The paper aims to examine the nature of competition within an industry by proposing and examining three separate sources of competitive heterogeneity: the strategies that industry members use, the performance that they obtain, and how effectively the strategies are utilized to obtain such performance results.
To do so, a restricted latent structure finite mixture model is devised that can quantify the contribution of these three potential sources of heterogeneity in the formulation of latent competitive groups within an industry. The paper illustrate this modeling framework with respect to COMPUSTAT strategy and performance data collected for public banks in the USA.
The paper shows how traditional conceptualizations via strategic or performance groups are inadequate to fully represent intra‐industry heterogeneity.
This research paper proposes a new class of restricted finite mixture‐based models, which fit a variety of alternative forms/models of heterogeneity. Information heuristics are developed to indicate “best model.”
