Motivation matters: Corporate scope and competition in complementary product markets

Published

Journal Article

© 2015 John Wiley & Sons, Ltd. Research summary: We argue that a pure capabilities-based view does not accurately explain the competitive dynamics of increasingly common settings in which firms act as both complementors and competitors. We propose that the Awareness-Motivation-Capability framework is more appropriate for these settings. We derive predictions from both a pure capabilities view and the AMC framework, and test those predictions in the U.S. auto leasing market, in which the leasing subsidiaries of car manufacturers directly compete with the same independent lessors who provide complements to the manufacturers. Although our results are consistent with capabilities playing an important role, motivation appears to be a critical factor explaining the competitive dynamics of the market. Managerial summary: Firms that compete with business units owned by larger corporate parents face additional considerations. Such subsidiary competitors can be motivated by broader corporate considerations, shifting their objectives, and consequently, their strategic actions. Expecting subsidiary competitors to pursue business unit profitability can mislead managers toward pricing, product mix, or market entry errors. We present an important example from consumer finance, where independent auto lessors, such as Bank of America (BoA), compete with captive leasing subsidiaries like Ford Motor Credit (FMC). Since FMC is motivated to subsidize and support vehicle sales for its manufacturer parent, a cost advantage is not enough for BoA to dominate the market. Understanding broader corporate motivations of competitors helps managers anticipate competition levels in potential markets, thereby improving decision-making and performance.

Full Text

Duke Authors

Cited Authors

  • Bennett, VM; Pierce, L

Published Date

  • July 1, 2016

Published In

Volume / Issue

  • 37 / 7

Start / End Page

  • 1304 - 1315

Electronic International Standard Serial Number (EISSN)

  • 1097-0266

International Standard Serial Number (ISSN)

  • 0143-2095

Digital Object Identifier (DOI)

  • 10.1002/smj.2398

Citation Source

  • Scopus