Strategic Entry Before Demand Takes Off

Qiaowei Shen () and J. Miguel Villas-Boas
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Qiaowei Shen: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Management Science, 2010, vol. 56, issue 8, 1259-1271

Abstract: In developing industries, firms have to decide whether and when to enter the market depending on the state of demand, existing firms in the industry, and the firm's capabilities. This paper investigates a model of increasing demand, in which firms decide when to enter the market anticipating the strategic behavior of other potential entrants, and the effects of entry on future potential entrants. This paper shows that the ability of early entry to deter future competitors' entry leads firms to enter the market at a rate faster than demand is expanding. If there is the potential for many firms to enter the market, firms may be less likely to enter because of future competitor entry to correct any market opportunities. If firms enter the market depending on their fixed capabilities rather than depending on the firm's circumstances at each moment in time, firms end up entering the market at a faster rate in the early periods.

Keywords: industry dynamics; strategic entry; competition (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:56:y:2010:i:8:p:1259-1271

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