Vassolo, R., Murcia, M.J., Garcia-Sanchez, J. (2015) The Evolution Of Competition Through The Business Cycle.

Vassolo, R., Murcia, M. J., & Garcia-Sanchez, J. (2015). The Evolution Of Competition Through The Business Cycle. In Academy of Management Proceedings (Vol. 2015, No. 1, p. 11882). Briarcliff Manor, NY 10510: Academy of Management.

Abstract

Business cycles affect the economic and business life prospects of firms anywhere; but alas literatures in management and strategy have persistently developed theories and empirical models that overlook how they affect competitive dynamics and competitive advantages. Within the cycle, economic recessions represent periods of reduced environmental munificence on the business cycle of non-industry specific genesis and of transitory nature that affect the survivability of all firms in an industry. This downturn event is, for these reasons, of especial interest to strategists and managers. Rooted in evolutionary economics, our work aims to provide insights on the conditions that allow companies to take advantage of business cycles, with an empirical emphasis in its downside portion, i.e., recessions. We specifically ground a case discussion of shifts in the competitive positioning of rivals in the US Automobile industry. Further, we formally model the dynamics of competition, and explore its nuances through multiple mathematical simulation runs, so that we derive general theoretical propositions. In specific, we propose that the depth and duration of an economic recession monotonically reinforce "supply-side" cost leadership capabilities. Also, we conjecture that the duration of a recession has more lasting effects the earlier it happens in an industry life cycle.