To Compete From Within: The Competitive Dynamics of Resource Bundling

The resource-based and competitive dynamics perspectives emphasize market activity in defining competition: Rivals compete in product and factor markets for customers and scarce resources. To address market opportunities, however, resources must be bundled into capabilities. Bundling represents the link between resources and value creation. Despite the competitive implications of resource bundling, the current literature implicitly assumes that firms take bundling actions in isolation, which does not reflect the phenomena in most industries, where rivals observe, react to, and learn from each other’s bundling, potentially resulting in escalation. To address this gap, we explore the competitive drivers of bundling, which differs from market-oriented activities in its internal nature and how it escalates within and across markets. We posit that simultaneous overlap in factor and product markets can enhance the visibility of bundling activity, foster resource similarity, and create performance pressure among rivals, leading to a market-level “race to bundle” and differentiation in bundling. We also analyze the moderating roles of the focal firm’s resource endowments relative to its rivals and the extent to which it overlaps with these rivals across factor markets. Based on over a million firm-month observations of 5,415 upstream oil and gas operators, we find that rivals bundling intensity is positively related to subsequent focal firm bundling intensity and nonconformity. These relationships are moderated by the firm’s relative resource endowments and multi-factor market overlap. This important complementary aspect of competition can enhance both the resource-based view and competitive dynamics research.