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Do New Competitors, New Customers, New Suppliers, ... Sustain, Destroy Or Create Competitive Advantage?, Michael D. Ryall, Glenn Macdonald

Michael D Ryall

We examine the effect of entry on the value appropriated by an incumbent. By ``entrant’’ we mean at any level of the value chain — from raw material suppliers to buyers. Our specific concern is whether competition guarantees the incumbent some positive minimum level of profit. We demonstrate that the net effect of entry is subtle — even when the entrant is a perfect imitator. On the one hand, entry typically results in greater value creation. This tends to soften competition and, thereby, lower the incumbent’s minimum level of appropriation. At the same time, however, entry also creates new competitive …