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Strategic Entry Before Demand Takes Off

Author

Listed:
  • Qiaowei Shen

    () (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • J. Miguel Villas-Boas

    () (Haas School of Business, University of California, Berkeley, Berkeley, California 94720)

Abstract

In developing industries, firms have to decide whether and when to enter the market depending on the state of demand, existing firms in the industry, and the firm's capabilities. This paper investigates a model of increasing demand, in which firms decide when to enter the market anticipating the strategic behavior of other potential entrants, and the effects of entry on future potential entrants. This paper shows that the ability of early entry to deter future competitors' entry leads firms to enter the market at a rate faster than demand is expanding. If there is the potential for many firms to enter the market, firms may be less likely to enter because of future competitor entry to correct any market opportunities. If firms enter the market depending on their fixed capabilities rather than depending on the firm's circumstances at each moment in time, firms end up entering the market at a faster rate in the early periods.

Suggested Citation

  • Qiaowei Shen & J. Miguel Villas-Boas, 2010. "Strategic Entry Before Demand Takes Off," Management Science, INFORMS, vol. 56(8), pages 1259-1271, August.
  • Handle: RePEc:inm:ormnsc:v:56:y:2010:i:8:p:1259-1271
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    File URL: http://dx.doi.org/10.1287/mnsc.1100.1190
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    References listed on IDEAS

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    Cited by:

    1. Guy Meunier & Jean-Pierre Ponssard & Francisco Ruiz-Alizeda, 2015. "Antitrust Versus Industrial Policies, Entry And Welfare," Working Papers hal-01117091, HAL.

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    Keywords

    industry dynamics; strategic entry; competition;

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