Competitive enterprise: Using power cycle theory to estimate firm's relative capabilities and market response

This dissertation uses international relations theory of the Power Cycle to estimate competitiveness and market influence of a firm. Competitiveness represents a ratio of aggregate capabilities of a firm to aggregate capabilities of the sector. Influence represents a ratio of a market value of a firm to a market value of the sector. The principal hypotheses of this study are that indices of firm's competitiveness and influence are cyclical, and neither relative capabilities nor relative market value can be maintained at fixed levels. Additionally, firm's influence may not correspond to a firm's competitiveness, resulting in either a positive or a negative gap.; This study also examines the lag between change in firm's competitiveness and change in firm's influence, the similarity between trends in firm's relative and absolute capabilities, and the impact of the occurrence of points of minimum, maximum, and inflection on firm's competitiveness cycle (critical points) on increase in firm's diversifiable risk. The analysis is conducted by "translating" the theory of the Power Cycle into the field of economics, collecting empirical data for the case study from primary U.S. aerospace defense manufacturers, and testing the data using statistical and econometric techniques.; Cyclicity in firm's competitiveness and influence is found. There is also an indication of the occurrence of statistically significant influence-competitiveness gap. However limited, these findings add to understanding of competitiveness dynamics and the debate whether a firm should maximize capabilities or market value. Ideally the two should overlap. In practice, it may become up to a firm to set the desired mix.; The lag between change in firm's competitiveness and change in firm's influence is not found. There is also no statistically significant difference between trends in firms' relative and absolute capabilities, or statistically significant relationship between the occurrence of critical points and increase in firm's diversifiable risk. Two conclusions are drawn. First, parallel trends in firms' relative and absolute capabilities indicate a mature, stable sector; deviating trends indicate a sector that is rapidly growing or declining. Second, firms react to change in competitive environment faster than states. The directions for further research include expanding analysis to additional industries, applying alternative curve-fitting algorithms, and using quarterly data.