Life in the fast lane: Origins of competitive interaction in new vs, established markets, страница 18

R&D moves

We find that high-performing firms prefer to engage in more frequent R&D moves than low-performing firms in both established and new markets, but for different reasons. In established markets, as anticipated by our evolutionary theory hypothesis, the R&D moves of high-performing firms focus on creating a series of temporary advantages in order to remain on existing peaks and possibly raise them. In contrast, such fine-tuning moves did not make sense to poorly performing firms that currently occupied valleys. Rather, they focused on market moves that can have immediate effects. As one participant-manager on a low-performing team stated ‘we would look at our market share and we would focus on those products where we were losing out. We would increase our advertising on those.’ Others recognized the value of R&D moves only in hindsight: ‘[Last round] our competitors were a step ahead of us. They did R&D to improve their products and we didn't. We just relied on sales and marketing.’ In other words, while market moves were a natural proximate solution to pressing performance problems, poorly performing firms often did not recognize that longer-term R&D moves might also be a solution.

In new markets, R&D moves play a different role that focuses on wide-ranging exploration of the new landscape. Intriguingly, high-performing firms moved aggressively while lagging firms were hesitant. As one low-performing manager noted, ‘In regard to the Vodite market, we thought ‘let's wait and see’… We decided to focus on only one project so as to learn more about the market and then conduct R&D later to differentiate more. We did not want to commit to multiple projects for a so far unproven market.’ Another weak-performing team noted that ‘we have adopted more of a ‘wait and see’ strategy for the Vodite market before we start expensive R&D.’ In contrast, a high-performing team said that ‘we spent a lot on R&D.’ Thus, we find strong qualitative and quantitative support for the argument that high performers are especially motivated to engage in R&D moves in new markets.

Overall, our results are a significant departure from the usual explanation that high performers are likely to make fewer moves than low performers. Rather, we find that this result is contingent on market type and move type—i.e., high performers are likely to make more market moves in new markets and more R&D moves in both kinds of markets.

Contributions to theories of temporary advantage

More broadly, we add insights to several literatures through our focus on temporary competitive advantage. First, we contribute to competitive dynamics. This literature emphasizes established markets like airlines, radio stations, and trucking. In contrast, we contribute by extending competitive dynamics to markets with varying temporary advantages. Our results suggest that high-performing firms are motivated to maintain status quo, but that this requires different search strategies in different markets. In established markets, high performers bolster their positions on existing peaks. In new markets, they boldly attempt to capture new peaks. By contrast, low-performing firms seek to disrupt the status quo, but this similarly requires different strategies in different markets. In established markets, low performers are aggressive risk takers that disrupt their rivals. In new markets, they are paralyzed risk avoiders because they lack the market understanding necessary to disrupt rivals.