Competition between blended traditional and virtual sellers
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Competition in many electronic markets increasingly involves blended ‘bricks and clicks’ firms and virtual firms lacking any presence offline. Firms which enter the online marketplace do so for a variety of reasons, including experimentation, foreclosing rivals, responding to customer requests, and so on. This study utilises a unique data set of small Australian firms, and examines the relationship between the strategic motivation for entry and the actual results of entry. Utilising a bivariate ordered probit model with endogenous dummy variables, the endogeneity of firm strategic goals and implicit estimates of the parameters of the post-entry business environment is accommodated. The study finds that the goal of entry materially affects subsequent performance: firms entering to expand their market size ordinarily succeed, but those entering to reduce costs do not. Blended firms enjoy no strong advantages over pure online entrants.
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