Investigating the action dilemma: Untangling the relationships between firm activity, rival activity, and firm performance

This dissertation explores the action dilemma by examining the relationships between firm activity, rival activity and firm performance. Drawing from Schumpeter's theory of creative destruction and recent literature in industrial organization economics, hypotheses are developed examining the dilemma between competitive action and performance, and competitive action and rivalry. A unique data set of over 4,600 competitive actions composing rivalry in eleven different industries is used to test the hypotheses. Results support the notion of an action dilemma: firms must act to increase performance, but that action is positively related to rival action which, in turn, adversely affects firm performance. The research begins to explore how different types of action can positively increase performance without inciting rivalry.