Missing the starting gun: de alio entry order in new markets, inertia and real option capabilities

Abstract

This article analyses entry order decisions of incumbent firms diversifying from other industries (de alio entrants) in new markets. We study this issue in the Security Software Industry, a high turbulent industry in which de alio firms were first technological movers but start-ups dominate the downstream product market. With a generalized Tobit estimation of observed entry order decisions, we find that pre-entry firm capabilities that should represent strategic options do not significantly explain firm entry order. The article argues that inertial decisions more than rational assessments drive de alio entry order in Security Software.

Localized knowledge spillovers and skill‐biased performance

“…In addition, this view creates incentives to move the industrial configuration from a classical, vertically integrated organization toward modularization, specialization, and division of labor (Saxenian, 1994; Giarratana, 2008). Recent business evidence shows that the new champions of the Japanese economy are not the traditional keirestu , but relatively new, high‐tech, medium‐ and small‐sized firms that dominate specialized industry modules, such as the cluster of hardware components in Nagano, where firms like Shinko specialize in glass‐to‐metal seal production, Nidec in hard‐disk motors, Koa in film chip resistors, and Kyoden in the design of printed circuits (The Economist, 2009).…”

Building product diversification through contractual R&D agreements

“…We obtained the primary data from the InfoTrac Promt Database. By following a procedure adopted in previous studies (Giarratana and Fosfuri, ; Fosfuri et al., ; Giarratana, ; Fosfuri and Giarratana, ), we identified press articles related to the sample firms and that indicated a ‘product introduction’ event. A key word search of article texts revealed three relevant pieces of information: the name of the company, the date of its product introduction, and the market object of the penetration.…”

Overlap in external technology search locations and the breadth of IPR assets: lessons from the Security Software Industry

“…Firms' core business can influence the way ETS is spatially distanced or converged from competitors because a firm's core sector could exhibit common patterns in searching external knowledge and technology. Moreover, SSI can also host de alio companies as implied by Giarratana (2008). Hence, I employ three dummies that address the core business of the sampled organisations: Hardware (SIC code 357), Software (SIC 737), or Electronics (SIC 359-370).…”