Summary: Introduction To Strategy Economics

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  • 1 Week 1

    This is a preview. There are 2 more flashcards available for chapter 1
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  • 1.2 Part 2: Entry Strategy

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  • What are the 4 steps of entrepreneurship as a process of creating new firms (process view)?

    1. Prospective entrepreneur (intention, skills)
    2. Nascent entrepreneur (setting up a firm)
    3. Young business owner (startup)
    4. Established business owner (established firm)
    • Exit, after 2/3/4
  • What is occupational preference?

    The question of would you prefer to work as an entrepreneur or an employee and why
  • Why should individuals become entrepreneurs according to the rational choice theory? (3)

    • Entrepreneurship as occupation
    • Individuals make choices that make them better off (revealed preference)
    • Occupational choice based on expected utility and opportunity costs (alternatives)
  • When can irreversibility be applied to entry decision and is it higher? (3)

    1. Investments required to enter an industry are harder to reverse
      • Investments in intangible and fixed assets
      • Industry-level
    2. Regional concentration with other similar firms is lower
      • Firm-level
    3. Individuals have lower levels of education
      • Individual-level
  • What are the 2 main models for entry strategy?

    1. Creative destruction
    2. Creative construction or 'Knowledge spillover theory of entrepreneurship'
  • What is 'creative construction' or 'knowledge spillover theory of entrepreneurship'?

    New startups driven by employees commercialising unused knowledge of existing firms, may include collaboration with incumbents
  • What happens because of the 'knowledge spillover theory of entrepreneurship'? (2)

    • Knowledge spills over from incumbent firms and universities to new companies
      • New companies commercialise knowledge generated by incumbent firms and universities
    • Links (regional) knowledge generation to (regional) business entry
      • the unused or underutilized part of the knowledge stock of a region as a source of business formation opportunities
  • What are the main findings from Tvetkova and Partridge (2019)?

    • Knowledge generation has heterogeneous effects on business formation depending on the (high-tech) sector
      • Results for high-tech service firms in line with knowledge spillover theory of entrepreneurship
      • Knowledge spillover theory of entrepreneurship not applicable in the high-tech goods producing sector and the computer and electronic product manufacturing
  • 1.3 Part 3: Exit Strategy

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  • In what order is the frequent exit of young entrepreneurs/ businesses? (3)

    • New entrepreneurs/ firms
    • Liability of neweness
    • Frequent exit of new entrepreneurs/ firms
  • What is meant by 'threat of early failure'?

    At the point of founding of an organisation the risk of dying is highest and decreases with growing age of the organization

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