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Do competitors respond to capacity changes? Evidence from U.S. manufacturers

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Listed:
  • Rajat Mishra

    (Stephen F. Austin State University)

  • Randy Napier

    (The University of Texas at Arlington)

  • Mahmut Yasar

    (The University of Texas at Arlington)

Abstract

The dynamics of strategic response among competing firms have been widely studied in strategic management literature—but this topic remains largely unaddressed in operations management. We develop and empirically test a competitive tactical response (CTR) framework for understanding action and reaction cycles. We use archival financial statement data on U.S. manufacturing companies from the COMPUSTAT data base for the years from 1987 to 2015 to investigate competitive responses to capacity decisions between market-leading firms and their principal competitors. We perform regression analysis on forty industries in which a market share leader and a principal challenger could be identified. This yielded 5355 observations lagged by one year from each focal firm’s capacity action to the competitor’s response. We find support for the hypothesis that the rival firm’s capacity actions influence the competitor’s capacity decisions. We did not find support for the hypotheses that the rival firm’s capacity response is moderated by industry growth, leader-challenger market share gap, or industry concentration. This research extends the study of dynamic competitive response to tactical operational decisions, and informs management practice by providing insight into the potential reaction of competitors to a focal firm’s capacity decisions.

Suggested Citation

  • Rajat Mishra & Randy Napier & Mahmut Yasar, 2019. "Do competitors respond to capacity changes? Evidence from U.S. manufacturers," Operations Management Research, Springer, vol. 12(3), pages 159-172, December.
    • Handle: RePEc:spr:opmare:v:12:y:2019:i:3:d:10.1007_s12063-019-00145-9
    DOI: 10.1007/s12063-019-00145-9
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    Cited by:

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