The Impact Of Multimarket Contact On New Market Entry:the Evidence From Budget Hotels Industry

Traditional competitive strategy research focus on the impact of industry characteristics and intracompany resource characteristics on the establishment of company's sustainable competitive advantage and strategy is regarded as long-term endeavor and commitment.However,with the development of economy and society,interfirm rivalry is intensifying.It is quite difficult for a company to establish long-term and sustainable competitive advantage and a company's competitive advantage is closely related to the consequence of the company's direct competition with its rivals in the short run.Therefore,it is vital significant to analyze the competitive interactions between a company and its rivals in multiple markets and discuss interfirm competitive landscape and strategic interdependence relationship.These are the focus of attention of multimarket contact research.The industry of Chinese budget hotels has experienced rapid expansion and development in recent years.The competitive landscape has been going through constantly changing.Numerous budget chain brand hotels encounter and compete with each other in various geographic markets,which indicates the phenomenon of multimarket competition is obvious.This paper choose JINJIANG INN,HOME INN and HANTING INN these three representative enterprises of Chinese budget hotel industry as research object and the year 2007-2014 as studying period.We choose 285 prefecture-level cities as geographic markets and define company-market level as the analysis level of multimarket contact.We use Cox proportional hazard regression model to investigate the impact of the degree of multimarket contact among firms within the budget hotels industry on companies' initiating strategic actions of entering new markets.The empirical results show that the relationship between the degree of multimarket contact and new market entry is presented as an inverted U-shape curvilinear relationship.When the degree of multimarket contact among companies is relatively low,the likelihood of company initiating new market entry actions will rise with the increase of the degree of multimarket contact among each other.In this stage,the leading function is that company builds footholds in rivals' markets and broaden the source of income and acquire more competitive intelligence of rivals.This process is also the stage that multimarket contact induces the amplification of competitive intensity among companies.However,when the degree of multimarket contact reach a relatively high level,the likelihood of company initiating new market entry actions will decline with the degree of multimarket contact continue to increase.In this stage,the leading function is the strategic deterrence that companies each other have abilities to implement retaliation in multiple markets,which leads to the mutual forbearance of each other.This process is the stage that multimarket contact induces the decline of competitive intensity among companies.The paper also introduces market concentration and sphere of influence these two moderating variables.It is found that market concentration strengthens the positive effect that multimarket contact facilitating new market entry and weakens the negative effect that multimarket contact inhibiting new market entry and causes the highest level of inverted-U shape curve to ascend.The sphere of influence weakens the positive effect that multimarket contact facilitating new market entry and strengthens the negative effect that multimarket contact inhibiting new market entry and causes the highest level of inverted-U shape curve to decline.This research has some guiding significance for senior decision makers of budget hotels.The paper demonstrates that a company can take advantage of new market entry this kind of strategic action to structure multimarket strategic interdependent relationships with its rivals,thereby refrain from fierce competition with rivals and seek for possible tacit collusion with rivals.