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"Dominance By Birthright"? Reconfiguration Of Firm Boundaries To Acquire New Resources And Capabilities

J. Chan, David Reiner
Published 2019 · Engineering, Computer Science

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We examine pre-entry resources and capabilities (R&Cs) of de alio and de novo entrants in an emerging industry. Then, we investigate how entrants modify their firm boundaries, after entering a new industry, to acquire the R&Cs deemed critical to be competitive and survive in the industry. Our analysis uses the global biofuel industry as a case study. We use multiple sets of data, including primary data collected from semi-structured interviews with industry stakeholders and experts across major biofuel-producing countries as well as quantitative data from industry reports. Firms typically deploy two successive strategies in order to survive and grow. First, they extend vertical boundaries to capitalise on their own pre-entry R&Cs. Then they move quickly to acquire new R&Cs, which are classified as critical in the value chain of the industry. A new taxonomy of pre-entry R&Cs is proposed i) to distinguish critical and non-critical forms of R&Cs, and ii) to reflect the ease of acquisition of any requisite R&Cs, which are context specific. These strategic moves lead to the bi-directional vertical integration observed in the biofuel industry. Managers need to be able to assess the opportunities for entry and subsequent strategies to be competitive by assessing their R&Cs in terms of criticality and ease of acquisition in their entry decision making. A new taxonomy of R&Cs of the firm is proposed which has theoretical significance and practical implications for new entrants.
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