ABSTRACT:
The number of mobile app startups is increasing, but these startups face an increasingly hypercompetitive environment. To ensure long-term returns on their investments, these startups need to mitigate new entry threats. This entails limiting competitors’ ability to imitate products. However, a minimal amount is known about the factors that influence competitors’ identification of imitation targets and their willingness to imitate. We propose a research model that focuses on these two aspects to understand new entry threats. We adopt the cognitive view of Signaling Theory to examine the impact of a startup’s signaling on new entry threats. Startups rely on various rhetorical and substantive signals to establish their high quality in the market. We argue that competitors are influenced by those signals when “carrying out” new entry threats. In our model, we incorporate the competitor’s cognitive perspective by hypothesizing about the influence of the competitor’s funding status and experience. We test the model using a dataset of 3,286 startups active on the two largest app marketplaces from 2012 to 2022. The findings support all the hypotheses proposed. Thus, this study offers significant theoretical contributions and practical implications for mitigating new entry threats.
Key words and phrases: Mobile apps, entry threats, competitive signals, online startups, online rhetoric, startup funding