Life in the fast lane: Origins of competitive interaction in new vs, established markets, страница 3

Two literatures are particularly significant in characterizing the strategies that may generate temporary competitive advantages. The first focuses on characteristics of environments in which competitive advantage is likely to be temporary. It suggests that competitive advantage is likely to be temporary in high-velocity environments (Eisenhardt, 1989) that are characterized by instability and intense rivalry. New markets, which are typically more unpredictable and intensely competitive than established ones, are prototypical high-velocity environments. The argument is that instability creates rapidly changing opportunities that offer competitive advantages with temporary duration (Santos and Eisenhardt, 2009). Slogans such as you snooze, you lose colloquially capture strategy in these environments. Hypercompetition among intense rivals and undefined turfs of competition further accentuate the likelihood of temporary advantage by creating ‘competence-destroying turbulence’ (D'Aveni, 1999: 134) and a ‘constant condition of disequilibrium’ (D'Aveni, 1994: xiii). Here, terms like gold rush and land grab capture the intense competition for new opportunities. Taken together, the core argument is that strategies that engage competitors frequently in the pursuit of a series of temporary advantages are necessary to achieve superior performance in high-velocity environments (Tushman and Anderson, 1986; D'Aveni, 1994). Empirical studies of fast and frequent competitive maneuvering in such environments support this argument (Brown and Eisenhardt, 1998; Zott, 2003; Thomas and D'Aveni, 2009).

The second literature focuses on the characteristics of competitive maneuvering (i.e., moves intended to defend or improve a firm's position relative to its rivals) (Chen, Smith, and Grimm, 1992). This literature emphasizes the interplay of competitive moves, interdependence among rivals, and firm performance. In particular, it posits that competitive moves can create or enhance the competitive advantages of the focal firm and undermine the advantages of its rivals (Chen and Hambrick, 1995; Ferrier et al., 1999; Katila and Chen, 2008). For instance, researchers have studied pricing, routing, and advertising moves that are intended to maintain the firm's existing position (Miller and Chen, 1994; Smith et al., 2001), as well as capacity and geographic expansion moves to extend that position (Audia and Greve, 2006).

Empirical research on competitive moves offers valuable insights. Studies in a variety of contexts, such as airlines (Miller and Chen, 1994), trucking (Audia, Locke, and Smith, 2000), radio broadcasting (Greve, 1998), and Fortune 500 firms (Ferrier et al., 1999) examine the effects of fast, diverse, and frequent moves on firm performance. Although these studies show the benefits of engaging competitors speedily (Chen and Hambrick, 1995; Ozcan and Eisenhardt, 2009), asynchronously (Katila and Chen, 2008), and diversely (Miller and Chen, 1996), the most consistent findings center on move frequency (Young et al., 1996; Ferrier et al., 1999; Chen, 2007). For example, in a study of competitive moves in the software industry, Young et al. (1996) show that more frequent competitive moves yield a higher returns on assets and sales. More frequent competitive moves are also linked to lower likelihood of dethronement of industry leaders (Ferrier et al., 1999) and improved market share (Ferrier, 2001).

A second set of empirical studies examines why some firms engage in frequent moves while others do not. Some studies point to performance-based incentives. The argument is that managers enact competitive moves more frequently when their firms perform poorly and make fewer moves when they are doing well (Greve, 1998, 2003b; Smith et al., 2001). Other studies find that firms engage in more moves when their competitors are unlikely or unable to respond with effective countermoves (Evans and Kessides, 1994; Chen, 1996; Gimeno, 1999). Still others argue that only resource-rich firms can make many moves (Cyert and March, 1963). Overall, prior research offers diverse motivations for why firms might make frequent competitive moves.