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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
    DOI: 10.1287/mnsc.1100.1190
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    References listed on IDEAS

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    2. Pavan, Giulia & Pozzi, Andrea & Rovigatti, Gabriele, 2020. "Strategic entry and potential competition: Evidence from compressed gas fuel retail," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    3. Bryan Bollinger & Ulrich Doraszelski & Kenneth L. Judd & Ryan C. McDevitt, 2024. "The timing and location of entry in growing markets: subgame perfection at work," RAND Journal of Economics, RAND Corporation, vol. 55(2), pages 169-198, June.
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    5. Fay, Scott & Feng, Cong & Patel, Pankaj C., 2022. "Staying small, staying strong? Retail store underexpansion and retailer profitability," Journal of Business Research, Elsevier, vol. 144(C), pages 663-678.
    6. Li, Quan & Zha, Yong & Dong, Yu, 2023. "Subsidize or Not: The Competition of Credit Card and Online Credit in Platform-based Supply Chain System," European Journal of Operational Research, Elsevier, vol. 305(2), pages 644-658.
    7. Benson Tsz Kin Leung & Pinar Yildirim, 2020. "Competition, Politics, & Social Media," Papers 2012.03327, arXiv.org.
    8. Qiaowei Shen, 2014. "A Dynamic Model of Entry and Exit in a Growing Industry," Marketing Science, INFORMS, vol. 33(5), pages 712-724, September.
    9. Jason R. Blevins & Ahmed Khwaja & Nathan Yang, 2018. "Firm Expansion, Size Spillovers, and Market Dominance in Retail Chain Dynamics," Management Science, INFORMS, vol. 64(9), pages 4070-4093.
    10. Alina Sorescu & Sorin M. Sorescu & Will J. Armstrong & Bart Devoldere, 2018. "Two Centuries of Innovations and Stock Market Bubbles," Marketing Science, INFORMS, vol. 37(4), pages 507-529, August.
    11. A. Ronald Gallant & Han Hong & Ahmed Khwaja, 2018. "The Dynamic Spillovers of Entry: An Application to the Generic Drug Industry," Management Science, INFORMS, vol. 64(3), pages 1189-1211, March.
    12. Jörg Claussen & Christian Essling & Christian Peukert, 2018. "Demand variation, strategic flexibility and market entry: Evidence from the U.S. airline industry," Strategic Management Journal, Wiley Blackwell, vol. 39(11), pages 2877-2898, November.
    13. Mushegh Harutyunyan & Chakravarthi Narasimhan, 2024. "Don’t Hurry, Be Happy! The Bright Side of Late Product Release," Marketing Science, INFORMS, vol. 43(6), pages 1188-1203, November.
    14. Yanjie Wu & Sujuan Wang, 2021. "Sustainable Market Entry Strategy under a Supply Chain Environment," Sustainability, MDPI, vol. 13(6), pages 1-15, March.
    15. Yuxin Chen & Ozge Turut, 2018. "Entry deterrence/accommodation with imperfect strategic thinking capability," Quantitative Marketing and Economics (QME), Springer, vol. 16(2), pages 175-207, June.

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