Small entrants and large incumbents: A framework of micro entry

Translating a diverse body of research, including industrial organization economics, strategy, and entrepreneurship, we present a framework of micro entry-specifically, how de novo entrants penetrate markets dominated by large incumbents without intensifying rivalry. Entrant-incumbent relations has received substantial attention in these three literatures, but with a few exceptions, prior research has focused mainly on hostile entry and on large or comparable players. We explain, however, that acute size differences create distinct entrant-incumbent dynamics. Normatively, we show how, when, and where micro entrants are most likely to penetrate markets dominated by large incumbents. Conceptually, we expand resource partitioning and mutual forbearance theories by relaxing their assumptions and then remeshing their logic, thus offering nuanced insights on entrant-incumbent relations when size differences are very large. Contrary to the creative-destructive hypothesis, we evince that market penetration is more likely when micro entrants either solidify large incumbents' positions or target small niches that are inconsequential for large incumbents. Reactions to micro entry are also influenced by contextual factors- when large incumbents operate in value networks that expand through integration or modularity.