Abstract
Institutional theory contends firms imitate other firms with ideal traits, whereas the strategicgroups literature on imitation suggests firms imitate similar firms. We address this debate bystudying 1,067 market entries by founder‐managed start‐ups in the U.S. Competitive LocalExchange Carrier industry from 1996 to 2004. In support of the strategic groups literature,start‐ups imitate entry decisions of and gravitate toward markets that are densely populated byother start‐ups. Though start‐ups avoid markets already densely populated by corporate ventures,they imitate the market entries of corporate ventures. Our discussion of these and other findingsprovide insights for start‐ups navigating new industries.
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