The relative impact of actual and potential rivalry on firm profitability in the pharmaceutical industry

Cool, Karel; Röller, Lars‐Hendrik; Leleux, Benoı̂t

doi:10.1002/(sici)1097-0266(199901)20:1<1::aid-smj995>3.0.co;2-x

Cited by 37 publications

(16 citation statements)

References 14 publications

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“…One industry-specific explanation for the lack of incumbent response is the high rate of entry in the magazine industry; the mean number of new entrants into a market in the sample is nine. Because entry is almost continuous, it may be that the threat of entry keeps prices low, even in the absence of entry (Hannan, 1979;Cool, Roller, and Leleux, 1999). In other words, the magazine industry may be a contestable market in which incumbents set low prices in anticipation of entry, regardless of whether or not it actually occurs.…”

Section: Discussionmentioning

confidence: 99%

Incumbent pricing responses to entry

Simon

2005

Strat. Mgmt. J.

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Empirical research on incumbent pricing responses to new entry has yielded mixed results. Some studies find that incumbents cut prices post entry, while others find that incumbents accommodate entry by leaving prices unchanged (or even raising prices). To better understand these findings, this study explores the conditions under which incumbents are more likely to cut prices when faced with entry. I argue that incumbents vary in their incentives to cut prices; incumbents with greater incentives are more likely to respond aggressively to entry. Using data on magazine subscription prices, I find that, on average, incumbent magazines do not reduce prices following entry. But, the results suggest that newer incumbents cut prices more than older incumbents, while incumbents that compete in fewer and in more competitive markets cut prices less following entry. These results help to explain inconsistent empirical results in the literature, and support a more general explanation of when firms respond aggressively to entry: incumbents respond to entry more aggressively when their incentives to do so are greater.

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Section: Discussionmentioning

confidence: 99%

Incumbent pricing responses to entry

Simon

2005

Strat. Mgmt. J.

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“…The increase in rivalry will tend to produce a negative impact on firm profitability. Cool et al. (1999) show that both actual and potential increases in rivalry generate adverse effects on profitability, and Whalen (1992) finds that rivalry has a negative effect on profitability in local banking markets.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

To Conform or To Perform? Mimetic Behaviour, Legitimacy‐Based Groups and Performance Consequences*

Barreto

Baden‐Fuller

2006

J Management Studies

236

203

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The study of interorganizational imitation has been an important strand in the recent literature on institutional theory. This paper offers new insights for our understanding of mimetic isomorphism and its reliance on legitimacy: we suggest that legitimacy-based reference groups guide firms in their mimetic behaviour, that firms undertake imitation even against their own "ex ante" information, and that legitimacy-based imitation contributes negatively to firms' profitability. We examine Portuguese bank branching decisions between 1988 and 1996 and find that banks imitate their legitimacy-based groups, and not only towards "ex ante" (firm-specific) attractive locations, but also towards unattractive locations; we also find that mimetic branching produces a negative effect on profitability. We conclude that these results show the importance of legitimacy pressures on organization decisions and the tension between the pressure to conform and the pressure to perform. Copyright Blackwell Publishing Ltd 2006.

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“…The pharmaceutical industry is characterized by substantial entry barriers, large initial investments in product development, great financial effects from registered new drugs, long new product development processes, and a considerable degree of institutional and governmental interaction (Yeoh and Roth, 1999;Roberts, 1999;Koretz and Lee, 1998;Cool, Rö ller and Leleux, 1999). This study is specifically focused on clinical research activities.…”

Section: Clinical Research In the Pharmaceutical Industrymentioning

confidence: 99%

Gendering knowledge: the practices of knowledge management in the pharmaceutical industry

Styhre

Ingelgård

Roth

2001

Knowl Process Manag

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Knowledge and knowledge management have become two of the latest buzzwords in the management literature. However, the literature presents primarily normative, undersocialized models of how knowledge could be administrated and developed as an organizational resource, and does not sufficiently recognize the social, political and emotional aspects of knowledge. In general, the knowledge of knowledge management is not situational. For instance, in what respect does the notion of knowledge take gender issues into account? This paper presents a study of clinical research activities in a major multinational pharmaceutical company and it suggests that the processes of knowing are always embedded in existing social and political, gendered assumptions and beliefs. Therefore, knowledge management need to be further developed to avoid general problematic positions.

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The relative impact of actual and potential rivalry on firm profitability in the pharmaceutical industry

Cited by 37 publications

References 14 publications

Incumbent pricing responses to entry

Incumbent pricing responses to entry

To Conform or To Perform? Mimetic Behaviour, Legitimacy‐Based Groups and Performance Consequences*

Gendering knowledge: the practices of knowledge management in the pharmaceutical industry

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