Market Entry by High Technology Startups: The Effect of Competition Level and Startup Innovativeness

Abstract

We study the level of market competition as a determinant for the propensity of cooperation between startups entering new markets and incumbents operating in these markets. We provide ample empirical evidence suggesting that startups and incumbents are more likely to cooperate in the commercialization of startups' technological innovations, in markets with either high or low competition levels than in markets with moderate competition levels. Importantly, we further show that startups' innovativeness has a contingent effect — it encourages cooperation at low-to-moderate levels of competition, but encourages competition at moderate-to-high levels of competition.

Keywords: high technology startups, incumbents, cooperation, competition, competition level, innovativeness