Customer-specific synergies and market convergence

Research output: Contribution to journalArticleScientificpeer-review

Researchers

Research units

  • Purdue University
  • University of Zurich

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.

Details

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

    Research areas

  • 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

ID: 2028946