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Innovation and entrepreneurial ecosystems: fintech in the financial services industry

Review of Managerial Science volume 16, pages 45–64 (2022)Cite this article

Abstract

Technological change that arises outside an industry and is used within it affects entrepreneurship and entrepreneurial ecosystems, but remains understudied. In this project we assess the role of financial technology (fintech) innovation in the process of firm entry into the investment advisory sector, bearing in mind that the core of this innovation arises from technological development that is external to the industry. Our analysis of a sector of the U.S.-based financial services industry indicates that fintech innovation has contributed to a substantial increase in the rate of entrepreneurial entry into the industry. More importantly, we show that this innovation has an asymmetric effect on the firms in the industry, strengthening startups and smaller firms while increasing competitive pressure on larger incumbents. Our findings contribute to the literature by exemplifying that external technology shocks can change market structure by strengthening entrepreneurial ecosystems.

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Fig. 1
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Source: Bloomberg; Investment Company Institute

Fig. 4

Source: Investment Company Institute

Notes

  1. All RIA firms are registered either at the federal level with SEC or at the state level via FINRA. SEC-registered firms are larger organizations with $100 million or more in Assets Under Management. State-registered firms are smaller organizations with less than $100 million in Assets Under Management.

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Authors and Affiliations

  1. St. John’s University, New York, USA

    Alexander Berman

  2. Ohio University, Athens, USA

    Marcelo Cano-Kollmann

  3. Department of Strategic Management, Alter Hall, Fox School of Business, Temple University, Philadelphia, PA, 19122, USA

    Ram Mudambi

Authors
  1. Alexander Berman
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  2. Marcelo Cano-Kollmann
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  3. Ram Mudambi
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Correspondence to Ram Mudambi.

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Berman, A., Cano-Kollmann, M. & Mudambi, R. Innovation and entrepreneurial ecosystems: fintech in the financial services industry. Rev Manag Sci 16, 45–64 (2022). https://doi.org/10.1007/s11846-020-00435-8

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Keywords

  • Technological change
  • Fintech
  • Entrepreneurial ecosystems
  • Innovation
  • Information technology (IT)