The influence of regulation and disruptive potential on the entrants´ motivation and ability within the context of a network industry

This paper explores how regulation affects the motivation and ability of entrant firms to create successful new sub-markets that are shaped by a potential disruptive innovation. We focus on the telecommunication industry, particularly on the hotspot sub-market, to study these effects in the context of a network industry. In this setting, the impact of a potentially disruptive innovation might be different because of the institutional embeddedness of incumbent and entrant firms. We examine this phenomenon by analysing the entrants´ strategies and success of market entry into the hotspot sub-market in 17 Western European countries. The results indicate that the sub-market success of entrants in regulated markets depends both on the regulation and the resistance of incumbents to regulation in a specific country. The findings from this paper further contribute to the general understanding of disruptive innovation, suggesting that regulation can be a more powerful force than the nature of the innovation itself on market outcomes. Finally, for Western Europe´s telecommunication industry, our results show a predominately sustaining innovation character of WLAN used as public hotspots.