The role of irreversibilities in competitive interaction: behavioral considerations from organization theory

Ming-Jer Chen, S. Venkataraman, Sylvia Sloan Black and Ian C. MacMillan
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Ming-Jer Chen: Darden Graduate School of Business, University of Virginia, USA, Postal: Darden Graduate School of Business, University of Virginia, USA
S. Venkataraman: Darden Graduate School of Business, University of Virginia, USA, Postal: Darden Graduate School of Business, University of Virginia, USA
Sylvia Sloan Black: School of Business and Economics, North Carolina Agricultural and Technical State University, USA, Postal: School of Business and Economics, North Carolina Agricultural and Technical State University, USA
Ian C. MacMillan: The Wharton School, University of Pennsylvania, USA, Postal: The Wharton School, University of Pennsylvania, USA

Managerial and Decision Economics, 2002, vol. 23, issue 4-5, 187-207

Abstract: Using behavioral insights from organization theory, this paper examines the significance of the irreversibility of an attacker's competitive move in interfirm competitive interaction. The study suggested that irreversibility is a multifaceted construct that is broadly composed of two dimensions: internal commitment (which is based on organizational inertia) and public commitment (which is based on the degree of publicity or public exposure received). It hypothesized that these two irreversibilities would have opposite effects on competitors' responses. The hypotheses were tested with data on competitive moves and countermoves exchanged by major US airlines. As predicted, the results reveal that internal commitment tended to reduce the likelihood of response, increased the response delay, and decreased the probability that the initial move will be matched; on the contrary, the impacts of public commitment were exactly the opposite. Copyright © 2002 John Wiley & Sons, Ltd.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:23:y:2002:i:4-5:p:187-207

DOI: 10.1002/mde.1061

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