If Entry Strategy and Money go Together, What is the Right Side of the Coin?

TL;DR

This study compares IO and RBV strategic models using a multi-agent simulation to determine which yields higher short-term and long-term firm performance in hypercompetitive markets.

Contribution

It introduces a multi-agent simulation approach to compare IO and RBV strategies, revealing long-term advantages of RBV and short-term gains of IO in competitive markets.

Findings

IO firms outperform in short-term ROA

RBV firms achieve higher long-term performance

RBV firms excel in highly profitable competitive markets

Abstract

The goal of this study is to determine which strategic model, either IO or RBV, allows firms to generate the highest performance on a competitive market. Contrasting with classical studies that mobilize analyses as VARCOMP, we deploy a multi-agent system simulating the behavior of firms adopting RBV or IO strategic models. For an equivalent proportion of both strategic orientations, we study the instant and total performances of the firms on hypercompetitive markets. We show that the performance of best-performing IO firms, measured by the ROA, is higher in the short term, but that RBV firms obtain an average higher sustained performance, in the long term. Moreover, when they are in competition with IO firms on a highly profitable and competitive market, RBV firms which dare to enter such markets obtained generally the highest performance.