A dynamic analysis of market entry rates in a global industry: a community ecology perspective

Abstract

States that it is critical that incumbent firms understand the processes that enhance or inhibit entry of new firms into their industry. A new entrant into an industry may create additional demand by legitimizing the technology/products, and/or may share the existing market by drawing buyers away from incumbents. An analysis of market entry rates is especially important in new, high technology industries where sub‐groups of firms pursue different technology and global market diversification strategies because such sub‐groups may have asymmetrical cross‐effects on entry rates of new firms. Suggests a community ecology approach to assessing the impact of industry density on new firm entry rates. The framework is demonstrated by applying it to the global personal computer industry during the period of 1977‐1992. Results suggest that density has a nonmonotonic positive effect, while the firm‐level variables of technological strategy and market expansion strategies have a monotonic positive effect on new firm entry rates.