Competitor identification, perceived environmental uncertainty, and firm performance

Abstract

To create a competitive advantage and generate superior performance, firms must first identify rivals. However, there is little understanding of how perceived environmental uncertainty affects competitor identification, why some firms are better at identifying domestic versus foreign rivals, or how competitor identification is related to firm performance. In this paper we theorize that perceived environmental uncertainty is an important antecedent of competitor identification; it influences how many competitors a firm identifies. Our theory also suggests that different firm characteristics influence domestic/foreign competitor identification and that there is an inverted-U shaped relationship between under/overidentification of competitors and firm performance. Based on a large sample of Taiwanese firms, we find support for each of these ideas. Our study helps reinforce the importance of competitor identification for firm success.