We act therefore we are: A theory of action‐driven strategy

Competitive dynamics and organizational learning are used to predict that competitive actions drive organizational strategy. Competitive actions expose the firm to the competitive environment, creating salient experience and knowledge and affording learning opportunities, which build market familiarity and narrow the managerial selection of strategic options. Findings reveal that characteristics of competitive behavior such as the scope of competitive actions and the use of a diverse mix of actions in competitive repertoires by firms are associated with the adoption of diversification strategies. These findings highlight the possible underlying mechanisms that link competitive behavior and strategy and indicate that firms might access knowledge and experience obtained in the marketplace when they decide to diversify.