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The purpose of this paper is to examine how firms with multimarket contacts in both product and geographic markets make foreign direct investments (FDI) location choices and to advance the understanding about how managers with cognitive limits cope with opportunities to take the advantage of mutual forbearance in two types of markets.

Drawing upon the literatures on multimarket contact and decision making, the authors develop original hypotheses on how multimarket contacts in two types of markets influence firms’ choice of destination for foreign investments. The authors test the hypotheses using longitudinal archival data on foreign market entries of Japanese auto parts makers.

The authors find that when choosing FDI locations, firms reduce the cognitive burdens of coping with multimarket contacts in the two types of markets by focussing exclusively on what is perceived as relevant to the decision at hand. The authors also find that this propensity is particularly significant for large firms, whereas small firms use different decision rules and avoid entering markets with the greater degree of multimarket contact with prior entrants, whether in product or national market.

Although heuristics simplify competitive environments and reduce managers’ cognitive burdens, such a cost-saving orientation could increase the risk associated with international entry that may end in severe counterattacks from prior entrants, wasteful foreign investments, and substantial entry failures.

This study contributes to the literature by adopting multimarket contact theory to foreign market entry, jointly analyzing two types of multimarket contacts, testing three alternative hypotheses about how boundedly rational managers cope with multimarket contacts in two markets, and demonstrating that managers focus on multimarket contacts only in one type of markets when making entry decisions.

Studies of multimarket contact typically hypothesize (and find) that the relationship of contact levels between firms and the likelihood of aggressive competitive behaviors is linear and negative. This includes the likelihood of entry moves by multimarket rivals. However, a linear negative relationship between market entry and multimarket contact, which implies that deterrence exists at lower levels of contact, makes it unlikely that firms' will enter into each others' markets in order to create that deterrent.

We address this theoretical issue by distinguishing between multimarket contact and multimarket competition. Lower levels of multimarket contact provide models for a focal firm that both guide and legitimize its strategic moves. As multimarket contact levels increase, multimarket competition eventually ensues as multimarket rivals recognize their mutual interdependence and further entry into shared markets is deterred. We develop the logic for this non-linear relationship by incorporating theory from the strategic, institutional, and decision-making literatures that has direct implications for the way in which contact between firms across multiple markets is likely to affect managerial cognitions and firm actions.

Since firms must enter into the markets of their (multimarket) competitors to build multimarket structures which yield competitive benefits, we conclude by developing several propositions about how such entry might best be achieved to avoid retaliatory responses by multimarket competitors.

The paper's aim is to build a model that predicts the optimum tactics for capitalizing on inventions within the context of competitive interaction among large firms. For patenting, the paper seeks to show how invention value and firm rivalry drive the tactics of competing, deterring competitors, retreating from markets, and cooperating. It also aims to explore the effects of the contingencies of patent bulking, technology complexity, spheres of influence, resource similarity, and complementary‐resource tacitness.

The work is conceptual.

The base model shows that patenting can be used to protect markets where there is high invention‐value and high rivalry. When both invention‐value and rivalry are low, the best tactic is to cooperate. When value is high and rivalry low, patenting can be used as a signaling and deterring mechanism, but when value is low and rivalry is high the best option is to let patents lapse and retreat from markets. The moderating effects of patent bulking, technology complexity, spheres of influence, resource similarity, and complementary‐resource tacitness affect rivalry and the amount of patenting that will be done.

The paper provides propositions for empirical testing that are predictive of firm performance, rivalry, and patent bulking. Despite the authors' attention to key contingencies, it is impossible to be completely comprehensive in addressing all contingencies.

The framework provides tactics for competing and, consequently, maximizing income and minimizing costs.

The work synthesizes extant thinking on patents and multipoint competition. While the base model should be valuable for managers, the overall work should be valuable for academics.

The purpose of this paper is to examine the effects of political risk on firms' likelihood of foreign market entry and performance by adopting a strategic view of political risk and drawing upon the arguments of multimarket contact theory.

This study estimates the location choice and performance of Japanese auto parts‐makers using panel regression models.

The study finds that firms with low multimarket contact in the home country and high multimarket contact in the host country are less likely to avoid politically risky host countries and that firms which entered politically risky host countries exhibit greater performance when the degree of multimarket contact with prior entrants is high.

Although the research design raises a concern about the generalizability of the findings, this study highlights the strategic importance of politically risky markets and suggests the importance of considering competitive interactions with rivals in examining interdependent behavior in foreign direct investments.

Instead of consistently avoiding politically risky markets, managers should actively consider the potential strategic importance of these markets. A post‐entry strategy suggested by the findings is taking positive steps to leverage the benefits of multimarket contacts for managing subsidiaries in politically risky host countries.

Unlike previous studies, this study emphasizes the strategic potential of politically risky markets and takes a view that firms have variable political risk tolerance. Furthermore, the authors' adoption of multimarket contact theory allows a novel approach to benchmarking against rivals for foreign entry decisions.

The purpose of this study is to investigate the impact of multimarket contacts on bank stability in the Vietnamese banking system between 2006 and 2015.

The system generalized method of moments proposed by Arellano and Bover (1995) is used to examine the relationship between multimarket contacts and bank stability.

The findings show that multimarket contacts among Vietnamese commercial banks improve bank stability. In addition, more x-efficient banks appear to be more stable. The same is true for banks with less holding liquid assets, for those with less excessive lending, for smaller banks, for those with the greater level of intermediation and for those with a higher level of foreign ownership. Listed banks are found to be less-risk taking than unlisted banks.

This study is the first attempt to examine the relationship between multimarket contacts and bank stability in an emerging market in the Asia-Pacific region.

Multimarket competition is an area of competitive dynamics focused on studying situations where firms compete against each other simultaneously in more than one market. The intensity of competition depends on the aggressiveness and the market contingencies, influencing the competitive strategies. Particularly, the purpose of this paper is to explore the influence of multimarket competition and market contingencies on innovation.

An exploratory qualitative approach using the Grounded Theory is applied with conceptual purposes. The data were collected through in-depth semi-structured interviews and additional observations with senior strategies and decision-makers. The paper follows an extensive narrative to understand decision-taking processes on competitive strategy with the support of analytical software. The paper was performed in the automotive components industry making seats in two different countries to acknowledge the influence of market contingencies.

The results suggest that multimarket competition does not reduce the level of aggressiveness, but it offers a background that favors opportunities for companies and new business in circumstances of crisis associated to innovation. Depending on the market contingencies, strategies can foster a higher technological innovation, in those cases of high development in the industry, or diversification, when the development is lower.

This paper contributes to enrich multimarket competition theory with the study of innovation strategies in different market conditions, a topic not much explored in multimarket literature. Additionally, it suggests implications for managers attending to different market contingencies.

This paper discusses the design of hypothesis tests about multimarket contact and uses a sample of chemicals firms to illustrate researchers' choices and to provide new evidence about the effects of multimarket contact in product and innovation markets. Multimarket contact has a large, stable and statistically significant association with a firm's citations of the patents of another firm. The effect is present even when controls are added for each paired firm's pertinent characteristics (including the effects of its product and innovation markets) that would be expected to affect citations or reflect the effects of the research underlying the citations. New probability measures of multimarket contact are introduced and discussed, and their performance is compared with simple count measures.

The growing literature on multimarket contact and mutual forbearance in management and economics has produced an inflation of multimarket contact measures. The lack of validation of these multiple measures has hindered the accumulation of consistent knowledge and comparison of empirical findings. This paper investigates the measurement of the multimarket contact concept. Specifically, we review the existing measures of multimarket contact, identify the main differences among them, and evaluate their reliability and discriminant and predictive validity at multiple levels of analysis, both cross-sectionally and longitudinally. The results indicate substantial differences in the reliability and discriminant validity of these measures. Predictive validity depends critically on the level of measurement and on whether longitudinal or cross-sectional correlations are considered.

In this paper we differentiate between the creation and subsequent exploitation of multimarket contact. We examine specific factors that influence the likelihood that a firm will seek to develop a purposive set of overlapping markets with specific competitors, as opposed to developing naë contacts based on an internally derived logic. We suggest that competitor identification, organization structure, ease of competitive response and industry structure (including the presence of network externalities, barriers to entry, and industry growth rate) all play important roles in determining the ability of managers to seek rivalry-reduction that has been found to follow the development of market overlap. We offer several propositions that serve to define the boundaries of research into mutual forbearance and multimarket competition, and that may help to explain empirical results obtained to date.