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Competitors matter: How competitors' actions moderate the influence of firm profitability on the prioritization between growth and efficiency increase
Author(s) -
Hutzschenreuter Thomas,
Borchers S. Alexander,
Harhoff PhilippaLuisa
Publication year - 2021
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3238
Subject(s) - competitor analysis , profitability index , promotion (chess) , business , industrial organization , prioritization , product (mathematics) , quality (philosophy) , marketing , microeconomics , economics , finance , mathematics , process management , philosophy , geometry , epistemology , politics , political science , law
Firms have been shown to prioritize between growth and efficiency increase sequentially depending on their level of profitability. Adding arguments from the attention‐based view to this discussion, we hypothesize that actions of competitors in the marketplace could moderate this relationship. Using data from business simulations, we specifically test whether the influence of firm profitability on the prioritization decision varies with changes in competitor products' pricing, promotion, and quality. Our analysis reveals that product promotion intensifications of competitors strengthen the positive relationship between firm profitability and the prioritization of growth relative to efficiency increase, whereas product price reductions weaken this relationship.