Third, while much empirical literature focuses on the benefits of frequent moves, avoiding competition can be advantageous as mutual forbearance suggests.1 Reconciling these contrasting views suggests the need for clarifying when firms may prefer fewer moves (and, thus, disengaging with competitors) as a way to extend the duration of competitive advantage. The motivations to enact versus avoid market moves that engage competitors directly may be particularly sensitive to the nature of advantage in specific market contexts.
Our purpose is to address these open issues. Specifically, we ask ‘what motivates firms to engage in competitive moves in established markets with moderately temporary advantages versus new markets with highly temporary advantages?’ In response, we conceptualize competitive moves as evolutionary search (Nelson and Winter, 1982; Katila and Chen, 2008), and examine predictions about the determinants of such search in established and new markets.
Our research design is a longitudinal, experiential simulation in which participants manage firms that compete against each other in a computer-simulated environment. Our simulation includes two different markets (i.e., an established and a new market) and, thus, provides a unique opportunity to contrast markets that differ with regard to the likely duration of advantage. We collect quantitative data for 32 runs of the simulation involving 480 participants, spanning 1999 to 2006. We supplement these data with in-depth fieldwork with participant-managers.
We have three core contributions. First, we challenge traditional theory by identifying intriguing differences in the origins of competitive moves across markets. The relationship between performance and competitive moves depends on the type of market, not just on whether performance is high or low. In general, high performers are motivated to engage in competitive moves to maintain the status quo in a market and low performers to disrupt it. But these goals require different search solutions in different markets. High performers move conservatively in established markets but engage in bold moves in new markets. By contrast, low performers boldly try to disrupt their rivals' positions in established markets, but move conservatively in new markets. Overall, our results depart significantly from the usual explanation that high performers are likely to make fewer moves than low performers.
Second, we incorporate competitive dynamics in evolutionary search theory (e.g., Katila and Chen, 2008; Katila, Bahceci, and Miikkulainen, 2010). The search literature is often firm centric. Our contribution is to examine how rival firms that start from different starting positions on a landscape (i.e., high and low performing), use different types of problem-solving moves (i.e., R&D and marketing), and search across different landscapes (i.e., known and emerging), enact and respond to each others' moves. Overall, we find that firms do not search in isolation. Competitor search influences motivations to search, especially for low performers. High performers are also influenced by competitors in established markets, but less so in new markets.
Our third contribution is a fresh approach to studying competitive moves. Despite their advantages, experiential simulations where participant-managers interact in a computer-simulated environment are rarely used to study competitive moves and firm performance.2 Thus, our multimethod combination of simulation and fieldwork introduces a significant empirical approach to a literature that is ‘biased toward archival research’ and leaves management intentions and interactions unexplored (Smith et al., 2001: 2).
THEORETICAL BACKGROUND
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
Competitive moves and temporary advantage
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