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Multimarket Contact Externalities: The Effect of Rivals' Multimarket Contacts on Focal Firm Performance

Author

Listed:
  • Jaime Gómez

    (Universidad de la Rioja)

  • Raquel Orcos

    (Universidad de Zaragoza)

  • Sergio Palomas

    (Universidad de Zaragoza)

Abstract

Given that firms develop their activities in a network of multiple players, interfirm rivalry is not only a matter of direct competitors, but also of indirect competition. In spite of this, the literature on competitive dynamics tends to focus on analyzing rivalry as an exclusive function of the competitive relationship between a focal firm and its direct rivals. In this article, we extend competitive dynamics literature by considering how focal firms are affected by the relationships of their rivals with third-pa rty firms. Specifically, we study the effect that the multimarket contacts of rivals produces on the performance of the focal firm. Additionally, we incorporate the idea that there are different strategic options for operating in an industry that affect the intensity of multimarket contact externalities. Our results show that multimarket contact among firms causes externalities that indirectly affect firms that are not directly involved in this competitive relationship. We find that multimarket contact externalities differ between and within strategic groups.

Suggested Citation

  • Jaime Gómez & Raquel Orcos & Sergio Palomas, 2013. "Multimarket Contact Externalities: The Effect of Rivals' Multimarket Contacts on Focal Firm Performance," Working Papers 1302, Departament Empresa, Universitat Autònoma de Barcelona, revised Apr 2013.
    • Handle: RePEc:bbe:wpaper:1302
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    References listed on IDEAS

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