Professor of Strategy
Inter-Organizational Relationships; Price War; Strategic Alliance; Common Ownership Ties;
Despite their prevalence and significance, competitive wars have received limited attention from the strategy literature. Our knowledge of how inter-organizational linkages influence competitive wars is particularly lacking.Drawing on the social embeddedness perspective, the authors argue that both direct linkages (i.e., strategic alliances) and indirect linkages (i.e., common ownership ties and common analyst ties) reduce the likelihood of war, thereby functioning as the glue that binds firms together. Yet once competitive wars are launched in related markets, indirect linkages through common third parties may continuously function as glue, reducing the likelihood of war spillover, whereas direct linkages, such as strategic alliances, may facilitate the spillover of competitive wars, akin to adding gasoline to a fire.Using data from the U.S. domestic airline industry between 1991 and 2010, the authors' empirical evidence offers strong support for their predictions.