Abstract

Though diversification is one of the central themes in strategic management research (Rumelt, Schendel & Teece, 1994), the patterns of diversification that occur at early stages of firm formation have not been directly studied. Studies sampled on large and mature firms might suffer from the sample selection and survivor bias (Heckman, 1979) because small, young and private firms are neglected. In order to address this limitation, this study examines how organizational age affects decisions by organizations to enter new product-markets. Using organizational learning framework, this study integrates the internal and external drivers of diversification, argues new ventures diversify in a different way than established firms because their unique learning modes. In our view, new ventures are more likely to conduct trail-and-error learning to build competency, and use other firm’s experience to alleviate uncertainty.

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