RESEARCH INSIGHT | Cannibalizing Your Product Line Can Actually Be an Effective Marketing Strategy

Abstract

Research contrasting the marketing strategies of foreign and domestic firms within local markets is scarce but is of critical importance to both types of firms. This research examines how intentional cannibalization (IC) functions in Western and Chinese enterprises operating in China and evaluates IC’s impact on radical innovation and subsequent performance while accounting for the moderating effects of cost leadership and differentiation strategies. The investigation uncovers important marketing strategy concerns for firms competing in emerging markets such as China. The results demonstrate that IC on its own correlates with radical innovation for Western firms, but not for Chinese firms. For Chinese firms, the link between IC and radical innovation becomes significant only in combination with a cost leadership strategy. For Western firms, the link between IC and radical innovation is strengthened when these firms pursue a differentiation strategy and, in contrast to Chinese firms, radical innovation mediates the effect between IC and performance. Thus, the way IC and radical innovation affect performance varies across Western and Chinese enterprises. These findings bolster and extend research regarding strategies of local and nonlocal firms in home markets.