The Impact of Startup Entry on the Innovativeness of Incumbents

Table of Contents

1. Introduction

2. Related Literature and Hypothesis Development

2.1 Impact of Competition on Innovation

2.2 Moderating Effect of Age

3. Empirical Setting

3.1 Competition and Innovation in the Insurance Industry

3.2 New Market Entrants: InsurTech Startups

4. Data Sample, Method and Empirical Approach

4.1 Data Collection and Sample

4.2 Dependent Variable: Incumbents’ Innovativeness

4.2.1 Measuring Innovation in Financial Services

4.2.2 Coding Guidelines for Innovation Score

4.3 Independent Variable: Startup Entry

4.4 Control Variables

4.5 Research Design

5. Descriptive Statistics and Regression Model Results

5.1 Descriptive Statistics

5.2 Presentation of Results

5.2.1 Effect of Competition on Innovation

5.2.2 Effect of Age on Competition-Innovation Relationship

5.3 Additional Testing

6. Conclusion

Research Objectives and Themes

This thesis investigates how the entry of new startups, specifically within the InsurTech sector, impacts the innovation behavior and performance of established insurance incumbents. The study seeks to determine whether a curvilinear, inverted-U relationship exists between startup entry and incumbent innovation, and explores whether firm age acts as a moderating factor in this dynamic.

• The influence of competition on incumbent innovation patterns.
• The role of InsurTech startups as a new competitive force in the financial services sector.
• The moderating effect of organizational age on innovation responsiveness.
• Methodological approaches to measuring innovation in financial services via annual reports.
• The relationship between firm characteristics (size, profitability, leverage) and innovative output.

Excerpt from the Book

Summary of Chapters

1. Introduction: Introduces the research problem, outlines the theoretical context of the competition-innovation relationship, and states the primary aim and hypotheses of the study.

2. Related Literature and Hypothesis Development: Reviews existing academic literature on competition and innovation to establish a theoretical foundation and derive two main research hypotheses.

3. Empirical Setting: Describes the insurance industry landscape, including recent technological trends and the emergence of specialized InsurTech startups.

4. Data Sample, Method and Empirical Approach: Details the data collection process, the construction of the innovation scoring model based on annual reports, and the econometric methodology applied.

5. Descriptive Statistics and Regression Model Results: Presents the statistical analysis of the dataset and discusses the regression findings regarding the impact of startup entry and firm age on innovation.

6. Conclusion: Summarizes the study’s findings, discusses implications for practitioners and policymakers, acknowledges research limitations, and suggests future research directions.

Keywords

Competition, Innovation, Startups, InsurTech, Insurance Industry, Firm Age, Financial Services, Inverted-U Relationship, Incumbents, R&D, Market Entry, Digital Transformation, Quantitative Analysis, Regression Model, Economic Growth

Frequently Asked Questions

What is the core focus of this research?

The research examines the relationship between the entry of startups into the insurance industry and the subsequent innovation behavior of established incumbent firms.

What are the primary thematic areas covered?

The work covers competition theory, the impact of InsurTech on traditional insurance business models, innovation metrics in financial services, and the moderating role of firm age.

What is the primary research objective?

The primary objective is to test whether startup entry has a curvilinear (inverted-U) effect on incumbent innovation and if this effect is stronger for younger incumbents.

Which scientific methodology is utilized?

The author uses a quantitative approach, constructing an innovation score from annual reports of ten major insurance companies and applying a quasi-Poisson regression model to analyze panel data.

What does the main body of the work analyze?

The main body analyzes the competitive landscape of the insurance industry, develops hypotheses based on existing literature, and provides an empirical evaluation of innovation drivers using collected data on 244 InsurTech startups.

Which keywords characterize this thesis?

Key terms include Competition, Innovation, Startups, InsurTech, Incumbents, Firm Age, and Financial Services.

How is "InsurTech" defined in this study?

The study defines InsurTech as an insurance company, intermediary, or value chain segment specialist that utilizes technology to either compete or provide value-added benefits to the industry.

What does the "inverted-U" relationship suggest in this context?

It suggests that startup entry initially has a positive impact on incumbent innovation, but this effect diminishes once competition reaches an excessive level due to the "Schumpeterian effect."

Does firm age play a significant role?

Yes, the findings suggest that the positive effect of startup entry on innovation is slightly stronger for younger incumbents compared to older, more rigid peers.

Are there limitations to the study's findings?

The author acknowledges limitations such as the small sample size, the specific five-year observation period (2011-2015), and potential endogeneity issues like reverse causality.