Rivalry Between Multinational Enterprises: An Event History Approach

Abstract

Our study investigates rivalry between multinational enterprises (MNEs) in host country markets. Drawing on the awareness-motivation-capability perspective, we show how the speed of an MNE's response to a rival's attack is influenced by resourcerelated factors, including distance, government constraints, and subsidiary control, and by market-related factors, including initiating country importance, location of the response in the initiating country, and multimarket contact. We provide a new conceptualization and empirical approach for studying rivalry between MNEs. Additionally, our theory and evidence imply that important constraints on MNE actions in host country markets go well beyond the constraints faced in domestic competition.

Competing in (and out of) transition economies

“…The assumption seems to suggest that firms-foreign or localstrategically respond to the shifts in institutional transitions separately without considering the dynamics that are pervasive in the competition between foreign and local rivals (Peng, Tan, & Tong, 2004). This view is inconsistent with the competitive dynamics literature that focuses on the dynamic interaction between rivals (Chen & Miller, 1994;D'Aveni, 1994;Smith, Grimm, & Gannon, 1992;Yu & Cannella, 2007). Thus, we endeavor to bring together the much-needed competitive dynamics perspective to the research on strategic choices in transition economies.…”

“…Competitive pressures are the main motivation sources to respond (Miller & Chen, 1996). Finally, a firm needs to have capabilities that enable actions to gain a competitive advantage against its rivals (Ndofor et al, 2011;Yu & Cannella, 2007). In short, awareness, motivation, and capabilities must co-exist in order to respond to competitive moves and formulate counter-movers.…”

“…Response is "a counteraction taken by a competing firm to defend or improve its relative position" (Chen et al, 1992: 440). The AMC framework suggests that competing firms will respond to competitive actions only if they are aware of these actions and have the motivation and capabilities to respond (Smith et al, 2001;Yu & Cannella, 2007). Awareness is the capacity of the firm to understand the consequences of its own and its rivals' actions.…”

“…The AMC framework is one of the most widely used frameworks in competitive dynamics (Chen, 1996;Ferrier, 2001;Ferrier, Smith, & Grimm, 1999;Meyer & Sinani, 2009;Yu & Cannella, 2007). Competitive actions are "externally directed, specific, and observable competitive moves initiated by a firm to enhance its competitive position" (Ferrier, 2001: 859).…”

“…Building on these insights, competitive dynamics research focuses on competitive actions and reactions (Smith et al, 1991;Smith, Ferrier, & Ndofor, 2001). However, thus far, most research on competitive dynamics has been limited to firms in developed economies with relatively stable institutional contexts (Chen, Smith, & Grimm, 1992;Smith et al, 1991;Yu & Cannella, 2007). In addition to the general paucity of competitive dynamics research in transition economies, the limited number of studies typically examines cross-sectional data and hence lacks a much-needed dynamic interaction dimension (Chang & Park, 2012).…”