Does it pay to be different?: Competitive non-conformity under different regulatory regimes

This paper examines how non-conformity in a firm's competitive actions as compared to its rivals impacts firm performance. While a firm may realize some performance benefits from actions that differentiate it from rivals, institutional norms place limits on these benefits. We examine how one institutional constraint, the degree of regulation, affects the relationship between competitive non-conformity, and performance. The degree of regulation is a key factor in determining the extent to which firms can engage in, and benefit from, unconventional actions. However, little research has examined this issue. Drawing from the competitive dynamics and institutional literature, we develop and test a model using longitudinal data from the U.S. airline industry during both regulated and deregulated periods. Our prediction of a curvilinear effect of nonconformity was supported in the regulated period, but not the deregulated period. Particularly notable are the results showing that regulation is a critical determinant of both firm behaviors and the outcomes associated with non-conforming actions. (C) 2007 Elsevier Inc. All rights reserved.