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Growth and survival: The moderating effects of local agglomeration and local market structure growth and survival


Pe'er, Aviad; Vertinsky, Ilan; Keil, Thomas (2016). Growth and survival: The moderating effects of local agglomeration and local market structure growth and survival. Strategic Management Journal, 3(37):541-564.

Abstract

One of the central explanations of the high failure rates of de novo entrants is the liability of smallness. As a corollary, most prior literature has suggested that firms should experience survival benefits from growth. In this paper, we argue that survival benefits need to be balanced against the potential cost of rapid growth, and they are contingent upon the structure of the environment. We predict a curvilinear relationship between an entrant's growth rate and failure and argue that the relationship is contingent upon the local agglomeration of economic activity and the local structure of competition. We test and find support for our predictions using firm-level longitudinal data of all de novo entrants into the Canadian manufacturing sector between 1984 and 1998.

Abstract

One of the central explanations of the high failure rates of de novo entrants is the liability of smallness. As a corollary, most prior literature has suggested that firms should experience survival benefits from growth. In this paper, we argue that survival benefits need to be balanced against the potential cost of rapid growth, and they are contingent upon the structure of the environment. We predict a curvilinear relationship between an entrant's growth rate and failure and argue that the relationship is contingent upon the local agglomeration of economic activity and the local structure of competition. We test and find support for our predictions using firm-level longitudinal data of all de novo entrants into the Canadian manufacturing sector between 1984 and 1998.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Business and International Management
Social Sciences & Humanities > Strategy and Management
Language:English
Date:March 2016
Deposited On:23 Aug 2019 08:55
Last Modified:31 Jul 2020 03:34
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:0143-2095
OA Status:Closed
Publisher DOI:https://doi.org/10.1002/smj.2331
Other Identification Number:merlin-id:10123

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