Towards a behavioral theory of competitive interactions

A system dynamics approach

J. Luoma, Sampsa Ruutu, H. Tikkanen

Research output: Chapter in Book/Report/Conference proceedingConference abstract in proceedingsScientific

Abstract

Competitive dynamics research has produced compelling insights into how firms use market-oriented moves to attain and sustain competitive advantage. Surprisingly, there has been less integrative research on how combinations of various mechanisms and processes affect competitive dynamics over time. Consequently, we develop a system dynamic model of dyadic competitive interaction by drawing insights from behavioral theory of the firm and evolutionary theory. We show how a small set of existing, well-established behavioral assumptions about how firms employ competitive actions can explain a rich variety of competitive behavior patterns. Our simulations corroborate the robust empirical finding that, generally, a high level of competitive activity leads to high performance. However, competitive actions also incur costs and increase the risk that rivals respond. By implication, managers cannot know with precision if they should increase competitive activity. We explain how this un-resolvable uncertainty surrounding the gains from competitive actions is in itself a sufficient explanation of interfirm performance differences.
Original languageEnglish
Title of host publicationAcademy of Management Proceedings
PublisherAcademy of Management
DOIs
Publication statusPublished - 2012
EventAcademy of Management 2012 Annual Meeting - Boston, United States
Duration: 3 Aug 20127 Aug 2012

Publication series

NameAcademy of Management Proceedings
PublisherAcademy of Management
Number1
Volume2012
ISSN (Print)0065-0668
ISSN (Electronic)2151-6561

Conference

ConferenceAcademy of Management 2012 Annual Meeting
CountryUnited States
CityBoston
Period3/08/127/08/12

Fingerprint

Behavioral theory
System dynamics
Interaction
Competitive dynamics
Simulation
High performance
System dynamics model
Evolutionary theory
Uncertainty
Behavioral theory of the firm
Competitive advantage
Competitive behavior
Managers
Costs

Keywords

  • Competitive dynamics
  • behavioral theory of the firm
  • simulation

Cite this

Luoma, J., Ruutu, S., & Tikkanen, H. (2012). Towards a behavioral theory of competitive interactions: A system dynamics approach. In Academy of Management Proceedings Academy of Management. Academy of Management Proceedings, No. 1, Vol.. 2012 https://doi.org/10.5465/AMBPP.2012.33
Luoma, J. ; Ruutu, Sampsa ; Tikkanen, H. / Towards a behavioral theory of competitive interactions : A system dynamics approach. Academy of Management Proceedings. Academy of Management, 2012. (Academy of Management Proceedings; No. 1, Vol. 2012).
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Luoma, J, Ruutu, S & Tikkanen, H 2012, Towards a behavioral theory of competitive interactions: A system dynamics approach. in Academy of Management Proceedings. Academy of Management, Academy of Management Proceedings, no. 1, vol. 2012, Academy of Management 2012 Annual Meeting, Boston, United States, 3/08/12. https://doi.org/10.5465/AMBPP.2012.33

Towards a behavioral theory of competitive interactions : A system dynamics approach. / Luoma, J.; Ruutu, Sampsa; Tikkanen, H.

Academy of Management Proceedings. Academy of Management, 2012. (Academy of Management Proceedings; No. 1, Vol. 2012).

Research output: Chapter in Book/Report/Conference proceedingConference abstract in proceedingsScientific

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AB - Competitive dynamics research has produced compelling insights into how firms use market-oriented moves to attain and sustain competitive advantage. Surprisingly, there has been less integrative research on how combinations of various mechanisms and processes affect competitive dynamics over time. Consequently, we develop a system dynamic model of dyadic competitive interaction by drawing insights from behavioral theory of the firm and evolutionary theory. We show how a small set of existing, well-established behavioral assumptions about how firms employ competitive actions can explain a rich variety of competitive behavior patterns. Our simulations corroborate the robust empirical finding that, generally, a high level of competitive activity leads to high performance. However, competitive actions also incur costs and increase the risk that rivals respond. By implication, managers cannot know with precision if they should increase competitive activity. We explain how this un-resolvable uncertainty surrounding the gains from competitive actions is in itself a sufficient explanation of interfirm performance differences.

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Luoma J, Ruutu S, Tikkanen H. Towards a behavioral theory of competitive interactions: A system dynamics approach. In Academy of Management Proceedings. Academy of Management. 2012. (Academy of Management Proceedings; No. 1, Vol. 2012). https://doi.org/10.5465/AMBPP.2012.33