Are competitive reactions changing over time?

Abstract

Purpose - The purpose of this paper is to answer why the predominant competitive reaction (CR) is non-reactive one in the previous literature by showing that some fluctuations of CR may average out to zero. Design/methodology/approach - This research proposes a model for measuring CR volatility to examine whether a firm's CR differs over time. A rolling-windows time series approach is applied to three different data sets. Findings - The results show that firms indeed react to each other, but the types of reactions vary over time, thereby creating a misunderstood "no-reaction" in the literature. Practical implications - This study may help understand the gap between academic findings (i.e. no-reaction) and managerial reality (i.e. marketing wars). Originality/value - Although a firm's CR should be understood as a series of managerial actions that may change over time, the extant literature has not considered this temporal variation of CR. This paper provides a systematic review of the empirically based literature and provides insights into the importance of strategic variation in competitive dynamics.