Competition in Multiple Geographic Markets: The Impact on Growth and Market Entry

Abstract

We investigate the impact of contact between organizations in multiple geographic markets, focusing on two competitive behaviors: growth in current markets and entry into new markets. Drawing on sociological and economic theories, we propose that the extent of multimarket contact determines the level of competition experienced by a focal organization and therefore influences its growth and market entry. We also propose that market structure, specifically the extent to which markets are dominated by a few large firms, influences competition and therefore influences growth and market entry. Finally, we propose that market structure accentuates multimarket competitive dynamics, as mutual forbearance is more pronounced in markets dominated by a few large firms. Analysis of growth and market entry by a mixed population of multi- and single-market firms in the California savings and loan industry generally supports our model and shows that multipoint competition affects all rivals, multi- and single-market firms alike.