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Evidence suggests that firms often do not respond to competitive attacks even when they are aware of an attack and have the capability to counter it. We believe that this is because they engage in a form of nonresponse that we designate as strategic forbearance, a phenomenon that has been mostly neglected by scholars of competitive dynamics. We view such forbearance as a critical component of competitive strategy – an attempt to situate responses to attacks within a more complex and nuanced strategic, organizational and environmental context. Forbearance, we argue, represents managers’ mindful attempts to transcend reflexive responses by expanding the range of considerations a) beyond an attacker to other stakeholders and rivals, b) beyond the immediate attack to its historical setting and long-term relational implications, and c) beyond unitary tactics to those concerning global strategic coherence and adaptation. We define formally and tentatively operationalize strategic forbearance, before deriving propositions concerning its five general transcending drivers. Ultimately, we believe, the study of forbearance can bring scholars of competitive dynamics closer to the heart of the reflective competitive strategy.

In the multimarket competition literature, the maintenance of mutual forbearance depends on how firms respond when the mutual forbearance is disturbed. While previous research highlights the import...

Research on multimarket contact (MMC) explains why mutual forbearance (reduced aggressiveness) may emerge among familiar rivals within certain industries, but less understood is how competition cha...

Translating a diverse body of research, including industrial organization economics, strategy, and entrepreneurship, we present a framework of micro entry—specifically, how de novo entrants penetrate markets dominated by large incumbents without intensifying rivalry. Entrant–incumbent relations has received substantial attention in these three literatures, but with a few exceptions, prior research has focused mainly on hostile entry and on large or comparable players. We explain, however, that acute size differences create distinct entrant–incumbent dynamics. Normatively, we show how, when, and where micro entrants are most likely to penetrate markets dominated by large incumbents. Conceptually, we expand resource partitioning and mutual forbearance theories by relaxing their assumptions and then remeshing their logic, thus offering nuanced insights on entrant–incumbent relations when size differences are very large. Contrary to the creative-destructive hypothesis, we evince that market penetration is mor...

Most studies of responses to change in competitive environments focus on competitor-specific adaptations. However, rivals are often acutely aware of one another, and this awareness should influence their competitive behavior. In this study, we focus on three market structures that affect competitive behavior: competitive parity, status disparity, and multipoint contact. In particular, we examine how securities analysts responded to a regulatory discontinuity, Regulation Fair Disclosure (�Reg-FD�), which promotes competitive parity by eliminating privileged access to proprietary firm information as a critical source of competitive advantage. We predict and find that Reg-FD activated mutual forbearance among analysts linked through multipoint contact. We also predict and find that high-status analysts forbear more strongly. Analysts' responses to heterogeneity in competitive advantage thus depend importantly on their competitive overlap and status, which has implications for both their behavior and the information they provide to investors.

One strand of theoretical development in the multimarket competition literature asks the important question of whether or not mutual forbearance applies uniformly to all types of competitive action...

Research supports mutual forbearance theory by demonstrating the inverted U-shaped relationship it predicts, between multimarket contact (MMC) and market entry, in a variety of mature product markets. Less studied is the role of MMC when markets are in turmoil. We show that when product markets are at risk of disruption, dominant firms that have MMC with fringe rivals - firms that compete with uncommon business models and technologies – are more likely to enter. MMC with dominant rivals continues to influence entry as mutual forbearance theory predicts, but its effect is weaker in market in flux as compared to stable markets. The findings contribute to the MMC theory and research on firm response to disruptive innovation.

The author introduces the construct of forbearance response and develops a theoretical model for predicting when defenders will respond to competitive attacks with forbearance, counteraction, or wo...

With its focus on product-market rivalry, competitive dynamics research fails to tell the whole story. We develop a theory of factor-market rivalry to shed light on atypical rivals and competitive blind spots. Focusing on resource versatility and mobility, the theory introduces dynamic constructs—resource discontinuities, leapfrogging, and captivity—and explains their role in triggering cascading effects. To illustrate the theory's conceptual utility, we apply the concepts of factor-market rivalry to mutual forbearance in multimarket competition.

The mutual forbearance hypothesis states that when the same competitors meet in multiple markets, rivalry is deterred. Our study highlights how pressures for local responsiveness impact the veracity of this hypothesis for multinational corporations (MNCs) in host countries. We develop theory to explain how subsidiary ownership, home-host cultural distance, host country regulatory restrictions on MNC activities, and the presence of local competitors affect the rivalry-dampening impact of multi-market contact. We tested our hypotheses with a sample of 13 global automobile companies operating in 27 countries and report strong support for our hypotheses.

I extend multimarket contact theory beyond its current focus on inter-firm tacit collusion, explaining how firm-level competence depletion and population-level punctuated forbearance converge to un...

The mutual forbearance hypothesis proposes that multiple contacts with rivals deter competitive aggressiveness. In this study we examine some of the contingencies governing the mutual forbearance h...

Despite increasing attention given to mutual forbearance strategies (MFS), researchers have virtually ignored the internal arrangements necessary for their implementation. We argue that the design of the mutual forbearance competitor may pose some unique implementation challenges for the firm, theorize about the administrative mechanisms that we expect to characterize firms implementing MFS, and suggest that, to the extent that future researchers do not model the qualities theoretically necessary to implement MFS, the full competitive consequences of MFS will not be appreciated.

Research on multimarket competition has demonstrated that structural patterns of firms’ competitive interactions across markets provoke implicit agreements of collusion, and that firms build multim...

Every internationalizing firm faces two critical decisions, which markets to enter and when, under conditions of uncertainty. Two distinct research streams within the strategic management literatur...

The extant literature on mutual forbearance has explained the relationship between multi-market contact and cooperation through deterrence. Thus, it adopted a coercive perspective and ignored the c...

How can strategic trade policy (STP) influence the competitive actions of firms when they expand abroad? Drawing from the multimarket competition and strategic trade policy literatures, we argue that STP will have strong effects on both home firm and foreign firm competitive activity. We distinguish among three policies: traditional strategic trade policies that use trade barriers to support national firms; structural impediments initiatives that focus on removing foreign internal barriers; and liability of foreignness that provides a "soft" barrier to foreign entry. If STP protects the home firm's "backyard", the more aggressive the home firm will be abroad, which then affects the foreign firm's reactions. The conditions under which mutual forbearance is likely to emerge are discussed.

Firms competing in multiple markets find equilibrium through spheres of influence and mutual forbearance, but imperfect competitive information may give one firm an incentive to influence rivals' behavior and uncover information. We suggest that a firm's resource allocations can divert competitors' resource allocations, enhancing the firm's own sphere of influence without precipitating a destructive all-out war. We define the stratagems thrust, feint, and gambit and conclude that corporate strategy decisions can only be imperfectly understood if competitive interaction is not taken into account.

This paper tests Edward's (1955) mutual forbearance hypothesis and the Caves-Porter (1977) resource heterogeneity hypothesis with dynamic measures of firm- level rivalrous behavior. We find multima...

In this study, we examined how firm-specific competitive conditions influence firms' patterns of market entry and exit, focusing on two features of firms' competitive conditions: market domain overlap, which measures the potential for competition, and multimarket contact, which measures the potential for mutual forbearance. A dynamic analysis of California commuter airlines from 1979 through 1984 showed that increases in market domain overlap raised airlines rates of market entry and exit, but increases in multimarket contact lowered them, especially in markets clearly dominated by a single airline. Thus, paradoxically, close competitors are not the most intense rivals: airlines that meet in multiple markets are less aggressive toward each other than those that meet in one or a few markets.

Empirical results have shown that multipoint contact diminishes interfirm competition, based on mutual forbearance hypothesis. However, multinational corporations (MNCs) often face the pressure of ...

We investigate how multimarket contact between two firms influences the likelihood of alliance formation between them. Application of conventional I/O-based alliance theory would suggest that two f...

This study seeks to analyze the joint effect of multimarket contact and firm nationality on the likelihood of market exit for pharmaceutical companies. Past research on the relation between multimarket contact and exit has established that multimarket contact leads to mutual forbearance, which reduces the likelihood of exit. I propose to examine the same link between MMC and exit with two extensions: first, explaining role of inter-firm coordination resulting in a U- shaped relationship between multimarket contact and exit; and second, the differences in exit likelihood between MNCs and domestic firms at similar levels of multimarket contact. Using cardiovascular drug sale data for 179 firms in 200 pharmaceutical molecules in India for the period of 2008-2011, this study shows that multimarket contact has a U-shaped relation with exit likelihood, and this relation is more prominent for multinational firms.

Rivalry not only occurs in product markets, but also in factor markets (i.e., competition over the acquisition of valuable resources); yet, prior studies on multimarket contact have largely focused...

Strategy research has predominantly focused on how firms act and has mainly ignored competitive forbearance: decisions to not act despite a possibility or even a temptation to do so. Competitive fo...

In this study, we develop theory and examine empirical evidence regarding the implications of multisupplier contact (MSC) – a concept parallel to that of multimarket contact (MMC) but in reference to factor markets wherein two or more firms purchase input resources from more than one of the same suppliers. We predict that MSC can give rise to mutual forbearance in upstream (factor) markets, but only when the resources involved are relatively mobile. Further, we develop theory to predict that MMC in downstream markets has important implications for mutual forbearance in factor markets (upstream markets) as well as its more familiar implications in downstream markets. We test our theory with a sample of public electricity-generating companies competing in both downstream wholesale electricity markets and upstream coal supply markets and report strong support for most of our hypotheses.

Relative to the wealth of findings about mutual forbearance that multimarket contact theory predicts, we know less about how organizations transfer experiences across multiple markets and benefit f...

Multimarket contact, which can both heighten interfirm competition and facilitate mutual forbearance, has been an important concept in the competitive dynamics literature. This paper disentangles t...

Choosing the optimal entry strategy is critical to firms’ global success and survival. Traditional organizational economic approaches predict a firm’s entry mode from the degree of opportunistic behavior expected based on transaction-level attributes. These approaches acknowledge that firms can, and often do, engage in forbearance: choosing not to act opportunistically even when the ability to do so is present. Yet, the assumption that one cannot know ex ante which firms will act opportunistically and which will forbear suggests that all firms must be presumed to be potentially opportunistic. This results in a bias toward a greater degree of vertical integration than may actually be necessary or cost-effective. To address this limitation, we integrate organizational economics and the resource based view to develop theory on how a key attribute of transacting firms—corporate reputation—acts as a credible signal of trustworthiness and increases the perceived likelihood of forbearance. This results in reputa...

Industrial organization economics discusses the "mutual forbearance hypothesis" in which interdependence among competitors is likely to decrease multipoint competition. On the contrary, the competi...

This study develops and tests a theoretical framework which suggests that the relationship between the level of multi-territory (or multi-point) contact and rivalry takes the form of an inverted U-...

What do we know and how do we really know it? This is an ambitious question, isn't it? Actu ally, I am going to presume on your forbearance by doing something a little different. It is tradi tional in Academy presidential addresses to speak about us as scholars, and how the Acad emy can better serve our needs. However, I want to break with that tradition today and take a step closer to presidential addresses in the other social sciences by addressing our ideas. I pro pose that at least some of what we know exists in separate domains, and I argue that many of us inhabit two parallel intellectual worlds. One of those worlds is the world of scholar ship. In this world we build on the intellectual work of others and conduct research in which we seek to carefully check claims against real ity. Our scholarship may be more or less rele vant to practice, or centered in the world of ideas, but in this scholarly world we are self conscious about careful definitions and the in tellectual history of our ideas, and we display a deliberate skepticism toward assertions and claims. We are all familiar with this world. However, I suggest that many of us also in habit a second world. I call this one the world of folk wisdom about management and organiza tions. This second world is not as openly ac knowledged, is not as well understood, and is underappreciated. I see these as parallel worlds, which means, if I recall my geometry correctly, that they never touch one another. Actually, this is an exagger ation. They do touch and inform one another for most of us, and the degree of their mutual influ ence differs from person to person. Some, of course, live wholly in the world of scholarship, and some live wholly in the world of folk wis dorn. And I am sure there are colleagues with extensive overlap between these worlds. So, with those caveats, and to be absolutely safe, I speak only about myself. My wish is to better understand our world of folk wisdom and to work toward greater mutual influence between both these worlds. The extent to which I, at least, was operating in two nearly parallel worlds became clear to me this last year. I had the opportunity thrust on me to practice what I have been preaching these past twenty years. I have been working two managerial jobs?one you know about, as pres ident of the Academy, but the other less well known: I have been serving as the interim dean of my management school. This latter job, for those who may not know, is a real managerial job. We are a 21 million dollar operation with about 240 employees, and less than 30 percent of our revenue comes from the state or endow ments. That means we have to find 70 percent of our budget every year out in the student-tuition marketplace. We need to do all of this while coping with a bureaucracy?the University of California?that puts adjectives like Byzantine, red tape, bureaucratic, ossified, and Kafkaesque to shame. Putting together the Academy pro gram two years ago and serving as president this year were certainly managerial learning experiences, but these responsibilities were like kicking pebbles compared to the Sisyphean task of running a fee-dependent, ambitious business school encased in a research-proud state uni versity system. But I am not here to whine; really I am not. Rather, I want to be a reflective observer who uses my time doing some real, serious organi zational management to learn more about what we know as scholars and how we know it. So I asked myself: Was anything I learned studying, teaching, and thinking about management and I thank Greg Bigley, Harry Briggs, Rob Folger, and Lyman Porter for their comments on earlier versions of this address.