Toward a social practice theory of relational competing

• Author: Rebecca Bednarek,Paula Jarzabkowski
• Published date: 01 March 2018
• Date: 01 March 2018
• DOI: http://doi.org/10.1002/smj.2724

SPECIAL ISSUE ARTICLE

Toward a social practice theory of relational

competing

Paula Jarzabkowski

1*

| Rebecca Bednarek

2*

1

Cass Business School, City, University of

London, London, U.K.

2

Birkbeck, University of London, London, U.K.

Correspondence

Paula Jarzabkowski, Cass Business School, City,

University of London, 106 Bunhill Row, London

EC1Y 8TZ, U.K.

Email: paula.jarzabkowski.1@city.ac.uk

Funding information

British Academy, Grant/Award number:

SG091192; Insurance Intellectual Capital

Initiative; Economic and Social Research Council

(ESRC), Grant/Award numbers: RES-186-27-

0020, RES-173-27-0163; European Commission

Marie Curie Fellowship, Grant/Award number:

275759

Research Summary: This article brings together the com-

petitive dynamics and strategy-as-practice literatures to

investigate relational competition. Drawing on a global

ethnography of the reinsurance market, we develop the

concept of micro-competitions, which are the focus of

competitors’everyday competitive practices. We find var-

iation in relational or rivalrous competition by individual

competitors across the phases of a micro-competition,

between competitors within a micro-competition, and

across multiple micro-competitions. These variations arise

from the interplay between the unfolding competitive

arena and the implementation of each firm’s strategic

portfolio. We develop a conceptual framework that makes

four contributions to: relational competition; reconceptua-

lizing action and response; elaborating on the awareness-

motivation-capability framework within competitive

dynamics; and the recursive dynamic by which imple-

menting strategy inside firms shapes, and is shaped by,

the competitive arena.

Managerial Summary: Competition is often seen as war:

“attack,”“retaliation,”and “dethronement.”Yet competi-

tion can also be relational, incorporating collaboration

and reciprocity. We show these dynamics in a syndicated

financial market, reinsurance, where multiple competitors

get the same price for a share of the same deal. Our com-

petitors have rivalrous motivations to win business and

relational motivations to ensure buoyant pricing, maintain

market health, and enable long-standing client relation-

ships to persist. These motivations are grounded in the

strategizing practices with which firms implement their

strategic portfolios and compete on deals. Competitors’

rivalrous or relational motivations are highly dynamic,

shifting throughout the competition on any deal and

*The first and second authors contributed equally to this publication.

Received: 25 August 2015 Revised: 5 July 2017 Accepted: 18 September 2017 Published on: 20 December 2017

DOI: 10.1002/smj.2724

794 Copyright © 2017 John Wiley & Sons, Ltd. wileyonlinelibrary.com/journal/smj Strat Mgmt J. 2018;39:794–829.

across the multiple deals on which they compete. Cumu-

latively these practices shape the entire market for these

volatile, uncertain financial products.

KEYWORDS

practice theory, relational competition, reinsurance,

strategizing, strategy-as-practice, syndicated market

1|INTRODUCTION

This article brings together th e competitive dynamics and str ategy-as-practice literat ures to

explore relational compet ition. Relational competit ion differs from the dominant focus in compet-

itive dynamics on head-to-h ead rivalry (e.g., Kilduff, E lfenbein, & Staw, 2010; Marce l, Barr, &

Duhaime, 2011; Nadkarni, Che n, & Chen, 2016; Rindova, Ferrier, & W iltbank, 2010) involving

zero-sum games and attacks, co unterattacks and retaliati on (Chen & Miller, 2015). By contr ast,

in relational competitio n “the goal is not to damage or beat a riva l but to do well by contributing

to and creating value for many pl ayers, even one’srivals”(ibid, 761). For ex ample, competitors

might contribute to common standards tha t benefit the entire market . Yet, as a relatively recent

concept, there is a dearth of em pirical research into relati onal competitive dynamics. T his is par-

tially because understanding r elational competition requir es an expanded view of action that

moves beyond dyadic dynamics betwee n specific rivals to account for relatio nships with a

broader set of competitors an d stakeholders (Chen & Miller, 20 12, 2015), some of whom are not

known and whose actions are not dir ectly observable to rivals. The strategy-as-practice ( Vaara &

Whittington, 2012; Whitting ton, 2006) approach offers conc eptual resources to study such

broader relationships and m ore indirect interactions. As explained in the literatu re review, its

social practice theory of a ction (Feldman & Orlikowski, 2011; Schatzki, Knorr-Cet ina, &

Savigny, 2001) allows us to explor e how competitors interact indi rectly within their everyday

practices, even when they are not di rectly attacking or responding to each other’s actions. Simul-

taneously, studying relation al competition through a pract ice lens addresses a long-called f or

extension of strategy-as- practice beyond the internal s trategizing practices that ha ve been its dom-

inant empirical focus (Jarzabkowski & Spee, 2009; Vaara & Whittington, 2012). Bringing the

two literatures together th erefore provides conceptual r esources of mutual benefit for th eir respec-

tive research agendas.

Our interest in this issue was piqued by the relational element in the competitive dynamics of

the industry we were studying. Reinsurance is a $260 billion financial market that insures insur-

ance companies against large-scale losses. Its role in underpinning claims from the insurance

industry makes it an economically and socially important market, helping societies to recover from

disaster (Borscheid, Gugerli, & Straumann, 2013). Reinsurance is a syndicated market, where mul-

tiple competitors take shares in a deal at the same price (Bretz, 2015). Syndication is a way to

share the risk and increase the chances that all competitors might survive any particularly large-

scale catastrophic loss (Jarzabkowski, Bednarek, & Spee, 2015a). Syndication generates a rela-

tional incentive for competitors to “lift all boats”(Chen & Miller, 2015, p. 761) by keeping the

price on a deal high through their individual quotes, which informs the eventual single market

price, for the benefit of all competitors. A primary goal within pricing is, thus, to provide a good-

quality playing field for all competitors rather than necessarily to beat a rival. Syndication does

JARZABKOWSKI AND BEDNAREK 795

not, however, mean a lack of competition as market players remain highly competitive in also

wanting a share of the best deals (Ernst & Young, 2013).

1

Syndication is not particular to reinsur-

ance, being prevalent in many financial markets, including the syndicated loans market (Hallak &

Schure, 2011), venture capital investments (Lerner, 1994), and initial public offerings (Corwin &

Schultz, 2005). Yet, despite their economic significance and prevalence (Thomson Reuters, 2015),

syndicated markets have rarely been studied by strategy scholars and we lack explanations of

competition in such contexts.

Our article, based on a 3-year global ethnography of the reinsurance industry, addresses this

gap in relational competitive dynamics generally and within syndicated markets particularly. Based

on our findings, we develop the concept of micro-competitions. These are the specific issues, such

as an airline route, a particular product offering or, in our case, an individual reinsurance deal, that

are the focus of the everyday competitive practices of multiple competitors. We show that, despite

the overarching potential for relational competition, there is variation in relational or rivalrous

competition by any individual competitor across the phases of a micro-competition, between com-

petitors within a micro-competition, and across multiple micro-competitions. Our findings surface

one rivalrous and four relational motivations for these shifting and varied competitive dynamics.

Finally, we explain this variation through the interplay between the unfolding wider competitive

arena, which we define as the multiple micro-competitions upon which all competitors act, and

the unfolding implementation of each firm’s specific strategic portfolio. These findings are drawn

together into a conceptual framework that is the basis for our contributions to: relational competi-

tion; reconceptualizing action and response within competitive dynamics; elaborating on the com-

petitive dynamics awareness-motivation-capability framework; and understanding the recursive

dynamic by which implementing strategy inside firms shapes, and is shaped by, the competitive

arena.

2|THEORETICAL FRAMING

2.1 |Competitive dynamics

Competitive dynamics, which focuses on “understanding what a firm does when it competes with

specific rivals”(Chen & Miller, 2015, p. 758), has moved the study of competition beyond static

characterizations at the industry level of analysis (Chen & Miller, 2012). Its initial focus was on

dyadic interactions between specific competitors (Baum & Korn, 1996, 1999; Chen & MacMillan,

1992). For instance, Chen and Miller (1994) explored retaliation by examining how observable

moves by one airline, such as price cuts, represented attacks to which other airlines responded. More

recently, studies have examined action-repertoires or sequences of competitive actions over time

(Lamberg, Tikkanen, Nokelainen, & Suur-Inkeroinen, 2009; Miller & Chen, 1994; Rindova et al.,

2010). These provide important insights into how various team (Chen, Lin, & Michel, 2010; Ham-

brick, Cho, & Chen, 1996), firm (Chen & Hambrick, 1995) and market attributes (Baum & Korn,

1996; Chen & MacMillan, 1992) explain different types of competitive actions and responses and

their correlation with various performance measures (Boyd & Bresser, 2008; Derfus, Maggitti,

Grimm, & Smith, 2008). Ferrier’s (2001) study is illustrative, showing that competitive attack, as a

1

Syndicated markets are regulated to prevent collusion. Reinsurers do not know their peers' quotes on deals and a European Commis-

sion report (Ernst & Young, 2013) found no evidence of improper alignment of premiums, noting that the market is intensely compet-

itive. More widely, post-2008, syndicated loans have been one of the most fiercely competitive areas in global finance

(Corbett, 2008).

796 JARZABKOWSKI AND BEDNAREK