Multimarket Contact Externalities: The Effect of Rivals' Multimarket Contacts on Focal Firm Performance

Jaime Gómez, Raquel Orcos () and Sergio Palomas ()
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Raquel Orcos: Universidad de Zaragoza
Sergio Palomas: Universidad de Zaragoza

No 1302, Working Papers from Departament Empresa, Universitat Autònoma de Barcelona

Abstract: Given that firms develop their activities in a network of multiple players, interfirm rivalry is not only a matter of direct competitors, but also of indirect competition. In spite of this, the literature on competitive dynamics tends to focus on analyzing rivalry as an exclusive function of the competitive relationship between a focal firm and its direct rivals. In this article, we extend competitive dynamics literature by considering how focal firms are affected by the relationships of their rivals with third-pa rty firms. Specifically, we study the effect that the multimarket contacts of rivals produces on the performance of the focal firm. Additionally, we incorporate the idea that there are different strategic options for operating in an industry that affect the intensity of multimarket contact externalities. Our results show that multimarket contact among firms causes externalities that indirectly affect firms that are not directly involved in this competitive relationship. We find that multimarket contact externalities differ between and within strategic groups.

Keywords: Multimarket contact externalities; strategic group; mutual forbearance; rivalry; performance (search for similar items in EconPapers)
Pages: 51 pages
Date: 2013-04, Revised 2013-04
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Published in Working Papers at the Department of Business, April pages 1-52

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http://www.uab.cat/doc/DOC_WP_13_02 Revised version, 2013 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:bbe:wpaper:1302

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