Letting Go of the Past: Organizational Memory Decay and Firm Competitive Aggressiveness

Abstract:
Combining insights from competitive dynamics with cognitive psychology, this study explores how organizational memory decay in relation to price wars influences the aggressiveness of a firm’s competitive behavior and the important contingencies that may govern such influence. We predict that the decay of organizational memories of price wars will increase a firm’s competitive aggressiveness in a given market but that this effect is contingent upon the existence of retrieval cues. Specifically, we argue that this pro-competition effect is weaker when the focal firm repeatedly encounters the same price-war rivals in the same market, when it observes similar wars in other markets, and when external information intermediaries refer repeatedly to price war. Finally, we propose that memory decay can be beneficial when the focal firm “forgets” its previous wars and its competitors do not. We examine our hypotheses in the context of the U.S. domestic airline industry (1979–2018) utilizing an extensive dataset that includes the U.S. Department of Transportation (DOT) database; 75 Air Transport Association (ATA) annual reports (1937–2011); 720 annual reports of individual airlines (1979–2018); all price-war related articles in the Factiva database; and 23,670 articles from Aviation Daily (1989-2018). By integrating quantitative and qualitative data, we aim to test the research hypotheses and to develop a rich historical narrative that fully captures the nature of price wars and the context of this study.
Contact Emails:
qjoanne@ceibs.edu