Competitive reaction to the introduction of a new product: An exploratory market signalling study/ Carmen Otero-Neira

Firms are in constant need of improving their competitive position. To do so, they employ a variety of marketing strategies such as introducing new products, price cutting of existing products and increasing marketing budgets. Reactions from competitors partly determine the success or failure of such marketing strategies and whether or not they result in competitive advantages. To expand upon the signalling theory, this study examines: first, the relationships between product innovativeness, competitive intensity and market signals, and second, the relationships between market signals, rival knowledge and type of competitive reaction. Using a sample of 93 key informants, the research primarily suggests that product innovativeness influences the signals of consequences and commitment, whereas competitive intensity has only a positive impact on the consequences signal. Furthermore the signals of consequences and commitment are negatively related to simple (or similar) reaction. Lastly, the responding firm's knowledge of its rivals also has an influence on simple reaction. The study concludes with the implications of findings on future research and managerial practice.