Summary: Introduction To Strategy Economics

Read the summary and the most important questions on Introduction to Strategy Economics

• 1 Week 1

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• 1.2 Part 2: Entry Strategy

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• What are the 4 steps of entrepreneurship as a process of creating new firms (process view)?

  1. Prospective entrepreneur (intention, skills)
     
  2. Nascent entrepreneur (setting up a firm)
  3. Young business owner (startup)
  4. Established business owner (established firm)

  • Exit, after 2/3/4

• What is occupational preference?

  The question of would you prefer to work as an entrepreneur or an employee and why

• Why should individuals become entrepreneurs according to the rational choice theory? (3)

  • Entrepreneurship as occupation
    
  • Individuals make choices that make them better off (revealed preference)
  • Occupational choice based on expected utility and opportunity costs (alternatives)

• When can irreversibility be applied to entry decision and is it higher? (3)

  1. Investments required to enter an industry are harder to reverse
     
  • Investments in intangible and fixed assets
  • Industry-level
  2. Regional concentration with other similar firms is lower
  • Firm-level
  3. Individuals have lower levels of education
  • Individual-level

• What are the 2 main models for entry strategy?

  1. Creative destruction
     
  2. Creative construction or 'Knowledge spillover theory of entrepreneurship'

• What is 'creative construction' or 'knowledge spillover theory of entrepreneurship'?

  New startups driven by employees commercialising unused knowledge of existing firms, may include collaboration with incumbents

• What happens because of the 'knowledge spillover theory of entrepreneurship'? (2)

  • Knowledge spills over from incumbent firms and universities to new companies
    
  • New companies commercialise knowledge generated by incumbent firms and universities
  • Links (regional) knowledge generation to (regional) business entry
  • the unused or underutilized part of the knowledge stock of a region as a source of business formation opportunities

• What are the main findings from Tvetkova and Partridge (2019)?

  • Knowledge generation has heterogeneous effects on business formation depending on the (high-tech) sector
    
  • Results for high-tech service firms in line with knowledge spillover theory of entrepreneurship
  • Knowledge spillover theory of entrepreneurship not applicable in the high-tech goods producing sector and the computer and electronic product manufacturing

• 1.3 Part 3: Exit Strategy

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• In what order is the frequent exit of young entrepreneurs/ businesses? (3)

  • New entrepreneurs/ firms
    
  • Liability of neweness
  • Frequent exit of new entrepreneurs/ firms

• What is meant by 'threat of early failure'?

  At the point of founding of an organisation the risk of dying is highest and decreases with growing age of the organization