Research suggests that firms avoid excessive differentiation or conformity by using industry competitors as reference targets in a process that Snow and Hambrick call ‘strategic adjustment’. To date explanations of strategic adjustment have focused on the influence of one of two sources: (1) firms base targets on the collective strategic decisions of other firms in the industry; and (2) firms base targets on the strategic decisions of the market leader. This article explores how both these sources influence strategic adjustment by looking at the product portfolio strategies of firms in industries where competitive positions depend on periodically launching models with multiple features and functionalities. The authors develop hypotheses on when firms use targets based on collective industry product decisions and/or the market leader product decisions. These hypotheses are tested using data on 570 mobile phone models launched in the UK by 14 firms from 1997 to 2008.
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