Essays on Competitive Dynamics: Strategic Groups, Strategic Moves and Performance in the Global Insurance Industry

Ever since the early days of research into the functioning of economic markets (Smith, 1776), there has been a vibrant academic debate on the role of competition. While this debate has traditionally been led by economists and centered on the welfare effects of competition (Hayek, 1968; Schumpeter, 1934, 1943), strategic management scholars turned the focus of the debate toward individual firms, and their competitive strategies and advantages (Porter, 1980, 1985). Even though they initially adopted economic ideas, management scholars soon developed their own perspectives on interfirm rivalry that were better suited to explain performance differences between firms (Baum & Korn, 1999; Chen, 1996; Hunt, 1972). These theories and related work became known as "competitive dynamics research" within the strategic management discipline (Ketchen, Snow, & Hoover, 2004).

Competitive dynamics research comprises several sub-streams – such as competitive action-response, co-opetition, multipoint competition and strategic groups (Ketchen et al., 2004). These different areas of interest are united by their common empirical focus on the real competitive behavior of firms. Further, they consider the competitive action as the constituting element of competitive behavior and thus as the vehicle through which firms engage in rivalry, reposition themselves, and eventually create competitive advantages (Chen, 2009b; Chen, Smith, & Grimm, 1992; Ferrier, Smith, & Grimm, 1999).

With its distinct focus, competitive dynamics research produced various important insights into the causes and consequences of competitive behaviors. However, the research strand also faces some challenges that go beyond the research gaps within its sub-streams (Ketchen et al., 2004; Smith, Ferrier, & Ndofor, 2001b). In light of its past successes and an increasing degree of differentiation in the questions competitive dynamics research asks, the future progress of competitive dynamics research requires novel dynamic theories, innovative empirical strategies, and methods that are better suited to capture temporal dynamics (Baldwin, 1995; Chen, 2009b; Daems & Thomas, 1994). Furthermore, the progress within several sub-fields of competitive dynamics research is currently impeded by the dominance of certain theoretical paradigms or research practices – such as the focus on firm dyads within the action-response sub-stream. To overcome these challenges, scholars have suggested future research to challenge these dominant theoretical ideas with novel arguments from a wider range of theoretical perspectives (Smith et al., 2001b; Thomas & Carroll, 1994).

The main part of this dissertation consists of three individual studies, which mitigate these overarching issues of competitive dynamics research while addressing distinct research gaps within the field's sub-streams. The dissertation's first study, for example, contrasts the dominant research practice to perceive strategic group dynamics as consequences of industry level events and variations (Mascarenhas, 1989; Zuniga-Vicente, Fuente-Sabaté, & Suarez-Gonzalez, 2004b). The study instead suggests a behavioral theory of a firm's repositionings vis-à-vis its own strategic group that centers on the managerial decision-making process and behavioral biases. The second study contributes to an emergent body of work in the action-response sub-stream of competitive dynamics research (Hsieh & Chen, 2010; Zuchhini & Kretschmer, 2011) that challenges the validity of the dominant research paradigm (i.e., the focus on firm dyads in predicting competitive moves) for markets that are characterized by a large number of rivals. The third study reveals shortcomings in the extant practice of studying competitive actions and underlines that competitive actions should not be studied in isolation but in a manner that considers the interrelationships within action sequences.