Diversifying Entry: Some Ex Ante Explanations for Postentry Survival and Growth

Abstract

Links between theoretically determined preentry conditions and the postentry performance of diversifying entries made by large industrial firms are examined. Industry, firm, and relatedness variables explained up to 26 percent of the variance in performance, which was measured as the survival, sales growth, and market share growth of entrant businesses. Selling and advertising intensity in an entered industry, scale of entry, and the interaction of scale and seller concentration have strong influences on postentry performance. Other variables show moderate associations. Overall, industry factors appear to have stronger effects than firm-level or relatedness variables.