Abstract
This study examines boundary conditions of the mutual forbearance hypothesis, which predicts an inverted-U-shaped relationship between multimarket contact and market entry. Drawing on recent developments of the behavioral theory of the firm, we empirically test whether past performance and resource endowment shapes this relationship. Using a sample of 1391 companies in the U.S. insurance industry covering 51 states in a 4-year panel, we find that insurance companies take into account the level of multimarket contact with their rivals when making market entry decisions, and that past performance related to aspiration level and the firm's resource endowment have significant effects on such decisions.
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