How Does Regulation Impact Strategic Repositioning by Firms Across Submarkets? Evidence from the Indian Pharmaceutical Industry

Ajay Bhaskarabhatla (), Priyatam Anurag (), Chirantan Chatterjee () and Enrico Pennings
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Ajay Bhaskarabhatla: Erasmus School of Economics, Erasmus University Rotterdam, 3000 DR Rotterdam, Netherlands
Priyatam Anurag: Indian Institute of Management Lucknow, Uttar Pradesh 226013, India
Chirantan Chatterjee: Indian Institute of Management Ahmedabad, Ahmedabad, Gujarat 380015, India

Strategy Science, 2021, vol. 6, issue 3, 209-227

Abstract: We study coercive institutional pressures as an impetus for firms to reposition across intraindustry boundaries. Integrating the literatures on strategic repositioning and submarkets, we predict that firms respond to regulations limiting the profitability of a submarket by repositioning and shifting demand to proximate, unregulated submarkets within the industry. We expect repositioning to be more pronounced for firms with greater ability to shift demand across submarkets. Evidence from pharmaceutical firms’ responses to partial price regulation in India supports our hypotheses. Repositioning firms increase prices and sales in the unregulated submarket, consistent with a Dorfman–Steiner-type model of endogenous and costly demand shifting toward the unregulated submarket. We contribute to the literature on strategic repositioning and highlight challenges of regulating industries with internal boundaries and insulated niches.

Keywords: strategic repositioning; organizational economics; competitive strategy (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:orstsc:v:6:y:2021:i:3:p:209-227

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