Do strategic groups explain differences in multimarket competition spillovers?

Abstract

Multimarket competition theory states that if two firms coincide in multiple markets, the level of rivalry between them changes, which, in turn, affects their performance. This article extends this perspective in two ways. We first propose that multimarket competition affects not only the rivalry levels of multimarket rivals but also the rivalry experienced by the other firms present in the markets in which these multimarket rivals operate. We refer to these indirect effects as multimarket competition spillovers, and we propose that they affect firm performance. Second, we conjecture that multimarket competition spillovers are more intense when the firm that creates the spillover and the one that receives it belong to the same strategic group. Our analyses of the Spanish retail banking sector show that the performance of firms is significantly affected by the multimarket competition spillovers of rivals that belong to the same strategic group. © 2016, © The Author(s) 2016.