Joining the pack or going solo? A dynamic theory of new firm positioning

Abstract

The question of new firm positioning in the marketplace and entrant's subsequent long-term performance lies at the heart of strategic entrepreneurship. We suggest a dynamic theory of new firm positioning that hinges on an important feature of the competitive environment: industry-level product diversity. The key argument is that industry-level product diversity drives imitation or differentiation at entry, which in turn shapes the exit likelihood of new entrants. So, in our theory, the extent of the new entrant's product portfolio overlap with all the industry's incumbents takes center stage. Support for our logic is obtained from the analysis of the life histories of 640 British motorcycle producers during the period 1899-1993. © 2012 Elsevier Inc.