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If Entry Strategy and Money go Together, What is the Right Side of the Coin?

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  • Jean-Philippe Timsit
  • Annick Castiaux

Abstract

The goal of this study is to determine which strategic model, either IO or RBV, allows firms to generate the highest performance on a competitive market. Contrasting with classical studies that mobilize analyses as VARCOMP, we deploy a multi-agent system simulating the behavior of firms adopting RBV or IO strategic models. For an equivalent proportion of both strategic orientations, we study the instant and total performances of the firms on hypercompetitive markets. We show that the performance of best-performing IO firms, measured by the ROA, is higher in the short term, but that RBV firms obtain an average higher sustained performance, in the long term. Moreover, when they are in competition with IO firms on a highly profitable and competitive market, RBV firms which dare to enter such markets obtained generally the highest performance.

Suggested Citation

  • Jean-Philippe Timsit & Annick Castiaux, 2011. "If Entry Strategy and Money go Together, What is the Right Side of the Coin?," Papers 1104.0777, arXiv.org.
  • Handle: RePEc:arx:papers:1104.0777
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    File URL: http://arxiv.org/pdf/1104.0777
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    1. Wernerfelt, Birger & Montgomery, Cynthia A, 1988. "Tobin's q and the Importance of Focus in Firm Performance," American Economic Review, American Economic Association, vol. 78(1), pages 246-250, March.
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