The Competitive Dynamics of Entrepreneurial Market Entry

The Competitive Dynamics of Entrepreneurial Market Entry

The Johns Hopkins University series on Entrepreneurship

Edited by Gideon D. Markman and Phillip H. Phan

Research on general market entry usually focuses on large enterprises. Often, however, small entrants can alter the competitive dynamics of an industry. This volume brings together the most prominent thought leaders and the best research on the asymmetric entrant-incumbent dynamics. The ideas presented offer a more nuanced perspective on how, when, where and with what consequences small, single-product firms enter markets that are dominated by large, multiproduct and multimarket incumbents.

Chapter 8: Commentary on ‘Corporate Ventures into Industrial Markets’

Phillip H. Phan

Subjects: business and management, entrepreneurship, economics and finance, industrial economics

Extract

8. Commentary on “Corporate ventures into industrial markets” Phillip H. Phan Market entry decisions have been the mainstay of the marketing and strategy literatures for at least three decades. In economics, rational choice approaches have been articulated in prior game-theoretic models of entry decisions. However, those models have generally focused on the anticipation of an incumbent’s reaction to entry and the resulting (backwardinduced) entrant decision. More sophisticated models have examined the aggressiveness (scale and scope) of entry to suggest variations that entrants might use to attenuate incumbent reaction. Judo strategy, for example, suggest that entrants facing large incumbents use a “weak” entry strategy to mitigate the risk of retaliation or that entrants exploit blind spots in incumbent competitive positions such as market niches that incumbents cannot serve because of structural inefficiencies or strategic lock-in. For parsimony, these models generally ignore the market conditions at entry or assume incumbent reaction is based on the cost/benefit trade-off, which is given by its opportunity cost, itself a general function of the market environment. The paper in this chapter introduced the notion to the entrepreneurship literature that corporate entrepreneurs anticipate the industry conditions they are likely to face and then condition their entry strategies to exploit those conditions. Instead of simply being concerned about incumbent retaliation, the authors embedded the consideration for the market conditions (high or low growth) in the entry decision. They posit a “selffulfilling prophesy” (Biggadike 1979) model, in which entrepreneurs that perceive high-growth opportunities choose to aggressively enter by setting...

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