Incumbent Business Research Articles

Entry regulations with implementation lag: Evidence from convenience store markets in Korea

Seocho County in Korea attempted to advance the interests of incumbent businesses by weakening competition in the convenience store market. To this end, it created a regulation impeding the opening of new convenience stores. Although this regulation intensified proximity restrictions between stores, our findings reveal that the announcement of legislation condemned incumbent businesses to unfavorable survival probabilities. We provided supporting evidence that so-called implementation lags—time lags between the announcement and implementation of policies—and adaptive behaviors of potential store owners may have caused unintended consequences. Our findings imply that policymakers should consider implementation lag and the adaptive behaviors of economic agents.

A Systematic Review of Developing a Comprehensive and Strategic Framework for Business Model Innovation and Adaptation Amid Technology and Market-Driven Disruption for Incumbent Businesses

Purpose - This study aims to address a crucial gap in academic understanding regarding business-model innovation and adaptation, particularly within the dynamic landscape of technology and IT-based companies experiencing disruptive innovations. To meet the increased demand for a precise approach, timely execution, and relevant content in business-model evolution, this study strives to develop a comprehensive framework. Through synthesizing existing knowledge, the goal is to contribute valuable insights and offer a cohesive guide for businesses navigating the complexities of innovating and adapting their business models amidst technological disruptions.
 Design/Methodology/Approach - Through a systematic review of 29 research articles from reputable journals, we employ a structured, five-step approach to define research questions, conduct literature search, select relevant studies, rigorously extract and synthesize data, and report findings. Emphasizing methodological rigor, consistent with established practices, this approach provides a robust foundation for developing a strategic framework for business model evolution amid disruptions.
 Findings - This study contributes significantly by developing a comprehensive and integrated framework to help incumbent businesses navigate disrupter threats and implement business-model innovation. The synthesis of the relevant literature and practical guidance empowers incumbent businesses for long-term competitiveness.
 Research Implications - This study has substantial implications, offering academia a comprehensive and integrated strategic framework for navigating disrupter threats through business-model innovation. It provides practical guidance for incumbent businesses, aiding in strategic decision-making and competitiveness. The findings set the stage for future research to explore industry-specific contexts and advance methods for early disrupter detection in the evolving landscape of technology disruptions.

The impact of the innovation city project on the local economy: Evidence from Korean Innovation City Project from 2012 to 2014

This study employs a difference-in-differences approach to investigate the impact of the Korean Innovation City Project (KICP) on employment and productivity. KICP is a place-based policy that involved relocating public institutions and providing economic incentives to attract businesses. Our findings show that newly established businesses experienced positive employment effects mainly in the nontradable sector, but temporary negative productivity effects in the tradable sector. We also identified significant positive spillover effects on productivity for incumbent businesses. Moreover, our results suggest that the effectiveness of place-based policies should consider sectoral heterogeneity, between-firm spillover, and lasting effects.

Why Do We Fight? Internal Conflict and Incumbent Business Model Innovation

Why Do We Fight? Internal Conflict and Incumbent Business Model Innovation

Place‐based subsidies and employment growth in rural America: Evidence from the broadband initiatives programme

AbstractThis paper studies the labour market effects of the Broadband Initiatives Program (BIP), a programme authorized by the American Recovery and Reinvestment Act of 2009 to promote broadband deployment, mainly in rural areas. The BIP is one of the largest USDA broadband programmes implemented to date, providing more than $3.4 billion in grants and loans in FY 2010. We investigate the impacts of BIP investments on employment outcomes in BIP‐recipient Census tracts compared to similar tracts outside of BIP project service areas between the inception of the programme in 2010 and 2019. We use a quasi‐experimental research design that combines difference‐in‐difference regression with propensity score matching estimation to identify the causal effect of the BIP investments on employment outcomes. We find that the BIP investments had a positive overall effect on employment growth that increased over time. The subsidized investments had a greater effect on employment in startups than in incumbent businesses, in the goods‐producing sector and the information and communications technology sector than other sectors, and a greater effect in micropolitan census tracts than tracts located in metropolitan areas or in small town and remote rural locations.

Finding a niche in digital plenitude: sport media strategies of smaller European football leagues

ABSTRACT Research question Digital disruption is heavily impacting incumbent sports media business models. While major sports seem to cope with digital disruption, the challenges appear much bigger for minor sports. Therefore, the contribution focuses on the efforts of smaller European football leagues to adapt their business models. Two research questions follow: RQ1: What are the most important challenges to the BMs of smaller football leagues? RQ2: Which approaches to adapt BMs are explored by the smaller leagues examined? Research methods A comparative case study was conducted. The sample consisted of eight European smaller football leagues, which are characterized by substantial diversity in terms of population size, wealth and sporting quality. The empirical material consists of document analyses and expert interviews with league managers exploring broadcasting rights, revenues, the competition within the media environment and future broadcasting strategies. Results and findings Aggressive global competition and changing media consumption patterns and behaviors challenges the incumbent business models. The leagues are actively exploring new business models, although these efforts are rather conservative. Most successful is the collective marketing of overseas rights and the selling of betting rights. The leagues struggle to capture value from datafication and new media outlets. Implications The leagues face a complex challenge to increase local interest to combat interest from globally dominant leagues. They have to develop a ‘digital mindset’ and to balance value creation and capture. The hybrid strategy using traditional distribution channels as ‘backbone’ while exploring new BMs should occur. They should consider intensifying collective marketing efforts.

Netflix’s complicated role as an innovative disruptor in the film industry

This article analyzes specific aspects of industry practice to consider ways in which Netflix has proven itself an innovative disruptor in the film industry. By applying Clayton Christensen’s theory and model of innovative disruption to Netflix, it addresses ways both Netflix and “incumbents” (in this case, legacy film industry businesses, namely the Hollywood studios) epitomize the concept, and what this has meant and might mean in the near future for the industry as a whole.While the streaming platform’s categorization as an innovative disruptor is not new and has drawn plenty of criticism, the author pulls from a combination of academic research and up-to-date coverage in trade journals to analyze four key areas of industry practice where the label could be justified. These four areas are: the skipping and/or collapsing of the usual distribution windows; the traditional lack of clear viewership data to compare with theatrical box office figures; the inclusion in prestige events like Cannes and the Oscars; and the use of metrics and algorithms to track and target users in minute detail.The article also analyzes ways in which Netflix itself has exploited and promoted the ‘innovative disruptor’ label as advantageous for its own business. The steps which have gotten Netflix to where it is today offer insight into film business strategies and industry trends that are actively shaping the future of the industry. This is reflected in how quickly and constantly the film business changes, underscoring how some of the data and information detailed in this article may already be out of date by the time of publication.The article draws conclusions about why Netflix has faced concentrated pushback from legacy businesses in each of the four industry areas analyzed. The article also considers ways the industry and the incumbent business model are themselves adapting as a result. These dual realities demonstrate the full arc of disruption.

Incumbent business ecosystems in the face of new entry: An event study of Google's autonomous car announcement

This study investigates the value implications for an incumbent business ecosystem when an innovation is newly introduced. We theorize the different entrance modes and pathways through which the innovation can join the value co-creation structure of an incumbent ecosystem. We further theorize how the innovation entrance can affect the value appropriation arrangements among innovators and various incumbent ecosystem actors. The automobile ecosystems and Google's initial announcement of its autonomous cars serve as our empirical context. Applying our theories, we first qualitatively prescribe Google's potential actions and predict their value implications on the incumbent automobile ecosystem. Then, through an event study, we empirically validate the predictions. We observe that, on average, the incumbent actors of the automobile ecosystem benefited from Google's announcement. Moreover, car manufacturers particularly benefited from Google's attempted entry, arguably because they held critical gatekeeping positions along Google's entrance pathway. Car component manufacturers, but not other incumbent actors, were also able to benefit because of their tight integration with the gatekeepers. Our theoretical development and empirical exploration contribute to the emerging literature on ecosystem strategies by highlighting the dynamics and value implications when innovations are introduced into incumbent business ecosystems.

Shared value as shared power: Business in South Africa’s democratic transition

Purpose: This study aimed to better define the boundary conditions of voluntary business engagement for social and economic transformation.Approach: Case study of the Consultative Business Movement (CBM) in South Africa’s democratic transition through historical narrative and analysis, applying both contemporaneous and contemporary lenses.Findings: The analysis demonstrates that creating shared value requires shared power, an arrangement into which incumbent businesses may reluctantly enter, and from which they may quickly exit when their own political interests are met but before transformational economic goals have been achieved. Thus, exogenous forces are necessary to dependably shape a private sector that is fully aligned with economic transformation and peaceful development.Practical implications: Economic and political carrots and sticks combined with the mandatory embedding of business actors in broader networks may be required to ensure that business strategies and operations are more directly the result of consensus reached with more progressive social and economic agents in ways that advance societal goals. Those managers who do want to lead change should take from the experience of CBM the imperative to take no unilateral decisions but rather to share decision-making power with civil society and community actors.Originality/value: The article challenges and refines discourse that assumes that business interests are broadly aligned with sustainable societal outcomes. It thus sheds light on the boundary conditions for the variety of propositions in the management literature that business and societal aims are largely aligned that have been underexplored.

How Transformative Business Model Renewal Leads to Sustained Exploratory Business Model Innovation in Incumbents: Insights from a System Dynamics Analysis of Case Studies

The digital era and mounting sustainability pressures have reinforced incumbents’ need to respond to radical innovation through business model innovation. Despite advancements in the literature on incumbent business model innovation, there are still open debates regarding strategies for achieving systematic innovation and poor integration between the literature on managing multiple business models and the strategic management of business model innovation. To address these gaps, we investigated three Brazilian incumbents that developed systematic business model innovation processes and analyzed their evolution. We followed a multiple case study methodology, deploying system dynamics as an analytical lens. Our findings showed that the evolution of innovation departments from business model renewal to exploration is based on a systemic tension between solving the core problems of the business and creating openness to innovation, innovation capabilities, and resources. By assigning the innovation departments a vital role in the renewed business model and exploring synergies to manage multiple business models, the companies create a “buffer” to sustain exploratory business model innovation. We suggest that the strategy for conducting business model renewal matters, especially when the renewal is transformative, aiming to shape the future. We contribute to incumbent business model innovation theory by showing the system dynamics behind the evolution from business model renewal to exploration and by connecting the management of parallel business models to the strategic management of business model innovation.

Revolutionary innovation and the incumbent business: Patterns of relationship and coping strategies

Revolutionary innovations bring about drastically new ways of doing business that potentially challenge the dominance and even the survival of many powerful incumbent firms. The choice of the incumbent firms’ strategies in coping with a revolutionary innovation depends on the specific patterns of relationship between the revolutionary innovation and the incumbent firms’ core business, be it substitutive, complementary, or parallel . In the situation of a substitutive relationship, the incumbent firms could exit from the incumbent business through swift divesting or gradual harvesting before it is eventually displaced or eroded. In a complementary relationship, the incumbents could absorb the innovation into the incumbent business by embracing the innovation that enables them to add entirely new functions to their incumbent business or assimilating the innovation to enhance the value of the incumbent business. In a parallel relationship, the revolutionary innovation either results in the retrenchment of the incumbent business or leaves it undisturbed, which, respectively, calls for specializing in certain niches of the incumbent business or further solidifying the incumbent business. In addition to the above coping strategies focusing primarily on the incumbent business, the incumbent firms also need to deal simultaneously with the new businesses inspired and propelled by the revolutionary innovation. They could fend off the potential disruptions of the innovation by engaging in a competitive fight in the market domain or a nonmarket fight in the sociopolitical domain. They could also enter those new businesses through greenfield entry or merger and acquisition .

A framework for environmental evaluation of business models: A test case of solar energy in Kenya

Business models have the potential to deliver environmental sustainability in companies through innovative approaches to creating and delivering value. Business model innovation has been shown as a means to integrate circular economy principles into companies' operations. Several frameworks have been created to guide the transition from traditional to circular business models. However, there is a need for a framework that quantitatively evaluates business models to inform the transition based on their relative environmental performance in creating and delivering value. This study presents a new framework for evaluating the Environmental performance of Business Models (EBuM). The EBuM framework consists of sequential steps of life cycle assessment, participatory decision-making, and business model innovation. It enables organisations to integrate environmental considerations in their decisions and operations. The framework was applied to solar energy companies in Kenya. Life cycle assessments of the photovoltaic systems were conducted through the lens of business models of participating companies to provide insights into the hotspots of environmental impacts. Each company participated in two workshops to evaluate the potential of business model innovation in mitigating the environmental impacts of their activities. Findings showed that the environmental impacts of incumbent business models were generally higher than of their circular economy-oriented substitutes. Business model innovation could, for example, lower the climate change potential by 12 %–55 % and the metal depletion potential by 40 %–70 %. While the framework has been applied to solar energy companies, it can be applied to other business models in different sectors.

The Social Impacts of Circular Strategies in the Apparel Value Chain; a Comparative Study Between Three Countries

The apparel value chain is essential for the livelihood of millions of workers around the globe. However, human rights violations and the lack of a sustained income by apparel workers demonstrate the poor working conditions present in this sector. Circular economy (CE) has been used by incumbent businesses and startups as a framework to achieve sustainability, thus contributing to its economic, environmental and social dimensions. However, there is a lack of knowledge on its social impact. Most of the literature assesses CE’s social impacts by focusing only on the number of jobs created. However, the majority of studies agree on the need to analyse further the quality and inclusivity aspects. This paper explores the social impact of the different circular strategies implemented in three countries. It assesses social impacts related to the quality of jobs, workers’ sustainable livelihood and gender equality and inclusion. Results corroborate that CE social ambition is low, and that current circular strategies follow the same feminisation and precariousness of working conditions found in the linear apparel value chain. Thus, policymakers and businesses alike need to strengthen their CE social ambition; coordinate policy and strategies with different countries stakeholders of the apparel value chain to minimise trade-offs; and safeguard a just circular transition. This research contributes to the body of literature on CE by introducing a social impact assessment framework for circularity called SIAF-CE⚥. Additionally, it provides evidence on the current CE social impact implemented by startups and incumbents in regional and global contexts.

Plausible Scenarios for Thai Sustainable Energy in 2050: Cloud and Clear

This study’s goal is to illustrate future energy scenarios for Thailand in the year 2050: Cloud and Clear scenarios. Cloud depicts a scenario of an economy driven mainly by value-based industrial manufacturing. Security of energy supply is prioritized, with an emphasis on environment concerns and GHG emissions. Energy industry is dominated by incumbent businesses, which play important role in energy transition. Clean energy is gaining more market share, but fossil fuels remain the primary source of energy. Clear reflects the new economy driven by new S-curve businesses. Energy sustainability became first priority for national policy. Diverse options for end-users are available for self-management. New players can be competitor in Thai energy industry. Clean energy became one of the main energy sources. The quantitative results show that owing to the pandemic’s impact, short-term energy demand and GHG emissions decrease dramatically, then rebound and split into two scenarios: uptrend for Cloud and downtrend for Clear. Pathway to sustainable energy is revealed in Clear scenario. Peak energy demand can be reached within 2030. The peak of GHG emissions has already passed and will be approaching to the level of 2DC pathway. Therefore, more actions are required to achieve the ambitious goal of 1.5C.

INCUMBENT BUSINESS MODEL INNOVATION UNDER MISPERCEIVED HYPERCOMPETITION

Hypercompetition theory states that incumbent firms must restructure their organizations, resources, and product portfolios, as competitive advantages cannot be sustained over time. Yet, hypercompetition is rarer than many scholars and practitioners suggest. In this paper, we suggest that if managers misperceive the true state of competition in their industry, they run two potential risks. The first is to underestimate the competitive dynamics and to therefore focus too much on incremental changes to their existing business model. The second is to overestimate the dynamics and to waste resources on unnecessary radical business model innovation. In this chapter we discuss these risks in light of recent research on both hypercompetition and on incumbent business model innovation.

Land property rights and rural enterprise growth: Evidence from land titling reform in China

We exploit a large-scale land titling reform in China that clearly entitles rural households to land rights by issuing uniform land use certificates and study how this impacted entrepreneurship in rural areas. We find that the reform significantly increases business creation in rural areas without decreasing the quality of new entrants or incumbent businesses. It also spurs entrepreneurship among professional and large farmers and attracts more urban residents to start new businesses in rural areas. Additional analysis provides evidence that increased land and labor availability and productivity, and improved social trust may serve as the mechanisms underlying these effects. Altogether, these results reveal that well-defined land property rights have enabled more enterprise growth in rural areas.

Regulating new digital market and its effects on the incumbent market: Investigation of online peer-to-peer short-term rental

The gig economy's disruptions on incumbent businesses have raised significant attention from policy-makers. This research focuses on one of the gig economy platforms, the online peer-to-peer (P2P) short-term rental (STR) platform. We examine how the governmental STR interventions affect the long-term rental (LTR) market. Using the prospect theory and the theory in the economics of regulation, we study the relationship between the STR regulations and the LTR rental prices. We find a nonlinear relationship between the STR regulation and the LTR rental prices through analyzing a constructed panel of monthly LTR and STR data from 15 cities across the United States. The nonlinear relationship between these two indicates that STR regulations only have a short-term impact on the LTR market prices but they cannot effectively contain the negative impacts of STR on the LTR market in the long run. Thus, policy-makers need to find alternative ways to govern the STR businesses. We discussed the related practical implications for gig economy research and policy-making.

Creating value through product-service-software systems in institutionalized ecosystems – The case of autonomous ships

Introducing product-service-software systems (PSSS) to the market requires forming an enabling ecosystem, which can be largely based on incumbent business ecosystems. Creating value through PSSS with autonomous capabilities will likely encounter numerous challenges related to the lock-ins in current ecosystem structure. We use institutional theory as a lens and autonomous ships as the case to shed some light on types and impacts of these barriers. We identify a set of institutional barriers pertinent to regulatory, normative and cultural-cognitive pillars of institutions. We further analyze how institutional barriers affect creating, delivering, and capturing value of autonomous ships, ultimately shaping the ecosystem formation around PSSS. The main contribution of the paper is the depiction of early ecosystem dynamics as the mutual adaptation of the PSSS value proposition and the structure of the incumbent ecosystem.

Dynamic resource redeployment in global semiconductor firms

AbstractThis study explores how firms decide in which businesses to further invest and from which businesses to withdraw resources by examining the detailed product portfolios of firms in the global semiconductor industry. Results show that resource redeployment within incumbent businesses is more prevalent than via new entry or complete exit, since the former is more flexible and easily reversible than the latter. This study further finds that, while underutilized resources may drive resource redeployment, resource shortage by a newly entered or expanding incumbent business may also siphon resources away from other incumbent businesses, leading to their exit or temporary retrenchment. Fabless firms with resource that are more fungible, scalable, and decomposable vis‐a‐vis integrated device manufacturers show a more flexible and gradual pattern of resource redeployment.Managerial summaryIn fast‐moving environments, firms should quickly redeploy resources to more promising business areas. We find fabless firms with more fungible, scale free, and decomposable resources engage in more active resource redeployment than integrated device manufacturers with specialized fabs and equipment, like Intel or Samsung. Redeployment among the latter requires a well‐planned, synchronized approach so as to avoid idle resources. As such, in order to take advantage of dynamic resource redeployment, managers should begin by assessing the characteristics of firm resources along these dimensions. Managers may also consider business model transformation to separate their activities by specializing in areas in which they can best utilize their resources and capabilities, like fabless firms and foundries in the semiconductor industry.

Removing the Barriers to Enterprise

The prime minister established a Taskforce on Innovation, Growth and Regulatory Reform (‘TIGRR’) in February 2021. Led by MPs Sir Iain Duncan Smith, Theresa Villiers and George Freeman, its remit was to ‘to scope out and propose options for how the UK can take advantage of our newfound regulatory freedoms to deliver these aims, as well as challenging the Government’s own emerging proposals’. The TIGGR received submissions from, or met, with more than 150 organisations and individuals. The IEA is publishing three of those contributions in this collection: the IEA’s own submission, drafted by Victoria Hewson, Head of Regulatory Affairs, and those of Sir Mark Boleat and Jon Moynihan OBE, two distinguished commentators who gave their personal view. The TIGGR published its report and recommendations on 16 June 2021. Its findings are wide-ranging and ambitious, and reflect some of the recommendations made by our authors. We are publishing this collection to inform the discussion about the TIGRR report and regulatory reform in general. The report and the three submissions illustrate the scale of the challenge to achieve the prime minister’s objectives of driving innovation, reducing barriers to entry and improving the regulatory environment for small businesses. They also show that there are myriad opportunities to make progress towards them. Sir Mark reflects on the structural reasons for the present regulatory burden, the need to address regulator accountability and the tendency of incumbent business, far from seeking deregulation, to favour ever greater regulation as a barrier to entry for potential competitors. Jon Moynihan reflects on the differences between common and civil law traditions, and the UK’s regulatory culture and incentives. He puts forward some key areas such as health care and financial services, where reforms could transform innovation and competitiveness. Victoria Hewson puts forward three examples of current regulations that could be reformed, one concerning industrial goods, one concerning digital services and one concerning employment law, and considered the benefits and trade offs that might result.