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Necessity Entrepreneurship and Competitive Strategy

Author

Listed:
  • Block, Jörn

    () (University of Trier)

  • Kohn, Karsten

    () (KfW Bankengruppe)

  • Miller, Danny

    () (HEC Montreal)

  • Ullrich, Katrin

    () (KfW Bankengruppe)

Abstract

Many start-ups chose to compete with incumbent firms using one of two generic strategies: cost leadership or differentiation. Our study demonstrates how this choice depends on whether the startup was founded out of necessity. Our results, based on a representative data set of 4,568 German start-ups, show that necessity entrepreneurs are more likely than other entrepreneurs to pursue a cost leadership strategy, and less likely to pursue a differentiation strategy. Decomposition analyses further show that up to half of the difference in choice of strategy can be attributed to distinct endowments of human capital, socio-economic attributes, and start-up project characteristics that correlate with necessity entrepreneurship.

Suggested Citation

  • Block, Jörn & Kohn, Karsten & Miller, Danny & Ullrich, Katrin, 2014. "Necessity Entrepreneurship and Competitive Strategy," IZA Discussion Papers 8219, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp8219
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Krieger, Alexander & Block, Joern & Stuetzer, Michael, 2018. "Skill variety in entrepreneurship: A literature review and research directions," MPRA Paper 88389, University Library of Munich, Germany.
    2. David B. Audretsch & Erik E. Lehmann & Matthias Menter, 2016. "Public cluster policy and new venture creation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 43(4), pages 357-381, December.
    3. Peter Zwan & Roy Thurik & Ingrid Verheul & Jolanda Hessels, 2016. "Factors influencing the entrepreneurial engagement of opportunity and necessity entrepreneurs," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 273-295, December.
    4. Monica C. Diochon & Alistair R. Anderson & Yogesh Ghore, 2017. "Microfranchise emergence and its impact on entrepreneurship," International Entrepreneurship and Management Journal, Springer, vol. 13(2), pages 553-574, June.
    5. Coduras, Alicia & Saiz-Alvarez, José Manuel & Ruiz, Jesús, 2016. "Measuring Readiness for Entrepreneurship: An Information Tool Proposal," MPRA Paper 86603, University Library of Munich, Germany.
    6. repec:kap:sbusec:v:49:y:2017:i:4:d:10.1007_s11187-017-9857-7 is not listed on IDEAS
    7. David Urbano & Sebastian Aparicio & Victor Querol, 2016. "Social progress orientation and innovative entrepreneurship: an international analysis," Journal of Evolutionary Economics, Springer, vol. 26(5), pages 1033-1066, December.
    8. repec:spr:joevec:v:28:y:2018:i:1:d:10.1007_s00191-017-0499-3 is not listed on IDEAS
    9. Jörn H. Block & Andreas Landgraf, 2016. "Transition from part-time entrepreneurship to full-time entrepreneurship: the role of financial and non-financial motives," International Entrepreneurship and Management Journal, Springer, vol. 12(1), pages 259-282, March.
    10. Jacob Hörisch & Jana Kollat & Steven A. Brieger, 2017. "What influences environmental entrepreneurship? A multilevel analysis of the determinants of entrepreneurs’ environmental orientation," Small Business Economics, Springer, vol. 48(1), pages 47-69, January.
    11. Angulo-Guerrero, María J. & Pérez-Moreno, Salvador & Abad-Guerrero, Isabel M., 2017. "How economic freedom affects opportunity and necessity entrepreneurship in the OECD countries," Journal of Business Research, Elsevier, vol. 73(C), pages 30-37.
    12. repec:eee:jbvent:v:33:y:2018:i:3:p:241-260 is not listed on IDEAS
    13. Maria Abreu & Pelin Demirel & Vadim Grinevich & Mine Karataş-Özkan, 2016. "Entrepreneurial practices in research-intensive and teaching-led universities," Small Business Economics, Springer, vol. 47(3), pages 695-717, October.
    14. Nongainéba Benjamin Zoumba, 2017. "Necessity and Opportunity motivations to Entrepreneurs behaviors
      [Motivos de necesidad y oportunidad para el comportamiento de los empresarios]
      ," Post-Print hal-01536124, HAL.
    15. repec:gam:jsusta:v:10:y:2018:i:8:p:2594-:d:159651 is not listed on IDEAS
    16. Nabil Abou Lebdi & Katrin Hussinger, 2016. "Startup Innovation during the Past Economic Crisis," CREA Discussion Paper Series 16-27, Center for Research in Economic Analysis, University of Luxembourg.

    More about this item

    Keywords

    competitive strategy; new venture strategy; necessity entrepreneurship; product differentiation; decomposition analysis; cost leadership;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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