Competitive advantage in new markets : the case of on-line business
Understanding how firms gain competitive advantage is perhaps the central question faced by strategy researchers (Rouse and Daellenbach, 1999; Powell, 2001). An examination of competitive advantage within the context of new markets presents an important and interesting dimension of this problem. It offers the opportunity to examine the potential for different types of entrant to establish competitive advantage. While competitive advantage in new markets has been addressed from a number of different theoretical perspectives, the suggestion here is that a resource-based conceptual lens can better explain the nature of the competitive challenge facing firms. A theoretical model of competitive advantage in new markets is developed, which highlights the importance of a firm's resource and capability endowments at the time of market entry, although it is argued that the main challenge faced by firms is the ability to adapt, where this refers to a firm's ability to develop the capabilities that are critical for success in new markets. Empirical research is carried out in respect of two UK-based on-line sectors, the Internet Service Provider sector and the online broking sector. The results of the survey research provide further evidence and support for the role of initial endowments of resources and capabilities at the time of new market entry, while the main findings of the case study research develop theory in respect of capability development in both new and established firms, suggesting that the process of capability development is itself an evolutionary one.