The Value of Competitor Information: Evidence from a Field Experiment
Understanding the competitive environment is considered central to strategic decision-making, but growing evidence suggests that firms may lack knowledge about their competitors even when the costs to acquiring it are low. Is competitor information not as valuable as theorized? I empirically explore this question by running a field experiment in collaboration with Yelp across 3,218 businesses in the personal care industry, where treatment firms receive easily accessible information on their nearby competitors’ prices. I find that over 46% of firms are not aware of their competitors’ prices prior to receiving information. However, once firms receive competitor information, they are 17% more likely to change their prices and do so in performance-enhancing ways, which ultimately results in higher proxies of performance. Treatment effects are larger for firms that face higher levels of competition and firms without prior experience using price promotions, suggesting that a lack of competition or capabilities to use information may not fully explain firms’ lack of knowledge. Given this large positive impact of competitor information, why had firms not invested in this information on their own? Evidence from interviews and a follow-up experiment across control firms suggest managers appear to have underestimated the value of paying attention to this information, because outdated knowledge they held falsely led them to believe they were already aware of it. These findings suggest that inattention may be a key barrier that leads firms to fail to realize gains from even readily accessible data.
LOCATION:HBS Chao 103 STATUS:CONFIRMED DTSTART:20191003T163000Z DTEND:20191003T180000Z END:VEVENT END:VCALENDAR