Barriers to entry and firm performance: a proposed model and curvilinear relationships

Abstract

This research examines the relationships among the barriers to market entry: capital requirements; competitive advantage of incumbent firms; business environment; and firm competence, and their relationship to firm performance. Through a mail survey, data were collected on a sample of 190 companies. A hierarchical regression analysis enabled the assessment of the relationships among barriers to entry and firm performance. In addition, the paper examines the quadratic function of second degree among the variables to see the curvilinear relationships between independent and dependent variables. The results indicate the presence of curvilinear relationships between some barriers for market entrants and performance of market entrants. While the examination of linear relationships between barriers and firm performance is important, the analyses of curvilinear relationships shed more light into our understanding of barriers and performance. Therefore this study contributes to the literature by highlighting the importance of U-shaped and inverted curvilinear relationships between barriers to entry and firm performance.

Keywords:

• barriers to entry
• market entry barriers
• market entry
• competition
• competitive advantage
• capital requirements
• firm competence
• firm performance
• curvilinear relationship