Dynamics of competition and survival

Abstract

Along time, increasing competitiveness is said to have shortened firms' life spans; however, for those who managed to survive, the question relies on what are the best competitive positions. The question is whether firms can sustain a competitive advantage for longer periods. To answer it, this article analyzes the combined performance (profit and growth) trajectories of 993 firms along two decades, comparing their competitive dynamics with the overall market. We use American COMPUSTAT data (1990-2009), decomposing the individual firm effect in hierarchical modeling and segregating the different strategic choices and transitions between advantage, disadvantage and parity along that period. The results reveal that most firms are unable to maintain advantage/disadvantage for longer periods. Moreover, the comparison between the 993 long-lived firms and the overall database reveals a more conservative profile of competitiveness of the former, suggesting different strategies between the groups.