Background: In the face of rapid technological development and progressing globalization, businesses find themselves under increasing pressure to keep up with new competitors and innovations. Even well-established market leaders are challenged to find an appropriate response to these developments and often fail in the face of disruptive innovation. This phenomenon puzzles researchers and practitioners alike. Especially the often undirected incumbent response and the influence factors are hardly understood and constitute a promising field of research. As the banking industry is currently under pressure from an increasing number of FinTechs, it appears to be particularly susceptible to disruption and provides an interesting context to investigate incumbent response to disruptive innovation.

Purpose: The purpose of our study is to explore factors that impact how incumbents in the banking industry respond to disruptive innovation. Thereby, we contribute to the development of a circumstance-contingent theory of incumbent response. In the process, we identify different response strategies that are employed in the Swedish banking industry.

Method: In order to gain a deep understanding of incumbent response to disruptive innovation and the factors that influence it, we conduct a qualitative multiple case study of three large Swedish banks. Following an inductive approach, we apply content analysis to the data that we gathered through semi-structured interviews and secondary research. Through cross-case analysis, we combine the factors that emerge from the different cases, compare them to the existing literature and consequently create a framework of influence factors on incumbent response in the banking industry.

Conclusion: In total, seven factors that can be clustered into four distinct categories were found to influence incumbent response to disruptive innovation in the banking industry. These are the environmental factors Regulatory Requirementsand Shareholders, the organizational factorIT Legacy Structure, the managerial factors Managerial Capabilities & Experienceand Perceived Urgencyas well as the strategy-related factors Strategic Relevanceand Resources.