Laying the foundation for competition network theory, this study suggests that the network of competitive relations in which a firm is situated can affect its performance. This study shifts from the industry or firm level to the network level of analysis, thus offering several insights into the implications of competition. Specifically, firm performance is expected to decline with the intensity of the firm’s competitive relations and its degree centrality in the competition network. In turn, the centrality of the firm’s competitors in this network can enhance performance, whereas structural equivalence of the relations of the firm and its competitors mitigate this performance effect.

Finally, variation in the intensity of competition is expected to generate an inverted U-shaped performance effect. Hence, besides industry structure and the firm’s resource profile, the firm’s position in its competition network and the nature of its competitive relations can shape its performance. This study offers illustrative examples and calls for empirical investigation of competition networks.