We examine how entrepreneurial entry by diversifying and de novo firms in new industries leads to different levels of performance. We propose that the two types of firms differ in their dynamic capabilities, which enable them to overcome growth impediments and transition to incumbency in the industry. Diversifying firms have already adapted firm knowledge and people to enter the targeted industry, making them better equipped to tackle the challenges of impediments to growth, which arise at larger sizes, older tenure levels in industry, and due to technological discontinuities. Meanwhile, de novo firms, ostensibly tailor-made for the targeted industry, are more likely to stumble over these growth challenges, and will eventually lag behind their competitors with pre-entry experience. We find support for our hypotheses using a near census of firms in the US wireless telecommunications industry over the 1983-2004 period.
- Market Entry