Complementarity-based hypercompetition in the software industry: Theory and empirical test, 1990-2002

This study examines the hypercompetition phenomenon within the prepackaged software industry. It theoretically develops and empirically validates the idea that dynamically changing complementarity relationships among software product markets increase industry hypercompetition. The study also explain...

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Bibliographic Details
Published in:Strategic management journal 2010-12, Vol.31 (13), p.1431-1456
Main Authors: Lee, Chi-Hyon, Venkatraman, N., Tanriverdi, Hüseyin, Iyer, Bala
Format: Article
Language:English
Subjects:
Banking industry
Business organization
Competition
Competitive advantage
complementarities
Computer software
Core competencies
Corporate planning
dynamic capabilities
Extractive industries
Financial portfolios
Firm theory
hypercompetition
Industrial market
Industrial products
Market analysis
Market share
Market structure
Organizational analysis
Organizational behaviour
Organizational structure
packaged software industry
Planning methods
Product management
Product markets
Resource allocation
Software
Software industry
Strategic management
Studies
temporary advantage
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Summary:This study examines the hypercompetition phenomenon within the prepackaged software industry. It theoretically develops and empirically validates the idea that dynamically changing complementarity relationships among software product markets increase industry hypercompetition. The study also explains how dynamic capabilities for the management of complementary product markets can enable an independent software vendor (ISV) to create and renew temporary advantages. Specifically, an ISV can maintain or increase its performance rank in its product markets in three ways: (1) by competing with a portfolio of strongly complementary products; (2) by forming a product market portfolio that has strong complementarity relationships with other product markets in the industry; and (3) by dynamically and purposefully responding to the changing product market complementarities: (a) reconfiguring resource allocations of its products to strengthen the complementarities of its product portfolio and (b) undertaking entry and exit moves that reposition the portfolio in a stronger complementarity position. These dynamic capabilities enable the ISV to coevolve with the changing complementarities, change and improve its performance rank, and trigger new competitive moves by rivals; and accordingly, contribute to the escalation of rivalry in the industry. The study finds support for these ideas in a study of 1,200 ISVs from 1990 to 2002.
ISSN:0143-2095
1097-0266
DOI:10.1002/smj.895