Erosion, Time Compression, and Self-Displacement of Leaders in Hypercompetitive Environments

Gonçalo Pacheco-de-Almeida ()

No 1195, HEC Research Papers Series from HEC Paris

Abstract: This article examines how leader firms should respond to the erosion of competitive advantages caused by rapid imitation and innovation in hypercompetitive environments. On the one hand, shorter-lived advantages induce leaders to develop new advantages faster. On the other hand, hypercompetition also erodes the expected returns from new advantages — reducing leaders’ incentives to accelerate investments. Since investing faster also raises costs, this article shows that leaders often prefer to renew competitive advantages more slowly in more hypercompetitive industries — thereby increasing the probability of being displaced by competitors. This phenomenon is dubbed self-displacement. Firms’ decision to self-displace themselves from industry leadership with greater probability is deliberate and rationa l — not a result of leaders’ inability to respond to competitive threats, as previously assumed in the literature. This article also shows that leaders’ rule of thumb in more hypercompetitive environments should be to accelerate the development of advantages with high competitive value but low market value. This study is based on a theoretical model and numerical analysis grounded on stylized empirical facts that govern industry competitive macrodynamics and firm investment microdynamics in most industries. Because the model builds on empirically observable constructs, its theoretical propositions are amenable to large sample testing.

Keywords: hypercompetition; time compression; sustainable competitive advantage; industry leadership; imitation; innovation (search for similar items in EconPapers)
JEL-codes: M10 M20 M21 O31 O32 O33 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2017-03-24, Revised 2017-03-24
New Economics Papers: this item is included in nep-ino
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2025460 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1195

Access Statistics for this paper

More papers in HEC Research Papers Series from HEC Paris HEC Paris, 78351 Jouy-en-Josas cedex, France. Contact information at EDIRC.
Bibliographic data for series maintained by Antoine Haldemann ().