The effects of competition on market segment selection

In this research, we investigate the dynamics of firms' segment selection, in which segments a firm decides to enter and compete, and in which segments a firm decides to exit, from a competitive perspective. Specifically, we examine how firms make segment selection by simultaneously considering seemingly contradictory effects: the segment competitive condition predicts that firms avoid competition and imitation effects that influence firms to imitate each other and to cluster together. To investigate this, we observed positional moves of firms operating in the U.S. automobile industry between 1950 and 1993 (annual panel data) with around 11,000 items of complete observations with an unbalanced time series cross sectional panel. The data recorded 723 segment entries and 627 segment exits. A discrete time event history analysis with time-varying independent variables was employed to estimate the effects of the independent variables on the probability of a company conducting segment entry or exit in a specific segment. The results suggest that although firms tend to avoid their competitors, the fear of losing market opportunity makes firms follow and imitate each other, and thus mitigate their effort to reduce the competition.Ph.D.Includes bibliographical referencesby Setiadi Uma