New firm survival: Industry, strategy, and location

Abstract

How important is the physical location of a new firm for its chances of survival? Location of a new firm, whether in urban, metro, or rural vicinities, can have important impacts on performance outcomes. Urban locations often contain a wealth of diverse resources but may also have a greater number of competitors. Rural locations may lack diversity but can enable the firm to exploit a niche with limited competition. We suggest that a simple examination of new firm location will not adequately predict survival chances. Rather the impact on location of the new firm will be influenced by the industry in which the new firm operates and by the strategy the new firm pursues.The industry of the new firm is examined by focusing on where the new firm is located in the value chain. We predict that a new firm upstream in the industry value chain will have better chances of survival than new firms downstream in the industry value chain. New firms with broadly focused strategies are hypothesized to have greater survival chances than new firms strategically positioned to exploit a narrow market focus. And we predict that new firms in urban locations will have greater chances for survival than new firms in rural locations.