Retaliatory Behavior to New Product Entry

Abstract

In this article, the authors focus on the defense strategies that firms pursue when threatened by rival new products in their markets. They investigate retaliation as a multidimensional construct. The integrative framework combines the analysis of the marketing instrument used to react and the speed and breadth of retaliation. Results emphasize the importance of the rival product's innovativeness in generating a reciprocal retaliation (a move in kind), though innovativeness slows the incumbent's reaction time. Market growth encourages rapid retaliation, especially on the product mix, whereas in concentrated markets, firms react less strongly on the product mix and exhibit slower reactions. The study also captures the phenomenon of incumbent inertia: Larger incumbents retaliate less strongly and more slowly.