Academic journal article Academy of Strategic Management Journal

Competitive Network and Competitive Behavior: A Study of the U.S. Airline Industry

Academic journal article Academy of Strategic Management Journal

Competitive Network and Competitive Behavior: A Study of the U.S. Airline Industry

Article excerpt

ABSTRACT

Drawing upon the embeddedness perspective, multipoint competition, and resource-based view, I conceptualize the competitive network based on multimarket contact and resource homogeneity. A competitor analysis should not remain only at the dyadic level, but rather should expand to the whole competitive network. I hypothesize certain effects of a firm's position in the market network and resource network on its competitive behavior. Specifically, the more central a firm is in the competitive network, the more competitive activities the firm will conduct and the more intense the rivalry experienced by it. Also, the more structurally constraint a firm is in the competitive network, the less competitive activities will be conducted by the firm and the less intense the rivalry experienced by it. I also hypothesize that competitive activities and intensity of rivalry will negatively affect organizational performance. Using network analysis, I empirically tested these hypotheses for the case of the U.S. scheduled airline industry during the period 1998 to 2000. The results support my arguments. This study will advance an integrated understanding of the embeddedness perspective, multipoint competition, and resource-based view.

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

The study of competitive behavior and of inter-firm rivalry has become a central area of research in strategy (Porter, 1980). To understand and predict this interactive competitive behavior, previous research has investigated the effect of multipoint competition on intensity of rivalry between dyadic pairs (Barnett, 1993; Barnett, Greve, & Park, 1994; Chen, 1996; Evans & Kessides, 1994; Gimeno & Woo, 1996b). Meanwhile, researchers have conceptualized competitor analysis at the dyadic level (Chen, 1996). However, no study has conceptualized competitor analysis at the industry-system or network level or examined the effects of a firm's position in a competitive network on its competitive behavior. To obtain a more comprehensive understanding of competitor analysis and competitive behavior, I have conceptualized the competitive network and have empirically tested my theoretical model. My central research question is how a firm's structural positions in a competitive network affect its competitive behavior and ultimately its organizational performance.

The embeddedness perspective (Baum & Dutton, 1 996; Dacin, Ventresca, & Beai, 1 999; Granovetter, 1985) suggests that competitors are not atomistic entities free to undertake any competitive action, but rather are embedded in a network of relationships that influences their competitive behavior. Although the effect of cooperative linkages between firms on competitive dynamics has received a great deal of attention (Gnyawali & Madhavan, 2001; Madhavan, Gnyawali, & He, 2004), no researchers have investigated the effect of competitive linkages between firms. In this paper, I will study these negative connections among competitors within the same industry. A firm's structural position in a competitive network will significantly influence the information flow among the network members and consequently will influence its awareness of competitive activities as well as its motivation and capability to conduct such.

Multipoint competition research has studied the effect of multimarket contact on dyadic rivalry in a given market (Gimeno & Woo, 1996a, 1996b, 1999; Young, Smith, Grimm, & Simon, 2000). However, I argue that firms compete in multiple markets against multiple competitors. The shared markets among competitors constitute one part of what I define as a competitive market network. The second part of the competitive market network is the resource network.

The resource-based view (Barney, 1991; Conner & Prahalad, 1996; Peteraf, 1993) argues that firms are different in terms of their unique resources bundles. These varied strategic or resource endowments not only determine the firm's competitive advantage (Conner & Prahalad, 1996; Rumelt, 1984), but also constrains its strategic choices (Collis, 1991; Teece, Pisano, & Shuen, 1997). …

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