Product Strategies and Survival in Schumpeterian Environments: Evidence from the US Security Software Industry

Abstract

This paper seeks to explore the drivers of survival in environments characterized by high rates of entry and exit, fragmented market shares, rapid pace of product innovation and proliferation of young ventures. The paper aims to underscore the role played by postentry product strategies, along with their interaction, after carefully controlling for 'at entry' factors and demographic conditions. Based on a population of 270 firms that entered the US security software industry between 1989 and 1998, we find evidence that surviving entities are those that are more aggressive in the adoption of versioning and portfolio broadening strategies. In particular, focusing on any one of these two strategies leads to a higher probability of survival as opposed to adopting a mixed strategy.

Competitive pressure and technological degree of the product portfolio: Implications for firm performance

“…Here, an important choice variable for the management of the firm can be the level of the technological content of the product portfolio, as pointed out, among others, by Garud -Kumaraswamy (1993) and Giarratana -Fosfuri (2007).…”

“…The management of the product portfolio represents a key strategic issue for firms (Sorenson 2000;Giarratana -Fosfuri 2007;Eggers 2012). According to prior literature, product scope width is particularly conducive during higher degrees of environmental turbulence (Dobrev et al 2002) and for pursuing a hedging strategy against risk of losses (Sorenson 2000).…”

“…According to prior literature, product scope width is particularly conducive during higher degrees of environmental turbulence (Dobrev et al 2002) and for pursuing a hedging strategy against risk of losses (Sorenson 2000). Deeper product broadening is suitable to raise entry barriers (Lancaster 1990) and obtain demand synergies via a "one-stop shopping" product offer (Giarratana -Fosfuri 2007).…”

“…Thus, TECH_PP simultaneously incorporates a firm's product offerings and their rate of technological content. Next to linearity (Giarratana -Fosfuri 2007), former studies depict a potential nonlinear relation between product proliferation strategies and firm performance (Barroso -Giarratana 2013). In order to capture any curvilinear nature of the relationship between firm performance and technological degree of the product portfolio, we introduce the square term of TECH_PP into our model specifications, if significant nonlinearity can be demonstrated.…”

“…Prior publications revealed that mostly absolute firm size, complementary assets, location, external channels of R&D, and breadth of product range were at the forefront of empirical investigations (Sorenson 2000;Dobrev et al 2002;Folta et al 2006;Laursen -Salter 2006;Giarratana -Fosfuri 2007). These results notwithstanding, there might be other potential issues at work, which the business press and anecdotal evidences point out, for example, scale economies, the innovativeness of the product portfolio, and the possession of absorptive capacity (Dobrev -Carroll 2003;Giarratana, 2004;Chiaroni et al;The Economist 2011a).…”