Competitive Dynamics (Action-Response) Analysis

They are Chen's two pairwise constructs for characterizing any two competitors. Market commonality measures how much the firms' markets overlap, weighted by how important each market is to each firm, reflecting their degree of multimarket contact. Resource similarity measures how comparable the two firms' strategic resources are. Chen argues these jointly determine the competitive tension between a pair: high commonality makes a rival more motivated to respond because more is at stake, and high similarity makes it more capable of matching a move. They turn rivalry into a firm-pair-specific prediction rather than a generic industry condition.

AMC is Chen's behavioral logic for predicting competitive responses. A firm will counter a rival's action only if it is aware of the move, motivated to respond to it, and capable of mounting a response. Awareness depends on the move's visibility; motivation rises with market commonality and the threat the move poses; capability rises with resource similarity and slack. By assessing all three conditions for a given action and rival, the analyst predicts whether a response will occur, how fast, and of what kind. A move that the rival cannot see, does not care about, or cannot answer will go uncontested.

Through structured content analysis, as documented by Smith, Ferrier, and Ndofor. Analysts systematically collect reports of firms' competitive moves — price changes, product launches, capacity changes, entries, signals — from news and trade publications and code each as a dated action with attributes such as type and magnitude. A rival's subsequent move that addresses the same arena is coded as a response, with its timing measured to capture speed. This produces a longitudinal record of action-response sequences that can be analyzed statistically. The method's validity hinges on comprehensive sources and careful coding rules to avoid coverage bias and spurious response attributions.