When positional advantage backfires: How social buffering halts positional advantage

Abstract

A fundamental assumption in the strategy field is that competitive advantage is beneficial or at least not harmful to the firm possessing it. Building on recent work that highlights that competitive advantage may—under certain conditions—backfire, we explore when and how prior commitments may halt positional advantage. We introduce the concept of social buffering to highlight the embeddedness of organizations in the history of their relationships and argue that firms are severely limited in acting on their positional advantage under high levels of social buffering. We empirically investigate our theory using the U.S. beer distribution industry. We use longitudinal data on beer distributors and the county-level composition of their portfolios between 1997 and 2016 from three U.S. states. Our results provide broad support for our theory and show that higher levels of social buffering in local distribution portfolios halt positional advantage. Our results are robust across instrumented and non-instrumented model specifications.

Keywords: intermediary organizations, distributor portfolios, industry evolution, positional strategies, social buffering

JEL Classification: L22