| HBS Working Paper Series
Competing in New Markets and the Search for a Viable Business Model
Prior research examines how firms compete effectively in established markets. This study investigates new markets, and traces how entrepreneurial rivals in such a market search for a successful strategy. Through an in-depth, multiple-case study of firms in the nascent online-investing market, we induce a theoretical framework to explain how firms win the race to find a viable business model. As the new market emerged, high-performing firms enacted three strategies in sequence that helped them achieve their objective quickly and efficiently. First, their executives focused primarily on substitutes but copied from rivals. Next, they actively tested their assumptions and made major resource commitments to the business model they identified as the most lucrative. Finally, they deliberately maintained a loosely structured organizational activity system in order to continue to accommodate emergent sources of value. For these firms, competition resembled neither economic rivalry nor collective action but a logic of interaction akin to parallel play. The resultant middle-range theory has implications for research on entrepreneurial competition in new markets and on the organizational processes of developing a business model.
Keywords: Business Model;
Market Entry and Exit;
Financial Services Industry;