Bringing Managers into Theories of Multimarket Competition: CEOs and the Determinants of Market Entry

Multipoint contact has been shown to deter aggressive actions by multipoint rivals toward each other, producing a situation of mutual forbearance between firms. However, in order to establish this deterrent, firms must enter each other?smarkets, which is the kind of action that deterrence is supposed to limit. This study explores the question: Under what conditions are firms likely to enter the markets of their multimarket rivals and when will they engage in mutual forbearance? We extend existing multipoint theory by specifying previously neglected motivations that lead firms to prefer, up to the point where forbearance concerns become paramount, to enter the markets in which their multipoint rivals already compete. Incorporating theory from the strategy, institutional, and decision-making literatures, our study shows that differing levels of multipoint contact have different effects on managerial cognitions and firm actions. Our study also focuses on the role of the CEO and analyzes the motivations that influence longer-tenured and newer CEOs to recognize and abide by the mutual interdependencies that their firm?s multimarket ties represent. We also examine the how different performance antecedents of managerial actions, affect the market entry decisions of these CEOs given their firm?s level of multimarket contact with its competitors. Our findings produce support for an inverted-U shaped relationship between multipoint contact and market entry. We also find evidence that longer-tenured CEOs abide by their firm?s multimarket relationships, regardless of recent firm performance. Newer CEOs do so only when performance is poor.