Competitive Dynamics: Themes, Trends, and a Prospective Research Platform

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1

Competitive Dynamics: Themes, Trends,
and
a
Prospective
Research
Platform





Ming
-
Jer Chen

Darden Graduate School of Business

University of Virginia

(434) 924
-
7260

chenm@darden.virginia.edu





Danny Miller

HEC Montreal and University of Alberta

(514) 340
-
6501

danny.miller@hec.ca



February 8
, 2012


Academy of Management Annals (
June
2012)
,
6: 1
-
89 (
forthcoming
)




Corresponding Author: Ming
-
Jer Chen,
chenm@darden.virginia.edu


*
This paper is dedicated to I
an C. MacMillan, whose mentorship and guidance has been
instrumental not only to Ming
-
Jer’s work in competitive dynamics, but also to his academic career
in management.
The authors would like to thank Royston Greenwood,
Ken Craddock,
George Huber,
Dev Jenn
ings, Gavin Kilduff
, Hao
-
Chieh Lin,
Isabelle Le Breton
-
Miller,
John Michel, David Sirmon,
Wenpin Tsai, and Jing Zhou for their valuable comments on an earlier draft of this paper. Financial
support from the Darden Foundation, University of Virginia, and f
rom the Social Sciences and
Humanities Research Council of Canada is acknowledged
.

2

Competitive Dynamics: Themes,
Trends, and a Prospective
Research
Platform


ABSTRACT

We provide a critical retrospective o
f the competitive dynamics
perspective before propo
sing an
integrative research platform for the future. We argue that competitive dynamics can serve as a
synthesizing

framework for linking strategy content and process, resource
-
based and market
perspectives, strategy development and implementation, and m
acro
-
competitive and micro
-
actor
viewpoints. We first present the core distinguishing elements and purposes of
competitive
dynamics
. Then, we identify and relate the most prominent research themes in the field: a focus
on action/response dyads, strategic

competitive behaviors, competitive repertoires,
corporate
-
level competitive and resource analyses, and competitive perceptions. Characteristic
methodological
concern
s are also discussed. Recent trends in each of these areas are
highlighted
;

these

includ
e

an increased emphasis on context
-
specific research, cross
-
border
investigations, and behavioral interdependencies. We conclude by identifying gaps in the
literature and proposing a general model and research agenda that integrates micro
-
behavioral
and m
acro
-
organizational aspects of strategy and connects competitive dynamics to
previously
unexplored
domains in the literature .



3

Competitive Dynamics: Themes, Trends
, and a Prospective
Research
Platform


Several major lines of work have
emerged
in the str
ategic management field since it
s

rise
in the early 1980s
.

These include the resource
-
based view (Barney, 1991),
the dynamic
capabilities perspective (Teece, Pisano
,

& Shuen, 1997), and
the study of top management
teams
(Hambrick & Mason, 1984).

Competit
ion per se has been the focus of scholars of
industrial
economics and structural analysis (Porter, 1980), strategic groups and configurations (Cool &
Schendel, 1987; Miller, 1996), game theory (Brandenburger & Nalebuff, 1996), network theory
(Tsai, 2002),
population ecology (Freeman, Carroll, & Hannan, 1983),
and competitive dynamics
(
Baum & Korn, 1996;

Smith, Grimm
,

& Gannon, 1992).


This chapter reviews the literature on competitive dynamics, first defining its distinctive
elements, then highlighting its
core themes and research foci. It proceeds to identify prominent
trends in the research before pointing out gaps and areas of promise. Competitive dynamics

remains notably underdeveloped in several key respects:

I
t lacks an integrative framework that
c
an organize its many facets; its potential to bridge micro and macro

perspectives
with
in
the

discipline has not been realized; and it has yet to
establish

many fruitful links with other
disciplines in the management field. We shall try to address these ch
allenges, concluding by
proposing a general model of competitive behavior that can bridge micro and macro approaches
and connect with key paradigms in management.


The field of c
ompetitive dynamics has flourished in recent years
,

for a variety of reasons
.
First, it
offers

a fine
-
grained approach to understanding what specific firms do when they
compete with specific rivals.
I
t
studies
measurable actions that are subject to rigorous study

and therefore yield
cumulative findings. It also examines the
int
eractions

among competitors,
focusing not
only on actions but on the responses elicited. Thus
competitive dynamics

is one of
4

the few areas of strategy study that is quintessentially longitudinal.

Moreover, it has benefited
from several frameworks that en
rich our understanding of the forces driving competition.
In
this essay, we shall build on
a
framework,
the
awareness
-
motivation
-
capability (
AMC
)

model,

that shows

promise

for linking micro

and macro

perspectives of organizations.
Finally,
competitive dy
namics
is beginning to demonstrate, to mutual benefit, its potential for for
g
ing
closer links with other areas of strategy and organization.

Historical Roots

The term

competitive dynamics


has been used in many contexts, ranging from studies
of the comp
etition among species for survival to those
considering
how
different organizational

forms
vie

for dominance
,

and
to
studies
pursuing game theoretic models
.

Our use of the term,
however, and the scope of this essay, is quite specific:
Competitive dynamic
s

is the study of
interfirm rivalry based on
specific competitive actions and reactions
, their strategic and
organizational contexts, and their drivers and consequences (Baum & Korn, 1996;
Smith,
et al.
,
1992). We situate competitive dynamics

quite square
ly in the literature on competitive
strategy.


Although

competition is a central element of strategy, too

little research has been done to
take
it

beyond simple and static characterization
and
toward a detailed analysis of
dynamic
competitive
-
behavioral pa
tterns.
M
uch of the early work on strategy, for example, relied on
approaches such as industry
-
structure analysis

(Porter
, 1980).

The
intent of competitive
dynamics

research, like other
research on
strategy, has been to address such fundamental
questions

as:

How do firms

interact when they

compete? Why do they compete in
particular

ways? How do competitive behaviors
influence

organizational performance
, and vice versa

(
Ketchen, Snow, & Hoover, 2004;

Smith, Ferrier, & Ndofor, 2001)? Unlike game theoret
ic

5

formulations, insights are sought from empirical observation rather than formal or logical
modeling.

I
n contrast to the

traditional

approaches taken to study these issues,
competitive dynamics

research embraces as the primary object of study
the competi
tive
actions

of a firm. The
intellectual roots of this micro
-
level focus on individual actions can be traced to Schumpeter’s
(1950)
conception
of creative destruction, which
he used to characterize

the dynamic process by
which firms act upon and react to
one another in the pursuit of market opportunities. Indeed,
creative destruction
wa
s defined as the eventual

and inevitable

decline of firms through
the
process of competitive action and reaction.

Firms act and rivals
respond
, and these actions and
react
ions determine survival and long
-
term performance.

Similarly, the Austrian School (
Jacobs
o
n, 1992;

Mises, 1949; Young, Smith, & Grimm,
1996) considered competition to be a d
ynamic market process rather than a static market
condition. The focus
wa
s
on the
process by which a market moves toward and away from
equilibrium; it is this movement, not the equilibrium per se, that
was taken to be

of interest.
Premised on disequilibrium, Austrian economics view
ed

advantage as transient
, with a limited
temporal wind
ow for exploitation (
Chen, 2009;
D'Aveni, Dagnino, & Smith
, 2010
;
Gimeno &
Woo, 1996; Roberts
&

Eisenhardt, 2003; Thomas, 1996; Thomas & D’Aveni, 2009).


In the strategic management field, early
work using

this competitive framework

includes
Mac
Millan, Mc
Caffrey, & Van Wijks’
s

(1985) small
-
sample study of responses to a banking
innovation, and Bettis and Weeks’s (1987) case study of competitive interactions between
Polaroid and Kodak, in all cases paying special heed to the impermanence of advantage.

6

The w
ork by MacMillan, et al. (1985)

and

Bettis & Weeks (1987) marked the beginning
of competitive dynamics research in strategic
management; only

later
did

scholars in other fields
adopt

the term to refer to this line of research
.
1


Defining Features


There
are a number of essential features that characterize
the
body of work
we designate

as competitive dynamics.

First, competition is considered to be “dynamic” and interactive, and
action/response dyads

and sometimes stream
s

of such actions

constitute the bu
ilding blocks
of competition
. Second, t
he focus is on actual actions exchanged by firms: these may include
new product introductions or advertising campaigns, entry into new markets, changes in pricing
policy,
and
relocation or redesign of facilities.


Th
is

interaction
or engagement between firms

lies at the heart of strategy
,

and
the
action/response dyad
lends itself to precise and
concrete
analysis.
Indeed, the

emphasis on
real actions
taken by managers stands in direct contrast to
the common use of ope
rating and financial statistics
for

infer
ring

strategic postures.
Third, the

pairwise comparison of firms or rivals

their positions, intentions, perceptions, and
resources

is central to competitor analysis, an integral part of

competitive dynamics
.
Thus
relativity

is an essential premise

the notion that a firm’s strategy and market position
must

be
examined within the context of

and vis
-
à
-
vis
its competitors
’ strategies and positions
.

S
trategy is not conceived of in the abstract
; rather
, following Mintzbe
rg, Raisinghani, &
Theoret (1976) and Mintzberg (1978),

it

is regarded as a pattern in the stream of decisions. The
term

pattern


implies some
thematic consistency
. Indeed
, a degree of

coherence in a firm’s
competitive behaviors or actions

and
reactions

is assumed to exist over time.
Moreover
, the



1
In early years, such terms as “competitive interaction
,

“competitive engagement,”
or “interfirm rivalry” had been
used interchangeab
ly

(Chen, 2010)
. To economists, dynamics involved temporal consideration rather than the
interacti
ve nature of competition that competitive dynamics

researchers intended to explore.


7

research assumes that
each firm is unique
, with its own specific resource endowments and
market profiles. Similarly, each competitive relationship between firms is

said to be

idiosyncratic and directional.
U
nderlying
organizational forces

are believed to

explain and
predict firm behaviors or (re)
actions in the marketplace. Among these forces, leadership and
human a
gency

are held to be central to strategy and competition (Hambrick & Mason, 1984;
Montgomery
, 2
008).

The
se features of

competitive dynamics

stand in contrast to previous
approaches such as Porter’s (1980) five
-
force analysis,
which occurs at the macro
-
industry level.
Exhibit
1
compares so
me of the salient features of competitive dynamics

to the mor
e
conventional Porterian analysis.

-
Insert Exhibit

1 about here
-

Distinctive Purposes


Predicting

competitive behavior.
The firm
-
dyadic approach constitutes a micro
analysis that complements the conventional macro analysis of industry structure as a drive
r of
strategic decisions.

To predict competitive response, a central component of firm behavior in a
rivalrous situation, it is essential to understand how a competitive action affects the internal
behavior of the defending
organization (Chen & Miller, 19
94).

The
awareness
-
motivation
-
capability
(AMC) framework
, on which we shall build later in this
chapter,

provides
an integrative
model

of the three key behavioral drivers that
shape

a
competitor’s actions and responses

(
Chen, 1996; Grimm, Lee, & Smith, 200
6; Smith, Ferrier, &
N
d
ofor, 2001; Yu & Cannella, 2007).


Simply stated, a competitor will not be able to respond to
an action unless it is
aware
of the action,
motivated
to react, and
capable
of responding. An
attacker or action
-
initiator may analyze and

predict each of its rivals’ response behaviors (e.g.,
likelihood and speed

of reaction
) along these three elements. From an attacker’s viewpoint, the
three behavioral drivers represent possible
response barriers
for a given rival (MacMillan,
8

1988).

T
he

AMC framework is useful in analyzing and predicting potential responses. It is
action
-

and competitor
-
specific, and analysis will vary depending on the action of interest and
the competitor under consideration. For an attacker, each of its rivals
differs

according to these
three elements
.

Capturing a
symmetrical competitive relationships between firms.


The
competitor
-
specific aspect of competitive dynamics highlights the nature of a critical dimension
of interfirm relationships: competitive asymmetry.

A s
trategist cannot assume that a
competitive action will affect each of
the AMC components

equally for all opponents.
Competitive asymmetry

the notion that two firms may not view their relationship or interaction
in the marketplace equally

is
very
prevalent
in business competition (DeSarbo, Grewal, &
Wind, 2006).
I
t is unlikely
, for example,

that
two rivals

will perceive every competitive action
or relationship in the same way.
Due to

differences in assumptions about industry outlook

and
disparate
organizat
ional
arrangements and preferences,

rivals may
differ in their
view
s of

the
ir

competitive relationship.
P
ut

symbolically
,
d
(
a
,
b
) ≠
d
(
b
,
a
)
.

As we shall see, such
c
ompetitive
asymmetry has important implications for how rivals engage each other in the
marketplace
.

Linking
s
trategy formulation to implementation.

The action
-
based focus and
behavioral orientation of
competitive dyna
mics

construe strategy as a set of coh
erent decisions
and actions. Competitive dynamics

thus embraces both strategy formulation and
implementation, as well as strategic content and process. It also takes into account both
external and internal concerns.

When developing strategy, a firm must
consider

possible retaliations from rivals. The
quality and depth of a firm’s knowledge of itself and its competitors
, therefore,

play a central
role in
competitive dynamics (Barnett, 1997, Barnett & Hansen, 1996; Gre
ve, 1996)
.
9

Consequently, competitive dynamics

scholars have studied both firm actions and the decision
-

makers responsible for these actions (Hambrick, Cho
, & Chen, 1996), topics that may
fall
both
into
traditional strategy content research and

into the p
rocess

domain (Ferrier, 2001)
,

and
that
encompass

both macro
-
industry forces
(Derfus, Maggitti, Grimm, & Smith, 2008)
and
micro
-
individual
(Kilduff, Elfenbein, & Staw, 2010)
or executive team behaviors (Chen, Lin, &
Michel, 2010
;

Ferrier & Lyon, 2004; Ma
r
c
el, Barr, & Duhaime, 2011
). Indeed,
competitive
dynamics

work spans different analytical
levels (e.g., action/response dyad, firm or business
level, and corporate or multibusiness level),

and it provides an important micro
-
macro link that
bridges a wide r
ange of research topics.

Our premise, then, is that
competitive dynamics

can serve as a useful integrative
framework for strategic management by linking strategy content (or formulation) and process (or
implementation), and macro
-
competitive and micro
-
acto
r viewpoints. It will be useful,
however, to discuss the major resea
rch themes and thrusts in the competitive dynamics

literature
before proposing a
research platform

that provides avenues for further empirical and conceptual
elaboration.


KEY RESEARCH TO
PICS AND THEMES

There have been several
attempts over the past ten years to review
competitive dynamics

re
search
(Chen, 2009
;
Ketchen,
et al.
, 2004;

Maggitti, 2006;

Smith, et al., 2001).
T
his chapter

tak
es

an integrative approach

to

make several

distincti
ve
contributions
. It stresses the
intellectual connections
among research themes (or streams) and

highlights the micro
-
behavioral
and
macro
-
strategy

link
ages

informed by
competitive dynamics

research
. It identifies
important research trends and opportuni
ties,

and it provides

a

conceptual framework for relating
the research to other important domains in the management literature.

10

Fi
ve distinct resea
rch themes have emerged among competitive dynamics

scholars over
the years, each of which has contributed t
o our understanding of firm strategy and the behavioral
dynamics of competition
: (1) competitive interaction: action
-
level studies; (2) strategic
competitive behavior and repertoire: business
-
level studies; (3) multimarket and multibusiness
competition: co
rporate
-
level studies; (4) integrative competitor analysis
; and (5) competitive
perception. Exhibit

2 schematically outlines the competitive dynamics

research domain,
highlights the makeup of each research theme, and shows how these themes are linked.
(A
ppendix A presents a more exhaustive summary of the studies within each theme.)
We
conclude this section with methodological concerns associ
ated with these five lines of
competitive dynamics

research.


-
Insert Exhibit 2

about here
-


Competitive Interactio
n: Action
-
Level Studies


Taking the exchange of
individual
competitive action
s

and response
s

as the focal point
s

of analysis, researchers began by
analyzing the drivers of

competitive response. An action is
defined as a specific and

detectable market move

initiated by a firm, such as introducing a new
pr
oduct or
entering a new market
;

such action
s

may erode a rival’s market share or

reduce its

anticipated returns.
A

response is a specific and datable countermove
, prompted by an initial
action

that a firm
takes to defend or
improve its share or profit position in its industry
(Baum &
Korn, 1999;

Boyd & Bresser, 2008
;
Chen & Miller, 1994;

Lee, Smith, Grimm, & Schomburg,
2000;

Smith, et al., 1992; Smith, et al., 2001).



This focus is of theoretical cons
equence because it is at this very basic
,

concrete level
that
competitive interaction occurs. Prior to the work of MacMillan, et al. (1985), the
action/response dyad level had
not

been a preoccupation of strategy or organizational studies.
The analysis o
f competition had centered on
more encompassing

aggregates such as a firm (Dess
11

& Beard, 1984), strategic group (Cool & Schendel, 1987), industry (Porter, 1980), and
community or population (Freeman,
et
a
l.
, 1983).
Competitive dynamics
, by contrast, opera
ted
at a more fine
-
grained, more specific, indeed more

micro” level

one that continues to lie at the
very heart of competitive dynamics and is its primary distinguishing feature.
For example,
Baum & Korn (1996, 1999), showed that for competitors in a dya
d, rates of competitive market
entry and exit rose with the degree of overlap between their market domains.

Characterizing and predicting competitive response.

By employing
diverse

theoretical perspectives such as expectancy
-
va
lence theory and game theory
, competitive
dynamics

scholars conceptualiz
e
d

and measur
e
d

key attributes of competitive response: the
likelihood of response, the number and the speed of responses, and the extent to which
a

response matches the initial action in breadth and severity.

R
esearchers were able to
demonstrate empirically that
these

attributes of response were functions of three different
characteristics: (1) attributes of the attack, such as

difficulty of implementation
,

the amount of
effort and time required for execution, a
nd
the
visibility or de
gree of industry attention
(Young,
et al.
, 1996); (2) characteristics of the attacker, such as the degree of organizational c
ommitment
to the attack

(Chen, Smith, & Grimm, 1992
); and (
3) characteristics of the defender, such as a
com
petitor’s dependence or a defender’s stake in the market under attack (Baum & Korn, 1999).
The research also demonstrated the performance consequences of different types of competitive
interactions
(Boyd & Bresser, 2008; Smith, et al., 2001; Young, et al.
, 1996).

Studies of competitive interaction have
also
shown, for

instance, that strategic as opposed
to tactical actions, as well as those that require lengthy execution time and those that are less
visible, tend to reduce

the number (
Chen & Miller, 1994)
and speed of rivals’ responses (
Smith,
12

Grimm, Gannon, & Chen, 1991
).
2

Moreover
, both competitor dependence and action
irreversibility are significant predictors of response, and they interact

positively

in affecting

the
likelihood of

response (Chen & MacM
illan, 1992). For example, when attacked in their key
markets, competitors tend generally to react decisively. However, they may react slowly to
signal their willingness to defend their position and, at the same time, show their desire to avoid
escalatio
n. In addition, competitive interaction has been shown to have an impact on
performance. For example, Young, et al. (1996),

found that competitive activity related
positively to a firm’s performance as evidenced by the market
-
share gains accruing to atta
ckers
and early responders
.
Smith et al. (2001), in their review of competitive
dynamics studies in
some 30 industries, concluded that one of the most consistent findings is a positive relationship
between
a focal
firm
’s

performance and the length of time
taken by rivals to respond.

Attending to irreversibility.

A major thrust of the competitive interaction theme is its

explicit attention to the issue of irreversibility

the extent to which a firm is irrevocably
committed to making economic investments and/
or
revamping
organizational and social
arrangements when it undertakes a competitive action
.

Chen & MacMillan (1992) argued that
the property of irreversibility extends beyond the tangible economic investments and capital
assets emphasized in previous res
earch (Ghemawat, 1991; Miller, 2003) to include broader
organizational, psychological, and socio
-
economic considerations, such as escalation of
commitment (Staw, 1981).
Chen, Venkataraman, Black, & MacMillan (2002) identified two
kinds of irreversibility:

internal, for example the amount of interdepartmental coordination
required for execution, and external, for example the degree of top management’s public



2

Competitive actions vary in terms of organizational and resource com
mi
tment
. Strategic actions (e.g.,
manufacturing capacity changes and major product introductions), in contrast to tactical actions (e.g., price changes,
promotions, distribution and service improvements), require a greater degree of organizational and resou
rce
commitment (Smith, et al., 1991)
.




13

endorsement of a move.


They found that the former property tends to escalate competition,
while the

latter has the opposite effect
.
The idea of irreversibility is critical
to such

central
competitive
constructs

as aggressiveness (Ferrier, 2001; Ferrier & Lee, 2002; Yu & Cannella,
2007) and implementation difficulty (Chen & Miller, 1994).


A va
luable c
ontribution of competitive dynamics

studies focus
ing

on individual
competit
ive actions and responses is that they have illuminated

the very core exchange
s
constituting competitive interaction. They

have moved strategy from an aggregate, sometimes
abstract

concept, to one that gets to the core dynamics of individual decisions and the reactions
to them. A limitation of these types of studies, however, is that sometimes the strategic context
is ignored

the fact that decisions often serve as part of a strateg
y or a strategic repertoire, and
that
the rationales behind those decisions as well as the responses to them must inevitably reflect
that. Quality leaders, for example, might be less responsive to a rival’s price cuts than
are
cost
leaders. The next sect
ion addresses the
competitive dynamics

literature that takes into account
this broader perspective of strategy.

Strategic Competitive
Behavior

and
Repertoire
: Business
-
Level Studies

Some competitive dynamics

research concentrates at the level of the firm

o
r business
,
while again adopting the individual competitive move as the building block of competition.
Studies in th
is

second research stream strive to lay bare the organizational and contextual
antecedents that drive competitive behavior and competitive
repertoires, and to capture the
ensuing performance outcomes. Firm
-
level data used in this stream are derived by examining a
wide variety of the competitive moves firms make in engaging their rivals over time.


Strategic competitive b
ehavior
: Antecedents

and outcomes.

This research
seeks

to
understand strategic behaviors via a systematic analysis of the attributes characterizing
sets of
competitive actions and responses. Through this lens,
the
behavioral properties of a fir
m such
14

as propensity
to act
, r
esponsiveness, execution speed, and action (or response) visibility ar
e
brought into focus. As noted, o
ne of the premises underlying competitive dynamics

research is
that a firm’s competitive
profile is reflected in its actions and reactions as it engages

with rivals
in the marketplace. Consequently, the behavioral properties addressed above find their
corresponding attributes at the action/response dyad level.

Drawing on theoretical perspectives
such as
upper
-
echelons theory,
information
-
processing theor
y,
Austrian economics
,

and institutional theory, research
ers in
attempting to understand competitive behavior and its performance consequences have

demonstrated
empirically the significance of a

firm’s information
-
processing capacity (Smith,
et
al.
, 1991)
,

size (Chen & Hambrick, 1995), and

top

management

team (TMT)
characteristics
(
Derfus,
et al.
, 2008
;
Ferrier, et al., 1999;

Ferrier & Lyon, 2004;

Hambrick,
et al.
, 1996;

Young,
et al., 1996).

For example, Chen & Hambrick (1995) tested a
set
of long
-
held ass
umptions about
the
competitive

behavior

of relatively small firms in an industry. They found that small firms tend
to initiate more attacks and are speedier at
their
execution, yet th
ey retain a low profile in those

attacks

which in some ways approximate
guerrilla warfare
. A
lso, small
firms
under

attack are
less likely to respond and slower in execution.
In addition
, these firms perform best when their
behavior adheres to that typ
ical for firms of their size: d
eviations from size
-
group patterns (e.g., a
small airline behaving like a large airline) appear to impair performance.

Ferrier
, S
mith
, & Grimm

(1999) investigated the “dethronement” and market
-
share
erosion of market leaders
in

approximately 40 industries over a seven
-
year period. They found
that l
eaders are more likely to be dethroned or
to
experience share erosion when
,
compared to
their challengers in the industry
,
they are less competitively aggressive, carry out simpler
competitive repertoires, and are less speedy in undertaking competitive act
ions.

15

Chen, et al. (2010) analyzed the likelihood of attack by examining the role of the
socio
-
behavioral integration of the top management team. They argued that TMT dynamics
shape how a firm enacts its environment and engages with rivals. The more cohe
sive the team
and the higher its socio
-
behavioral integration, the easier it
was
to launch decisive and swift
actions
against rivals. This was especially important in hypercompetitive environments in
which the competitive context was difficult to decipher

and competitive advantage temporary.
In such environments, the pressure to act quickly was intense
,

and generated

ample
conflict
among TMT members.

Competitive repertoire
. Ferrier (2001), Ferrier & Lee (2002)
,

Ferrier & Lyon (2004),
and Miller & Chen (1
994, 1996, 1996
a
)

conceptualized competitive

strategy as a repertoire of
micro competitive behaviors. A competitive repertoire is made up of the entire range of
a
firm’s

competitive moves (e.g., new market entries, major price initiatives). As noted, thi
s
conceptualization differs fundamentally from approaches previously adopted by most strategy
researchers, including Porter’s well
-
known generic strategies of low
-
cost/differentiation focus.
It is, however,
fully consistent with the long
-
held view of stra
tegy as a pattern
in the stream
of
decisions (Mintzberg, 1978).

Certain vital firm attributes, hitherto neglected, were identified
via

the study of
competitive repertoires: a firm’s competitive inertia or the overall level of activity in its set of
competi
tive actions (Miller & Chen, 1994), the simplicity or diversity in the types of competitive
moves it
makes (Ferrier & Lyon, 2004; Miller & Chen, 1996), and its nonconformity

or degree
of departure from industry norms (Miller & Chen, 1996). By employing
a

repertoire approach,
the research offered a novel conceptualization of these three critical constructs of competition,
which had traditionally fallen within the realm of organization theorists and sociologists but were
shown to hold great promise for deepe
ning our understanding of firm
-
level strategy. Strategic
16

repertoire studies integrate market
-
level variables (e.g., diversity and growth) with those at the
firm

level (e.g., size and age) in explaining the sources of repertoire simplicity, inertia, and
no
nconformity
. The latter
, in turn, are shown to have important performance consequences that
differ as a function o
f the compet
itive environment.
For example, Miller & Chen (1994)
studied competitive inertia
,
a firm’s level of overall competitive activity
.
They argued that
whereas

poor performance might induce tactical changes, it faile
d to stimulate policy reversals

or
strategic actions,
which are more difficult to implement, both operationally and politically.
Market growth, by contrast, related negativ
ely to inertia in strategic actions but not in tactical
ones, suggesting that expanding markets
can
promote major commitments of organizational
resources.


The work on strategic simplicity (Ferrier & Lyon, 2004
; Miller, 1993; Miller & Chen,
1996
) was also
interesting as it showed that firms that had performed well tended to simplify
their strategic repertoires, focusing on an ever narrower set of action types (e.g. price cuts, or
advertising alterations). At first, these

changes were salutary as they seeme
d to show
companies concentrating on what they did best and what they believed was most important.
But beyond a certain point, simplicity was associated with declines in performance. It seems
that under conditions of success, firms engage first in veridi
cal and then in superstitious varieties
of learning (Miller, 1990, 1993). Such repertoire studies t
ook

competitive dynamics beyond
action
/

response dyads to look at the entire
configuration

of competitive actions, and so provide a
more holistic picture of

competition posture.

Ferrier (2001), also adopting a repertoire approach, conceptualized strategy as a sequence
of competitive moves taken by a firm over time.
He and his colleagues (Ferrier & Lee, 2002;
Ferrier, MacFhionnlaoich, Smith, & Grimm, 2002),

i
nvestigated competitive aggressiveness as
reflected in the characteristics of
those

sequences of moves. Based on a multiyear,
17

multi
-
industry study of thousands of competitive moves, his findings
suggest
ed
, among other
things,

that a firm’s competitive agg
ressiveness is influenced by past performance,
organizational slack, and
TMT

heterogeneity, as well as industry characteristics such as growth
and concentration.
Characteristics of firms’
sequences

of competitive moves also account for
differences in thei
r relative performances, as is evident by the positive impact of attack volume
and duration on market
-
share gains
.

Conceptual
links.


The

competitive interaction literature and strategic competitive
behavior and repertoire research are complementary
. T
he
former concentrates on the
characteristics of individual competitive actions and reactions, the latter combines these actions
at the business level to more
richly

characterize strategy. Here we see the early promise of
moving from decision
-
level behavior
and the micro
-
influences that drive that behavior, to the
more comprehensive strategies that represent combinations or repertoires of decisions. The
former have been the province of behavioral analyses by those employing psychological lenses;
the latter h
ave been studied by those using economic and sociological perspectives. As we shall
see, the
competitive dynamics

approach shows promise of bridging the two and offering a
critical micro
-
macro link.

It is noteworthy that e
xplicit attention to path
depen
dence

the connections between

past
and current actions

conceptually links research in the action and strategic repertoire domains.
Firm attributes such as structure (Smith et al., 1991), top management characteristics (
Ferrier &
Lyon, 2004
;
Hambrick et al
., 1996), and firm size (Chen & Hambrick, 1995), as well as
repertoire inertia (Miller & Chen, 1994), simplicity (Ferrier & Lyon, 2004
;
Miller & Chen,
1996), nonconformity (Miller & Chen, 1996), and aggressiveness (Ferrier, 2001; Ferrier & Lee,
2002)
,

may
all influence the path
-
dependent capab
ilities

of a firm. More specifically, each
strategic action undertaken by a firm is constrained by its prior moves and, in turn, limits future
18

moves. Past investment and commitment will constrain a firm’s range of st
rategic options in
the future, as well as shape its capability and performance in creating and adding value. The

main implication of much of competitive dynamics
work is that competition is not frictionless,
nor is it commenced
de novo

in any new situatio
n, and history imprints itself on all competitive
actions.

For all of their richness, however, most
competitive dynamics
studies at the business
level are “under contextualized.” While they do consider the competitive context, they rarely
take into accoun
t organizational design factors or decision
-
making proclivities and biases that
condition characteristics such as repertoire inertia and simplicity. They examine, or at least
empirically control for, strategy and environment but by and large fail to look
into how human
and organizational agency links the two. Moreover, there has been scant effort to relate the
specific strategic actions to the repertoires in which they are embedded; for example, little is
known about whether inertial or simple strategic r
epertoires are a function of specific types of
actions and responses. In short, scholars within our first two research streams have not
undertaken to integrate their efforts. The firm
-
level macro orientation is not linked to the
decision
-
level micro orie
ntation.

Multimarket and Multibusiness Competition: Corporate
-
Level Studies

Multimarket competition.

There has been considerable interest over the past two
decades in the application
and extension of the theory of multimarket (or multipoint) competition

across a wide range of fields (Baum & Korn, 1999; Bernheim & Whinston, 1990; Evans &
Kessides, 1994; Gimeno, 1994
;
Gimeno, 1999; Gimeno & Woo, 1996, 1999; Greve, 2008;
Karnani & Wernerfelt, 1985; Knickerbocker, 1973; Haveman & Nonnemaker, 2000; also see
Y
u,
Subramaniam, & Cannella, 2009

for a comprehensive review). The focus of the theory has

been on mutual forbearance (Edwards, 1955), that is, the idea that firms operating in the same
19

markets will recognize their interdependence and, as a result, will ta
ilor their competitive
interactions to minimize risks of retaliation and escalation. Baum & Korn (1996), in supporting
this mutual forbearance hypothesis, found that close competitors avoid engaging in very intense
rivalry. Moreover, firms interacting in

multiple markets are less aggressive toward each other
than those that interact in one or a few markets. In fact, Gimeno & Woo (1996) showed that
multimarket contact suppresses the intensity of rivalry, whereas strategic similarity between
firms or compa
rability in their competitive strategy increases it. Gimeno and Woo (1999)
demonstrated that multimarket contact, by reducing the rivalry experienced by a market unit,
increases the profitability of that unit, and that the positive relationship between mu
ltimarket
contact and profitability will be stronger if the contacts occur in markets with strong
resource
-
sharing opportunities. In linking multimarket theory to competitive dynamics, Baum
and Korn (1999) found an inverted U
-
shaped relationship between t
he extent of multimarket
contact in competitor dyads and firms’ rates of entry into and exit from each other’s markets.
This curvilinear effect, however, varies from dyad to dyad and is influenced by the relative size
of competitors in a focal dyad and th
e relative levels of multimarket contact with competitors in
other dyads.

Multimarket competition and competitive dynamics are related but distinct research
streams, and a number of studies (e.g., Baum & Korn, 1999;
Gimeno

& Woo, 1996, 1999; Yu, et
al., 20
07) have integrated the two, in essence by considering the former to be a subset of the latter
(Upson, et al., 2011). That is, they have employed notions from multimarket competition to
provide
, in particular,
a theor
etical framework that enables
competit
ive dynamics

researchers to
investigate interfirm rivalry at the corporate level.

Following precedent set by studies of multimarket or multibusiness competition (e.g.
Collis & Montgomery, 2005
;
Greve, 2006;
Haveman & Nonnemaker. 2000;

Hitt, Ireland, &
20

Hos
kisson
, 2007
),

scholars have begun to study competitive modes of resource allocation by
multi
-
divisional corporations, and rivalry among multinational enterprises (MNEs) via
competitive moves, foreign
direct investments (Barnett, 1993; Chang & Xu, 2008; Me
yer &
Sinani, 2009), and market entries (Di Gregorio
,

Thomas, & Gonzalez de Castilla, 2008
;
Gielens,
Van
de Gucht,

Steenkamp, & Dekimpe
, 2008
).

Resource allocation as competitive moves.

McGrath, Chen, & MacMillan (1998)
have extended the above three resea
rch themes, which apply mainly to the business level, in
order to better understand corporate
-
level competition. They proposed that an acting firm’s
resource allocations across its divisions or business units could influence those of its rivals,
thereby e
nhancing its sphere of influence without precipitating an all
-
out competitive war. This
suggests that a firm competing in multiple markets may, via its resource
-
allocation patterns,
orchestrate its spheres of influence and initiate mutual forbearance or t
acit collusion with
multimarket competitors sharing similar markets (Edwards, 1955; Gimeno & Woo, 1996). In
such situations, the allocation of resources across different lines of business and industries may
substitute for destructive head
-
to
-
head competit
ion. With that in mind, McGrath
,

et al. (1998)
conceptualized stratagems of
thrust
,
feint
, and
gambit

and concluded that corporate strategy
decisions cannot be fully understood
unless competitive interaction is taken into account
explicitly.
They demonst
rated

that organization

and market factors

such as relative market
stake and competitive strength
could

be used to predict when such stratagems can be employed.



MNE rivalry.

Yu (2003), Yu & Cannella (2007),
and Yu,
et al.

(200
9
),

by studying
rivalry be
tween

MNEs
in host country markets,
have taken

an important fi
rst step in

applying

competitive dynamics to the international setting.
In employing the AMC perspective and

evaluating
market
-
resource consideration
s
,
for example, Yu & Cannella (2007)

found t
hat the
speed of an MNE’s response to a rival MNE’s attack is influenced by resource
-
related factors
21

such as geographic distance and government constraints
,

and by market
-
related factors such as
the

strategic importance of the initiating country and the po
rtfolio of multimarket contacts
between the competitors.

The study highlights the significance of host
-
country market
constraints on MNE competitive actions, which go much beyond the constraints imposed in the
context of domestic competition.

In light of
the growing economic significance and prevalence of diversified national,
multimarket, and multinational firms, the study of corporate
-
level strategy and competition is
increasingly relevant. Yet, despite the focus on specific decisions for market entry a
nd resource
allocation, there remains a glaring omission in some of this literature: a rich characterization of
strategy and strategic differences across different markets and business units. As with our
earlier streams of research

in competitive dynamics
, this branch exists generally independent of
and unrelated to the others. Consequently, our knowledge of the broader macro
-
strategic
context of the specific decisions being examined is still relatively shallow.


Integrative Competitor Analysis

Competit
ive dynamics
scholars have expanded the research domain
of
competitor
analysis to include more integrative approaches. As we shall see, a core contribution of this
orientation is a model that we shall build on later in our analysis to more systematically
organize
and unify the field of competitive dynamics and to link it to other management paradigms.

Market
-
resource concerns.

Competitor analysis has been an important approach for
strategy and organizational studies
.


T
raditional research in the area
,
however,

has focused
primarily on static strategic profiles or firm capabilities, often via analyses such as SWOT
(strength
-
weakness
-
opportunity
-
threat). Too often, these analyses have only tenuous links to
actual competitive behaviors. To address this c
hallenge, Chen (1996) proposed a model uniting
two

firm
-
specific, theory
-
derived constructs:
market commonality

and
resource similarity
.

The
22

notion of market commonality, or the degree of presence that a competitor manifests in the
markets it shares with a

focal firm, derives from the literature on multipoint or multimarket
competition referred to in the previous section.

Resource s
imilarity, or the extent to which a
given competitor possesses strategic endowments comparable, in both type and amount, to th
ose
of the focal firm, is based in

the resource
-
based theory of the firm (Barney, 1991) and notions of
strategic similarity (Gimeno & Woo, 1996). The premise is that each firm has a unique market
profile and strategic
-
resource endowment, and that a pairwi
se comparison with a given
competitor along

market
commonality/resource similarity dimensions

helps to illuminate the
tension between the two firms and predicts how they might interact in the market.

In that sense the model represents a theoretical integra
tion. The resource
-
based view
(RBV)
, focusing inwardly on a firm’s unique endowments, has within a short period risen to
prominence in the field of strategic management, in much the same way that Porter’s paradigm,
which focuses on external market forces,

influenced the discipline during the 1980s. Chen
(1996) integrated both firm and market perspectives

the internal and the external

suggesting
that implementing such a balanced and comprehensive approach is the ultimate challenge of
strategic
-
management r
esearch.

A number of studies have extended and reinforced this integrative approach. Sirmon,
Gove, & Hitt (2008)
have linked the resource
-
based view
to competitive dynamics, suggesting
that comparative advantage in bundling and deploying resource stocks

(
as

reflected by
industry
-
specific human
-
capital skills) result in
superior

outcome
s

in competitive contest
s
.
Ndofor, Sirmon, & He (2011), integrating
RBV

and competitive dynamics, found that
competitive actions that leverage or
liberate

firm resources
e
nhance

organizational performance.
Tsai, et al. (2011) linked these market and resource elements in a mediation model, showing that
23

a firm’s ability to
view

things from
a

rival’s perspective positively moderates the relationship
between resource deploymen
t capability and market share gain.

Competitive asymmetry.

The simultaneous consideration of market similarity and
resource commonality illustrates the complementarity between two prominent but contrasting
strategy paradigms and suggests a set of proposit
ions that link the two to interfirm rivalry and the
likelihood of action (and response). This approach also highlights the importance of
competitive asymmetry, suggesting that two firms facing exactly the same market conditions
may view each other and the
ir competitive relationships quite differently. Using Tversky’s
(1977) seminal work on the dimensions of similarity, Chen (1996) proposed that competitive
relationships between firms, viewed either through market commonality or resource similarity,
are ra
rely symmetrical. Such asymmetry may help to explain perceptual discrepancies and
behavioral vari
ations in interfirm competition

and information exchanges.

Awareness
-
motivation
-
capability (AMC).


The joint consideration of these
market
-
similarity and reso
urce
-
commonality constructs, as well as consistent empirical support
from prior
competitive dynamics

studies, has brought to light three essential antecedents that
affect a firm’s competitive activity: its awareness of another firm’s moves, its motivation
to act
(or respond), and its capability to act (or respond). For example, the greater a rival’s mar
ket
commonality with a focal firm, the less motivated that rival would be to initiate an attack against
the firm for fear of retaliation across multiple mar
kets, and the greater a rival’s resource
similarity with an attacking firm, the greater would be its ability to respond to the attacker

(Chen
1996)
.

This model, as we shall argue, may be used to structure an integrative research platform
for competitive d
ynamics going forward.

It should be noted that there is a direct correspondence between the individual
components of AMC and
market

commonality/resource similarity
. For

example, market
24

commonality constructs, such as Baum & Korn’s (1996) market
-
domain ov
erlap, tap into
motivation, while constructs relating to resource similarity, such as Gimeno’s (1999) strategic
similarity, affect action or response capability, and both constructs are often associated with
awareness (Chen, 1996).

Extensions.

Theoretic
al and empirical studies that have built on the AMC model and
its components include Baum and Korn’s (1999) dyadic examination of dynamic competition;
Gardner’s (2005) investigation of interfirm rivalry in human

resources
; and Mas
-
Ruiz,
Nicolau
-
Gonzalbez,
& Ruiz
-
Moreno’s (2005) study of asymmetrical rivalry between strategic
groups. Studies making related contributions include
DeSarbo
,
et al.
’s (2006) verification of
competitive asymmetry based on consumer survey data; Yu & Ca
n
nella’s (2007) study of marke
t
and resource antecedents of rivalry among MNEs; Kilduff,
et al.
’s (2010) exploration of the
psychology of rivalry, and Upson, Ketchen, Connelly, & Ranft’s (2011) examination of the
impact of competitor analysis on engagement between rivals with “foothold
” positions in a
multimarket context. The AMC perspective has also been used to predict a range of strategic
actions in the fields of marketing (e.g.,
Gielens,
et al.
, 2008
) and management information
systems (e.g., Chi, Ravichandran, Andrevski, 2010).

Conceptual links
.

In a real sense,
the
competitive dynamics

work
that has been done
in
the area of
integrative competitor analysis is the most encompassi
ng

among the four research
streams we have dealt with so far. Several recent

extensions of the
integr
ative competitor
analysis

approach are especially noteworthy in highligh
ting its links with our other competitive
dynamics

research themes. The first is that market
-
resource and
awareness
-
motivation
-
capability lens
es

ha
ve

been used to examine corporate
-
le
vel competition.
These studies have investigated MNE rivalry (Yu & Cannella, 2007), foreign direct investment
25

(Meyer & Sinani, 2009), market entry (Gielens, et al., 2008), and foreign
-
domestic firm rivalry
(Chang &
X
u, 2008).

In a second extension, the th
ree AMC antecedents of competitive behavior were used to
predict the levels of interfirm competitive tension that managers perceive (Chen,
Su, & Tsai
,
2007). These studies have drawn attention to competitive
perception

as opposed to the
objective

aspects
of competition that were the focus of the first three research themes (Livengood
& Reger, 2010).

The AMC perspective also offers a useful macro/micro link in the study of competitive
dynamics (Kilduff, et al., 2010). Coupled with the idea of competitive

asymmetry, this

perspective

led to the development of a rival
-
centric perceptual approach (
Capron & Chatain,
2008; Tsai, Su, & Chen
, 2011) in which seeing through the eyes of a rival is a key requirement of
competitive analysis.

Such an extension offers
an opportune platform for examining rivalry at
the individual or micro level (Kilduff, et al., 2010).

A third extension of integrative competitor analysis is theorization beyond industry and
market boundaries. Markman, Gianiodis, & Buchholtz (2009)
focus
e
d

on the idea of resource
dissimilarity and product
-
market dissimilarity

to

investigate rivalry in factor markets and in
upstream/downstream industries
.
Capron & Chatain (2008) explored actions that firms take to
erode rivals’ resources in factor and poli
tical markets, proposing several key drivers and
performance implications. A related line of inquiry explores the impact of executive leadership
on competition, thereby bringing people and leadership back into strategy research (Montgomery,
2008).
Leader
s, of course, influence strategic behavior and are a critical resource in factor
-
market
rivalry (Gardner, 2005;

Hambrick, et al., 1996).

Lastly,

researchers have extended
the integrative
competitor
analysis

to non
-
competi
ng

stakeholders. Peteraf & Bergen
(2003)
extended
the
market

commonality/resource similarity

26

framework to

include customers
, while

Markman, Waldron, & Panagopoulos (2011)
differentiated “attackers” from “competitors” to theorize interfirm rivalry among
non
-
competitors and NGOs. Chen and M
iller (2011),
in proposing

a relati
onal

perspective of
competitive dynamics, advanced a multidimensional framework that is more encompassing,
places greater emphasis on value creation for the community, and contemplates more
stakeholders than the conventio
nal combative view.
In fact
, by
characterizing

the relationship
between
any

actors or entities
, the
market

commonality/resource similarity
framework

can be
employed

for a multi
-
level analysis of firms, groups, individuals, and nations.

Competitive

Perception

Thus far
our research streams

have concentrated on the actual behavior involved in
competition

the competitive actions and responses that take place at the level of
action/response dyads, businesses, or multibusiness corporations. But implicit

in our discussion
are the motivations and cognitions of the actors who initiate and respond to competitive
actions

all of which relate to human perception

(Miller & Droge, 1986; Staw, 1991).
A
stream of recent work has begun to make those hitherto implic
it considerations explicit,
acknowledging that action can take place
only
via human agency
,

and that all human agency is
filtered by perception

(
Staw, 1991).

Strategy and organization studies that have adopted a
perceptual lens to investigate competition
include Reger’s (1990) analysis of competitive
positioning, Reger and Huff’s (1993) examination of strategy group, and Porac, Thomas, &
Baden
-
Fuller (1989) and Porac, Thomas, Wilson, Paton, & Kanfer’s (1995)

investigation of
intraindustry rivalry among Sco
ttish knitwear producers.

The incorporation of perceptions in competitive dynamics research began in earnest with
the Chen & Miller (1994) paper, which was a forerunner of the AMC model. Using an
expectancy
-
valence framework (Vroom, 1964), the authors dev
eloped a model to predict the
27

features of a competitive attack that would minimize the chances of retaliation. It was proposed
that the proclivity to respond to an attack would depend on a rival’s subjective reward or
“valence” for launching a successful
response (the motivational or “M” component of AMC),
coupled with that rival’s perceived probability
that
it
would have ample capability to respond
(the “C” component of AMC). The visibility or awareness (the “A” of AMC) of an attack was
a third component

of the model. The prediction of the model was

borne out
:

that less visible
attacks, or actions attacking more peripheral markets and/or requiring more cost and disruption
to respond to, elicited the fewest competitive responses. Indeed, highly visible a
ttacks and
actions that were relatively easy to respond to had the highest probability of meeting with
retaliation. As predicted, the lower the likelihood of response, the more successful the attacker.
Although this expectancy
-
valence model was assessed
using concrete measures, it is at heart one
that is very much based on managerial perceptions.

As noted,
Chen (1996) built on this framework in put
ting forth the AMC perspective.
T
he AMC model itself and each of its elements has a vital per
ceptual compone
nt.
Awareness
involves perception, motivation is driven by perceptions, and capability

cannot lead to action
unless it is perceived to be adequate and unless a rival, threat, or advantage is perceived by
managers as being important enough to warrant the c
ommitment of capability
-
building
resources. Thus, the components of the
AMC model

can only have implications for action via
the perceptions of managers within attacking and responding companies (Porac et al., 1995).
Notably,
the model suggests that compe
titive asymmetries will exist between different pairs of
rivals: Perceptions, motivations, and capabilities are apt to vary considerably between the parties.

The AMC model,

as noted,

has served as a focal point for much of the research on
managerial percep
tions and competition. In all of this work, the perceptions of managers and
top management teams regarding the emotional and behavioral significance of specific rivals and
28

“competitive turf” is central. As such, the research in this domain begins to

exam
ine

directly

the perceptions of managers and the contexts that shape those perceptions. In these attempts,
new concepts such as competitive tension (Chen,

et al.
, 2007), identity domains (Livengood &
Reger, 2010), and competitive acumen (T
sai,
et al.
, 201
1
) have been developed to incorporate
the importance of such perceptions.

Chen, et al. (2007), for example,
have demonstrated the importance of competitive
tension

the strain between a focal firm and a given rival that is likely to elicit an attack on the
rival. They argue that each of the components
of the AMC model

awareness, motivation, and
capability

contribute
s

to potential tension and therefore

enhance
s

the likelihood of rivalry
-
like
exchanges. Although competitive tension includes both objective an
d perceptual
con
siderations, this paper

devotes its attention mainly to perceived competitive tension, while
controlling for the influence of objective industry
-
structure tension. All three factors may
enhance perceived tension and thereby increase a firm
’s propensity to attack a given rival. The
significance of competitive perception, demonstrated in this study, has dire
ct bearing
on
Livengood & Reger
’s (2010) discussion of proprietary “turf.”

Yet another determinant

of competitive behavior driven by per
ception is a firm’s
“identity domain,” or TMT members’ consensual comprehension of the competitive arena that
demonstrates and reinforces their marketplace identity

(Miller, Le Breton
-
Miller & Lester,
201
1
).

Livengood & Reger (2010) suggest that firms ten
d to compete in certain arenas in
which they perceive their identity to be at stake

areas of enhanced “psychological
consequence.” (Organizational identity refers to its members’ consensual understanding of
“who we are as an organization.”) Volvo, for ex
ample, with its identity as a safety
-
driven
company, will invest handsomely in keeping its cars safe, perhaps at the expense of emphasizing
other rewarding sources of automobile (and company) performance. From a competitive
29

viewpoint, any attack, even an
indirect and weak one, that falls into an organization’s
self
-
constructed identity territory may provoke fierce and forceful retaliation that may seem
irrational to outsiders. Again, the AMC model is used to predict competitive actions and
reactions. Thi
s attention to identity considerations increases awareness of that aspect of the
environment most relevant to defending or strengthening the identity domain. Emotional ties to
identity enhance the motivation to defend or nurture the identity domain, and m
anagerial
attention to the domain increases resource allocation toward it and augments related capabilities.
Such ties may result in the asymmetrical perceptions and actions of different competitors
operating in the same environment, as in the well
-
known
Boeing versus Airbus
case
(Casadesus
-
Masanell, Voigt, & Mitchell, 2006). Their

differing views of the industry and its
competitive outlook have led these archrivals to adopt fundamentally different strategies and
business and operationa
l models.

Kilduff,
et al.

(2010) incorporate perceptions into their analysis in a different way. They
are concerned with the
subjective intensity

of rivalry between individuals, groups, and
companies, arguing that aspects such as proximity and prior competitive interactions

increase
rivals’ attention toward one another and their perceived enmity and intensity
of rivalry.

For
example, a study of auction behavior showed that bidders were more apt to exceed their limits
when facing few rather than many
opposing
bidders
. The i
mplication is that
rivalry may
develop between specific bidders who become targets of one another
,

and that
that induces them
to

try unreasonably hard to achieve “victory” (Ku, Malhotra & Murnighan, 2005).

Thus,
Kilduff et al. (2010) argue the importance
of prior interactions in enhancing the desire of rivals
to best one another, even though from a rational point of view, the results of those prior
interactions may have no bearing on the situation

at hand. In short, rivalry here is conceived as
a subjecti
ve competitive relationship that actors have with one another, and that increases their
30

psychological involvement and the perceived stakes of competition

independent of the
objective characteristics of the situation. Thus the emotional aspects of
competit
ion, much
neglected in the field, now assume a new prominence
.


Finally,

Tsai, et al. (2011
), adopting a rival
-
centric view of competitive dynamics, argue
that it is important for a focal firm to have “competitive acumen”

an ability to understand its
rival
’s perceptions and to see things from its rival’s perspective. Only then can it make
appropriate competitive decisions. Competitive embeddedness in the market
-
engagement
relationship with those
rivals (Gimeno, 2004
;
Gnyawali & Madhavan, 2001) is shown to

be

central to understanding a rival’s perceptions, which, in turn, has positive consequences for
market
-
share gain against the rival.

Conceptual links.

P
erceptual studies of competitive dynamics are especially
interesting as they
bridge micro and macro p
erspective
s (Staw, 1991).

The

perceptions

and
inclinations of leaders (Miller & Droge, 1986) and their interactions with other top team
members (Chen et al., 2010)

may shape competitive

actions (Dutton & Jackson, 1987)
.


O
ver
time, th
at

stream of decision
s constitutes strategy at the firm and corporate levels

a
quintessentially macro
-
organizational phenomenon
(Mintzberg,
et al.
, 1976; Mintzberg, 1978).
I
ndividual human perceptions are
also
at the heart of micro approaches in organizational
behavior and be
havioral economics, where perceptual biases are the focus of studies of decision
making and choice
(Ariely, 2008; Barberis & Thaler, 2003; Loewenstein, 1996).

J
ust as individual perceptions lead to actions that are aggregated to
influence

corporate
behavio
r, so do more macro concepts such as organizational identity, identity domains, and
corporate interaction histories shape the perceptions of individual decision makers functioning
within
organizations
(Le Breton
-
Miller, Miller & Lester, 2011).

Porac et al
.’s (1995) work on
rivalry
among

Scottish knitwear producers
demonstrated

that industry and market boundaries
31

were

socially constructed around a collective cognitive model formed by firms
as

they observe
d

each other’s competitive interactions. Thus direct
ions of

influence between macro and micro as
mediated by perception are clearly bi
-
directional.

In short, the perceptual approach holds promise for multilevel varieties of research that
will provide insights into the forces that shape our organizations and

competitive engagements
with rivals.

To sum up, the above five research t
hemes constitute the core of competitive dynamics
work. Together, they provide an encompassing overview of the competitive dynamics field and
its key contributions to the strategy a
nd organization literature. Exhibit 3 presents
schematically the core research themes (denoted in bold/italics), as well as some representative
concepts (e.g.,
the
market

commonality/resource similarity

and rival
-
centric approac
h
es
) and
extensions (e.g.,
factor
-
market or non
-
market rivalry). The exhibit, which provides
diagrammatic representation

of the
relationships
shown in Exhibit 2, displ
ays how various
components of competitive dynamics

are connected
,

and how they constitute an integrated line
of wor
k.



As shown in the exhibit,
the research domains of
strategic competitive behavior and
repertoire

(2) and

multimarket/multibusiness competition

(3) both derive directly from

competitive interaction

(1),
i.e.
,

the exchange of actions and
reactions betwee
n two firms (or

“actors”). In the lower part of the exhibit

the domain of

integrative competitor analysis

(4)
captures the relationship between two actors, and it is this relationship from which

the domain of

competitive perception

(5), and concepts such
as competitive asymmetry and tension, are
formed. Clearly,
integrative competitor analysis
, which unites interfirm market
-
resource
relationship and
competitive interaction
, play
s

a central role in connecting
the
various research
themes and concepts in com
petitive dynamics. The

Extensions


box

in the
exhibit

identifies a
32

few areas in which researchers have applied core competitive dynamics work to factor and
non
-
factor markets, to the study of relationships and/or interactions with customers and
stakehold
ers, and to multi
-
level analysis at the individual or team/group level.

-
Insert Exhibit 3 about here
-

The pivotal role of
AMC (awareness, motivation, capability) in competitive

dynamics
work is also conveyed in the exhibit.
3

Indeed
,
the AMC model

has eme
rged as the theoretical
framework with perhaps the greatest potential to connect a wide range of topics in competition
and strategy. As we shall see in the proposed synthesis
in the “R
esearch
G
aps
and
O
pportunities


section
, the AMC model

can be
employed

to weave together the various
competitive dynamics
research

streams, incorporate them into an integrative framework, and tie
them

to research paradigms within and beyond the strategy discipline. Most important,
the
model

provides a foundation for linking
micro and macro

organizational research and studies in
competition and cooperation.

Appendix A lists some representative studies for each of the five themes and highlights
the key findings and theoretical perspectives of each study. Due to the interconn
ectedness
among various research themes, a

study may fit two
(
or more
)

themes

but
we categorize
each

paper into only one theme
,

based on its
primary theoretical focus and
contribution
. In order to
link the

key ideas examined in a given study to the
AMC m
o
del, the appendix identifies
variables used in each
analysis
that
relate

to these three primary behavioral drivers.
It should be



3

The AMC factors can be either barriers or facilitators to action and response
(Haleblian, McNamara,

Kolev,

&

Dykes, 201
2
).

33

noted that w
e
identify

the variables in
a

given study that correspond
to

the AMC components
,
even though the study may not
emp
loy the

AMC perspective.
4


-
Insert Appendix A about here
-

Beyond the five

core themes, competitive dynamics has benefited from a range of
methodological approaches, none of which has proven to be definitive. I
n fact, a
strength of the
field has been its
openness to a variety of methods and analytical approaches.

Methodological Approaches

A
wide variety
of methods
has
been used in competitive dynamics research
. First, there
is a diversity of promising and often very fine
-
grained data sources.
These inclu
de revealing
archival records of actions taken (Smith, et al., 1991; Yu & Cannella, 2007), managerial
responses to questionnaires and also those of knowledgeable industry expert informants (Chen,
et al., 2010;

DeSarbo, et al., 2006; Marcel, et al., 2011),
and detailed field interviews
(Lamberg,
Tikkanen, & Kokelainen,
& Suur
-
Inkeroinen,
2009).
What is telling about these sources is the
ir
level of detail and precision, which has lent considerable credibility to m
any
findings

in
competitive dynamics.
R
esear
chers have also availed themselves of
analytical approaches
rang
ing

from

quite original

simulation (Chen, 2007; Chen, Katila, McDonald, & Eisenhardt,
2010)
and

qualitative
methodologies
(Lamberg, et al.
, 2009) to
the more popular

quantitative and
econometr
ic methods (Ferrier, 2001).

As we have seen, the level of action aggregation in analyses of competitive dynamics
spans from action
-
response dyads (Smith, et al., 1992) to repertoires of competitive moves that
an organization exercises within a given time p
eriod (Miller & Chen, 1994; 1996; 1996
a
), to



4

T
he categorization of
a

same
variable may
differ among

paper
s because of differences in

their theoretical focus
and orientation
.


Unle
ss a paper s
tate
s that a variable includes more than one AMC component, each variable is
categorized by one component only.



34

streams of competitive moves (Ferrier, 2001). Even interaction histories have figured into
recent analysis to examine subjective perceptions of rivalry (Kilduff,
et al.
, 2010).

This
diversity suggests promisin
g opportunities for blending different methods to conduct studies that
bridge micro and macro considerations and take advantage of different approaches.


The advantage of the
dyadic

approach is that it allows researchers to examine the
very
fine
-
grained at
tack and response behavior of particular competitive initiatives

for example,
which kinds of actions, by what kinds of organizations, elicit which specific kinds of responses?
The disadvantage of this approach is that by focusing on one kind of action and

response, one
ignores t
he broader context of other type
s of decisions that may be taking place and shaping the
dyadic interchange being examined.

The advantage of the
repertoire

approach

which studies the majority or full set of
market initiatives for a g
iven firm over a specified interval

is that it enables researchers to
richly characterize competitive strategy in a concrete way. As we have seen, characterizations
include such dimensions as strategic simplicity, inertia, and conformity. For simplicity
one
assesses the degree to which a firm concentrates on one or two kinds of actions, or employs a
wide array

for example, do price increases represent a large fraction of a company’s
competitive initiatives (Ferrier & Lyon, 2004)? Researchers

could also a
ssess the degree to
which actions conform to industry norms (conformity) (Miller & Chen, 1996
a
) or, in
combination, represent a relatively low level of activity (inertia) (Miller & Chen, 1994).
Unfortunately, the repertoire approach, by aggregating differ
ent actions during a specific
interval, makes it difficult to ascertain the reactions from rivals that specific actions engender.

Chen (2007),

Ferrier (2001), Katila & Chen (2008),
Rindova, Ferrier, & Wiltbank (2010)

examine

sequences of actions

carried ou
t over time.
For instance, Ferrier (2001) combines

all
actions such as pricing, marketing, and capacity moves that are said to fall within a single
35

competitive attack

an uninterrupted sequence of competitive moves. He examines the
simplicity/complexity,
action volumes, and heterogeneity of these sequences. This approach
has the advantage of partitioning action sequences into

relatively discr
et
e attacks
according to
the natural rhythm of the focal firm, instead of according to an arbitrary time period. T
he
difficulty

is in identifying such distinct

periods and finding the true
boundaries between attacks.

Similarly, by incorporating rigorous
sequencing

methods (A
b
bott, 1990; Abbott, 1995),
Chen (2007), Katila & Chen (2008), and Ri
n
dova, et al. (2010) inve
stigated patterns in
competitive moves over time. Their stud
ies

of timed action sequences contrast with previous
treatments of isolated competitive moves, and reveal the longitudinal processes that characterize
competitive dynamics

and the
pivotal integra
tive role
it

plays in linking strategy content
(or
formulation) and

process (or implementation).


The emphasis by
scholars on novel methods aimed at gathering fine
-
grained and dynamic
longitudinal data on strategic decisions and interaction patterns
has yi
elded a variety of

promising examples and models
for
future researchers
,

not only
of competitive dynamics

but of
strategy in general.





EVOLUTIONARY TENDENCIES WITHIN COMPETITIVE DY
N
AMICS

Having structured and provided an overview of the
competitive

dynamics

field and
described its methods, we now examine some important trends in the way it has emerged over
the past decades, with some foci falling away, and others
receiving more attention
.
Indeed,
the
field has itself been dynamic over the past two
decades, and is evolving at a healthy pace. It is
useful to highlight some of the more consistent trajectories that have characterized the field’s
development.


36

From action/response dyad or individual “actions,” to a stream or pattern of
actions, to a set

of interconnected actions among market players.

Initial studies of
competitive dynamics concentrated on rivalrous exchanges between two entities (either firms or
market actions). Indeed, a core insight of the approach of competitive dynamics was this ne
ed
to
examine company moves in the context of actual competitive

engagements. Therefore, the
action/response dyad served as the basic unit of observation (Smith, et al., 1991;
Smith,
et al.
,
1992). There was

interest not only in the investigation of indi
vidual moves (either actions or
reactions) per se, but also their market antecedents and consequences (
Barnett, 1993; Grimm, et
al., 2006; Ingram & Baum, 1997). Over time, however, there has been

a growing
tendency
to
consider longer and
more multifaceted

sequences of actions and interactions, driven

in part

by
researchers


interest in assessing constructs such as competitive aggressiveness over time longer
periods of time (Ferrier, 2001).

Thus researchers began to explore
the
action/reaction/counter
-
reac
tion
(or “
triad”) involving more extended exchanges of moves and
countermoves (Lamberg, et al., 200
9
)
. S
till other scholars delved into the study of temporally
connected actions taken by a number of firms, considering the behavioral interdependencies
amon
g market players

such as “red queen” traps of running hard just to keep
up (Barnett, 1993;
Haleblian,
McNamara, Kolev, & Dykes
, 2012
; Hsih, Tsai, & Chen, 2011) and the
“follow
-
the
-
leader” behaviors first examined by scholars of international business
(Knic
kerbocker, 1973).

Studies also evolved from a focus on individual actions (Smith, et al., 1992) to
concentration on entire competitive repertoires encompassing not singular moves but whole sets
of interconnected actions that a firm might pursue, say, over
the course of a given year. These
moves might include initiati
ves in pricing, advertising, marketing, product lines, and systems of
delivery (
Yu, 2003
; Yu & Cannella, 2007). As noted, these repertoires could be characterized
37

by their simplicity or focus
on a single kind of move (Ferrier & Lyon, 2004), their inertia (Miller
& Chen, 1994), or their overall conformity to industry practices (Miller & Chen, 1996
). In this
way, a richer and more elaborate conceptualization of competitive

strategy could emerge.

From a simple
, specific
attribute of act
ion (or response) to a more sophisticated one.
The early work on competitive dynamics analyzed specific aspects of competitive engagements,
for example, the speed of a
response (Chen & MacMillan, 1992
;
Eisenhardt,
1989) or the

likelihood that a given competitive move would result in a response (Barnett, 1997; Smith, et al.,
1991).
The investigation tended to be limited, and the conceptualization of constructs was
specific and confined (such as response speed). The

selectiveness of a competitive attack was
also examined (Chen & Hambrick, 1995).

Later studies, however, began to embrace more sophisticated and comprehensive
conceptualizations of actions. These included considerations of actions’ inertial nature (Mi
ller
& Chen, 1994), their consistency over time (Barnett, 1993; Ferrier, 2001; Lamberg
, et al.
, 2009),
their institutional conformity to practice (Miller & Chen, 1996a; Podolny, 1993), or their
reflecti
ng

or align
ing

with the theme of a competitive reperto
ire (Miller & Chen, 1996).
Indeed, this increased depth of characterization grew in part by situating competitive actions
within a repertoire of types and frequencies of different moves that a firm could pursue over a
given time period

usually a
year (Fer
rier, 2001