Why do firms behave similarly? A study on new product introduction in the Japanese soft-drink industry

Asaba, Shigeru; Lieberman, Marvin

We analyze new product introduction in the Japanese soft-drink industry to distinguish among theories of why firms exhibit similar behavior. Some theories suggest that firms mimic others with comparable resource endowments in order to mitigate rivalry or to minimize risk. Other theories suggest that imitation economizes on information costs. In the Japanese soft-drink industry, there is often bunching of new product introductions and imitation of competitors' offerings. As a result, Japanese beverage manufacturers duplicate each other's product lines. In the US, by comparison, the extent of such duplication is much less. The empirical results provide support for both sets of theories, but in different contexts. The analysis of firms' initial entry into brand-new products suggests that firms enter when they observe larger competitors doing so. Entry by large firms provides information that demand for the product is likely to grow; indeed, such entry may give legitimacy to the product and stimulate consumer demand. On the other hand, the analysis of new product introduction within established product categories suggests that firms often mimic competitors that share a similar resource base. One interpretation is that the bunching of entry into emerging product markets is largely the result of economizing on information costs, whereas the bunching of product introductions within established categories is caused more by competitive interaction among similar firms.

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Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 155
Published Here
February 10, 2011