Who Deters Entry? Evidence on the Use of Strategic Entry Deterrents

TLDR

Firms deter entry into new product markets by creating product loyalty through advertising and preempting markets with broad patents, while for existing products they fill niches, target profitable divisions, and use advertising. Strategic entry deterrents are more common in concentrated, research‑intensive markets—especially for new products and when large firms dominate—yet firm size does not influence deterrence for existing products, and deterrence is reduced when other barriers are present. © 1992 MIT Press.

Abstract

To deter entry into new product markets, firms most often use the creation of product loyalty through advertising and the preemption of markets through numerous and broad patents. Filling all product niches, making the results for highly profitable division, and advertising are used most frequently for existing products. For newly developed products, strategic entry deterrents are used more often when markets are concentrated, populated by large firms, and research intensive. Strategic entry deterrents for existing products are used in concentrated, research intensive markets, but firm size has no effect. Firms develop strategies to deter entry less when other barriers exist. Copyright 1992 by MIT Press.