Article | Strategic Management Journal | December 2010

Life in the Fast Lane: Origins of Competitive Interaction in New vs. Established Markets

by Rory McDonald, Eric L. Chen, Riitta Katila and Kathleen M. Eisenhardt

Abstract

Prior work examines competitive moves in relatively stable markets. In contrast, we focus on less stable markets where competitive advantages are temporary and R&D moves are essential. Using evolutionary search theory and an experiential simulation with in-depth fieldwork, we find that the relationship between performance and subsequent competitive moves depends on the type of market, not just on whether performance is high or low. High performers seek to maintain status quo, but this requires different strategies in different markets. They are conservative in established markets and bold in new ones. In contrast, low performers seek to disrupt the status quo. Again, this requires different strategies in different markets. Unlike high performers, low performers are bold in established markets and conservative in new ones where they lack understanding of how to disrupt rivals. Overall, our results incorporate unstable markets in theories of competitive dynamics and competitive interaction in theories of evolutionary search. By examining R&D moves, we also extend competitive dynamics research to include technology-based firms for whom temporary advantages are often essential.

Keywords: Balance and Stability; Competitive Advantage; Supply and Industry;

Citation:

McDonald, Rory, Eric L. Chen, Riitta Katila, and Kathleen M. Eisenhardt. "Life in the Fast Lane: Origins of Competitive Interaction in New vs. Established Markets." Special Issue on The Age of Temporary Advantage. Strategic Management Journal 31, no. 13 (December 2010): 1527–1547.