Competitive Strategies and Exit Decisions in Oligopolies

Abstract:     
We examine corporate exit resolutions, including the decisions to merge, to be acquired, and to file for bankruptcy, as a result of long-term deployment of generic competitive strategies among rival firms. We construct a theory that forecasts diverse exit outcomes and demonstrate its predictions within the U.S. automotive industry. We find that unless competitors split the market into separate niches, a clash between firms that utilize a single competitive strategy causes the less efficient ones to go bankrupt, and firms that utilize different competitive strategies throughout their going-concern stages are generally more sustainable than those deploying only a single strategy.

Keywords: Exit Decisions, Bankruptcy, Merger, Acquisition, Porter’s Competitive Strategies, Cost Leadership, Product Differentiation, Focus, Pooling/Separating Equilibrium

JEL Classification: A12, D41, D43, D58, D74, G33, G34

working papers series