Necessity Entrepreneurship and Competitive Strategy

31 Pages Posted: 11 Jun 2014

See all articles by Jorn H. Block

Jorn H. Block

University of Trier - Faculty of Management; Erasmus University Rotterdam (EUR) - Institute of Management (ERIM)

Karsten Kohn

Kreditanstalt für Wiederaufbau (KfW), KfW Development Bank; IZA Institute of Labor Economics

Danny Miller

HEC Montreal

Katrin Ullrich

Center for European Economic Research (ZEW)

Abstract

Many start-ups chose to compete with incumbent firms using one of two generic strategies: cost leadership or differentiation. Our study demonstrates how this choice depends on whether the startup was founded out of necessity. Our results, based on a representative data set of 4,568 German start-ups, show that necessity entrepreneurs are more likely than other entrepreneurs to pursue a cost leadership strategy, and less likely to pursue a differentiation strategy. Decomposition analyses further show that up to half of the difference in choice of strategy can be attributed to distinct endowments of human capital, socio-economic attributes, and start-up project characteristics that correlate with necessity entrepreneurship.

Keywords: cost leadership, competitive strategy, new venture strategy, necessity entrepreneurship, product differentiation, decomposition analysis

JEL Classification: L10, L26

Suggested Citation

Block, Jorn Hendrich and Kohn, Karsten and Miller, Danny and Ullrich, Katrin, Necessity Entrepreneurship and Competitive Strategy. IZA Discussion Paper No. 8219, Available at SSRN: https://ssrn.com/abstract=2448795

Jorn Hendrich Block (Contact Author)

University of Trier - Faculty of Management ( email )

D-54296
Germany

Erasmus University Rotterdam (EUR) - Institute of Management (ERIM) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Karsten Kohn

Kreditanstalt für Wiederaufbau (KfW), KfW Development Bank ( email )

Palmengartenstr. 5-9
Frankfurt, 60325
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Danny Miller

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3 H3T 2A7
Canada

Katrin Ullrich

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

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