Creative destruction: An action-based study of market share leaders and challengers

This dissertation explores the phenomenon of 'creative destruction' by examining the pattern of competitive interaction among market share leaders and challengers and its impact on the likelihood of dethronement and market share erosion of the leader. The model draws from theories within IO economics and Austrian economics and builds on recent research in strategic management examining competitive dynamics among rivals.; The data set consists of Leader-Challenger matched pairs which compete in 41 different industries over a 6-year time frame. The competitive actions of both leader and challenger for each industry were extracted through structured content analysis of F&S Predicasts. Event history analysis was used to test hypotheses relating to a range of independent variables including action dynamics between leaders and challengers, slack resources, and industry context.; Results suggest that MSLs which execute more total actions and a broader range of action types than challengers are less likely to experience market share erosion and dethronement. Similarly, MSLs which have faster action response times than challengers are less likely to experience erosion and dethronement. In addition, when MSLs and challengers differ in the types of actions each chooses to implement, MSLs are less likely to experience erosion and dethronement. MSLs which hold greater unabsorbed slack than challengers are less likely to be dethroned. MSLs competing in industries with low barriers to entry and/or high rates of growth are more likely to experience market share erosion and dethronement.; Overall, this research provides new theoretical insight and empirical evidence regarding the relationship between strategic interaction between large firms and the persistence of market share leadership. In addition, it adds richness and depth to existing methods of observing and measuring competitive dynamics. This research also introduces and develops the 'action-based view' of the firm by suggesting that the pattern of rivalrous actions plays a key role in firms' ability to sustain competitive advantage. Finally, this dissertation provides value to practitioners, particularly with respect to links between market share position and competitive activity, action diversity, response timing, and action similarity.