Incumbent Firms Research Articles

The Mediating Effect of IT-Enabled Dynamic Capabilities and Organizational Readiness on the Relationship Between Transformational Leadership and Digital Business Model Innovation: Evidence From Indonesia Incumbent Firms

The outbreak of the coronavirus disease 2019 (COVID-19) has triggered the massive adoption of digital products and services in Indonesia, forcing established organizations to accelerate digital transformation and adaptation of their digital enabled business model to stay relevant. This article investigates how established firms achieve digital business model innovation (DBMI) and the role of transformational leadership (TL) as a key antecedent. Based on the cross-sectional survey data from 124 public listed firms in Indonesia, this study reveals that established firms in the uncertainty’s situation require Transformational Leadership, and TL indirectly influence DBMI through organizational readiness and ITeDC. We also found that despite the direct impact of organizational readiness on DBMI, partial mediation through IteDC can be a plausible mechanism. We contribute to the business model literature by offering a more integrated view of the antecedents concerning established firms’ DBMI.

Building innovative capacity in regional entrepreneurship and innovation (eco)systems: Startups versus incumbent firms

AbstractThis article studies how three sets of regional factors—knowledge, agglomeration, and openness—impact and interact differently with startups and incumbent firms in their innovative capacity building. Based on a large dataset of Chinese high‐tech firms, regression analysis shows that the speed of growing startup innovative capacity relies positively on regional knowledge stock and localization economies. In addition to regional knowledge stock, incumbent innovative capacity building benefits from urbanization economies and regional openness. Favorable regional factors, including the presence of universities and the clustering of knowledge‐intensive peers, also enable startups (but not incumbents) to leverage internal knowledge assets into their innovative capacity. The results suggest that it is not only the access to the external knowledge environment but also proactive endeavors to cross‐fertilize between internal and external knowledge that underlie the eco‐systemic nature of startup innovative capacity building.

Strategic foresight of entrepreneurial firms in energy transition

PurposeThe purpose of this study is to explore the principal research query and whether strategic foresight deployed by entrepreneurial firms in energy transition aims at crafting future readiness.Design/methodology/approachWith a focus on entrepreneurial firms working in the alternative energy segment in the Indian context, the intent is to examine the deployment of strategic foresight by incumbent firms and their entrepreneurial journey. The authors have adopted the approach of Eisenhardt for this research. The area of interest for the authors entailing strategic foresight by entrepreneurial firms in energy transition aligns with defining features reflecting the aim of Eisenhardt method for this exploratory research coupled with constructivism.FindingsWhile the future scenarios in the energy sector have to be necessarily multiple, their alignment with different geographic, economic, demographic and political outlooks shall be defined by the pathways niched through the deployment of strategic foresight for arriving at those scenarios.Research limitations/implicationsStrategic foresight deployed by entrepreneurial firms has the potential to create future readiness through self-reliant sustainable economic value chains for local populace, thus propagating holistic development in remote regions.Originality/valueThis paper attempts to knit together the domains of strategic foresight, entrepreneurial firms and energy transition through case research and present the future thinking deployed for navigation in uncharted pathways by capturing the foresight component of these incumbent firms chosen through careful case selection. The narrative has been strengthened by the varied interviews across participants and the observations made by the authors during the research work.

The impact of incumbents' operational and governance responses on the sharing economy: An asset orchestration perspective

AbstractLeveraging an asset‐sharing operating model, sharing economy platforms have disrupted incumbent firms in many industries. This research draws on the asset orchestration perspective to examine incumbents' asset orchestration (i.e., operational and governance actions) as they respond to threats from the sharing economy and the effectiveness of these actions in curbing a sharing economy firm's performance. We also analyze how the sharing economy firm's competitive moves counteract incumbents' asset orchestration responses. Our longitudinal empirical analysis in the accommodation industry demonstrates that the growth of sharing economy increases incumbent hotels' asset‐based operational actions, which reduce the sharing economy's performance. Although incumbents' asset governance actions increase as the local sharing economy grows, they do not seem to hinder sharing economy's performance. This research highlights the role of asset orchestration in the competition between incumbents and the sharing economy and contributes to the operations and sharing economy literature.

From a mining town to a town of industrial multinationals: Explaining transformation through human agency and mining assets

The article examines the transformation of a mining town to an industrial powerhouse by focusing on relations between specific agents and assets in the community. The objectives of this research are 1) to outline how human agency in a mining town mediated key transformation events, 2) to identify skills or specific capabilities of these agents which enacted changes, and 3) to recognize which (mining-related) assets were used or altered in the process. We take a closer look at Idrija, a former mercury mining town in Slovenia that has been transformed into a successful industrial town, also home to two multinational firms. The study is based on desk-based research, 12 semi-structured interviews with key agents and thematic interview analysis. We discover that the transformation of Idrija has been a gradual process, spanning four decades and consisting of several critical junctures where different types of human agency were required to make changes to existing mining assets. Interpersonal and institutional trust, loyalty, paternalism of incumbent firms, strategic thinking of agents, external market orientation and smallness are some of the soft assets that have proven time and again to be crucial for human agency at critical junctures. These soft assets, especially in institutionally thick post-mining areas, could become a tool for designing visions for the future, matching the expectations and capabilities of mining communities.

Open innovation in nascent ventures: Does openness influence the speed of reaching critical milestones?

Research on open innovation (OI) has demonstrated the benefits of openness for firm innovation processes, but studies have mostly offered cross-sectional insights on incumbent firms. This study offers a more dynamic perspective on the relevance of OI for nascent ventures. Combining entrepreneurship and OI theories, we argue that it is key for resource-scarce nascent ventures to achieve critical venture-creation milestones. While OI can help these ventures to leverage salient external partnerships, we argue that it affects their speed of reaching these milestones. We test our hypotheses on a longitudinal sample focusing on external collaboration practices of nascent ventures in the renewable energy or information and communications technology industries. Our results show that, while engaging in R&D collaborations slows down nascent ventures’ product development and sustainable profit generation activities, joining industry associations does not have a slow-down effect. Our results complement the OI literature by warning about the downsides of openness for nascent ventures, particularly during the venture creation phase, where speed is a high priority.

Scaling organizational agility: key insights from an incumbent firm's agile transformation

PurposeThis paper aims to examine the key challenges experienced and lessons learned when organizations undergo large-scale agile transformations and seeks to answer the question of how incumbent firms achieve agility at scale.Design/methodology/approachBuilding on a case study of a multinational corporation seeking to scale up agility, the authors combined 36 semistructured interviews with secondary data from the organization to analyze its transformation since the early planning period.FindingsThe results show how incumbent firms develop and successfully integrate agility-enhancing capabilities to sense, seize and transform in times of digital transformation and rapid change. The findings highlight how agility can be established initially at the divisional level, namely with a key accelerator in the form of a center of competence, and later prepared to be scaled up across the organization. Moreover, the authors abstract and organize the findings according to the dynamic capabilities framework and offer propositions of how companies can achieve organizational agility by scaling up agility from a divisional to an organizational level.Practical implicationsAlong with in-depth insights into agile transformations, this article provides practitioners with guidance for developing agility-enhancing capabilities within incumbent organizations and creating, scaling and managing agility across them.Originality/valueExamining the case of a multinational corporation's exceptional, pioneering effort to scale agility, this article addresses the strategic importance of agility and explains how organizational agility can serve incumbent firms in industries characterized by uncertainty and intense competition.

How to mitigate the inhibitory effect of organizational inertia on corporate digital entrepreneurship?

As a novel way for incumbent firms to discover and utilize entrepreneurial opportunities in the digital era, corporate digital entrepreneurship (CDE) is significant for realizing digital transformation through dealing with organizational sclerosis and bureaucratization. Previous studies have identified the variables having positive effects on CDE and put forward practical solutions to promoting CDE. However, the majority of them have ignored the variables having negative effects on CDE and how to mitigate the inhibitory effects. In order to fill the research gap, this study investigates the causal relationship between organizational inertia (OI) and CDE and examines the moderating roles of internal factors such as digital capability (DC) and entrepreneurial culture (EC) as well as external factors such as institutional support (IS) and strategic alliance (SA). Based on multiple linear regression (symmetric) and fuzzy-set qualitative comparative analysis (asymmetric) using survey data from 349 Chinese firms, the results demonstrate that OI has a significant negative effect on CDE. In addition, DC, EC, and SA play negative moderating roles in the relationship between OI and CDE, which means that they could reduce the inhibitory effect derived from OI when incumbent firms implement CDE. Moreover, dividing OI into three dimensions discovers that the moderating roles of DC, EC, and SA present different features. This study enriches the literature on corporate entrepreneurship and provides valuable practical implications for incumbent firms to achieve successful CDE by revealing how to overcome the inertia deeply embedded in organizations.

Leveraging big data for strategic marketing: A dynamic capabilities model for incumbent firms

Big data can improve the profitability and competitiveness of organisations by extending market knowledge and strategic marketing insight. However, there is a disconnect between the opportunities presented and the readiness of incumbent firms to engage with big data, with consequences for their ability to benefit from it. With many organisations overwhelmed by how to manage and use big data, the paper identifies the dynamic capabilities required to exploit big data for strategic marketing and to improve market responsiveness. Data gathered from in-depth, semi-structured interviews with senior managers from four case study organisations, reveals the five interconnected dynamic capabilities required to leverage value from big data. These capabilities are shown to be part of a sequential ‘sensing-reconfiguring-seizing’ process, in which the reconfiguring capabilities play a vital role. The findings contribute to dynamic capabilities theory by identifying and mapping the configuration of big data capabilities required to support strategic marketing initiatives. A new Big Data Capabilities Model is developed, which can be used by organisations to guide how they can leverage value from big data.

Intellectual property crises induced by incumbent firms and latecomer firms’ catch-up performance: evidence from different sectoral environments

ABSTRACTWhy and how do incumbent firms (IFs) induce crises for latecomer firms? How do latecomer firms (LCFs) manage the crises, and how does crisis management affect LCFs’ catch-up? To answer these questions, we look at crises induced by IFs and LCFs’ crisis management by drawing on competitive dynamics and crisis management theories. Based on two case studies in the telecommunications sector, we find that IFs induce crises using intellectual property (IP) lawsuits (called IP crises) for hindering LCFs’ catch-up. Two LCFs achieved different catch-up performance based on the effectiveness of subsequent IP crisis management. In particular, we also find that the sectoral environments, in terms of technological and demand regimes, can act as a moderator in the relationship between the IP crisis management and the catch-up performance. We propose a more fine-grained view in catch-up studies by suggesting that the constructs ‘IFs-induced IP crises’ and ‘LCFs’ IP crisis management”.

Digital new market creation by incumbent firms: A political lens on the effect of formalization on agility

Digital new market creation has several advantages for incumbent firms (hereafter referred to as ‘incumbents’) that they seek to exploit by using formalization and implementing agility in their new product development (NPD). We introduce the construct of NPD decision agility encompassing the dimensions of sensemaking, speed, and iteration. However, research reveals heterogeneous insights into formalization’s suitability for digital new market creation and NPD decision agility. In response to this research gap, we test our hypotheses by applying a behavioral lens to a sample of 129 incumbents. We reconcile these heterogeneous insights on innovation by showing that formalization increases digital new market creation, but has more fine-grained effects on NPD decision agility. Although improving sensemaking and reducing iteration, formalization has no effect on speed. Furthermore, political behavior increases formalization’s negative effect on iteration. We contribute to research digitalization and agility at the intersection of information systems and innovation management by reconciling these heterogeneous insights.

Dynamic and Ordinary Capabilities in Industry Transformation: The Case of the Electric Vehicle Industry

In 2018, in the Dialogue, Debate, and Discussion section of MOR 14.3, an interesting series of articles was published in the ‘Forum on Tesla and the Global Automotive Industry’, where researchers discussed the future dynamics of the global automotive sector. In their work, Perkins and Murmann (2018) contended that, based on Tesla's success, a well-funded company could develop a new electric vehicle (EV) from scratch and move it into production within three to five years if it would invest one to two billion USD in design, development, and manufacturing. Expressing a contrasting view, MacDuffie (2018) questioned this possibility, arguing that EV product architecture is unlikely to become substantially more modular and any new entrant would therefore have to develop the ordinary capabilities that current automotive original equipment manufacturers possess, and there is no guarantee that a firm can develop such capabilities. Teece (2018) joined the debate by proposing a capability-based framework within which to analyze four paradigm shifts that have marked progress in the global automotive industry: EVs, autonomous vehicles, connected cars, and personal mobility services. He argues that these paradigm shifts have created opportunities for new entrants while posing challenges to incumbent firms. To navigate through the uncertainty associated with these paradigm shifts, incumbent firms need to enhance and refine their dynamic capabilities and leverage their integration skills. Jiang and Lu (2018) based their contribution to this debate on the development of the Chinese EV market. In MOR 15.1, published in 2019, Teece (2019) further elaborated his framework to facilitate analysis of the prospects for Chinese firms seeking a stronger foothold in the global automobile market. All these articles have been well received by MOR readers and were ranked among the top 20 articles in full-text view times between June 2021 and June 2022.

Strategies for the declining printing industry: Diversification, consolidation, and internationalisation

Purpose: The study explores how forces of disruption and innovation affect the printing industry in an emerging market context and how incumbent firms respond to the challenges associated with these forces.Design; methodology approach: The research is an exploratory study based on qualitative analysis of senior managers within the South African large-scale printing industry that seeks to gain their perspectives on viable options to curb declining growth.Findings/results: The study results are organised around the industry’s challenges, the organizational capabilities required to address these challenges and the opportunities presented by the market disruption. Respondents argue that opportunities exist within the sector but that this requires fresh thinking and a more entrepreneurial approach. Strategies highlighted include consolidation, diversification and internationalisation.Originality value: The study applies theories associated with disruptive innovation and creative destruction to an industry facing long-term structural decline. Respondents maintain that there are options for growth even in the face of such disruption and address the role of management and entrepreneurial activities in this regard.Practical implications: The study results suggest that for smaller, more agile printers there are opportunities to take advantage of disruptive innovation, especially where they have less legacy baggage and fewer sunk costs to recuperate. For the larger printing firms there may be tangential opportunities to go ‘downmarket’ into less developed countries that are often at earlier stages of market disruption. Further innovation is required to stave off the decline prevalent in the traditional printing industry and embrace a growth mentality.Contribution: The article demonstrates the application of disruptive innovation in an emerging market context and the role of strategic management in addressing such disruption through consolidation, diversification, efficiency drives, and internationalisation.

Perspectives on Rent Generation and Rent Appropriation in Fisheries

The article debates the origin of rent in natural-resource based industries (NRBIs) such as fisheries, and how the rent generated can be appro­priated. The Norwegian fish harvest­ing industry is used to illustrate the arguments. It is argued that the industry-specific institu­tional framework of the fish harvesting industry positively affects the compe­titive forces of the industry, and thereby its economic performance. Fishery management institu­tions create high barriers to entry for outside firms, and they dampen internal rivalry between incumbent firms. As a result, the opportunity to earn what this paper labels institutional rent arises. The article further argues that nature itself and how it is managed through, for example, harvesting rules, enables an NRBI to earn resource rent if the players get free or cheap access to the input factor, in this case fish. Finally, the article argues that it is stakeholders other than the harvesting companies that control both the institutional and resource rents, that is, the owners of the natural resource and the authorities who manage it as well as the industry-specific institu­tional framework. Nevertheless, neither the owners nor the authorities benefit from the industry-specific rent generated. The rent is appropriated by the capital owners and the crew onboard the boats in the form of above-normal profits and above-normal wages. Whether or not such a skewed rent distribution is considered fair and sustainable is a political issue.

Competition, reallocation, and growth: Theory and evidence from Africa

This paper investigates whether economic policy facilitates output growth by exploring the role of competition. We present a growth model with heterogeneous firms in which exposure to competition induces reallocation of market shares from less productive to more productive firms and forces the least productive firms to exit the industry. Confronted by a competition threat, incumbent firms choose either upgrading their products or bribing a policymaker in order to prevent entry by potential competitors. Product upgrading is less profitable than bribing for low-productivity firms but more profitable for high-productivity firms. Reallocation of market shares to more productive firms leads to higher aggregate industry productivity. Testing this prediction of the model using a generalized difference-in-differences approach and production data that cover 23 manufacturing industries and 34 African countries, we found that industries that upgrade more grow disproportionately faster in countries where competition policy is more intensive.

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 Process for Managing Digital Transformation: An Organizational Inertia Perspective

Digital transformation is often described as organizational change that is simultaneously triggered and enabled by digital technologies. As with other types of organizational transformation, overcoming organizational inertia lies at the heart of digital transformation. However, our understanding of the specific processes employed by incumbent firms to overcome organizational inertia in digital transformation is currently limited. In this paper, we draw on the case study of AsiaBank, a large traditional bank in Asia, to explore the microfoundations of how incumbent firms tackle different types of inertia as they embark on a digital transformation journey. We identify four key digital transformation processes—i.e., embracing the consumerization of digital technologies, diffusing and appropriating digital business practices, enabling distributed organizing, and revamping IT architecture—that combine to reduce negative psychology, sociocognitive, sociotechnical, political, and economic inertia in digital transformation. Our findings expand the extant view on the role of agency in overcoming organizational inertia and contribute to the literature at the intersection of digital innovation and transformation.

The Impact of New Free Trade Agreements on Incumbent Firms and Workers

The Impact of New Free Trade Agreements on Incumbent Firms and Workers

Product Differentiation in IT Industries: The Interplay between M&As and In-House Innovation and Exploitative Innovation Orientation

Firms in IT industries are under constant competitive pressure from incumbent firms and startups to offer innovative products and services. This study explores the effect of mergers and acquisitions (M&As) on firms’ product differentiation in IT industries. The unique characteristics of IT industries, namely hypercompetition, distributed innovation, modularity of products, and the tacit nature of knowledge, make M&As an attractive mechanism to enable IT firms to stay competitive. Drawing on product differentiation theory, we hypothesize a positive effect of M&As on product differentiation and suggest that this relationship is more potent in firms with higher in-house innovation, an exploitative innovation orientation, and under high levels of industry turbulence. We test our hypotheses using M&A transactions from 1996 to 2016 and a unique 10-K textual analysis-based measure of product differentiation. Using the difference-in-differences identification strategy, the following findings are supported: (1) M&As lead to higher product differentiation, (2) in-house innovation capability and exploitation-oriented innovation strategy positively moderate the positive effect of M&As. These results, which are robust to endogeneities and other robustness tests, contribute to theory and managerial practice by shedding light on the role of M&As as an essential mechanism for product innovation and the complementary role of in-house innovation capability and strategy for firms that intend to take advantage of M&As for creating a competitive edge through differentiating their products and services from competitors. These findings have important managerial value, providing an alternative narrative to the current view on M&As in IT industries as a means of absorbing and dismantling the competition.

How Incumbent Firms Cope with Economic Policy Uncertainty: The Case of Corporate Venture Capital Investments in Innovative Startups as a Real Option

How Incumbent Firms Cope with Economic Policy Uncertainty: The Case of Corporate Venture Capital Investments in Innovative Startups as a Real Option