The role of competitive strategy in the success of initial public offerings of stock : a game theoretic examination of the evolution of strategy within competitive groups in the southwestern United States

This study examines how a firm's competitive strategy, relative to that of its direct industry rivals, can predict market performance. A game theoretic perspective, suggesting evolutionarily stable patterns in the variety of strategy choices among competitors, is directed toward addressing this issue in a sample of competitive groups in the Southwestern United States. In this study, a competitive group is characterized as a focal firm, which has recently gone public and its three most direct market rivals. Measures are suggested and implemented to operationalize the constructs: evolutionary stability, strategic variety, fit of strategic variety with environmental variety and group density. The study sample consisted of 62 newly public firms and their respective competitive groups collected from a population of initial public offerings in the Southwestern United States. Results from regression analysis suggest that the fit of a competitive group's strategic variety with both the variety of threats and opportunities in the group's relevant environment can dependably predict a small portion of the variance in the evolutionary stability of the group. Hypotheses suggesting that membership in more stable groups will lead to superior market performance, however, were not supported. Finally, group density was found to be a significant predictor of the longer term market performance of initial public offerings of stock. As a theory building effort, however, results of this study should be viewed as preliminary and relied upon only after verification via further empirical research. Suggestions for refinement of measures and directions for future research are offered.