Strategic Management Journal Strat. Mgmt. J., 23: 969–978 (2002) Published online 25 July 2002 in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/smj.258 RESEARCH NOTES AND COMMENTARIES COMPETITIVE FORCES AND STRATEGIC CHOICE DECISIONS: AN EXPERIMENTAL INVESTIGATION IN THE UNITED STATES AND JAPAN MICHAEL SONG, 1 * ROGER J. CALANTONE 2 and C. ANTHONY DI BENEDETTO 3 1 Center for Technology Entrepreneurship, University of Washington, Seattle, Washington, U.S.A. 2 The Eli Broad Graduate School of Management, Michigan State University, East Lansing, Michigan, U.S.A. 3 School of Business and Management, Temple University, Philadelphia, Pennsylva- nia, U.S.A. Managers operate in a complex, uncertain environment and tend to form simplified models in order to cope with this environment and make competitive strategic decisions (i.e., cost- leadership, differentiation, or focus). In this study, we use an experimental design to examine the strategic choice decision-making process in firms located in the United States and Japan. We develop several main-effect propositions regarding managerial selection of competitive strategies, depending on the competitive forces (buyer power, threat of substitutes, threat of new firm entry, and high intensity of rivalry) they are facing. We propose a main effect due to country of origin: Japanese managers prefer a cost-leadership strategy more than American managers do. We also propose several interaction effects regarding cross-national differences in strategy selection between Japanese and U.S. managers. To test our propositions, we collected experimental data from 316 U.S. executives and 459 Japanese executives. We assessed relative impacts of the competitive forces on strategic decision-making using a multilevel regression analysis. The research findings indicated that high buyer power and high substitution threat were associated with a preference for cost-leadership strategies, and Japanese managers were significantly more likely to prefer a cost-leadership strategy than U.S. managers. We also found that, under conditions of high buyer power, U.S. managers were less likely than Japanese managers to enter a market with a differentiation or focus strategy. We found little support for other interaction hypotheses, suggesting points of similarity between U.S. and Japanese managers. We conclude with a discussion of theoretical and managerial implications of our results. Copyright  2002 John Wiley & Sons, Ltd. INTRODUCTION Managers use ‘mental models’ to simplify and understand the competitive environment within Key words: competitive forces; decision-making; strate- gic choice *Correspondence to: Michael Song, Center for Technology En- trepreneurship, University of Washington, 323 Mackenzie Hall, Box 353200, Seattle, WA 98195-3200, U.S.A. which they work (Porac and Thomas, 1990; Song, Di Benedetto, and Zhao, 1999). In today’s global economy, strategic decisions, such as a choice of competitive strategy for market entry, may be more complex since cultural traits influence managerial perceptions and actions (Ralston et al., 1993; Smith, Peterson, and Wang, 1996; Hitt et al., 1997). Managers from different nations may use different criteria to select a competitive strategy, because they use different ‘mental models.’ That Copyright  2002 John Wiley & Sons, Ltd. Received 14 September 1999 Final revision received 25 March 1999