Recent work in several disciplines has established that the volatility of performance for US firms has greatly increased over the last 50 years. Yet, it is the differences in durable performance of firms that have been the primary focus of inquiry in competition and business strategy. This study documents the sharply increased within-industry heterogeneity of returns in the US manufacturing sector from 1950 to 2002, and links these changes to the documented increases in volatility. The evidence supports a broad, monotonic shift towards a new, more dynamic form of competition, which some have called hypercompetition.
Bain, J.S. ( 1959) Industrial Organization. New York: John Wiley and Sons.
3.
Barney, J.B. ( 1991) ‘Firm Resources and Sustained Competitive Advantage’ , Journal of Management17: 99-120.
4.
Baum, J.A.C., Calabrese, T. and Silverman, B.S. ( 2000) ‘Don’t Go It Alone: Alliance Network Composition and Startups’ Performance in Canadian Biotechnology’, Strategic Management Journal21(3): 267-95.
5.
Bettis, R. and Hitt, M. ( 1995) ‘The New Competitive Landscape’, Strategic Management Journal16 (Summer Special Issue): 7-20.
6.
Brown, S. and Eisenhardt, K. ( 1998) Competing on the Edge. Boston, MA: Harvard Business School Press.
7.
Brush, T.H., Bromiley, P. and Hendricks, M. ( 1999) ‘The Relative Influence of Industry and Corporation on Business Segment Performance’, Strategic Management Journal20(6): 519-47.
8.
Brynjolfsson, E., McAfee, A., Sorell, M. and Zhu, F. ( 2007) ‘Scale withoutMass: Business Process Replication and Industry Dynamics’, MIT Sloan working paper.
9.
Campbell, J., Lettau, M., Malkeiel, B. and Xu, Y. ( 2001) ‘Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk’, Journal of Finance56(1): 1-43.
10.
Carroll, R.J. and Ruppert, D. ( 1988) Transformation and Weighting in Regression. New York: Chapman and Hall.
11.
Christensen, C.M. ( 1997) The Innovator’s Dilemma. Boston, MA: Harvard Business School Press.
12.
Comin, D.A. and Mulani, S. ( 2005) ‘A Theory of Growth and Volatility at the Aggregate and Firm Level’, NBER working paper11503.
13.
Comin, D.A. and Mulani, S. ( 2006) ‘Diverging Trends in Aggregate and Firm Volatility’ , Review of Economic and Statistics88(2): 374-83.
14.
Comin, D.A. and Philippon, T. ( 2006) ‘The Rise in Firm-Level Volatility: Causes and Consequences’ , in M. Gertler and K. Rogoff (eds) NBER Macroeconomics Annual 2005. Cambridge, MA: MIT Press.
15.
Cubbin, J. and Geroski, P. ( 1987) ‘The Convergence of Profits in the Long Run: Inter-Firm and Inter-Industry Comparisons’, Journal of Industrial Economics35(4): 427-42.
16.
D’Aveni, R.A. ( 1994) Hypercompetition. New York: The Free Press.
17.
D’Aveni, R.A. ( 1995) Hypercompetitive Rivalries. New York : The Free Press.
18.
D’Aveni, R.A. ( 1999) ‘Strategic Supremacy through Disruption and Dominance’ , MIT Sloan Management Review40(3): 127-35.
19.
Davis, S.J., Haltiwanger, J., Jarmin, R. and Miranda, J. ( 2007) ‘Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms’, in D. Acemoglu, K. Rogoff and M. Woodford (eds) NBER Macroeconomics Annual 2006. Cambridge, MA: MIT Press.
20.
Demsetz, H. ( 1973) ‘Industry Structure, Market Rivalry, and Public Policy’, Journal of Law and Economics16(1): 1-9.
21.
Dickey, D. and Fuller, W. ( 1979) ‘Distribution of the Estimators for Autoregressive Time Series with a Unit Root’, Journal of the American Statistical Association74: 427-31.
22.
Diereckx, I. and Cool, K. ( 1989) ‘Asset Stock Accumulation and Sustainability of Compeititve Advantage’, Management Science35: 1504-14.
23.
Dosi, G. ( 1982) ‘Technological Paradigms and Technological Trajectories’ , Research Policy11: 147-62.
24.
Eisenhardt, K.M. and Martin, J.A. ( 2000) ‘Dynamic Capabilities: What are They?’, Strategic Management Journal21 (Oct.-Nov., Special Issue): 1105-21.
25.
Fama, E.F. and French, K.R. ( 2004) ‘New Lists: Fundamentals and Survival Rates’ , Journal of Financial Economics73: 239-69.
26.
Fisher, F.M. and McGowan, J.J. ( 1983) ‘On the Misuse of Accounting Rates of Return to Infer Monopoly Profits’, American Economic Review73(1): 82-97.
27.
Geroski, P.A. and Jacquemin, A. ( 1988) ‘The Persistence of Profits: A European Perspective’ , Economic Journal98: 375-89.
28.
Ghemawat, P. ( 1997) Games Businesses Play: Cases and Models. Cambridge, MA: MIT Press.
29.
Hamel, G. ( 2000) Leading the Revolution. Boston, MA : Harvard Business School Press.
30.
Hawawini, G., Subramanian, V. and Verdin, P. ( 2003) ‘Is Performance Driven by Industry-or Firm-Specific Factors? A New Look at the Evidence’, Strategic Management Journal24: 1-16
31.
Helfat, C.E. ( 1997) ‘Know-How and Asset Complementarity: The Case of R&D’, Strategic Management Journal18(5): 339-60.
32.
Helfat, C., Finkelstein, S., Mitchell, W., Peteraf, M.A., Singh, H., Teece, D.J. and Winter, S.G. ( 2007) Dynamic Capabilities: Understanding Strategic Change in Organizations. Malden, MA: Blackwell .
33.
Henderson, R. and Clark, K.C. ( 1990) ‘Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms’ , Administrative Science Quarterly35: 9-30.
34.
Hoopes, D.G., Madsen, T.L. and Walker, G. ( 2003) ‘Introduction to the Special Issue: Why is There a Resource-Based View? Toward a Theory of Competitive Heterogeneity’ , Strategic Management Journal24: 889-902.
35.
Irvine, P.J. and Pontiff, J. ( 2009) ‘Idiosyncratic Return Volatility, Cash Flows, and Product Market Competition’, Review of Financial Studies22(3): 1149-77.
36.
Jacobson, R. ( 1992) ‘The "Austrian" School of Strategy’, Academy of Management Review17(4): 782-805.
37.
Keifer, N.M., Vogelsang, T.J. and Bunzel, H. ( 2000) ‘Simple Robust Testing of Regression Hypotheses’ , Econometrica68: 695-714.
38.
Kirzner, I.M. ( 1997) ‘Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach’, Journal of Economic Literature35: 60-85.
39.
Klepper, S. ( 2002) ‘Firm Survival and the Evolution of Oligopoly’ , Rand Journal of Economics33: 37-61.
40.
Klepper, S. and Simmons, K.L. ( 2000) ‘Dominance by Birthright: Entry of Prior Radio Producers and Competitive Ramifications in the US Television Receiver Industry’ , Strategic Management Journal21(10-11): 997-1016.
41.
McGahan, A.M. and Porter, M.E. ( 1997) ‘How Much Does Industry Matter, Really?’, Strategic Management Journal18: 15-30.
42.
McGahan, A.M. and Porter, M.E. ( 1999) ‘The Persistence of Shocks to Profitability’ , Review of Economics and Statistics81(1): 143-53.
43.
McGahan, A.M. and Porter, M.E. ( 2002) ‘What Do We Know about Variance in Accounting Profitability?’ , Management Science48: 834-51.
44.
McGahan, A.M. and Porter, M.E. ( 2003) ‘The Emergence and Sustainability of Abnormal Profits’ , Strategic Organization1(1): 79-108.
45.
McNamara, G., Vaaler, P. and Devers, C. ( 2003) ‘Same as it Ever Was: The Search for Evidence of Increasing Hyper-Competition’, Strategic Management Journal24: 261-78.
46.
Milgrom, P.R. and Roberts, J. ( 1990) ‘The Economics of Modern Manufacturing: Technology, Strategy, and Organization’, American Economic Review80 (June): 511-28.
47.
Milgrom, P.R. and Roberts, J. ( 1995) ‘Complementarities and Fit: Strategy, Structure, and Organizational Change in Manufacturing’, Journal of Accounting and Economics19 (March-May): 179-208.
48.
Mitchell, W. ( 1989) ‘Whether and When? Probability and Timing of Incumbents’ Entry into Emerging Subfields’, Administrative Science Quarterly34: 208-30.
49.
Moody’s (various years) Moody’s Industrial Manual. New York : Moody’s Investor Service, Inc.
50.
Mueller, D.C. ( 1986) Profits in the Long Run. Cambridge : Cambridge University Press.
51.
Mueller, D. C. (ed.) (1990) The Dynamics of Company Profits. Cambridge: Cambridge University Press.
52.
Newey, W. and West, K. ( 1987) ‘A Simple Positive Semi-Definite, Heteroskedasticity, and Autocorrelation Consistent Covariance Matrix Estimation’, Econometrica55: 703-8.
53.
Park, J.Y. ( 1990) ‘Testing for Unit Roots and Cointegration by Variable Addition’, in T. Fomby and F. Rhodes (eds) Advances in Econometrics: Cointegration, Spurious Regressions, and Unit Roots. London : JAI Press.
54.
Peltzman, S. ( 1977) ‘The Gains and Losses from Industrial Concentration’ , Journal of Law and Economics20(2): 229-63.
55.
Peteraf, M.A. ( 1993) ‘The Cornerstones of Competitive Advantage: A Resource-Based View’, Strategic Management Journal14(3): 179-92.
56.
Porter, M.E. ( 1979) ‘The Structure within Industries and Companies Performance’ , Review of Economics and Statistics61: 214-28.
57.
Porter, M.E. ( 1980) Competitive Strategy. New York: The Free Press.
58.
Porter, M.E. ( 1996) ‘What is Strategy?’, Harvard Business Review74(6): 61-79.
59.
Prahalad, C.K. and Hamel, G. ( 1990) ‘The Core Competence of the Corporation’, Harvard Business Review68(3): 79-92.
60.
Prais, S.J. and Winsten, C.B. ( 1954) ‘Trend Estimators and Serial Correlation’, Cowles Commission Monograph No. 23. New Haven, CT: Yale University Press.
61.
Quinn, J.B., Baruch, J.J. and Zien, K.A. ( 1997) Innovation Explosion: Using Intellect and Software to Revolutionize Growth Strategies. New York: The Free Press.
62.
Roberts, P.W. and Eisenhardt, K.M. ( 2003) ‘Austrian Insights on Strategic Organization: From Market Insights to Implications for Firms’, Strategic Organization1(3): 345-52.
63.
Roquebert, J.A., Phillips, R.L. and Westfall, P.A. ( 1996) ‘Markets vs Management: What "Drives" Profitability?’ , Strategic Management Journal17(8): 633-44.
64.
Ruefli, T.W. and Wiggins, R.W. ( 2003) ‘Industry, Corporate, and Segment Effects and Business Performance: A Non-Parametric Approach’, Strategic Management Journal24: 861-79.
65.
Rumelt, R. ( 1991) ‘How Much Does Industry Matter?’, Strategic Management Journal12: 167-85.
Schmalensee, R. ( 1985) ‘Do Markets Differ Much?’, American Economic Review75(3): 341-51.
68.
Schmalensee, R. ( 1987) ‘Collusion Versus Differential Efficiency: Testing Alternative Hypotheses’, Journal of Industrial Economics35: 399-425.
69.
Schumpeter, J.A. ( 1950) Capitalism, Socialism and Democracy, 3rd edn. New York: Harper.
70.
Slywotzky, A. ( 1996) Value Migration. Boston, MA: Harvard Business School Press.
71.
Teece, D., Pisano, G. and Shuen, A. ( 1997) ‘Dynamic Capabilities and Strategic Management’ , Strategic Management Journal18: 509-33.
72.
Thomas, L.G. ( 1996) ‘The Two Faces of Competition: Dynamic Resourcefulness and the Hypercompetitive Shift’, Organization Science7: 221-42.
73.
Tirole, J. ( 1988) The Theory of Industrial Organization. Cambridge, MA: MIT Press.
74.
Tushman, M.L. and Anderson, P. ( 1986) ‘Technological Discontinuities and Organizational Environments’, Administrative Science Quarterly31: 439-65.
75.
Vogelsang, T.J. ( 1998) ‘Trend Function Hypothesis Testing in the Presence of Serial Correlation’, Econometrica66(1): 123-48.
76.
Walker, G., Madsen, T.L. and Carini, G. ( 2002) ‘How Does Institutional Change Affect Heterogeneity among Firms?’, Strategic Management Journal23: 89-105.
77.
Waring, G.F. ( 1996) ‘Industry Differences in the Persistence of Firm-Specific Returns’, American Economic Review86(5): 1253-65.
78.
Wiggins, R.W. and Ruefli, T.W. ( 2002) ‘Sustained Competitive Advantage: Temporal Dynamics and the Incidence and Persistence of Superior Economic Performance’ , Organization Science13(1): 82-105.
79.
Wiggins, R.W. and Ruefli, T.W. ( 2005) ‘Schumpeter’s Ghost: Is Hypercompetition Making the Best of Times Shorter?’, Strategic Management Journal26(10): 887-911.
80.
Zollo, M. and Winter, S.G. ( 2002) ‘Deliberate Learning and the Evolution of Dynamic Capabilities’, Organization Science13: 339-51.
