Business level strategy summary
Week 2 – competitive dynamics
Boyd & Bresser (2008) – performance implications of delayed competitive responses: evidence from the US retail industry
Abstract: the timing of competitive actions and responses is a key management concern that has important performance
consequences. This study focuses on the timing and consequences of competitive responses. Theory predicts a negative linear
relationship between response delay and responder performance mirrored by an opposing positive linear relationship between
response delay and first mover performance. In contrast, our study suggests that response delay has a curvilinear relationship
with responder performance and a linear relationship with first mover performance. We test our propositions using retail industry
data and discuss the implications.
Main contribution of the paper: The performance effects of response timing for the responder and the first mover are different
and not the mirror image of one another. The first function is curvilinear and the second linear.
Theory
Proposed relationships: Response delay has a curvilinear relationship with responder performance and a linear relationship with
first mover performance.
• 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 intermediate response delays supported
o Inverted u-shape
First mover research suggests that attacked firms should respond as quickly as possible, because
response performance will be increasingly limited as a first mover becomes more established
On the other hand, response delays may be advantageous because they allow firms to collect more
information about a pioneer’s action. Delays may allow for the resolution of market or technological
uncertainties, and the development of more effective responses such as a better product or a superior
marketing program
The inconclusive evidence and the fact that both fast and delayed responses can be advantageous
suggest a nonlinear relationship. A response timing decision is always a balancing act, and its
effectiveness depends on a firm’s ability to assess market dynamics correctly and develop an effective
response. A balance must be found between the risks of premature entry against missed opportunity.
If a firm responds too early because it has not waited long enough for uncertainties to subside or to
develop an effective response, its performance is likely to suffer. If a firm responds too late, it may not
be able to expand successfully because earlier movers will have gained enough leadership to dominate
the market.
Thus, the puzzle surrounding the performance effect of response timing may be resolved by proposing
a curvilinear relationship: On average, there will be lower success for fast responders, higher success
for responders with intermediate delays, and lower success for late responders. Responders with
intermediate delays can be expected to outperform fast and late responders because a measured delay
will allow for designing an appropriate response without moving too late.
• H2: First mover performance and response delay are related in a linear manner: as response delays are longer (shorter),
performance decreases are smaller (greater). supported
o Linear relationship
The longer a first mover firm remains unchallenged, the greater the market shares and profits that
accrue to this firm. Long response delays provide pioneers with an opportunity to establish first mover
, advantages such as technological leadership or buyer switching costs that lead to superior
performance. These first mover advantages can be substantial and may not be easily overcome by later
moving competitors.
Empirical evidence supports a positive linear relationship between first mover performance and the
length of time it takes for competitors to respond. We agree with the literature that there is a positive
linear relationship between actor performance and response delay because we do not expect the actor
performance effect to be a mirror image of the responder performance effect.
In competitive environments, the first mover’s ability to reap the benefits of a move is time dependent:
the later the first moving firm faces competitive responses, the more time it has to absorb first mover
benefits.
In sum, the joint contribution of our two hypotheses to the first mover literature is the prediction that the performance effects of
response timing for the responder and the first mover are different and not the mirror image of one another. Our theoretical
reasoning suggests that the first function is curvilinear and the second linear.
Nadkarni, Chen & Chen (2016) – The clock is ticking! Executive temporal depth, industry velocity, and competitive
aggressiveness
Abstract: we examine how the interplay between executive temporal depth (time horizons that executives consider when
contemplating past and future events) and industry velocity (the rate at which new opportunities emerge and disappear in an
industry) shapes competitive aggressiveness (a firm’s propensity to challenge rivals directly and intensely in order to maintain or
improve its market position) and firm performance. Based on panel data (from 1995 to 2000) from 258 firms in 23 industries, we
found that executive temporal depth exhibited different patterns of relationships with competitive aggressiveness in low- and
high-velocity industries. Moreover, competitive aggressiveness had a positive main effect on firm performance, but this effect was
stronger in high-velocity industries than in low-velocity industries.
Main contribution of the paper: The effects of executive temporal orientation are contingent on macro temporal forces – industry
velocity. Executive temporal depth exhibited different patterns of relationships with competitive aggressiveness in low- and high-
velocity industries. Moreover, competitive aggressiveness had a positive main effect on firm performance, but this effect was
stronger in high-velocity industries than in low-velocity industries. The results suggest that executive PTD and FTD orientations
promote competitive aggressiveness and in turn superior performance in high-velocity environments but may be dysfunctional in
low-velocity environments and vice versa.
Theories:
• Competitive dynamics (industry and firm level forces for competitive responses)
• Upper echelon theory and executive cognition (subjective basis for competitive behavior)
• Entrainment theory (fit & misfit between executives and external environment)
Proposed relationships
• 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 supported
o PTD allows for depth of understanding the historical context and increases the chances of quickly finding
relevant lessons from a wide range of past actions and outcomes in undertaking present behaviors. These
attributes associated with PTD will promote awareness of the competitive landscape and in turn increase
competitive aggressiveness in low-velocity industries, but inhibit competitive awareness and in turn
aggressiveness in high velocity industries. By considering a longer time horizon, executives can draw on and
combine many more pieces of information to quickly find many solutions to current competitive problems in
low-velocity industries. Conversely, in high-velocity industries, short product and process life cycles and new
ways of problem solving quickly decrease the usefulness of past knowledge, experiences and advantages.
• 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. supported
o In low-velocity industries, changes in technologies, competition and customer preferences are gradual and
subtle, occur over relatively long cycles, and are not easily visible in the short term. We expect that a long FTD
will positively influence firms’ competitive aggressiveness in these environments for two reasons. First, a long
FTD may alert executives to potential developments in the distant future that are not easily visible in the short
run, allowing them to quickly recognize and respond to more opportunities and threats ahead of rivals in a
proactive manner, in turn resulting in greater competitive aggressiveness. Second, in low velocity environments
where changes are slow and can be gauged accurately in advance, an extensive and exhaustive a priori long-
term strategic analysis can reduce potential barriers to identifying new opportunities as well as to coordinating
and allocating resources needed to quickly realize multiple opportunities. Thus, a long executive FTD will
facilitate competitive aggressiveness in low-velocity industries, whereas a short FTD will hinder aggressiveness.
o In high-velocity industries, the advantages of FTD are likely to occur only up to certain levels, beyond which a
longer FTD can hinder competitive aggressiveness for several reasons. First, an excessively long FTD “engenders
