The competitive dynamics of strategic risk-taking, unethical behavior, and entry

Abstract

This article argues that strategic risk-taking in the form of unethical behavior can lead to successful entry and that this entry can drive incumbents to either adopt similar behavior or potentially be forced out of the market. Thus, entrepreneurs can introduce innovative, but socially destructive, behavior to a market and motivate its adoption by incumbents. Empirical support is found using a policy change in the liver transplant market to identify the use and adoption of unethical misrepresentation of patient health status. This article contributes to our understanding of entrepreneurial strategy as well as the competitive dynamics between entrants and incumbents in adopting new risky innovations and, in particular, unethical behaviors.