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Erosion, time compression, and self-displacement of leaders in hypercompetitive environments

Author

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  • Gonçalo Pacheco-De-Almeida

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, Stern school of business - NYU - New York University [New York] - NYU - NYU System)

Abstract

This article examines how leader firms should respond to the erosion of competitive advantages caused by rapid imitation and innovation in hypercompetitive environments. On the one hand, shorter-lived advantages induce leaders to develop new advantages faster. On the other hand, hypercompetition also erodes the expected returns from new advantages--reducing leaders' incentives to accelerate investments. Since investing faster also raises costs, this article shows that leaders often prefer to renew competitive advantages more slowly in more hypercompetitive industries--thereby increasing the probability of being displaced by competitors. This phenomenon is dubbed self-displacement. Firms' decision to self-displace themselves from industry leadership with greater probability is deliberate and rational--not a result of leaders' inability to respond to competitive threats, as previously assumed in the literature. This article also shows that leaders' rule of thumb in more hypercompetitive environments should be to accelerate the development of advantages with high competitive value but low market value. This study is based on a theoretical model and numerical analysis grounded on stylized empirical facts that govern industry competitive macrodynamics and firm investment microdynamics in most industries. Because the model builds on empirically observable constructs, its theoretical propositions are amenable to large sample testing.

Suggested Citation

  • Gonçalo Pacheco-De-Almeida, 2010. "Erosion, time compression, and self-displacement of leaders in hypercompetitive environments," Post-Print hal-00576341, HAL.
  • Handle: RePEc:hal:journl:hal-00576341
    DOI: 10.1002/smj.896
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    Citations

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    Cited by:

    1. Giachetti, Claudio & Li Pira, Stefano, 2022. "Catching up with the market leader: Does it pay to rapidly imitate its innovations?," Research Policy, Elsevier, vol. 51(5).
    2. Dawid, Herbert & Keoula, Michel Y. & Kopel, Michael & Kort, Peter M., 2023. "Dynamic investment strategies and leadership in product innovation," European Journal of Operational Research, Elsevier, vol. 306(1), pages 431-447.
    3. Carlos S Baradello & Andrea Salazzaro, 2012. "The Role of Imitation in Global High-Tech Product Development," Symphonya. Emerging Issues in Management, University of Milano-Bicocca, issue 1 Innovat, pages 57-71.
    4. Yang, Wei & Meyer, Klaus E., 2015. "Competitive dynamics in an emerging economy: Competitive pressures, resources, and the speed of action," Journal of Business Research, Elsevier, vol. 68(6), pages 1176-1185.
    5. Brian Wu & Zhixi Wan & Daniel A. Levinthal, 2014. "Complementary assets as pipes and prisms: Innovation incentives and trajectory choices," Strategic Management Journal, Wiley Blackwell, vol. 35(9), pages 1257-1278, September.
    6. Mary Beth Rousseau & Blake D. Mathias & Laura T. Madden & T. Russell Crook, 2016. "Innovation, Firm Performance, And Appropriation: A Meta-Analysis," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 20(03), pages 1-29, April.
    7. Dean A. Shepherd & Trenton A. Williams, 2023. "Different response paths to organizational resilience," Small Business Economics, Springer, vol. 61(1), pages 23-58, June.
    8. Neeraj Singhal, 2020. "Strategic Responses During Crisis: An Empirical Investigation," Metamorphosis: A Journal of Management Research, , vol. 19(2), pages 121-128, December.
    9. Kim Wang, 2017. "Technology Deployment By Late Movers," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 21(04), pages 1-25, May.
    10. Jeffrey E. Stambaugh & John Martinez & G. T. Lumpkin & Niyati Kataria, 2017. "How well do EO measures and entrepreneurial behavior match?," International Entrepreneurship and Management Journal, Springer, vol. 13(3), pages 717-737, September.
    11. Rahul Kapoor & Shiva Agarwal, 2017. "Sustaining Superior Performance in Business Ecosystems: Evidence from Application Software Developers in the iOS and Android Smartphone Ecosystems," Organization Science, INFORMS, vol. 28(3), pages 531-551, June.
    12. Jeffrey E. Stambaugh & John Martinez & G. T. Lumpkin & Niyati Kataria, 0. "How well do EO measures and entrepreneurial behavior match?," International Entrepreneurship and Management Journal, Springer, vol. 0, pages 1-21.
    13. de Rassenfosse, Gaétan & Jaffe, Adam B., 2018. "Econometric evidence on the depreciation of innovations," European Economic Review, Elsevier, vol. 101(C), pages 625-642.
    14. Gaétan de Rassenfosse & Adam B. Jaffe, 2017. "Econometric Evidence on the R&D Depreciation Rate," NBER Working Papers 23072, National Bureau of Economic Research, Inc.

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