Concentration of rivals' actions and competitive reaction

Abstract

Purpose - The purpose of this paper is to explore how managers' evaluation of and reaction to multiple rivals' actions will be affected by the distributional characteristics of these actions, including the extent to which rivals' actions are centered on certain firms (actor concentration), concentrated in certain time periods (temporal concentration), and clustered in certain geographic locations (spatial concentration). Design/methodology/approach - The analyses are based on panel data on Taiwanese producers of personal computers and peripherals and the investments they made in mainland China after the Asian financial crisis. The authors employ fixed-effect logit regression to test the hypotheses. Findings - Rivals' recent actions in China increase a focal firm's inclination to act especially when these rivals' actions are characterized by a high level of actor, temporal, and/or spatial concentration. Originality/value - The analytical approach goes beyond a dyad-level conceptualization of interfirm rivalry. Incorporating insights from behavioral decision making, the paper shows how a firm with limited attentive capacity reacts to the aggregate impact of multiple rivals' actions.