Necessity Entrepreneurship and Competitive Strategy

Arbeitspapier

Many start-ups chose to compete with incumbent firms using one of two generic strategies: cost leadership or differentiation. Our study demonstrates how this choice depends on whether the startup was founded out of necessity. Our results, based on a representative data set of 4,568 German start-ups, show that necessity entrepreneurs are more likely than other entrepreneurs to pursue a cost leadership strategy, and less likely to pursue a differentiation strategy. Decomposition analyses further show that up to half of the difference in choice of strategy can be attributed to distinct endowments of human capital, socio-economic attributes, and start-up project characteristics that correlate with necessity entrepreneurship.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 8219

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Firm Strategy, and Market Performance: General ; Entrepreneurship
• Subject: cost leadership ; competitive strategy ; new venture strategy ; necessity entrepreneurship ; product differentiation ; decomposition analysis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Block, Jörn Hendrich ; Kohn, Karsten ; Miller, Danny ; Ullrich, Katrin
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/99016