All the Right Moves: How Entrepreneurial Firms Compete Effectively

Abstract

In this article, we examine competitive moves by which firms achieve superior performance. In contrast to prior work that has focused on moves and the related competitive advantages of large firms, we draw attention to entrepreneurial firms. Based on 32 runs of a multi-round experiential simulation and in-depth participant interviews, we find that entrepreneurial firms require competitive strategies that are different from those of a control group of comparable large firms. Entrepreneurial firms that stay below the radar in established markets and are quick to explore in new markets perform better. They succeed in established markets with a strategy that works around large firm competition but ultimately surprises them, and in new markets with a strategy that sets the standards of competition swiftly by continuously creating and destroying new strongholds ahead of large firms. Overall, successful entrepreneurs use a combination of selective, invisible, and asynchronous strategies that vary depending on whether the market is established or new. Our findings contribute to literatures on evolutionary learning, exploration and exploitation, and competitive dynamics.

Keywords: competition, innovation, startups, R&D, new markets, temporary competitive advantage