New Firm Survival: Industry, Strategy, and Location

Posted: 17 Nov 2009

See all articles by Paul D. Reynolds

Paul D. Reynolds

Florida International University, Eugenio Pino & Family Global Entrepreneurship Center

Mary L. Williams

affiliation not provided to SSRN

Timothy M. Stearns

affiliation not provided to SSRN

Nancy M. Carter

Catalyst Associates, Inc.

Date Written: 1995

Abstract

Investigates three factors that reflect resource commitment based on decisions made during a startup's gestation phase: (1) the firm's physical location as a place of business; (2) the firm's strategic focus as a method of competing for environmental resources; and (3) industry affiliation that defines the firm's core technology. After a discussion of these three contextual conditions, six hypotheses are offered: (1) new firm survival chances are higher in urban locations and are lower in rural locations; (2) survival chances will be improved for new firms upstream in the industry chain, whereas new firms downstream will have a decrease in survival chances; (3) survival chances will be improved for new firms with a broad strategic focus, whereas new firms with a narrow strategic focus will have a decrease in survival chances; (4) survival chances will be improved for new firms with narrow strategic focus in downstream industries, whereas new firms with broad strategic focus will have a decrease in survival chances in downstream industries; (5) new firms' survival chances will be significantly influenced by the dual attributes of location and strategy; and (6) industry-location interaction will be significant--i.e., new firms located downstream will have survival chances greater in urban locations and lesser in rural areas, whereas upstream new firms, such as in manufacturing, will not be significantly affected. Data were gathered from 2,653 responses to surveys sent out to new firms in Pennsylvania and Minnesota in 1986, with subsequent phone interviews completed in 1991 to verify the status of the initial survey respondents. Findings indicate that, contrary to the hypothesis presented, firms in rural areas have an increased chance of survival whereas firms in urban areas have a decreased chance of survival. Also, the introduction of the measure for industry was not found to be significant and, subsequently, two other hypotheses are rejected: survival chances are not improved for new firms upstream in the industry chain and new firms downstream do not have a decrease in survival chances. In addition, strategy was found to be significantly related to survival chances, though support for each of the hypotheses presented were mixed. Broad strategies of new firms were not found to be associated with higher survival chances, but narrow strategies were found to have a decrease in survival chances. Support was not found for the hypothesis that new firms located downstream in the industry chain will have survival chances greater in urban locations and lesser in rural locations, or for the idea that upstream new firms will not be significantly affected. However, support was found for the hypotheses that new firms with broad strategic foci in downstream industries will have decreased survival chances and new firms with narrow strategic foci in downstream industries will have increased survival chances. Finally, no relationships in urban locations were found to be significant, but significant contrasts were found in metro and rural locations (except in the distribution industry). (SFL)

Keywords: Resource allocation, Industry sectors, Manufacturing industries, Firm performance, Urban areas, Rural areas, Firm strategies, Firm gestation, Startups, Retail industry, Service industries, Firm location, Firm survival

Suggested Citation

Reynolds, Paul D. and Williams, Mary L. and Stearns, Timothy M. and Carter, Nancy M., New Firm Survival: Industry, Strategy, and Location (1995). Journal of Business Venturing, Vol. 10, Issue 1, p. 23-42 1995. Available at SSRN: https://ssrn.com/abstract=1506336

Paul D. Reynolds

Florida International University, Eugenio Pino & Family Global Entrepreneurship Center ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Mary L. Williams

affiliation not provided to SSRN

Timothy M. Stearns

affiliation not provided to SSRN

No Address Available

Nancy M. Carter

Catalyst Associates, Inc. ( email )

120 Wall Street, 15th Floor
New York, NY 10005
United States
2125147600 x 307 (Phone)
2125148470 (Fax)

HOME PAGE: http://www.catalystwomen.org/about/staff.shtml#3

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