Incumbent Firms Research Articles

Corporate Experimentation: Antitode or Oxymoron?

Experimentation in entrepreneurship has become the basis for the most influential approaches, e.g., lean startup, to launch and develop new ventures. Recently, the ideas developed around experimentation, strongly rooted in the startup context, have begun to be adopted by incumbent organisations, with the promise that these experimentation approaches can benefit corporate entrepreneurship activities, i.e., entrepreneurship activities in the corporate context, despite the established and corporate bureaucratic processes and practices. While there is a growing and significant body of literature investigating experimentation in the startup context, there is no corresponding research exploring the peculiar implications of experimentation in corporate entrepreneurship. Furthermore, current indications for managers and practitioners on how to exploit the benefits of experimentation approaches in the corporate context appear unclear. This issue is more relevant today when companies have to face fast-changing customer needs and market trends, as well as the design of complex value propositions. Through an exploratory multiple case study - based on semi-structured interviews – involving three incumbent firms, this study explores how experimentation is conducted in incumbent organisations and used as a tool to support corporate entrepreneurship. This study provides detailed empirical evidence on how incumbents can adopt experimentation approaches in the corporate context, together with a set of specific managerial practices. Specifically, we document corporate experimentation challenges at three levels of analysis: (i) experimentation-level challenges; (ii) firm-level challenges, and (iii) network-level challenges. Based on the findings of this study, we contribute to research and practice on experimentation in corporate entrepreneurship.

How Incumbent Firms Respond to Emerging Technologies: Comparing Supply-Side and Demand-Side Effects

A perennial challenge for executives in established firms is deciding how and when to respond to emerging technologies. This article demonstrates that the way emerging technologies play out in established industries differs according to how the business system is affected. Some have primarily a supply-side effect (on how a firm in the industry creates its product), while others have a primarily demand-side effect (on how users consume the product). Supply-side effects play out over relatively long periods of time in a predictable way, with incumbent firms executing similar strategies though at different speeds. Demand-side effects are faster-acting and more volatile, with incumbents often experimenting with a range of different business models as they seek a viable way forward in a changing market. By understanding these important differences between supply-side and demand-side effects and being able to anticipate the typical patterns of responses from incumbents, executives can make better choices in how and when to invest in emerging technologies.

Based on Consumer Psychology Analyzing Caitangs Innovative Marketing Strategy

As industry 4.0 evolves, how to acquire customers from the high-tech sector has become one of the top difficulties for incumbent firms. Previous research indicates that consumer psychology is important in establishing innovative marketing strategies. However, most existing research is still focused on a theoretical framework built around production, pricing, distribution, promotion, and other marketing factors but ignores systematic consumer influence. Therefore, this research conducts a case study analysis on the Chinese domestic cosmetic brand Caitang to research innovative marketing strategies based on consumer psychology. The author points to the relevancy and important role that (1) personal relevancy, ingroup perception and national pride, (2) para-social interaction, (3) high cognition and trust play in influencing consumer purchasing behavior. The author then explains the principles and effectiveness of using these three marketing strategies. Domestic firms receive insights if they plan to innovate companies promotion strategy. The author recommends adopting personally relevant advertisements, interactive opportunities, and signature products in promoting purchasing intention.

PROFIT AND ADVERTISING RELATIONSHIP BASED ON PRODUCT DIFFERENTIATION

This paper investigates the positive relationship between profit and advertising based on product differentiation on imperfect oligopoly market. Differentiated product under these markets put pressure on manufacturers to produce high quality products. Advertising helps them to take advantages of economies of scale, absolute cost advantage and capital requirement on new entrance. The study is using firms’ data of certain specific manufacturers of heterogeneous products, through multiple regression, to prove that the positive relationship between profit rate and advertising is significant and still hold. By using the same data, the study could be able to relate the advantage of advertising for incumbent firms with barrier to entry for the new firms. In addition, the paper also highlights the view of ethical values of advertising based on Islamic perspective. The discussion focused on informative and educative advertising which is allowed in Islam and persuasive approach as well as manipulative advertising which is prohibited and immoral according to Islam.

Infrastructure Quality and FDI Inflows: Evidence from the Arrival of High-Speed Internet in Africa

Abstract Does ambient infrastructural quality affect foreign direct investment (FDI) in developing countries? This paper investigates how the arrival of high-speed internet in Africa triggered FDI into the region. It also explores the role of complementary infrastructure, such as access to electricity and road connectivity, in amplifying the impact of internet connectivity on investment. To causally estimate impacts, the paper exploits plausibly exogenous variations in access to high-speed internet induced by the staggered arrival of submarine fiber-optic internet cables and spatial variations in terrestrial fiber cable networks across locations on the continent. Findings from the paper indicate that access to high-speed internet induces FDI, particularly in the service sector, with the finance, technology, retail, and health services subsectors as the main beneficiaries. Access to (hard) infrastructure, such as electricity and roads, amplifies the impact of internet connectivity on FDI, thus highlighting the role of complementarities in the impact of infrastructure. Further, the results suggest that improvement in quality of governance and increased performance of incumbent firms are plausible mechanisms.

Entrepreneurial growth in digital business ecosystems: an integrated framework blending the knowledge-based view of the firm and business ecosystems

Digitalisation is shaping the contemporary technological context of entrepreneurial activities, where firms grow through interacting with digital ecosystem stakeholders. This study investigates how incumbent firms seek entrepreneurial growth by re-configurating their knowledge bases in digital business ecosystems. We propose and develop a conceptual framework that blends the digital business ecosystem perspective and the knowledge-based view of the firm. Through a longitudinal case study of a Chinese textile manufacturing firm, we identify three pathways for entrepreneurial growth. The results contribute to the entrepreneurship literature by demonstrating how digital technologies foster corporate entrepreneurship in incumbent firms. The proposed framework extends the analytical power of the knowledge-based view by incorporating ecosystem elements into the firm’s internal and external knowledge management. The findings also generate relevant and actionable managerial implications for entrepreneurs, managers, and policymakers that are applicable in the context of digital business ecosystems.

Diversifier’s Entry as a Catalyst for Incumbent Firms’ Exploratory Innovation Efforts

Diversifier’s Entry as a Catalyst for Incumbent Firms’ Exploratory Innovation Efforts

How Hiring Former Founders As Employees Shapes Incumbent Firms’ Creative Performance

How Hiring Former Founders As Employees Shapes Incumbent Firms’ Creative Performance

Fiscal windfalls and entrepreneurship: fostering entry or promoting incumbents?

AbstractWe study the impact of government fiscal windfalls on entrepreneurship through an analysis of shocks to transfer payments in Peru. These pure transfers generate higher government spending, and we contrast the impacts on incumbent firms and entrants. Incumbent exits from the financial system are reduced, but previously troubled firms experience deteriorating performance. Increased transfers result in higher rates of firm entry into formal borrowing and superior entrant outcomes. Overall, startups outperform non-startups after heightened transfers.

Effects of business improvement districts on firm performance, property values and urban safety: an empirical study of five small to medium-sized Swedish towns

ABSTRACT Business improvement districts (BIDs) have emerged as possible solutions for the revitalisation of declining urban areas. We investigate the effects of a voluntary Swedish BID programme on firm performance, urban safety and property values in five small to medium-sized Swedish towns, and find that it increased labour productivity for incumbent firms within the BID by about 7%, mainly through an increase in revenues. However, the positive effect of the BID programme on firm performance is transitory, decreasing sharply during the third year after implementation and then becoming insignificant. As for urban safety and property values, the results are mostly insignificant.

Agri-food importing firms amid a global health crisis

This paper exploits daily customs transaction data on the universe of Swiss agri-food importing firms to assess the response of firms to a global shock. Estimating a linear model that regresses product-level import margins on daily COVID19 shocks and a host of fixed effects, we find that the pandemic had a substantial trade-reducing effect on imports. The trade effects were driven mainly by a reduction in the number of importing firms (i.e., 63% of the total effect), and much less by the number of products imported and the average import value per product per firm. We explore several sources of heterogeneity and show, among others, that larger and incumbent firms were affected more by the trade adjustments. Our results also reveal that the relative contribution of each import margin to the decline in aggregate imports depends on the level of data aggregation (i.e., daily, weekly or monthly). Finally, we validate and confirm our main findings by testing two mechanisms: (i) third-country supply-side effects using insights from structural gravity models and (ii) changes to consumer demand using consumer mobility, and retailer and consumer scanner data.

New entrants, incumbents, and the search for knowledge: the role of job title ambiguity in the US information and communication technology industry, 2004–2014

Abstract New entrants and incumbent firms rely on new knowledge to innovate and compete in the market. One way to acquire new knowledge is through the recruitment of new employees from competitors, a phenomenon popularly known as “poaching.” Digital labor platforms are widely used by firms for this aim. We argue that job titles represent the first and most visible public source of information about knowledge workers and thus play a key role in navigating the vast spectrum of competencies available in digital platforms. Our analyses of the career trajectories of 11,644 knowledge workers in the United States between 2004 and 2014 suggest that increases in the ambiguity of a job title claimed by an employee are negatively associated with the likelihood of the employee being hired by a new employer. This finding appears stronger in the case of transitions to incumbent firms rather than new entrants. In the concluding section of the paper, we take stock of the various analyses presented and reflect on the potential role of job titles in the strategic management of human capital.

Disruption and the ecosystem: The changing roles of ecosystem stakeholders in the course of disruption

Digital disruption in the form of new business models may include changes to the ecosystem of a firm. This paper defines the ecosystem as external stakeholders interdependent on a focal firm, and shows how such stakeholders play different roles as disruption unfolds. Focusing on incumbent firms and their ecosystems, this paper describes and categorizes the role of ecosystem stakeholders across various stages of disruption. Two cases on the disruption caused by digitalization in the advertising sector are analyzed. A processual ecosystem stage model is developed including the following roles: reassuring, questioning, unbalancing, and settling. These roles point at the reliance on past stakeholders during disruption, and show how new stakeholders come into play. Most disruption research has focused on how new actors replace incumbent firms or the sector-level disorder. The ecosystem lens centered on an incumbent brings a fresh perspective on such firms' efforts to survive and shows how interdependencies in the ecosystem play out when disruption takes place. The processual stage model, which delineates the different roles of ecosystem stakeholders during a disruption, offers valuable new insights to the existing disruption literature.

Effects of open innovation in startups: Theory and evidence

A robust literature has provided compelling evidence showing how open innovation impacts incumbent firms. However, only a paucity of research has linked open innovation strategies to different types of innovation in startups. This paper fills this gap in the literature by focusing on if, how and why open innovation enhances innovative activity in newly created firms. In particular, the paper examines how the role of both the specific external partner as well as the geographical location of partner matters in how product and process innovation is shaped in startups. The empirical evidence garnered in this paper suggest that not only do startups benefit from open innovation, but also the extent of product innovation and the propensity to innovate new processes in startups are significantly affected by specific external partner and its geographical location. The positive impact of open innovation reflects the heterogeneous effects of knowledge embedded in different partner types and the role that technological, institutional, and competitive arrangements play domestically and internationally in startup innovation. This study provides new light on how and why open innovation benefits not just incumbents but also startups as well.

A Game-Theoretic Analysis of Canada’s Entry for LNG Exports in the Asia-Pacific Market

The import demand for energy resources, including liquefied natural gas (LNG), has been steadily increasing in the Asia-Pacific region. Australia, the Middle East (Qatar), the Russian Federation, and the U.S. are the major players who compete strategically to capture this ever-growing market for LNG. The objective of this paper is to examine the potential for Canada’s entry into this market as another LNG exporter and what impact that can have on the existing suppliers. Using a game-theoretic LNG export competition model, we explore the conditions under which Canada can make a profitable entry. We also investigate the effect of Canada’s entry on the profitability of the four incumbent exporters. Employing a multi-leader Stackelberg model, we found that Canada’s entry could be a Pareto superior outcome under certain conditions because it benefits all competing firms and consumers. Further, Canada’s entry into the LNG export market always helps the low-cost incumbent firms by increasing their output and profit. However, the high-cost incumbent firms’ output falls, while their profit may increase or decrease depending on the unit cost and market size parameters. With differential export costs between Canada and the U.S., the latter has an incentive to act strategically to affect the entrance of the former.

Incumbent entry modes and entry timing in sustainable niches: The plant-based protein transition in the United States, Netherlands, and United Kingdom

While literature on sustainability transitions has generally portrayed incumbent firms as reluctant to engage in sustainable niches and primarily employing strategies that aim to limit niche growth, practice offers many examples that contradict this. In this paper, we mobilize insights from organizational literature, and particularly the concept of entry modes and entry timing from the international business and strategy literature, to investigate incumbent firms’ engagement in sustainable niches through the introduction of new products, collaborative efforts with new entrants, the introduction of new brands, mergers & acquisitions, and investments. We focus on entry modes of incumbent firms, including food firms, meat processors, retailers, and food service firms, in meat substitute markets in the United States (US), the Netherlands (NL), and the United Kingdom (UK). We identify distinct entry mode patterns for the four firm types and that the entry modes of different types of incumbent firms vary in their timing and commitment towards the plant-based meat substitute niche. Contrary to the general consensus stemming from previous literature on incumbent engagement in transitions, our case shows that incumbents proactively engaged with niche products incentivized by economic opportunities stemming from changing consumption patterns, which preceded any regulatory action.

A Policy Conundrum: Schumpeterian Growth or Job Creation?

This paper formally and quantitatively analyzes the impact of economic policies on long-run growth and equilibrium unemployment. We construct a dynamic general equilibrium model featuring innovation contests through creative destruction, fully-endogenous Schumpeterian growth, rent-protection activities by incumbent firms, and search-based unemployment. We find that industrial policies in the form of production subsidies/taxes to small young firms or large adult firms and R&D subsidies/taxes to entrepreneurs suffer from the policy conundrum: they lead to either faster growth with fewer jobs or slower growth with more jobs. In contrast, labor market policies reducing job vacancy costs avoid the policy conundrum by generating higher growth and lower unemployment.

Does the development zone promote population urbanization? Evidence from China

As the main space carriers of industrial agglomeration and land development, the development zones’ (DZs’) ability to absorb the population is crucial to the coordination of land urbanization and population urbanization. Based on the theory of New Economic Geography, this study uses China’s fifth and sixth census data to empirically analyze the impact and mechanism of DZs on population urbanization by comprehensively utilizing propensity score matching, difference-in-difference model and mediating effect model. Results show that the establishment of DZs can promote the population urbanization. When the dominant industries planned by the DZs are in line with the local comparative advantage, the intensity of population urbanization affected by the DZs will enhance. The “policy rents” provided by the DZs attract firms to gather, which in turn creates additional jobs by attracting new firms and expanding the scale of incumbent firms, attracting additional population inflow. From another perspective, the establishment of DZs improves labor’s wages and welfare, promotes the stable living of labor nearby, which boost population urbanization. In addition, the expansion of land supply is also a channel for the DZ to promote population urbanization.

WHAT DO WE KNOW? FDI INFLOWS, MANAGERIAL SPILLOVERS AND INNOVATION OUTCOMES OF LOCAL FIRMS DURING GLOBAL CRISES

Global crises have become our business reality. How can local firms continue to sustain their competitiveness during these crises through innovation? Previous literature emphasized the role of foreign direct investment (FDI) inflows, but was generally inconclusive. This study examines FDI and managerial spillovers as antecedents of innovation outcomes in 369 local firms in 12 Eurasian countries during the 2008–2009 global financial crisis. The study finds that new product and service introductions by incumbent firms are driven by the local presence of the multinational enterprises (MNEs). Moreover, firms with more non-native managers and CEOs with substantial industry experience have a higher propensity to introduce new products and services. The study contributes to the theory of FDI spillovers and the literature on antecedents of innovation outcomes by showing that non-native managers can serve as channels of managerial spillovers. Furthermore, we conceptually distinguish between managerial spillovers from MNEs and managerial spillovers from abroad (e.g., via hiring managers born or educated abroad).

Impact of Regulations on Firm Value: Evidence from the 2016 U.S. Presidential Election

Abstract Using the 2016 U.S. presidential election result as a shock to the expectations about the future regulatory environment, I find that most regulated firms earned approximately 4% higher cumulative abnormal stock returns than least regulated firms during the first 10 trading days after the election. Exploring economic mechanisms, I find evidence consistent with the explanation that more regulations disproportionately harm high-growth firms and allow incumbent firms to extract rents through lower competition and political favoritism. Stock returns are also followed by a shift in firm fundamentals over 3 years after 2016, consistent with the economic mechanisms.