Underlying mechanism behind word responses in competitive dynamics

The traditional action-response perspective has largely ignored the role of language in competitive dynamics. In this study, I treat language (i.e., word response) as an alternative way to react to rivals when a firm is attacked, in addition to no reaction and action-based reaction. Word response is a specific and public announcement of a focal firm’s potential move in reaction to a competitor’s word or action attack. To explore the underlying mechanism behind word responses, I aim to answer two major questions. The first question is under what situations are responders motivated to use words as competitive responses? For this question I emphasize characteristics of the action, the market, and the actor, using measures such as action type, market dependence of the responder, multimarket contact of the responder in the market, and the competitive aggressiveness of the actor. The second question is what kinds of responders are more likely to use words as competitive responses? For this question, I focus on responder characteristics, such as firm reputation, CEO tenure, and CEO duality. According to Porter’s competitive signaling theory, I argue that responders can use words in reaction to an attack in order to test the waters, deter rivalry, and demonstrate toughness because word responses require few resources, can be accomplished quickly, are reversible, while at the same time still carrying some commitment. Besides incorporating language into the action-response perspective, my dissertation also further integrates the upper-echelons perspective with competitive dynamics research, providing a more realistic and complete understanding of competitive engagement. I test my theory in the consumer electronics (CE) industry with 20 major global CE manufacturers between 2007 and 2014.