Rivalry Deterrence In International Markets: Contingencies Governing The Mutual Forbearance Hypothesis

Abstract

The mutual forbearance hypothesis states that when the same competitors meet in multiple markets, rivalry is deterred. Our study highlights how pressures for local responsiveness impact the veracity of this hypothesis for multinational corporations (MNCs) in host countries. We develop theory to explain how subsidiary ownership, home-host cultural distance, host country regulatory restrictions on MNC activities, and the presence of local competitors affect the rivalry-dampening impact of multi-market contact. We tested our hypotheses with a sample of 13 global automobile companies operating in 27 countries and report strong support for our hypotheses.