Multimarket Competition, Mobility Barriers, and Firm Performance

Abstract

abstractThis study develops and tests a theoretical framework which suggests interactive dynamics, with strong performance implications, between the height of mobility barriers surrounding strategic groups and the extent of within‐group multimarket competition. Empirical analysis drawn from a longitudinal sample of pharmaceutical firms indicates that within‐group multimarket competition has strong positive effect on firm performance for strategic groups surrounded by high mobility barriers. As we move lower on the mobility barriers hierarchy, this effect decreases, becoming non‐significant for groups surrounded by moderate mobility barriers and negative for groups surrounded by low mobility barriers. These findings highlight the conditions under which mobility barriers and multimarket competition have significant performance implications. In addition, our results suggest that mobility barriers and multimarket competition are not substitutive but complementary devices promoting mutual coordination within strategic groups. Finally, our findings point to the need to consider multimarket contacts as an aggregate property of strategic groups.