Integrating nonmarket and market action, response, and initiating firm performance in competitive dynamics

Abstract

Purpose– The purpose of this paper is to seek to advance the understanding of competitive interaction framework based on competitive dynamics theory that investigates how nonmarket and market factors concurrently affect the relationships among action and response, their integration, and initiating firm performance.Design/methodology/approach– To test the hypotheses for this study, the authors used data collected from the news found in web sites of 72 Chinese firms over a five-year period from January 2007 to December 2011. The authors use the approach suggested by Baron and Kenny (1986) to test the mediated effect of rival response and speed, after structured content analysis is adopted to overcome the challenges of identification and measurement by using a sample of competitive actions and responses.Findings– The results test partial mediating role of rival response and speed in linking nonmarket, market, and integrated action with initiating firm performance outcomes. Rival responses and speed may vary systematically in nonmarket action. The relationship between the integration of competitive action and initiating firm performance is positive, high, and significant.Research limitations/implications– The results of this study were limited by a sample in China. The authors further need to consider how nonmarket and market components are operationalized in different institutional environments. The authors study only captures observable moves reported in the news of Chinese firms’ web sites. This single-data source collection raises the specter of cognitive bias. It is advised to collect data from multiple sources, perhaps directly measuring the managers’ perception by using a questionnaire-based survey.Practical implications– Firms whose main focus is to launch market actions in an effort to gain competitive advantage should ensure that their nonmarket actions constitute interfirm rivalry. Particularly, this study also encourages managers to continuously and rapidly integrate nonmarket actions into their analyses of market competition for firm success. Additionally, managers need to develop effective information-processing mechanisms to analyze, monitor, forecast, and interpret rival response and speed for each competitor.Originality/value– The research contributes to the authors’ understanding of the nature of nonmarket and market competition by bridging nonmarket action into traditional competitive dynamics.