Journal
STRATEGIC MANAGEMENT JOURNAL
Volume 37, Issue 5, Pages 870-895Publisher
WILEY
DOI: 10.1002/smj.2372
Keywords
customer-specific synergies; competitive advantage; bundling strategy; market convergence; demand-based theory
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We use an analytical model to study the effects of customer-specific synergies, i.e., synergies that arise when firms sell multiple products to the same customers. At the firm level, we show that the profitability of a customer-specific synergy depends upon cross-market correlation of customer preferences, differs when the synergy is cost-based versus differentiation-based, and can even be negative when the synergy is kept proprietary to a single firm. We also show that returns to imitating such a synergy may decline as it strengthens. At the industry level, we find that exploiting customer-specific synergies causes endogenous market convergence at a point that depends upon whether the synergy is cost-based or differentiation-based and whether it is imitated. Copyright (c) 2015 John Wiley & Sons, Ltd.
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