Strategic Deterrence Among Multipoint Competitors

Organizations often encounter the same competitors in more than one market. Some conclude that these “multipoint” rivals should deter one another from competing, but empirical support for this hypothesis is lacking. Using an integration of strategic and ecological theories, this paper predicts that multipoint contact affects competition within but not between strategic groups, and that whether multipoint contact deters competition depends on firms’ strategies. These predictions are supported by ecological models of market exit rates in the customer premises equipment and service (CPES) sector of the deregulated American telephone industry. Evidence also is found that strategic groups not protected by mobility barriers face strong competition from other strategic groups.