Entrepreneurship scholars have long noted the need to explore the performance of new ventures by looking at the interaction between environmental and industry factors (Davidsson & Wiklund, 2001; Wiklund & Shepherd, 2005). This notion emerged in Strategic Management where research has shown that firm performance differs significantly across industries and sub-organization units (Short, Ketchen, Palmer, & Hult, 2007). However, empirically and theoretically the strategic group literature has ignored entrepreneurial choices such as when new ventures establish operations in the same environment, interact, and share resources.

Our study suggests alternative unifying features for defining strategic groups in an entrepreneurial context (Dranove, Peteraf, & Shanley, 1998). We suggest that entrepreneurial strategic groups exist when businesses in a similar stage of development concentrate geographically, exploit similar resource environments, and interact. Using various measures of industry density and strategic group configurations, we hypothesize that new businesses in a strategic group will show superior performance.