Life in the fast lane: Origins of competitive interaction in new vs, established markets, страница 17

We also conducted analyses with alternative measures of firm performance. In (unreported) results, we used stock price and return on investment as independent variables. Because these variables are not available for Sonites and Vodites separately, we used an aggregate measure. We also used aggregate market share (Sonite and Vodite). These results (available from the authors) are consistent with our original findings.

DISCUSSION

1.Top of page

2.Abstract

3.INTRODUCTION

4.THEORETICAL BACKGROUND

5.HYPOTHESES: ORIGINS OF COMPETITIVE MOVES

6.METHODS

7.RESULTS

8.DISCUSSION

9.CONCLUSION

10.Acknowledgements

11.APPENDIX

12.REFERENCES

We examine the origins of competitive moves. Specifically, using the lens of evolutionary search theory, we study how prior performance influences a firm's propensity to engage its competitors in two markets where competitive advantage is moderately and highly temporary, respectively. Relying on experiential simulation methods coupled with in-depth fieldwork and covering 32 industries with 160 firms, we have several key findings.

Key findings for competitive moves

Market moves

We find that market moves originate for different reasons in the two markets. In established markets with moderately temporary advantages, high-performing firms are motivated to avoid market moves. Consistent with prior research (Gimeno and Woo, 1996), norms of mutual forbearance emerge in these markets because it is easy for rivals to detect and respond to market moves that encroach in their occupied customer segments. Thus, high-performing teams conservatively seek to maintain the status quo. As one successful team noted ‘we envision our Sonite [established] market share stabilizing around 30 percent, making our company a secondary player with no interest in taking over the market.’ In contrast, low-performing teams eschew the status quo. For example, a low-performing team felt ‘compelled to compete in the low end [Sonite market segment]’ to prevent a particularly aggressive firm from ‘obtaining a complete stranglehold.’ Thus, these low-performing teams attempt to disrupt the status quo despite the risks of challenging rivals in their established turfs. Overall, our findings provide strong qualitative and quantitative evidence that, as predicted by our evolutionary theory hypothesis, high-performing firms avoid market moves that attempt to scale occupied peaks, while low-performing firms engage in them in order to disrupt the advantages of others.

Conversely, high-performing firms are motivated to make frequent market moves in new markets with highly temporary advantages. In these markets, customer segments have not developed, rivals are confused, and advantages are likely to be highly temporary. In the language of landscapes, peaks are ambiguous, unpredictable, and fluctuating such that they are often unknown, unstable, or indefensible. A consistent finding in our written cases is that high-performing firms often quickly released products into the new Vodite market without much information. These moves were motivated by their interest in exploring the new market. But their effect was often to surprise and confuse other firms, especially low-performing firms. For example, one low-performing team expressed surprise by saying ‘it was without knowing any information, that they [the other firm] introduced a product just right there. They were a really risky team.’ While the team ascribed their rival's uninformed market move to an inherent propensity for risk, they failed to consider that their rival was engaging in search to locate successful product-market combinations. In contrast, a high-performing team described their release of a very basic product that they intended to ‘tweak and improve’ as they learned, illustrating the confident use of market entry moves to explore and learn the new landscape. In contrast, low performers avoided market moves because they did not see an immediate way to use them to disrupt others in a new market.