Information and Rivalry: How Do Firms Respond to Competitors’ Investment Decision under Environmental Uncertainty? -- Evidence from the U.S. Electric Utility Companies’ Adoption of Solar Energy
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Date
2015-02
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Abstract
A broad literature in strategy examines how competitors’ presence affects the focal firm’s strategic decision making. This stream of research identifies imitation and deterrence as two distinct patterns, and concludes with an inverted U-shaped relationship. Yet, we propose in this study that under environmental uncertainty competition could both strengthen and undermine the benefits of imitation, and consequently lead to a U-shaped relationship. Combining both information- and competition-based theories, we develop stylized models of how firms update their beliefs and make strategic decision under environmental uncertainty. The analytical results suggest a U-shaped relationship, and we find empirical evidence consistent with our predictions using data on the U.S. electric utility companies’ commitment to develop utility-scale solar projects.
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Business: 3rd Place (The Ohio State University Edward F. Hayes Graduate Research Forum)