Session 112

The Impacts of Diversification on Entrepreneurial Ventures

Track K

Date: Wednesday, October 14, 2009


Time: 10:00 – 11:15


Room: Meeting Room 13

Session Co-Chairs:
David Deeds, University of St. Thomas
Christoph Zott, IESE Business School

Title: Big Expansions, Monopoly Markets and the Survival of de Novo Entrants


  • Terence Fan, Singapore Management University

Abstract: This paper challenges the misconception that high growths automatically enhance the survival of de novo entrants, and cautions managers of de novo new entrants against too aggressive a production increase over a short time frame. Instead of narrowing the gap in production scale with incumbents and galvanizing employees through ambitious target, aggressive expansions in production can subject new entrants to increased survival hazards should demand fall below expectations. Empirical evidence from the intra-European airline industry confirms the significant survival risk incurred by the biggest and most aggressive production expansions. Meanwhile, exploring and continuing production in monopoly markets are shown to significantly reduce the survival odds of de novo new entrants.

Title: First-Time Diversification and Survival of Young Firms


  • Rui Baptista, Technical University of Lisbon
  • Murat Karaoz, Akdeniz University
  • Joao Leitao, Technical University of Lisbon

Abstract: Diversification of young, small firms has deserved little study. In particular, it has not been clarified by the literature whether the use of such strategy in early years makes any significant contribution to firm survival. We investigate the effect of first-time diversification and expansion by young firms on survival. We find that the decision of new firms to diversify for the first time significantly increases survival probability. We find that young firms expanding into the same industry by creating a new establishment are more likely to survive than those who do not (regardless of overall size). However, young firms diversifying into other industries have a significantly higher chance of survival than start-ups expanding into the same industry. These results suggest that diversification may be a life-saving strategy for start-ups.

Title: Internal Network and Diversification: Empirical Evidence From Family Business Groups in Taiwan


  • Hsi-Mei Chung, I-Shou University
  • Hung-Bin Ding, Loyola College-Maryland

Abstract: Diversification is a major strategic choice. As diversification strategies supported by strong organizational knowledge base are more likely to succeed, firms seeking diversification opportunities would search for new information to complement their existing expertise. However not all organizations are equipped with the same ability to process and to acquire external knowledge when considering diversification decisions. In this research, we focus on family business groups to examine the relationship between diversification and the internal network with a family business group. Using panel data of family business groups in Taiwan, the results of our analysis suggest that internal network within a firm affect its propensity to diversify. However, delegation and participation in public affairs are positively correlated with the degree of diversification.

Title: Performance Implications of Product/International Diversification in SMEs: New Evidence


  • Maria J. Sanchez-Bueno, Carlos III University of Madrid
  • Fernando Muñoz-Bullon, Carlos III University of Madrid

Abstract: We examine the joint effect of product and international diversification on the performance of small and medium enterprises (SME) in Spain over the period 1993-2006. The evidence reveals the existence of a negative relationship between geographic expansion and profitability. In turn, the adoption of both product and international diversification is not associated with higher performance. These results suggest that although diversification may be a relevant strategy for small businesses, the distinctive particularities of the latter — e.g., limited resources, lack of previous experience in the adoption of new products and accessing new markets — might constrain this alternative for business growth. As a conclusion, Spanish SMEs should overcome their shortcomings before adopting diversification.

All Sessions in Track K...

Sun: 10:00 – 11:30
Session 254: Developing a Game Plan for Strategy Research on Social Entrepreneurship
Sun: 13:00 – 14:30
Session 253: Knowledge Spillovers and Strategic Entrepreneurship
Sun: 15:00 – 16:30
Session 252: Key Issues and Emerging Questions in Entrepreneurial Strategy Research
Sun: 16:30 – 17:30
Session 315: Entrepreneurship & Strategy, IG Meeting
Mon: 12:45 – 14:00
Session 102: Networks, Alliances and Entrepreneurship
Session 244: Entrepreneurship in Emerging and Transition Economies
Mon: 15:45 – 17:00
Session 100: Founders, Founding Conditions and Human Capital
Session 249: Examining Entrepreneurial Phenomena at Multiple Levels
Mon: 17:15 – 18:30
Session 101: Opportunities & Founders
Session 248: Issues in Governance and Technology Commercialization in New Ventures
Tue: 10:00 – 11:15
Session 107: Current Thoughts on Entrepreneurship in Emerging and Transition Economies
Session 111: Opportunties, Uncertainty & Innovation in Entrepreneurial Ventures
Tue: 11:30 – 12:45
Session 106: Current Thoughts on Signaling and Venture Capital
Tue: 14:30 – 15:45
Session 108: The Impact of Institutions, Regions and Countries on Entrepreneurial Ventures
Wed: 10:00 – 11:15
Session 105: Current Research on Serial Entrepreneurs and Market Makers
Session 112: The Impacts of Diversification on Entrepreneurial Ventures
Wed: 11:30 – 12:45
Session 104: Employees Mobility and Corporate Entrepreneurship
Session 109: Current Research on Uncertainty and Entrepreneurship

Strategic Management Society

Washington DC