Publications
Publications
- Forthcoming
- Strategy Science
A Spanner in the Works: Category-Spanning Entrants and Audience Valuation of Incumbents
By: Rory McDonald and Ryan T. Allen
Abstract
Previous work has examined how audiences evaluate category-spanning organizations, but little is known about how their entrance affects evaluations of other, proximate organizations. We posit that the emergence of category-spanning entrants signals the advent of an altered future state—and seeds doubt about incumbents’ prospects in a reordered industry-categorization scheme. We test this hypothesis by treating announcements of funding for startups as an information shock to investors evaluating incumbent financial-service providers between 2010 and 2017—a period marked by atypical category combinations at fintech startups. We find that announcements by startups that embodied unusual combinations of categories resulted in lower cumulative average returns for incumbents, both in absolute terms and in comparison to typical startups. Our theory and results contribute to research on categorization in markets and to theories of disruptive innovation and industry evolution.
Keywords
Emerging Industries; Industry Dynamics; Organization And Management Theory; Technology Strategy; Technology And Innovation Management; Entrepreneurship; Information Technology; Strategy; Management; Theory; Innovation and Management
Citation
McDonald, Rory, and Ryan T. Allen. "A Spanner in the Works: Category-Spanning Entrants and Audience Valuation of Incumbents." Strategy Science (forthcoming).