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Diffusion and Imitation of Growth Strategies in Firm Clusters

Diffusion and Imitation of Growth Strategies in Firm Clusters. M. Gabriela Contreras October 2010. Outline. Introduction Research Question Vocabulary Data & Methodology Expected Challenges Questions & Feedback. Introduction. Rejuvenation of firm growth studies Beyond Gibrat's Law

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Diffusion and Imitation of Growth Strategies in Firm Clusters

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  1. Diffusion and Imitation of Growth Strategies in Firm Clusters • M. Gabriela Contreras • October 2010

  2. Outline • Introduction • Research Question • Vocabulary • Data & Methodology • Expected Challenges • Questions & Feedback

  3. Introduction • Rejuvenation of firm growth studies • Beyond Gibrat's Law • Existing literature focuses on factors (variables) driving firm growth. • Focus on the how not the what

  4. Introduction • Firms are typically understood as profit maximizers • However, firms may depart from this strategy and become “conformists.” • Imitation • Changing strategies when profts fall below a certain threshold

  5. Hypotheses & Assumptions • AI) Firms are not profit maximizers. • A2)Firms have little information of the consumer demand function of their competitors • HI) Firms imitate growth strategies of other firms within a cluster. HIa) Firms imitate growth strategies of well- performing firms within a cluster.

  6. Vocabulary • Firm- a small high- tech business with one or more branches. • Cluster- a regional agglomeration of firms or firm heardquarters. • Growth strategy- the method through which a firm decides to grow, such as an increase in number of FTEs, mergers & acquisitions. • Well- performing strategy- a growth strategy that leads to a higher survival rate of a firm.

  7. Data & Methodology • Data & Scope • Firm- level performance data for small high-tech firms in Silicon Valley, CA • Number of employees • Mergers and acquisitions • Profits • Sources • Kauffman Database • Bureau of Labor Statistics • Small Business Advocacy

  8. Data & Methodology • Methodology • Imitation of a growth strategy • Bayesian Networks • Causality of a firm engaging in a growth strategy • Success of a growth strategy* • Survival Analysis Model • Censor on firm growth strategy • Probability of “death” of a firm given a set of time- dependent covariates * First pass is to evaluate plain imitation behavior

  9. Expected Challenges • Data availability: • Kauffman data available for 3 years • No geographical identifiers • LEEM Database is not accessible • Best database out there! • Cohort choice • Based on expected data availability • Geography- based clusters of industries

  10. Questions for the Audience • Data sources • Methodology • On-going related work?

  11. Questions

  12. Bibliography • Beaudry, C., & Swann, G.M.P. (2009). Firm growth in industrial clusters of the United Kingdom. Small Business Economics, 32, 409-424. • Bonaccorsi, A., & Giannangeli, S. (2010). One or more growth processes? Evidence from new Italian firms. Small Business Economics. • Coad, A. & Rao R. (2008). Innovation and firm growth in high-tech sectors: A quantile regression approach. Research Policy, 37, 633-648. • Stam, Erik. (2010). Growth Beyond Gibrat: firm Growth Processes and Strategies. Small Business Economics. 35, 129-135 • Parker, S.C., Storey D.J, Van Wittelosstuijn A. (2010). What happens to gazelles? The importance of a dynamic management strategy. Small Business Economics. • Wiklund, J., Patzelt, H., & Shepherd, D.A. (2009). Building an integrative model of small business growth. Small Business Economics. 32, 351-374.

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