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.