Dynamic Strategy - Academic article - Competitive Actions and Dynamics in the Digital Age: An Empirical Investigation of Social Networking Firms

The purpose of this article is to examine the competition between firms in the social networking services (SNS) industry and the way that competitive actions taken by firms enhance their performance. SNS industry is composed of companies like Facebook, LinkedIn, Hi5, and MySpace.  

According to the authors, SNS firms use two ways to compete with other firms in their industry. The first way they use is to undertake “value cocreation actions” (Devi et al, 2009), which include codevelopment of technology with third party developers and forming alliances with firms to develop relational capabilities. The second way is to take aggressive actions against their competitors by using a “repertoire of competitive actions”(Devi et al, 2009). 

The authors use hypothesis testing in order to conduct their research. Their main hypotheses are:

• codevelopment actions are positively related to firm performance 
• relational capability actions are positively related to firm performance
• complexity of action repertoire is positively related to firm performance 
• the volume of actions taken by firms is positively related to firm performance

In order to find the information for their research, the authors used data from 52 SNS firms in a period of 3 years. This resulted in the authors having a sample of 156 firm years, which is a very good sample for their research.

The results of the study showed that the first hypothesis is true for most of the firms. Codevelopment helps firms to achieve greater performance. Hypothesis 2 was also supported by the results, so this means that relational capabilities actions help firms to have greater performance. The third hypothesis was also supported by the final results. Complex actions taken by the firms when they try to compete with their competitors help their performance. The fourth hypothesis was not supported by the study. The volume of actions taken by firms when competing was not clearly shown to affect firm’s performance.

As for managers, this study can help them in many ways. By studying the results of this study they can learn the types of competitive actions that each firm took and thus they can understand industry dynamics and develop better strategies to compete in this industry. The fact that this research combines IT, IS, and strategic management can help managers understand the competitive advantages that their firms can have by combining the same three components.

References

Devi R. Gnyawali, Weiguo Fan, James Penner, (2009). Competitive Actions and Dynamics in the Digital Age: An Empirical Investigation of Social Networking Firms, Information Systems Research Vol. 21, No. 3, September 2010, pp. 594–613

The article can be found in the following address:

http://libproxy.uhcl.edu:2057/ehost/detail?sid=9665d816-2aab-43bb-8f9e-8ed21577d5fb%40sessionmgr111&vid=4&hid=112