The Parenting Paradox: How Multibusiness Diversifiers Endorse Disruptive Technologies While Their Corporate Children Struggle

Abstract

We examine the role of multibusiness corporations in the development of young industries. We propose and find that established firms diversifying into a new industry that owes its birth to a disruptive technological change give birth to corporate children that are both weaker survivors than freestanding start-ups and stronger legitimators of the industry as a whole. Thus, corporate parents promote the survival of other organizations in this type of young industry while hindering the survival of their own offspring. Using event history models, we examine this paradox in the U.S. personal computer industry from 1975 through 1994.