CHANGE OF INCUMBENT COMPETITION TRIGGERED BY NEW ENTRY: A CASE OF THE JAPANESE EYEWEAR RETAIL INDUSTRY

Abstract

 The purpose of this research is to clarify the mechanism that competition between established incumbents changes when new entry impacts environments. More specifically, this research analyzes how differences of incumbent responses to entry influence competition.

　Radical new entry impacts incumbents. Existing literatures on radical entry or radical innovation have treated incumbents as one population and focused on relations between incumbents and entrants, rather than between incumbents. However, the degrees of incumbent responses to entry should vary depending upon the specific characteristics of an incumbent firm. Moreover, not only competition between incumbents and entrants, but also competition between incumbents can change due to differences in responses to the entry among incumbents.

 Consequently, this research examines the differences in responses to the entry among incumbents and the resulting dynamics of competition between incumbents. The case study of the Japanese eyewear retail industry demonstrates the following two points. First, a response to the entry differs between established leader firm and follower firm. The leader firm that maintains a competitive advantage is difficult to respond to the entry effectively. In contrast, the follower firm that has no competitive advantage can respond to the entry more effectively than the leader.

 Second, because of differences in responses to the entry among incumbents, there is a possibility that the follower firm builds a competitive advantage over the leader firm. The follower firm which reconfigures their capabilities in response to the entry achieves a new competitive advantage. In contrast, the leader firm which doesn't reconfigure their capabilities following the entry is difficult to respond to strategic change of the follower firm. Thus, this research concludes that when the follower firm responds to the entry more effectively than the leader firm, the follower firm is more likely to build a competitive advantage over the leader firm.