The Role Of Strategic Similarity In The Crisis Spillover Effects

When a crisis occurs, not only the focal firm suffers, but firms in the same industry are affected to different extents. From the perspective of strategic groups, we explored the mechanism of crisis spillover effects based on the stakeholder theory, classification theory and competition theory. This paper mainly answered the following two questions.First, what is the impact of strategic similarities between target and focal firms on changes in post-crisis performance of the target firms? On the one hand, stakeholders classify the target firms based upon their perceived similarity in core attributes with the focal firm. Those who share more strategic similarities are more likely to be classified into the same category with the damaged organization and be penalized by the stakeholders, which causes the contagious effects. On the other hand, firms within the same strategic group are expected to have similar markets and resources and compete intensely against each other. When a crisis occurs to one organization, firms within the same strategic group will get more benefits of competition. In this paper, we examine the dominant effects of the strategic similarities.Second, how is the above relationship moderated by the market position of the focal firm? On the one hand, firms in higher market position have more influence and social awareness. They are usually imitated by firms who belong to the same strategic group. So when a crisis occurs to one organization in high market position, stakeholders have more reason to believe that firms with the same strategic group are also facing the same situation, which enhances the negative spillover effects of a crisis. On the other hand, crisis leads to target customers of the focal firm transferring to other competitors. This effect is intensified when crisis occurs to a firm in higher market position. To firms who belong to the same strategic group, it is good news which means broader market share release. In this paper, we examine the moderation mechanism for the market position of the focal firm.This study examined a longitudinal sample of aviation accidents in the U.S. aviation industry from1978when the U.S. relaxed the control of civil aviation. Using the multiple hierarchical regression method, this study found the coexistence of competition effect and contagion effect, and the final performance for the negative spillover. The negative effects increased with the similarity between the focal firm and the rivals, but partially offset by the increasing market share of the focal firm which lead to countervailing competitive effects.