Stakeholder orientation and market impact: evidence from India

Abstract

This study integrates insights from stakeholder theory and the literature on competitive dynamics and incumbent responses to entry. While research in economics and strategy has examined how market incumbents respond to new entrants, little is known about the heterogeneity in these responses to the entry of a stakeholder-oriented firm; our study addresses this research gap. Findings from a novel, longitudinal dataset of 206 granularly defined pharmaceutical markets in India suggest that stakeholder-oriented firm entry in these markets is associated with an impact on prices and product differentiation with heterogeneous responses from high-end and low-end incumbents. Specifically, entry by a stakeholder-oriented firm results in a reduction in prices and dosage sizes from high-end incumbents, whereas low-end incumbents respond in the opposite direction.