NEW FIRM SURVIVAL - INDUSTRY, STRATEGY, AND LOCATION

How important is the physical location of a new firm for its chances of survival? Location of a new firm, whether in urban, metro, or rural vicinities, can have important impacts on performance outcomes. Urban locations often contain a wealth of diverse resources but may also have a greater number of competitors. Rural locations may lack diversity but can enable the firm to exploit a niche with limited competition. We suggest that a simple examination of new firm location will not adequately predict survival chances. Rather the impact on location of the new firm will be influenced by the industry in which the new firm operates and by the strategy the new firm pursues. The industry of the new firm is examined by focusing on where the new firm is located in the value chain. We predict that a new firm upstream in the industry value chain will have better chances of survival than new firms downdstream in the industry value chain. New firms with broadly focused strategies are hypothesized to have greater survival chances than new firms strategically positioned to exploit a narrow market focus. And we predict that new firms in urban locations will have greater chances for survival than new firms in rural locations. We propose in this research that survival chances of new firms are best understood by examining interaction effects between location, industry, and strategy. To accomplish this examination, we develop a model for testing two-way interactions between industry-strategy, location-strategy, and industry-location. Finally, we include a three-way interaction where new firms are tested for survival outcomes based on the combination of location, strategy, and industry. The findings of this study, based on a large representative sample of over 1900 new firms, suggest that new firm survival chances are not significantly impacted when industry was examined separately. The findings do indicate that survival chances are associated with strategy and location and by the two-way interactions of industry by strategy. Although the three-way interaction test of industry, strategy, and location did not indicate statistical significance, there are specific instances where survival chances of the new firm appear to be modified by industry and location.