Performance implications of delayed competitive advantage
Boyd & Bresser (2008)
- US retail industry (intense rivalry and media attention)
- Content analysis of press articles + event study (regression)
o Effect of competitive movements + responses in 12 months (response delay) on stock
deviation from expected stock price
Response delay (-) tactical action (pricing or advertising actions with less resources)
Industry concentration (+) imitation
Industry growth (+) response delay
H1:
Responder performance and response delay are related in an inverted U-shaped manner: Lower
performance will result for fast and late responders, and higher performance for firms with
Responder stock effect
intermediate response delays
Responder model: Inverse U-shape (=curvilinear)
(-)
Response delay Stock effect - Lower stock effect for fast and late
responders
a. Bad luck (wrong assumptions)
b. Conscious choice
c. Blind spots judgmental mistakes
i. Problem framing limitations
ii. Escalation of commitment
iii. Overconfidence
- Higher stock effect for intermediate
Response delay (timing)
response delays
H2:
First mover performance and response delay are related in a linear manner: As response delays are
longer (shorter),
First-moverperformance
stock effect decreases are smaller (greater)
First mover model:
(+)
Response delay Stock effect Linear relationship
- Lower stock effect for first mover if the
responder responds fast (low response
delay)
Response delay (timing)
A fast response is not necessarily the best response (seen from the responder)
Balancing risk of premature entry against missed opportunity
,The clock is ticking! Executive temporal depth, industry velocity and competitive aggressiveness
Nadkarni, Chen & Chen (2016)
- US firms > 1 billion + single business + different industries
- Content analysis of news headlines
o Effect of executive temporal depth on competitive aggressiveness (affected by
industry velocity) and firm performance in turn (GLS regression)
- Contingency theory and entrainment theory
Competitive aggressiveness = action volume and speed
Executive temporal depth (PTD & FTD) (micro) (content analysis) = time distance (or time horizons)
into the past and the future that executives typically consider when contemplating events that have
happened or may happen
a) Letter to shareholders (LTS) in annual reports
b) Management’s discussion and analysis (MD&A)
c) Executive conference calls with analysts
Firm performance = return on sales (ROS) and return on assets (ROA)
Industry velocity (macro) = industry clock speed = the speed or rate at which new opportunities
emerge and disappear
Industry velocity
(+)
Executive Competitive Firm
temporal depth agressiveness performance
H1:
Industry velocity will moderate the relationship between executive PTD and competitive
aggressiveness such that this relationship will be positive in low-velocity industries, but negative in
high velocity industries
Low velocity In a low velocity industry, managers are
better able to combine patterns and see
opportunities and threats
Past temporal (+) Competitive
depth (PTD) agressiveness
, High velocity A high velocity industry is known for short life
cycles so past knowledge, experiences and
advantages are not useful and possible
miscalculations / ignoring of current events
Past temporal (-) Competitive
leads to more vulnerability
depth (PTD) agressiveness
H2:
Industry velocity will moderate the relationship between executive FTD and competitive
aggressiveness such that this relationship will be linear positive in low-velocity industries but inverted
U in high-velocity industries
Low velocity In a low velocity industry, managers are
better able to combine patterns (pattern
detection) and see opportunities and threats
quickly, and reduce barriers and allocate
Future temporal (+) Competitive
resources
depth (FTD) agressiveness
High velocity Too long FTD may hinder awareness of short
term changes and also the fact that managers
might not want to deviate from the long term
(Inverse U-shape) perspective
Future temporal Competitive
However, in short term thus more flexibility
depth (FTD) agressiveness
H3:
Industry velocity will moderate the relationship between competitive aggressiveness and firm
performance such that this relationship will be more positive in high industries than in low velocity
industries
High velocity Low velocity
>
Competitive (+) Firm Competitive (+) Firm
agressiveness performance agressiveness performance
- Marginally supported. Main effects are true. But significant difference is not there.
Boyd & Bresser (2008)
- US retail industry (intense rivalry and media attention)
- Content analysis of press articles + event study (regression)
o Effect of competitive movements + responses in 12 months (response delay) on stock
deviation from expected stock price
Response delay (-) tactical action (pricing or advertising actions with less resources)
Industry concentration (+) imitation
Industry growth (+) response delay
H1:
Responder performance and response delay are related in an inverted U-shaped manner: Lower
performance will result for fast and late responders, and higher performance for firms with
Responder stock effect
intermediate response delays
Responder model: Inverse U-shape (=curvilinear)
(-)
Response delay Stock effect - Lower stock effect for fast and late
responders
a. Bad luck (wrong assumptions)
b. Conscious choice
c. Blind spots judgmental mistakes
i. Problem framing limitations
ii. Escalation of commitment
iii. Overconfidence
- Higher stock effect for intermediate
Response delay (timing)
response delays
H2:
First mover performance and response delay are related in a linear manner: As response delays are
longer (shorter),
First-moverperformance
stock effect decreases are smaller (greater)
First mover model:
(+)
Response delay Stock effect Linear relationship
- Lower stock effect for first mover if the
responder responds fast (low response
delay)
Response delay (timing)
A fast response is not necessarily the best response (seen from the responder)
Balancing risk of premature entry against missed opportunity
,The clock is ticking! Executive temporal depth, industry velocity and competitive aggressiveness
Nadkarni, Chen & Chen (2016)
- US firms > 1 billion + single business + different industries
- Content analysis of news headlines
o Effect of executive temporal depth on competitive aggressiveness (affected by
industry velocity) and firm performance in turn (GLS regression)
- Contingency theory and entrainment theory
Competitive aggressiveness = action volume and speed
Executive temporal depth (PTD & FTD) (micro) (content analysis) = time distance (or time horizons)
into the past and the future that executives typically consider when contemplating events that have
happened or may happen
a) Letter to shareholders (LTS) in annual reports
b) Management’s discussion and analysis (MD&A)
c) Executive conference calls with analysts
Firm performance = return on sales (ROS) and return on assets (ROA)
Industry velocity (macro) = industry clock speed = the speed or rate at which new opportunities
emerge and disappear
Industry velocity
(+)
Executive Competitive Firm
temporal depth agressiveness performance
H1:
Industry velocity will moderate the relationship between executive PTD and competitive
aggressiveness such that this relationship will be positive in low-velocity industries, but negative in
high velocity industries
Low velocity In a low velocity industry, managers are
better able to combine patterns and see
opportunities and threats
Past temporal (+) Competitive
depth (PTD) agressiveness
, High velocity A high velocity industry is known for short life
cycles so past knowledge, experiences and
advantages are not useful and possible
miscalculations / ignoring of current events
Past temporal (-) Competitive
leads to more vulnerability
depth (PTD) agressiveness
H2:
Industry velocity will moderate the relationship between executive FTD and competitive
aggressiveness such that this relationship will be linear positive in low-velocity industries but inverted
U in high-velocity industries
Low velocity In a low velocity industry, managers are
better able to combine patterns (pattern
detection) and see opportunities and threats
quickly, and reduce barriers and allocate
Future temporal (+) Competitive
resources
depth (FTD) agressiveness
High velocity Too long FTD may hinder awareness of short
term changes and also the fact that managers
might not want to deviate from the long term
(Inverse U-shape) perspective
Future temporal Competitive
However, in short term thus more flexibility
depth (FTD) agressiveness
H3:
Industry velocity will moderate the relationship between competitive aggressiveness and firm
performance such that this relationship will be more positive in high industries than in low velocity
industries
High velocity Low velocity
>
Competitive (+) Firm Competitive (+) Firm
agressiveness performance agressiveness performance
- Marginally supported. Main effects are true. But significant difference is not there.
