Life in the fast lane: Origins of competitive interaction in new vs, established markets, страница 7

We propose in Hypothesis 4 that high-performing firms are particularly motivated to engage in frequent R&D moves in new markets for several reasons. First, since new but unpredictable peaks often arise as markets clarify, high-performing firms are highly motivated to keep pace by engaging in frequent R&D moves that offer technical alternatives to capture them. Consistent with this logic, one participant-manager described, ‘Since we don't have a lot of information on customer preferences and purchase criteria [in the new market], we began development on a product with average specifications, and then will tweak/improve the product as additional information becomes available.’ Moreover, since undiscovered peaks are often near other peaks (Kauffman, 1995) and, thus, reachable through locally proximate R&D moves (i.e., products developed for one segment can typically be offered in nearby segments), high-performing firms (since they have already discovered at least one peak) can more readily use R&D moves to capture other peaks and so are more motivated to do so. Second, high-performing firms are likely to be more confident given their success and, thus, more willing to engage in R&D moves in an unknown market, as illustrated by a manager of a high-performing firm who said ‘if it fails, we'll struggle our way back…so we'll try to be the risk takers.’ In contrast, low-performing firms may lack the confidence to act in a new market that they do not understand, given its instability and their lack of success. These firms may also see no immediate path for how to use R&D moves to improve their position.

Overall, high-performing firms seek to maintain their position in new markets through aggressive market and R&D moves to learn about the new landscape and stay ahead of competitors (Katila and Chen, 2008). By contrast, low-performing firms in the market are paralyzed by the instability, unsure what to do and, thus, avoid moves. We hypothesize:

Hypothesis 3 (H3). High-performing firms will be more likely to enact market moves than low-performing firms in markets with highly temporary advantages.

Hypothesis 4 (H4). High-performing firms will be more likely to enact R&D moves than low-performing firms in markets with highly temporary advantages.

METHODS

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

Research setting

We tested the hypotheses using data from an experiential simulation, Markstrat3 (Larréché and Gatignon, 1998). Markstrat is a longitudinal simulation in which participant teams comprise the firms that compete with each other in a computer-simulated industry environment. The teams make a variety of competitive moves in each round of play in order to outmaneuver their rivals, gain competitive advantage, and perform well (Chen, 2007).

The Markstrat industry consists of two hypothetical product markets, Sonite and Vodite. At the beginning of the simulation, all firms compete in the established Sonite market. This market has five customer segments. In each segment, customers have different preferences for specific product features. The segments also differ by size, margins, price sensitivity, and customer growth. In contrast, the Vodite market is new. Characteristic of new markets, the three emerging customer segments are unstable and disorganized. Customer preferences, including desired product features and adoption, preferred distribution channels, and price sensitivity, are unpredictable. Finally, like most new markets, there is very little information about the Vodite market. Indeed, it does not exist until a firm introduces a product.