New Plant Venture Performance Differences Among Incumbent, Diversifying, and Entrepreneurial Firms: The Impact of Industry Learning Intensity

Prior firm experience, firm capabilities, and the industry environment are known to be important determinants of new-venture performance. We hypothesize that firm experience prior to setting up a new venture influences the ability to learn from experience after start-up (which is a key capability), and that this relationship is moderated by the importance of learning by doing within the new venture's industry (which is a critical aspect of the industry environment). We argue that together, these relationships influence performance differences among new plant ventures of incumbents, diversifying entrants, and entrepreneurial (de novo) entrants. Using data on 47,915 new plant ventures in U.S. manufacturing, we find that incumbents and diversifying entrants establish significantly more productive new plants than de novo entrants, and that this advantage significantly increases with the importance of learning by doing in an industry (industry learning intensity). These productivity differences appear to be driven more by learning subsequent to plant start-up than by initial disparities in productivity. Together, these findings strongly suggest that pre-start-up experience adds to the process of post-start-up learning, and that the industry learning environment plays an important role in whether entrepreneurial firms can achieve a competitive advantage over existing firms. This paper was accepted by Lee Fleming, entrepreneurship.