Competition serves as the underlying premise of capitalism. But competition is about far more than price points and has become an academic field unto itself. University of Rhode Island professor of entrepreneurial management and law Ken Smith has built a career on studying the interplay among companies as they each chase the same market.
This month the Academy of Management, a scholarly association, will honor him with its Distinguished Educator Award. Smith becomes the first URI professor to receive the award, bestowed annually since 1989.
Smith recently spoke with Providence Business News about business competition and how he studies it.
PBN: You spent a long time in Maryland. What brought you to URI?
SMITH: I was born and raised in Rhode Island. The University of Rhode Island has done a great many things to help me. Of course, they gave me a good education, most of the friends I have today are friends that I made at the university. … In 1979 [URI] hired me to be an adjunct professor for a year. They encouraged me to pursue a PhD. and I did that in 1980. In fact, my goal in 1980 was to move as far away as I could from Rhode Island. So I did, my wife and my two children moved to Washington State and I have my PhD.
I intended at that time to come back to the university and, in fact, received a job offer. But I was intrigued by the notion of business research and the University of Maryland offered me a greater opportunity. … At that point, I thought I’d stay at Maryland a couple years and return to Rhode Island but it turned out to be 27 years.
PBN: At Maryland, you made a name for yourself studying business competition. Do you study competition in general or a specific aspect of it?
SMITH: It’s much more specific than competition. Of course, everyone knows what competition is, and in research circles it’s been very hard to study competition. By competition, I mean how firms act with regard to one another.
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PBN: Is there more to competition than price?
SMITH: Sure. I think price is the kind of thing in competition that no firm wants to engage in because price affects the bottom line so quickly. Ideally, you would like to take actions that your rivals cannot react to.
[For example], in the airline industry it’s pretty easy for airlines to charge for bags when everyone charges for bags. There’s no net advantage to charging for bags. Now Southwest does not charge for bags, so conceivably they have an advantage. … Another example of advertising perhaps – and this is an old example but a good one – the Pepsi challenge. Back in the ’80s Pepsi, knowing that consumers favored Pepsi to Coke, provided this taste test and it was awfully hard for Coke to respond to that because Coke also knew from the research that customers were favoring Pepsi to Coke. Coke’s only way of responding was to introduce new Coke. And, of course, that was a failure.
PBN: Those are examples of big companies. What about small companies?
SMITH: My experience is many small-business owners don’t think they have competition. But that’s a dangerous assumption. If I could use the example of my own business in Rhode Island back in the ’70s: we were a machine-tool company that didn’t have any particular advantage. In fact, we had high costs of labor, we had old equipment and the competition outside of New England was much more sophisticated. We were able to find that the particular company that I owned did have some competency in producing drive shafts. So we refocused the company on the production of drive shafts. … All the competition for these drive shafts at the time was in the Midwest, highly unionized, larger firms and no one had focused on drive shafts. … It was maybe not an enduring advantage but it did last and provide significant profits and allow the company to grow.
SMITH: My business experience in Rhode Island at the time was – and of course, the machine-tool industry is not a desirable job – young people always think of doing something better with their lives. … So I think at that time the problem was both finding people but also trying to make the job a better experience. … And at that point the state was particularly helpful … they would provide job training. In other words, they would pay for the salary … for perhaps the first three months. And that allowed use to invest in these new employees, create a job that was not so tedious and boring and allow them to learn some skills.
PBN: What do you see as Rhode Island’s competitive advantage?
SMITH: I hear the talk about creating a knowledge center. And I read and have learned about entrepreneurship in the state but there obviously needs to be more resources dedicated to entrepreneurship.
I think the state should not be interested in creating more bakeries or restaurants. They should be thinking about creating firms that can grow and employ citizens of the state and that’s a different kind of business than the traditional entrepreneurship. … The reality is businesses that last long and employ think big from the start, that they have to grow in five years to $20 million, $40 million, employing a couple hundred employees. •
INTERVIEW
KEN SMITH
POSITION: Professor of entrepreneurial management and law at the University of Rhode Island
BACKGROUND: During the 1970s, Ken Smith founded and served as CEO of Enterprise Manufacturing Co. and Stokes Marine Supply Co. Inc., both in Pawtucket. From 1983 to 2009, he taught business at the University of Maryland. During his tenure, he also spent time as a visiting professor in France and Ireland. He came to URI in 2010.
EDUCATION: Bachelor’s in business and economics from the University of Rhode Island in 1970; master’s in business administration from URI in 1972; Doctorate in business policy from the University of Washington in 1983
FIRST JOB: Cleaned pans at Mary’s Bakery in Pawtucket at age 13
RESIDENCE: South Kingstown
AGE: 63
