Competitive repertoire complexity: Governance antecedents and performance outcomes

Abstract

Research summary: Past inquiry has found that implementing complex competitive repertoires (i.e., diverse and dynamic arrays of actions) is challenging, but firms benefit from doing so. Our examination of the antecedents and outcomes of complex competitive repertoires develops a more nuanced perspective. Data from 1,168 firms in 204 industries reveal that complexity initially harms performance, but then becomes a positive factor, except at high levels. We use agency and tournament theories, respectively, to examine how key governance mechanisms—ownership structure and executive compensation—help shape firms' competitive repertoires. We find that the principals of agency theory and the pay gap of tournament theory are both important antecedents of competitive complexity, and an interaction exists wherein firms build especially complex repertoires when both influences are strong. Managerial summary: In boxing, the fight does not always go to the bigger or stronger person, or even to whomever throws the most punches—the fight is sometimes won by the boxer who is unpredictable, such as throwing an uppercut when the opponent expected a right hook. Similarly, when companies compete in the marketplace, advantage is afforded not only to those with more resources or who engage in more competitive activity, but also to those whose actions are unpredictable. In this study, we develop the notion of “competitive complexity,” which describes the diversity and changing nature of a company's competitive moves. Implementing complex competitive repertoires can be painful in the short term but, if done correctly, can help company performance in the long run. Copyright © 2016 John Wiley & Sons, Ltd.

Top Management Team Heterogeneity, Group Cohesion, Competitive Repertoire Complexity and Performance: Evidence from Kenyan Food and Beverage Manufacturers

“…Unless the TMT was able to work together, differences in the TMT characteristics and deployment of a large number of various competitive actions would impair firm performance. This was also consistent with Connelly et al (2017) who found that competitive repertoire complexity was harmful to performance in the short term and could overburden the TMT in the long term.…”

“…In this case the range of moves is wide and the actions are not concentrated to any type of actions. Connelly, Tihanyi, Ketchen, Carnes and Ferrier (2017) noted that as competition progresses, organizations find it necessary to engage opponents with a complicated array of moves. This allows the firm to counter an evolving environment in a better manner and gain competitive advantage.…”

How Competitive Action Mediates the Resource Slack–Performance Relationship: A Meta‐Analytic Approach

“…Research on repertoires provides a 'holistic depiction of how characteristics of a firm's body of competitive activity allow it to compete effectively or cause it to struggle in the marketplace' (Connelly et al, 2017(Connelly et al, , p. 1153. From prior work examining a variety of antecedents to competitive repertoires, as well as performance outcomes (Ferrier and Lee, 2002;Gnyawali et al, 2006;Ndofor et al, 2011;Yu et al, 2009), two highly studied attributes of competitive repertoires have emerged: competitive aggressiveness and competitive complexity (Connelly et al, 2017;Ferrier, 2001).…”

Placing their bets: The influence of strategic investment on CEO pay‐for‐performance

“…Quasi-indexing institutional investors reside somewhere between dedicated and transient investors along these three factors. We focus on ownership by dedicated and transient institutional investors because dedicated investors might use their influence to rein in CEO compensation and transient investors could allow for more lenient compensation policies (Connelly, Tihanyi, Ketchen, Carnes, & Ferrier, 2017). We calculate the percentage of all firm shares held by dedicated and transient investors to measure dedicated institutional ownership and transient institutional ownership.…”