Customer-specific synergies and market convergence

Jens Schmidt*, Richard Makadok, Thomas Keil

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

16 Citations (Scopus)

Abstract

We use an analytical model to study the effects of customer-specific synergies, i.e., synergies that arise when firms sell multiple products to the same customers. At the firm level, we show that the profitability of a customer-specific synergy depends upon cross-market correlation of customer preferences, differs when the synergy is cost-based versus differentiation-based, and can even be negative when the synergy is kept proprietary to a single firm. We also show that returns to imitating such a synergy may decline as it strengthens. At the industry level, we find that exploiting customer-specific synergies causes endogenous market convergence at a point that depends upon whether the synergy is cost-based or differentiation-based and whether it is imitated. Copyright (c) 2015 John Wiley & Sons, Ltd.

Original languageEnglish
Pages (from-to)870-895
Number of pages26
JournalStrategic Management Journal
Volume37
Issue number5
DOIs
Publication statusPublished - May 2016
MoE publication typeA1 Journal article-refereed

Keywords

  • customer-specific synergies
  • competitive advantage
  • bundling strategy
  • market convergence
  • demand-based theory
  • SUSTAINABLE COMPETITIVE ADVANTAGE
  • BUYER-SUPPLIER RELATIONSHIPS
  • DIVERSIFIED SERVICE FIRMS
  • RESOURCE-BASED VIEW
  • VALUE CREATION
  • NETWORK EXTERNALITIES
  • SOFTWARE INDUSTRY
  • PERFORMANCE
  • SCOPE
  • PERSPECTIVE

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