Tuesday October 1, 2020 – 12:15-13:45pm – Ecully campus – Room B1070

Incumbent inertia: When and how to respond to an innovative startup?

Dr. Benoit CHEVALIER-ROIGNANT, emlyon business school

Abstract: This paper models a situation in which a startup introduces an innovation and an incumbent decides on the appropriate response to the competitive threat. I characterize the incumbent’s optimal policy, specifying the (analytic) conditions under which an incumbent ignores the threat or decides to copy or acquire the innovative startup. Incumbent inertia may arise if the incumbent waits until the market is sufficiently ripe or when the incumbent is ambivalent about the appropriate response. This second rationale has not been identified as a cause for incumbent inertia in the literature.