IDEAS home Printed from
   My bibliography  Save this article

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


  • Natarajan Balasubramanian

    () (Whitman School of Management, Syracuse University, Syracuse, New York 13244)


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.

Suggested Citation

  • Natarajan Balasubramanian, 2011. "New Plant Venture Performance Differences Among Incumbent, Diversifying, and Entrepreneurial Firms: The Impact of Industry Learning Intensity," Management Science, INFORMS, vol. 57(3), pages 549-565, March.
  • Handle: RePEc:inm:ormnsc:v:57:y:2011:i:3:p:549-565

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Peter Thompson, 2005. "Selection and Firm Survival: Evidence from the Shipbuilding Industry, 1825-1914," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 26-36, February.
    2. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters,in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87 World Scientific Publishing Co. Pte. Ltd..
    3. David C. Mowery & Bhaven N. Sampat & Arvids A. Ziedonis, 2002. "Learning to Patent: Institutional Experience, Learning, and the Characteristics of U.S. University Patents After the Bayh-Dole Act, 1981-1992," Management Science, INFORMS, vol. 48(1), pages 73-89, January.
    4. Peter Doeringer & Christine Evans-Klock & David G. Terkla, 2002. "Start-Up Factories: High Performance Management, Job Quality, and Regional Advantage," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number suf, November.
    5. Peter Thompson, 2001. "How Much Did the Liberty Shipbuilders Learn? New Evidence for an Old Case Study," Journal of Political Economy, University of Chicago Press, vol. 109(1), pages 103-137, February.
    6. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
    7. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
    8. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    9. Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 561-583, August.
    10. Agarwal, Rajshree & Gort, Michael, 1996. "The Evolution of Markets and Entry, Exit and Survival of Firms," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 489-498, August.
    11. Steven J. Davis & John Haltiwanger, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 819-863.
    12. 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.
    13. Natarajan Balasubramanian & Marvin Lieberman, 2006. "Industry Learning Environments and the Heterogeneity of Firm Performance," Working Papers 06-29, Center for Economic Studies, U.S. Census Bureau.
    14. Steven Klepper, 2002. "The capabilities of new firms and the evolution of the US automobile industry," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 645-666, August.
    15. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
    16. Natarajan Balasubramanian & Marvin B. Lieberman, 2011. "Learning‐By‐Doing And Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 59(2), pages 177-198, June.
    17. Shaker A. Zahra & Harry J. Sapienza & Per Davidsson, 2006. "Entrepreneurship and Dynamic Capabilities: A Review, Model and Research Agenda," Journal of Management Studies, Wiley Blackwell, vol. 43(4), pages 917-955, June.
    18. Marvin B. Lieberman, 1984. "The Learning Curve and Pricing in the Chemical Processing Industries," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 213-228, Summer.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Natarajan Balasubramanian & Mariko Sakakibara, 2015. "Spinout Formation: Do Opportunities and Constraints Benefit High Capital Founders?," Working Papers 15-07, Center for Economic Studies, U.S. Census Bureau.
    2. Argote, Linda & Fahrenkopf, Erin, 2016. "Knowledge transfer in organizations: The roles of members, tasks, tools, and networks," Organizational Behavior and Human Decision Processes, Elsevier, vol. 136(C), pages 146-159.
    3. Frank Neffke & Matté Hartog & Ron Boschma & Martin Henning, 2014. "Agents of structural change. The role of firms and entrepreneurs in regional diversification," Papers in Evolutionary Economic Geography (PEEG) 1410, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Apr 2014.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:57:y:2011:i:3:p:549-565. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.