Abstract

The examination of firm performance among incumbents and its interaction with industry structure and its environment (Davidsson & Wiklund, 2001; Wiklund & Shepherd, 2005) is highly evolved in the fields of strategy (McCann & Folta, 2008) and economics (Ellison, Glaeser, & Kerr, 2010). However, in entrepreneurship scholars have dealt less frequently with these relationship and, as consequence, little is known about how these attributes affect the performance of new ventures (Short, Payne, & Ketchen, 2008). Further, the effects of agglomeration of companies are not fully known (McCann & Folta, 2011) even though its effects do benefit industries and local economies (Rosenthal & Strange, 2003).

Our paper examines how industrial agglomeration and strategic group membership affects the performance of new ventures that pursue business incubation as a strategy. We examine the interaction between environmental conditions and new venture strategy. These are measured as agglomeration at the state and local level and membership in a strategic group, respectively. We set out to study agglomeration and strategic groups phenomena at its emergence through the study of new ventures in environments where industry agglomeration is non-existent.

Our hypotheses read: H1: Higher levels of industrial agglomeration increases new firm performance. H2: Strategic group membership increases new firm performance. H3: Higher industrial agglomeration combined with strategic group membership increases new firm performance (incubation hypothesis). H4: Emerging agglomerations have bigger performance differentials than established agglomerations. H5: Emerging entrepreneurial strategic groups have bigger performance differentials than established strategic groups. H6: Emerging agglomerations combined with emerging strategic groups increases new firm performance (incubation hypothesis).

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