A firm has competitive relationships with its rivals, which themselves have competitive relationships with other rivals. Dyadic competitive relationships between firms compose competition networks among firms. The purpose of this study is to explain competitive dynamics from a network perspective. By integrating an awareness-motivation-capability perspective, which primarily theorizes the dyadic competitive relationships between two firms, with a social network perspective, which mainly scrutinizes the influence of network ties and structure on firm behavior, I have investigated the influence of a firm's relational and structural embeddedness in competition networks on the intensity of the firm's competitive activity, which is composed of action frequency, variety, and magnitude. The main thesis is that a focal firm will engage in less intense competitive activity when it is embedded in a competition network that induces more intense rivals' competitive activity. Since intense retaliation by rivals decreases the focal firm's performance, it will intend to avoid provoking this rivals' intense retaliation. By using a sample of petrochemical companies in Japan from 1986 to 1994, as predicted, I found that a focal firm engages in less intense competitive activity in conditions of stronger inward competitive ties or more betweenness centrality in its competition network.
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