Explaining Competitive Reactions to New Products: An Empirical Signaling Study

Abstract

This article develops a conceptual model to help explain the strength of competitive reactions to new product introductions and presents the findings from a preliminary empirical investigation of this model. Being able to explain the strength of competitive reactions to new product introductions is important, as such reactions often determine a product's success or failure in the marketplace. To explain these reactions Oliver Heil and Rockney Walters investigate competitive market signals associated with new product introductions and the reactions of competing firms to the signals. The authors empirically test the hypothesized linkages among three market signals—hostility, consequences and commitment—and competitive reactions using primary data collected from a large number of US corporations. The empirical results show that the market signaling variables explain a significant portion of the variance in the perceived strength of competitive reactions to new product introductions. The study has implications for managers introducing new products and for researchers studying new product introductions and competition.