Digital entrepreneurship is an emerging phenomenon in the digital era. While the literature has started to look into this phenomenon, the attention has been paid mainly to digital startups in free markets. In a regulatory environment, however, it is unclear how a new startup might digitally transform business through entrepreneurial actions to overcome the challenges and barriers from regulations. Drawing on the dynamic capabilities and digital innovation literature, I conduct an in-depth longitudinal study at a Dutch digital startup. I trace the underlying mechanisms through which it creates digital solutions to the regulations in the Dutch healthcare sector — demand-driven digital disruption, fast digital adaptation, and continuous digital transplantation. Novel implications for digital entrepreneurship in the regulatory environment are presented.

Introduction

Recent literature has documented the digitization of innovation and entrepreneurship allows rapid growth of new startups in free markets (Huang et al., 2017; Nambisan, 2017; Nambisan et al., 2017). One of the reasons is that digital startups grow by drawing on and adding to digital infrastructure (Henfridsson and Bygstad, 2013; Yoo et al., 2010), which allow them to leverage the real options by adapting information technology (IT) platform (Fichman, 2004) and shape agility upon digital options (Sambamurthy et al., 2003). The literature, however, is unclear about in a regulatory environment, how digital startups may take “disruptive” entrepreneurial actions with digital platforms to overcome the regulatory inhibitors and barriers of business. This paper aims to shed some light on this important but relatively ignored area in the research on digital entrepreneurship by an extensive research effort of an in-depth longitudinal study of a Dutch digital startup in the healthcare sector. I draw on the dynamic capabilities literature (Dong and Wu, 2015; Teece, 2007; Teece et al., 1997) and the digital innovation literature (Henfridsson et al., 2014; Nambisan et al., 2017) as the starting point to guide my thinking through how digital startups sense and seize the entrepreneurial opportunities in the regulatory environment, and constantly innovate by reconfiguring their digital platforms in other markets. In this study, I trace three mechanisms leading to the success of a Dutch digital startup to entrepreneurially cope with the regulatory environment: demand-driven digital disruption, fast digital adaption, and continuous digital transplantation. I present these mechanisms and their sequential process, which provide unique insight for research and practice of digital entrepreneurship.