Entry into Nascent Industries: Disentangling a Firm's Capability Portfolio at the Time of Investment Versus Market Entry
| Author | Mahka Moeen |
| Published date | 01 October 2017 |
| DOI | http://doi.org/10.1002/smj.2642 |
| Date | 01 October 2017 |
Strategic Management Journal
Strat. Mgmt. J.,38: 1986–2004 (2017)
Published online EarlyView 21 April 2017 in WileyOnline Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2642
Received 31 October 2013;Final revision received29 October 2016
Entry into Nascent Industries: Disentangling a Firm’s
Capability Portfolio at the Time of Investment Versus
Market Entry
Mahka Moeen*
Department of Strategy and Entrepreneurship, Kenan-Flagler School of Business,
University of North Carolina, Chapel Hill, North Carolina
Research summary: This article examines the capability antecedents of rm entry into nascent
industries. Because a rm’s technological investmentsin nascent industries typically occur before
market entry, this study makes a distinction between rm capabilities at the time of market entry
and at the time of initial investment. At the time of market entry, core technical capabilities and
complementary assets inuence the likelihood of entry. However, at the time of investment, a
rm’s integrative capabilities as well as the initial stocks of related technical capabilities and
complementary assets become critical, as they enable endogenous development of core technical
capabilities and complementary assets by the time of entry. The empirical sample consists of rms
involved in eld experiments in agricultural biotechnology during the period 1980–2010.
Managerial summary: New product commercialization in a nascent industry typically requires
access to not only core technologies of the focal industry, but also supporting commercialization
assets. However, rms may not possess these critical capabilities when they rst invest in the
industry. Instead, empirical evidence from the context of agricultural biotechnology shows that
at the time of rst investment, a rm’s integrative capabilities partly explain their likelihood of
entry. Integrative capabilities encompass a set of practices that enable effective coordination
and communication, and in turn put rms in an advantageous position to develop the needed
capabilities by the time of entry. Copyright © 2017 John Wiley & Sons, Ltd.
Introduction
Entrepreneurial entry of rms into nascent indus-
tries has been a topic of extensive research within
the economics, strategy, and entrepreneurship liter-
atures. In understanding the capability antecedents
of a rm’s entry, scholars have focused on the role
of pre-entry capabilities (Klepper & Simons, 2000;
Mitchell, 1989) and dened them as the capabilities
Keywords: integrative capabilities; market entry; nascent
industries; pre-entry capabilities; product commercializa-
tion
*Correspondence to: Mahka Moeen, Kenan-Flagler
Business School, University of North Carolina, 4611
McColl Building, Chapel Hill, NC 27599. E-mail:
mahka_moeen@kenan-agler.unc.edu
Copyright © 2017 John Wiley & Sons, Ltd.
that a rm possesses before market entry and the
rst product commercialization (Helfat & Lieber-
man, 2002). This research has provided insights
about pre-entry capabilities in the forms of related
technical capabilities (Helfat, 1997) and comple-
mentary assets (Mitchell, 1989) that are leveraged
by diversifying entrants into an industry (Bayus &
Agarwal, 2007; Klepper & Simons, 2000). How-
ever, this stream has abstracted awayfrom two con-
siderations: the distinction between capabilities at
the time of initial investment and at the time of mar-
ket entry, and the stage of industry evolution at the
time of investment.
Prior to market entry into an industry, rms typ-
ically invest in turning technological opportunities
into commercially valuable products and in recon-
Entry into Nascent Industries 1987
guring capabilities that enable them to succeed
in the industry (Jovanovic, 2004; Malerba & Ors-
enigo, 1999). Thus, embedded within the single
concept of pre-entry capabilities, a distinction may
be made between the stocks of capabilities pos-
sessed by the rm at the time of market entry and
those possessed by the rm at the time of initial
investment. Are the same types of capabilities that
are critical at the time of market entry also the dis-
tinguishing factors at the time of investment? The
distinction between these two time junctures (Win-
ter, 2012) illuminates whether a rm’s entry is due
to passive leverage of capabilities from prior oper-
ations and exogenous “dominance by birthright”
or whether leveraged capabilities enable endoge-
nous development of new capabilities, which in turn
lead to entry.
In addition, rms’ investments prior to entry into
a nascent industry may have been initiated during
the incubation period, that is, the period between
the introduction of a technological discovery and
the rst instance of product commercialization
(Moeen & Agarwal, 2017). The emergence and
co-evolution of an industry’s knowledge base and
competitive landscape during the incubation period
contrasts nascent industries with existing industries.
During the incubation period, potential entrants
typically face high uncertainty about the prospects
of the industry, lack access to a well-established
industry knowledge base, are unable to conduct
capability benchmarking, and/or do not have
the option to enter through acquisition of an
existing rm. These distinctive features call for
scholarly attention to pre-entry capabilities during
this period.
To ll these research gaps, this article studies
capability antecedents of entry into a nascent indus-
try. When viewed at the time of entry, techni-
cal capabilities and complementary assets, the two
capabilities that have been the focus of the exist-
ing literature (Mitchell, 1989; Teece, 1986), are
related to market entry. However, at the time of
investment, the role of “integrative capabilities” or
the ability to integrate activities, capabilities, and
objectives in a repeated and reliable manner (Helfat
& Campo-Rembado, 2016) becomes relevant. Inte-
grative capabilities may enable a rm’s efforts to
access core technical capabilities and complemen-
tary assets. Thus, along with expertise in related
technical elds and the initial stock of complemen-
tary assets, they have an indirect effect on entry.
The hypotheses are empirically corroborated for
a sample of rms involved in technological invest-
ments in agricultural biotechnology, that is, the
use of modern biotechnology techniques to modify
plants for enhanced agricultural productivity, in
the United States during the period 1980– 2010.
Federal regulations require seeking release permits
prior to conducting eld experiments on transgenic
crops. This unique and important feature enables
compilation of a comprehensive list of rms at the
risk of entry, given that applying for eld release
permits indicates rms’ interest and resource allo-
cation in market applications related to agricultural
biotechnology.
The theoretical contributions relate to enrich-
ing the concept of pre-entry capabilities by disen-
tangling its constituent capability components at
two time junctures of initial investment and mar-
ket entry. In doing so, this article draws attention
to the endogenous source of heterogeneity in rms’
stock of capabilities at the time of entry (Mahoney
& Pandian, 1992; Maritan & Peteraf, 2011). Rather
than presuming a rm’s capabilities as exogenous
factors leveraged to the nascent industry, this arti-
cle points to enabling factors for active building
and acquiring of capabilities prior to entry. Fur-
ther, this article extends the growingliterature about
integrative capabilities by noting their role in over-
coming challenges and enhancing effectiveness of
the capability development efforts that are critical
for entry into nascent industries. Accordingly, it
shows how emergence of nascent industries may
rely on integrative capabilities of early entrants, and
how entrepreneurial startups lacking such capabili-
ties may face impediments in their attempts to enter
nascent industries.
Theoretical Framework
Background: Capability Requirements for
Market Entry
The “match” between a rm’s pre-entry capabil-
ities and the required capabilities of the industry
inuences the likelihood of market entry (Helfat
& Lieberman, 2002). Scholars have typically con-
ceptualized pre-entry capabilities by distinguishing
between diversifying and de novo entrants (Carroll,
Bigelow, Seidel, & Tsai, 1996; Ganco & Agarwal,
2009), and have identied technical capabilities
(Bayus & Agarwal, 2007; Klepper & Simons,
Copyright © 2017 John Wiley & Sons, Ltd. Strat. Mgmt. J.,38: 1986–2004 (2017)
DOI: 10.1002/smj
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