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Strategic responses of incumbents to new entry: the effect of ownership structure: capital structure, and focus |
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| Authors: | Khanna N; Tice S |
| Institution: | Michigan State University, USA 1 Tulane University, USA Correspondence to: N Khanna, 320 Eppley Center, Eli Broad College of Business, Michigan State University, East Lansing, MI 48824, USA e-mail: khanna@pilot.msu.edu |
| Abstract: | We examine how certain firm- and market-specific characteristicsaffect incumbent firms' responses to new entry into their localmarkets. Data comes from the discount department store industrywhere Wal-Mart entered a large number of markets in a shortperiod of time. Consistent with existing research, larger andmore profitable incumbents respond more aggressively to Wal-Mart'sentry, while more highly levered incumbents respond less aggressively.Also, there is evidence that incumbent managers fight harder(possibly overinvest) when their job is at greater risk andhigh managerial ownership appears to reduce this agency problem.Incumbent firms behave differently in markets under attack byWal-Mart than in markets not yet threatened, suggesting thatsome of the documented responses are specific to Wal-Mart'sentry. |
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