‐oriented entry decisions. Using multiple‐industry survey data, the current study empirically verifies that these two entry motivation dimensions explain a great portion of actual firms' new product market entry behaviors and that they are independent of each other. Subsequently, this study validates that firms' operational size and their environmental factors like perceived technological uncertainty and competitive intensity upon new market entry affect the degrees of the two dimensions of firms' new product market entry motivation. More specifically, large firms less emphasize target‐market profits than small firms, and when perceived technological uncertainty is high, potential market entrants become less target market profit focused but more competitor focused. Under a highly competitive new market condition, firms focus on both target‐market profits and competitors. Based on the analysis of new market entry motivation dimensions, the current study proposes a new typology of established firms' market entry behaviors. The suggested typology represents the four different types of new product market entrants and examines specific characteristics and entry strategies for each type of potential entrants. This entry‐motivation framework should provide a deeper understanding of the backgrounds of entry behaviors and assist firms in developing appropriate entry strategies and in advantageously responding to rival firms' actions with regard to entry.     

Same as it ever was: the search for evidence of increasing hypercompetition

Some strategy scholars and practitioners contend that markets have become increasingly hypercompetitive in recent years. We examine this contention by analyzing industry and business performance patterns in a broad sample of firms drawn from the Compustat Industry Segment database for the 1978–97 period. We find little support for the argument that markets have become more hypercompetitive. From the late 1970s to the late‐1980s we observe decreased performance and market stability, consistent with increasing hypercompetition contentions. From the late 1980s to the mid‐1990s, however, trends reverse and performance and market stability increase. For strategy research, our results suggest that hypercompetitive perspectives are important but no more so now than they were in recent years. For practice, our results suggest that managers today face markets no more dynamic and opportunities to gain and sustain competitive advantage no more challenging than in the past. Accordingly, they should continue developing a portfolio of skills to manage businesses whether conditions are increasingly stable or unstable. Copyright © 2002 John Wiley & Sons, Ltd.