Early and late-stage startup funding in hospitality : effects on incumbents' market value

Abstract

This study investigates the effect of funding rounds received by travel startups to assess stock market awareness of these potential new entrants. Using event analysis on the incumbent firms' stock market value we found that early-stage funding for startups offering traditional and alternative hotel and lodging services have a negative and positive effect, respectively. For startups offering intermediary services we found a negative effect of late-stage funding rounds. The effects also differed depending on the level of market commonality and resource similarity between startups and incumbent hotel firm. The findings support awareness of competition as a critical managerial task. This study offers an understanding of startups in the travel industry and provides insights for practitioners.