The Competitive Tension as a Moderator for Strategic Innovation

Abstract

The tension created by competition has long been of interest to innovation researchers. A notable contribution to this topic stems from the behavioral theory of the firm (Greve 2003). Scholars have noted that in firms while high performance reduces R&D intensity and innovation launches, contingency variables such as growth stage, performance below the aspiration level, and ambidexterity increase innovation decisions. On the other hand because the firm “has a stick of market share with which to discipline the other firm” (Karnani and Wernerfelt, 1985: 90) competitive tension in firm dyads has an inevitable attack and mostly withdrawal effect (Hambrick and Fredrickson, 2005). Although improving our understanding of the rivalry, or interactive market behavior, between firms in their quest for competitive position in an industry these studies have focused on the structural properties of an industry (e.g., market share or innovation typology) and ignored specific effects of competitive tension between firms. As a result, limited attention has been paid to the nuance of interfirm rivalry in strategic innovation.To address this gap, I turn to strategic innovation research, which has studied interfirm rivalry as creative market actions exchanged between industry members (Tsai, Su, and Chen 2011; Greve 2003). While competitive dynamics research has been limited to perceptional settings specifically, the organizational drivers underlying a firm's competitive behavior: awareness-motivation-capability framework, several ideas developed by this research stream can help analyzing strategic innovation (Chen, Su, and Tsai 2007). The current study looks into the competitive relationships between firms via strategic innovation, investigating if it is possible vice versa. By bringing together oligopolistic reaction theory in the business innovation literature and competitive dynamics research in the strategy literature, my approach aims to inject dyadic analysis of firm competition into studies on strategic innovation and advance our knowledge about competitive tension.