To understand how firms live life in the fast lane, we examine firm performance and competitive interaction in new versus established markets. We conclude that high performance motivates search for continued dominance. This means conservative moves to bolster strategic position in more stable established markets, but bold moves to capture new opportunities in new markets where advantages are highly temporary. Conversely, low performance motivates disruptive market moves in established markets where advantages are moderately temporary, but conservative restraint in new markets where advantages are highly temporary. Together, the findings confirm that an evolutionary theory perspective that joins competitive dynamics with varied environments can provide a rich understanding of temporary advantage and the origins of competitive moves.
Acknowledgements
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 appreciate the thoughtful comments of Editor Giovanni Battista Dagnino and our anonymous reviewers, as well as those of the seminar audiences at the West Coast Research Symposium and the Academy of Management meetings. We acknowledge the generous research support of the National Science Foundation (Grant SBE-0915236 for the second author) and the Stanford Technology Ventures Program.
APPENDIX
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
Measures of a firm's commercialization and market moves (labeled as market moves) were based on any changes in the customer segments in which the firm marketed products in each round. There were three types. Market probe is an entry into a customer segment in which the firm did not compete in the prior round, with a product that is supported by minimal advertising (less than $ 1.5 million). Our interviewees indicated that Markstrat participants view $ 1.5 million as a modest advertising expenditure, consistent with an experiment to learn about a market (Brown and Eisenhardt, 1997). By contrast, we measure market entry as entry into a customer segment in which the firm did not compete in the prior round, with a product that is supported by significant advertising (greater than $ 1.5 million). Since this is a major market investment, actual advertising expenditures were much higher, continued over several rounds of competing in the customer segment, and often consumed significant portions of the teams' budgets. We measure market exit as withdrawal of all products from a customer segment in which the firm is competing. We summed these moves to compute market moves.
Measures of a firm's R&D investment moves (labeled as R&D moves) were based on three types of R&D investments. An R&D probe is a $ 100,000 investment to create a prototype of a new product. Its rationale is typically to experiment to learn more about feasibility and cost. By contrast, an R&D product move is an R&D investment exceeding $ 100,000 to further develop a new product. Thus, product moves are much more costly and considerably larger than a probe. We measure an R&D process move as an R&D investment in an existing product that reduces its production cost. We then summed these moves to compute R&D moves.
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