Resource similarity and market commonality are receiving increased attention in the strategic management literature. In this thesis, I attempt to explore how the firm¡¦s characteristics and the resource similarity between two firms affect the tendency of firm¡¦s action. And follow this with a discussion of the necessity to put the resource similarity into consideration when we analyze the firm¡¦s action tendency from the aspect of market commonality. The thesis focuses on the competitive interaction in Taiwan domestic automobile industry between 1991 and 1996. In the concluding section, I explore the implication of each hypothesis under the empirical evidences.