Abstract
Multimarket contact (MMC) refers to the situation in which more than two firms simultaneously compete with each other in multiple products and/or geographical markets. Most studies on MMC have explored how the market overlap creates “mutual forbearance”, which lessens the intensity of rivalry. While prior studies have mainly focused on how reduced rivalry from MMC influences market-related decisions, only a few have paid attention to its impact on innovation activities. The purpose of this research is to explore how multimarket competition influences different stages of innovation. Specifically, we focus on three stages of innovation: Content development, commercialization, and protection of IPs (Intellectual Property). This study is conducted as an exploratory case research based on the in-depth analysis of two leading Korean Mobile game companies. Based on our findings, we explain how mutual forbearance and observability of the rival’s competitive action influence the choice of strategic decisions across different stages of innovation.
Highlights
Firms often encounter the same rivals across multiple geographical and product markets
Strategy scholars have shown that multimarket contact (MMC) between the same rivals leads to different strategic responses
We aim to address the following research question: How do rivals strategically react to multimarket contact-based competition across different stages of innovation?
Summary
Firms often encounter the same rivals across multiple geographical and product markets. Studying 45 firms in the U.S personal computer industry, Kang, Bayus and Balasubramanian [2] provided evidence that the existence of frequently encountered rivals influences pricing and new product development decisions. The market overlap is known to increase competition for acquiring valuable knowledge-based resources and the likelihood of taking protective measures (i.e., patent lawsuit) [3]. These studies suggest that MMC findings can be extended and applied to other contexts with different industry characteristics and value chain activities (e.g., upstream versus downstream)
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