The Influence of the Red Queen Theory on Enterprise Survivability

in a Dynamic Environment

Fenghai Zhang

and Yixin Jiang

Department of Business Management, Dalian Polytechnic University, Dalian, China

Keywords: Red Queen Theory, Competitive Experience, Competitive Logic.

Abstract: With the intensification of environmental pollution, sustainable development has become a new direction

advocated by the party and the country. Faced with the ever-increasing demand for green in the market,

organizations need to find ways to maintain competitiveness in the changing logic of competition. The Red

Queen theory emphasizes the importance of competition logic and competitive experience. How the industry

can improve its survivability in a dynamic environment is the key issue studied in this article. This paper

explores the impact of competitive experience on corporate performance, and uses environmental dynamics

as a moderating variable, selecting 24 listed banks from 2016 to 2020 as the research objects, and draws the

following conclusions: (1) Competitive experience can effectively improve corporate performance (2)

Environmental dynamics positively regulate the relationship between competitive experience and corporate

performance, and provide useful enlightenment for improving organizational viability.

1 INTRODUCTION

In the report of the 19th National Congress of the

Communist Party of China, it is proposed that the

development concept of innovation, coordination,

greenness, openness, and sharing should be

effectively implemented, taking into account

economic and ecological benefits, and promoting

sustainable development. For enterprises, from

focusing on rapid economic growth to focusing on

economic green development, how to maintain their

competitiveness in the changing logic of competition

has become an important issue.

The Red Queen theory believes that competition

is a zero-sum game, where the profit of one party

represents the loss of the other party. When two

organizations are competitors to each other, the

progress of the target organization triggers the

learning behavior of the opponent organization, and

the improvement of the opponent organization's

ability in turn stimulates the problem search of the

target organization(Deng, Guo 2020); the logic of

competition is inherent, only when a company has

accumulated a wealth of competitive experience in

the fierce competition, can it glimpse the face of the

competition logic and adapt it to it.

So how much impact does the environmental

change have on the company? How does competitive

experience affect enterprise viability? How can

companies use competitive experience to better

survive in a dynamic environment? From the

perspective of the Red Queen theory, this article

explores the impact of competitive experience on

corporate viability by analyzing changes in the logic

of competition, and provides suggestions for

companies to improve their organizational viability.

2 THEORETICAL SUMMARY

The Red Queen theory is a hypothesis put forward by

the biologist Leigh Van Valen in 1973, which vividly

explains the evolutionary process of symbiosis

between biological species. Apply the Red Queen

Theory to Organizational Competition, the Red

Queen theory includes two aspects:

Competitive experience: Barnett and Hansen

(1996) introduced the Red Queen theory to

organizational survival: the target organization learns

in order to make itself stronger and gains a slight

advantage in the competition, which in turn promotes

the learning behavior of competitors; the

competitiveness of competitors is enhanced,

Zhang, F. and Jiang, Y.

The Inﬂuence of the Red Queen Theory on Enterprise Survivability in a Dynamic Environment.

DOI: 10.5220/0011178100003440

In Proceedings of the International Conference on Big Data Economy and Digital Management (BDEDM 2022), pages 351-355

ISBN: 978-989-758-593-7

351

Resulting in the target organization being at a

disadvantage in the competition and the lack of

resources, so that another round of problem search is

carried out. The two compete with each other and

influence each other, accumulating rich competitive

experience. Deng Xinming, Guo Yanan (2020)

proposed that the more recent competitive behaviors,

the more advantageous the competitive experience it

produces will be to the enterprise and the more it can

improve the viability and competitiveness of the

enterprise; the more long-term competitive

experience the more adverse the impact on the

enterprise. Will reduce the viability and

competitiveness of enterprises. (Yu, Wang, Duan

2012, Zeng, Zhou, Chen 2004)

Competitive Logic: Competitive logic has

evolved in the competition between enterprises again

and again. It is the rules of competition, the way of

competition, and the key to the success or failure of

competition. Enterprises will discover the

competition logic after gaining a wealth of

competitive experience. This article discusses based

on these two aspects.

3 MATERIALS AND METHODS

3.1 The Impact of Competitive

Experience on Corporate

Performance

The longer the organization exists, it means that the

organization has withstood the test of the past, and the

competition experience is relatively richer.

Compared with the short-lived organization, they can

use more successful experience, which is more

conducive to the development of corporate

performance.

In addition, companies with relatively rich

competitive experience are more adaptable to the

environment than those without competitive

experience, and are more conducive to the survival of

the company. According to the resource-based

theory, the internal organizational capabilities,

resources, and knowledge accumulation within an

enterprise are the key to explaining that an enterprise

obtains excess returns and maintains a competitive

advantage.

According to the Queen of Hearts competition

theory, the competition is a group of organizations

capable of continuous learning. Learning in the

competition can bring more knowledge to the

enterprise. Like the external environment, the internal

resources of the company also play a major role and

play a decisive role in creating a competitive

advantage in the market. This shows the importance

of the accumulation of corporate knowledge and

historical competition experience for companies to

face competition.

In summary, this article proposes: In summary,

this article proposes:

H1: Competitive experience has a positive impact

on corporate performance.

3.2 The Regulating Effect of

Environmental Dynamics

The strategic choice theory believes that the

enterprise is in an open system and interacts with the

surrounding environment. When selecting strategic

behaviors, managers need to consider the internal and

external environments faced by the enterprise (Child

1997)

Environmental dynamics is the dynamic

characteristics of the environment, which mainly

refers to the fact that the external environment on

which enterprises depend for survival and

development is constantly updated and difficult to

accurately predict. The dynamics of the environment

the Red Queen theory are manifested as changes in

the logic of competition. Enterprises will learn

independently to discover and adapt to the logic of

competition; the logic of competition is the rules of

competition, the way of competition, and the key to

the success or failure of competition. Due to changes

in the environment, market competition rules,

competition methods, and corporate win-loss criteria

have changed. The changes in these elements are in

line with the definition of competition logic.

Therefore, the Red Queen theory is suitable for

studying the relationship between the environment,

ecology, and individual companies.

Environmental dynamics, from a macro

perspective, are reflected in a series of changes in

policies and standards, and from a micro perspective,

they are reflected in the emergence of new

technologies, the rise of new competitors, changes in

competitive concepts, and so on.

The original competitive environment is very

different from before. According to the Red Queen

theory, when the environment undergoes major

changes, the above-mentioned series of changes all

reflect that the logic of competition is also changing

accordingly. At this time, the competitive experience

derived from the fierce battle in the original

competition logic will no longer apply.

BDEDM 2022 - The International Conference on Big Data Economy and Digital Management

352

In a dynamic environment, when the logic of

competition changes, the company's original

competitive experience may have a negative impact

on the company because it does not adapt to the new

competitive environment. Every competition has a

subtle impact on the enterprise. Therefore, the closer

the time of the competition, the closer the competitive

experience will be to the changing logic of

competition. The greater the impact of the

competitive experience on the enterprise, the greater

the company’s ability to survive and improve. The

more long-term competitive experience, the more

suitable the original competition logic, the more

unfavorable the impact on the enterprise, and the

lower the survival and competitiveness of the

enterprise. If you insist blindly, the company will fall

into a competitive trap, and thus go into decline.

H2a: Environmental dynamics positively regulate

the impact of competitive experience on corporate

performance

H2b: Environmental dynamics negatively

regulate the impact of competitive experience on

corporate performance

Based on the above analysis, the research model

of this paper is shown in Figure 1

Figure 1: Theoretical model.

4 RESULTS & DISCUSSION

4.1 Data Source

This paper selects 24 listed banks from the wind

database and the Guotaian database as the research

sample, and eliminates the samples of ST and delisted

companies and companies with missing important

variables. This article is based on the scientific

development concepts and development methods

proposed by the Fifth Plenary Session of the

Eighteenth Central Committee to guide my country's

development during the 13th Five-Year Plan period

and even more long-term development. Therefore,

the period from 2016 to 2020 is selected as the

research time.

4.2 Variable Measurement

4.2.1 Corporate Performance

This article selects ROA, the rate of return on assets,

to reflect the performance level of an enterprise, and

the measurement formula of competitive experience

refers to Deng Xinming’s measurement method

(2020) (Deng, Guo, Long, Lin 2020):

𝐶𝑜𝑚𝑒𝑥𝑝𝑒𝑟𝑖𝑒𝑛𝑐𝑒



∑

（

𝐷



∑

𝐷



）





∑

𝐷



Among them, t0 represents the year of the sample,

that is, the age of the sample in the current year; Dit

and Djt are binary indicator variables. If the company

i(j) exists in the market in year t, it is 1, otherwise it

is 0.

4.2.2 Environmental Dynamics

With reference to Zeng Deming's (Zeng, Zhou, Chen

2004) measurement method of environmental

dynamics, the environmental dynamics is measured

by the coefficient of variation of the operating income

of the sample enterprises over 5 years. This paper

calculates the ratio of the standard deviation of the

main business income of the sample enterprises to the

mean value in the past 5 years, and takes the

logarithm to express.

4.2.3 Model Construction

ROA



=β



+β



𝐶𝑜𝑚𝑒𝑥𝑝𝑒𝑟𝑖𝑒𝑛𝑐𝑒



+β





+β



𝐶𝑜𝑚𝑒𝑥𝑝𝑒𝑟𝑖𝑒𝑛𝑐𝑒



×ED



Among them, t0 represents the year of the sample,

that is, the age of the sample in the current year; ROA

represents the corporate performance of firm i in t0;

represents the competitive experience, EDit0

represents the dynamics of the environment, and eit0

is the random disturbance item.

4.2.4 Descriptive Statistical Analysis

First of all, this article carried out a variable

correlation analysis for each variable, and the test

results are shown in Table1. According to relevant

test data, there is a significant positive correlation

between competitive experience and corporate

performance (0.440, P<0.05); the correlation

coefficient between the logarithm of environmental

uncertainty and corporate performance is positive,

but not significant (0.002, p-value) 0.979); there is a

negative correlation between the logarithm of

environmental uncertainty and competitive

experience (-0.309, p<0.1)

The Inﬂuence of the Red Queen Theory on Enterprise Survivability in a Dynamic Environment

353

Table 1: Pairwise correlations.

Variables (1) (2) (3)

(1) roa 1.000

(2) exp 0.440* 1.000

(0.000)

(3) lned 0.002 -0.309* 1.000

(0.979) (0.001)

*** p<0.01, ** p<0.05, * p<0.1

From the results in Table2, it can be seen that the

F value is 16.021, and P<0.01 indicates that the

overall model is at the 1% level. The competitive

experience t value is 5.66, indicating that this variable

is significant. It can be seen from the model that the

regression coefficient between competitive

experience and enterprise performance is 0.01, and it

is significant at the level of 1%, indicating that if the

competitive experience is added for one year; The

logarithm of environmental dynamics is positively

correlated with corporate performance, but the

significance is not obvious. The enterprise

performance will increase by 0.01. Therefore, the

more competitive experience of listed banks, the

better the ROA performance level, and the better the

follow-up performance level, because a good

historical performance level can contribute to the

company's business development and provide certain

resource support.

Table 2: Linear regression.

roa Coef. St.Err. t-value p-value [95% Conf Interval] Sig

exp .01 .002 5.66 0 .006 .013 ***

lned .276 .155 1.78 .078 -.031 .584 *

Constant .143 .036 3.93 0 .071 .215 ***

Mean dependent var 0.116 SD dependent var 0.042

R-squared 0.215 Number of obs 120

F-test 16.021 Prob > F 0.000

Akaike crit. (AIC) -441.699 Bayesian crit. (BIC) -433.337

*** p<.01, ** p<.05, * p<.1

Table3 reports the test results of environmental

dynamics. Competitive experience and corporate

performance are significantly positively correlated at

the level of 1%; after the introduction of

environmental dynamics and interaction terms

between environmental dynamics and competitive

experience, competitive experience and

environmental dynamics And the interaction terms of

the two are significantly positive at the 1% level,

indicating that the impact of competitive experience

on corporate performance increases with the increase

of environmental dynamics.

Table 3. Linear regression.

roa Coef. St.Err. t-value

-value [95% Conf Interval] Si

exp .088 .016 5.45 0 .056 .12 ***

lne

-1.116 .319 -3.50 .001 -1.749 -.484 ***

explne

.327 .067 4.87 0 .194 .46 ***

Constant -.184 .075 -2.46 .016 -.333 -.036 **

Mean de

endent va

0.116 SD de

endent va

0.042

R-square

0.348 Number of obs 120

F-test 20.665 Prob > F 0.000

Akaike crit. (AIC) -462.032 Bayesian crit. (BIC) -450.882

*** p<.01, ** p<.05, * p<.1

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354

5 CONCLUSIONS

This paper selects 24 listed banks from 2016 to 2020

as the research objects, examines the impact of

competitive experience on corporate performance,

and analyzes the moderating role of environmental

dynamics in this process. This article draws the

following main conclusions: (1) Competitive

experience can effectively improve corporate

performance (2) Environmental dynamics positively

regulate the relationship between competitive

experience and corporate performance.

Enhancing corporate viability is the top priority of

Chinese companies, and it is also a prerequisite for

companies to maintain long-term growth and a source

of competitive advantage. The dynamic environment

has brought many uncertain influences to enterprises.

If enterprises want to improve their survivability,

both internal and external parties need to play a role.

From the external environment, enterprises can only

understand the logic of competition through

continuous competition. The most urgent thing is to

formulate policies to guide enterprises to change their

original competition methods, and use new

competition logic to guide enterprises to adapt to new

competition.

From the internal point of view of the enterprise,

the competitive logic of using competitive experience

to adapt to changes is the key point, and actively

participate in competition. Companies with rich

competitive experience have a certain degree of

sensitivity to environmental changes and can better

adapt to changes in the logic of competition. Business

managers should look at the changes in the market

environment more rationally and avoid blind self-

confidence, special attention is needed to understand

the recent actions of competitors.

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