De novoventure strategy: arch incumbency at inaugural entry

Abstract

By definition,de novoindustry ventures do not share many market-contact points with incumbents—itself an important source of competitive ‘stability’ through mutual forbearance. As such, these ventures are often subject to aggressive retaliation at the outset, which could threaten their very survival. In this study, the notion of an arch incumbent is developed, hypothesizing that, in general, a large market overlap with an incumbent lowers the survival odds of ade novoentrant. However, a large market overlap with the arch incumbent combined with an aggressive inaugural market entry or a different market positioning reduces the probability of retaliation by the arch incumbent (and subsequently other incumbents as well), and hence increases the probability of survival for ade novoentrant. The empirical experience ofde novoventures in the intra-European passenger airline industry supports these hypotheses. Copyright © 2009 John Wiley & Sons, Ltd.