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The effect of the innovative environment on exit of entrepreneurial firms
Author(s) -
Sarkar M. B.,
Echambadi Raj,
Agarwal Rajshree,
Sen Bisakha
Publication year - 2006
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.534
Subject(s) - industrial organization , business , face (sociological concept) , scale (ratio) , product (mathematics) , entrepreneurship , marketing , sociology , finance , social science , physics , geometry , mathematics , quantum mechanics
To foster ‘creative destruction,’ entrants must survive the turbulent conditions they face in their first crucial years in the industry. We investigate how the external knowledge milieu of an entrant, conceptualized as its innovative environment, causes systematic variation in survival patterns. We test our model from 3,431 firms in 33 industries over 80 years. We depict the innovative environment along two knowledge‐related dimensions, namely technology regime and technology intensity. While the aligned state of the innovative environment, where product innovation exists in tandem with abundant innovation opportunities, promotes entrant survival, we find that this beneficial effect is more pronounced for small entrants due to a possible mitigation of scale disadvantages. Copyright © 2006 John Wiley & Sons, Ltd.