Cointegration of firm strategies within groups: a long‐run analysis of firm behavior in the Japanese steel industry

Abstract

This paper uses cointegration analysis to study the competitive interaction among firms within the integrated and minimill groups in the Japanese steel industry. The use of cointegration analysis overcomes some of the limitations associated with prior attempts at modeling firm behavior within groups, and allows us to model strategies that take considerable time to adjust. Results indicate that several strategies displayed slow adjustment characteristics. All of the strategies that displayed these properties were cointegrated within the group. Finally, over the long run, the rate of strategic response to 'shocks' in the system varied across members and strategies: some converged, while others diverged from the group relationship. We conclude by discussing the relevance of our findings to research on strategic groups and competitive dynamics among firms. Thus the paper contributes to the literature on strategic groups and competitive dynamics, and illustrates the use of cointegration analyses to study the competitive behavior of firms.

The role of human mobility in promoting Chinese outward FDI: A neglected factor?

“…The equilibrium error (the difference between the variables at a certain time) always fluctuates around the mean. This process of reverting to the mean is often referred to in econometric literature as errorcorrecting behaviour (Nair and Filer, 2003). Toda and Phillips (1993) show that levels of autoregressions are an unreliable basis for regression inference in the nonstationary case, since the coefficient and significance level of individual variables will be affected by the co-movement between the variables.…”

Generic Strategies and sustainability of Financial Performance of Nepalese Enterprises

“…A firm pursuing a differentiation strategy is likely to create a unique perception of its products and services superior to its competitors, enabling it to command abovemarket prices, and greater profitability (Kotha & Nair 1995;Nair & Filer, 2003). Other researchers have used the margin variable to measure cost efficiency (e.g., Hambrick, 1983;Berman et al, 1999).…”

Cointegration relationships of strategy variables among firms within strategic groups

“…Hence, we examine the validity of the cointegration analysis in this field. We replicate Nair and Filer's (2003) procedures and extend them to four industries in Taiwan to explore the feasibility of this methodology.…”

“…Dranove et al (1998) and Fiegenbaum and Thomas (1995) argue that certain criteria exist for strategic group membership in some industries, which in turn influences variation of individual company's strategy variables. Nair and Filer (2003) first propose the cointegration method for interpreting the long-term dynamic equilibrium among firms in a strategic group. Nair and Filer (2003) utilize data from the Japanese steel industry and successfully identify the long-term dynamic equilibrium relationships among firms.…”

“…Nair and Filer (2003) first propose the cointegration method for interpreting the long-term dynamic equilibrium among firms in a strategic group. Nair and Filer (2003) utilize data from the Japanese steel industry and successfully identify the long-term dynamic equilibrium relationships among firms. These relationships illustrate that adjustment of a firm's strategy variables during a subsequent period will 'converge' or 'diverge' from an equilibrium level within the strategic group.…”