Abstract

The purpose of this paper is to explicate a novel demarcation among new ventures – their level of product market diversification at the time of firm founding. We draw upon the rich diversification and organizational imprinting literatures to hypothesize and test several relationships between the level of diversification at the time of a firm’s founding and its performance trajectory.

We argue that diversification at the founding of a firm – what we term being “Born Diversified” (BD) – imprints a broad entrepreneurial mindset in the managers of a new venture, which in turn is positively related to performance trajectories. This imprinted mindset increases the likelihood that managers will recognize cross-domain synergies and provides them with the confidence and knowledge to exploit such opportunities, long after the firm’s founding. Thus, while initial performance may be higher for ventures that do not disperse resources over several markets, increases in subsequent performance may be better gleaned from multi-market activity.

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