INCUMBENTS USE OF PREENTRY ALLIANCES BEFORE EXPANSION INTO NEW TECHNICAL SUBFIELDS OF AN INDUSTRY

Industry incumbents frequently delay entry into emerging technical subfields, fearing product cannibalization and uncertain investment, and enter only after technical and market uncertainties have subsided. We predict that many incumbents, particularly stronger firms, will participate in alliances with other firms before their standalone entry. The alliances will be used to realize part of the value of specialized assets and to gain information about the emerging products and markets. We support the predictions with evidence from the U.S. market of the medical diagnostic imaging industry.