A Note on Necessity Entrepreneurship and Competitive Strategy
22 Pages Posted: 2 Jul 2013
Date Written: July 2, 2013
Many start-ups chose to compete with incumbent firms using one of two generic strategies: cost leadership or differentiation. Our note demonstrates how this choice depends on whether the start-up was founded out of necessity. Our results, based on a representative dataset of 4,568 German start-ups, show that the start-ups of necessity entrepreneurs are more likely than others to pursue a cost leadership strategy, and less likely to pursue a differentiation strategy.
Keywords: necessity entrepreneurship, competitive strategy, cost leadership, product differentiation, KFW/ZEW Start-up Panel, new venture strategy
JEL Classification: L10, L26
Suggested Citation: Suggested Citation