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Keeping Your Enemies Closer: When Market Entry as an Alliance with Your Competitor Makes Sense

Author

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  • C. Jeffrey Cai

    (Mays Business School, Texas A&M University, College Station, Texas 77843)

  • Jagmohan S. Raju

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

Abstract

We present an analytical framework of multimarket competition and supporting empirical analysis to explain why and when competing firms in an existing market may prefer an alliance entry over independent entry into a new market. Our findings suggest that an alliance entry is more profitable than an independent entry (i) when the new market is larger relative to the existing market, and (ii) when the competition in the existing market is stronger relative to the new market. We compare these key predictions with archival data from the regional shopping center industry in the United States and find that instances of alliance formation in this industry are consistent with our model-based predictions.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mksc.2016.0988 .

Suggested Citation

  • C. Jeffrey Cai & Jagmohan S. Raju, 2016. "Keeping Your Enemies Closer: When Market Entry as an Alliance with Your Competitor Makes Sense," Marketing Science, INFORMS, vol. 35(5), pages 743-755, September.
    • Handle: RePEc:inm:ormksc:v:35:y:2016:i:5:p:743-755
    DOI: 10.1287/mksc.2016.0988
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    References listed on IDEAS

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    1. Scott, John T, 1982. "Multimarket Contact and Economic Performance," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 368-375, August.
    2. Sreekumar R. Bhaskaran & V. Krishnan, 2009. "Effort, Revenue, and Cost Sharing Mechanisms for Collaborative New Product Development," Management Science, INFORMS, vol. 55(7), pages 1152-1169, July.
    3. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
    4. Gary Hamel, 1991. "Competition for competence and interpartner learning within international strategic alliances," Strategic Management Journal, Wiley Blackwell, vol. 12(S1), pages 83-103, June.
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    Cited by:

    1. Amir Fazli & Jeffrey D. Shulman, 2018. "Implications of Market Spillovers," Management Science, INFORMS, vol. 64(11), pages 4996-5013, November.
    2. Xu, Xiaoyan & Choi, Tsan-Ming & Chung, Sai-Ho & Guo, Shu, 2023. "Collaborative-commerce in supply chains: A review and classification of analytical models," International Journal of Production Economics, Elsevier, vol. 263(C).

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