They Saw It Coming: Executive Experience and Foresight in Competitor Identification

How can a firm increase its chances of spotting an up-and-coming competitor? I examine how the experience of top management teams (TMTs) relates to the foresight needed to spot “rising stars”—that is, competitors that are currently ignored by other firms in a market but later grow to become prominent threats. My theory hinges on the primacy of relational versus categorical reasoning in mental models of competition. Firm mental models conceptualize competition through a relational lens, such that deep experience within the focal firm encourages fixation on familiar, proximate rivals while varied experience across firms redirects attention to the competitive periphery. In contrast, industry mental models rely on categorical reasoning, such that varied experience across industries yields a shallow understanding of divergent—and often irrelevant—categorical logics while deep experience in the focal industry builds the expertise to see which competitors will break out in the future. I further show that deep industry experience enables the TMT to draw more useful insights from varied firm experience, while a combination of varied firm and industry experience creates harmful information overload. I find support for my theory using a hand-collected dataset on competitor identification and TMTs in the enterprise software industry.