Value from gestalt: how sequences of competitive actions create advantage for firms in nascent markets
Article first published online: 27 OCT 2010
Copyright © 2010 John Wiley & Sons, Ltd.
Strategic Management Journal
Special Issue: The Age of Temporary Advantage?
Volume 31, Issue 13, pages 1474–1497, December 2010
How to Cite
Rindova, V., Ferrier, W. J. and Wiltbank, R. (2010), Value from gestalt: how sequences of competitive actions create advantage for firms in nascent markets. Strat. Mgmt. J., 31: 1474–1497. doi: 10.1002/smj.892
- Issue published online: 27 OCT 2010
- Article first published online: 27 OCT 2010
- Manuscript Revised: 6 APR 2010
- Manuscript Received: 1 OCT 2008
- competitive dynamics;
- competitive advantage;
- pattern perception and sensemaking;
- sequence analysis;
- market valuations;
- stock returns
Research on competitive dynamics and hypercompetition has demonstrated the importance of firm competitive actions for disrupting industry positions and gaining competitive advantage. The effects of competitive actions in disequilibrium environments, such as nascent markets, however, have not been examined. In this paper, we argue that under conditions of high ambiguity, firms can gain competitive advantage from the Gestalt properties present in the sequences of their competitive actions. Such properties, we argue, facilitate investor sensemaking and influence their valuations. Drawing on psychological research on pattern perception and holistic information processing, we investigate the effects of four Gestalt properties—simplicity, predictability, grouping, and motif—on investor valuations of new firms competing in the nascent markets that emerged around the commercialization of the Internet in the mid-1990s. We find support for our arguments that the dynamic properties of action sequences provide firms with advantages and that simplicity, grouping, and motif are associated with increases in the market value of high-ambiguity firms, but not of low-ambiguity ones. Our study advances research on competitive advantage by developing both theory and methods for studying how the dynamic, holistic properties of firms' competitive actions contribute to competitive advantage under varying levels of ambiguity. Copyright © 2010 John Wiley & Sons, Ltd.