Survival Strategy for Startup Business

10775 Words May 12th, 2013 44 Pages
Product Strategies and Firm Survival in Technologically Dynamic Industries

Barry L. Bayus Kenan-Flagler Business School University of North Carolina CB 3490 Chapel Hill, NC 27599 Voice: (919) 962-3210 Fax: (919) 962-7186 Barry_Bayus@UNC.edu Rajshree Agarwal College of Business University of Illinois at Urbana-Champaign 350 Wohlers Hall, 1206 S. Sixth Street Champaign, IL 61822 Voice: (217) 265-5513 Fax: (217) 244-7969 agarwalr@uiuc.edu

Key words: innovation, industry evolution, marketing, entrepreneurship Revised May 2006 This research has had a long development cycle. We appreciate comments of the following people on a much earlier version of this paper: Jay Barney, Gaurab Bhardwaj, Oliver Chatain, Raj Echambadi, Glenn Hoetker, Steven
…show more content…
Indeed, several empirical studies confirm that diversifying entrants with prior experience have higher survival rates than entrepreneurial startups (e.g., Mitchell 1991; Carroll et al. 1996; Klepper and Simons 2000; 2005; Klepper 2002). Because the evolution of new and emerging industries crucially depends on innovation and new product introductions (e.g., Gort and Klepper 1982; Agarwal and Bayus 2002), research in the third stream tends to focus on the relationship between product strategy, variety, and firm survival (e.g., Romanelli 1989; Christensen et al.

1

1998; Dowell and Swaminathan 2000; Sorenson 2000; Barnett and Freeman 2001; Jones 2003). As a whole, this body of research has increased our knowledge of the factors related to firm survival in new industries. But, this understanding has come from isolated analyses within each research stream. Only a few studies consider the joint effects of corporate demographics and pre-entry experience (e.g., Carroll et al. 1996; Teagarden, et al. 2000), and even fewer attempt to integrate findings across the pre-entry experience and post-entry product strategy literatures (e.g., Fosfuri and Giarratana 2004). In this paper, all three factors are considered. We empirically study the relationship between firm survival and the product strategies employed by diversifying entrants and entrepreneurial startups, while controlling for key corporate demographic effects. We

examine these effects in a