The structure of competition

How competition between one's rivals influences imitative market entry

Kai Yu Hsieh, Freek Vermeulen

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

This paper investigates how the pattern of encounters between a firm's competitors affects the firm's inclination to follow its competitors into a new market. We theorize that direct encounters between a firm's rivals lead to a herding effect, making imitative market entry more likely. Past mutual forbearance between a firm's competitors (resulting from asymmetric multimarket competition) further strengthens this herding effect, by enhancing the firm's expectations of market attractiveness. In contrast, aggressive past rivalry between the competitors (resulting from symmetric multimarket contact) dampens these expectations, producing a competition effect that makes herding less probable. We test our idea in two distinct contexts-the Chinese pharmaceutical industry and the Taiwanese computer hardware industry-and find consistent support in both settings. We discuss how our analysis of what we call the "structure of competition" can be extended to research on other forms of firm behavior.

Original languageEnglish
Pages (from-to)299-319
Number of pages21
JournalOrganization Science
Volume25
Issue number1
DOIs
Publication statusPublished - 2014 Jan
Externally publishedYes

Fingerprint

Drug products
Computer hardware
Industry
Market entry
Competitors
Herding
Rivalry
Mutual forbearance
Multimarket competition
New markets
Market attractiveness
Firm behavior
Pharmaceutical industry
Multimarket contact
Computer industry

Keywords

  • Herding theory
  • Imitation
  • Market entry
  • Multimarket competition
  • Structure of competition

ASJC Scopus subject areas

  • Management of Technology and Innovation
  • Strategy and Management
  • Organizational Behavior and Human Resource Management

Cite this

The structure of competition : How competition between one's rivals influences imitative market entry. / Hsieh, Kai Yu; Vermeulen, Freek.

In: Organization Science, Vol. 25, No. 1, 01.2014, p. 299-319.

Research output: Contribution to journalArticle

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