Masters of War: Rivals' Product Innovation and New Advertising in Mature Product Markets

Fosfuri, Andréa; Giarratana, Marco S.

doi:10.1287/mnsc.1080.0939

Cited by 128 publications

(89 citation statements)

References 48 publications

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“…By exploiting the information in the completed transactions and systematically analyzing how these transactions differ from welldefined counterfactuals, our approach makes it possible to estimate the relative importance of various drivers of value creation. While prior work, such as Fosfuri and Giarratana (2009), has focused on the effect of competitive actions (e.g., advertising, product introduction) on value capture by an individual firm (e.g., Tobin's Q) we provide a step forward toward fully decomposing the causal path going from firm investment to firm profit via value creation.…”

Section: Implications For Empirical Work In Value-based Strategiesmentioning

confidence: 99%

Estimating Value Creation from Revealed Preferences: Application to Value-Based Strategies

Chatain

Mindruta

2016

SSRN Journal

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Research summary: We develop and apply a new set of empirical tools consistent with the tenets of valuebased business strategies, leveraging the principle that "no good deal comes undone" and the methods of revealed preferences, to empirically estimate drivers of value creation. We demonstrate how to use these tools in an analysis of value creation in buyer-supplier relationships in the UK corporate legal market. We show that our approach can uncover evidence of subtle mechanisms that traditional methods cannot easily distinguish from each other. Furthermore, we show how the estimates can be used as parameters of biform games for outof-sample analyses of strategic decisions. With readily available data on relationships between firms, this approach can be applied to many other contexts of interest to strategy researchers.Managerial summary: Managers need to understand the drivers of value creation for customers in order to make competitive positioning decisions and understand when they can capture value under competition. However, estimates of the relative importance of each driver are typically difficult to obtain. In this article, we help remedy this problem by demonstrating a novel method that obtains estimates of the contribution of various drivers of value creation from commonly available data of buyer-supplier relationships. These estimates can then be used to inform the strategy-making process. Research abstractWe develop and apply a new set of empirical tools consistent with the tenets of value-based business strategies, leveraging the principle that "no good deal comes undone" and the methods of revealed preferences, to empirically estimate drivers of value creation. We demonstrate how to use these tools in an analysis of value creation in buyer-supplier relationships in the UK corporate legal market. We show that our approach can uncover evidence of subtle mechanisms that traditional methods cannot easily distinguish from each other. Furthermore, we show how the estimates can be used as parameters of biform games for out-of-sample analyses of strategic decisions. With readily available data on relationships between firms, this approach can be applied to many other contexts of interest to strategy researchers.Word count: 125 words.Keywords: value-based strategy, revealed preferences, cooperative game theory, buyer-supplier relationships, client-specific economies of scope Managerial abstractManagers need to understand the drivers of value creation for customers in order to make competitive positioning decisions and understand when they can capture value under competition. However, estimates of the relative importance of each driver are typically difficult to obtain. In this paper, we help remedy this problem by demonstrating a novel method that obtains estimates of the contribution of various drivers of value creation from commonly available data of buyer-supplier relationships. These estimates can then be used to inform the strategy-making process.Word count: 84 words.3

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Section: Implications For Empirical Work In Value-based Strategiesmentioning

confidence: 99%

Estimating Value Creation from Revealed Preferences: Application to Value-Based Strategies

Chatain

Mindruta

2016

SSRN Journal

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“…First, firms can induce greater per capita consumption of their products within their existing customer base (Chaudhuri & Holbrook, 2001;Fosfuri & Giarratana, 2009). This may happen by encouraging the purchase of greater quantities of their products or through the creation of new usage occasions that increase consumption frequency.…”

Section: Channels Of Market Share and Market Size Dynamicsmentioning

confidence: 99%

“…To capture how these processes influence firm performance, research has been recently fuelled by perspectives on market size and market share dynamics (Fosfuri & Giarratana, 2009;Mahajan, Sharma, & Buzzel, 1993;Nguyen & Shi, 2006). While market size dynamics involve the creation of value with low competitive aggressiveness, market share dynamics are more targeted to direct competition, as firms expand their boundaries by stealing part of their rivals' business (Lumpkin & Dess, 1996;Miller, 1993).…”

Section: Introductionmentioning

confidence: 99%

“…Given the importance of disentangling strategic moves associated with market share and market size effects, a recent stream of research has started to explore these issues (Fosfuri & Giarratana, 2009;Eaton, Kortum, & Kramarz, 2011;Cennamo & Santaló, 2013). Our study goes in this direction.…”

Section: Introductionmentioning

confidence: 99%

“…Few studies has accomplished this task; notable exceptions are Fosfuri & Giarratana (2009), who investigate the relationship between rivals' product introductions and number of new advertising campaigns in a duopoly case and Eaton et al (2011) who analyze how firms' domestic sales and market share relate to their international market activity. We add evidence from a more competitive sector with several firms that show heterogeneity in their product portfolio composition and advertising postures and we focus on an unexplored combination between product specialization and brand breadth.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Product and Marketing Actions in a Competitive Scenario

Giarratana

Perri

2014

SSRN Journal

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We analyze product and marketing actions and their consequences on firm competitive outcomes. These actions are investigates in relative terms compared to a firm's direct competitors. Our results shed new light on how a firm's choices regarding product portfolio and marketing postures affect its performance, while accounting for competitive conditions in the external environment. The theory is tested using data from the US apparel industry.

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The cost of integrating external technologies: Supply and demand drivers of value creation in the markets for technology

Ceccagnoli

Jiang

2012

Strategic Management Journal

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A classic question faced by technology suppliers and buyers is whether to compete in the product markets or to cooperate through licensing. We address this question by examining an important, demand-side barrier to licensing-the buyers' cost of integrating a licensed technology. We argue that this cost can be affected by suppliers' knowledge transfer capabilities, buyers' absorptive capacity, and the cospecialization between R&D and downstream activities in the buyers' industries. Following this argument and a stylized bargaining model, we hypothesize that the supplier's knowledge transfer capability stimulates licensing. Moreover, the importance of this capability increases when licensing to industries where potential buyers have weak absorptive capacity or R&D and downstream activities are cospecialized. We find support for our hypotheses using a panel dataset of small 'serial innovators.' †: Controlled for by including the time averages of the time varying explanatory variables."." means the corresponding variable was dropped from estimation because of colinearity. The colinearity occurred because in the estimation we used the dummy form of the corresponding variables (1 if the corresponding variable is above the sample medium, and 0 if otherwise). When we use the continuous form of the corresponding variables, the results remain qualitatively unchanged.

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Masters of War: Rivals' Product Innovation and New Advertising in Mature Product Markets

Cited by 128 publications

References 48 publications

Estimating Value Creation from Revealed Preferences: Application to Value-Based Strategies

Estimating Value Creation from Revealed Preferences: Application to Value-Based Strategies

Product and Marketing Actions in a Competitive Scenario

The cost of integrating external technologies: Supply and demand drivers of value creation in the markets for technology

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