Charlotte R. Ren, Ye Hu, Yu (Jeffrey) Hu and Jerry Hausman
Product variety is an important strategic tool that firms can use to attract customers and respond to competition. This study focuses on the retail industry and investigates how stores manage their product variety, contingent on the presence of competition and their actual distance from rivals. Using a unique data set that contains all Best Buy and Circuit City stores in the United States, the authors find that a store’s product variety (i.e., number of stock-keeping units) increases if a rival store exists in its market but, in the presence of such competition, decreases when the rival store is collocated (within one mile of the focal store). Moreover, collocated rival stores tend to differentiate themselves by overlapping less in product range than do non-collocated rivals. This smaller and more differentiated product variety may be because of coordinated interactions between collocated stores. In summary, this paper presents evidence of both coordination and competition in retailers’ use of product variety.
Management Science 57, no. 6 (2011): 1009-1024
Click here for the paper: Ren-Hu-Hu-Hausman 2011MS (SSRN Version).
Olav Sorenson, Susan McEvily, Charlotte R. Ren and Raja Roy
Although strategy research typically regards firm scope as a positional characteristic associated with performance differences, we propose that broad contemporary scope also provides insight into the routines that govern firm behavior. To attain broad scope, firms must repeatedly explore outside the boundaries of their current niche. Firms with broad niches therefore operate under a set of routines that repeatedly propel them into new market segments, expanding their niche. These niche expansions, however, involve risky organizational changes, behavior that disadvantages generalists relative to specialists, despite the positional value of broad scope. Empirical analyses of machine tool manufacturers and computer workstation manufacturers support this conjecture: (i) generalists introduce new products at a higher than optimal rate, thereby increasing their exit rates; and (ii) generalists also more frequently launch new models with novel features or targeted at new consumer segments rather than improving only incrementally on existing products, further accelerating their odds of failure. After adjusting for these behavioral differences, broad niche widths reduce exit rates, suggesting that they provide positional advantages. The paper discusses how this phenomenon may help to explain the diversification and multi-nationality discounts.
Strategic Management Journal 27, no. 10 (2006): 915-936
Click here for the paper: Sorenson-McEvily-Ren-Roy_2006SMJ