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Securing Their Future? Entry And Survival In The Information Security Industry

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  • Ashish Arora
  • Anand Nandkumar

Abstract

In this paper we study how the existence of a functioning market for technology differentially conditions the entry strategy and survival of different types of entrants, and the role of scale, marketing ability and technical assets. Markets for technology facilitate entry of firms that lack proprietary technology and increase vertical specialization. However, they also increase the relative advantage of downstream capabilities, which is reflected in the relatively improved performance of incumbent Information and Communication Technologies (ICT) firms compared to startups. We find that diversifying entrants perform better relative to startups. Contrary to earlier studies, we find that spin-offs do not perform any better than other startups. Moreover, firms founded by serious hobbyists and tinkerers, whom we call hackers, perform markedly better than other startups. These findings reflect the non-manufacturing setting of this study, as well as the distinctive nature of software technology.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13634.

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Date of creation: Nov 2007
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Publication status: published as Patents, Thickets and the Financing of Eastly-Stage Firms; Evidence from the Software Industry , Iain M. Cockburn, Megan J. MacGarvie. in Entrepreneurship: Strategy and Structure , Hellmann and Stern. 2009
Handle: RePEc:nbr:nberwo:13634

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  1. Thomas Hellmann, 2007. "When Do Employees Become Entrepreneurs?," Management Science, INFORMS, INFORMS, vol. 53(6), pages 919-933, June.
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  4. Giarratana, Marco S., 2004. "The birth of a new industry: entry by start-ups and the drivers of firm growth: The case of encryption software," Research Policy, Elsevier, Elsevier, vol. 33(5), pages 787-806, July.
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  7. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, Econometric Society, vol. 50(3), pages 649-70, May.
  8. Anton, James J & Yao, Dennis A, 1995. "Start-ups, Spin-offs, and Internal Projects," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 11(2), pages 362-78, October.
  9. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(4), pages 421-440, December.
  10. Cohen, Wesley M & Klepper, Steven, 1992. "The Anatomy of Industry R&D Intensity Distributions," American Economic Review, American Economic Association, American Economic Association, vol. 82(4), pages 773-99, September.
  11. Constance E. Helfat & Marvin B. Lieberman, 2002. "The birth of capabilities: market entry and the importance of pre-history," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 725-760, August.
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