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Briance Mascarenhas and Megan Mascarenhas

A strategic group is defined as a set of firms within an industry pursuing a similar strategy. The strategic group concept emerged with much promise over 40 years ago. Research on strategic groups over time in a broad variety of settings has sought to clarify their theoretical and empirical properties. These research findings are gradually being translated into practical managerial guidance, so that the strategic group concept can be understood, operationalized, and used productively by managers. Two main approaches exist for identifying strategic groups—a ground-up approach, using disaggregated data, and a top-down, using cognition. Once identified, managerial insights can be derived from clarifying a strategic group’s profile. Firm membership in a group helps to uncover immediate and more distant types of competitors. Group profitability differences reveal the more rewarding and less attractive areas within an industry, as well as identify the lower-return groups from where firm exits are likely to occur. Group dynamics reflect competitive and cooperative behavior within and between groups. Several promising areas for future research on strategic groups to improve understanding and practice of strategy.


Pierre-Yves Donzé

The Swiss watch industry has enjoyed uncontested domination of the global market for more than two decades. Despite high costs and high wages, Switzerland is the home of most of the largest companies in this industry. Scholars in business history, economics, management studies, and other social sciences focused on four major issues to explain such success. The first is product innovation, which has been viewed as one of the key determinants of competitiveness in the watch industry. Considerable attention has been focused on the development of electronic watches during the 1970s, as well as the emergence of new players in Japan and Hong Kong. Yet the rebirth of mechanical watches during the early 1990s as luxury accessories also can be characterized as a product innovation (in this case, linked to marketing strategy rather than pure technological innovation). Second, brand management has been a key instrument in changing the identity of Swiss watches, repositioning them as a luxury business. Various strategies have been adopted since the early 1990s to add value to brands by using culture as a marketing resource. Third, the evolution of the industry’s structure emphasizes a deep transformation during the 1980s, characterized by a shift from classical industrial districts to multinational enterprises. Concentration in Switzerland, as well as the relocation abroad of some production units through foreign direct investment (FDI) and independent suppliers, have enabled Swiss watch companies to control manufacturing costs and regain competitiveness against Japanese firms.Fourth, studying the institutional framework of the Swiss watch industry helps to explain why this activity was not fully relocated abroad, unlike most sectors in low-tech industries. The cartel that was in force from the 1920s to the early 1960s, and then the Swiss Made law of 1971, are two major institutions that shaped the watch industry.


Nydia MacGregor and Tammy L. Madsen

Regulatory shocks, either by imposing regulations or easing them (deregulation), yield abrupt and fundamental changes to the institutional rules governing competition and, in turn, the opportunity sets available to firms. Formally, a regulatory shock occurs when jurisdictions replace one regulatory system for another. General forms of regulation include economic and social regulation but recent work offers a more fine-grained classification based on the content of regulations: regulation for competition, regulation of cap and trade, regulation by information, and soft law or experimental governance. These categories shed light on the types of rules and policies that change at the moment of a regulatory shock. As a result, they advance our understanding of the nature, scope, magnitude, and consequences of transformative shifts in rules systems governing industries. In addition to differences in the content of reforms, the assorted forms of regulatory change vary in the extent to which they disrupt an industry’s state of equilibrium or semi-equilibrium. These differences contribute to diverse temporal patterns or dynamics, an area ripe for further study. For example, a regulatory shock to an industry may be followed by rapid adjustment and, in turn, a new equilibrium state. Alternatively, the effects of a regulatory shock may be more enduring, contributing to ongoing dynamics and prolonging an industry’s convergence to new equilibrium state. As such, regulatory shocks can both stimulate ongoing heterogeneity or promote coherence within and among industries, sectors, organizational fields, and nation states. It follows that examining the content, scope, and magnitude of regulatory shocks is key to understanding their impact. Since conforming to industry regulation (deregulation) increases economic returns, firms attempt to align their policies and behaviors with the institutional rules governing an industry. Thus, regulatory shocks stimulate the evaluation of strategic choices and, in turn, impact the competitive positions of firms and the composition of industries. Following a shock, at least two generic cohorts of firms emerge: incumbents, which are firms that operated in the industry before the change, and entrants, which start up after the change. To sustain a position, entrants must build capabilities from scratch whereas incumbents must replace or modify the practices they developed in the prior regulatory era. Not surprisingly, the ensuing competitive dynamics strongly influence the distribution of profits observed in an industry and the duration of firms’ profit advantages. Our review highlights some of the prominent areas of research inquiry regarding regulatory shocks but many areas remain underexplored. Future work may benefit by considering regulatory shocks as embedded in a self-reinforcing system rather than simply an exogenous inflection in an industry’s evolutionary trajectory. Opportunities also exist for studying how the interplay of industry actors with actors external to an industry (political, social) affects the temporal and competitive consequences of regulatory shocks.