Multimarke competitive context, differentiation, and performance: The US automotive industry over time

Most research investigations of differentiation as a dominant competitive strategy have been conducted in a single-market context, with the market considered as synonymous with industry. It remains unclear as to how firms engage in differentiation as competition shifts from the single-market to multimarkets. Further, it is also not known if the multimarket competitive context affects differentiation in any particular ways.;The research contributes to the literature at the intersection of competitive strategy and competitive dynamics. I find that under multimarket competition, firms employ a basket of differentiation strategies against each other at the inter-firm dyad level. Moreover, differentiation is also affected by the two characteristics associated with the multimarket competitive context.;Overall, my study shows that (i) differentiation at the inter-firm dyad level in the US automotive industry had accentuated over time, reflecting an upward spiraling curve; (ii) reciprocal multimarket relationships led to higher differentiation compared to non-reciprocal multimarket relationships; and (iii) high levels of differentiation were associated with correspondingly high levels of performance at the inter-firm dyad level. In effect, this research establishes that a hypercompetitive shift had occurred in the industry over 1993-99. Firms were engaged in intense differentiation efforts against each other, as they competed as dyads across the product segment-based multimarkets. By doing so, they were able to achieve associated performance benefits.;Keywords: differentiation, performance, inter-firm dyad level, multimarket competitive context, strategic importance of the focal market, and reciprocal versus non-reciprocal multimarket relationships.;Through this research, I investigate the impact of a product segment-based multimarket competitive context on differentiation and performance. The research is conducted at the inter-firm dyad level in the US automotive industry over 1993 to 1999---a seven-year timeframe measured as four bi-annual waves of longitudinal data. In studying the evolution of differentiation, I also include in my model the contingent impact of two specific multimarket contextual factors: (i) the strategic importance of the focal market, and (ii) the reciprocal versus non-reciprocal nature of multimarket relationships. The conceptual framework is enriched by juxtaposing insights from two complementary views of the market---as rational-economic entities versus social constructions. Methodologically, the study combines two powerful techniques of longitudinal data analysis (latent growth curve modeling with random coefficient modeling), to test alternate sets of hypotheses.