Does Market Share Still Matter?

Market share has traditionally correlated strongly with profitability because of efficiency, market efficiency, and customer perception effects. But, as the authors demonstrate, the relationship has been changed by the digital transformation in firms. The authors’ research finds that the market-share profitability relationship has become weaker for firms that favor investment in value creation over value appropriation and for firms operating in B2B markets. In both cases, digital helps smaller firms catch up with larger rivals. But digital can also amplify market share effects for large firms focusing digital investments on customer-facing processes and for large firms that create digital platforms.