Market Incumbents Research Articles

Frenemies: Exploring interfirm credit between an incumbent and a capital‐constrained startup

AbstractInterfirm credit, a financial relationship between two firms, has garnered recent attention due to its potential to aid innovative startups' funding challenges and shape competitive dynamics. We examine a supply chain consisting of an incumbent and a capital‐constrained startup firm. The startup's entry may cannibalize the incumbent's market share. Therefore, we model their interaction as a Stackelberg game, with the incumbent leading. The startup faces funding challenges and can opt for bank financing, interfirm credit, or mixed financing. Under interfirm credit, the incumbent and startup firms engage in financial collaboration, which requires the incumbent to decide on the trade‐off between profit sharing and market erosion. We consider two cases of financial sufficiency: (i) sufficient funds for production that satisfy the loan amount required for the startup firm's production and (ii) limited funds for production that are insufficient for the startup firm's needs and limit the startup firm's production. We find that bank financing is not always beneficial to firms. Specifically, under limited funds for production, when a startup has moderate initial available funds, he will opt for profit sharing with the incumbent and prefer interfirm credit, allowing both firms to achieve a win‐win outcome. However, suppose the incumbent strategically determines the interest rate. In that case, mixed financing becomes advantageous for both firms when the startup firm's initial available funds are high and the loan amount is ample. Finally, when the startup predetermines the loan amount, he will pursue economic funding if his product is competitive.

A narrative review of the Medtronic Hugo RAS and technical comparison with the Intuitive da Vinci robotic surgical system.

Medtronic launched the Hugo Robotic-Assisted Surgery (RAS) System in 2021, offering a modular alternative to the incumbent market leader in surgical robotics, the Intuitive da Vinci (dV) surgical system. A detailed technical review of the Hugo RAS was conducted to explore the strengths and weaknesses of this new robotic surgical system. Each component of the system-vision tower, arm cart, and surgeon console-was compared against the existing dV systems. The docking process, instrumentation, and external arm movement trajectories were analyzed. The modular Hugo RAS provides the possibility of operating using up to four arm carts. It has certain design features that are unique to itself, and others that have been implemented to address the shortcomings of the dV Si. While Medtronic's first-generation robot offers distinct advantages over the older Intuitive systems, the true test of its mettle will be its performance compared to the latest dV Xi.

Enacting disruption: how entrepreneurial ventures innovate value propositions to increase the attractiveness of their technologies

PurposeEntrepreneurial ventures aspiring to disrupt existing market incumbents often use business-model innovation to increase the attractiveness of their offerings. A value proposition is the central element of a business model, and is critical for this purpose. However, how entrepreneurial ventures modify their value propositions to increase the attractiveness of their comparatively inferior offerings is not well understood. The purpose of this paper is to analyze the value proposition innovation (VPI) of aspiring disruptors.Design/methodology/approachThe authors used a flexible pattern matching approach to ground the inductive findings in extant theory. The authors conducted 21 semi-structured interviews with managers from startups in the global electric vehicle industry.FindingsThe authors developed a framework, showing two factors, determinants and tactics, that play a key role in VPI connected by a continuous feedback loop. Directed by the determinants of cognitive antecedents, development drivers and realization capabilities, aspiring disruptors determine the scope, focus and priorities of various configuration and support tactics to enable and secure the success of their value proposition.Originality/valueThe authors contribute to theory by showing how cognitive antecedents, development drivers and capabilities determine VPI tactics to disrupt existing market incumbents, furthering the understanding of configuration tactics. The results have important implications for disruptive innovation theory, and entrepreneurship research and practice, as they offer an explanatory framework to analyze strategies of aspiring disruptors who increase the attractiveness of sustainable technologies, thereby accelerating their diffusion.

Strategic Pricing in Volatile Markets

Dynamic Strategic Pricing Firms use pricing strategically to influence entry and exit of competitors. A key form of strategic pricing is limit pricing, whereby a market incumbent sets low prices to deter a potential entrant. In practice, strategic pricing takes place in dynamic, stochastic environments: An incumbent that uses prices to signal unprofitable entry, in reality, has to do so repeatedly and under changing market conditions. In “Strategic Pricing in Volatile Markets,” Gryglewicz and Kolb study dynamic entry deterrence through limit pricing in markets subject to persistent demand shocks. The primary insight is that when the market is subject to persistent shocks, the incentive to signal disappears in some market conditions. In equilibrium, pricing and entry decisions exhibit path dependence, depending not only on the market’s current size, but also its historical minimum. When prices are used as signals to deter entry, prices can increase for strategic reasons over an interval of time during which demand falls.

Archetypes of product launch by insiders, outsiders, and visionaries

Abstract What archetypes emerge from prominent episodes of product launches? This essay examines a set of episodes in information technology history that led to significant changes in industry leadership. It highlights that, in all of these instances, there is an example of a “visionary” archetype—an individual or a set of leaders who promulgate a unique view for addressing a business opportunity, which they use as they launch a new product. These archetypes are couched as insiders or outsiders depending on the firm’s status before the new product launch, and incumbent market leaders are insiders. The narrative arc is similar, as the visionary first encounters resistance and crises, must overcome challenges, and usually has to overcome skeptics via a product launch that gains market acceptance. However, the narratives of insiders and outsiders differ systematically based on their market position, leading to asymmetric approaches to market competition. This review stresses the importance of visionaries in industrial change brought about by product entry. It raises questions about integrating such narratives into the analysis of significant changes in market structure.

The study of value network reconstruction and business model innovation driven by entrepreneurial orientation

The impacts of business models on the successes of companies are convincing. Business Model Canvas (BMC) provides the basic framework that describes business logic. Yet it lacks an academic understanding of the internal structures of business models. This paper uses the grounded theory method, qualitative analysis as well as entrepreneurial orientation theory to conduct an individual case study on SHEIN’s business model. The research shows that SHEIN accurately addresses the customer pain points and customer benefits of fashionable women, and gains the trust of end-users by integrating its supply chain based in China. Entrepreneurial orientation drives SHEIN to set up its value network. From the perspective of value discovery, SHEIN accurately targets segmented customer groups. The enterprise reaches end users through social networks and establishes customer relationship with high viscosity. From the perspective of value creation, SHEIN reconstructs the value network, delivering great shopping experiences with low costs. From the perspective of value acquisition, SHEIN has scalability in cost structure and expandability in revenue source. The research found that SHEIN has occupied the low-end market of fast fashion through low-end entry, and is moving to the mainstream market of fast fashion through customer group upgrading, design upgrading and supply chain upgrading, bringing competitive challenge to the fast fashion market incumbents. The innovation of this research lies in: First, the Business Model Iterative Canvas (BMIC) could interpret the business models and their logic in-depth. Second, the research reveals how the competitive advantage is created through value network reconstruction.

Sharing Homes and Beds: Baptist-Bootlegger Coalitions and the Politics of Authenticity in the Regulation of Los Angeles's Short-Term Rental Markets

Platform economy politics reflect a trend of corporations working with civic actors to achieve shared political goals, reconfiguring once adversarial relationships (e.g., management vs. labor, homeowners vs. tenants). Yet theories on urban politics and policymaking often do not account for such “Baptist-Bootlegger” coalitions (Smith and Yandle 2014; Yandle 1983). This article analyzes how the efforts of two competing Baptist-Bootlegger coalitions shaped the 2018 short-term rental (i.e., Airbnb, HomeAway) ordinance in Los Angeles, CA, USA. I argue that a subtly coordinated partnership of housing groups, neighborhood activists, and hotel market incumbents leveraged their individual authenticity and resources to successfully articulate a shared vision with policymakers. Conversely, an opposing coalition of short-term rental platforms and hosts more explicitly combined their efforts under an organizational framework that conflated economic and moral claims; this hybrid organizational identity was perceived as less authentic by policymaking audiences and precluded potentially more strategic forms of organizing.

Pineapple: The growth challenges faced by a South African Insurtech disruptor

Subject area of the teaching case: This case study is intended to supplement postgraduate business learning with the facilitation of an academic practitioner. The case draws on a culmination of subjects, and the participants are encouraged to juxtapose the case information with their professional experiences; however, the primary focus of the case material will be centred on strategy, innovation, and entrepreneurship. Student level: The primary audience for the teaching case is management education programmes including: Master of Business Administration (MBA), Postgraduate Diploma (PGDip), specialist Masters in Management, and certain Executive Education programmes. Brief overview of the teaching case: This case is about protagonist Ndabenhle Junior Ngulube, the cofounder of an innovative technology-enabled insurance intermediary company called Pineapple. The company has identified an opportunity to resolve the inherent conflict of interest within the insurance industry, as well as the grudge association of non-life insurance purchases. While the competitive landscape of the sector is traditionally dominated by a few large incumbent market participants, Pineapple's digital distribution strategy is more effective at converting ‘clicks-to-clients’, at a fraction of the typical customer acquisition cost. The peer-to-peer business model also allows for superior risk-selection, greater affinity, and lower incidents of fraudulent claims. Ndabenhle and the team develop the company's customer acquisition strategy by drawing on technological trends, reputation drivers, and a concentrated social media approach that focusses on trust, access, product, and value. But, as 2020 begins, Ndabenhle faces choices about the means and methods of scaling the business operation. The case documents the first few years of Pineapple's operations, with a strong focus on business model innovation, distribution, scalability, and technological integration. Expected learning outcomes: To analyse the role disruptive technologies play within sectoral business model innovation To evaluate the industry-specific competitive business landscape and complexities of building and maintaining a sustainable competitive advantage within a niche market segment To assess the strategic growth opportunities for an emerging market Insurtech disruptor To critically appraise the entrepreneurial complexities faced by decision-makers when looking to challenge incumbent market leaders

Dual-branded hotels: Resource-based entry strategies in agglomerated markets

Despite the growing importance of dual-branded hotels, research on this trend is lacking. This study investigates the effect of resource-based entry strategies for dual-branded hotels vis-à-vis incumbent market competition on performance. Using a hierarchical linear model, we found that best performance is achieved by dual-branded hotels that pursue a diversification strategy by entering the market with one brand above and one brand below the mode class of the market. Dual-branded hotels can thus achieve competitive advantage by exploiting superior financial resources and tourism destinations are able to gain monetary advantage from resources employed by dual-branded hotels. This study extends current research on dual-branded hotels by investigating entry strategies and contributes to the resource-based view literature by investigating dual-brands’ resource exploitation and resource spillovers in agglomerated markets.

Impact and implications for practice

Impact and implications for practice

The Market Size Paradox of Niche Product Innovations

When do niche product innovations—new products that initially appeal to narrow market segments—achieve widespread commercial success? To answer this question, I develop an agent-based model of innovation diffusion in a competitive product market. The model varies two important parameters of the market: incumbent market power (the degree to which sales are concentrated in a small number of incumbents), and customer mimesis (the degree to which customers’ preferences depend on other customers’ preferences). The model indicates that niche product innovations are more likely to be big hits than products with broad appeal when incumbent market power and customer mimesis are both high, but less likely when both are low. I empirically validate the model using a consumer panel dataset of over 11,000 new consumer products purchased by about 400,000 consumers from 2006-2019. The results imply a “market size paradox”: under certain conditions, innovations that initially appeal to relatively narrow market niches (as opposed to broad appeal) actually tend to achieve greater widespread commercial success. Thus prior to launch, niche innovations, which have more potential for commercial success, may systematically appear to have small potential market sizes according to traditional market-sizing techniques.

Optimal Model Combination of Cross-border E-commerce Platform Operation Based on Fractional Differential Equations

Abstract This article takes cross-border e-commerce platform operation receipts as the research object. It uses fractional differential equations to construct a market demand function jointly affected by channel radiation range, price, and price differences. The study results show that the heterodyne effect of cross-border e-commerce guarantees the competitive position of the market incumbents of the cross-border e-commerce platform. The article also illustrates the effectiveness and practicality of the cross-border e-commerce supply and demand fractional differential matching decision-making method.

Business Model Innovations for Renewable Energy Prosumer Development in Germany

In Germany, the number of renewable energy prosumers has increased rapidly since 2000. However, the development of prosumers has faced and will continue to face various economic, social, and technological challenges, which have triggered the emergence of a number of innovative business models (BM). This paper enriches the empirical basis for prosumer-oriented BMs by investigating two BM innovations in Germany (P2P electricity trading and aggregation of small-size prosumers) drawing on business model and socio-technical transition theories. A mix of qualitative data collection methods, including document analysis and semi-structured expert interviews, was applied. We found that while both BMs can potentially address the challenges associated with renewable energy prosumer development in Germany, small-scale prosumers’ participation in both BMs has been limited so far. We identified various internal and external drivers and barriers for scaling up these BMs for prosumer development in Germany. Despite these barriers, both aggregation and centralized P2P targeting prosumers may potentially be also taken up by incumbent market actors such as utilities. Decentralized P2P on the other hand still faces significant internal and external barriers for upscaling. Based on the analysis, the paper provides policy recommendations with respect to the identified drivers and barriers. From a theoretical perspective, our findings provide further evidence to challenge the dichotomous understanding of niche actors and incumbents, the latter of which are often theorized to be resistant to radical innovations.

The strategic options of fintech platforms: An overview and research agenda

AbstractThe failure rate of fintech platforms is disproportionately high, which may be because (1) there is a lack of published knowledge on the appropriate strategies to adopt and/or (2) the traditional prescriptions for strategy may be less relevant in the context of fintech platforms. To ascertain either or both of these possibilities, we conducted a comprehensive review of the fintech literature and found that not only is there a relative paucity of research on Fintech Strategies, but there are also important limitations associated with the existing works. To address these limitations, we first identified the unique characteristics of fintech platforms and the strategic implications of those characteristics. Next, we adapted a framework made up of six conventional core logics of strategy and juxtaposed the prescriptions of those logics with the unique characteristics identified. Finally, we constructed a research agenda consisting of a number of open questions based on our analysis to provide directions for future research in this area. The agenda suggests that fintech platform strategies have to account for competing institutional logics stemming from the platforms' dual identity and the tensions between conforming for legitimacy and differentiating for competitive advantage. There is also a need to account for an exceptionally dynamic and unpredictable regulatory landscape, as well as the responses and competitive actions of influential market incumbents.

Industrial R&D and national innovation policy: an institutional reappraisal of the US national innovation system

AbstractStudies highlight how the once envied US national innovation system (NIS) is now showing signs of slowing down. In this article, we unpack this issue from an industrial R&D perspective. First, we highlight that open innovation (OI) practices (i.e., external sources and markets for technologies) have increased the rate of inventive activity in the current wave of industrial R&D, but financialization skews the firms’ focus on short-term profits and shareholder value maximization. When OI intersects with an institutional context that propagates such shareholder-centric governance of R&D, three social costs are incurred by the US NIS: (i) irrational relationship between risks and rewards, (ii) weak antitrust and intellectual property (IP) rights that result in a lack of business dynamism, and (iii) austerity and weak demand-side policies. We contend that these social costs tilt the R&D trajectory toward incremental R&D at the expense of the blue-sky science needed to retain US leadership in technological innovation. Second, we document three social benefits that public-sector R&D agencies generate for the US NIS: (i) undertaking a technology brokerage role, (ii) creating radical R&D markets, and (iii) embracing stakeholder governance. We emphasize how a hidden “entrepreneurial network state” subtly creates and shapes breakthrough R&D and markets for private sector firms but cannot recoup the rewards for society due to political rhetoric that favors incumbent market power. Third, we recommend both incremental and radical policies to drive institutional reforms that promote a stakeholder-centric form of R&D governance so that the future wave of industrial R&D creates value for society. Overall, we draw attention to the role politics plays in industrial R&D and the US NIS and how small adjustments in institutional dimensions and governance modes can impact the US R&D trajectory and competitiveness.

Good Corp, Bad Corp, and the Rise of B Corps: How Market Incumbents’ Diverse Responses Reinvigorate Challengers

Social movements challenge incumbents and drive institutional change by introducing market alternatives—new products and organizational forms that embody an alternative institutional logic. Research has shown that in response to market alternatives, incumbents resist through heterogeneous behaviors: incumbents maintain their commitment to the dominant logic, effectively marginalizing challengers, while also ostensibly endorsing the alternative logic and often successfully coopting challengers. Although incumbents’ strategic responses to pioneering market alternatives are well documented, we do not know how their heterogeneous behaviors affect new waves of challenger mobilization and how these mobilizations may differently address the hazards of cooptation and marginalization. We investigate the rise of the B Corp (Certified B Corporation) movement against the backdrop of both ongoing shareholder supremacy and rising corporate social responsibility (CSR) among incumbent corporations. Our multi-method, multi-stage investigation reveals that heterogeneous incumbent behaviors encourage new waves of challenger mobilization by seeding divergent mobilizing frames. This variety can lead to a paradoxical form of mobilization in which challengers dynamically balance the tension between their movements’ focus on expansion and purity, rather than prioritizing one over the other. The B Corp movement demonstrates how achieving this balance may help challengers avoid cooptation or marginalization, sustain their challenge against incumbents, and achieve more-transformative change. For incumbents, our findings show that both resistance to and the ostensible embrace of alternative logics may stave off immediate challenges but can also invigorate future challenges that pose substantive threats to the dominant logic.

Community energy projects in the context of generation and transmission expansion planning

We extend multi-level generation and transmission expansion planning optimisation methods to analyse the impact of the community energy sector emergence on power system expansion. Methodologically, we do this by incorporating biform games and linear production games into the classic power transmission and generation expansion planning problem. The model is formulated as a Mathematical Program with Equilibrium Constraints (MPEC). Using a stylised example based on Chilean power market data, we show that community energy projects can be an optimal choice for residential customers. Furthermore, we find that community energy projects can widely impact the power system as a whole. Importantly, unlike some large generation projects, they can have positive effects on electricity customers who do not participate in them. Nevertheless, the implementation of net billing schemes, potential competitors for community energy projects, may be preferred when net billing injection prices are comparatively high, there are potentially high levels of confidence about the final payoffs, and there exist comparatively lower investment costs. Yet, we show that, depending on the specific case analysed with our model, it is likely that under the above circumstances nodal prices increase, social welfare decreases, and capacity limitations need to be addressed. The methodology developed in this work can be a valuable tool to examine and better understand the complexities of community energy projects and their interactions with market incumbents.

Innovation and Patenting within Containerized Liner Shipping

Increasingly, in many industries, companies commercialize their technology and innovations through patenting to gain an edge over competition. Within the maritime sector, while literature on innovation is expanding, issues related to the importance of intangible assets, such as patenting, for the participant firms of the industry remain unaddressed. Utilizing innovational frameworks and patent data withdrawn from European Patent Organization’s (EPO’s) database, the aim of this paper is to investigate the innovative level, in terms of patents granted, of incumbent market actors in liner shipping. Apart from patent counts, this exercise sheds light on the areas to which these patents apply, providing a classification while also investigating additional attributes which relate to patent citations, investors and applicants. Although results indicate a varying degree of utilization of the patenting system amongst liner carriers, they nonetheless affirm to some extent that knowledge creation is a valuable tool in the arsenal of some liner carriers, and that patenting is one of the various means utilized to enhance their market position and achieve a sustained competitive advantage. In addition, findings suggest that liner carriers’ innovative efforts have, based on the forward citations received, some significance, while they focus primarily the development of patented technologies which enhance the operational efficiency of their vessels. In this respect, the investigation undertaken sheds some light and provides a novel perspective on understanding the behaviour and innovative propensity of liner shipping companies.

Wind Turbine Blades Using Recycled Carbon Fibers: An Environmental Assessment.

Polymers reinforced with virgin carbon fibers (VCF) are being used to make spar caps of wind turbine (WT) blades and polymers with glass fibers (GF) to make skins of the blade components. Here, we assess the life cycle environmental performance of the hybrid blades with spar caps based on VCF and the shells and shear webs based on RCF (recycled CF) composites (RCF-hybrid). The production of the WT blades and associated reinforced polymers is assumed to occur in Sweden, with their uses and end-of-life management in the European region. The functional unit is equivalent to three blades in an offshore WT with the market incumbent blades solely based on the GF composite or the hybrid option. The RCF-hybrid blades offer 12-89% better environmental performance in nine out of 10 impact categories and 6-26% better in six out of 10 impact categories. The RCF-hybrid blades exhibit optimum environmental performance when the VCF manufacturing facilities are equipped with pollution abatement systems including regenerative thermal oxidizers to reduce ammonia and hydrogen cyanide emissions; spar caps are made using VCF epoxy composites through pultrusion and resin infusion molding, and the blade scrap is mechanically recycled at the end of life. The energy and carbon payback times for the RCF-hybrid blades were found to be 5-13% lower than those of the market incumbents.

Synthesizing the biochemical and semiconductor worlds: the future of nucleic acid nanotechnology.

Since its inception nearly 40 years ago [Kallenbach, et al., Nature, 1983, 305, 829; N. C. Seeman, J. Theoretical Biology, 1982, 99, 237], Nucleic Acid Nanotechnology (NAN) has matured and is beginning to find commercial applications. For the last 20 years, it has been suggested that NAN might be an effective replacement for parts of the semiconductor lithography or protein engineering workflows. However, in that time, these incumbent technologies have made significant advances, and our understanding of NAN's strengths and weaknesses has progressed, suggesting that the greatest opportunities in fact lie elsewhere. Given the commitment of resources necessary to bring new technologies to the market and the desire to use those resources as wisely as possible, we conduct a critical examination of where NAN may benefit from, and provide benefit to, adjacent technologies and compete least with market incumbents. While the accuracy of our conclusions may be limited by our ability to extrapolate from the current state of NAN to its future commercial success, we conclude that the next promising direction is to create a bridge between biology and semiconductor technology. We also hope to stimulate a robust conversation around this technology's capabilities with the goal of building consensus on those research and development efforts that would advance NAN to the greatest effect in real-world applications.