The Johns Hopkins University series on Entrepreneurship
Edited by Gideon D. Markman and Phillip H. Phan
Chapter 11: A Retrospective on Competition in Multiple Geographic Markets: The Impact on Growth and Market Entry
Heather A. Haveman and Lynn Nonnemaker We began work on this paper with two observations: (1) firms often compete with each other simultaneously in multiple markets and (2) in most markets, there is a mix of multi- and single-market firms. Consider, for instance, commercial banks. All across the country, you’ll find branches of Bank of America, Citibank, and Chase. But you’ll also find local banks, such as River City Bank in California and Bridgehampton National Bank in New York, which have branches in only one area (FDIC, 2010; Teckchandani, 2010). Keeping these facts in mind, we wrote “Competition in multiple geographic markets” with the aim of making three contributions to our knowledge of firm strategy and behavior: (1) We sought to expand analysis of spillovers between markets, which had focused exclusively (but understandably) on firms that operated in multiple markets, to firms that operated in a single market. (2) We sought to extend the outcomes studied from pricing (e.g., Gimeno and Woo, 1999) and market exit (e.g., Barnett, 1993) to market entry and growth. (3) We sought to add to the then-small literature that focused on geographic markets, rather than product- or client-based markets. For multi-market firms, we found similar patterns of mutual forbearance from aggressive behavior—here operationalized as entering new markets and expanding in existing ones—as had been found in previous research on prices and market exit. Specifically, multi-market firms forbore from acting aggressively in markets where they met a moderate (not small or large) number of...
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