The Notion of Arch Incumbency for De Novo Ventures: Experience from European Airlines

Publication Type

Conference Paper

Publication Date

8-2008

Abstract

By definition, de novo industry 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. While a large market overlap with a single established incumbent (the ‘arch-incumbent’ to a new entrant) is not conducive to survival in general, there is a special exception for ventures with sufficient entry resources and scale to rapidly increase efficiency and to signal deep financial resources to withstand retaliation. The empirical experience of de novo entrants to the intra-European passenger air travel industry supports this notion. In particular, this intricate effect between entry capacity and market overlap with the arch-incumbent on venture survival overshadows the impact of a low-cost market positioning and other possible competitive advantages over incumbents that pre-dated the industry liberalization.

Keywords

new venture strategy, entry deterrent, arch-incumbent

Discipline

Strategic Management Policy | Transportation

Research Areas

Strategy and Organisation

Publication

Academy of Management Annual Meeting, Anaheim, 8-13 August 2008

First Page

354

City or Country

Anaheim, CA, USA

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