AN EMPIRICAL-ANALYSIS OF STRATEGIC COMPETITION AND FIRM VALUES - THE CASE OF R-AND-D COMPETITION

We operalionalize a firm's competitive strategy through a new empirica l measure, and develop a framework for empirical analysis of the marke t value of strategic behavior. Using this framework, we study announce ment effects of R&D spending. The announcing firm's stock prices are p ositively influenced by a change in spending, and negatively by our co mpetitive strategy measure (CSM). Competitors' stock prices are positi vely influenced by the interaction between the market's reaction to th e announcing firm and the CSM. Our results are consistent with positiv e effects of 'accommodating' competition with strategic substitutes, a nd nonpositive effects of 'tough' competition with strategic complemen ts.