How does institutional change affect heterogeneity among firms?

This paper examines the variation in performance of incumbents and entrants following the deregulation of prices and entry in the airline industry. Our approach is similar to earlier studies of interfirm performance heterogeneity across industries. Drawing on theories of industry evolution, we hypot...

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Bibliographic Details
Published in:Strategic management journal 2002-02, Vol.23 (2), p.89-104
Main Authors: Walker, Gordon, Madsen, Tammy L., Carini, Gary
Format: Article
Language:English
Subjects:
Air transportation industry
Aircraft industry. Spacecraft
Airline deregulation
Airline industry
Airlines
Applications
Applied sciences
Aviation regulation
Business management
Business structures
capabilities
Competition
Corporate strategies
Deregulation
Engineering techniques in metallurgy. Applications. Other aspects
Enterprises
entrant behavior
Exact sciences and technology
firm heterogeneity
Firm modelling
Hypotheses
Incumbency
Incumbents
Industrial market
Industrial regulation
Industry
Industry analysis
Institutional change
Management
Metals. Metallurgy
Operational research and scientific management
Operational research. Management science
Organization theory
Organizational behavior
Organizational change
Startups
Statistical variance
Strategic management
Studies
Variance analysis
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Summary:This paper examines the variation in performance of incumbents and entrants following the deregulation of prices and entry in the airline industry. Our approach is similar to earlier studies of interfirm performance heterogeneity across industries. Drawing on theories of industry evolution, we hypothesize that the performance of entrants will have higher variance than incumbents. Further, given the opportunities offered by price deregulation, we propose that incumbents will have higher variance in performance under deregulation than in the earlier regime. The findings indicate that entrant performance heterogeneity is significantly greater than incumbent performance heterogeneity following deregulation, but that the variation in performance among incumbents does not significantly change when deregulation occurs. The second result is surprising given the range of service and process innovations that incumbents initiated. These results suggest that the distinction between entrants and incumbents is critical to future studies of performance variation within and across industries.
ISSN:0143-2095
1097-0266
DOI:10.1002/smj.216