IEARS

Xi Zhang

Xi ZhangXi Zhang is an Ph.D. candidate in business data science from Martin Tuchman School of Management, New Jersey Institute of Technology. Her research explores the role of firm-level upstream and downstream capabilities, such as access to complementary technologies and in-house users, during a disruptive technological change in high-tech industries. She is currently exploring the evolution of robo-advising and the dynamic shifting of business models of firms in wealth management industry, to answer the question that how incumbent financial service firms navigate a disruptive technological change on a business model perspective. She is also participating researches on technological disruption in multi-side platform, peer-to-peer lending, digitalization of financial services and fintech entrepreneur survival. Her proposal “Surviving the fuzzy front end: Entrepreneurs’ social network, degree of involvement and startup survival in India and the U.S.” has been accepted in Strategic Management Society (SMS) Annual Conference and Eastern Academy of Management (EAM) International Conference.


Abstract

Upstream and Downstream Capabilities of Incumbents: Navigating a Disruptive Technological Change

Artificial Intelligence (AI) is at the forefront of disruptive innovation in several industries, and has challenged incumbent firms to redesign their business models. However, researchers are yet to investigate how incumbents build and adapt their competencies to navigate the disruptive change. We build on prior research and  explore the role of an incumbent’s access to in-house upstream capabilities and/or in-house downstream capabilities help the firm successfully navigate a disruptive change. We suggest that during a disruptive change, firms with access to only in-house upstream complementary technologies but no downstream access to in-house users will seek to develop downstream capabilities by serving the low-margin customers and emerging markets. By contrast, the firms with downstream access to in-house users but with no access to upstream complementary technologies will seek the upstream capabilities by allocating resources to related technologies and collaborating with firms that possess such capabilities. We test our predictions in the context of wealth management industry where the advent of the disruptive robo-advisors is increasingly challenging the traditional business models. We develop a theoretical framework that explains how incumbent firms navigate the disruptive challenge over time. Our study contributes to research to both AI innovation and disruptive change, and offers novel insights into the evolution of an ecosystem. We also shed critical insights into the role of upstream and downstream capabilities of incumbents challenged by a disruptive change.