Competition and unethical firm behavior
(A2022-106538)

AUTHORS

Lars Gemmer, University of Cologne; Alexander Edeling, KU Leuven; Marc Fischer, University of Cologne

ABSTRACT

There is an ongoing debate about the role of market share and market share-based competition. We address this discussion by analyzing the relationship between the specific competitive posi-tion of a company and its unethical behavior. Based on a sample of 2,489 companies, we intro-duce new variables that reflect the competitive position of a firm and identify which competitive constellations increase competitive pressure and force companies to act unethically. Further-more, we show how unethical behavior, in turn, affects the competitive position and thus reveal the dynamics between both constructs. Although the initial goal of the ethical misconduct is ac-tually to strengthen the competitive position, this position is weakened as the market share per additional disclosed incidence of unethical behavior decreases by 4.31%. Managers should be aware of this paradoxical relationship when developing competitive strategies and should not assume that a market share orientation is infallible.