Competing in Crowded Markets: Multimarket Contact and the Nature of Competition in the Enterprise Systems Software Industry
Authors: Chellappa, Ramnath K.; Sambamurthy, V.; Saraf, Nilesh
Journal: Information Systems Research (2010)
<jats:p> As more and more firms seek to digitize their business processes and develop new digital capabilities, the enterprise systems software (ESS) has emerged as a significant industry. ESS firms offer software components (e.g., ERP, CRM, Marketing analytics) to shape their clients' digitization strategies. With rapid rates of technological and market innovation, the ESS industry consists of several horizontal markets that form around these components. As numerous vendors compete with each other within and across these markets, many of these horizontal markets appear to be crowded with rivals. In fact, multimarket contact and presence in crowded markets appear to be the pathways through which a majority of the ESS firms compete. Though the strategy literature has demonstrated the virtues of multimarket contact, paradoxically, the same literature argues that operating in crowded markets is not wise. In particular, crowded markets increase a firm's exposure to the whirlwinds of intense competition and have deleterious consequences for financial performance. Thus, the behavior of ESS firms raises an interesting anomaly and research question: Why do ESS firms continue to compete in…