infonet-economy

This study incorporates the external environmental context into the study of competitive dynamics by examining how market shocks affect a firm's inclination to take new competitive action. We propose that market shocks temporarily change the rules of the competitive game. While we agree with prior research that third party rivalry is a major antecedent of competitive actions, we argue that in the aftermath of market shocks new competitive opportunities arise that lead managers to detach their focus from the competitive behavior their rivals have displayed. Considering the terrorist attacks of 9/11 and Hurricane Katrina as natural experiments, we study the amount and types of competitive actions firms within the global property and casualty (P&C) insurance industry have taken in their efforts to outmaneuver their rivals. We find support for our arguments and demonstrate how market shocks punctuate and alter patterns of interfirm rivalry.