A Demand-Side View of Incumbent Inertia and Performance
(A2020-63212)

AUTHORS

Jonathan Bohlmann, NC State University; Michael Stanko, NC State University; Jelena Spanjol, Ludwig-Maximilians-Universität (LMU) Munich

KEYWORDS

Demand-side inertia; incumbent strategies; incumbent performance

ABSTRACT

Incumbents are often, but not always, posited to suffer from inertia, making them slow to respond to market opportunities. Supply-side studies of incumbent inertia (factors internal to the firm) are more prevalent than those on demand-side factors, which relate to a firm’s customers and may explain incumbent advantages. We introduce a framework for a demand-side view of incumbent inertia, recognizing how the supply- and demand-side factors interrelate. On the one hand, incumbents learn and develop various routines and assets (supply-side factors) that influence their product strategies, typically reflecting inertia and incremental innovation. At the same time, customers learn about the benefits of products in the market, forming preferences that may reflect switching costs and network externalities (demand-side factors). Our framework considers both the demand- and supply-side factors, allowing a more comprehensive perspective of incumbent strategies and performance.