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IIMA INDIA Research and publications Similarly, by announcing its intent to acquire a major competitor, a dominant firm can potentially speed up the consolidation process in the remainder of its industry. Non-Contractual Announcements Non-contractual announcements refer to impending actions of a firm that are not contractual in nature. Such announcements (or pre-announcement or signals) can revolve around the initiation of a new product development effort, the launch of a new product, an impending change in pricestructures, and other similar non-contractual actions. Several scholars have noted the influence of announcements of price changes and product pre-announcements on the behavior of other players in a market (Heil and Walters 1993; Mitchell 1989; Prabhu and Stewart 2001; Robertson, Eliashberg and Rymon 1995). Microsoft has routinely used product pre-announcements to encourage independent software vendors to come on board its product development efforts. Such pre-announcements can also signal to potential competitors that they might perhaps be better off not entering that market, or exiting the market, if already in it (Bayus, Jain and Rao 2001; Gruca and Sudarshan 1995). Product preannouncements can also be used by a firm to get customers to delay their purchases till such time as the product is released, and in certain cases to encourage other players to alter their product design plans (see Bridges, Yim and Briesch 1995; Gruca and Sudarshan 1995). Lilley and Rockney (1997) find that firms make product pre-announcements significantly in advance of the new product launch to signal complementors, suppliers and customers and give them time to align their efforts. The New York Post has used announcements of intended price changes to influence it competitor, New York Daily News, to raise its prices (Brandenburger and Nalebuff 1995). It should be noted that the efficacy of announcements is likely to depend on the reputation and position of the firm making the announcements. Robertson, Eliashberg and Rymon (1995) show that the influence of price increase announcements depends on the characteristics of the signaling firm. Bayus, Jain and Rao (2001) found that vaporware announcements by dominant software firms deter competitor market entry. W.P. No. 2013-05-07 Page No. 14
IIMA INDIA Research and publications To summarize, MDBs may be categorized into four categories – contractual actions, noncontractual actions, contractual announcements and non-contractual announcements. Contractual actions try to shape markets by entering into agreements with other organizations at an arm’s length (e.g., franchising) or across organizational boundaries (e.g., JVs), whereas non-contractual actions aim to persuade by raising or lowering the stakes for a market player (staking), altering the physical context of a player (physical context setting), and altering a player’s decision framing (decision context setting). Announcements about impending contractual or non-contractual actions can accelerate the effect of these actions respectively. We now turn to a discussion of antecedents of MDBs. Antecedents of Market-Driving Behaviors Our proposed framework (see Figure 2) includes four classes of antecedents: Firm-related variables, Player-related variables, Firm-Player relational variables and Contextual Variables. A complete discussion of all possible antecedent variables is beyond the scope of this paper. We include an illustrative set of antecedent variables in our discussion, and develop theoretical propositions concerning their impact on MDBs. In developing our arguments, we largely focus on the level of the four categories of MDBs. In future research, it would be useful to examine the influence of other antecedents as well as MDBs at a more granular level. We adopt the perspective of a protagonist firm operating at the product-market level. W.P. No. 2013-05-07 Page No. 15
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