Entry Barriers: A Dull-, One-, or Two-Edged Sword for Incumbents? Unraveling the Paradox from a Contingency Perspective

Abstract

The long-held precept of equating entry barriers with sustainable incumbent advantage increasingly is met with skepticism as incidents of innovative late entrants leapfrogging over market incumbents become more pervasive across industries. Ostensibly, the reassessment of the traditional assumptions underlying entry barrier strategy has become imperative; to this end, the authors present a framework that investigates the contingent effects of incumbents' barrier building on their own performance. Specifically, the authors examine five types of entry barriers (capital requirements, cost advantages, switching costs, distribution access, and proprietary assets) for the nature of their impact in the following presupposed yet unresolved roles: (1) as effectual versus ineffectual entry deterrents and (2) as enablers versus inhibitors of incumbents' innovativeness. In addition, the authors take other variables into account (i.e., competitors' innovativeness and incumbents' market and technological orientation) to identify the contingencies of the framework. Using data from Korean consumer product industries, the authors empirically test and substantiate the variable (i.e., positive, negative, and neutral) impact of entry barriers on incumbents' performance.