Competitive Sensemaking in Value Creation and Capture

We suggest that a systematic socio-cognitive approach to “competitive sensemaking”has been absent from theory and research on competitive strategy. We define competitivesensemaking as the social and cognitive processes that underlie how firms detect, define, andconceptualize their competitive relationships with other firms. Competitive sensemaking is asubset of the more general process of strategic sensemaking, which is the “making plausiblesense” of the broad array of stimuli and circumstances that characterize complex market situations. Using the value-based view of value creation and capture as a conceptual base for ourarguments, we unpack four cognitive underpinnings of competitive sensemaking: mental timetravel, comparability, counterfactual reasoning, and stories. We then show how these fourcomponents were differentially involved in shaping competitive sensemaking in four actualmarket situations. In doing so, we illustrate how competitive sensemaking provides fundamental inputs into the value creation and value capture process. We conclude the paper bydrawing out the implications of competitive sensemaking for strategy theory and research