Competitive Dynamics

by

Anja Tuschke, Viktoria Judith Salomon

• LAST REVIEWED: 28 August 2019
• LAST MODIFIED: 28 August 2019
• DOI: 10.1093/obo/9780199846740-0171

Introduction

This article introduces research in competitive dynamics, a collection of work that has developed within the field of strategic management since the late 1980s. Competitive dynamics is the study of interfirm rivalry constituted of competitive actions and responses, their micro- and macro-level context as well as their antecedents and consequences (Chen and Miller 2012, cited under Reviews). Related research addresses fundamental questions such as: “Why do firms engage in competitive rivalry?” “What characterizes the competitive interaction between firms?” “How do focal firms’ competitive actions and rivals’ responses influence firm performance?” “How do contextual factors influence competitive dynamics?” Competition has long been at the center of academic debate, starting with the analysis on the functioning of economic markets and Adam Smith’s welfare competition. While this debate had traditionally been dominated by economists, scholars such as Michael Porter introduced a management perspective on competition. Within the management discipline, two conceptions of competition developed. In a more static conception based on economic theory, competition was formalized as an inherent characteristic of market structures, viewing market forces as determinants of the degree and the type of competition within an industry (Baum and Korn 1996, cited under Multimarket Contact, Multimarket Competition, and Mutual Forbearance). A second conception was motivated by Joseph Schumpeter’s concept of “creative destruction” and the Austrian school of economics (Smith, et al. 2001, cited under Reviews). This dynamic conception of competition accentuates the individual behavior of each competing firm (Baum and Korn 1996, cited under Multimarket Contact, Multimarket Competition, and Mutual Forbearance) and became known as “competitive dynamics research.” It assumes that performance differences between firms operating in the same industry are the result of competitive actions that are aimed at obtaining successive temporary advantages (Young, et al. 1996, cited under Competitive Actions: Characteristics, Drivers, and Performance Outcomes). Since the beginning of the 1990s, the competitive dynamics research program has flourished, and a large body of work has emerged within the literature on competitive strategy, consisting of several sub-streams such as competitive action and response, first-mover advantage, and multimarket competition(Ketchen, et al. 2004, cited under Reviews). Research within these sub-streams is largely unified by its reliance on a common theoretical perspective, the awareness-motivation-capability (AMC) framework (Chen 1996, cited under Awareness-Motivation-Capability Framework). Leading scholars in the field of competitive dynamics are, among others, Ming-Jer Chen, Walter J. Ferrier, Danny Miller, and Ken G. Smith.

Reviews

In recent years, there have been several attempts to review the competitive dynamics research. Four major narrative reviews were published in a management handbook respectively in leading management journals. Smith, et al. 2001; Ketchen, et al. 2004; Chen 2009; as well as Chen and Miller 2012 are excellent starting points for management scholars to obtain an overview on selected key topics in competitive dynamics research.

• Chen, M. -J. “Competitive Dynamics Research: An Insider’s Odyssey.” Asia Pacific Journal of Management 26.1 (2009): 5–25.

  DOI: 10.1007/s10490-008-9110-7

  Although this article does not cover the competitive dynamics literature as comprehensively as other reviews, it provides insights into the scholarly pursuit of one of the most rewarded scholars in the competitive dynamics field. Chen offers firsthand knowledge and experience for scholars interested in the field by focusing on his own research program and twelve of his frequently cited core publications.

• Chen, M.-J., and Danny Miller. “Competitive Dynamics: Themes, Trends, and a Prospective Research Platform.” Academy of Management Annals 6.1 (2012): 135–210.

  Offers the most comprehensive overview of the field. Five major research themes are identified: (1) competitive interaction: action-level studies, (2) strategic competitive behavior and repertoire: business-level studies, (3) multimarket/multibusiness competition: corporate-level studies, (4) integrative competitor analysis, and (5) competitive perception. Building on the AMC framework and integrating micro- and macro-organization studies, an integrative future research platform is proposed. Especially the overview of evolutionary tendencies within the competitive dynamics field makes this article a must read for all scholars interested in competitive dynamics.

• Ketchen, D. J., Jr., C. C. Snow, and V. L. Hoover. “Research on Competitive Dynamics: Recent Accomplishments and Future Challenges.” Journal of Management 30.6 (2004): 779–804.

  DOI: 10.1016/j.jm.2004.06.002

  This literature review is a key resource for anyone doing research on competitive dynamics. Studies are reviewed along six sub-streams within the competitive dynamics research: (1) competitive action and response, (2) first-mover advantages, (3) coopetition, (4) multipoint competition, (5) strategic groups, and, (6), regional clusters. Suggestions for future research within each sub-stream are made. Opportunities to integrate these sub-streams are outlined.

• Smith, K. G., W. J. Ferrier, and H. Ndofor. “Competitive Dynamics Research: Critique and Future Directions.” In The Blackwell Handbook of Strategic Management. Edited by M. A. Hitt, R. E. Freeman, and J. S. Harrison, 314–361. Oxford: Blackwell, 2001.

  After the 1990s, in which competitive dynamics research has received widespread approval among strategic management scholars, Smith and colleagues were the first scholars to critically review this broad body of literature. In doing so, the historical background of the field is highlighted, particularly detailed, and a general model of competitive dynamics is introduced.