Skip to main content

Advertisement

SpringerLink
Log in

Innovation and entrepreneurial ecosystems: fintech in the financial services industry

  • Original Paper
  • Published:
Review of Managerial Science Aims and scope Submit manuscript

Abstract

Technological change that arises outside an industry and is used within it affects entrepreneurship and entrepreneurial ecosystems, but remains understudied. In this project we assess the role of financial technology (fintech) innovation in the process of firm entry into the investment advisory sector, bearing in mind that the core of this innovation arises from technological development that is external to the industry. Our analysis of a sector of the U.S.-based financial services industry indicates that fintech innovation has contributed to a substantial increase in the rate of entrepreneurial entry into the industry. More importantly, we show that this innovation has an asymmetric effect on the firms in the industry, strengthening startups and smaller firms while increasing competitive pressure on larger incumbents. Our findings contribute to the literature by exemplifying that external technology shocks can change market structure by strengthening entrepreneurial ecosystems.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Source: Bloomberg; Investment Company Institute

Fig. 4

Source: Investment Company Institute

Similar content being viewed by others

Notes

  1. All RIA firms are registered either at the federal level with SEC or at the state level via FINRA. SEC-registered firms are larger organizations with $100 million or more in Assets Under Management. State-registered firms are smaller organizations with less than $100 million in Assets Under Management.

References

  • Acs ZJ, Audretsch DB (1988) Innovation in large and small firms: an empirical analysis. Am Econ Rev 78(4):678–690

    Google Scholar 

  • Acs ZJ, Audretsch DB (1990) Innovation and small firms. MIT Press, Cambridge

    Book  Google Scholar 

  • Ács ZJ, Audretsch DB (eds) (1991) Innovation and technological change: an international comparison. University of Michigan Press, Ann Arbor

    Google Scholar 

  • Acs Z, Stam E, Audretsch D, O’Connor A (2017) The lineages of the entrepreneurial ecosystem approach. Small Bus Econ 49(1):1–10

    Article  Google Scholar 

  • Agarwal R, Gort M (1996) The evolution of markets and entry, exit and survival of firms. Rev Econ Stat 78(3):489–498

    Article  Google Scholar 

  • Agarwal R, Gort M (2002) Firm and product life cycles and firm survival. Am Econ Rev 92(2):184–190

    Article  Google Scholar 

  • Aldrich HE (2012) The emergence of entrepreneurship as an academic field: a personal essay on institutional entrepreneurship. Res Policy 41(7):1240–1248

    Article  Google Scholar 

  • Ali A (1994) Pioneering versus incremental innovation: Review and research propositions. J Prod Innov Manag 11(1):46–61

    Article  Google Scholar 

  • Alvedalen J, Boschma R (2017) A critical review of entrepreneurial ecosystems research: towards a future research agenda. Eur Plan Stud 25(6):887–903

    Article  Google Scholar 

  • Autio E, Nambisan S, Thomas LD, Wright M (2018) Digital affordances, spatial affordances, and the genesis of entrepreneurial ecosystems. Strateg Entrep J 12(1):72–95

    Article  Google Scholar 

  • Benner M, Tushman M (2003) Exploitation, exploration, and process management: the productivity dilemma revisted. Acad Manag Rev 28(2):238–256

    Article  Google Scholar 

  • Benzing C, Chu HM, Kara O (2009) Entrepreneurs in Turkey: a factor analysis of motivations, success factors, and problems. J Small Bus Manag 47(1):58–91

    Article  Google Scholar 

  • Berman A, Marino A, Mudambi R (2020) The global connectivity of regional innovation systems in Italy: a core–periphery perspective. Reg Stud 54(5):677–691

    Article  Google Scholar 

  • Beugelsdijk S, Mudambi R (2013) MNEs as border-crossing multi-location enterprises: the role of discontinuities in geographic space. J Int Bus Stud 44(5):413–426

    Article  Google Scholar 

  • Birch DL (1981) Who creates jobs? Public Interest 65:3–15

    Google Scholar 

  • Bitler MP, Robb AM, Wolken JD (2001) Financial services used by small businesses: evidence from the 1998 Survey of Small Business Finances. Federal Reserve Bull 87:183–205

    Article  Google Scholar 

  • Blanka C (2019) An individual-level perspective on intrapreneurship: a review and ways forward. RMS 13(5):919–961

    Article  Google Scholar 

  • Blau DM (1987) A time-series analysis of self-employment in the United States. J Political Econ 95(3):445–467

    Article  Google Scholar 

  • Bresnahan T, Trajtenberg M (1995) General purpose technologies: ‘engines of growth’? J Econom 65(1):83–108

    Article  Google Scholar 

  • Callejón M, Segarra A (1999) Business dynamics and efficiency in industries and regions: the case of Spain. Small Bus Econ 13(4):253–271

    Article  Google Scholar 

  • Calvo GA, Wellisz S (1980) Technology, entrepreneurs, and firm size. Quart J Econ 95(4):663–677

    Article  Google Scholar 

  • Carlsson B (1989) The evolution of manufacturing technology and its impact on industrial structure: an international study. Small Bus Econ 1(1):21–37

    Article  Google Scholar 

  • Carlsson B (1992) Management of flexible manufacturing: an international comparison. Omega 20(1):11–22

    Article  Google Scholar 

  • Carlsson B, Audretsch DB, Acs ZJ (1994) Flexible technology and plant size US manufacturing and metalworking industries. Int J Ind Organ 12(3):359–372

    Article  Google Scholar 

  • Casson M, Yeung B, Basu A, Bose A, Wadeson N (eds) (2006) The oxford handbook of entrepreneurship. Oxford University Press, Oxford

    Google Scholar 

  • Chandy RK, Tellis GJ (2000) The incumbent’s curse? Incumbency, size, and radical product innovation. J Mark 64(3):1–17

    Article  Google Scholar 

  • Schwab C, Co I (2009) A case for starting or joining a Registered Investment Advisory (RIA) Firm. Schwab Advisor Services, San Francisco

    Google Scholar 

  • Chen MJ, Hambrick DC (1995) Speed, stealth, and selective attack: How small firms differ from large firms in competitive behavior. Acad Manag J 38(2):453–482

    Article  Google Scholar 

  • Christensen C (1997) The innovator’s dilemma: when new technologies cause great firms to fail. Harvard Business Review Press, Cambridge

    Google Scholar 

  • Christensen CM, Bower JL (1996) Customer power, strategic investment, and the failure of leading firms. Strateg Manag J 17(3):197–218

    Article  Google Scholar 

  • Cohen W (1995) Empirical studies of innovative activity. In: Stoneman P (ed) Handbook of the economics of innovation and technical change. Blackwell, Oxford

    Google Scholar 

  • Cohen WM, Levinthal DA (1990) Absorptive capacity: a new perspective on learning and innovation. Adm Sci Q 35(1):128–152

    Article  Google Scholar 

  • Crifo P, Sami H (2008) Entrepreneurship turnover and endogenous returns to ability. Econ Model 25(4):585–604

    Article  Google Scholar 

  • Dean TJ, Brown RL, Bamford CE (1998) Differences in large and small firm responses to environmental context: Strategic implications from a comparative analysis of business formations. Strateg Manag J 19(8):709–728

    Article  Google Scholar 

  • Du Gay P (1991) Enterprise culture and the ideology of excellence. New Formations 13(1):45–61

    Google Scholar 

  • Du Gay P (1996) Consumption and Identity at Work. Sage, Thousand Oaks

    Book  Google Scholar 

  • Ferreira JJ, Fernandes CI, Kraus S (2019) Entrepreneurship research: mapping intellectual structures and research trends. RMS 13(1):181–205

    Article  Google Scholar 

  • Garicano L, Rossi-Hansberg E (2006) The knowledge economy at the turn of the twentieth century: The emergence of hierarchies. J Eur Econ Assoc 4(2–3):396–403

    Article  Google Scholar 

  • Ghavami H, Lotfalipoor MR (2008) Study the factors affecting the choice of entrepreneurship versus wage employment for graduates: a case study at Mashhad University of Ferdowsi. Knowl Dev Mag 15(24):163–182

    Google Scholar 

  • Ghemawat P (1991) Commitment: the dynamic of strategy. The Free Press, New York

    Google Scholar 

  • Gilbert CG (2005) Unbundling the structure of inertia: resource versis routing rigidity. Acad Manag J 48(5):741–763

    Article  Google Scholar 

  • Gort M, Klepper S (1982) Time paths in the diffusion of product innovations. Econ J 92(367):630–652

    Article  Google Scholar 

  • Hannan M, Freeman J (1997) The population ecology of organizations. Am J Sociol 82(5):929–964

    Article  Google Scholar 

  • Hannan M, Freeman J (1984) Structural inertia and organizational change. Am Sociol Rev 49(2):149–164

    Article  Google Scholar 

  • Hannigan TJ, Hamilton R, Mudambi R (2015) Competition and competitiveness in the U.S. airline industry. Compet Rev 25(2):134–155

    Google Scholar 

  • Heelas P, Morris P (eds) (1992) The values of the enterprise culture: the moral debate. London, Routledge

    Google Scholar 

  • Hill C, Rothaermel F (2003) The performance of incumbent firms in the face of radical technological innovation. Acad Manag Rev 28(2):257–274

    Article  Google Scholar 

  • Hockerts K, Wüstenhagen R (2010) Greeing Goliaths versis Davids—theorizing about the role of incumbents and new entrants in sustainable entrepreneurship. J Bus Ventur 25(5):481–492

    Article  Google Scholar 

  • Holtz-Eakin D, Kao C (2003) Entrepreneurship and economic growth: the proof is in the productivity. Syracuse University Center for Policy Research Working Paper 50.

  • Hora W, Gast J, Kailer N, Rey-Marti A, Mas-Tur A (2018) David and Goliath: causes and effects of coopetition between start-ups and corporates. RMS 12(2):411–439

    Article  Google Scholar 

  • Investopedia LLC (2019) Investopedia. Available online at investopedia.com. http://www.investopedia.com/terms/d/doublebottom.asp.

  • Isenberg D (2011) The entrepreneurship ecosystem strategy as a new paradigm for economy policy: principles for cultivating entrepreneurship. Babson Entrepreneurship Ecosystem Project, Babson College, Babson Park, MA

    Google Scholar 

  • Klepper S, Simons K (2000a) The making of an oligopoly: firm survival and technological change in the evolution of the U.S. tire industry. J Political Econ 108(4):728–760

    Article  Google Scholar 

  • Klepper S, Simons K (2000b) Dominance by birthright: entry of prior radio producers and competitive ramifications in the U.S. television receiver industry. Strateg Manag J 21(10–11):997–1016

    Article  Google Scholar 

  • Kraus S, Roig-Tierno N, Bouncken RB (2019) Digital innovation and venturing: an introduction into the digitalization of entrepreneurship. RMS 13:519–528

    Article  Google Scholar 

  • Kücher A, Mayr S, Mitter C, Duller C, Feldbauer-Durstmüller B (2020) Firm age dynamics and causes of corporate bankruptcy: age dependent explanations for business failure. RMS 14(3):633–661

    Article  Google Scholar 

  • Kuznets S, Murphy JT (1966) Modern economic growth: rate, structure, and spread, vol 2. Yale University Press, New Haven

    Google Scholar 

  • Laudien SM, Pesch R (2019) Understanding the influence of digitalization on service firm business model design: a qualitative-empirical analysis. RMS 13(3):575–587

    Article  Google Scholar 

  • Miller D (1983) The correlates of entrepreneurship in three types of firms. Manag Sci 29(7):770–791

    Article  Google Scholar 

  • NATIXIS Global Asset Management (2013) 2013 global survey of financial advisors: building a practice to meet modern market challenges. Natixis Investment Institute, Boston

    Google Scholar 

  • Nelson R, Winter S (1982) An evolutionary theory of economic change. Belknap Press of the Harvard University Press, Boston, MA

    Google Scholar 

  • Niemand T, Rigtering JC, Kallmünzer A, Kraus S, Maalaoui A (2020) Digitalization in the financial industry: a contingency approach of entrepreneurial orientation and strategic vision on digitalization. Eur Manag J

  • O’Connell JF, Williams G (2005) Passengers’ perceptions of low cost airlines and full service carriers: a case study involving Ryanair, Aer Lingus, Air Asia and Malaysia Airlines. J Air Transp Manag 11(4):259–272

    Article  Google Scholar 

  • Parker SC (2009) The economics of entrepreneurship. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • Peretto PF (1998) Technological change, market rivalry, and the evolution of the capitalist engine of growth. J Econ Growth 3(1):53–80

    Article  Google Scholar 

  • Reynolds PD (1999) Creative destruction: source or symptom of economic growth. In: Acs Z, Carlsson B, Karlsson C (eds) Entrepreneurship, small and medium-sized enterprises and the macroeconomy. Cambridge University Press, Cambridge, pp 97–136

    Google Scholar 

  • Roig-Tierno N, Kraus S, Cruz S (2018) The relation between coopetition and innovation/entrepreneurship. RMS 12:379–383

    Article  Google Scholar 

  • Schaffner JA (1993) Rising incomes and the shift from self-employment to firm-based production. Econ Lett 41(4):435–440

    Article  Google Scholar 

  • Schultz TP (1990) Women’s changing participation in the labor force: a world perspective. Econ Dev Cult Change 38(3):457–488

    Article  Google Scholar 

  • Schumpeter JA (1934) The theory of economic development. Harvard University Press, Cambridge

    Google Scholar 

  • Schumpeter JA (1942) Capitalism, socialism, and democracy. Harper and Brothers, New York

    Google Scholar 

  • Sköld M, Freij A, Frishammar J (2020) New entrant or incumbent advantage in light of regulatory change: a multiple case study of the Swedish life insurance industry. Eur Manag Rev 17(1):209–227

    Article  Google Scholar 

  • Sørensen JB, Stuart TE (2000) Aging, obsolescence, and organizational innovation. Adm Sci Q 45(1):81–112

    Article  Google Scholar 

  • Spigel B (2017) The relational organization of entrepreneurial eco-systems. Entrep Theory Pract 41(1):49–72

    Article  Google Scholar 

  • Sussan F, Acs Z (2017) The digital entrepreneurial ecosystem. Small Bus Econ 49(1):55–73

    Article  Google Scholar 

  • Tiburon Strategic Advisors (2009) An initial overview of the fee-based financial advisors (RIAs) market. Tiburon Research, Tiburon

    Google Scholar 

  • Valliere D, Peterson R (2009) Entrepreneurship and economic growth: Evidence from emerging and developed countries. Entrep Reg Dev 21(5–6):459–480

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. St. John’s University, New York, USA

    Alexander Berman

  2. Ohio University, Athens, USA

    Marcelo Cano-Kollmann

  3. Department of Strategic Management, Alter Hall, Fox School of Business, Temple University, Philadelphia, PA, 19122, USA

    Ram Mudambi

Authors
  1. Alexander Berman
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Marcelo Cano-Kollmann
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Ram Mudambi
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Ram Mudambi.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Berman, A., Cano-Kollmann, M. & Mudambi, R. Innovation and entrepreneurial ecosystems: fintech in the financial services industry. Rev Manag Sci 16, 45–64 (2022). https://doi.org/10.1007/s11846-020-00435-8

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11846-020-00435-8

Keywords

Search

Navigation