Determinants of Response Strategies in Factor- Market Competition

ABSTRACT. To more specifically understand the interaction between compa-nies in the factor market, this paper conceptually applies product-market com-petitive dynamics to the factor market. The effects of a competitive action in the factor market on the three dimensions of the Awareness-Motivation-Capability (AMC) perspective are explored, and proposed to determine the response strate-gy (do nothing, defending, counterattacking, or total war) of the company under attack. To illustrate the theory with practical examples, two case studies are con-ducted. Finally, further research suggestions are provided. This paper contrib-utes to the scientific literature in explaining how product-market competition models might be applied to the factor market and thereby incorporating previ-ous research into a new framework to understand competitive interaction be-tween companies that compete in the factor market. From a managerial point of view, this research can be used as a guide to predict a competitor’s reaction to a certain competitive action that a company is planning to undertake.