A distinctive competencies approach to multimarket contact
Will, Thomas Eugene
MetadataShow full item record
This dissertation proposes a theoretical framework for understanding multimarket contact (MMC) dynamics across levels of analysis, and then tests for nonprice competitive effects at both firm and the firm-market analytical levels. I theorize that the profit-enhancing effects of MMC’s short-term collusive outcomes are more than offset in the long-term by the performance-depleting convergence of MMC’s firm and population level consequences. Multimarket contact leads to rivalry reduction, mimicry, and myopia. These outcomes mediate firm level competency depletion over time by decreasing problemistic search, increasing path dependence, reducing competitive experience, inducing mimetic isomorphism, promoting macrocultures, and locking the firm into foothold commitments. At the population level, multimarket contact destabilizes concentration levels, generating patterns of ‘punctuated forbearance’ in which flurries of intense rivalry interrupt extended periods of tacit collusion. Firm level competence depletion and population level punctuated forbearance converge to undermine long-term firm performance. Punctuated forbearance ultimately exposes the very competence depletion that it largely drives and from which it partially derives. Empirical analyses are set in the U.S. passenger airline industry. At the firm-market level, findings indicate a negative relationship between multimarket contact and on-time performance, suggesting that MMC may undermine competence development in service quality. Analysis at the firm level employs a new measure introduced in this dissertation. Findings indicate strong positive relationships between firm level multimarket contact and organizational resource allocation to promotion and sales and to customer service. Contrary to the competence depletion hypothesis, firm level MMC seems to amplify rather than dampen inter-firm rivalry along certain nonprice dimensions. Cumulatively, the empirical results suggest that the implications of multimarket contact extend well beyond the firm-market level pricing outcomes traditionally emphasized by the mutual forbearance hypothesis.