Deja Vu: Why Firms Respond More Than Once To A Competitor Action

Why does a firm respond to a competitor's action as it does? Prior to this grounded theory study, there was no transparency, the black box of competitive response remained dark. Using a series of three embedded case studies and examining eighteen competitive responses, this study has illuminated the processes connecting the inputs and outputs related by previous content based research in competitive response. One pattern that quickly emerged was multiple responses to competitive actions/trends. Understanding why firms pursue multiple responses and what does and does not constrain their choices became the focus of this research.To widen the beam of light, this study takes a broader view of competitive response recognizing that, from an Austrian viewpoint, all responses - imitation, modified imitation or novel - can erode the advantage created by the initiating firm. To control for rival hypotheses, the participating firms were all in the same service industry characterized by high visibility that maximizes awareness and minimizes response uncertainty. Emerging from this study are five response processes, all with the potential to produce multiple responses. These processes are differentiated by their triggers, which include perceived survival threats, performance below expectations, trends with and without revenue opportunities and trends with an impact to firm identity. This study also revealed the response pressure mechanism in which a delay in the firm's main response and a looming penalty for not responding within a response window were found to generate interim responses. Implications from this study include: an initial understanding that how a firm responds depends on the triggers; a firm may respond more than once to a competitor action; responses come in all shapes, sizes and frequencies; the number of responses is dependent on the response pressure mechanism; and how a firm responds is molded by its perceptions, its current and aspired identities, and the customer appeal of the initial action. Though this study must be replicated in additional contexts to ensure generalizeability, a final contribution of this research is to demonstrate the complementary value of process and content research to allow the full picture of competitive response to take shape.