How Strategic Groups Act Competitively Within and Across Markets

Abstract

Our study analyzes rivalry within and across markets of size-defined strategic groups in the banking industry. We consider that, owing to group-level effects, like efficiency and funding, the degree of rivalry of size-defined strategic groups depends on whether the competitor is acting in the same or in a different market and whether the competing firms are within the same strategic group or in different groups. We estimate the effect of group interactions within and across loans and deposits markets on firm performance in the Spanish banking industry. We find evidences of rivalry as described in our hypotheses.