AUSTRIAN AND INDUSTRIAL-ORGANIZATION PERSPECTIVES ON FIRM-LEVEL COMPETITIVE ACTIVITY AND PERFORMANCE

Drawing on the Austrian school of economics and the structure-conduct- performance (s-c-p) paradigm of industrial organization, the authors p resent and test a dynamic model of competitive activity and performanc e. They examine the model in two stages. First, they explore the influ ence of industry-level and firm-level cooperative mechanisms on firm-l evel competitive activity. Second, they examine the effect of firm- an d industry-level competitive activity on firm performance. The authors use the dynamic model of competitive activity to examine the complex linkages between the firm's environment, its actions, and its performa nce outcomes. They report a longitudinal analysis of a sample of 1,903 competitive moves undertaken in the software industry. Hypothesis tes ting supports the relationships in the model argued from the Austrian perspective, but provides only partial support for those derived from the s-c-p paradigm. Firm-level cooperative mechanisms are found to inc rease the firm's competitive activity, and firm-level competitive acti vity is related positively to the firm's return on assets and return o n sales. Contrary to expectation based on the s-c-p paradigm, industry -level cooperative mechanisms are not related to the firm's competitiv e activity or to its performance. Consistent with the IO paradigm, how ever, a measure of industry rivalry that directly captures industry-le vel competitive activity is related negatively to firm-level performan ce.