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
Copyright
c
2022 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
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
in
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 companys 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

𝐶𝑜𝑚𝑒𝑥𝑝𝑒𝑟𝑖𝑒𝑛𝑐𝑒

ED

𝐶𝑜𝑚𝑒𝑥𝑝𝑒𝑟𝑖𝑒𝑛𝑐𝑒

×ED

+e

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
p
-value [95% Conf Interval] Si
g
exp .088 .016 5.45 0 .056 .12 ***
lne
d
-1.116 .319 -3.50 .001 -1.749 -.484 ***
explne
d
.327 .067 4.87 0 .194 .46 ***
Constant -.184 .075 -2.46 .016 -.333 -.036 **
Mean de
p
endent va
r
0.116 SD de
p
endent va
r
0.042
R-square
d
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
BDEDM 2022 - The International Conference on Big Data Economy and Digital Management
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.
REFERENCES
Deng Xinming, Guo Yanan, Long Xianyi, Lin Xiaozhen.
The relationship between competitive experience and
organizational survival based on the perspective of the
Red Queen: an empirical study from my country’s
passenger car industry [J]. Journal of Management
Engineering, 2020, 34(05): 86- 94.
Deng Xinming, Guo Yanan. Competitive experience,
multi-market exposure and corporate performance——
Based on the perspective of Red Queen competition [J].
Management World, 2020, 36(11): 111-132.
Ji Fang, Zhao Daozhi. The impact of low-carbon economy
on corporate competitiveness based on the Red Queen
theory [J]. Journal of Beijing Institute of Technology
(Social Science Edition), 2011, 13(05): 7-11.
Yu Ming, Wang Jinai, Duan Ye. Summary and Prospect of
the Research on the Queen of Hearts Competition
Theory[J]. Foreign Economics and Management, 2012,
34(05): 45-51.
Zeng Deming, Zhou Rong, Chen Liyong. Study on the
relationship between environmental dynamics, capital
structure and company performance[J]. Financial and
Economic Research,2004,30(3):67-7.
The Influence of the Red Queen Theory on Enterprise Survivability in a Dynamic Environment
355