Competitive Dynamics Research: Critique and Future Directions

A series of actions (moves) and reactions (countermoves) among firms in an industry create competitive dynamics. These action/reaction dynamics reflect the normal and innovative movement of firms in pursuit of profits. Firms act creatively (introduce a new product, a new promotion, or a new marketing agreement! to enhance or improve profits, competitive advantage, and industry position; successful actions (actions which generate new customers and profits) promote competitive reaction as rivals attempt to block or imitate the action. The study of competitive dynamics is thus the study of how firm action (moves) affects competitors, competitive advantage, and performance. Sometimes these actions and reactions can escalate among firms so that the industry performance is adversely affected; at other times, the pattern of behavior can be more gentlemanly and profitable.