Diffusion and Imitation of Growth Strategies in Firm Clusters

1
Diffusion and Imitation of Growth Strategies in
Firm Clusters

• M. Gabriela Contreras
• October 2010

2
Outline

• Introduction
• Research Question
• Vocabulary
• Data Methodology
• Expected Challenges
• Questions Feedback

3
Introduction

• Rejuvenation of firm growth studies
• Beyond Gibrat's Law
• Existing literature focuses on factors
  (variables) driving firm growth.
• Focus on the how not the what

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Introduction

• Firms are typically understood as profit
  maximizers
• However, firms may depart from this strategy and
  become conformists.
• Imitation
• Changing strategies when profts fall below a
  certain threshold

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Hypotheses Assumptions

• AI) Firms are not profit maximizers.
• A2)Firms have little information of the consumer
  demand function of their competitors
• HI) Firms imitate growth strategies of other
  firms within a cluster.
• HIa) Firms imitate growth strategies of well-
  performing firms within a cluster.

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Vocabulary

• Firm- a small high- tech business with one or
  more branches.
• Cluster- a regional agglomeration of firms or
  firm heardquarters.
• Growth strategy- the method through which a firm
  decides to grow, such as an increase in number of
  FTEs, mergers acquisitions.
• Well- performing strategy- a growth strategy that
  leads to a higher survival rate of a firm.

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Data Methodology

• Data Scope
• Firm- level performance data for small high-tech
  firms in Silicon Valley, CA
• Number of employees
• Mergers and acquisitions
• Profits
• Sources
• Kauffman Database
• Bureau of Labor Statistics
• Small Business Advocacy

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Data Methodology

• Methodology
• Imitation of a growth strategy
• Bayesian Networks
• Causality of a firm engaging in a growth strategy
• Success of a growth strategy
• Survival Analysis Model
• Censor on firm growth strategy
• Probability of death of a firm given a set of
  time- dependent covariates
• First pass is to evaluate plain imitation
  behavior

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Expected Challenges

• Data availability
• Kauffman data available for 3 years
• No geographical identifiers
• LEEM Database is not accessible
• Best database out there!
• Cohort choice
• Based on expected data availability
• Geography- based clusters of industries

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Questions for the Audience

• Data sources
• Methodology
• On-going related work?

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Questions
12
Bibliography

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• Stam, Erik. (2010). Growth Beyond Gibrat firm
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