The current issue and full text archive of this journal is available at
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EBR
21,1
64
Received December 2007
Revised January 2008,
February 2008
Accepted February 2008
European Business Review
Vol. 21 No. 1, 2009
pp. 64-77
q Emerald Group Publishing Limited
0955-534X
DOI 10.1108/09555340910925184
Barriers to entry and market
strategy: a literature review
and a proposed model
Anders Pehrsson
School of Management and Economics, Växjö University, Växjö, Sweden
Abstract
Purpose – The purpose of this paper is to review previous research and to propose a model for the
impact of barriers to entry on the market strategy of an entrant firm, where product/market scope and
product differentiation are central strategy components. The paper asks, what is the impact of barriers
on market strategies of entrants? Are early and late entrants affected in different ways?
Design/methodology/approach – A model and propositions are developed-based on a review of
previous research. The model applies the contingency perspective and company cases exemplify the
model.
Findings – It is proposed that a firm that enters a market late and faces extensive barriers would
choose a broader product/market scope and differentiate its products to a larger extent than an early
entrant. It is also proposed that incumbents’ market strategies indirectly affect the market strategy of
an entrant firm as incumbents’ market strategies interact with barriers, and the effects are due to entry
timing.
Research limitations/implications – The study contributes theoretically as it extends current
knowledge of the impact of barriers to entry on strategy. Management of entrant firms are advised to
strive for a fit between barriers and market strategy and consider the propositions.
Originality/value – The model and the propositions concern barrier effects on two key components
of the market strategy of an entrant firm: product/market scope and product differentiation. Another
important value is that the model accounts for interactions between incumbent strategies and barriers
to entry, and effects on the market strategy of an entrant firm.
Keywords Market entry, Marketing strategy, Competitors
Paper type Literature review
Introduction
Barriers to entry have been a popular field of research since the seminal work of Bain
(1956). Barriers are obstacles preventing entrant firms from being established in a
particular market (Porter, 1980). However, despite the practical and theoretical
importance of the matter, we still have only limited understanding of the impact of
barriers on the market strategy of an entrant firm.
A deeper empirical exploration of the issue calls for a reliable model that clarifies
expected relationships. An empirical example is the comprehensive work that takes
place within the European Union in order to create unified rules for international
competition and reduce the impact of barriers originating from government regulations.
The author is grateful for valuable comments received from two anonymous reviewers of
European Business Review, and the financial support provided by The Nicolin Foundation CN70
of the Swedish Committee of the International Chamber of Commerce.
Industries such as telecommunications are subject to these unification processes Barriers to entry
(Pehrsson, 2001). A general aim is to encourage the establishment of both domestic and market
competitors and competitors stemming from other countries (Karlsson, 1998). But what
is the expected impact of barriers on market strategies of entrants? Are early and late strategy
entrants affected in different ways?
In theoretical terms, we need further knowledge of a relation between conditions
external to the firm and the firm strategy, and, therefore, application of the contingency 65
perspective (Hambrick, 1983; Peteraf and Reed, 2007) is appropriate. The central view
is that a fit between external conditions and firm strategy provides a basis for
competitive advantage and high performance (Miller, 1996).
According to the review by Peteraf and Reed (2007), an earlier central criticism of
contingency theory was that contingency research was reductionist (Meyer et al., 1993),
and empirical models did not account for the impact of interactions among central
elements. However, recent studies on internal alignment focus on interaction effects
among firm attributes and impact on firm performance (Kauffman, 1993; Levinthal,
1997). Yet, we still have very limited knowledge of interactions among external
conditions and the impact on firm strategy.
This paper applies the contingency perspective and focuses on the impact of
barriers to entry on the market strategy of early and late entrants. The purpose is to
review previous research and to propose a model for the impact of barriers on strategy
where product/market scope and product differentiation are central strategy
components. The resulting model addresses external firm conditions and proposes
direct effects of exogenous and endogenous barriers and indirect effects of incumbents’
market strategies. These constitute the frame for barriers that originate from
incumbents’ behavior, and incumbent strategies assumingly interact with barriers to
entry.
Although, for example, the performance impact of barriers to entry has been widely
investigated (Marsh, 1998), only a few studies have focused on the impact on the
market strategy of entrant firms. Robinson and McDougall (2001) studied entrants and
found that the negative performance effects of three barriers (scale effects, capital need,
and product differentiation) were particularly important when the product/market
scope was narrow. Further, Pehrsson (2001) observed that deregulation in the
telecommunications industry caused adjustments of the product/market scope of
market entrants. Finally, Han et al. (2001) and Salavou et al. (2004) found that a need for
capital stimulated the innovativeness and product differentiation of entrants.
We therefore need to continue to study the impact of barriers on the product/market
scope and product differentiation of market entrants. More precisely, there is a lack of
knowledge of direct and indirect barrier effects on entrants’ product/market scope and
product differentiation. The fact that competitors may constitute a primary source of
barriers has largely been neglected, and incumbents’ market strategies most probably
indirectly affect the strategy of an entrant firm. Competitors are crucial here as they
demonstrate certain market strategies and thereby create customer loyalties and other
barriers (Porter, 1980). Also, the literature indicates that the effects are due to entry
timing (Karakaya and Stahl, 1989), and the effects on the strategy of an early entrant
may not be the same as those for a late entrant.
The paper is organized in this way: In Section 2, I review previous research on
barriers to entry and the strategy impact of barriers; in Section 3, I present the model
EBR and propositions about relationships in the model; Section 4 presents illustrative
21,1 company cases; conclusions and implications follow in Section 5.

Literature review
This section of the paper first presents important exogenous and endogenous barriers
to entry that have been observed by scholars. The section then reviews previous
66 studies on the impact of barriers on product/market scope and product differentiation,
and the impact on entry timing.

Important barriers to entry

A barrier to entry can be categorized as either exogenous or endogenous (Shepherd,
1979). Exogenous barriers are those that are embedded in the underlying market
conditions and, in principle, firms are not able to control exogenous barriers. On the
contrary, endogenous barriers are created by the established firms through their
market strategies and their competitive behavior and are thus based on incumbents’
reactions to new entrants’ efforts to become established. However, Gable et al. (1995)
observed that frequently the barrier types are mutually reinforcing, and they may be
difficult to interpret.
Table I lists important barriers to entry that have been observed in the literature,
with studies cited by author and publication date.
As regards the exogenous barriers, incumbents’ cost advantages are considered
important by several authors (Gable et al., 1995; Han et al., 2001). This barrier means that
incumbents may possess absolute or variable cost advantages, forcing the entrant firm
to achieve scale effects and low costs. Incumbents’ product differentiation (Pehrsson,
2004; Schlegelmilch and Ambos, 2004) is another important barrier as it creates loyalties
and relations among buyers and established sellers, and accompanying obstacles for the
entrant trying to access customers (Johansson and Elg, 2002).
Furthermore, the extensive need for capital in order to be firmly established in a
market is an important exogeneous barrier emphasized by many authors (Harrigan,
1981; Siegfried and Evans, 1994), and the importance is also valid for customers’
switching costs (Gruca and Sudharshan, 1995; Karakaya and Stahl, 1989). This barrier
is due to the costs that any potential customer faces trying to switch from one supplier
to another. For example, costs may be allocated to employee retraining or changes in
product design.
Available distribution channels might not be anticipated by the entrant firm, or
they may be controlled by competitors, creating customer access obstacles (Han et al.,
2001; Pehrsson, 2004). Other barriers may include incumbents’ brand loyalty (Krouse,
1984), costs independent of scale (Karakaya, 2002; Porter, 1980), government policy
(Delmas et al., 2007; Russo, 2001), number of competitors (Harrigan, 1981), seller
concentration (King and Thompson, 1982), and need for research and development
(Schmalensee, 1983) including costs for adaptating technology to local market
conditions (Pehrsson, 2004).
Endogenous barriers are created by the competitive behavior of incumbent firms
in accordance with their market strategies. Important endogenous barriers may
originate from excess capacity. This is generally accompanied by increased
advertising or promotional activity (Demsetz, 1982; Gable et al., 1995) or pre-emptive
pricing resulting in price competition (Guiltinnan and Gundlach, 1996; Simon, 2005).

Important barriers to entry
Exogenous barriers
Incumbents’ absolute or variable cost
advantages
Incumbents’ product differentiation
Incumbents’ brand image
Need for capital for the establishment
Customers’ switching costs
Access to distribution channels
Costs independent of scale
Government policy
Number of competitors
Seller concentration
Need for research and development or
patent
Endogenous barriers
Incumbents’ increased advertising
Incumbents’ increased sales promotion
Incumbents’ price competition
Incumbents’ reactions in general
It is thus appropriate to view endogenous barriers as established firms’ reactions to
new entrants (Karakaya and Stahl, 1989; Yip, 1982). In fact, incumbents may deter the
entry of newcomers simply by creating expectations of fear for the incumbent’s
post-entry reaction (Karakaya and Stahl, 1989).
Barriers to entry
Examples of studies
and market
strategy
Bain (1956), Day (1984), Gable et al. (1995), Han et al.
(2001), Harrigan (1981), Henderson (1984), Karakaya and
Stahl (1989), Lieberman (1987), Mann (1966), Porter (1980),
Scherer (1970), Schmalensee (1983), Siegfried and Evans 67
(1994), Weizsacker (1980), Yip (1982)
Bain (1956), Bass et al. (1978), Caves (1972), Gable et al.
(1995), Hofer and Schendel (1978), Johansson and Elg
(2002), Karakaya (2002), Karakaya and Kerin (2007),
Karakaya and Stahl (1989), Makadok (1998), Mann (1966),
Pehrsson (2004), Porter (1980), Robinson and McDougall
(2001), Schlegelmilch and Ambos (2004), Schmalensee
(1983), Siegfried and Evans (1994)
Krouse (1984)
Bain (1956), Baumol and Willig (1981), Eaton and Lipsey
(1980), Gable et al. (1995), Han et al. (2001), Harrigan (1981),
Karakaya (2002), Karakaya and Kerin (2007), Mann (1966),
Porter (1980), Salavou et al. (2004), Siegfried and Evans
(1994)
Gruca and Sudharshan (1995), Han et al. (2001), Karakaya
and Stahl (1989), McFarlan (1984), Pehrsson (2004), Porter
(1980); Stigler and Becker (1977)
Gable et al. (1995), Han et al. (2001), Karakaya and Stahl
(1989), Pehrsson (2004), Porter (1980)
Karakaya (2002), Karakaya and Kerin (2007), Porter
(1980),Scherer (1970)
Beatty et al. (1985), Bonardi (1999), Delmas and Tokat
(2005), Delmas et al. (2007), Dixit and Kyle (1985), Gable
et al. (1995), Grabowski and Vernon (1986), Haveman
(1993), Karakaya and Stahl (1989), Marsh (1998), Moore
(1978), Porter (1980), Pustay (1985), Russo (2001)
Harrigan (1981)
Bain (1956), Caves (1972), Crawford (1975), King and
Thompson (1982), Mann (1966)
Ghadar (1982), Harrigan (1981), Mansfield et al. (1981),
Pehrsson (2004), Reinganum (1983), Schmalensee (1983)
Brozen (1971), Comanor and Wilson (1967), Demsetz
(1982), Gable et al. (1995), Harrigan (1981), Netter (1983),
Reed (1975), Reekie and Bhoyrub (1981), Spence (1986)
Gable et al. (1995), Williamson (1963) Table I.
Gable et al. (1995), Guiltinnan and Gundlach (1996), Studies of important
Needham (1976), Simon (2005), Smiley and Ravid (1983) exogenous and
Gable et al. (1995), Karakaya and Stahl (1989), Needham endogenous barriers to
(1976), Yip (1982) entry
EBR However, Gable et al. (1995) found that exogenous and endogenous barriers are
21,1 mutually reinforcing. They studied entry barriers in retailing and found that
incumbents frequently increased advertising and sales promotion when reacting to
market entrants. These measures enhanced the degree of product and service
differentiation attributed to the incumbent, while the measures also provided a method
for an existing retailer to increase the costs of entry to a potential competitor. The
68 observed endogenous barriers of increased advertising and sales promotion thus
reinforce the exogenous barriers of capital need and product differentiation.
Further, a number of studies (Karakaya, 2002; Karakaya and Kerin, 2007; Karakaya
and Stahl, 1989; Siegfried and Evans, 1994) have explored the relative importance
of individual barriers. Karakaya (2002) examined the importance of 25 potential
barriers to entry in industrial markets. The majority of the executives in the survey
considered the most important barriers to be incumbents’ cost advantages and the need
for capital to enter markets.

The impact of barriers on strategy

Researchers have studied the impact of barriers to entry on two strategy components,
namely product/market scope (Bonardi, 1999; Delmas and Tokat, 2005; Haveman,
1993; Pehrsson, 2001, 2007; Robinson and McDougall, 2001), and product
differentiation (Delmas et al., 2007; Russo, 2001; Schlegelmilch and Ambos, 2004)
including innovativeness (Han et al., 2001; Salavou et al., 2004). Table II summarizes
key findings of the studies of strategies of market entrants and incumbents.
As regards product/market scope, Pehrsson (2007) studied perceptions of expansion
barriers in 191 subsidiaries of incumbent Swedish manufacturing firms in Germany,
the United States and the UK. He found that the impact of barriers was due to the
breadth of the product/market scope of the firms. Hence, obstacles to access customers
affect performance in a negative way if the firm has a narrow product/market scope.
One reason why the obstacles are not significant if the scope is broad may be that
different customer types and delivered products in this context are associated with
more degrees of freedom in choosing customers. Problems in accessing a certain
customer type may thus be balanced against limited problems regarding other types.
Robinson and McDougall (2001) established a similar pattern. They studied the
moderating effect of product/market breadth on the relationship between entry
barriers and performance of 115 new ventures. Three barriers were closely studied:
economies of scale, capital need, and product differentiation. It was found that the
negative effect of capital need on return on sales was smaller for ventures pursuing a
broad scope. Further, the negative effects of all barriers were smaller for broad-scope
ventures as regards shareholder wealth.
Government policy changes manifested by, for example, deregulation or other
institutional changes stimulate adjustments of the product/market scope of
incumbents (Bonardi, 1999; Delmas and Tokat, 2005; Haveman, 1993; Pehrsson,
2001). Haveman (1993) showed that many firms in the savings and loans industry had
expanded into new areas as a result of deregulation. Further, Pehrsson (2001) found
that choices of customers made by both incumbents and entrant firms followed
deregulations in the British and Swedish telecommunications industries.
As regards the product differentiation component of market strategy, Han et al.
(2001) and Salavou et al. (2004) found that market entrants’ innovativeness reduced the
 Barriers to entry
Strategy
Studies Barriers component Key findings and market
Studies of entrant firms
strategy
Robinson and McDougall Incumbents’ cost Product/market Larger negative
(2001) advantages (scale effects), scope performance effect when
capital need, and product the scope of an entrant 69
differentiation firm is narrow
Pehrsson (2001) Government policy Product/market Deregulations cause
scope adjustments in the
product/market scope of
an entrant firm
Han et al. (2001), Salavou Capital need Product Capital need stimulates
et al. (2004) differentiation innovativeness of an
entrant firm
Studies of incumbents
Pehrsson (2007) Product differentiation, Product/market Negative performance
switching costs, and scope effects when the scope of
channel access an incumbent is narrow
Bonardi (1999), Delmas Government policy Product/market Deregulation causes
and Tokat (2005), scope adjustments in the
Haveman (1993) product/market scope of
an incumbent
Delmas et al. (2007), Russo Government policy Product Deregulation causes Table II.
(2001), Schlegelmilch and differentiation technology and other Studies of the impact of
Ambos (2004) differentiations of an market entry barriers on
incumbent market strategy

impact of capital need. A firm’s innovativeness reflects its way of pursuing product
differentiation relative to competitors (Kustin, 2004).
The literature also addresses changes in barriers to entry due to deregulation and
their effects on incumbents’ differentiation (Delmas et al., 2007; Russo, 2001;
Schlegelmilch and Ambos, 2004). Delmas et al. (2007) observed a variety of
differentiation efforts in response to deregulation in the US electric utility industry,
while Schlegelmilch and Ambos (2004) studied strategic options in such industries. In
particular, Russo (2001) found that technology differentiation was a common effect of
deregulation in the utility industry. Delmas et al. (2007) advocate that, in fact,
differentiation is common in industries that is subject to deregulation.

The impact of barriers on entry timing

Makadok (1998) and Pehrsson (2004) underscore that the entry timing advantages of
first- and early-movers seem to be resistant to erosion by the entry of additional
competitors in a market. Once a new competitor has entered the market, it is difficult to
match the performance of the incumbents due to extensive customer loyalties
established previously. For the entrant firm this creates severe obstacles to customer
access.
Karakaya and Stahl (1989) studied the effects of barriers on the timing of market entry
of 49 firms delivering industrial goods and consumer goods. The researchers particularly
found that switching costs of potential customers is perceived as more important for
late entry than early entry in both industrial goods and consumer goods markets.
EBR This finding supports the notion that late market entrants will face extensive obstacles to
21,1 access customers due to previous loyalties between sellers and buyers.

A model of the impact of entry barriers on strategy

The model presented in this section proposes relationships between barriers to entry,
incumbents’ market strategies and the market strategy of an entrant firm (Figure 1). The
70 model applies the contingency perspective (Hambrick, 1983; Peteraf and Reed, 2007) and
proposes that an entrant firm’s market strategy is contingent on the external conditions
of barriers to entry (P1-2 in Figure 1). It is also assumed that competitors constitute a
main source of barriers; therefore, the model proposes indirect effects and interactions
between incumbents’ market strategies and barriers (P3). Further, entry timing is
important; the propositions suggest that strategies of early and late entrants differ.
This section first defines the key concepts of the model and continues with
motivations and presentations of the propositions.

The concepts in the model

The term “barriers to entry” stems from industrial organization literature and refers to
obstacles that firms have to face when they try to establish themselves in a market
(Porter, 1980). Advantages of incumbent firms established earlier correspond to the
extent to which the incumbents can raise their prices above a theoretical equilibrium
without attracting other firms to enter the market (Bain, 1956). Barriers are exogenous
or endogenous and are mutually reinforcing (see the literature review above).
Entrant firms and incumbents demonstrate certain market strategies.
Miller (1987) found that the dominant content components of strategy were

Market strategy of an
Barriers to entry P1-2 early or late entrant
firm
Exogenous and
endogenous barriers Product/market scope,
product differentiation

P3

Incumbents’ market
strategies

Figure 1. Product/market scope,

A model of the impact of product differentiation
strategy on market entry
barriers (P1-3 indicate
propositions)
product/market scope, product innovation, differentiation, and cost control. Barriers to entry
Product/market scope corresponds to the breadth of business activities and is and market
manifested by the breadth of the range of product types and customer types. As
product innovation is a way of differentiating the product in relation to competing strategy
products, I include innovation in product differentiation (Kustin, 2004). Further, as cost
control is an ingredient of price, and customers are generally more concerned with
prices than firm costs, prices are frequently subject to differentiation (Porter, 1980). 71
Therefore, product differentiation in the model also includes pricing.
However, product differentiation does not only refer to the physical product core.
Usunier (1993) suggests that services linked to products such as after-sales services are
central to differentiation, and Pehrsson (2006) further emphasizes flexibility attributes.
These attributes combine with other attributes in order to meet individual customer
needs, and include, for example, solutions to customer problems and distribution
features.
Differentiating products in relation to products of competitors may thus give the
firm competitive advantages. In essence, Porter (1980) convincingly argues that
differentiation is a way of creating layers of insulation against competitive warfare and
increases the odds of achieving high financial performance.

Direct effects of barriers to entry

Pehrsson (2007) and Robinson and McDougall (2001) found that the effects of barriers
were less severe if the product/market scope of a market entrant was broad. Based on
the findings, the researchers argue that product/market breadth of market entrants
generally moderates the relationship between entry barriers and performance.
Theoretically, a market entrant that has to face extensive barriers to entry would prefer
a broad product/market scope. In that way, the entrant may be able to exploit the
degrees of freedom that accompany the broad scope, and balance obstacles in
accessing a certain customer type against obstacles relating to other types.
However, research has shown that late market entrants tend to be exposed to more
comprehensive barriers than early entrants (Makadok, 1998; Pehrsson, 2004). In
particular, customer loyalties and customers’ switching costs (Karakaya and Stahl,
1989) constitute key competitive advantages of early entrants. A late market entrant
would, therefore, theoretically have to face more severe obstacles in trying to access
customers than would an early entrant:
P1. A firm that enters a market late and has to face extensive barriers will choose
a broader product/market scope than an early entrant.
In accordance with the results of Han et al. (2001) and Salavou et al. (2004), market
entrants frequently use product innovations to overcome market entry barriers. As
innovativeness manifests product differentiation, it is logical to propose that a market
entrant may use product differentiation in order to respond to barriers, and that
comprehensive differentiation efforts follow extensive barriers. As a late entrant is
theoretically exposed to more extensive barriers than an early entrant, this leads to the
second proposition:
P2. A firm that enters a market late and has to face extensive barriers will
differentiate its products to a larger extent than an early entrant.
EBR Indirect effects of barriers to entry
21,1 P1 and P2 do not pay attention to indirect effects, crucial interactions among barriers
to entry and other important conditions external to the entrant firm. However, we can
expect that barriers interact with incumbents’ market strategies. This expectation
relies on the necessity of observing competitors as they pursue certain market
strategies, and are able to create customer loyalties and other barriers (Porter, 1980). If
72 we pay attention to incumbents, a strategy that promotes the development of brand
loyalty, for example, focuses on a factor that create barriers (Krouse, 1984).
Further, entry timing advantages of first- and early-movers (Makadok, 1998;
Pehrsson, 2004) generally stem from the firms’ opportunities to penetrate potential
customers, start to differentiate products, and develop customer relationships. If
successful, the customer relationships and accompanying loyalties become effective
barriers to competition. Theoretically, late entrants therefore have difficulty matching
the performance of the early entrants. We may therefore propose that the interaction
affects early and late entrants in different ways:
P3. Incumbents’ market strategies indirectly affect the market strategy of an
entrant firm as incumbents’ market strategies interact with barriers to entry.
The effects are different for early and late entrants.

Illustrative cases
Deregulation and unification of rules pertaining to firms operating telecommunications
networks caused operators to reconsider their market strategies in Europe (Pehrsson,
2001). Unlike many other European countries, Sweden has never legalized a monopoly
for the establishment of telecommunications networks or for the offering of services.
However, Televerket (the Swedish public telecommunications administration)
historically had a monopoly-like hold on many sectors of the market. This
organization was converted in 1993 into a company group with a parent firm, Telia. As
there are no regulations protecting Swedish interests or restricting foreign operators
from establishing themselves in the country, many firms have entered the market.
Any firm with a desire to enter the market will have to face the barrier of capital
need in terms of the arrangement of infrastructure. For example, Tele2 entered the
market early and addressed this need for capital by cooperating with the Swedish State
Rail Administration. The background for Kinnevik’s establishment of Tele2 is that
Kinnevik had gained experience from mobile telephony in the USA (NetCom Systems,
1994). Parallel with these activities, preparations began within traditional
telecommunications for voice and data in the 1980s. A gateway for data traffic was
opened in 1986, and in 1989 an agreement was concluded with the Swedish State Rail
Administration for joint investments in a fiber optic network. Tele2 was formed in
1987 with the intention to offer stationary telephony primarily to households based on
low prices. When the deregulation of the telecommunications market accelerated in
1993, Tele2 was able to act fast and reached second place after the incumbent, Telia.
Dotcom Data & Telecommunications entered the Swedish market late and had to
face the extensive barriers caused by the dominance of the incumbent and early
entrants. By the end of the 1990s, Dotcom was the only operator in the Swedish market
with telecommunications operations that were not part of the original corporate core
business (Dotcom Data & Telecommunications, 1995). The product/market scope was
dominated by local data networks and included also stationary telephony, leased lines,
office exchanges, extensive communications systems, support systems and so on. Barriers to entry
Middle-sized companies, large companies, and public administrations were the main and market
target groups.
In sum, the case of Dotcom Data & Telecommunications illustrates P1. The firm strategy
was exposed to extensive barriers due to the firm’s late market entry and chose a broad
product/market scope. In that way, the firm was able to exploit the degrees of freedom
that accompanied the broad scope, and balance obstacles in accessing a certain 73
customer type against obstacles regarding other types.
Further, Dotcom Data & Telecommunications tried to avoid price competition and,
instead, strived for long-term customer relationships. As there were six phases of the
delivery chain (analysis of needs, systems design, installation, education, service, and
financing) there were many options to conduct product differentiation. A comparison
with the limited low-price differentiation of Tele2 illustrates P2. However, in
accordance with P3, both entrants had to face the barriers caused by the incumbent’s
(Telia’s) strategy of keeping its market dominance and loyal customers.

Conclusions and implications

Despite the limitation that there may be more important external conditions beyond
incumbents’ market strategies that interact with barriers to entry, we are now able to
conclude the a firm that enters a market late and has to face extensive barriers
probably would choose a broader product/market scope and differentiate its products
to a larger extent than an earlier entrant. Also, it is proposed that incumbents’ market
strategies indirectly affect the market strategy of an entrant firm as incumbents’
market strategies interact with barriers, where the effects are due to entry timing. In
sum, the model extends our knowledge as it accounts for the direct impact of barriers
to entry on product/market scope and product differentiation, and specifies central
conditions external to the entrant firm. Also, the model accounts for entry timing
effects.
In accordance with the contingency perspective management of entrant firms would
be advised to strive for a fit between barriers to entry and market strategy and thereby
bear in mind the proposals put forward in this paper. Of importance are not only direct
effects of barriers on product/market scope and product differentiation, but also the
way incumbent strategies interact with barriers. It would also be advisable for each
firm to evaluate the relative importance of barriers and acknowledge that a late entry is
generally accompanied by more extensive barriers than an early entry. Further, as
exogenous barriers and endogenous barriers are often mutually reinforcing, attention
needs to be paid to combined effects.
Further empirical research should be conducted in terms of applying the model
developed in this paper. A suggestion for future research is to explore how
management perceives barriers to entry, and how this perception contributes to the
emergence and sustainability of competitive advantage. Also, it would be interesting to
explore managerial knowledge of barriers in early and late phases of market entry.

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About the author

Anders Pehrsson is Professor of Business Administration at the School of Management and
Economics, Växjö University, Sweden. He has contributed strategy papers to Business Strategy
Series, European Business Review, Journal of Business Research, Management Decision,
Scandinavian Journal of Management, Strategic Change, Strategic Management Journal and a
number of books. Recent monographs are Strategy in Emerging Markets and International
Strategies in Telecommunications (Routledge: London, New York). Anders Pehrsson can be
contacted at: anders.pehrsson@vxu.se

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