Strategic Deterrence Among Multipoint Competitors

Theory and methods from organizational ecology and the strategyfield are combined to predict the dynamic consequences of strategicdeterrence. A model is developed to investigate which strategieswill prevail through an industry ‘shake out’ whensome firms compete while others forbear from competing withtheir ‘multipoint’ rivals—those faced in morethan one markes or market segment. Theory predicts that multipointcontact affects competition within but not between strategicgroups, and it is speculated that whether multipoint contactdeters competition depends on strategic objectives. The predictionsare supported by estimates of market exit rates in the customerpremises equipment and service (CPES) sector of the deregulatedAmerican telephone industry. The results show that, due to forbearance,weak competitors can out-survive strong competitors. Evidencealso is found that strategic groups not protected by mobilitybarriers face strong competition from other strategic groups.Implications for the study of strategic evolution are discussed.