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Our study examines asymmetric rivalry within and between strategic groups defined according to the size of their members. We hypothesize that, owing to several forms of group-level effects, including switching costs and efficiency, strategic groups comprising large firms expect to experience a large amount of retaliation from firms within their group and accommodation from the group comprising …
We develop a technique to assess the impact of changes in mortgage markets on households, exploiting an implication of the permanent income hypothesis: The higher a household's expected future income, the higher its desired consumption, ceteris paribus. With perfect credit markets, desired consumption matches actual consumption and current spending forecasts future income. Because credit market…
Deregulation of geographic restrictions in banking over the past 20 years has intensified both potential and actual competition in the industry. The accumulating empirical evidence suggests that potential efficiency gains associated with consolidating banks are often not realized. We evaluate the impact of this increased competition on the productive efficiency of non-merging banks confronted w…
In this study we examine the changes in executive compensation at the top management team (TMT) level following an environmental shift. Using the context of deregulation in the airline industry, we find that: (1) a dramatic environmental change that heightens managerial discretion leads to greater pay level and performance sensitivity of TMT compensation; and (2) the greater the magnitude of tu…
We investigate how the deregulation of the French banking industry in the 1980s affected the real behavior of firms and the structure and dynamics of product markets. Following deregulation, banks are less willing to bail out poorly performing firms and firms in the more bank-dependent sectors are more likely to undertake restructuring activities. At the industry level, we observe an increase i…
This paper examines the variation in performance of incumbents and entrants following the deregulation of prices and entry in the airline industry. Our approach is similar to earlier studies of interfirm performance heterogeneity across industries. Drawing on theories of industry evolution, we hypothesize that the performance of entrants will have higher variance than incumbents. Further, given…
In deregulated industries former monopolies often adopt asymmetric behaviors: these firms impede the entry of foreign competitors in their home market, especially using defensive political strategies, and, at the same time, aggressively develop international strategies in foreign markets. To account for this behavior, I develop a game theoretic model involving three players: the former monopoly…
The business strategy literature offers apparently opposite views of the ability of vertical integration to cope with the uncertainty related to changing regulatory environments. In this paper, we analyze how the process of retail deregulation affects the comparative efficiency of governance structures, which range on a continuum from fully vertically integrated structures to market transaction…
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