Understanding Verbal Response in Competitive Dynamics

Our study develops theory about the role of language in the competitive engagement of rival firms. We start with the widely- researched action-response model of Smith, Grimm and Gannon (1992), describing how its roots in information-processing theory suggest that language should play an important role. We separate verbal actions and responses from the more familiar market actions and responses. Verbal actions and responses are defined as specific statements issued by a firm or its leaders in a public forum. Verbal actions can occur at any time, but verbal responses – the focus of our paper – are prompted by a rival’s earlier action. The initial (prompting) action can be either verbal or market-based. In the original action-response model, characteristics of the action, the actor, and the environment are used to predict both the likelihood of a market action response by rivals and the characteristics of the market action response when one is forthcoming. Similarly, our model explains how the characteristics of the initiating action, the competitive context, and the actor that initiates the action affect the likelihood of a verbal response and its characteristics when a verbal response is issued. We argue that verbal responses are motivated by uncertainty reduction (seeking additional information) and by rivalry reduction. Additionally, we describe the situations in which verbal responses are likely to be successful – that is, situations in which a verbal response leads either to better and more complete information or leads a rival to avoid or retract an earlier action.