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Inter-firm rivalry and firm growth: Is there any evidence of direct competition between firms?

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  • Alex Coad
  • Mercedes Teruel

Abstract

Inter-firm competition has received much attention in the theoretical literature, but recent empirical work suggests that the growth rates of rival firms are uncorrelated, and that firm growth can be taken as an essentially independent process. We begin by investigating the correlations of the growth rates of competing firms (i.e. the largest and second-largest firms in the same industry) and observe that, surprisingly, the growth of these firms can be taken as independent. Nevertheless, peer-effect regressions, that take into account the simultaneous interdependence of growth rates of rival firms, are able to identify significant negative effects of rivals' growth on a firm's growth.

Suggested Citation

  • Alex Coad & Mercedes Teruel, 2010. "Inter-firm rivalry and firm growth: Is there any evidence of direct competition between firms?," Papers on Economics and Evolution 2010-18, Philipps University Marburg, Department of Geography.
    • Handle: RePEc:esi:evopap:2010-18
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    1. Austan Goolsbee & Chad Syverson, 2008. "How Do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1611-1633.
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    Cited by:

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    2. Mohamed Amara & AbdelRahmen El Lahga, 2015. "A note on MAR and Jacobs externalities in the Tunisian manufacturing industries," Letters in Spatial and Resource Sciences, Springer, vol. 8(2), pages 151-167, July.
    3. Syed Waqar Ahmed & Danish Ahmed Siddiqui, 2020. "Human Resource Management, Total Quality Management and Competitive Advantages: Evidence from Pakistani Banking Industry," Human Resource Research, Macrothink Institute, vol. 4(1), pages 1-45, December.
    4. Hui Zhao & Ao Lei & Yuhui Li & Dingjun Hong, 2023. "The Sectoral and Regional Peer Influences on Heavy-Pollution Corporate Environmental, Social, and Governance Performance," Sustainability, MDPI, vol. 15(17), pages 1-42, August.
    5. Maksim Belitski & Tatiana Stettler & William Wales & Jeff Martin, 2023. "Speed and Scaling: An Investigation of Accelerated Firm Growth," Journal of Management Studies, Wiley Blackwell, vol. 60(3), pages 639-687, May.
    6. Sumarsid & Tri Erie Wardhani & Aripin, 2020. "Human Resource Management for Increasing Employees’ Satisfaction and Enhancing Competitive Strengths," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 543-553.
    7. Jacob Holm, 2014. "The significance of structural transformation to productivity growth," Journal of Evolutionary Economics, Springer, vol. 24(5), pages 1009-1036, November.
    8. Heiseung Kim & Changhyun Park & Heesang Lee, 2019. "The Effect of Incremental Innovation and Switching-Over to Architectural Innovation on the Sustainable Performance of Firms: The Case of the NAND Flash Memory Industry," Sustainability, MDPI, vol. 11(24), pages 1-20, December.

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    More about this item

    Keywords

    Competition; Firm growth; Peer effects econometrics Length 32 pages;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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