Incumbent’s Curse Revisited: Are Firm Stereotypes Beneficial or Harmful for Established Companies Pursuing Radical Technological Innovations?

Established companies often struggle while start-ups gain market share by pursuing radical technological innovations. Research has found that internal organisational barriers can cause this incumbent’s curse, but it has not explored the role of external actors. Drawing on social judgements of organisations theory, we suggest that potential consumers possess firm stereotypes (i.e., warmth and competence perceptions), which affect their expectations about the success of established companies and start-ups in pursuing radical technological innovations. Findings from three experimental studies show that established companies are perceived as more competent but less warm than start-ups. This perception leads to higher success expectations for established companies pursuing radical technological innovations. Yet, these benefits are no longer present after the revelation of information about a fatal error.