The assertion that competitive interaction is a central focus of business strategy emerged from the Strategic Management Research Group (SMRG) at the University of Maryland. The premise of this perspective is that competition among firms can be modeled using communication theory to explain how firms in an industry interact. Competition, in this framework, is represented as the series of actions and counteractions, termed responses, that firms undertake to position themselves in their industry. Thus, in this model, interaction (actions and responses) equates with competition. Studies conducted by the members of the SMRG have outlined the relationship of key variables within the Communication-Information Processing Model of Competitive Interaction (CIP) to measures of performance, a key outcome variable in strategic management research.
A factor that is hypothesized to influence the response variables within the model is homophily—a concept which refers to the similarity of characteristics between sender (the actor) and the receiver (the responder). The proposed relationship between homophily and response however, has been minimally explored. This study investigated the relationship between homophily and response through the development and presentation a thesis that the strategic group concept of firms within an industry (Hunt, 1972) can be used as a proxy for the homophily construct. This study investigated the influence that strategic groups in an industry may have on the variables representing the competitive behavior of firms in that industry, as captured by the Communication-Information Processing Model of Competitive Interaction.
The intersections between the strategic group literature base and the emerging theoretical and empirical literature of the Communication-Information Processing Model of Competitive Interaction were presented and discussed. From this discussion, testable hypotheses were developed in order to extend the theory by explaining how the strategic group concept is associated with key variables of the CIP model. The tests of the hypotheses regarding the influence of the strategic group construct on components of the Communication-Information Processing Model of Competitive Interaction reveal that there is a relationship between the similarity of strategic group membership of the actor and responder and certain response characteristics central to the CIP model
