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Closing One Door but Opening Another: Deterrence and Shifts in Direction of Resource Accumulation
Prior research shows that competitors’ deterrence within a technological domain diminishes a firm’s inventive effort in that particular domain. Yet, it falls short of explaining to which alternative domain a firm allocates inventive effort instead. We show that competitors’ deterrence in domains where a firm was active induces it to allocate more inventors to another domain, especially one that is more technologically distant or science- based. Our findings reveal a potentially insidious consequence of deterrence – while it deters firms from inventing in a particular domain, it also pushes them to alternative domains where they may create substitutes. Further, this study shows that competitors’ deterrence is an external factor that attenuates firms’ inertial tendencies, creating the impetus for firms to shift the direction of resource accumulation.