This paper investigates the relationship between startup entrants and innovation behavior of incumbents. In specific, the insurance industry is empirically analyzed, since many technology driven insurance startups have recently entered this market. After an extensive literature review on the competition-innovation relationship, hypotheses are derived. In detail, it is expected that startup entry has a positive effect on the innovativeness of incumbents, and that this effect will eventually diminish with rising competition, therewith creating an inverted-U relationship.
In addition, it is assumed that the positive effect of startup entry will be more impactful for younger incumbents. To evaluate these hypotheses, an innovation score is constructed based on companies’ annual reports. It measures innovation within six broad areas, ranging from organizational changes to new product launches. The population of this study incorporates 10 major insurance companies from Europe and the United States over a period from 2011 to 2015 and 244 InsurTech startups that entered the market in this observation period.
In line with prior research, the evidence suggests that startup entrance has a curvilinear effect on incumbents’ innovativeness. Therewith, this study finds that the inverted-U relationship between competition and innovation holds, also when considering startup entry. Lastly, the findings suggest that the positive effect of startup entry is stronger for younger incumbents. In conclusion, an extensive understanding of the given relationship between startup entry and incumbents innovativeness is crucial for practitioners in order to further shift their mindset to a more proactive innovation behavior.
The field of innovation is important for both practitioners and scholars. The Boston Consulting Group´s annual global survey of the state of innovation supports the importance of innovation, as 79 percent of the respondents’ ranked innovation as a top-three priority for their company. Especially in industries with (rising) competition, innovation is considered a crucial activity in order to distinguish oneself from competition. Still, evidence found in literature is contradictory as not all economic theories follow this positive competition-innovation relationship. For example, Schumpeter (1942) as well as Dixit and Stiglitz (1977) and Salop (1977) with their theories of industrial organization suggest that with rising competition, innovation should decline.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Related Literature and Hypothesis Development
- Impact of Competition on Innovation
- Moderating Effect of Age
- Empirical Setting
- Competition and Innovation in the Insurance Industry
- New Market Entrants: InsurTech Startups
- Data Sample, Method and Empirical Approach
- Data Collection and Sample
- Dependent Variable: Incumbents' Innovativeness
- Measuring Innovation in Financial Services
- Coding Guidelines for Innovation Score
- Independent Variable: Startup Entry
- Control Variables
- Research Design
- Descriptive Statistics and Regression Model Results
- Descriptive Statistics
- Presentation of Results
- Effect of Competition on Innovation
- Effect of Age on Competition-Innovation Relationship
- Additional Testing
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This research investigates the relationship between startup entrants and incumbent firms' innovation behavior. Specifically, it examines the insurance industry where numerous technology-driven insurance startups have recently emerged. The study aims to determine the impact of startup entry on the innovativeness of incumbent firms, specifically exploring whether this impact is influenced by factors such as the level of competition and the age of incumbent firms.
- Impact of startup entry on the innovativeness of incumbents
- Curvilinear relationship between competition and innovation
- Moderating effect of age on the competition-innovation relationship
- Innovation in the insurance industry
- InsurTech startups and their role in the market
Zusammenfassung der Kapitel (Chapter Summaries)
The first chapter introduces the research topic, providing an overview of the relationship between startup entry and incumbent firms' innovation behavior, particularly in the insurance industry. Chapter two reviews relevant literature and develops hypotheses based on the impact of competition on innovation and the moderating effect of age. Chapter three explores the empirical setting, focusing on the dynamics of competition and innovation within the insurance industry and the emergence of InsurTech startups. Chapter four delves into data collection, sample selection, and the methodological approach used to analyze the data, outlining the measurement of innovation, the definition of startup entry, and the inclusion of control variables. Finally, chapter five presents the descriptive statistics and regression model results, analyzing the effect of competition on innovation, the moderating effect of age on the competition-innovation relationship, and additional testing. This chapter also provides insight into the impact of startup entry on the innovation behavior of incumbent firms in the insurance industry.
Schlüsselwörter (Keywords)
The research focuses on the relationship between competition, innovation, startups, and InsurTech. It investigates the impact of startup entry on the innovativeness of incumbent firms, examining the effect of competition and age on this relationship. The study aims to contribute to the understanding of innovation dynamics in the insurance industry and the role of InsurTech startups in shaping the competitive landscape. The research employs quantitative analysis techniques to measure and analyze the relationship between these key variables. The primary research focuses include the competition-innovation relationship, the impact of startup entry on incumbents, and the role of age in moderating this relationship. This research also explores the concept of InsurTech and its implications for the insurance industry.
- Citation du texte
- Kilian Gundlach (Auteur), 2017, The Impact of Startup Entry on the Innovativeness of Incumbents, Munich, GRIN Verlag, https://www.grin.com/document/468702
