Abstract: The Discontinuous Shift to Digital Exchanges in Sweden, 1985-1992

Mirko Ernkvist


Based on a historical innovation process study of a Swedish entrant firm that introduced the world's first commercially successful digital option exchange and the first privately owned exchange, we study the entrepreneurial and institutional conditions for the introduction of a discontinuous innovation and business model in finance. Previous research has argued that there are prohibitive barriers for de novo entrant discontinuous innovation in finance due to extensive regulatory barriers and elite power interest in retaining status quo. We argue that a key to understanding the pioneering discontinuous technological shift was an adaptive techno-social system that was open for both technological and business model experimentation in the first phase of the era of ferment, coupled with a deliberate regulatory process that enabled the entrant to influence the policy process in the second phase. Within this process, the entrant had a key role in changing the status quo by acting as a dual technological and corporate political entrepreneur. As a proactive corporate political entrepreneur, entrants had a key role in the initial phase to gain supervisors' approval and mobilize partners for temporary experimentation with the new business models, and in the second phase to influence the regulatory policy toward change in favor of its business model.