Following or Running Away from the Market Leader? The Influences of Environmental Uncertainty and Market Leadership

Abstract

Competitive dynamics theory suggests that rival firms imitate other competing firms with similar resources to maintain competitive parity while are likely to differentiate from the market leader to avoid its dangerous retaliation. According to neo‐institutional theory, in highly uncertain environments, rivals are likely to imitate the market leader because they assume it possesses superior market knowledge. Combining these two lines of argument, we argue that a rival's decision whether to follow or run away from the market leader depends on environmental uncertainty and market leadership, the latter expressing the extent to which the market leader owns a larger market share vis‐à‐vis the other rivals. The empirical analysis relies on data about the product line strategies of 66 mobile phone vendors in the 1994–2010 period. The results show that when environmental uncertainty is low, the relationship between a firm's market leadership and imitation by its rivals is negative, whereas in conditions of high environmental uncertainty, imitation of the market leader increases with its market leadership.

Information-based imitation of university commercialization strategies: The role of technology transfer office autonomy, age, and membership into an association

“…| S i,t – S j,t− 2 |). We assumed that a smaller absolute deviation between the TTO’s strategy and the strategy of the commercialization leader indicates greater imitation of the leader (Baum et al, 2000; Deephouse, 1999; Giachetti and Torrisi, 2018).…”

“…This variable measures a focal TTO’s size relative to the commercialization leader’s TTO size. Since the leader will be always greater in size by definition (see equation (1)), we expect that the greater the size difference between the leader and the focal TTO, the more the latter will perceive the former to possess more information about how to strategize, and therefore the greater will be the imitation (Giachetti and Torrisi, 2018). We measured this variable as the absolute difference between the log of revenues from spinoffs of the focal TTO and the leader over time.…”

“…First, previous studies have examined imitation by looking at the characteristics of the industry leaders (e.g. their strategy or prestige; Baum et al, 2000; Giachetti and Torrisi, 2018; Haveman, 1993) or the characteristics of the industry (e.g. uncertainty, volatility, information asymmetry; Semadeni and Anderson, 2010) but there is a shortage of studies that look at the characteristics of the followers themselves (Massini et al, 2005).…”

O setor como determinante da estrutura de capital: evidências após as alterações das alíquotas do IPI no Brasil

“…Para Giachetti & Torrisi (2017), em estratégia, o papel de influenciador assumido pela empresa líder do setor muda de acordo com as incertezas do ambiente e com sua visibilidade; por exemplo, o primeiro líder possui um nível diferente de visibilidade que o segundo. Se a liderança e a incerteza são altas, os pares tendem à imitação, mas se a incerteza é baixa, a diferenciação vai ocorrer por propósitos competitivos.…”

The Economies and Diseconomies of Industrial Clustering: Multinational Enterprises versus Uninational Enterprises

“…What is missing from this literature is a good argument for why UNEs would act differently from MNEs. Giachetti and Torrisi (2017) draw from neo-institutional theory and find that all types of firm imitate the market leader in highly uncertain environments. A cluster is such an environment because therein competition tends to be innovation-based with technologies and practises changing rapidly and a cluster is where the market leader is most likely to reside.…”