Competitive Intensity

Competitive intensity refers to the extent to which firms exert pressure on one another within a given industry, by attacking each other’s competitive position to increase their own performance at the expense of others’ performance. The competitive intensity among existing firms in an industry may manifest in a variety of forms, like price discounting, new product introductions, aggressive advertising campaigns, the offering of an increasing number of complementary services, among others. The intensity of competition can have a positive effect on an economic system as a whole, since a higher intensity forces firms to do better than their rivals, for example by introducing better innovations, with the aim to maximize their performance within the competitive environment. As a result, such a phenomenon usually leads to better products and services for consumers. However, the intensity of competition among firms in an industry could undermine their ability to generate profits, and highly competitive industries might discourage new firms to enter. Understanding the intensity of competition within an industry is important for many stakeholders. For example, it is crucial for new firms that are considering entering the industry and need to assess its attractiveness in terms of profit potential. It is also important for industry incumbents who may have to decide whether to increase their resources to sustain their performance or divest and enter into new industries. Furthermore, it is essential for national authorities and regulators, who are responsible for avoiding collusive behaviors among dominant players that could undermine consumers’ purchasing power. The purpose of this article is to present key themes that aid in understanding competitive intensity and to summarize relevant research works published on this topic, primarily in the management literature. In this way, it aims to assist students and academics in navigating this subject more effectively while developing their research work. Specifically, this bibliography is organized as follows. First, it discusses how the concept of competitive intensity has been examined across various streams of literature. It is worth noting that the focus of this article is on the competitive intensity among firms within an industry, rather than among a firm’s organizational units, subsidiaries, or employees. Second, it discusses the main antecedents of competitive intensity (i.e., those factors affecting the extent to which firms compete aggressively) presented by studies in the extant literature. Third, it discusses the main outcomes of competitive intensity explored so far in the literature in terms of firms’ performance and strategic responses to competition. Finally, it presents the main measurements of competitive intensity used by scholars to examine this construct empirically.