Institutional Path Dependence in Competitive Dynamics: The Case of Paper Industries in Finland and the USA

Abstract

Prior research on competitive dynamics has failed to offer tools to understand distorted patterns of competition that emerge from distinct institutional and historical contexts. Our analysis suggests that a joint effect of institutional rules, governance structures, and shared cognition plays a pivotal role in firm-level competitive behavior and capability development. We show how globally significant market positions can result from specific institutional arrangements between firms and governments, especially if coupled with interfirm contractual commitments. Our results call for more attention to these interfirm commitments that are built on formal rules and governmental support, but whose impact they yet exceed.