Knowledge Inheritance, vertical Integration, and entrant survival in the early U.S. auto industry created by Nicholas Argyres and Romel Mostafa

A key finding in the literature on industry evolution and strategy is that knowledge “inherited” from the founder’s previous employer can be an important source of a new firm’s capabilities. We analyze the conditions under which knowledge that is useful for carrying out a key value chain activity is inherited, and explore the mechanism through which such an inheritance shapes an entrant’s strategies and, in the process, influences its performance. Evidence from the early U.S. auto industry indicates that employee spinoffs generated from incumbents that had integrated a key value chain activity were also more likely to integrate that activity than other entrants, which, we suggest, reflects the application of knowledge inheritance relative to that activity. Moreover, we find that the integration of this key activity, stimulated by knowledge inheritance, contributed to the establishment of defensible strategic positioning, thereby enhancing the survival duration of inheriting spinoffs. We thus link together the phenomena of knowledge inheritance, vertical integration, and strategic positioning to explain entrant performance. Previously, these three phenomena have tended to be treated disparately in the literature, rather than in combination. Figures References Related Details Vol. 59, No. 4 Permissions Permissions Metrics Downloaded 36 times in the past 12 months History Published online 10 July 2015 Published in print 1 August 2016 Information © Academy of Management Journal Keywords knowledge inheritance strategic positioning vertical integration We are grateful to Lyda Bigelow and Steven Klepper for sharing data, and Dan Dunn and Leslie Kendall for sharing their expertise on the early U.S. auto industry. Feedback from Academy of Management Journal associate editor Kyle Mayer and three anonymous referees improved the paper significantly. Rajshree Agarwal, Brian Anderson, Pratima Bansal, Stefano Brusoni, Xavier Castaneda, Ronnie Chatterji, Adam Fremeth, Tony Frost, Brent Goldfarb, Barton Hamilton, Guy Holburn, Tammy Madsen, Joanne Oxley, Claus Rerup, Brian Richter, Oliver Williamson, and Chris Zott also offered helpful comments. Finally, Katherine Dobscha, Jared Siegel, and James Wright provided outstanding research assistantship. Download PDF