Age Cohorts, Competitive Intensity and Ownership: A Study of Founding Rates in an Emerging Market

Abstract

Age Cohorts, Competitive Intensity and Ownership: A Study of Founding Rates in an Emerging Market In this paper we extend Barnett’s theory of competitive intensity on in two ways. First, we include a test of the liability of newness to examine how age cohorts affect founding rates. Second, we argue that organizational populations are heterogeneous in their vulnerability to competition and therefore in the distribution of competitive intensity, as manifested in the prediction of founding rates. We measure heterogeneity in terms of owner type. As an institutional variable, owner type has been studied in a variety of industries and countries and has been found to affect performance significantly. However, the reasons for this influence have been anecdotal, relying on broad descriptions of different types and inferring their effect. Here we construct a test which allows us to order the competitive intensities of three owner types found in emerging markets to identify which of their characteristics has the strongest influence on industry competition. The owner types we study are the state, foreign corporations and private ownership. We argue that private sector firms are the most vulnerable to competitive forces and find that their influence on founding rates exceeds significantly that of state and foreign firms. The date are Chinese manufacturing firms from 1998 to 2007 across all regions and industries.