Competitive Dynamics of Interindustry Systems: How Structure and Conduct Coevolve
Published in 80th Annual Meeting of the Academy of Management, 2020
Abstract
Research on multimarket contact (MMC) explains why mutual forbearance (reduced aggressiveness) may emerge among familiar rivals within certain industries, but less understood is how competition changes when MMC crosses industry boundaries. Taking a system-level view of the competitive arena, we introduce the concept of systemic MMC (extent of embeddedness in industry-agnostic MMC groups) and apply it to explain how the antecedents and outcomes of competitive behaviors differ: network-invariant actions seek advantage within current markets; network-restructuring actions change MMC, reshaping interindustry embeddedness. We posit that systemic MMC facilitates mutual forbearance from network-invariant aggressiveness, while firms employ restructuring actions to improve their position, which they then, in turn, exploit for mutual forbearance. However, this jockeying for position by more numerous direct and indirect competitors limits each firm’s ability to maintain its degree of systemic MMC. We find support for these hypotheses with a novel combination of data sets on technology firm competitive relations and action repertoires during 2010-2016. Contributing to the literature on competitive dynamics and multimarket competition theory, this study shows how competitive structure and behavior coevolve endogenously, and mutual forbearance may still arise in interindustry competition systems, but its nature and persistence vary.