The timing of diversification and startup firms’ survival: a resource-based perspective

ABSTRACT

The study investigates the determinants of first-time diversification activities undertaken by about 3,000 startups in the United States. Drawing on the resource-based view, we examine the impact of resource endowment on the timing of diversification. We further examine the effect of the timing of diversification on the likelihood of firm survival and then test for persistence. The analysis offers three main insights. First, resources play a crucial role in early diversification. Second, early diversification reduces the hazard of exit from the market. Third, the positive impact of early diversification on survival attenuates after five to six years. Our study contributes to the literature on the resource-based view and firm survival. The findings have important implications for entrepreneurs, policymakers, and entrepreneurship scholars.

KEYWORDS:

• Diversification
• resource-based view
• firm survival
• startups
• hazard model

JEL:

• Codes: C41
• L25
• L26
• M13